II

103D CONGRESS

1ST SESSION S. 1579

To contain health care costs and improve access to health care through

accountable health plans and managed competition, and for other purposes.

IN THE SENATE OF THE UNITED STATES

OCTOBER 21 (legislative day, OCTOBER 13), 1993

Mr. BREAUX (for himself, Mr. DURENBERGER, Mr. LIEBERMAN, and Mr.

NUNN) introduced the following bill; which was read twice and referred

to the Committee on Finance

A BILL

To contain health care costs and improve access to health

care through accountable health plans and managed competition, 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 ‘‘Managed Competition Act of 1993’’.

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

7 this Act is as follows:

Section 1. Short title; table of contents.

Sec. 2. Findings; purposes.

Sec. 3. Glossary of certain terms used in titles I and II.
2

•S 1579 IS

TITLE I—MANAGED COMPETITION IN EMPLOYER-BASED HEALTH

PLANS: INCENTIVES TO CONTROL COSTS

Subtitle A—Use of Tax Incentives to Purchase Cost-Effective Plans

Sec. 1001. Uniform tax disincentive to effectively limit deductibility of excess

employer health plan expenses.

Sec. 1002. Increase in deduction for health plan premium expenses of self-employed individuals.

Sec. 1003. Deduction for health plan premium expenses of individuals.

Sec. 1004. Exclusion from gross income for contributions by a partnership or

S corporation to a health plan covering its partners or shareholders.

Sec. 1005. Employer obligations.

Subtitle B—Health Plan Purchasing Cooperatives (HPPCs)

Sec. 1101. Establishment and organization; HPPC areas.

Sec. 1102. Agreements with accountable health plans (AHPs).

Sec. 1103. Agreements with small employers.

Sec. 1104. Enrolling individuals in accountable health plans through a HPPC.

Sec. 1105. Receipt of premiums.

Sec. 1106. Coordination among HPPCs.

Sec. 1107. Complaint process; ombudsman.

Sec. 1108. Enrollee satisfaction surveys; monitoring enrollee disenrollment.

Subtitle C—Accountable Health Plans (AHPs)

PART 1—REQUIREMENTS FOR ACCOUNTABLE HEALTH PLANS

Sec. 1201. Registration process; qualifications.

Sec. 1202. Specified uniform set of effective benefits; reduction in cost-sharing

for low-income individuals; quality standards.

Sec. 1203. Collection and provision of standardized information.

Sec. 1204. Prohibition of discrimination based on health status for certain conditions; limitation on pre-existing condition exclusions.

Sec. 1205. Use of standard premiums.

Sec. 1206. Financial solvency requirements.

Sec. 1207. Grievance mechanisms; enrollee protections; written policies and procedures respecting advance directives; agent commissions.

Sec. 1208. Additional requirements of open AHPs.

Sec. 1209. Coordination of benefits with low-income assistance.

Sec. 1210. Additional requirement of certain AHPs.

Sec. 1211. Funding for approved medical residency training programs and physician retraining programs.

PART 2—PREEMPTION OF STATE LAWS FOR ACCOUNTABLE HEALTH PLANS

Sec. 1221. Preemption from State benefit mandates.

Sec. 1222. Preemption of State law restrictions on network plans.

Sec. 1223. Preemption of State laws restricting utilization review programs.

PART 3—CLARIFYING APPLICATION OF FEDERAL ANTITRUST LAWS TO

ACCOUNTABLE HEALTH PLANS

Sec. 1231. Publication of guidelines.

Subtitle D—National Health Board
3

•S 1579 IS

Sec. 1301. Establishment of National Health Board.

Sec. 1302. Specification of uniform set of effective benefits.

Sec. 1303. Benefits, Evaluations, and Data Standards Board.

Sec. 1304. Health Plan Standards Board.

Sec. 1305. Registration of accountable health plans.

Sec. 1306. Specification of risk-adjustment factors.

Sec. 1307. National health data system.

Sec. 1308. Measures of quality of care of specialized centers of care.

Sec. 1309. Agency for Clinical Evaluations.

Sec. 1310. Report and recommendations on achieving universal coverage.

Sec. 1311. Monitoring reinsurance market.

Sec. 1312. Authorization of appropriations; sunset.

Subtitle E—Managed Competition in Rural and Urban Underserved Areas

PART 1—SPECIAL TREATMENT OF DESIGNATED UNDERSERVED AREAS

Sec. 1401. Designation of underserved areas.

Sec. 1402. Special treatment.

PART 2—TRANSITIONAL SUPPORT FOR DEVELOPMENT OF ACCOUNTABLE

HEALTH PLANS IN UNDERSERVED AREAS

Sec. 1411. Technical assistance funding.

Sec. 1412. Rural development grants.

Sec. 1413. Migrant health centers.

Sec. 1414. Community health centers.

PART 3—ESTABLISHMENT OF RURAL EMERGENCY ACCESS CARE HOSPITALS

Sec. 1421. Rural emergency access care hospitals described.

Sec. 1422. Coverage of and payment for services.

Sec. 1423. Effective date.

PART 4—TRANSITIONAL ASSISTANCE FOR SAFETY NET HOSPITALS

Sec. 1431. Payments to hospitals.

Sec. 1432. Application for assistance.

Sec. 1433. Public service responsibilities.

Sec. 1434. Authorization of appropriations.

Subtitle F—Treatment of Chronically Underserved Areas

Sec. 1501. Promoting State action.

Subtitle G—Repeal of COBRA Continuation Requirements

Sec. 1601. Repeal of COBRA continuation requirements.

Subtitle H—Definitions

Sec. 1701. Definitions.

TITLE II—LOW-INCOME ASSISTANCE FOR HEALTH COVERAGE

Subtitle A—Low-Income Assistance

Sec. 2001. Eligibility.

Sec. 2002. Premium assistance.
4

•S 1579 IS

Sec. 2003. Cost-sharing assistance.

Sec. 2004. Assistance for certain items and services.

Sec. 2005. Computation of base Federal premium amount.

Sec. 2006. Applications for assistance.

Sec. 2007. Reconciliation of premium assistance through use of income statements.

Sec. 2008. Treatment of certain cash assistance recipients.

Sec. 2009. Definitions.

Subtitle B—Long-Term Care Phase-Down Assistance to States

Sec. 2101. Long-term care phase-down assistance.

Subtitle C—Financing

PART 1—MEDICARE SAVINGS

Sec. 2201. Reduction in update for inpatient hospital services.

Sec. 2202. Reduction in conversion factor for physician fee schedule for nonprimary care services.

Sec. 2203. Reduction in hospital outpatient services through establishment of

prospective payment system.

Sec. 2204. Increase in medicare part B premium for individuals with high income.

Sec. 2205. Phased-in elimination of medicare hospital disproportionate share

adjustment payments.

Sec. 2206. Reduction in routine cost limits for home health services.

Sec. 2207. Reduction in routine cost limits for extended care services.

Sec. 2208. Reductions in payments for hospice services.

PART 2—OTHER SAVINGS

Sec. 2211. Requirement that certain agencies prefund government health benefits contributions for their annuitants.

Subtitle D—Repeal of Medicaid Program

Sec. 2301. Repeal of medicaid program.

TITLE III—TRAINING AND EDUCATION OF HEALTH CARE

PROFESSIONALS

Subtitle A—Reform of Federal Funding for Medical Residency Training

Sec. 3001. Definitions.

Sec. 3002. Approval of medical residency training positions.

Sec. 3003. Funding for approved medical residency training programs and physician retraining programs.

Sec. 3004. Financing.

Sec. 3005. National Medical Education Fund.

Sec. 3006. Repeal of separate medical education payments under medicare.

Subtitle B—Other Medical Education Grants and Programs

Sec. 3101. Scholarship and loan repayment programs of National Health Service Corps.

Sec. 3102. Area health education centers.

Sec. 3103. Public health and preventive medicine.
5

•S 1579 IS

Sec. 3104. Family medicine.

Sec. 3105. General internal medicine and pediatrics.

Sec. 3106. Physician assistants.

Sec. 3107. Allied health project grants and contracts.

Sec. 3108. Nurse allied health project grants and contracts.

Sec. 3109. Nurse practitioner and nurse midwife programs.

Sec. 3110. Use of health care policy and research funds for primary care.

TITLE IV—PREVENTIVE HEALTH AND INDIVIDUAL

RESPONSIBILITY

Subtitle A—Expansion of Public Health Programs

Sec. 4001. Immunizations against vaccine-preventable diseases.

Sec. 4002. Prevention, control, and elimination of tuberculosis.

Sec. 4003. Lead poisoning prevention.

Sec. 4004. Preventive health measures with respect to breast and cervical cancers.

Sec. 4005. Office of Disease Prevention and Health Promotion.

Sec. 4006. Preventive health and health services block grant.

Sec. 4007. Categorical grants for early intervention regarding acquired immune

deficiency syndrome.

Sec. 4008. Programs of Office of Smoking and Health.

Subtitle B—Medicare

PART 1—COVERAGE OF PREVENTIVE SERVICES

Sec. 4101. Coverage of colorectal screening.

Sec. 4102. Coverage of certain immunizations.

Sec. 4103. Coverage of well-child care.

Sec. 4104. Annual screening mammography.

Sec. 4105. Financing of additional benefits.

PART 2—NOTICE OF ADVANCE DIRECTIVE RIGHTS

Sec. 4111. Providing notice of rights regarding medical care to individuals entering medicare.

TITLE V—MALPRACTICE REFORM

Subtitle A—Findings; Purpose; Definitions

Sec. 5001. Findings; purpose.

Sec. 5002. Definitions.

Subtitle B—Grants to States for Alternative Dispute Resolution Systems

Sec. 5101. Grants to States.

Sec. 5102. Administration.

Subtitle C—Uniform Standards for Malpractice Claims

Sec. 5201. Applicability.

Sec. 5202. Treatment of noneconomic and punitive damages.

Sec. 5203. Periodic payments for future losses.

Sec. 5204. Uniform statute of limitations.

Sec. 5205. Special provision for certain obstetric services.
6

•S 1579 IS

Sec. 5206. Uniform standard for determining liability in actions based on negligence.

Sec. 5207. Jurisdiction of Federal courts.

Sec. 5208. Preemption.

Subtitle D—Grants to States for Development of Practice Guidelines

Sec. 5301. Grants to States.

TITLE VI—PAPERWORK REDUCTION AND ADMINISTRATIVE

SIMPLIFICATION

Sec. 6001. Preemption of State quill pen laws.

Sec. 6002. Confidentiality of electronic health care information.

Sec. 6003. Standardization for the electronic receipt and transmission of health

plan information.

Sec. 6004. Use of uniform health claims forms and identification numbers.

Sec. 6005. Priority among insurers.

Sec. 6006. Furnishing of information among health plans.

Sec. 6007. Failure to satisfy certain health plan requirements.

Sec. 6008. Definitions.

1 SEC. 2. FINDINGS; PURPOSES.

2 (a) FINDINGS.—Congress finds the following:

3 (1) NEED FOR COST CONTAINMENT INCEN4 TIVES.—The current health insurance marketplace is

5 unable to provide efficient and effective health care

6 coverage because—

7 (A) there is no organized method for price8 based competition among health plans offering

9 standardized benefits;

10 (B) there is no method by which health

11 plans are held accountable for their perform12 ance in effectively and efficiently improving the

13 health and well-being of their enrollees;

14 (C) the Internal Revenue Code not only

15 provides no incentives for employees to select

16 carefully among competing health plans on the
7

•S 1579 IS

1 basis of cost, but also provides incentives for

2 employers and employees to select plans with

3 greater expenses;

4 (D) health plans frequently manage costs

5 through underwriting practices and favorable

6 selection rather than through increased effi7 ciencies in the provision of health care; and

8 (E) underwriting practices discriminate

9 unfairly against individuals in need of health

10 care.

11 (2) MANAGED COMPETITION.—

12 (A) The economy of the United States has

13 been based on a model of competitive markets

14 and the United States has successfully relied on

15 this model in order to promote efficiencies and

16 innovation in nearly every economic area.

17 (B) However, in order to provide for such

18 a market in health care, there is a need to pro19 vide proper incentives to providers and pur20 chasers in the market for health care.

21 (C) Only through such a reform will the

22 country achieve the dual goals of maintaining

23 high quality care, innovation, and consumer

24 choice and of providing real incentives for cost

25 containment.
8

•S 1579 IS

1 (b) PURPOSE.—

2 (1) GENERAL OBJECTIVE.—It is the general ob3 jective of this Act to reform the health care market4 place to provide universal access to high quality,

5 cost-effective care through competitive health plans.

6 (2) COST CONTAINMENT OBJECTIVE.—It is also

7 a specific objective of this Act to bring the rate of

8 increase in health care costs by the year 2000 down

9 to the rate of increase in costs in the economy as a

10 whole.

11 (3) SPECIFIC MEASURES TO ACHIEVE OBJEC12 TIVES.—In order to—

13 (A) control costs through enhanced price

14 competition, the Act extends tax benefits for

15 employer contributions only to the lowest price

16 of a qualifying plan in an area;

17 (B) promote competition based on cost-ef18 fective care instead of through risk selection,

19 the Act standardizes benefits, prohibits experi20 ence rating, and adjusts premium payments to

21 plans based on the risk characteristics of indi22 viduals enrolled in the plan;

23 (C) provide access to coverage, the Act

24 makes available to all individuals competitively
9

•S 1579 IS

1 priced accountable health plans regardless of

2 their employment status;

3 (D) to promote competition based on qual4 ity, the Act provides for the systematic report5 ing and public dissemination of information on

6 the performance of plans in meeting the clinical

7 health requirements, functional needs, well8 being, and personal satisfaction of its enrollees;

9 and

10 (E) improve health care coverage of low-in11 come individuals, the Act offers financial assist12 ance in purchasing accountable health plans

13 and meeting cost-sharing requirements.

14 SEC. 3. GLOSSARY OF CERTAIN TERMS USED IN TITLES I

15 AND II.

16 The following specialized, defined terms are used in

17 titles I and II of this Act:

18 ACCOUNTABLE HEALTH PLAN; AHP.—The

19 terms ‘‘accountable health plan’’ and ‘‘AHP’’ are de20 fined in section 1701(b)(1).

21 APPLICABLE FEDERAL ASSISTANCE AMOUNT.—

22 The term ‘‘applicable Federal assistance amount’’ is

23 defined in section 2009(c)(1).
10

•S 1579 IS

1 APPLICABLE LOW-INCOME PREMIUM

2 AMOUNT.—The term ‘‘applicable low-income pre3 mium amount’’ is defined in section 2009(c)(2).

4 BASE FEDERAL PREMIUM AMOUNT.—The ‘‘base

5 Federal premium amount’’ is defined in section

6 2005(a)(1).

7 BASE INDIVIDUAL PREMIUM.—The term ‘‘base

8 individual premium’’ is defined in section

9 2009(c)(3).

10 BENEFITS, EVALUATIONS, AND DATA STAND11 ARDS BOARD.—The term ‘‘Benefits, Evaluations,

12 and Data Standards Board’’ refers to the Board es13 tablished under section 1303.

14 BOARD.—The term ‘‘Board’’ is defined in sec15 tion 1701(b)(2).

16 CLOSED AND OPEN PLANS.—The terms

17 ‘‘closed’’ and ‘‘open’’ are defined, with respect to a

18 health plan, under section 1701(b)(4).

19 ELIGIBLE EMPLOYEE.—The term ‘‘eligible em20 ployee’’ is defined in section 1701(a)(2).

21 ELIGIBLE FAMILY MEMBER.—The term ‘‘eligi22 ble family member’’ is defined in section 1701(a)(3).

23 ELIGIBLE INDIVIDUAL.—The term ‘‘eligible in24 dividual’’ is defined in section 1701(a)(1).
11

•S 1579 IS

1 ELIGIBLE RESIDENT.—The term ‘‘eligible resi2 dent’’ is defined in section 1701(a)(4).

3 ENROLLEE UNIT.—The term ‘‘enrollee unit’’ is

4 defined in section 1701(a)(5).

5 FAMILY ADJUSTED TOTAL INCOME.—The term

6 ‘‘family adjusted total income’’ is defined in section

7 2009(b)(1).

8 HEALTH OUTCOME.—The term ‘‘health out9 come’’ is defined in section 1302(b)(5)(B).

10 HEALTH PLAN STANDARDS BOARD.—The term

11 ‘‘Health Plan Standards Board’’ refers to the Board

12 established under section 1304.

13 HEALTH PLAN.—The term ‘‘health plan’’ is de14 fined in section 1701(c)(1).

15 HPPC; HEALTH PLAN PURCHASING COOPERA16 TIVE.—The terms ‘‘health plan purchasing coopera17 tive’’ and ‘‘HPPC’’ are defined in section

18 1701(b)(3).

19 INDIVIDUAL RESPONSIBILITY PERCENTAGE.—

20 The term ‘‘individual responsibility percentage’’ is

21 defined in section 2009(c)(5).

22 INVESTIGATIONAL TREATMENT.—The term ‘‘in23 vestigational treatment’’ is defined in section

24 1302(b)(4)(B).
12

•S 1579 IS

1 LOW-INCOME INDIVIDUAL.—The term ‘‘low-in2 come individual’’ is defined in section 2009(a)(1).

3 MEDICALLY APPROPRIATE.—The term ‘‘medi4 cally appropriate’’ is defined in section 1302(b)(1).

5 MEDICARE BENEFICIARY.—The term ‘‘medicare

6 beneficiary’’ is defined in section 1701(a)(6).

7 MEDICARE-ELIGIBLE INDIVIDUAL.—The term

8 ‘‘medicare-eligible individual’’ is defined in section

9 1701(a)(6).

10 MODERATELY LOW-INCOME INDIVIDUAL.—The

11 term ‘‘moderately low-income individual’’ is defined

12 in section 2009(a)(2).

13 MODIFIED FAMILY INCOME.—The term ‘‘modi14 fied family income’’ is defined in section 2009(b)(2).

15 NETWORK PLAN.—The term ‘‘network plan’’ is

16 defined in section 1208(b)(3)(D) and in section

17 1222(b)(1).

18 PARTICIPATING PROVIDER.—The term ‘‘partici19 pating provider’’ is defined in section 1222(b)(2).

20 PHYSICIAN INCENTIVE PLAN.—The term ‘‘phy21 sician incentive plan’’ is defined in section

22 1207(b)(2).

23 POVERTY LINE.—The term ‘‘poverty line’’ is

24 defined in section 2009(c)(4).
13

•S 1579 IS

1 PRE-EXISTING CONDITION.—The term ‘‘pre-ex2 isting condition’’ is defined in section

3 1204(b)(2)(B)(ii).

4 PREMIUM CLASS.—The term ‘‘premium class’’

5 is defined in section 1701(c)(3).

6 REFERENCE PREMIUM RATE.—The term ‘‘ref7 erence premium rate’’ is defined in section

8 2009(c)(4).

9 SECRETARY.—The term ‘‘Secretary’’ is defined

10 in section 1701(c)(4).

11 SMALL EMPLOYER; LARGE EMPLOYER.—The

12 terms ‘‘small employer’’ and ‘‘large employer’’ are

13 defined in section 1701(c)(2).

14 SPECIALIZED CENTER OF CARE.—The term

15 ‘‘specialized center of care’’ is defined in section

16 1308(d).

17 STATE-ADJUSTED POVERTY LEVEL DEFINED.—

18 The term ‘‘State-adjusted poverty level’’ is defined

19 in section 2009(b)(3)(A).

20 STATE.—The term ‘‘State’’ is defined in section

21 1701(c)(5).

22 TREATMENT.—The term ‘‘treatment’’ is defined

23 in section 1302(b)(5)(A).

24 TYPE OF ENROLLMENT.—The term ‘‘type of

25 enrollment’’ is defined in section 1701(c)(6).
14

•S 1579 IS

1 UNIFORM SET OF EFFECTIVE BENEFITS.—The

2 term ‘‘uniform set of effective benefits’’ is defined in

3 section 1701(c)(7).

4 UTILIZATION REVIEW PROGRAM.—The term

5 ‘‘utilization review program’’ is defined in section

6 1223(b).

7 VERY LOW-INCOME INDIVIDUAL.—The term

8 ‘‘very low-income individual’’ is defined in section

9 2009(a)(3).

10 TITLE I—MANAGED COMPETI11 TION IN EMPLOYER-BASED

12 HEALTH PLANS: INCENTIVES

13 TO CONTROL COSTS

14 Subtitle A—Use of Tax Incentives

15 to Purchase Cost-Effective Plans

16 SEC. 1001. UNIFORM TAX DISINCENTIVE TO EFFECTIVELY

17 LIMIT DEDUCTIBILITY OF EXCESS EMPLOYER

18 HEALTH PLAN EXPENSES.

19 (a) IN GENERAL.—Chapter 43 of the Internal Reve20 nue Code of 1986 (relating to qualified pension plans, etc.)

21 is amended by adding at the end thereof the following new

22 section:
15

•S 1579 IS

1 ‘‘SEC. 4980C. EMPLOYER HEALTH PLAN EXPENSES IN EX2 CESS OF ACCOUNTABLE HEALTH PLAN

3 COSTS.

4 ‘‘(a) GENERAL RULE.—There is hereby imposed a

5 tax equal to the product of the rate of tax specified in

6 section 11(b)(1)(C) and the amount of the excess health

7 plan expenses of any employer.

8 ‘‘(b) EXCESS HEALTH PLAN EXPENSES.—For pur9 poses of this section—

10 ‘‘(1) IN GENERAL.—The term ‘excess health

11 plan expenses’ means health plan expenses paid or

12 incurred by the employer for any month with respect

13 to any covered individual to the extent such expenses

14 do not meet the requirements of paragraphs (2), (3),

15 and (4).

16 ‘‘(2) LIMIT TO ACCOUNTABLE HEALTH

17 PLANS.—Health plan expenses meet the require18 ments of this paragraph only if—

19 ‘‘(A) the expenses are attributable to cov20 erage of the covered individual under an ac21 countable health plan, and

22 ‘‘(B) in the case of a small employer, the

23 expenses are attributable to payment to a

24 health plan purchasing cooperative for coverage

25 under an accountable health plan.
16

•S 1579 IS

1 ‘‘(3) LIMIT ON PER INDIVIDUAL CONTRIBU2 TION.—

3 ‘‘(A) IN GENERAL.—Health plan expenses

4 with respect to any covered individual meet the

5 requirements of this paragraph for any month

6 only to the extent that the amount of such ex7 penses does not exceed the reference premium

8 rate (as defined in section 2009(c)(4) of the

9 Managed Competition Act of 1993) for the

10 month.

11 ‘‘(B) USE OF COMMUNITY RATE WITHIN

12 TYPE OF ENROLLMENT OR ACROSS HPPC AREAS

13 IN PLACE OF REFERENCE PREMIUM RATE FOR

14 LARGE EMPLOYERS.—In the case of an em15 ployer that is not a small employer and which

16 maintains a closed AHP (as defined in section

17 1701(b)(4)(A)) that elects certain rules to apply

18 under section 1205(b)(3) of the Managed Com19 petition Act of 1993, the reference premium

20 rate amount for a covered individual shall be

21 computed based on the weighted average of

22 such amounts within the type of enrollment or

23 across HPPC areas, as elected under such sec24 tion.
17

•S 1579 IS

1 ‘‘(C) TREATMENT OF HEALTH PLANS OUT2 SIDE THE UNITED STATES.—For purposes of

3 subparagraph (A), in the case of a covered indi4 vidual residing outside the United States, there

5 shall be substituted for the reference premium

6 rate such reasonable amounts as the National

7 Health Board determines to be comparable to

8 the limit imposed under subparagraph (A) or

9 subparagraph (B) (if applicable).

10 ‘‘(4) REQUIREMENT OF LEVEL CONTRIBU11 TION.—Health plan expenses meet the requirements

12 of this paragraph for any month only if the amount

13 of the employer contribution (for a premium class)

14 does not vary based on the accountable health plan

15 selected.

16 ‘‘(c) EXCEPTION FOR MEDICARE-ELIGIBLE RETIR17 EES.—Subsections (a) and (b) shall not apply to health

18 plan expenses with respect to an individual who is eligible

19 for benefits under part A of title XVIII of the Social Secu20 rity Act if such expenses are for a health plan that is not

21 a primary payor under section 1862(b) of such Act.

22 ‘‘(d) SPECIAL RULES.—

23 ‘‘(1) TREATMENT OF SELF-INSURED PLANS.—

24 In the case of a self-insured health plan, the amount

25 of contributions per employee shall be determined
18

•S 1579 IS

1 for purposes of subsection (b)(3) in accordance with

2 rules established by the National Health Board

3 which are based on the principles of section

4 4980B(f)(4)(B) (as in effect before the date of the

5 enactment of this Act).

6 ‘‘(2) CONTRIBUTIONS TO CAFETERIA PLANS.—

7 Contributions under a cafeteria plan on behalf of an

8 employee that are used for a group health plan cov9 erage shall be treated for purposes of this section as

10 health plan expenses paid or incurred by the em11 ployer.

12 ‘‘(e) EMPLOYEES HELD HARMLESS.—Nothing in

13 this section shall be construed as affecting the exclusion

14 from gross income of an employee under section 106.

15 ‘‘(f) OTHER DEFINITIONS.—For purposes of this sec16 tion—

17 ‘‘(1) COVERED INDIVIDUAL.—The term ‘cov18 ered individual’ means any beneficiary of a group

19 health plan.

20 ‘‘(2) GROUP HEALTH PLAN.—The term ‘group

21 health plan’ has the meaning given such term by

22 section 5000(b)(1), but does not include, as defined

23 by the National Health Board, health coverage

24 under a disability or accident policy or under a

25 workers’ compensation plan.
19

•S 1579 IS

1 ‘‘(3) HEALTH PLAN EXPENSES.—

2 ‘‘(A) IN GENERAL.—The term ‘health plan

3 expenses’ means employer expenses for any

4 group health plan, including expenses for pre5 miums as well as payment of deductibles and

6 coinsurance that would otherwise be applicable.

7 ‘‘(B) EXCLUSION OF CERTAIN DIRECT EX8 PENSES.—Such term does not include expenses

9 for direct services which are determined by the

10 National Health Board to be primarily aimed at

11 workplace health care and health promotion or

12 related population-based preventive health ac13 tivities.

14 ‘‘(4) SMALL EMPLOYER.—The term ‘small em15 ployer’ means, for a taxable year, an employer that

16 is a small employer (within the meaning of section

17 1701(c)(2) of the Managed Competition Act of

18 1993) for the most recent calendar year ending be19 fore the end of the taxable year.

20 ‘‘(5) TYPE OF ENROLLMENT.—The term ‘type

21 of enrollment’ is described in section 1701(c)(6) of

22 the Managed Competition Act of 1993.’’.

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

24 for such chapter 43 is amended by adding at the end

25 thereof the following new section:
20

•S 1579 IS

‘‘Sec. 4980C. Employer health plan expenses in excess of accountable health plan costs.’’.

1 (c) EFFECTIVE DATE.—

2 (1) IN GENERAL.—Except as otherwise pro3 vided in this subsection, the amendments made by

4 this section shall apply to expenses incurred for the

5 provision of health services for periods after Decem6 ber 31, 1994.

7 (2) TRANSITION FOR COLLECTIVE BARGAINING

8 AGREEMENTS.—The amendments made by this sec9 tion shall not apply to employers with respect to

10 their employees, insofar as such employees are cov11 ered under a collective bargaining agreement ratified

12 before the date of the enactment of this Act, earlier

13 than the date of termination of such agreement (de14 termined without regard to any extension thereof

15 agreed to after the date of the enactment of this

16 Act), or January 1, 1997, whichever is earlier.

17 SEC. 1002. INCREASE IN DEDUCTION FOR HEALTH PLAN

18 PREMIUM EXPENSES OF SELF-EMPLOYED IN19 DIVIDUALS.

20 (a) INCREASING DEDUCTION TO 100 PERCENT.—

21 Paragraph (1) of section 162(l) of the Internal Revenue

22 Code of 1986 is amended by striking ‘‘25 percent of’’.

23 (b) MAKING PROVISION PERMANENT.—Subsection

24 (l) of section 162 of such Code (relating to special rules
21

•S 1579 IS

1 for health insurance costs of self-employed individuals) is

2 amended by striking paragraph (6).

3 (c) LIMITATION TO ACCOUNTABLE HEALTH

4 PLANS.—Paragraph (2) of section 162(l) of such Code is

5 amended by adding at the end thereof the following new

6 paragraph:

7 ‘‘(3) DEDUCTION LIMITED TO ACCOUNTABLE

8 HEALTH PLAN COSTS.—No deduction shall be al9 lowed under this section for any amount which

10 would be excess health plan expenses (as defined in

11 section 4980C(b), determined without regard to

12 paragraph (4) thereof) if the taxpayer were a small

13 employer.’’.

14 (d) EFFECTIVE DATE.—

15 (1) IN GENERAL.—Except as otherwise pro16 vided in this subsection, the amendments made by

17 this section shall apply to taxable years beginning

18 after December 31, 1994.

19 (2) EXCEPTION.—The amendment made by

20 subsection (c) shall apply to expenses for periods of

21 coverage beginning on or after January 1, 1995.

22 SEC. 1003. DEDUCTION FOR HEALTH PLAN PREMIUM EX23 PENSES OF INDIVIDUALS.

24 (a) IN GENERAL.—Section 213 of the Internal Reve25 nue Code of 1986 (relating to medical, dental, etc., ex-
22

•S 1579 IS

1 penses) is amended by adding at the end the following new

2 subsection:

3 ‘‘(g) SPECIAL RULES FOR HEALTH PLAN PREMIUM

4 EXPENSES.—

5 ‘‘(1) IN GENERAL.—The deduction under sub6 section (a) shall be determined without regard to the

7 limitation based on adjusted gross income with re8 spect to amounts paid for premiums for coverage

9 under an accountable health plan.

10 ‘‘(2) LIMITS.—

11 ‘‘(A) LIMIT IN AMOUNT.—The amount al12 lowed as a deduction under paragraph (1) with

13 respect to the cost of providing coverage for any

14 individual shall not exceed the applicable limit

15 specified in section 4980C(b)(3) reduced by the

16 aggregate amount paid by all other entities (in17 cluding any employer or any level of govern18 ment) for coverage of such individual under any

19 health plan.

20 ‘‘(B) LIMIT TO HPPC PLANS.—

21 ‘‘(i) IN GENERAL.—The deduction

22 under this subsection shall be allowed only

23 in the case of an individual who obtains

24 coverage under an accountable health plan
23

•S 1579 IS

1 through a health plan purchasing coopera2 tive.

3 ‘‘(ii) EXCEPTION FOR EMPLOYEES OF

4 LARGE EMPLOYERS.—Clause (i) shall not

5 apply to an individual who obtains cov6 erage in an accountable health plan by vir7 tue of the individual’s (or other person’s)

8 employment by a large employer.

9 ‘‘(3) DEDUCTION ALLOWED AGAINST GROSS IN10 COME.—The deduction under this subsection shall

11 be taken into account in determining adjusted gross

12 income under section 62(a).

13 ‘‘(4) TREATMENT OF MEDICARE PROGRAM.—

14 Coverage under part A or part B of title XVIII of

15 the Social Security Act shall not be considered for

16 purposes of this subsection to be coverage under an

17 accountable health plan.’’.

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

19 subsection (a) shall apply to amounts paid after December

20 31, 1994, and taxable years ending after such date.
24

•S 1579 IS

1 SEC. 1004. EXCLUSION FROM GROSS INCOME FOR CON2 TRIBUTIONS BY A PARTNERSHIP OR S COR3 PORATION TO A HEALTH PLAN COVERING ITS

4 PARTNERS OR SHAREHOLDERS.

5 (a) S CORPORATIONS.—Section 1372 of the Internal

6 Revenue Code of 1986 (relating to partnership rules to

7 apply for fringe benefit purposes) is amended by adding

8 at the end thereof the following new subsection:

9 ‘‘(c) EXCEPTION FOR COVERAGE PROVIDED UNDER

10 SUBSIDIZED ACCIDENT OR HEALTH PLAN.—This section

11 shall not apply to coverage under a subsidized accident

12 or health plan maintained by the S corporation for its em13 ployees.’’.

14 (b) PARTNERSHIPS.—Section 707 of such Code (re15 lating to transactions between partner and partnership)

16 is amended by adding at the end thereof the following new

17 subsection:

18 ‘‘(d) EXCLUSION FOR COVERAGE PROVIDED UNDER

19 SUBSIDIZED ACCIDENT OR HEALTH PLAN.—In the case

20 of coverage under a subsidized accident or health plan

21 maintained by a partnership for its partners, for purposes

22 of sections 104, 105, 106, and 162(l)(2)(B), the partner23 ship shall be treated as the employer of each partner who

24 is an employee within the meaning of section 401(c)(1).’’.
25

•S 1579 IS

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

2 this section shall apply to taxable years beginning after

3 December 31, 1994.

4 SEC. 1005. EMPLOYER OBLIGATIONS.

5 (a) SMALL EMPLOYERS.—Each small employer (as

6 defined in section 1701(c)(2)) shall—

7 (1) have in effect an agreement described in

8 section 1103 with the health plan purchasing cooper9 ative (requiring the offering to employees of cov10 erage through accountable health plans) for the

11 HPPC area in which the employer has its principal

12 place of business, and

13 (2) comply with such agreement.

14 (b) OTHER EMPLOYERS.—

15 (1) IN GENERAL.—Each employer that is not a

16 small employer shall—

17 (A) offer to each employee (in a time and

18 manner specified by the National Health

19 Board) enrollment in a qualifying accountable

20 health plan (as defined in paragraph (3)) both

21 on an individual basis, and, if applicable and at

22 the employee’s option, on a family basis; and

23 (B) provide, at the option of the employee,

24 for deduction from wages or other compensa25 tion (in the manner specified in section
26

•S 1579 IS

1 1103(c)) of amount of any premiums due for

2 such enrollment (taking into account the

3 amount of any employer contribution).

4 (2) OPEN ENROLLMENT PERIODS.—For pur5 poses of paragraph (1)(A), the Board shall provide

6 for—

7 (A) initial enrollment periods (of not less

8 than 30 days) during which newly employed in9 dividuals are offered enrollment under a quali10 fying accountable health plan;

11 (B) an annual open enrollment period (of

12 not less than 30 days) in which employees are

13 offered enrollment under a qualifying account14 able health plan (and, if there is a choice

15 among such plans, the opportunity to change

16 the plan in which the employee is enrolled); and

17 (C) special enrollment periods during

18 which, because of a change in family situation

19 (such as marriage, birth or adoption of a child,

20 divorce, separation, or death), the employee is

21 offered the opportunity to change the type of

22 enrollment provided.

23 (3) QUALIFYING ACCOUNTABLE HEALTH

24 PLAN.—For purposes of this subsection, the term
27

•S 1579 IS

1 ‘‘qualifying accountable health plan’’ means, with re2 spect to an employee, an accountable health plan—

3 (A) that serves the area in which the em4 ployee resides, and

5 (B) for which the premium charged to the

6 employee for a premium class does not exceed

7 (except as provided in paragraph (4)) the pre8 mium of the least expensive accountable health

9 plan offered to individuals by a health plan pur10 chasing cooperative in the HPPC area in which

11 the employee resides for that premium class.

12 Nothing in this subsection shall be construed as pre13 venting an employer from offering, or an employee

14 from electing enrollment in, a health plan that

15 serves the area in which the employee is employed,

16 rather than the area in which the employee resides.

17 (4) SPECIAL RULE FOR CERTAIN CLOSED AHPS

18 ELECTING SPECIAL COMMUNITY RATING.—In the

19 case of a closed AHP offered to an employee, if the

20 plan has made an election described in section

21 1205(b)(3), paragraph (3)(B) shall be applied to the

22 plan based on the weighted average of premiums de23 termined without regard to age, HPPC area, or both

24 (as elected under such section), rather than on the

25 basis of premium class.
28

•S 1579 IS

1 (c) NONDISCRIMINATION UNDER GROUP HEALTH

2 PLANS.—

3 (1) APPLICATION OF RULES SIMILAR TO MEDI4 CARE NONDISCRIMINATION RULES.—Subject to

5 paragraph (2), the provisions of paragraphs (1)(A),

6 (1)(D), (1)(E), (3)(A), and (3)(C) of section

7 1862(b) of the Social Security Act shall apply to an

8 individual eligible for low-income assistance under

9 subtitle A of title II in the same manner as such

10 provisions apply to an individual age 65 or over who

11 is entitled to benefits under title XVIII of such Act

12 under section 226(a) of such Act.

13 (2) RULES OF APPLICATION.—In applying

14 paragraph (1) under this Act—

15 (A) in applying clauses (ii) and (iii) of sec16 tion 1862(b)(1)(A) of the Social Security Act,

17 any reference to ‘‘20 or more employees’’ is

18 deemed a reference to ‘‘5 or more employees’’;

19 (B) clause (iv) of section 1862(b)(1)(A) of

20 such Act shall not apply; and

21 (C) any reference to title XVIII of such

22 Act is deemed a reference to assistance under

23 subtitle A of title II of this Act.

24 (d) ENFORCEMENT.—

25 (1) CIVIL MONEY PENALTIES.—
29

•S 1579 IS

1 (A) SMALL EMPLOYER AGREEMENTS.—

2 Failure to have in effect or comply with an

3 agreement under subsection (a)(1)(A) is subject

4 to a civil monetary penalty (not to exceed $500)

5 for each day in which the violation continues.

6 (B) FAILURE TO OFFER COVERAGE OR

7 PROVIDE FOR WAGE DEDUCTION.—Failure to

8 offer coverage or provide for deduction from

9 wages required under subsection (b)(1) is sub10 ject to a civil monetary penalty (not to exceed

11 $500) for each day in which the violation con12 tinues.

13 (C) VIOLATION OF NONDISCRIMINATION

14 REQUIREMENTS.—Failure to comply with the

15 requirement of subsection (c) is subject to a

16 civil monetary penalty (not to exceed $500) for

17 each day for each individual with respect to

18 which the failure occurs.

19 (2) DIRECT ENFORCEMENT.—

20 (A) HPPC AGREEMENT.—An agreement in

21 effect between a small employer and a HPPC is

22 directly enforceable by civil action by the HPPC

23 or by an employee (as a third-party beneficiary

24 of the agreement). In any such action, if the

25 HPPC or employee substantially prevails, the
30

•S 1579 IS

1 HPPC or employee is entitled to reasonable at2 torneys’ fees.

3 (B) OFFER.—The obligation to offer cov4 erage under subsection (b) with respect to an

5 employee is directly enforceable by civil action

6 by the employee. In any such action, if the em7 ployee substantially prevails, the employee is

8 entitled to reasonable attorneys’ fees.

9 Subtitle B—Health Plan

10 Purchasing Cooperatives (HPPCs)

11 SEC. 1101. ESTABLISHMENT AND ORGANIZATION; HPPC

12 AREAS.

13 (a) HPPC AREAS.—

14 (1) IN GENERAL.—For purposes of carrying out

15 this title, subject to paragraphs (2) and (3), each

16 State shall be considered a HPPC area.

17 (2) ALTERNATIVE, INTRASTATE AREAS.—Each

18 State may provide for the division of the State into

19 HPPC areas so long as—

20 (A) all portions of each metropolitan sta21 tistical area in a State are within the same

22 HPPC area, and

23 (B) the number of eligible individuals re24 siding within a HPPC area is not less than

25 250,000.
31

•S 1579 IS

1 (3) ALTERNATIVE, INTERSTATE AREAS.—In ac2 cordance with rules established by the National

3 Health Board, one or more contiguous States may

4 provide for the establishment of a HPPC area that

5 includes adjoining portions of the States so long as

6 such area, if it includes any part of a metropolitan

7 statistical area, includes all of such area. In the case

8 of a HPPC serving a multi-state area, section

9 1701(c)(2)(C) shall only apply to the area if all the

10 States encompassed in the area by law agree to the

11 number to be substituted.

12 (b) ESTABLISHMENT OF HPPCS.—

13 (1) IN GENERAL.—Each State shall provide, by

14 legislation or otherwise, for the establishment by not

15 later than July 1, 1994, as a not-for-profit corpora16 tion, with respect to each HPPC area (specified

17 under subsection (a)) of a health plan purchasing

18 cooperative (each in this title referred to as a

19 ‘‘HPPC’’).

20 (2) INTERSTATE HPPC AREAS.—HPPCs with

21 respect to interstate areas specified under subsection

22 (a)(3) shall be established in accordance with rules

23 of the National Health Board.

24 (c) COOPERATIVE BOARD.—
32

•S 1579 IS

1 (1) ESTABLISHMENT.—Each HPPC shall be

2 governed by a Cooperative Board which shall be ini3 tially appointed by the Governor or other chief exec4 utive officer of the State (or as otherwise provided

5 under State law or by the National Health Board in

6 the case of a HPPC described in subsection (b)(2)).

7 The Cooperative Board for a HPPC shall be respon8 sible for ensuring the performance of the duties of

9 the HPPC under subsection (d).

10 (2) ELECTION.—By not later than January 1,

11 1996, each HPPC shall provide under State law (or

12 in the case of a HPPC described in subsection

13 (b)(2), under rules established by the National

14 Health Board) for the election of members to the

15 Cooperative Board from among eligible individuals

16 who are enrolled in an accountable health plan of17 fered by the HPPC and who do not receive remu18 neration from the HPPC or any such accountable

19 health plan for any services provided.

20 (3) LIMITATION ON COMPENSATION.—A HPPC

21 shall not provide compensation to members of the

22 Cooperative Board other than reimbursement for

23 reasonable and necessary expenses incurred in the

24 performance of their duties as members of the Coop25 erative Board.
33

•S 1579 IS

1 (d) DUTIES OF HPPCS.—

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

3 each HPPC shall—

4 (A) enter into agreements with accountable

5 health plans under section 1102;

6 (B) enter into agreements with small em7 ployers under section 1103;

8 (C) offer enrollment and enroll individuals

9 under accountable health plans, in accordance

10 with section 1104;

11 (D) charge, receive, and forward adjusted

12 premiums, in accordance with section 1105, in13 cluding reconciling low-income assistance

14 among accountable health plans;

15 (E) provide for coordination with other

16 HPPCs, in accordance with section 1106;

17 (F) provide for establishment of a com18 plaint process and appointment of an ombuds19 man, in accordance with section 1107;

20 (G) conduct and analyze surveys of en21 rollee satisfaction and monitor enrollee

22 disenrollment, in accordance with section 1108;

23 and

24 (H) carry out other functions provided for

25 under this title.
34

•S 1579 IS

1 (2) LIMITATION ON ACTIVITIES.—A HPPC

2 shall not—

3 (A) perform any activity (including review,

4 approval, or enforcement) relating to payment

5 rates for providers;

6 (B) except as specifically provided under

7 sections 1102, 1105, or 1106(c), perform any

8 activity (including review, approval, or enforce9 ment) relating to premium rates for health

10 plans;

11 (C) perform any activity (including reg12 istration or enforcement) relating to compliance

13 of accountable health plans with the require14 ments of part 1 of subtitle C (other than as re15 quired to carry out its specific duties under this

16 subtitle or under section 1305(c)(2));

17 (D) discriminate among such plans, other

18 than on the basis of the performance of such

19 plans under this title, as determined in accord20 ance with standards established by the National

21 Health Board under this title;

22 (E) assume financial risk in relation to any

23 such plan; or

24 (F) perform other activities identified by

25 the National Health Board as being inconsist-
35

•S 1579 IS

1 ent with the performance of its duties under

2 paragraph (1).

3 (e) PERFORMANCE OF DUTIES.—

4 (1) IN GENERAL.—If the National Health

5 Board finds that a HPPC is not carrying out its du6 ties as required under subsection (d), the Board

7 shall notify the Cooperative Board of the HPPC,

8 and the Governor (or other chief executive officer) of

9 each State in which the HPPC operates, of such

10 finding and permit the Board an opportunity to take

11 such action as may be necessary for the HPPC to

12 carry out such duties.

13 (2) CORRECTIVE ACTION.—If, after such an op14 portunity, the deficiency has not been corrected, the

15 National Health Board may—

16 (A) order the HPPC to hold a new election

17 for members of the Cooperative Board, and

18 (B) take such other action as may be ap19 propriate in order to assure the performance of

20 such duties.

21 (3) PERFORMANCE CRITERIA.—

22 (A) DEVELOPMENT.—The National Health

23 Board shall develop criteria relating to HPPC

24 performance of duties. Such criteria shall in25 clude criteria relating to the following:
36

•S 1579 IS

1 (i) OVERHEAD.—The HPPC overhead

2 percentage (computed under section

3 1105(b)(2)) for the HPPC.

4 (ii) FLOAT.—The average period (de5 scribed in section 1102(d)(2)) between the

6 HPPC’s receipt and payment of funds re7 ceived.

8 (iii) SATISFACTION OF ELIGIBLE INDI9 VIDUALS.—The satisfaction of eligible indi10 viduals with the performance of the HPPC

11 (as measured under surveys under section

12 1108).

13 (iv) ENROLLMENT OF AT RISK INDI14 VIDUALS.—The effectiveness of the

15 HPPC’s activities under section

16 1102(b)(3) in enrolling individuals who are

17 eligible for low-income assistance or who

18 reside in medically underserved areas.

19 (B) REPORT.—Each HPPC shall report to

20 the National Health Board, at such time and in

21 such manner as the Board specifies, such infor22 mation as the Board may require in order to

23 evaluate the performance of the HPPC in ac24 cordance with the criteria developed under sub25 paragraph (A).
37

•S 1579 IS

1 (C) PUBLICATION.—The National Health

2 Board shall publish annually a report that pro3 vides a comparison of the relative performance

4 of each HPPC, based on such criteria.

5 (f) EDUCATION AND DEVELOPMENT GRANTS.—

6 There are authorized to be appropriated $25,000,000 for

7 fiscal year 1994 for grants to assist States in the develop8 ment of HPPCs.

9 SEC. 1102. AGREEMENTS WITH ACCOUNTABLE HEALTH

10 PLANS (AHPS).

11 (a) AGREEMENTS.—

12 (1) OPEN AHPS.—Each HPPC for a HPPC

13 area shall enter into an agreement under this section

14 with each open accountable health plan (described in

15 section 1701(b)(4)(B)) that serves residents of the

16 area. Each such agreement under this section shall

17 include (as specified by the National Health Board)

18 provisions consistent with the requirements of the

19 succeeding subsections of this section. A HPPC may

20 not terminate such an agreement except as provided

21 in paragraph (3)(A).

22 (2) CLOSED AHPS.—Each HPPC for a HPPC

23 area shall enter into a special agreement under this

24 paragraph with each closed AHP that serves resi25 dents of the area, in order to carry out subsection
38

•S 1579 IS

1 (e). Except as otherwise specifically provided, any

2 reference in this Act to an agreement under this sec3 tion shall not be considered to be a reference to an

4 agreement under this paragraph.

5 (3) TERMINATION OF AGREEMENT.—In accord6 ance with regulations of the National Health

7 Board—

8 (A) the HPPC may terminate an agree9 ment under paragraph (1) or (2) if—

10 (i) the AHP’s registration under part

11 1 of subtitle C is revoked, or

12 (ii) the AHP is determined (in accord13 ance with rules established by the Board)

14 substantially to have violated the condi15 tions of such agreement; and

16 (B) the AHP may terminate either such

17 agreement only upon sufficient notice in order

18 to provide for the orderly enrollment of enroll19 ees under other AHPs.

20 The Board shall establish a process for the termi21 nation of agreements under this paragraph.

22 (b) OFFER OF ENROLLMENT OF INDIVIDUALS.—

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

24 this section between an AHP and a HPPC, the

25 HPPC shall offer, on behalf of the AHP, enrollment
39

•S 1579 IS

1 in the AHP to eligible individuals (as defined in sec2 tion 1701(a)(1)) at the applicable monthly premium

3 rates (specified under section 1105(a)).

4 (2) TIMING OF OFFER.—The offer of enroll5 ment shall be available—

6 (A) to eligible individuals who are employ7 ees of small employers, during the 30-day pe8 riod beginning on the date of commencement of

9 employment, and

10 (B) to other eligible individuals, at such

11 time (including an annual open enrollment pe12 riod specified by the National Health Board) as

13 the HPPC shall specify, consistent with section

14 1104(b).

15 (3) OUTREACH.—In carrying out the respon16 sibilities under paragraph (1), a HPPC shall per17 form such activities, including outreach, as may be

18 necessary to seek actively the enrollment of eligible

19 individuals, including individuals who are eligible for

20 low-income assistance or who reside in medically un21 derserved areas.

22 (c) RECEIPT OF GROSS PREMIUMS.—

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

24 this section between a HPPC and an AHP, payment

25 of premiums shall be made, by individuals or em-
40

•S 1579 IS

1 ployers on their behalf, directly to the HPPC for the

2 benefit of the AHP.

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

5 the option of an eligible individual described in para6 graph (2)(B), on a quarterly basis). The HPPC may

7 provide for penalties and grace periods for late pay8 ment.

9 (3) AHPS RETAIN RISK OF NONPAYMENT.—

10 Nothing in this subsection shall be construed as

11 placing upon a HPPC any risk associated with fail12 ure to make prompt payment of premiums (other

13 than the portion of the premium representing the

14 HPPC overhead amount). Each eligible individual

15 who enrolls with an AHP through the HPPC is lia16 ble to the AHP for premiums.

17 (d) FORWARDING OF ADJUSTED PREMIUMS.—

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

19 this section between an AHP and a HPPC, subject

20 to section 1205(c), the HPPC shall forward to each

21 AHP in which an eligible individual in an enrollee

22 unit has been enrolled an amount equal to the sum

23 of—
41

•S 1579 IS

1 (A) the standard premium rate (estab2 lished under section 1205) received for the pre3 mium class, and

4 (B) the product of (i) the lowest standard

5 premium rate offered by an open AHP for the

6 premium class, and (ii) a risk-adjustment factor

7 (determined and adjusted in accordance with

8 section 1306(b)) for the enrollee unit.

9 (2) PAYMENTS.—Payments shall be made by

10 the HPPC under this subsection within a period

11 (specified by the National Health Board and not to

12 exceed 3 business days) after the time of receipt of

13 the premium from the employer of the eligible indi14 vidual or the eligible individual, as the case may be,

15 based on estimates of applicable risk-adjustment fac16 tors. Subsequent payments shall be adjusted as ap17 propriate to reflect differences between the payments

18 that were made based on estimates and the pay19 ments that should have been made based on re20 ported (and audited) information.

21 (3) ADJUSTMENTS FOR DIFFERENCES IN

22 NONPAYMENT RATES.—In accordance with rules es23 tablished by the National Health Board, each agree24 ment between an AHP and a HPPC under this sec25 tion shall provide that, if a HPPC determines that
42

•S 1579 IS

1 the rates of nonpayment of premiums during grace

2 periods established under subsection (c)(2) vary ap3 preciably among AHPs, the HPPC shall provide for

4 such adjustments in the payments made under this

5 subsection as will place each AHP in the same posi6 tion as if the rates of nonpayment were the same.

7 (e) RECONCILIATION OF LOW-INCOME ASSISTANCE

8 AMONG ACCOUNTABLE HEALTH PLANS.—

9 (1) IN GENERAL.—Each agreement between an

10 AHP and a HPPC under this section (including a

11 special agreement entered into under subsection

12 (a)(2)) shall provide for such payments from the

13 AHP to the HPPC, and such payments from the

14 HPPC to the AHP, as the National Health Board

15 determines is necessary in order to assure the equi16 table distribution among all AHPs, nationwide, of

17 reductions in premiums and cost-sharing under sec18 tion 1205(c) and section 1202(c), respectively.

19 (2) INTER-HPPC COORDINATION.—For inter20 HPPC coordination of reconciliation processes under

21 paragraph (1), see section 1106(c).

22 (f) NOTICE OF DISENROLLMENT.—Within 3 business

23 days after receiving a notice of disenrollment of an individ24 ual from an AHP offered by a HPPC, the HPPC shall

25 notify the AHP of such notice.
43

•S 1579 IS

1 (g) LIMITATION ON EMPLOYMENT.—An AHP agrees

2 not to employ (or enter into a consulting or similar con3 tract with) any individual who was, within the previous

4 2 years, an employee of the HPPC with which the AHP

5 has an agreement in effect under this section.

6 (h) STANDARDS FOR OPERATIONAL SOFTWARE.—

7 The National Health Board shall establish standards for

8 operational software that may be used by HPPCs and

9 AHPs in carrying out agreements under this section.

10 SEC. 1103. AGREEMENTS WITH SMALL EMPLOYERS.

11 (a) IN GENERAL.—Each HPPC for a HPPC area

12 shall enter into an agreement under this section with each

13 small employer that employs individuals in the area. Each

14 agreement under this section, between a small employer

15 and a HPPC shall include (as specified by the National

16 Health Board) provisions consistent with the requirements

17 specified in the succeeding subsections of this section.

18 (b) FORWARDING INFORMATION ON ELIGIBLE EM19 PLOYEES.—

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

21 this section between a small employer and a HPPC,

22 the employer must forward to the appropriate

23 HPPC the name and address (and other identifying

24 information required by the HPPC) of each em25 ployee (including part-time and seasonal employees).
44

•S 1579 IS

1 (2) APPROPRIATE HPPC.—In this subsection,

2 the term ‘‘appropriate HPPC’’ means the HPPC for

3 the principal place of business of the employer or (at

4 the option of an employee) the HPPC serving the

5 place of residence of the employee.

6 (c) PAYROLL DEDUCTION.—

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

8 this section between a small employer and a HPPC,

9 if the HPPC notifies the employer that an eligible

10 employee is enrolled in an AHP through the HPPC,

11 the employer shall provide for—

12 (A) the deduction, from the employee’s

13 wages or other compensation, of the amount of

14 the premium due (less the amount of any em15 ployer contribution), and

16 (B) payment of such amount (including

17 any such contribution) to the HPPC.

18 In the case of an employee who is paid wages or

19 other compensation on a monthly or more frequent

20 basis, an employer shall not be required to provide

21 for payment of amounts to a HPPC other than at

22 the same time at which the amounts are deducted

23 from wages or other compensation. In the case of an

24 employee who is paid wages or other compensation

25 less frequently than monthly, an employer may be
45

•S 1579 IS

1 required to provide for payment of amounts to a

2 HPPC on a monthly basis.

3 (2) ADDITIONAL PREMIUMS.—If the sum of the

4 amount of the employer contribution and the

5 amount withheld under paragraph (1) is not suffi6 cient to cover the entire cost of the premiums, the

7 employee shall be responsible for paying directly to

8 the HPPC the difference between the amount of

9 such premiums and such sum.

10 (d) LIMITED EMPLOYER OBLIGATIONS.—Nothing in

11 this section shall be construed as—

12 (1) requiring an employer to provide directly for

13 enrollment of eligible employees under an account14 able health plan or other health plan,

15 (2) requiring an employer to make, or prevent16 ing an employer from making, information about

17 such plans available to such employees, or

18 (3) requiring an employer to make, or prevent19 ing an employer from making, an employer contribu20 tion for coverage of such individuals under such a

21 plan.

22 SEC. 1104. ENROLLING INDIVIDUALS IN ACCOUNTABLE

23 HEALTH PLANS THROUGH A HPPC.

24 (a) OFFER OF ENROLLMENT.—
46

•S 1579 IS

1 (1) IN GENERAL.—Each HPPC shall offer in

2 accordance with this section eligible individuals the

3 opportunity to enroll in an AHP for the HPPC area

4 in which the individual resides.

5 (2) FREEZING ENROLLMENT IN INSOLVENT

6 PLANS.—If a State superintendent of insurance,

7 State insurance commissioner, or other State official

8 with regulatory authority over an AHP has deter9 mined that the AHP is insolvent, a HPPC may dis10 continue offering enrollment in the AHP to individ11 uals not previously enrolled in the plan.

12 (b) ENROLLMENT PROCESS.—

13 (1) IN GENERAL.—Each HPPC shall establish

14 an enrollment (and disenrollment) process in accord15 ance with rules established by the National Health

16 Board consistent with this subsection.

17 (2) INITIAL ENROLLMENT PERIOD.—For each

18 eligible individual, at the time the individual first be19 comes an eligible individual in a HPPC area of a

20 HPPC, there shall be an initial enrollment period (of

21 not less than 30 days) during which the individual

22 may enroll in an AHP.

23 (3) GENERAL ENROLLMENT PERIOD.—Each

24 HPPC shall establish an annual period, of not less

25 than 30 days, during which eligible individuals may
47

•S 1579 IS

1 enroll in an AHP or change the AHP in which the

2 individual is enrolled.

3 (4) SPECIAL ENROLLMENT PERIODS.—In the

4 case of individuals who—

5 (A) through marriage, divorce, birth or

6 adoption of a child, or similar circumstances,

7 experience a change in family composition, or

8 (B) experience a change in employment

9 status (including a significant change in the

10 terms and conditions of employment),

11 each HPPC shall provide for a special enrollment

12 period in which the individual is permitted to change

13 the individual or family basis of coverage or the

14 AHP in which the individual is enrolled. The cir15 cumstances under which such special enrollment pe16 riods are required and the duration of such periods

17 shall be specified by the National Health Board.

18 (5) TRANSITIONAL ENROLLMENT PERIOD.—

19 Each HPPC shall provide for a special transitional

20 enrollment period (during a period beginning in the

21 Fall of 1994 specified by the National Health

22 Board) during which eligible individuals may first

23 enroll.
48

•S 1579 IS

1 (6) NO DUPLICATE ENROLLMENT.—No HPPC

2 shall permit an individual to be enrolled in more

3 than one AHP at a time.

4 (7) INDIVIDUAL ENROLLMENT OF FAMILY MEM5 BERS PERMITTED.—Nothing in this section shall be

6 construed as preventing an eligible individual who is

7 an eligible family member of an eligible employee or

8 other principal enrollee from electing to enroll on an

9 individual basis in a plan.

10 (c) ANALYSIS AND DISTRIBUTION OF COMPARATIVE

11 INFORMATION.—

12 (1) ANALYSIS OF INFORMATION.—Each HPPC

13 shall analyze the information reported under section

14 1203(a) on AHPs for which the HPPC is offering

15 enrollment (and may analyze such information on

16 closed AHPs serving residents of the HPPC area) in

17 order to distribute the information under paragraph

18 (2) in a form, consistent with section 1307(a)(2),

19 that permits the direct comparison of different

20 AHPs on the basis of the ability of the AHPs—

21 (A) to maintain and improve clinical

22 health, functional status, and well-being, and

23 (B) to satisfy enrolled individuals.

24 Such comparison may also be made to show changes

25 in the performance of AHPs over time.
49

•S 1579 IS

1 (2) DISTRIBUTION OF INFORMATION.—

2 (A) IN GENERAL.—Each HPPC shall dis3 tribute, to eligible individuals and employers,

4 information, in comparative form, on the prices,

5 health outcomes, and enrollee satisfaction of the

6 different AHPs for which it is offering enroll7 ment and may provide other information per8 taining to the quality of such AHPs. Such dis9 tribution shall occur at least annually before

10 each general enrollment period. Each HPPC

11 also shall make such information available to

12 other interested persons.

13 (B) ADDITIONAL INFORMATION.—Such in14 formation shall include—

15 (i) a summary of the analysis of infor16 mation collected under paragraph (1) and

17 information collected under section

18 1108(a)(2), and

19 (ii) a breakdown of the portion of

20 AHP premiums attributable to the HPPC

21 overhead amount (specified under section

22 1105(b)(3)).

23 (d) PERIOD OF COVERAGE.—

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

25 of an eligible individual who enrolls with an AHP
50

•S 1579 IS

1 through a HPPC during an initial enrollment period,

2 coverage under the plan shall begin on such date

3 (not later than the first day of the first month that

4 begins at least 15 days after the date of enrollment)

5 as the National Health Board shall specify.

6 (2) GENERAL ENROLLMENT PERIODS.—In the

7 case of an eligible individual who enrolls with an

8 AHP through a HPPC during a general enrollment

9 period, coverage under the plan shall begin on the

10 first day of the first month beginning at least 15

11 days after the end of such period.

12 (3) SPECIAL ENROLLMENT PERIODS.—

13 (A) IN GENERAL.—In the case of an eligi14 ble individual who enrolls with an AHP during

15 a special enrollment period described in sub16 section (b)(4), coverage under the plan shall

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

18 of the first month that begins at least 15 days

19 after the date of enrollment) as the Board shall

20 specify, except that coverage of family members

21 shall begin as soon as possible on or after the

22 date of the event that gives rise to the special

23 enrollment period.

24 (B) TRANSITIONAL SPECIAL ENROLLMENT

25 PERIOD.—In the case of an eligible individual
51

•S 1579 IS

1 who enrolls with an AHP during the transi2 tional special enrollment period described in

3 subsection (b)(5), coverage under the plan shall

4 begin on January 1, 1995.

5 (4) MINIMUM PERIOD OF ENROLLMENT.—In

6 order to avoid adverse selection, each HPPC may re7 quire, consistent with rules of the National Health

8 Board, that enrollments with AHPs be for not less

9 than a specified minimum enrollment period (with

10 exceptions permitted for such exceptional cir11 cumstances as the Board may recognize).

12 SEC. 1105. RECEIPT OF PREMIUMS.

13 (a) ENROLLMENT CHARGE.—The amount charged by

14 a HPPC for coverage under an AHP in a HPPC area

15 is equal to the sum of—

16 (1) the amount of the premium applicable to

17 the individual under section 1205(a)(1)(B) for such

18 coverage, and

19 (2) the HPPC overhead amount established

20 under subsection (b)(3) for enrollment of individuals

21 in the HPPC area.

22 (b) HPPC OVERHEAD AMOUNT.—

23 (1) HPPC BUDGET.—Each HPPC shall estab24 lish a budget for each year for each HPPC area in
52

•S 1579 IS

1 accordance with regulations established by the Na2 tional Health Board.

3 (2) HPPC OVERHEAD PERCENTAGE.—The

4 HPPC shall compute for each HPPC area an over5 head percentage which, when applied for each en6 rollee unit (whether enrolled on a family or individ7 ual basis) to the weighted average of the standard

8 premium amounts for premium classes for enroll9 ment on an individual basis (taking into account any

10 reduction in premiums attributable to low-income as11 sistance under section 2002), will provide for reve12 nues equal to the budget for the HPPC area for the

13 year. Such percentage may in no case exceed 1 per14 centage point.

15 (3) HPPC OVERHEAD AMOUNT.—The HPPC

16 overhead amount for enrollment, whether on an indi17 vidual or family basis, in an AHP for a HPPC area

18 for a month is equal to the applicable HPPC over19 head percentage (computed under paragraph (2))

20 multiplied by the weighted average of the standard

21 premium amounts for premium classes for enroll22 ment on an individual basis under the AHP for the

23 month (taking into account any reduction in pre24 miums attributable to low-income assistance under

25 section 2002).
53

•S 1579 IS

1 SEC. 1106. COORDINATION AMONG HPPCS.

2 (a) IN GENERAL.—The National Health Board shall

3 establish rules consistent with this section for—

4 (1) coordination among HPPCs in cases where

5 small employers are located in one HPPC area and

6 their employees reside in a different HPPC area

7 (and are eligible for enrollment with AHPs located

8 in the other area), and

9 (2) coordination among HPPCs in the low-in10 come assistance reconciliation processes under sec11 tion 1102(e)(1).

12 The Board shall establish standards for operational soft13 ware in order to promote coordination among HPPCs

14 under this title.

15 (b) COORDINATION RULES.—Under the rules estab16 lished under subsection (a)(1)—

17 (1) HPPC FOR EMPLOYER.—The HPPC for

18 the principal place of business of a small employer

19 shall be responsible—

20 (A) for providing information to the em21 ployer’s employees on AHPs for areas in which

22 employees reside;

23 (B)(i) for enrolling employees under the

24 AHP selected (even if the AHP selected is not

25 in the same HPPC area as the HPPC) and (ii)

26 if the AHP chosen is not in the same HPPC
54

•S 1579 IS

1 area as the HPPC, for forwarding the enroll2 ment information to the HPPC for the area in

3 which the AHP selected is located; and

4 (C) in the case of premiums to be paid

5 through payroll deduction, or employer con6 tribution, or both, to receive such premiums

7 and forward them to the HPPC for the area in

8 which the AHP selected is located.

9 (2) HPPC FOR EMPLOYEE RESIDENCE.—The

10 HPPC for the HPPC area in which an employee re11 sides shall be responsible for providing other HPPCs

12 with information concerning AHPs being offered in

13 such HPPC area.

14 (c) COORDINATION OF RECONCILIATION OF LOW-IN15 COME ASSISTANCE.—Under the rules established under

16 subsection (a)(2), the Board shall provide for such pay17 ments among the different HPPCs as the Board deter18 mines is necessary in order to assure the equitable dis19 tribution among AHPs in different HPPC areas of adjust20 ments in premiums and cost-sharing under section

21 1205(c) and section 1202(c), respectively.

22 SEC. 1107. COMPLAINT PROCESS; OMBUDSMAN.

23 (a) COMPLAINT PROCESS.—Each HPPC shall estab24 lish a process for the receipt and disposition of complaints

25 regarding the performance of its duties.
55

•S 1579 IS

1 (b) OMBUDSMAN.—

2 (1) IN GENERAL.—Each HPPC shall provide—

3 (A) for the appointment of an ombudsman,

4 and

5 (B) for a reasonable salary and staff for

6 the ombudsman.

7 (2) DUTIES AND AUTHORITIES.—Each ombuds8 man shall have the duty and authority to do the fol9 lowing:

10 (A) RELATING TO HPPCS.—(i) To inves11 tigate complaints regarding the failure of a

12 HPPC to perform its duties.

13 (ii) To assist AHPs and eligible individuals

14 in resolving grievances with the HPPC.

15 (iii) To issue public reports and reports to

16 the National Health Board on the HPPC’s per17 formance of such duties.

18 (B) RELATING TO AHPS.—(i) To inves19 tigate complaints concerning the failure of an

20 AHP to meet the applicable requirements of

21 part 1 of subtitle C.

22 (ii) To assist enrollees in AHPs in resolv23 ing grievances with such plans.

24 (iii) To issue public reports and reports to

25 the National Health Board on any finding that
56

•S 1579 IS

1 an AHP has failed to meet the applicable re2 quirements of part 1 of subtitle C.

3 (3) ACCESS TO INFORMATION.—The HPPC

4 shall provide the ombudsman and the ombudsman’s

5 staff with access to such information as may be nec6 essary to carry out such duties.

7 SEC. 1108. ENROLLEE SATISFACTION SURVEYS; MONITOR8 ING ENROLLEE DISENROLLMENT.

9 (a) ENROLLEE SATISFACTION SURVEYS.—

10 (1) IN GENERAL.—Each HPPC, using a stand11 ard survey instrument prescribed by the National

12 Health Board, shall collect information on the satis13 faction of eligible individuals with—

14 (A) the performance of the HPPC, and

15 (B) the performance of the AHP in which

16 they are enrolled.

17 (2) ANALYSIS.—Each HPPC shall—

18 (A) analyze the information collected under

19 paragraph (1),

20 (B) submit to the National Health Board

21 an annual report that summarizes such analy22 sis, and

23 (C) make a summary of such analysis

24 available to enrollees under section 1104(c)(2).
57

•S 1579 IS

1 (b) MONITORING ENROLLEE DISENROLLMENT.—

2 Each HPPC shall monitor enrollee disenrollment from

3 AHPs in order to determine whether there is a pattern

4 of disenrollment which does not reflect the distribution of

5 age, income, health condition, place of residence, and other

6 potential risk characteristics of their enrollees. If a HPPC

7 determines that such a pattern exists, the HPPC shall

8 provide the National Health Board with such information

9 on such pattern as the Board may specify and may peti10 tion under section 1305(c)(2) for the revocation of the reg11 istration of the AHP.

12 Subtitle C—Accountable Health

13 Plans (AHPs)

14 PART 1—REQUIREMENTS FOR ACCOUNTABLE

15 HEALTH PLANS

16 SEC. 1201. REGISTRATION PROCESS; QUALIFICATIONS.

17 (a) IN GENERAL.—The National Health Board shall

18 provide a process whereby a health plan (as defined in sec19 tion 1701(c)(1)) may be registered with the Board by its

20 sponsor as an accountable health plan. Such a registered

21 AHP is authorized to allocate its resources (except as oth22 erwise specifically required under this subtitle) to maxi23 mize the health of its enrollees.

24 (b) QUALIFICATIONS.—In order to be eligible to be

25 registered, a plan must—
58

•S 1579 IS

1 (1) provide, in accordance with section 1202,

2 for coverage of the uniform set of effective benefits

3 specified by the Board, for adjustments in cost-shar4 ing in the case of low-income individuals, and for

5 meeting quality standards established by the Board;

6 (2) provide, in accordance with section 1203,

7 for the collection and provision to the Board and

8 HPPCs of certain information regarding its enrollees

9 and provision of services;

10 (3) not discriminate in enrollment or benefits,

11 as required under section 1204;

12 (4) establish standard premiums for the uni13 form set of effective benefits, in accordance with sec14 tion 1205;

15 (5) meet financial solvency requirements, in ac16 cordance with section 1206;

17 (6) meet requirements relating to grievance pro18 cedures, physician incentive plans, advance direc19 tives, and agent commissions, in accordance with

20 section 1207;

21 (7) in the case of an open plan (as defined in

22 section 1701(b)(4)(B)), meet certain additional re23 quirements under section 1208 (relating to offering

24 of plans, acceptance of enrollees, and participation
59

•S 1579 IS

1 as a plan under the medicare program and under

2 the Federal employees health benefits program);

3 (8) provide for coordination of benefits with

4 low-income assistance under subtitle A of title II, in

5 accordance with section 1209;

6 (9) provide for any required medicare adjust7 ment payments, in accordance with section 1210;

8 (10) pay certain premiums to the National

9 Medical Education Fund, in accordance with section

10 1211; and

11 (11) pay registration fees imposed under sec12 tions 1303(d)(1) and 1304(d).

13 (c) MINIMUM SIZE FOR CLOSED PLANS.—No plan

14 may be registered as a closed AHP under this section un15 less the plan covers at least a number of employees greater

16 than the applicable number of employees specified in or

17 under section 1701(c)(2).

18 SEC. 1202. SPECIFIED UNIFORM SET OF EFFECTIVE BENE19 FITS; REDUCTION IN COST-SHARING FOR

20 LOW-INCOME INDIVIDUALS; QUALITY STAND21 ARDS.

22 (a) BENEFITS.—The National Health Board shall

23 not accept the registration of a health plan as an AHP

24 unless, subject to subsection (b), the plan—
60

•S 1579 IS

1 (1) offers only the uniform set of effective bene2 fits, established under section 1302(a)(1);

3 (2) has entered into arrangements with a suffi4 cient number, distribution, and variety of providers

5 to assure that the uniform set of effective benefits

6 is—

7 (A) available and accessible to each en8 rollee, within the area served by the plan, with

9 reasonable promptness and in a manner which

10 assures continuity, and

11 (B) when medically necessary, available

12 and accessible twenty-four hours a day and

13 seven days a week,

14 without imposing cost-sharing in excess of the cost15 sharing described in paragraph (4);

16 (3) provides for the application of coverage

17 standards, with respect to the uniform set of effec18 tive benefits, which are disclosed by the plan to plan

19 enrollees (in a manner specified by the Board) and

20 which are consistent with coverage criteria under

21 section 1302(b) (as interpreted by the Board);

22 (4) if it is a network plan (as defined in section

23 1222(b)(1)) makes available to nonparticipating pro24 viders, upon request, the criteria used in selecting
61

•S 1579 IS

1 those providers that are permitted to participate in

2 the plan;

3 (5)(A) provides, subject to subsection (c), for

4 imposition of uniform cost-sharing, specified under

5 such section as part of such set of benefits, and

6 (B) does not permit providers participating in

7 the plan under paragraph (2) to charge for services

8 included in the uniform set of effective benefits serv9 ices amounts in excess of such cost-sharing; and

10 (6) does not accept enrollment of an individual

11 who is enrolled under another AHP unless, as of the

12 effective date of the enrollment, the enrollment

13 under the other plan will be terminated.

14 (b) TREATMENT OF ADDITIONAL BENEFITS.—

15 (1) IN GENERAL.—Subject to paragraphs (2)

16 and (3), subsection (a) shall not be construed as

17 preventing an AHP from offering benefits in addi18 tion to the uniform set of effective benefits, if such

19 additional benefits are offered, and priced, sepa20 rately from the benefits described in subsection (a).

21 (2) NO DUPLICATIVE BENEFITS OR COVERAGE

22 OF COST-SHARING.—An AHP or other entity may

23 not offer under paragraph (1) or otherwise any addi24 tional benefits or plan that has the effect—
62

•S 1579 IS

1 (A) of duplicating the benefits required

2 under subsection (a), or

3 (B) of reducing the cost-sharing below the

4 uniform cost-sharing.

5 The National Health Board may file an action, in

6 any appropriate court, to enjoin an entity (other

7 than an AHP) that violates this paragraph.

8 (c) REDUCTION IN COST-SHARING FOR LOW-INCOME

9 INDIVIDUALS.—In the case of a low-income individual (as

10 defined in section 2009(a)(1)) eligible for cost-sharing as11 sistance under section 2003(a) and enrolled with an AHP,

12 the AHP shall reduce the cost-sharing otherwise applica13 ble to amounts that are nominal (as specified for purposes

14 of section 2003(a)(1)).

15 (d) LIMITATION ON IMPOSITION OF COST-SHAR16 ING.—In order to assure that providers of services for

17 which benefits are available through an AHP do not im18 pose cost-sharing in excess of that permitted under sub19 section (a)(5), each AHP may not provide payment for

20 services (other than emergency services) furnished by a

21 provider with an arrangement described in subsection

22 (a)(2) to meet the uniform set of effective benefits unless

23 the provider has agreed (in a manner specified by the Na24 tional Health Board) not to impose cost-sharing in excess

25 of that so specified.
63

•S 1579 IS

1 (e) QUALITY STANDARDS.—The National Health

2 Board shall establish standards relating to the minimum

3 level of acceptable quality for an AHP’s provision of the

4 uniform set of effective benefits. In order for a plan to

5 be registered under this subtitle, the plan must agree to

6 provide benefits in a manner that complies with such

7 standards.

8 SEC. 1203. COLLECTION AND PROVISION OF STANDARD9 IZED INFORMATION.

10 (a) PROVISION OF INFORMATION.—

11 (1) IN GENERAL.—Each AHP must provide the

12 applicable HPPC and the National Health Board (at

13 a time, not less frequently than annually, and in an

14 electronic, standardized form and manner specified

15 by the Board) such information as the Board deter16 mines to be necessary, consistent with this sub17 section and sections 1104(c) and 1307, to forward

18 payments to AHPs under section 1102(d) and to

19 evaluate the performance of the AHP in providing

20 the uniform set of effective benefits to enrollees in

21 each HPPC area.

22 (2) INFORMATION TO BE INCLUDED.—Subject

23 to paragraph (3), information to be provided under

24 this subsection shall include at least the following:
64

•S 1579 IS

1 (A) Information on the characteristics of

2 enrollees that may affect their need for or use

3 of health services and the determination of risk4 adjustment factors for enrollee units.

5 (B) Information on the types of treatments

6 and outcomes of treatments with respect to the

7 clinical health, functional status, and well-being

8 of enrollees.

9 (C) Information on health care expendi10 tures, volume and prices of procedures, and use

11 of specialized centers of care (for which infor12 mation is submitted under section 1308).

13 (D) Information on the flexibility per14 mitted by plans to enrollees in their selection of

15 providers.

16 (3) SPECIAL TREATMENT.—The Board may

17 waive the provision of such information under para18 graph (2), or require such other information, as the

19 Board finds appropriate in the case of a newly es20 tablished AHP for which such information is not

21 available.

22 (b) CONDITIONING CERTAIN PROVIDER PAY23 MENTS.—

24 (1) IN GENERAL.—In order to assure the collec25 tion of all information required from the direct pro-
65

•S 1579 IS

1 viders of services for which benefits are available

2 through an AHP, each AHP may not provide pay3 ment for services (other than emergency services)

4 furnished by a provider to meet the uniform set of

5 effective benefits unless the provider has given the

6 AHP (or has given directly to the National Health

7 Board and the applicable HPPC) standard informa8 tion (specified by the Board) respecting the services.

9 (2) FORWARDING INFORMATION.—If informa10 tion under paragraph (1) is given to the AHP, the

11 AHP is responsible for forwarding the information

12 to the Board and the applicable HPPC.

13 (c) AUDITING.—Each AHP shall provide, in accord14 ance with standards established by the Board, for the au15 diting of information provided under this section.

16 SEC. 1204. PROHIBITION OF DISCRIMINATION BASED ON

17 HEALTH STATUS FOR CERTAIN CONDITIONS;

18 LIMITATION ON PRE-EXISTING CONDITION

19 EXCLUSIONS.

20 (a) IN GENERAL.—Except as provided under sub21 section (b), an AHP may not deny, limit, or condition the

22 coverage under (or benefits of) the plan based on the

23 health status of an individual, claims experience of an indi24 vidual, receipt of health care by an individual, medical his25 tory of an individual, receipt of public subsidies by an indi-
66

•S 1579 IS

1 vidual, lack of evidence of insurability of an individual, or

2 any other characteristic of the individual that may relate

3 to the need for health care services.

4 (b) TREATMENT OF PREEXISTING CONDITION EX5 CLUSIONS FOR SERVICES.—

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

7 provisions of this subsection, an AHP may exclude

8 coverage with respect to services related to treat9 ment of a preexisting condition, but the period of

10 such exclusion may not exceed 6 months beginning

11 on the date of coverage under the plan. The exclu12 sion of coverage shall not apply to services furnished

13 to newborns and to pregnant women.

14 (2) CREDITING OF PREVIOUS COVERAGE.—

15 (A) IN GENERAL.—An AHP shall provide

16 that if an enrollee is in a period of continuous

17 coverage (as defined in subparagraph (B)(i)) as

18 of the date of initial coverage under such plan,

19 any period of exclusion of coverage with respect

20 to a preexisting condition for such services or

21 type of services shall be reduced by 1 month for

22 each month in the period of continuous cov23 erage.

24 (B) DEFINITIONS.—As used in this para25 graph:
67

•S 1579 IS

1 (i) PERIOD OF CONTINUOUS COV2 ERAGE.—

3 (I) IN GENERAL.—The term ‘‘pe4 riod of continuous coverage’’ means

5 the period beginning on the date an

6 individual is enrolled under an AHP

7 and ends on the date the individual is

8 not so enrolled for a continuous period

9 of more than 3 months.

10 (II) TRANSITIONAL AMNESTY AT

11 TIME OF INITIAL ENROLLMENT.—For

12 purposes of this clause, each individ13 ual who enrolls in an AHP before

14 July 1, 1995, is considered to have

15 had a period of continuous coverage

16 during the 6 months ending January

17 1, 1995.

18 (ii) PREEXISTING CONDITION.—The

19 term ‘‘preexisting condition’’ means, with

20 respect to coverage under an AHP, a con21 dition which has been diagnosed or treated

22 during the 3-month period ending on the

23 day before the first date of such coverage

24 (without regard to any waiting period).
68

•S 1579 IS

1 (3) LIMITATION TO UNIFORM SET OF EFFEC2 TIVE BENEFITS.—This subsection shall not apply to

3 treatment which is not within the uniform set of ef4 fective benefits.

5 (4) SPECIAL RULE FOR CERTAIN HEALTH

6 MAINTENANCE ORGANIZATIONS.—A health mainte7 nance organization that is an AHP shall not be con8 sidered as failing to meet the requirements of sec9 tion 1301 of the Public Health Service Act notwith10 standing that it provides for an exclusion of the type

11 described in paragraph (1) so long as such exclusion

12 is applied consistent with the previous provisions of

13 this subsection.

14 SEC. 1205. USE OF STANDARD PREMIUMS.

15 (a) STANDARD PREMIUMS FOR OPEN AHPS.—

16 (1) IN GENERAL.—

17 (A) ESTABLISHMENT.—Subject to sub18 section (c), each open AHP shall establish a

19 standard premium for the uniform set of effec20 tive benefits within each HPPC area in which

21 the plan is offered.

22 (B) APPLICABLE PREMIUM.—The amount

23 of premium applicable for all individuals within

24 a premium class (established under paragraph

25 (2)) is the standard premium amount multiplied
69

•S 1579 IS

1 by the premium class factor specified by the

2 Board for that class under paragraph (2)(B).

3 (C) UNIFORMITY WITHIN A YEAR.—Within

4 a HPPC area for individuals within a premium

5 class for months in a calendar year, the stand6 ard premium for all individuals in the class for

7 each month shall be the same.

8 (2) PREMIUM CLASSES.—

9 (A) IN GENERAL.—The National Health

10 Board shall establish premium classes—

11 (i) based on types of enrollment (de12 scribed in section 1701(c)(6)), and

13 (ii) within each type of enrollment,

14 based on the age of the principal enrollee

15 (or based on the age of another family

16 member of such enrollee in such cases as

17 the Board may provide).

18 In carrying out clause (ii), the Board shall es19 tablish reasonable age bands within which pre20 mium amounts will not vary for a type of en21 rollment.

22 (B) PREMIUM CLASS FACTORS.—

23 (i) IN GENERAL.—For each premium

24 class established under subparagraph (A),

25 the National Health Board shall establish
70

•S 1579 IS

1 a premium class factor that reflects, sub2 ject to clause (ii), the relative actuarial

3 value of benefits for that class compared to

4 the actuarial value of benefits for an aver5 age class. The weighted average of the pre6 mium class factors shall be 1. Such pre7 mium class factors shall be computed

8 based on the actuarial value of benefits for

9 such population group within the class

10 (which shall include the population eligible

11 to enroll with open AHPs through HPPCs)

12 as the Board determines to be appropriate.

13 (ii) LIMIT ON VARIATION IN PREMIUM

14 CLASS FACTORS WITHIN A TYPE OF EN15 ROLLMENT.—The highest premium class

16 factor within a type of enrollment may not

17 exceed twice the lowest premium class fac18 tor for that type of enrollment. The pre19 vious sentence shall not apply to premiums

20 imposed pursuant to a risk-sharing con21 tract under section 1876 of the Social Se22 curity Act.

23 (3) METHODOLOGY.—The amount of premiums

24 forwarded to AHPs is adjusted in accordance with

25 section 1102(d)(1).
71

•S 1579 IS

1 (b) STANDARD PREMIUMS FOR CLOSED AHPS.—

2 (1) ESTABLISHMENT.—Subject to subsection

3 (c) and paragraph (3), each closed AHP shall estab4 lish a standard premium for the uniform set of ef5 fective benefits within each HPPC area in which the

6 plan is offered.

7 (2) APPLICATION BY PREMIUM CLASS.—Subject

8 to paragraph (3)—

9 (A) the amount of premium applicable for

10 all individuals within a premium class is the

11 standard premium amount multiplied by the

12 premium class factor specified by the Board for

13 that class under subsection (a)(2)(B), and

14 (B) within a HPPC area for individuals

15 within a premium class, the standard premium

16 for all individuals in the premium class shall be

17 the same.

18 (3) COMMUNITY RATING PERMITTED.—

19 (A) SAME RATES WITHIN TYPE OF EN20 ROLLMENT WITHOUT REGARD TO AGE.—A

21 closed AHP may elect (in a manner specified by

22 the National Health Board) to apply this sub23 section on the basis of type of enrollment rather

24 than premium class. In such case, all references

25 in this subsection to premium class are deemed
72

•S 1579 IS

1 a reference to type of enrollment and the ref2 erence to premium class factor (for a type of

3 enrollment) is the weighted average of such fac4 tors for the plan within the type of enrollment.

5 (B) COMMUNITY RATING ACROSS HPPC

6 AREAS.—A closed AHP may elect (in a manner

7 specified by the Board) to apply this subsection

8 by treating two or more HPPC areas as a sin9 gle HPPC area. In such case, subject to sub10 paragraph (A), the premium class factor to be

11 applied shall be the weighted average of such

12 factors for the plan for the HPPC areas in13 volved.

14 (c) ADJUSTMENT OF PREMIUMS FOR LOW-INCOME

15 INDIVIDUALS.—

16 (1) VERY LOW-INCOME INDIVIDUALS.—In the

17 case of a very low-income individual (as defined in

18 section 2009(a)(3)) eligible for premium assistance

19 under section 2002 and enrolled with an AHP—

20 (A) the AHP shall adjust the premium

21 otherwise applicable so that the premium does

22 not exceed the sum of—

23 (i) the base Federal premium amount

24 (as defined in section 2005(a)(1)) for en25 rollment under the plan, and
73

•S 1579 IS

1 (ii) 10 percent of the amount (if any)

2 by which (I) the premium for the AHP in

3 which the individual is enrolled exceeds

4 (II) the reference premium rate (as defined

5 in section 2009(c)(4)); and

6 (B) the AHP shall credit against the pre7 mium owed the applicable Federal assistance

8 amount (as defined in section 2009(c)(1)) pro9 vided the plan under section 2002(a)(1)(B).

10 (2) MODERATELY LOW-INCOME INDIVIDUALS.—

11 In the case of a moderately low-income individual

12 (as defined in section 2009(a)(2)) eligible for pre13 mium assistance under section 2002 and enrolled

14 with an AHP—

15 (A) the AHP shall adjust the premium

16 otherwise applicable so that the premium does

17 not exceed the sum of—

18 (i) applicable low-income premium

19 amount (as defined in section 2009(c)(2))

20 for enrollment under the plan, plus

21 (ii) the individual responsibility per22 centage (as defined in section 2009(c)(5),

23 or 10 percentage points, whichever is

24 greater) of the amount by which (I) the

25 premium for the AHP in which the individ-
74

•S 1579 IS

1 ual is enrolled exceeds (II) the reference

2 premium rate (as defined in section

3 2009(c)(4)) for the individual; and

4 (B) the AHP shall credit against the pre5 mium owed the applicable Federal assistance

6 amount (as defined in section 2009(c)(1)) pro7 vided the plan under section 2002(a)(2)(B).

8 If the premium reduction under subparagraph (A) is

9 not a multiple of $1, the Board may provide for the

10 rounding of such reduction to a multiple of $1.

11 SEC. 1206. FINANCIAL SOLVENCY REQUIREMENTS.

12 (a) SOLVENCY PROTECTION.—

13 (1) FOR INSURED PLANS.—In the case of an

14 AHP that is an insured plan (as defined by the Na15 tional Health Board) and is issued in a State, in

16 order for the plan to be registered under this sub17 title the Board must find that the State has estab18 lished satisfactory protection of enrollees with re19 spect to potential insolvency of the plan.

20 (2) FOR OTHER PLANS.—In the case of an

21 AHP that is not an insured plan, the Board may re22 quire the plan to provide for such bond or provide

23 other satisfactory assurances that enrollees under

24 the plan are protected with respect to potential in25 solvency of the plan.
75

•S 1579 IS

1 (b) PROTECTION AGAINST PROVIDER CLAIMS.—In

2 the case of a failure of an AHP to make payments with

3 respect to the uniform set of effective benefits, under

4 standards established by the Board, an individual who is

5 enrolled under the plan is not liable to any health care

6 provider or practitioner with respect to the provision of

7 health services within such uniform set for payments in

8 excess of the amount for which the enrollee would have

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

10 timely manner.

11 SEC. 1207. GRIEVANCE MECHANISMS; ENROLLEE PROTEC12 TIONS; WRITTEN POLICIES AND PROCE13 DURES RESPECTING ADVANCE DIRECTIVES;

14 AGENT COMMISSIONS.

15 (a) EFFECTIVE GRIEVANCE PROCEDURES.—

16 (1) IN GENERAL.—Each AHP shall provide for

17 effective procedures for hearing and resolving griev18 ances between the plan and individuals enrolled

19 under the plan, which procedures meet standards

20 specified by the National Health Board.

21 (2) ACCESS OF OMBUDSMAN TO INFORMA22 TION.—Each AHP shall provide the ombudsman,

23 appointed under section 1107(b) for the HPPC area

24 in which the AHP operates, and the ombudsman’s

25 staff with access to such information as may be nec-
76

•S 1579 IS

1 essary for the ombudsman to carry out duties under

2 such section.

3 (b) RESTRICTION ON CERTAIN PHYSICIAN INCEN4 TIVE PLANS.—

5 (1) IN GENERAL.—A health plan may not be

6 registered as an AHP if it operates a physician in7 centive plan (as defined in paragraph (2)) unless the

8 requirements specified in clauses (i) through (iii) of

9 section 1876(i)(8)(A) of the Social Security Act are

10 met (in the same manner as they apply to eligible

11 organizations under section 1876 of such Act).

12 (2) PHYSICIAN INCENTIVE PLAN DEFINED.—In

13 this subsection, the term ‘‘physician incentive plan’’

14 means any compensation or other financial arrange15 ment between the AHP and a physician or physician

16 group that may directly or indirectly have the effect

17 of reducing or limiting services provided with respect

18 to individuals enrolled under the plan.

19 (c) WRITTEN POLICIES AND PROCEDURES RESPECT20 ING ADVANCE DIRECTIVES.—A health plan may not be

21 registered as an AHP unless the plan meets the require22 ments of section 1866(f) of the Social Security Act (relat23 ing to maintaining written policies and procedures respect24 ing advance directives), insofar as such requirements
77

•S 1579 IS

1 would apply to the plan if the plan were an eligible organi2 zation.

3 (d) PAYMENT OF AGENT COMMISSIONS.—An AHP—

4 (1) may pay a commission or other remunera5 tion to an agent or broker in marketing the plan to

6 individuals or groups, but

7 (2) may not vary such remuneration based, di8 rectly or indirectly, on the anticipated or actual

9 claims experience associated with the group or indi10 viduals to which the plan was sold.

11 SEC. 1208. ADDITIONAL REQUIREMENTS OF OPEN AHPS.

12 (a) REQUIREMENT OF AGREEMENT WITH HPPC.—

13 In the case of a health plan which is an open plan (as

14 defined in section 1701(b)(4)(B)), in order to be reg15 istered as an AHP the plan must have in effect an agree16 ment (described in section 1102) with each HPPC for

17 each HPPC area in which it is offered.

18 (b) REQUIREMENT OF OPEN ENROLLMENT.—

19 (1) IN GENERAL.—In the case of a health plan

20 which is an open health plan, in order to be reg21 istered as an AHP the plan must, subject to para22 graph (3), not reject the enrollment of any eligible

23 individual whom a HPPC is authorized to enroll

24 under an agreement referred to in subsection (a) if
78

•S 1579 IS

1 the individual applies for enrollment during an en2 rollment period.

3 (2) LIMITATION ON TERMINATION.—Subject to

4 paragraph (3), coverage of eligible individuals under

5 an open AHP may not be refused nor terminated ex6 cept for—

7 (A) nonpayment of premiums,

8 (B) fraud or misrepresentation, or

9 (C) termination of the plan at the end of

10 a year (after notice and in accordance with

11 standards established by the National Health

12 Board).

13 (3) TREATMENT OF NETWORK PLANS.—

14 (A) GEOGRAPHIC LIMITATIONS.—

15 (i) IN GENERAL.—An AHP which is a

16 network plan (as defined in subparagraph

17 (D)) may deny coverage under the plan to

18 an eligible individual who is located outside

19 a service area of the plan, but only if such

20 denial is applied uniformly, without regard

21 to health status or insurability of individ22 uals.

23 (ii) SERVICE AREAS.—The National

24 Health Board shall establish standards for

25 the designation by network plans of service
79

•S 1579 IS

1 areas in order to prevent discrimination

2 based on health status of individuals or

3 their need for health services.

4 (B) SIZE LIMITS.—Subject to subpara5 graph (C), an AHP which is a network plan

6 may apply to the Board to cease enrolling eligi7 ble individuals under the AHP (or in a service

8 area of the plan) if—

9 (i) it ceases to enroll any new eligible

10 individuals, and

11 (ii) it can demonstrate that its finan12 cial or administrative capacity to serve pre13 viously covered groups or individuals (and

14 additional individuals who will be expected

15 to enroll because of affiliation with such

16 previously covered groups or individuals)

17 will be impaired if it is required to enroll

18 other eligible individuals.

19 (C) FIRST-COME-FIRST-SERVED.—A net20 work plan is only eligible to exercise the limita21 tions provided for in subparagraphs (A) and

22 (B) if it provides for enrollment of eligible indi23 viduals on a first-come-first-served basis, except

24 that the plan, under rules of the Board, shall

25 provide preference for eligible individuals who
80

•S 1579 IS

1 are not eligible to enroll in another network

2 plan.

3 (D) NETWORK PLAN.—In this paragraph,

4 the term ‘‘network plan’’ means an eligible or5 ganization (as defined in section 1876(b) of the

6 Social Security Act) and includes a similar or7 ganization, specified in regulations of the

8 Board, that requires a limitation on enrollment

9 of employer groups or individuals due to the

10 manner in which the organization provides

11 health care services.

12 (c) REQUIREMENT OF PARTICIPATION IN MEDICARE

13 RISK-BASED CONTRACTING.—

14 (1) IN GENERAL.—In the case of a health plan

15 which is an open health plan and which is an eligible

16 organization (as defined in section 1876(b) of the

17 Social Security Act), in order to be registered as an

18 AHP the plan must enter into a risk-sharing con19 tract under section 1876 of the Social Security Act

20 for the offering of benefits to medicare beneficiaries

21 in accordance with such section.

22 (2) EXPANSION OF MEDICARE SELECT PRO23 GRAM.—Subsection (c) of section 4358 of the Omni24 bus Budget Reconciliation Act of 1990 (104 Stat.

25 1388–137) is amended by striking ‘‘only apply in 15
81

•S 1579 IS

1 States’’ and all that follows through the end and in2 serting ‘‘on and after January 1, 1992.’’.

3 (3) ELIGIBILITY FOR PAYMENT.—An AHP that

4 meets the requirement of paragraph (1) is eligible to

5 receive adjustment payments under section 1210(b).

6 (d) PARTICIPATION IN FEHBP.—

7 (1) IN GENERAL.—In the case of a health plan

8 which is an open health plan, in order to be reg9 istered as an AHP the plan must have entered into

10 an agreement with the Office of Personnel Manage11 ment to offer a health plan to Federal employees

12 and annuitants, and family members, under the

13 Federal Employees Health Benefits Program under

14 chapter 89 of title 5, United States Code, under the

15 same terms and conditions (other than the amount

16 of premiums) offered by the AHP for enrollment of

17 eligible individuals through HPPCs.

18 (2) CHANGE IN CONTRIBUTION AND OTHER

19 FEHBP RULES.—Notwithstanding any other provi20 sion of law, effective January 1, 1995—

21 (A) enrollment shall not be permitted

22 under a health benefits plan under chapter 89

23 of title 5, United States Code, unless the plan

24 is an AHP; and
82

•S 1579 IS

1 (B) the amount of the Federal Government

2 contribution under such chapter—

3 (i) for any premium class shall be the

4 same for all AHPs in a HPPC area,

5 (ii) for any individual in a premium

6 class shall not exceed the base individual

7 premium (as defined in section

8 2009(c)(3)), and

9 (iii) in the aggregate for any fiscal

10 year shall be equal to the aggregate

11 amount of Government contributions that

12 would have been made but for this sub13 section.

14 SEC. 1209. COORDINATION OF BENEFITS WITH LOW-IN15 COME ASSISTANCE.

16 (a) IN GENERAL.—Each AHP shall provide for—

17 (1) acceptance of information, electronically,

18 from the National Health Board on the eligibility of

19 individuals (and family members) for low-income as20 sistance under subtitle A of title II,

21 (2) an adjustment, in accordance with sections

22 1202(c) and 1205(c), in the cost-sharing or pre23 mium amounts otherwise imposed to reflect the cost24 sharing and premium assistance provided under

25 such subtitle, and
83

•S 1579 IS

1 (3) such reconciliation payments as may re2 quired under section 1102(e).

3 (b) REQUIREMENT OF SPECIAL AGREEMENTS FOR

4 NON-OPEN PLANS.—In the case of a health plan which

5 is not an open health plan, in order to be registered as

6 an AHP the plan must have in effect a special agreement

7 (described in section 1102(a)(2)) with each HPPC for

8 each HPPC area in which it is offered.

9 SEC. 1210. ADDITIONAL REQUIREMENT OF CERTAIN AHPS.

10 (a) MEDICARE ADJUSTMENT PAYMENT RE11 QUIRED.—Each AHP which is not described in section

12 1208(c)(1) shall provide for payment to the National

13 Health Board of such amounts as may be required as to

14 put the plan in the same financial position as the AHP

15 would be in if it was required to meet the requirement

16 of such section.

17 (b) REDISTRIBUTION OF PAYMENTS TO PLANS.—

18 The Board shall provide for the distribution of amounts

19 to be paid under subsection (a) among AHPs meeting the

20 requirement of section 1208(c)(1) in such manner as re21 flects the relative financial impact of such requirement

22 among such plans.
84

•S 1579 IS

1 SEC. 1211. FUNDING FOR APPROVED MEDICAL RESIDENCY

2 TRAINING PROGRAMS AND PHYSICIAN RE3 TRAINING PROGRAMS.

4 (a) REQUIREMENT.—Each AHP shall provide for

5 payment of 1 percent of gross premium receipts (as de6 fined in subsection (c)) to the National Medical Education

7 Fund established under section 3005.

8 (b) PAYMENT METHOD.—

9 (1) OPEN AHPS.—In the case of an open AHP,

10 the payment under subsection (a) shall be made

11 through a reduction of 1 percent in the payments

12 made by each HPPC to the AHP.

13 (2) CLOSED AHPS.—In the case of a closed

14 AHP, the payment under subsection (a) shall be

15 made on a monthly (or other basis) as specified by

16 the Board. Failure of a closed AHP to make such

17 a payment on a timely basis is a grounds for revoca18 tion of the registration of the AHP under this part.

19 (c) GROSS PREMIUM RECEIPTS DEFINED.—In this

20 section, the term ‘‘gross premium receipts’’ means, with

21 respect to—

22 (1) an open AHP, the payment amounts other23 wise payable by a HPPC to the AHP, or

24 (2) a closed AHP, an actuarial equivalent value

25 (as established in accordance with rules of the

26 Board, similar to the rules established for purposes
85

•S 1579 IS

1 of section 4980C(d)(1) of the Internal Revenue Code

2 of 1986).

3 PART 2—PREEMPTION OF STATE LAWS FOR

4 ACCOUNTABLE HEALTH PLANS

5 SEC. 1221. PREEMPTION FROM STATE BENEFIT MANDATES.

6 Effective as of January 1, 1995, no State shall estab7 lish or enforce any law or regulation that—

8 (1) requires the offering, as part of an AHP, of

9 any services, category of care, or services of any

10 class or type of provider that is different from the

11 uniform set of effective benefits;

12 (2) specifies the individuals to be covered under

13 an AHP or the duration of such coverage; or

14 (3) requires a right of conversion from a group

15 health plan that is an AHP to an individual health

16 plan.

17 SEC. 1222. PREEMPTION OF STATE LAW RESTRICTIONS ON

18 NETWORK PLANS.

19 (a) LIMITATION ON RESTRICTIONS ON NETWORK

20 PLANS.—Effective as of January 1, 1995—

21 (1) a State may not prohibit or limit a network

22 plan from including incentives for enrollees to use

23 the services of participating providers;
86

•S 1579 IS

1 (2) a State may not prohibit or limit a network

2 plan from limiting coverage of services to those pro3 vided by a participating provider;

4 (3) a State may not prohibit or limit the nego5 tiation of rates and forms of payments for providers

6 under a network plan;

7 (4) a State may not prohibit or limit a network

8 plan from limiting the number of participating pro9 viders;

10 (5) a State may not prohibit or limit a network

11 plan from requiring that services be provided (or au12 thorized) by a practitioner selected by the enrollee

13 from a list of available participating providers; and

14 (6) a State may not prohibit or limit the cor15 porate practice of medicine.

16 (b) DEFINITIONS.—In this section:

17 (1) NETWORK PLAN.—The term ‘‘network

18 plan’’ means an AHP—

19 (A) which—

20 (i) limits coverage of the uniform set

21 of effective benefits to those provided by

22 participating providers, or

23 (ii) provides, with respect to such

24 services provided by persons who are not

25 participating providers, for cost-sharing
87

•S 1579 IS

1 which are in excess of those permitted

2 under the uniform set of effective benefits

3 for participating providers;

4 (B) which has a sufficient number and dis5 tribution of participating providers to assure

6 that the uniform set of effective benefits (i) is

7 available and accessible to each enrollee, within

8 the area served by the plan, with reasonable

9 promptness and in a manner which assures con10 tinuity, and (ii) when medically necessary, is

11 available and accessible twenty-four hours a day

12 and seven days a week; and

13 (C) which provides benefits for the uniform

14 set of effective benefits not furnished by partici15 pating providers if the services are medically

16 necessary and immediately required because of

17 an unforeseen illness, injury, or condition.

18 (2) PARTICIPATING PROVIDER.—The term

19 ‘‘participating provider’’ means an entity or individ20 ual which provides, sells, or leases health care serv21 ices under a contract with a network plan, which

22 contract does not permit—

23 (A) cost-sharing in excess of the cost-shar24 ing permitted under the uniform set of effective

25 benefits, and
88

•S 1579 IS

1 (B) any enrollee charges (for such services

2 covered under such set) in excess of such cost3 sharing.

4 SEC. 1223. PREEMPTION OF STATE LAWS RESTRICTING UTI5 LIZATION REVIEW PROGRAMS.

6 (a) IN GENERAL.—Effective January 1, 1995, no

7 State law or regulation shall prohibit or regulate activities

8 under a utilization review program (as defined in sub9 section (b)).

10 (b) UTILIZATION REVIEW PROGRAM DEFINED.—In

11 this section, the term ‘‘utilization review program’’ means

12 a system of reviewing the medical necessity and appro13 priateness of patient services (which may include inpatient

14 and outpatient services) using specified guidelines. Such

15 a system may include preadmission certification, the appli16 cation of practice guidelines, continued stay review, dis17 charge planning, preauthorization of ambulatory proce18 dures, and retrospective review.

19 PART 3—CLARIFYING APPLICATION OF FEDERAL

20 ANTITRUST LAWS TO ACCOUNTABLE

21 HEALTH PLANS.

22 SEC. 1231. PUBLICATION OF GUIDELINES.

23 (a) IN GENERAL.—The President shall provide for

24 the development and publication of explicit guidelines on

25 the application of Federal antitrust laws to AHPs. The
89

•S 1579 IS

1 guidelines shall be designed to facilitate AHP development

2 and operation, consistent with the Federal antitrust laws.

3 (b) REVIEW PROCESS.—The Attorney General shall

4 establish a review process under which an AHP (or organi5 zation that proposes to establish an AHP) may obtain a

6 prompt opinion from the Department of Justice on the

7 plan’s conformity with the Federal antitrust laws.

8 (c) ANTITRUST LAWS DEFINED.—In this section, the

9 term ‘‘antitrust laws’’ has the meaning given it in sub10 section (a) of the first section of the Clayton Act (15

11 U.S.C. 12(a)), except that such term includes section 5

12 of the Federal Trade Commission Act (15 U.S.C. 45) to

13 the extent such section applies to unfair methods of com14 petition.

15 Subtitle D—National Health Board

16 SEC. 1301. ESTABLISHMENT OF NATIONAL HEALTH BOARD.

17 (a) IN GENERAL.—There is hereby established, as an

18 independent agency in the Executive Branch, a National

19 Health Board (in this title referred to as the ‘‘Board’’).

20 (b) COMPOSITION AND TERMS.—

21 (1) APPOINTMENT.—The Board shall be com22 posed of 5 members appointed by the President by

23 and with the advice and consent of the Senate. In

24 appointing members to the Board, the President

25 shall provide that all members shall demonstrate ex-
90

•S 1579 IS

1 perience with and knowledge of the health care sys2 tem.

3 (2) CHAIRMAN.—The President shall designate

4 one of the members to be Chairman of the Board.

5 (3) TERMS.—Each member of the Board shall

6 be appointed for a term of 7 years, except that, of

7 the members first appointed, 1 shall each be ap8 pointed for terms of 3, 4, 5, 6, and 7 years, as des9 ignated by the President at the time of appointment.

10 Members appointed to fill vacancies shall serve for

11 the remainder of the terms of the vacating members.

12 (4) PARTY AFFILIATION.—Not more than 3

13 members of the Board shall be of the same political

14 party.

15 (5) OTHER EMPLOYMENT PROHIBITED.—A

16 member of the Board may not, during the term as

17 a member, engage in any other business, vocation,

18 profession, or employment.

19 (6) QUORUM.—Three members of the Board

20 shall constitute a quorum, except that 2 members

21 may hold hearings.

22 (7) MEETINGS.—The Board shall meet at the

23 call of the Chairman or 3 members of the Board.

24 (8) COMPENSATION.—Each member of the

25 Board shall be entitled to compensation at the rate
91

•S 1579 IS

1 provided for level II of the Executive Schedule, sub2 ject to such amounts as are provided in advance in

3 appropriation Acts.

4 (c) PERSONNEL.—

5 (1) IN GENERAL.—The Board shall appoint an

6 Executive Director and such additional officers and

7 employees as it considers necessary to carry out its

8 functions under this Act. Except as otherwise pro9 vided in any other provision of law, such officers and

10 employees shall be appointed, and their compensa11 tion shall be fixed, in accordance with title 5, United

12 States Code.

13 (2) EXPERTS AND CONSULTANTS.—The Board

14 may procure the services of experts and consultants

15 in accordance with the provisions of section 3109 of

16 title 5, United States Code.

17 (d) USE OF U.S. MAIL.—The Board may use the

18 United States mails in the same manner and under the

19 same conditions as other departments and agencies of the

20 United States.

21 SEC. 1302. SPECIFICATION OF UNIFORM SET OF EFFECTIVE

22 BENEFITS.

23 (a) SPECIFICATION OF UNIFORM SET OF EFFECTIVE

24 BENEFITS; CONGRESSIONAL CONSIDERATION.—
92

•S 1579 IS

1 (1) TRANSMITTAL OF RECOMMENDATIONS TO

2 CONGRESS.—

3 (A) FOR 1995.—The Board shall transmit

4 to Congress, by not later than July 1, 1994,

5 recommendations for the uniform set of effec6 tive benefits to apply under this title for 1995

7 and, subject to subparagraph (B), subsequent

8 years.

9 (B) LATER YEARS.—The Board may

10 transmit to Congress, by not later than July 1

11 of a subsequent year, recommendations for

12 changes in the uniform set of effective benefits

13 to apply under this title for the following year

14 (and, subject to this subparagraph, subsequent

15 years).

16 (C) CONGRESSIONAL CONSIDERATION.—

17 (i) IN GENERAL.—Recommendations

18 transmitted under subparagraph (A) or

19 (B) shall apply under this title unless a

20 joint resolution (described in clause (ii))

21 disapproving such recommendations is en22 acted, in accordance with the provisions of

23 clause (iii), before the end of the 44-day

24 period beginning on the date on which

25 such recommendations were transmitted.
93

•S 1579 IS

1 For purposes of applying the preceding

2 sentence and clauses (ii) and (iii), the days

3 on which either House of Congress is not

4 in session because of an adjournment of

5 more than three days to a day certain shall

6 be excluded in the computation of a period.

7 (ii) JOINT RESOLUTION OF DIS8 APPROVAL.—A joint resolution described in

9 this clause means only a joint resolution

10 which is introduced within the 10-day pe11 riod beginning on the date on which the

12 Board transmits recommendations under

13 subparagraph (A) or (B) and—

14 (I) which does not have a pre15 amble;

16 (II) the matter after the resolv17 ing clause of which is as follows:

18 ‘‘That Congress disapproves the rec19 ommendations of the National Health

20 Board concerning the uniform set of

21 effective benefits as transmitted by

22 the Board on lllllll’’, the

23 blank space being filled in with the

24 appropriate date; and
94

•S 1579 IS

1 (III) the title of which is as fol2 lows: ‘‘Joint resolution disapproving

3 the recommendations of the National

4 Health Board concerning the uniform

5 set of effective benefits as transmitted

6 by the Board on lllllll.’’,

7 the blank space being filled in with

8 the appropriate date.

9 (iii) PROCEDURES FOR CONSIDER10 ATION OF RESOLUTION OF DIS11 APPROVAL.—Subject to clause (iv), the

12 provisions of section 2908 (other than sub13 section (a)) of the Defense Base Closure

14 and Realignment Act of 1990 shall apply

15 to the consideration of a joint resolution

16 described in clause (ii) in the same manner

17 as such provisions apply to a joint resolu18 tion described in section 2908(a) of such

19 Act.

20 (iv) SPECIAL RULES.—For purposes

21 of applying clause (iii) with respect to such

22 provisions—

23 (I) any reference to the Commit24 tee on Armed Services of the House of

25 Representatives shall be deemed a ref-
95

•S 1579 IS

1 erence to the Committee on Energy

2 and Commerce of the House of Rep3 resentatives and any reference to the

4 Committee on Armed Services of the

5 Senate shall be deemed a reference to

6 the Committee on Finance of the Sen7 ate; and

8 (II) any reference to the date on

9 which the President transmits a re10 port shall be deemed a reference to

11 the date on which the Board trans12 mits a recommendation under sub13 paragraph (A) or (B).

14 (D) TREATMENT OF DISAPPROVAL.—

15 (i) FOR 1995.—If recommendations

16 transmitted under subparagraph (A) are

17 disapproved by joint resolution under sub18 paragraph (C), then the Board shall trans19 mit to Congress, by not later than 15 days

20 after the date of adoption of the resolution,

21 recommendations for the uniform set of ef22 fective benefits to apply under this title for

23 1995 and, subject to subparagraph (B),

24 subsequent years. The provisions of sub25 paragraph (C) shall apply to such new rec-
96

•S 1579 IS

1 ommendations in the same manner as they

2 applied to the recommendations previously

3 transmitted under subparagraph (A), ex4 cept that any time period specified in such

5 subparagraph shall be half the period oth6 erwise provided.

7 (ii) FOR SUBSEQUENT YEARS.—If rec8 ommendations transmitted under subpara9 graph (B) are disapproved by joint resolu10 tion under subparagraph (C), then such

11 recommendations shall not take effect and

12 the recommendations not previously dis13 approved under this paragraph shall con14 tinue in effect until otherwise changed.

15 (2) SPECIFICATION OF ALL MEDICALLY APPRO16 PRIATE TREATMENTS.—

17 (A) MEDICALLY APPROPRIATE TREAT18 MENTS.—The uniform set of effective benefits

19 submitted under paragraph (1) shall include

20 such categories of health care services that the

21 Board determines will provide for the delivery

22 of medically appropriate treatment by AHPs.

23 (B) COVERAGE OF CLINICAL PREVENTIVE

24 SERVICES.—Such benefits shall include the full

25 range of effective clinical preventive services
97

•S 1579 IS

1 (including appropriate screening, counseling,

2 and immunization and chemoprophylaxis), spec3 ified by the Board, appropriate to age and

4 other risk factors.

5 (C) COVERAGE OF DIAGNOSTIC SERV6 ICES.—Such benefits shall include a full range

7 of diagnostic services not covered under sub8 paragraph (B).

9 (D) GUIDELINES.—Nothing in this para10 graph shall prohibit the Board from developing

11 guidelines that would specify the appropriate

12 uses of treatment in greater detail.

13 (E) ADDITIONAL COVERAGE.—Nothing in

14 this paragraph shall be construed as preventing

15 a plan from providing coverage of treatment

16 that has not been determined (under subsection

17 (b)) by the Board to be medically appropriate

18 for purposes of this paragraph.

19 (3) COST-SHARING.—

20 (A) IN GENERAL.—Subject to subpara21 graph (B), such set shall include uniform cost22 sharing associated with such benefits consistent

23 with subsection (c).

24 (B) TREATMENT OF NETWORK PLANS.—In

25 the case of a network plan (as defined in sec-
98

•S 1579 IS

1 tion 1222(b)), the plan may provide for charg2 ing cost-sharing in excess of the uniform cost3 sharing under subparagraph (A) in the case of

4 services provided by providers that are not par5 ticipating providers (as defined in such section).

6 (b) CRITERIA FOR DETERMINATION OF MEDICALLY

7 APPROPRIATENESS FOR BENEFIT COVERAGE.—

8 (1) IN GENERAL.—An AHP is required to pro9 vide for coverage of the uniform set of effective ben10 efits only for treatments and diagnostic procedures

11 that are medically appropriate. Subject to the suc12 ceeding provision of this subsection, for purposes of

13 this section, a treatment (as defined in paragraph

14 (6)(A)) or diagnostic procedure is considered to be

15 ‘‘medically appropriate’’ if the following criteria are

16 met (as interpreted by the Board):

17 (A) TREATMENT OR DIAGNOSIS OF MEDI18 CAL CONDITION.—

19 (i) IN GENERAL.—The treatment or

20 diagnostic procedure is for a medical con21 dition.

22 (ii) MEDICAL CONDITION DEFINED.—

23 The term ‘‘medical condition’’ means a dis24 ease, illness, injury, or biological or psycho25 logical condition or status for which treat-
99

•S 1579 IS

1 ment is indicated to improve, maintain, or

2 stabilize a health outcome (as defined in

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

4 of treatment, could lead to an adverse

5 change in a health outcome.

6 (iii) ADVERSE CHANGE IN HEALTH

7 OUTCOME DEFINED.—In clause (ii), an ad8 verse change in a health outcome occurs if

9 there is a biological or psychological

10 decremental change in a health status or if

11 the original endowment for a feature lies

12 outside the normal range.

13 (B) NOT INVESTIGATIONAL.—There must

14 be sufficient evidence on which to base conclu15 sions about the existence and magnitude of the

16 change in health outcome resulting from the

17 treatment or diagnostic procedure compared

18 with the best available alternative (or with no

19 treatment or diagnostic procedure if no alter20 native treatment or procedure is available).

21 (C) EFFECTIVE AND SAFE.—The evidence

22 must demonstrate that the treatment or diag23 nostic procedure can reasonably be expected to

24 produce the intended health result or provide

25 intended health information and is safe and the
100

•S 1579 IS

1 treatment or diagnostic procedure provides a

2 clinically meaningful benefit with respect to

3 safety and effectiveness in comparison to other

4 available alternatives.

5 (2) TREATMENT OR DIAGNOSTIC PROCEDURE

6 CONSISTENT WITH PRACTICE GUIDELINES.—A treat7 ment or diagnostic procedure that is provided con8 sistent with a practice guideline established by the

9 Agency for Clinical Evaluations, established under

10 section 1309, (or its predecessor) is deemed to be

11 medically appropriate.

12 (3) RELATIONSHIP TO FDA REVIEW.—

13 (A) APPROVED DRUGS, BIOLOGICALS, AND

14 MEDICAL DEVICES.—

15 (i) DRUGS.—A drug that has been

16 found to be safe and effective under sec17 tion 505 of the Federal Food, Drug, and

18 Cosmetic Act is deemed to meet the re19 quirements of paragraphs (1)(B) and

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

21 safety and effectiveness).

22 (ii) BIOLOGICALS.—A biological that

23 has been found to be safe and effective

24 under section 351 of the Public Health

25 Service Act is deemed to meet the require-
101

•S 1579 IS

1 ments of paragraphs (1)(B) and (1)(C)

2 (relating to not investigational and safety

3 and effectiveness).

4 (iii) MEDICAL DEVICES.—A medical

5 device that is marketed after the provision

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

7 Federal Food, Drug, and Cosmetic Act or

8 that has an application for premarket ap9 proval approved under section 515 of such

10 Act is deemed to meet the requirements of

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

12 not investigational and safety and effec13 tiveness).

14 (B) OTHER DRUGS, BIOLOGICALS, AND DE15 VICES.—A drug, biological, or medical device

16 not described in subparagraph (A) shall be con17 sidered to be investigational. Nothing shall pro18 hibit a AHP from covering such drugs,

19 biologicals, and medical devices, including treat20 ment investigational new drugs (IND).

21 (C) OFF-LABEL USE.—An off-label use for

22 a drug described in subparagraph (A)(i) is pre23 sumed to meet the requirements of paragraph

24 (1)(C) if the medical indication for which it is

25 used is listed in one of the following 3 compen-
102

•S 1579 IS

1 dia: the American Hospital Formulary Service2 Drug Information, the American Medical Asso3 ciation Drug Evaluations, and the United

4 States Pharmacopeia-Drug Information.

5 (4) COVERAGE OF INVESTIGATIONAL TREAT6 MENTS IN APPROVED RESEARCH TRIALS.—

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

8 medical costs (as defined in subparagraph (C))

9 associated with the delivery of investigational

10 treatments (as defined in subparagraph (B))

11 shall be considered to be medically appropriate

12 only if the treatment is part of an approved re13 search trial (as defined in subparagraph (D)).

14 (B) INVESTIGATIONAL TREATMENT DE15 FINED.—In subparagraph (A), the term ‘‘inves16 tigational treatment’’ means a treatment for

17 which there is not sufficient evidence to deter18 mine the health outcome of the treatment com19 pared with the best available alternative treat20 ment (or with no treatment if there is no alter21 native treatment).

22 (C) ROUTINE MEDICAL COSTS DEFINED.—

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

24 costs’’ means the cost of health services re25 quired to provide treatment according to the de-
103

•S 1579 IS

1 sign of the trial, except those costs normally

2 paid for by other funding sources (as defined by

3 the Board). Such costs do not include the cost

4 of the investigational agent, devices or proce5 dures themselves, the costs of any nonhealth

6 services that might be required for a person to

7 receive the treatment, or the costs of managing

8 the research.

9 (D) APPROVED RESEARCH TRIAL DE10 FINED.—In subparagraph (A), the term ‘‘ap11 proved research trial’’ means a trial—

12 (i) conducted for the primary purpose

13 of determining the safety, effectiveness, ef14 ficacy, or health outcomes of a treatment,

15 compared with the best available alter16 native treatment, and

17 (ii) approved by the Secretary of

18 Health and Human Services.

19 A trial is deemed to be approved under clause

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

21 of Health, the Food and Drug Administration

22 (through an investigational new drug exemp23 tion), the Department of Veterans Affairs, or

24 by a qualified nongovernmental research entity
104

•S 1579 IS

1 (as identified in guidelines issued by one or

2 more of the National Institutes of Health).

3 (5) DOCUMENTATION.—

4 (A) IN GENERAL.—Each AHP is respon5 sible for maintaining documentary evidence sup6 porting the plan’s decisions to cover or to deny

7 coverage based on the criteria specified in this

8 subsection.

9 (B) REFERENCES.—The evidence that may

10 be used in making such coverage decisions in11 cludes—

12 (i) published peer-reviewed literature,

13 (ii) opinions of medical specialty

14 groups and other medical experts,

15 (iii) evidence of general acceptance by

16 the medical community, and

17 (iv) recommendations of the Board.

18 (C) DISCLOSURE.—Each AHP shall dis19 close to its members, in a manner specified by

20 the Board, its coverage decisions and must sub21 mit information on such decisions to the Bene22 fits, Evaluations, and Data Standards Board.

23 (6) TREATMENT AND HEALTH OUTCOME DE24 FINED.—In this subsection (and subsection (a)(2)):
105

•S 1579 IS

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

2 means any health care intervention undertaken,

3 with respect to a specific indication, to improve,

4 maintain, or stabilize a health outcome or to

5 prevent or mitigate an adverse change in a

6 health outcome.

7 (B) HEALTH OUTCOME DEFINED.—The

8 term ‘‘health outcome’’ means an outcome that

9 affects the length or quality of an enrollee’s life.

10 (c) BASIS FOR COST-SHARING.—In establishing cost11 sharing that is part of the uniform set of effective benefits,

12 the Board shall—

13 (1) include only such cost-sharing as will re14 strain consumers from seeking unnecessary services,

15 (2) not impose cost-sharing for covered clinical

16 preventive services,

17 (3) balance the effect of the cost-sharing in re18 ducing premiums and in affecting utilization of ap19 propriate services, and

20 (4) establish a limit on the total cost-sharing

21 that may be incurred by an individual (or enrollee

22 unit) in a year.

23 To the extent consistent with the previous provisions, the

24 Board shall design such cost-sharing in a manner so to
106

•S 1579 IS

1 maintain overall utilization levels at a level no higher than

2 current overall utilization levels.

3 (d) AUTHORITY RESPECTING PROVIDERS.—

4 (1) NO AUTHORITY TO RESTRICT USE OF PRO5 VIDERS.—In the case of treatment included in the

6 uniform set of effective benefits, the Board is not

7 authorized—

8 (A) to restrict the coverage of such treat9 ment only to, or

10 (B) to require an AHP to provide coverage

11 of such treatment by,

12 a particular class (or classes) of providers, among

13 the providers that are legally authorized to provide

14 such treatment.

15 (2) AUTHORITY WITH RESPECT TO SCOPE OF

16 PRACTICE OF QUALIFIED PROVIDERS.—A State may

17 not prohibit or limit the scope of practice of a pro18 vider of health services, with respect to the provision

19 of the uniform set of effective benefits by an AHP,

20 to the extent that the Board finds that such prohibi21 tion or limitation restricts the utilization of qualified

22 providers.
107

•S 1579 IS

1 SEC. 1303. BENEFITS, EVALUATIONS, AND DATA STAND2 ARDS BOARD.

3 (a) ESTABLISHMENT.—The Board shall provide for

4 the initial organization, as a nonprofit corporation in the

5 District of Columbia, of the Benefits, Evaluations, and

6 Data Standards Board (in this section referred to as the

7 ‘‘BEDS Board’’), under the direction of a board of direc8 tors consisting of 5 directors.

9 (b) APPOINTMENT OF DIRECTORS.—

10 (1) SOLICITATION.—The Board shall solicit

11 nominations for the initial board of directors of the

12 BEDS Board from organizations that represent the

13 various groups with an interest in the health care

14 system and the functions of the Board.

15 (2) CONTINUATION.—The by-laws of the BEDS

16 Board shall provide for the board of directors subse17 quently to be appointed by the board in a manner

18 that ensures a broad range of representation of

19 through groups with an interest in providing and

20 purchasing health care.

21 (3) TERMS OF DIRECTORS.—The term of each

22 member of the board of directors shall be for 7

23 years, except that in order to provide for staggered

24 terms, the terms of the members initially appointed

25 shall be for 3, 4, 5, 6, and 7 years. In the case of

26 a vacancy by death or resignation, the replacement
108

•S 1579 IS

1 shall be appointed for the remainder of the term. No

2 individual may serve as a director of the board for

3 more than 14 years.

4 (c) FUNCTIONS.—

5 (1) IN GENERAL.—The BEDS Board shall

6 make recommendations to the Board concerning

7 each of the following:

8 (A) The uniform set of effective benefits.

9 (B) The standards for information to be

10 provided by AHPs.

11 (C) Auditing standards to ensure the accu12 racy of such information.

13 (D) Aggregate data on coverage decisions

14 made by AHPs and recommendations for eval15 uations of particular technologies.

16 Before making recommendations described in sub17 paragraphs (B) and (D), the BEDS Board shall

18 consult with the Agency for Clinical Evaluations re19 garding the need for information in performing its

20 activities.

21 (2) EVALUATIONS.—The BEDS Board shall

22 advise the Board on—

23 (A) matters related to the evaluation of

24 health care services, including information from

25 clinical and epidemiological studies, and
109

•S 1579 IS

1 (B) information provided by AHPs, includ2 ing AHP-specific information on clinical health,

3 functional status, well-being, and plan satisfac4 tion of enrolled individuals.

5 (3) NATIONAL HEALTH DATA SYSTEM.—The

6 BEDS Board shall provide the Board with its assist7 ance in the development of the standards for the na8 tional health data system under section 1307.

9 (d) FUNDING.—

10 (1) IN GENERAL.—In order to provide funding

11 for the BEDS Board, the National Health Board

12 shall establish an annual registration fee for AHPs

13 which is imposed on a per-covered-individual-basis

14 and is sufficient, in the aggregate, to provide each

15 year for not more than the amount specified in para16 graph (2) for the operation of the BEDS Board.

17 (2) AMOUNT OF FUNDS.—The amount specified

18 in this paragraph for each of fiscal years 1994 and

19 1995, is $50,000,000, and, for each succeeding fis20 cal year, is $25,000,000.

21 SEC. 1304. HEALTH PLAN STANDARDS BOARD.

22 (a) ESTABLISHMENT.—The Board shall provide for

23 the initial organization, as a nonprofit corporation in the

24 District of Columbia, of the Health Plan Standards Board

25 (in this section referred to as the ‘‘Plan Standards
110

•S 1579 IS

1 Board’’), under the direction of a board of directors con2 sisting of 5 directors.

3 (b) APPOINTMENT OF DIRECTORS.—

4 (1) SOLICITATION.—The Board shall solicit

5 nominations for the initial board of directors of the

6 Plan Standards Board from organizations that rep7 resent the various groups with an interest in the

8 health care system and the functions of the Board.

9 (2) CONTINUATION.—The by-laws of the Plan

10 Standards Board shall provide for the board of di11 rectors subsequently to be appointed by the board in

12 a manner that ensures a broad range of representa13 tion of through groups with an interest in providing

14 and purchasing health care.

15 (3) TERMS OF DIRECTORS.—The term of each

16 member of the board of directors shall be for 7

17 years, except that in order to provide for staggered

18 terms, the terms of the members initially appointed

19 shall be for 3, 4, 5, 6, and 7 years. In the case of

20 a vacancy by death or resignation, the replacement

21 shall be appointed for the remainder of the term. No

22 individual may serve as a director of the board for

23 more than 12 years.

24 (c) FUNCTIONS.—
111

•S 1579 IS

1 (1) IN GENERAL.—The Plan Standards Board

2 shall make recommendations to the Board concern3 ing the standards for AHPs (other than standards

4 relating to the uniform set of effective benefits and

5 the national health data system) and for HPPCs.

6 (2) ASSESSMENT OF RISK-ADJUSTMENT FAC7 TORS.—The Plan Standards Board shall provide the

8 Board with its assessment of the risk-adjustment

9 factors under section 1306.

10 (d) FUNDING.—In order to provide funding for the

11 Plan Standards Board, the National Health Board shall

12 establish an annual registration fee for AHPs which is im13 posed on a per-covered-individual-basis and is sufficient,

14 in the aggregate, to provide each year for not more than

15 60 percent of the amount specified in section 1303(d)(2)

16 for the operation of the Plan Standards Board.

17 SEC. 1305. REGISTRATION OF ACCOUNTABLE HEALTH

18 PLANS.

19 (a) IN GENERAL.—The Board shall register those

20 health plans that meet the standards under part 1 of sub21 title C.

22 (b) TREATMENT OF STATE CERTIFICATION.—If (and

23 so long as) the Board determines that a State super24 intendent of insurance, State insurance commissioner, or

25 other State official provides for the imposition of stand-
112

•S 1579 IS

1 ards that the Board finds are equivalent to the standards

2 established under part 1 of subtitle C for registration of

3 a health plan as an AHP, the Board may provide for reg4 istration as AHPs of health plans that such official cer5 tifies as meeting the standards for registration. Nothing

6 in this subsection shall require a health plan to be certified

7 by such an official in order to be registered by the Board.

8 (c) REVOCATION OF REGISTRATION.—

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

10 a process for revocation of such registration in cases

11 where the Board finds, after notice to the plan and

12 appropriate due process specified by the Board, that

13 a health plan no longer substantially meets the

14 standards for such registration or has failed to com15 ply with a requirement under section 1402(a).

16 (2) INITIATION OF PROCESS.—Such process

17 may be initiated upon the petition of a HPPC, the

18 ombudsman for a HPPC, or by the Board itself. If

19 the process is not initiated by a HPPC or ombuds20 man, the Board shall notify each HPPC involved

21 that such a process has been initiated. A HPPC may

22 provide notice to enrollees of an AHP at the time

23 such a process is initiated with respect to the AHP.

24 (3) NOTICE TO HPPC AND ENROLLEES.—No

25 registration of an AHP may be revoked unless the
113

•S 1579 IS

1 Board has provided for appropriate notice to the

2 HPPC and enrollees involved.

3 SEC. 1306. SPECIFICATION OF RISK-ADJUSTMENT FAC4 TORS.

5 (a) IN GENERAL.—The Board shall establish rules

6 for the process of risk-adjustment of premiums among

7 AHPs by HPPCs under section 1102(d)(1).

8 (b) PROCESS.—

9 (1) IDENTIFICATION OF RELATIVE RISK.—The

10 Board shall determine risk-adjustment factors for

11 types of enrollment that are correlated with in12 creased or diminished risk for consumption of the

13 type of health services included in the uniform set

14 of effective benefits, taking into account differences

15 in utilization resulting from low-income cost-sharing

16 assistance provided under section 2003. To the max17 imum extent practicable, such factors shall be deter18 mined without regard to the methodology used by in19 dividual AHPs in the provision of such benefits. In

20 determining such factors, with respect to an individ21 ual (in an enrollee unit) identified as having—

22 (A) a lower-than-average risk for consump23 tion of the services, the factor shall be a num24 ber, less than zero, reflecting the degree of such

25 lower risk;
114

•S 1579 IS

1 (B) an average risk for consumption of the

2 services, the factor shall be zero; or

3 (C) a higher-than-average risk for con4 sumption of the services, the factor shall be a

5 number, greater than zero, reflecting the degree

6 of such higher risk.

7 For an enrollee unit, the factor to be applied (pursu8 ant to section 1402(b)) shall reflect the factors ap9 plicable to all covered individuals in the unit.

10 (2) ADJUSTMENT OF FACTORS.—In applying

11 under section 1102(d)(1)(B) the risk-adjustment

12 factors determined under paragraphs (1) and (3),

13 each HPPC shall adjust such factors, in accordance

14 with a methodology established by the Board, so

15 that the sum of such factors is zero for all enrollee

16 units in each HPPC area for which a premium pay17 ment is forwarded under section 1102(d) for each

18 premium payment period.

19 (3) SPECIAL RISK-ADJUSTMENT FACTORS FOR

20 UNDERSERVED AREAS.—The Board shall determine

21 the special risk-adjustment factors that may be ap22 plied in the case of individuals residing in areas des23 ignated as rural or urban underserved areas under

24 section 1401.
115

•S 1579 IS

1 SEC. 1307. NATIONAL HEALTH DATA SYSTEM.

2 (a) STANDARDIZATION OF INFORMATION.—

3 (1) IN GENERAL.—The Board shall establish

4 standards for the periodic provision by AHPs of in5 formation under section 1203(a) and the auditing of

6 the information so provided.

7 (2) PATIENT CONFIDENTIALITY.—The stand8 ards shall be established in a manner that protects

9 the confidentiality of individual enrollees, but may

10 provide for the disclosure of information which dis11 closes particular providers within an AHP.

12 (b) ANALYSIS OF INFORMATION.—

13 (1) IN GENERAL.—The Board shall analyze the

14 information provided to the Board under section

15 1203(a) with respect to AHPs for which a HPPC is

16 not performing an analysis under section 1104(c)(1).

17 (2) CENTRAL ACCESS.—The Board shall make

18 available, in a central location and consistent with

19 subsection (a)(2), all of such analyses.

20 (3) DISTRIBUTION OF ANALYSES.—The Board

21 shall distribute the analyses in a form, consistent

22 with subsection (a)(2), that reports, on a national,

23 State, and community basis, the levels and trends of

24 health care expenditures, the rates and trends in the

25 provision of individual procedures, and (to the extent

26 such procedures are priced separately) the price lev-
116

•S 1579 IS

1 els and rates of price change for such procedures.

2 The reports shall include both aggregate and per

3 capita measures for areas and shall include com4 parative data for different areas.

5 (c) DISTRIBUTION OF INFORMATION.—

6 (1) ANNUAL REPORT ON EXPENDITURES.—The

7 Board shall publish annually (beginning with 1996)

8 a report on expenditures on procedures, volumes of

9 procedures, and, to the extent such procedures are

10 priced separately, the prices of procedures. Such re11 port shall be distributed to each AHP, each HPPC,

12 each Governor, and each State legislature.

13 (2) ANNUAL REPORTS.—The Board shall also

14 publish an annual report, based on analyses under

15 this section, that identifies—

16 (A) procedures for which, as reflected in

17 variations in use or rates of increase, there ap18 pear to be the greatest need to develop valid

19 clinical protocols for clinical decision-making

20 and review,

21 (B) procedures for which, as reflected in

22 price variations and price inflation, there ap23 pear to be the greatest need for strengthening

24 competitive purchasing, and
117

•S 1579 IS

1 (C) States and localities for which, as re2 flected in expenditure levels and rates of in3 crease, there appear to be the greatest need for

4 additional cost control measures.

5 (3) SPECIAL DISTRIBUTIONS.—The Board may,

6 whenever it deems appropriate, provide for the dis7 tribution—

8 (A) to an AHP of such information relat9 ing to the plan as may be appropriate in order

10 to encourage the plan to improve its delivery of

11 care, and

12 (B) to business, consumer, and other

13 groups and individuals of such information as

14 may improve their ability to effect improve15 ments in the outcomes, quality, and efficiency

16 of health services.

17 (4) ACCESS BY AGENCY FOR HEALTH CARE

18 POLICY AND RESEARCH.—The Board shall make

19 available to the Agency for Clinical Evaluations in20 formation obtained under section 1203(a) in a man21 ner consistent with subsection (a)(2).

22 SEC. 1308. MEASURES OF QUALITY OF CARE OF SPECIAL23 IZED CENTERS OF CARE.

24 (a) COLLECTION OF INFORMATION.—The Board

25 shall provide a process whereby a specialized center of care
118

•S 1579 IS

1 (as defined in subsection (d)) may submit to the Board

2 such clinical and other information bearing on the quality

3 of care provided with respect to the uniform set of effective

4 benefits at the center as the Board may specify. Such in5 formation shall include sufficient information to take into

6 account outcomes and the risk factors associated with in7 dividuals receiving care through the center. Such informa8 tion shall be provided at such frequency (not less often

9 than annually) as the Board specifies.

10 (b) MEASURES OF QUALITY.—Using information

11 submitted under subsection (a) and information reported

12 under section 1307, the Board shall—

13 (1) analyze the performance of such centers

14 with respect to the quality of care provided,

15 (2) rate the performance of such a center with

16 respect to a class of services relative to the perform17 ance of other specialized centers of care and relative

18 to the performance of AHPs generally, and

19 (3) publish such ratings.

20 (c) USE OF SERVICE MARK FOR SPECIALIZED CEN21 TERS OF CARE.—The Board may establish a service mark

22 for specialized centers of care the performance of which

23 has been rated under subsection (b). Such service mark

24 shall be registrable under the Trademark Act of 1946, and

25 the Board shall apply for the registration of such service
119

•S 1579 IS

1 mark under such Act. For purposes of such Act, such serv2 ice mark shall be deemed to be used in commerce. For

3 purposes of this subsection, the ‘‘Trademark Act of 1946’’

4 refers to the Act entitled ‘‘An Act to provide for the reg5 istration and protection of trademarks used in commerce,

6 to carry out the provisions of international conventions,

7 and for other purposes’’, approved July 5, 1946 (15

8 U.S.C. 1051 and following).

9 (d) SPECIALIZED CENTER OF CARE DEFINED.—In

10 this section, the term ‘‘specialized center of care’’ means

11 an institution or other organized system for the provision

12 of specific services, which need not be multi-disciplinary,

13 and does not include (except as the Board may provide)

14 individual practitioners.

15 SEC. 1309. AGENCY FOR CLINICAL EVALUATIONS.

16 (a) ESTABLISHMENT.—There is established within

17 the Department of Health and Human Services an agency

18 to be known as the Agency for Clinical Evaluations (in

19 this section referred to as the ‘‘Agency’’).

20 (b) APPOINTMENT OF ADMINISTRATOR.—There shall

21 be at the head of the Agency an official to be known as

22 the Administrator for Clinical Evaluations (in this section

23 referred to as the ‘‘Administrator’’). The Administrator

24 shall be appointed by the President, by and with the advice

25 and consent of the Senate.
120

•S 1579 IS

1 (c) DUTIES.—

2 (1) IN GENERAL.—The Administrator shall as3 sume the following responsibilites:

4 (A) Responsibilities of the Administrator

5 for Health Care Policy and Research, under

6 title IX of the Public Health Service Act and

7 under section 1142 of the Social Security Act.

8 (B) Responsibilities of the Director of the

9 National Center for Health Statistics (under

10 section 306 of the Public Health Service Act).

11 (C) Responsibilities of the Director of the

12 Office of Medical Applications of Research at

13 the National Institutes of Health.

14 (D) Responsibilities of the Director of the

15 Office of Research and Demonstrations of the

16 Health Care Financing Administration, insofar

17 as such responsibilities relate to clinical evalua18 tions.

19 (2) SPECIFIC DUTIES.—In carrying out respon20 sibilities under paragraph (1), the Administrator

21 shall—

22 (A) set priorities for the research commu23 nity to strengthen the research base;

24 (B) support research and evaluation (both

25 on a contract and investigator-initiated basis)
121

•S 1579 IS

1 on medical effectiveness through technology as2 sessment, consensus development, outcomes re3 search practice guidelines, and other appro4 priate activities;

5 (C) conduct effectiveness trials in collabo6 ration with medical specialty societies, medical

7 educators, and AHPs;

8 (D) maintain a clearinghouse and other

9 registries on clinical trials and outcomes re10 search data;

11 (E) assure the systematic evaluation of ex12 isting as well as new treatments and diagnostic

13 technologies in a constant, continuous effort to

14 upgrade the knowledge base for clinical deci15 sionmaking and policy choice; and

16 (F) design a computerized dissemination

17 system for providers to provide an interactive

18 system of information on outcomes research,

19 practice guidelines, and other information.

20 (3) ASSISTANCE.—The Administrator shall pro21 vide the Benefits, Evaluations, and Data Standards

22 Board with such information, on evaluations related

23 to the uniform set of effective benefits and any other

24 information developed in the scope of carrying out
122

•S 1579 IS

1 the Administrator’s responsibilities, as may be ap2 propriate.

3 (4) COOPERATION WITH OTHER AGENCIES.—In

4 carrying out responsibilities under this subsection,

5 the Administrator shall cooperate and consult with

6 the Director of the National Institutes of Health,

7 the Commissioner of Food and Drugs, the Secretary

8 of Veterans Affairs, and the heads of any other in9 terested Federal department or agency.

10 (d) REFERENCES.—Any reference in any law to the

11 Administrator for Health Care Policy and Research or to

12 the Agency for Health Care Policy and Research is

13 deemed a reference to the Administrator and Agency, re14 spectively, under this section.

15 (e) TRANSFERS.—There are hereby transferred to

16 the Agency the staff, funds, and other assets of the agen17 cies for which the Agency is assuming responsibilities

18 under subsection (c)(1).

19 (f) ADDITIONAL AUTHORIZATION OF APPROPRIA20 TIONS.—In addition to the amounts transferred under

21 subsection (e), there are authorized to be appropriated to

22 the Agency $250,000,000 for each fiscal year (beginning

23 with fiscal year 1995).
123

•S 1579 IS

1 SEC. 1310. REPORT AND RECOMMENDATIONS ON ACHIEV2 ING UNIVERSAL COVERAGE.

3 (a) FACTORS AFFECTING COVERAGE.—

4 (1) COLLECTION OF INFORMATION.—The

5 Board, on a continuing basis, shall collect informa6 tion concerning and analyze the number and charac7 teristics of eligible individuals (as defined in sub8 section (c)) who are not enrolled with AHPs com9 pared to such number and characteristics of individ10 uals enrolled. Such characteristics shall include age,

11 sex, race, ethnicity, family status, employment sta12 tus, whether the individual is an eligible employee,

13 income, health status, health risk factors, geography,

14 whether the individual resides in a rural or medically

15 underserved area, and such other factors as may af16 fect the election of an eligible individual to obtain

17 health coverage.

18 (2) REPORT.—By not later than April 1 of each

19 year (beginning with 1996), the Board shall submit

20 to Congress a report analyzing the information col21 lected under paragraph (1). Such report shall in22 clude an description of the primary factors contrib23 uting to lack of coverage of identifiable groups of eli24 gible individuals.

25 (b) RECOMMENDATIONS FOR INCREASING COV26 ERAGE.—
124

•S 1579 IS

1 (1) IN GENERAL.—By not later than January

2 1, 1997, the Board shall submit to Congress rec3 ommendations on the feasibility, cost-effectiveness,

4 and the economic impact of using different voluntary

5 and other methods for increasing the coverage of eli6 gible individuals.

7 (2) INDIVIDUAL MANDATE.—The Board shall

8 specifically make recommendations under paragraph

9 (1) regarding establishing a requirement that all eli10 gible individuals obtain health coverage through en11 rollment with an AHP.

12 (c) ELIGIBLE INDIVIDUAL DEFINED.—In this sec13 tion, the term ‘‘eligible individual’’—

14 (1) includes individuals who would be eligible

15 individuals but for section 1701(a)(4)(B), but

16 (2) does not include individuals eligible to enroll

17 for benefits under part B of title XVIII of the Social

18 Security Act.

19 SEC. 1311. MONITORING REINSURANCE MARKET.

20 (a) IN GENERAL.—The Board shall monitor the rein21 surance market for AHPs.

22 (b) PERIODIC REPORTS.—The Board shall periodi23 cally report to Congress respecting the availability of rein24 surance for AHPs at reasonable rates and the impact of
125

•S 1579 IS

1 such availability on the establishment of new plans and

2 on the financial solvency of current plans.

3 SEC. 1312. AUTHORIZATION OF APPROPRIATIONS; SUNSET.

4 (a) AUTHORIZATION OF APPROPRIATIONS.—There

5 are authorized to be appropriated to the National Health

6 Board for each of fiscal years 1994 through 2000 such

7 sums as may be necessary to carry out activities under

8 this Act.

9 (b) SUNSET.—Unless otherwise provided by law, the

10 National Health Board shall terminate on December 31,

11 1999.

12 Subtitle E—Managed Competition

13 in Rural and Urban Under14 served Areas

15 PART 1—SPECIAL TREATMENT OF DESIGNATED

16 UNDERSERVED AREAS

17 SEC. 1401. DESIGNATION OF UNDERSERVED AREAS.

18 (a) IN GENERAL.—The Governor of any State may,

19 subject to subsection (b), designate rural and urban areas

20 of a State as underserved areas for purposes of this part.

21 In designating such areas, the Governor shall take into

22 account—

23 (1) financial and geographic access to AHPs by

24 residents of such areas, and
126

•S 1579 IS

1 (2) the availability, adequacy, and quality of

2 qualified providers and health care facilities in such

3 areas.

4 (b) REVIEW BY BOARD.—No designation under sub5 section (a) shall take effect under this subsection unless

6 the Board—

7 (1) has been notified of the proposed designa8 tion, and

9 (2) has not, within 60 days after the date of re10 ceipt of the notice, disapproved the designation.

11 (c) CONSTRUCTION.—An area need not be designated

12 as a medically underserved area (under section 330(b)(3)

13 of the Public Health Service Act) or as a health profes14 sional shortage area (under section 332(a) of such Act)

15 in order to be designated as an underserved area under

16 this section.

17 (d) PERIOD OF DESIGNATION.—A designation under

18 this section shall be effective for a period, specified by the

19 Governor, of not longer than 3 years, except that such des20 ignation may be extended for additional 3-year periods.

21 SEC. 1402. SPECIAL TREATMENT.

22 (a) INCLUSION IN PLAN SERVICE AREA.—The

23 HPPC serving an area designated under section 1401 may

24 require AHPs, offered by the HPPC and with a service

25 area adjoining such area, to include the area as part of
127

•S 1579 IS

1 their service area. The Board may revoke under section

2 1305(c) registration of an AHP that fails to comply with

3 such requirement.

4 (b) APPLICATION OF SPECIAL RISK ADJUSTMENT

5 FACTORS.—In accordance with rules established by the

6 Board, for eligible individuals residing in an area des7 ignated under section 1401 and enrolled with an AHP,

8 the HPPC may apply special risk-adjustment factors (de9 termined under section 1306(b)(3)) in order to increase

10 the compensation available to AHPs serving such individ11 uals.

12 (c) DIRECT STATE SUBSIDIES.—The HPPC shall in13 crease the amount of the payments made to AHPs serving

14 individuals residing in an area designated under section

15 1401 by such amounts as the State makes available for

16 this purpose.

17 (d) TECHNICAL ASSISTANCE IN ANTITRUST MAT18 TERS.—The Department of Justice shall provide ongoing

19 technical assistance to organizations in relation to the ap20 plication of the Federal antitrust laws to the establishment

21 of an AHP in an area designated under section 1401.

22 Such assistance shall be in addition to the review process

23 provided under section 1231(b).
128

•S 1579 IS

1 PART 2—TRANSITIONAL SUPPORT FOR DEVEL2 OPMENT OF ACCOUNTABLE HEALTH PLANS

3 IN UNDERSERVED AREAS

4 SEC. 1411. TECHNICAL ASSISTANCE FUNDING.

5 (a) IN GENERAL.—The Secretary of Health and

6 Human Services shall make funds available under this sec7 tion to provide technical assistance and advice for entities

8 (including Federally qualified health centers and rural

9 health clinics) seeking to establish a network plan (as de10 fined in section 1222(b)(1)) in an underserved rural or

11 urban area.

12 (b) USE OF FUNDS.—Funds made available under

13 this section may be used for—

14 (1) assistance in network development, utilizing

15 existing local providers and facilities where appro16 priate;

17 (2) advice on obtaining the proper balance of

18 primary and secondary facilities for the local popu19 lation;

20 (3) assistance in coordinating arrangements for

21 tertiary care;

22 (4) assistance in recruitment and retention of

23 health care professionals; and

24 (5) assistance in coordinating the delivery of

25 emergency services with the provision of services by

26 an AHP.
129

•S 1579 IS

1 (c) USE OF RURAL HEALTH OFFICES.—In carrying

2 out this section with respect to entities in rural areas—

3 (1) the Secretary shall make funds available

4 through the Office of Rural Health Policy, and

5 (2) priority shall be given to making funds

6 available to State Offices of Rural Health.

7 (d) AUTHORIZATION OF APPROPRIATIONS.—There

8 are authorized to be appropriated $5,000,000 for each of

9 fiscal years 1995 through 1999 to carry out this section.

10 Of the amounts appropriated to carry out this section,

11 one-half of such amounts shall be made available to enti12 ties for the establishment of network plans in rural areas

13 and one-half of such amounts shall be made available to

14 entities for the establishment of network plans in urban

15 areas. Amounts appropriated under this section shall be

16 available until expended.

17 SEC. 1412. RURAL DEVELOPMENT GRANTS.

18 (a) IN GENERAL.—The Secretary of Health and

19 Human Services shall provide financial assistance to eligi20 ble entities in order to provide for the development and

21 implementation of AHPs in rural areas.

22 (b) ELIGIBLE ENTITIES.—

23 (1) IN GENERAL.—An entity is eligible to re24 ceive financial assistance under this section only if

25 the entity—
130

•S 1579 IS

1 (A) is based in a rural area, and

2 (B) is undertaking to develop and imple3 ment an AHP in a rural area with the active

4 participation of at least 3 health care providers

5 or facilities in the area.

6 (2) FEDERALLY QUALIFIED HEALTH CENTERS

7 AND RURAL HEALTH CLINICS.—Nothing in this sec8 tion shall be construed as preventing a Federally

9 qualified health center or rural health clinic from

10 qualifying for financial assistance under this section.

11 (c) USE OF FUNDS.—

12 (1) IN GENERAL.—Financial assistance made

13 available to eligible entities under this section may

14 only be used for the following:

15 (A) For development and implementation.

16 (B) For information systems, including

17 telecommunications.

18 (C) For meeting solvency requirements for

19 an AHP.

20 (D) For recruiting health care providers.

21 (2) LIMITATIONS.—Financial assistance made

22 available under this section may not be used for any

23 of the following:

24 (A) For a telecommunications system un25 less such system is coordinated with, and does
131

•S 1579 IS

1 not duplicate, such a system existing in the

2 area.

3 (B) For construction or remodeling of

4 health care facilities.

5 (d) APPLICATION.—

6 (1) IN GENERAL.—No financial assistance shall

7 be provided under this section to an entity unless

8 the entity has submitted to the Secretary, in a time

9 and manner specified by the Secretary, and had ap10 proved by the Secretary an application.

11 (2) INFORMATION TO BE INCLUDED.—Each

12 such application shall include—

13 (A) a description of the proposed AHP, in14 cluding service area and capacity,

15 (B) a plan for providing the continuum of

16 services included in the uniform set of effective

17 benefits, and

18 (C) a description of how the proposed

19 AHP will utilize existing health care facilities in

20 a manner that avoids unnecessary duplication.

21 (e) AUTHORIZATION OF APPROPRIATIONS.—

22 (1) IN GENERAL.—There are authorized to be

23 appropriated $75,000,000 for each of fiscal years

24 1995 through 1999 to carry out this section.
132

•S 1579 IS

1 Amounts appropriated under this section shall be

2 available until expended.

3 (2) INTEGRATION OF OTHER AUTHORIZA4 TIONS.—In order to provide for the authorization of

5 appropriations under paragraph (1), notwithstanding

6 any other provision of law, no funds are authorized

7 to be appropriated to carry out the following pro8 grams in fiscal years after fiscal year 1994:

9 (A) The rural health transition grant pro10 gram (under section 4005(e) of the Omnibus

11 Budget Reconciliation Act of 1987).

12 (B) The rural health outreach program

13 (for which appropriations were annually pro14 vided under the Departments of Labor, Health

15 and Human Services, and Education, and Re16 lated Agencies Appropriation Acts).

17 SEC. 1413. MIGRANT HEALTH CENTERS.

18 Section 329(h) of the Public Health Service Act (42

19 U.S.C. 254b(h)) is amended—

20 (1) in paragraph (1)(A), by striking ‘‘through

21 1994’’ and inserting ‘‘through 1999’’,

22 (2) in paragraph (2)(A), by striking ‘‘through

23 1994’’ and inserting ‘‘through 1999’’, and
133

•S 1579 IS

1 (3) by redesignating paragraph (3) as para2 graph (4) and by inserting after paragraph (2) the

3 following new paragraph:

4 ‘‘(3)(A) For the purpose of carrying out subpara5 graph (B), there are authorized to be appropriated

6 $11,500,000 for each of the fiscal years 1995 through

7 1999.

8 ‘‘(B) The Secretary may make grants to migrant

9 health centers for the purpose of assisting such centers

10 in integrating with AHPs and in providing (and coordinat11 ing the provision of) the uniform set of effective benefits

12 under such a plan.’’.

13 SEC. 1414. COMMUNITY HEALTH CENTERS.

14 Section 330(g) of the Public Health Service Act (42

15 U.S.C. 254c(g)) is amended—

16 (1) in paragraph (1)(A), by striking ‘‘through

17 1994’’ and inserting ‘‘through 1999’’,

18 (2) in paragraph (2)(A), by striking ‘‘through

19 1994’’ and inserting ‘‘through 1999’’, and

20 (3) by redesignating paragraph (3) as para21 graph (4) and by inserting after paragraph (2) the

22 following new paragraph:

23 ‘‘(3)(A) For the purpose of carrying out subpara24 graph (B), there are authorized to be appropriated
134

•S 1579 IS

1 $88,500,000 for each of the fiscal years 1995 through

2 1999.

3 ‘‘(B) The Secretary may make grants to community

4 health centers for the purpose of assisting such centers

5 in developing and integrating with accountable health

6 plans and in providing (and coordinating the provision of)

7 the uniform set of effective benefits under such a plan.’’.

8 PART 3—ESTABLISHMENT OF RURAL

9 EMERGENCY ACCESS CARE HOSPITALS

10 SEC. 1421. RURAL EMERGENCY ACCESS CARE HOSPITALS

11 DESCRIBED.

12 Section 1861 of the Social Security Act (42 U.S.C.

13 1395x) is amended by adding at the end the following new

14 subsection:

15 ‘‘Rural Emergency Access Care Hospital; Rural

16 Emergency Access Care Hospital Services

17 ‘‘(oo)(1) The term ‘rural emergency access care hos18 pital’ means, for a fiscal year, a facility with respect to

19 which the Secretary finds the following:

20 ‘‘(A) The facility is located in a rural area (as

21 defined in section 1886(d)(2)(D)).

22 ‘‘(B) The facility was a hospital under this title

23 at any time during the 5-year period that ends on

24 the date of the enactment of this subsection.
135

•S 1579 IS

1 ‘‘(C) The facility is in danger of closing due to

2 low inpatient utilization rates and negative operating

3 losses, and the closure of the facility would limit the

4 access of individuals residing in the facility’s service

5 area to emergency services.

6 ‘‘(D) The facility has entered into (or plans to

7 enter into) an agreement with a hospital with a par8 ticipation agreement in effect under section 1866(a),

9 and under such agreement the hospital shall accept

10 patients transferred to the hospital from the facility

11 and receive data from and transmit data to the facil12 ity.

13 ‘‘(E) There is a practitioner who is qualified to

14 provide advanced cardiac life support services (as de15 termined by the State in which the facility is lo16 cated) on-site at the facility on a 24-hour basis.

17 ‘‘(F) A physician is available on-call to provide

18 emergency medical services on a 24-hour basis.

19 ‘‘(G) The facility meets such staffing require20 ments as would apply under section 1861(e) to a

21 hospital located in a rural area, except that—

22 ‘‘(i) the facility need not meet hospital

23 standards relating to the number of hours dur24 ing a day, or days during a week, in which the

25 facility must be open, except insofar as the fa-
136

•S 1579 IS

1 cility is required to provide emergency care on

2 a 24-hour basis under subparagraphs (E) and

3 (F) of this paragraph; and

4 ‘‘(ii) the facility may provide any services

5 otherwise required to be provided by a full-time,

6 on-site dietician, pharmacist, laboratory techni7 cian, medical technologist, or radiological tech8 nologist on a part-time, off-site basis.

9 ‘‘(H) The facility meets the requirements appli10 cable to clinics and facilities under subparagraphs

11 (C) through (J) of paragraph (2) of section

12 1861(aa) and of clauses (ii) and (iv) of the second

13 sentence of such paragraph (or, in the case of the

14 requirements of subparagraph (E), (F), or (J) of

15 such paragraph, would meet the requirements if any

16 reference in such subparagraph to a ‘nurse practi17 tioner’ or to ‘nurse practitioners’ was deemed to be

18 a reference to a ‘nurse practitioner or nurse’ or to

19 ‘nurse practitioners or nurses’); except that in deter20 mining whether a facility meets the requirements of

21 this subparagraph, subparagraphs (E) and (F) of

22 that paragraph shall be applied as if any reference

23 to a ‘physician’ is a reference to a physician as de24 fined in section 1861(r)(1).
137

•S 1579 IS

1 ‘‘(2) The term ‘rural emergency access care hospital

2 services’ means medical and other health services fur3 nished by a rural emergency access care hospital.’’.

4 SEC. 1422. COVERAGE OF AND PAYMENT FOR SERVICES.

5 (a) COVERAGE UNDER PART B.—Section 1832(a)(2)

6 of the Social Security Act (42 U.S.C. 1395k(a)(2)) is

7 amended—

8 (1) by striking ‘‘and’’ at the end of subpara9 graph (I);

10 (2) by striking the period at the end of sub11 paragraph (J) and inserting ‘‘; and’’; and

12 (3) by adding at the end the following new sub13 paragraph:

14 ‘‘(K) rural emergency access care hospital

15 services (as defined in section 1861(oo)(2)).’’.

16 (b) PAYMENT BASED ON PAYMENT FOR OUTPATIENT

17 RURAL PRIMARY CARE HOSPITAL SERVICES.—

18 (1) IN GENERAL.—Section 1833(a)(6) of the

19 Social Security Act (42 U.S.C. 1395l(a)(6)) is

20 amended by striking ‘‘services,’’ and inserting ‘‘serv21 ices and rural emergency access care hospital serv22 ices,’’.

23 (2) PAYMENT METHODOLOGY DESCRIBED.—

24 Section 1834(g) of such Act (42 U.S.C. 1395m(g))

25 is amended—
138

•S 1579 IS

1 (A) in the heading, by striking ‘‘SERV2 ICES’’ and inserting ‘‘SERVICES AND RURAL

3 EMERGENCY ACCESS CARE HOSPITAL SERV4 ICES’’;

5 (B) in paragraph (1), by striking ‘‘during

6 a year before 1993’’ and inserting ‘‘during a

7 year before the prospective payment system de8 scribed in paragraph (2) is in effect’’;

9 (C) in paragraph (1), by adding at the end

10 the following: ‘‘The amount of payment shall be

11 determined under either method without regard

12 to the amount of the customary or other

13 charge.’’;

14 (D) in paragraph (2), by striking ‘‘Janu15 ary 1, 1993,’’ and inserting ‘‘January 1,

16 1996,’’; and

17 (E) by adding at the end the following new

18 paragraph:

19 ‘‘(3) APPLICATION OF METHODS TO PAYMENT

20 FOR RURAL EMERGENCY ACCESS CARE HOSPITAL

21 SERVICES.—The amount of payment for rural emer22 gency access care hospital services provided during

23 a year shall be determined using the applicable

24 method provided under this subsection for determin-
139

•S 1579 IS

1 ing payment for outpatient rural primary care hos2 pital services during the year.’’.

3 SEC. 1423. EFFECTIVE DATE.

4 The amendments made by this part shall apply to fis5 cal years beginning on or after October 1, 1994.

6 PART 4—TRANSITIONAL ASSISTANCE FOR

7 SAFETY NET HOSPITALS

8 SEC. 1431. PAYMENTS TO HOSPITALS.

9 (a) IN GENERAL.—The Secretary of Health and

10 Human Services shall make payments for transitional as11 sistance to eligible hospitals whose applications for assist12 ance have been approved under this part.

13 (b) GENERAL ELIGIBILITY REQUIREMENTS FOR AS14 SISTANCE.—

15 (1) HOSPITALS DESCRIBED.—

16 (A) IN GENERAL.—A hospital shall be gen17 erally eligible for assistance under this part if

18 the hospital—

19 (i) receives an additional payment

20 under section 1886(d)(5)(F) of the Social

21 Security Act and is described in clause

22 (i)(II) or clause (vii)(I) of such section, or

23 is deemed a disproportionate share hospital

24 under a State plan for medical assistance

25 under title XIX of such Act on the basis
140

•S 1579 IS

1 described in section 1923(b)(1) of such

2 Act; or

3 (ii) is a hospital that the Secretary

4 otherwise determines to be an appropriate

5 recipient of assistance under this part on

6 the basis of the existence of a patient care

7 operating deficit, a demonstrated inability

8 to secure or repay financing for a qualify9 ing project on reasonable terms, or such

10 other criteria as the Secretary considers

11 appropriate.

12 (B) DEVELOPMENT OF CRITERIA.—For

13 purposes of subparagraph (A)(ii), with respect

14 to rural hospitals which are at risk or critical

15 to health care access, the Prospective Payment

16 Review Commission, not later than 6 months

17 after the date of the enactment of this Act,

18 shall develop criteria to assist the Secretary in

19 deciding which such hospitals deserve assist20 ance.

21 (2) OWNERSHIP REQUIREMENTS.—In order to

22 qualify for assistance under this part, a hospital

23 must—

24 (A) be owned or operated by a unit of

25 State or local government;
141

•S 1579 IS

1 (B) be a quasi-public corporation, defined

2 as a private, nonprofit corporation or public

3 benefit corporation which is formally granted

4 one or more governmental powers by legislative

5 action through (or is otherwise partially funded

6 by) the State legislature, city or county council;

7 or

8 (C) be a private nonprofit hospital which

9 has contracted with, or is otherwise funded by,

10 a governmental agency to provide health care

11 services to low income individuals not eligible

12 for benefits under title XVIII or title XIX of

13 the Social Security Act, where revenue from

14 such contracts constitute at least 10 percent of

15 the hospital’s operating revenues over the prior

16 3 fiscal years.

17 (c) MEETING ADDITIONAL SPECIFIC CRITERIA.—

18 Hospitals that are generally eligible for assistance under

19 this part under subsection (b) may apply for the specific

20 programs described in this part and must meet any addi21 tional criteria for participation in such programs.

22 SEC. 1432. APPLICATION FOR ASSISTANCE.

23 (a) IN GENERAL.—No hospital may receive assist24 ance for a project under this part unless the hospital—
142

•S 1579 IS

1 (1) has filed with the Secretary, in a form and

2 manner specified by the Secretary an application for

3 assistance under this part;

4 (2) establishes in its application (for its most

5 recent cost reporting period) that it meets the cri6 teria for general eligibility under this part;

7 (3) includes a description of the project, includ8 ing the community in which it is located, and de9 scribes utilization and services characteristics of the

10 project and the hospital, and the patient population

11 that is to be served;

12 (4) describes the extent to which the project

13 will include the financial participation of State and

14 local governments, and all other sources of financing

15 sought for the project; and

16 (5) establishes, to the satisfaction of the Sec17 retary, that the project meets the additional criteria

18 for assistance under this part.

19 (b) CRITERIA FOR APPROVAL.—The Secretary shall

20 determine for each application for assistance under this

21 part—

22 (1) whether the hospital meets the general eligi23 bility criteria under section 1431(b);

24 (2) whether the hospital meets any additional

25 eligibility criteria;
143

•S 1579 IS

1 (3) whether the project for which assistance is

2 being requested meets the requirements of this part;

3 and

4 (4) whether funds are available, pursuant to the

5 limitations of each program, to fully fund the re6 quest for assistance.

7 SEC. 1433. PUBLIC SERVICE RESPONSIBILITIES.

8 (a) IN GENERAL.—Any hospital accepting assistance

9 under this part shall agree—

10 (1) to make the services of the facility or por11 tion thereof to be constructed, acquired, or modern12 ized available to all persons residing in the territorial

13 area of the applicant; and

14 (2) to provide a significant volume of services to

15 persons unable to pay therefore, consistent with

16 other provisions of this Act.

17 (b) ENFORCEMENT.—The Director of the Office of

18 Civil Rights of the Department of Health and Human

19 Services shall be given the power to enforce the public

20 service responsibilities described in this section.

21 SEC. 1434. AUTHORIZATION OF APPROPRIATIONS.

22 There is authorized to be appropriated $50,000,000

23 for each of the fiscal years 1995 through 1999 to carry

24 out this part.
144

•S 1579 IS

1 Subtitle F—Treatment of

2 Chronically Underserved Areas

3 SEC. 1501. PROMOTING STATE ACTION.

4 (a) STANDARDS FOR IDENTIFICATION OF CHRON5 ICALLY UNDERSERVED AREAS.—The National Health

6 Board shall develop, not later than 2 years after the date

7 of the enactment of this Act, standards for the identifica8 tion of chronically underserved areas in which the special

9 treatment provided under subsection (b) may be appro10 priate. Such standards shall be based on—

11 (1) inadequate access in an area to services in12 cluded within the uniform set of effective benefits,

13 (2) insufficient price competition for such serv14 ices in an area, and

15 (3) poor quality of such services in an area.

16 (b) STATE IDENTIFICATION OF AREAS AND PLAN.—

17 On and after 3 years after the date of the enactment of

18 this Act, a State may submit to the Board—

19 (1) a finding that an area within the State

20 meets the standards developed under subsection (a)

21 to be identified as a chronically underserved area,

22 and

23 (2) a plan for addressing the problem of health

24 care delivery in such area.
145

•S 1579 IS

1 No plan may be submitted under paragraph (2) for an

2 area unless the plan has been developed in cooperation

3 with each HPPC serving any portion of the area.

4 (c) CONTENTS OF PLAN.—A plan under subsection

5 (b)(2) for a chronically underserved area may provide for

6 the limitation of agreements under section 1102 to a sin7 gle AHP, with such contract awarded on a competitive

8 basis.

9 (d) REVIEW.—With respect to submissions under

10 subsection (b), the Board shall review—

11 (1) each finding described in subsection (b)(1),

12 and

13 (2) each plan submitted under subsection

14 (b)(2).

15 The Board shall approve or disapprove such a finding and

16 such a plan within 60 days of the date of its submission

17 and shall notify the State of its decision. If the Board dis18 approves the finding or the plan, the Board shall provide

19 the State with the reasons for the disapproval. If the

20 Board does not act within such period, the Board is

21 deemed to have approved the finding and the plan.
146

•S 1579 IS

1 Subtitle G—Repeal of COBRA

2 Continuation Requirements

3 SEC. 1601. REPEAL OF COBRA CONTINUATION REQUIRE4 MENTS.

5 (a) INTERNAL REVENUE CODE PROVISIONS.—

6 (1) IN GENERAL.—Section 4980B of the Inter7 nal Revenue Code of 1986 is repealed.

8 (2) CONFORMING AMENDMENTS.—Section 414

9 of such Code is amended—

10 (A) in subsection (n)(3)(C), by striking

11 ‘‘505, and 4980B’’ and inserting ‘‘and 505’’,

12 and

13 (B) in subsection (t)(2), by striking ‘‘505,

14 or 4980B’’ and inserting ‘‘or 505’’.

15 (b) ERISA.—

16 (1) IN GENERAL.—Part 6 of subtitle B of title

17 I of the Employee Retirement Income Security Act

18 of 1974 is amended—

19 (A) by striking sections 601 through 606,

20 and

21 (B) in section 609, as added by section

22 4301 of the Omnibus Budget Reconciliation Act

23 of 1993, by striking subsection (d).

24 (2) CONFORMING AMENDMENT.—Section

25 502(c)(1) of such Act (29 U.S.C. 1132(c)(1)) is
147

•S 1579 IS

1 amended by striking ‘‘paragraph (1) or (4) of sec2 tion 606 or’’.

3 (c) PUBLIC HEALTH SERVICE ACT.—Title XXII of

4 the Public Health Service Act is repealed.

5 (d) EFFECTIVE DATE.—The repeals and amend6 ments made by this section shall apply to health plans of

7 employers as of the January 1, 1995.

8 (e) NOTICE OF BENEFITS.—In the case of continu9 ation coverage which is in effect on January 1, 1995,

10 under a provision of law repealed by this section, such con11 tinuation may not be discontinued without 30-day notice

12 to the individual of such discontinuation. Such notice shall

13 include such information with respect to continuation of

14 coverage through coverage through a health plan pur15 chasing cooperative as the National Health Board shall

16 specify.

17 Subtitle H—Definitions

18 SEC. 1701. DEFINITIONS.

19 (a) ELIGIBILITY.—In this title and title II:

20 (1) ELIGIBLE INDIVIDUAL.—The term ‘‘eligible

21 individual’’ means, with respect to a HPPC area, an

22 individual who—

23 (A) is an eligible employee,

24 (B) is an eligible resident, or
148

•S 1579 IS

1 (C) an eligible family member of an eligible

2 employee or eligible resident.

3 (2) ELIGIBLE EMPLOYEE.—The term ‘‘eligible

4 employee’’ means, with respect to a HPPC area, an

5 individual residing in the area who is the employee

6 of a small employer.

7 (3) ELIGIBLE FAMILY MEMBER.—The term ‘‘el8 igible family member’’ means, with respect to an eli9 gible employee or other principal enrollee, an individ10 ual who—

11 (A)(i) is the spouse of the employee or

12 principal enrollee, or

13 (ii) is an unmarried dependent child under

14 22 years of age, including—

15 (I) an adopted child or recognized

16 natural child, and

17 (II) a stepchild or foster child but

18 only if the child lives with the employee or

19 principal enrollee in a regular parent-child

20 relationship,

21 or such an unmarried dependent child regard22 less of age who is incapable of self-support be23 cause of mental or physical disability which ex24 isted before age 22;
149

•S 1579 IS

1 (B) is a citizen or national of the United

2 States, an alien lawfully admitted to the United

3 States for permanent residence, or an alien oth4 erwise lawfully residing permanently in the

5 United States under color of law; and

6 (C) with respect to an eligible resident, is

7 not a medicare-eligible individual.

8 (4) ELIGIBLE RESIDENT.—

9 (A) IN GENERAL.—The term ‘‘eligible resi10 dent’’ means, with respect to a HPPC area, an

11 individual who is not an eligible employee, is re12 siding in the area, and is a citizen or national

13 of the United States, an alien lawfully admitted

14 for permanent residence, and an alien granted

15 asylum, admitted as a refugee, or whose depor16 tation has been withheld.

17 (B) EXCLUSION OF CERTAIN INDIVIDUALS

18 OFFERED COVERAGE THROUGH A LARGE EM19 PLOYER.—

20 (i) IN GENERAL.—The term ‘‘eligible

21 resident’’ does not include an individual

22 who—

23 (I) is covered under an AHP pur24 suant to an offer made under section

25 1005(b)(1)(A), or
150

•S 1579 IS

1 (II) subject to clause (ii), could

2 be covered under an AHP as the prin3 cipal enrollee pursuant to such an

4 offer if such offer had been accepted.

5 (ii) EXCEPTION FOR PART-TIME, SEA6 SONAL, AND TEMPORARY EMPLOYEES.—

7 Subclause (II) of clause (i) shall not apply

8 to an individual who is offered coverage

9 under an AHP by an employer and who is

10 only a part-time, seasonal, or temporary

11 employee of that employer. For purposes of

12 the previous sentence, the term ‘‘part13 time’’ means employment for an average of

14 less than 25 hours a week on a monthly

15 basis and an employee who is employed for

16 more than 8 weeks in a 12-month period

17 for an employer shall not be considered to

18 be seasonal or temporary employee.

19 (C) TREATMENT OF MEDICARE BENE20 FICIARIES.—The term ‘‘eligible resident’’ does

21 not include a medicare-eligible beneficiary.

22 (5) ENROLLEE UNIT.—The term ‘‘enrollee

23 unit’’ means one unit in the case of coverage on an

24 individual basis or in the case of coverage on a fam25 ily basis.
151

•S 1579 IS

1 (6) MEDICARE BENEFICIARY.—The term ‘‘med2 icare beneficiary’’ means an individual who is enti3 tled to benefits under part A of title XVIII of the

4 Social Security Act, including an individual who is

5 entitled to such benefits pursuant to an enrollment

6 under section 1818 or 1818A of such Act.

7 (7) MEDICARE-ELIGIBLE INDIVIDUAL.—The

8 term ‘‘medicare-eligible individual’’ means an indi9 vidual who—

10 (A) is a medicare beneficiary, or

11 (B) is not a medicare beneficiary but is eli12 gible to enroll under part A or part B of title

13 XVIII of the Social Security Act.

14 (b) ABBREVIATIONS.—In this Act, except as other15 wise provided:

16 (1) AHP; ACCOUNTABLE HEALTH PLAN.—The

17 terms ‘‘accountable health plan’’ and ‘‘AHP’’ mean

18 a health plan registered with the Board under sec19 tion 1201(a).

20 (2) BOARD.—The term ‘‘Board’’ means the Na21 tional Health Board established under subtitle D.

22 (3) HPPC; HEALTH PLAN PURCHASING COOP23 ERATIVE.—The terms ‘‘health plan purchasing coop24 erative’’ and ‘‘HPPC’’ mean a health plan purchas25 ing cooperative established under subtitle B.
152

•S 1579 IS

1 (4) CLOSED AND OPEN PLANS.—

2 (A) CLOSED.—

3 (i) IN GENERAL.—A plan is ‘‘closed’’

4 if the plan is limited by structure or law to

5 one or more large employers.

6 (ii) GRANDFATHER FOR TAFT-HART7 LEY PLANS.—A plan not described in

8 clause (i) that is maintained pursuant to

9 one or more collective bargaining agree10 ments between one or more employee orga11 nizations and one or more employers and

12 that was established as of September 7,

13 1993, shall be considered to be a closed

14 plan.

15 (iii) UNIVERSITY PLANS.—Nothing in

16 this subparagraph shall be construed as

17 preventing a university from offering en18 rollment, in a closed plan maintained by a

19 university, to students matriculating at the

20 university.

21 (iv) SMALL EMPLOYERS.—Subject to

22 clause (ii), a plan is not a ‘‘closed’’ plan if

23 the plan was formed by one or more small

24 employers or for the benefit of employees

25 of such an employer.
153

•S 1579 IS

1 (B) OPEN.—A plan is ‘‘open’’ if the plan

2 is not closed (within the meaning of subpara3 graph (A)).

4 (c) OTHER TERMS.—In this title and titles II and

5 VI:

6 (1) HEALTH PLAN.—The term ‘‘health plan’’

7 means a plan that provides health benefits, whether

8 through directly, through insurance, or otherwise,

9 and includes a policy of health insurance, a contract

10 of a service benefit organization, or a membership

11 agreement with a health maintenance organization

12 or other prepaid health plan, and also includes an

13 employee welfare benefit plan or a multiple employer

14 welfare plan (as such terms are defined in section 3

15 of the Employee Retirement Income Security Act of

16 1974).

17 (2) SMALL EMPLOYER; LARGE EMPLOYER.—

18 (A) IN GENERAL.—Subject to subpara19 graph (B), the term ‘‘small employer’’ means

20 an employer that normally employed fewer than

21 101 employees during a typical business day in

22 the previous year and the term ‘‘large em23 ployer’’ means an employer that is not a small

24 employer.
154

•S 1579 IS

1 (B) SPECIAL RULE FOR LARGE EMPLOY2 ERS.—Subject to subparagraph (C), the Board

3 shall provide a procedure by which, in the case

4 of an employer that is not a small employer but

5 normally employs fewer than 101 employees

6 (or, in the case of a State making an election

7 described in subparagraph (C)(i), the number of

8 employees specified under the State law) in a

9 HPPC area (or other locality identified by the

10 Board) during a typical business day, the em11 ployer, upon application, would be considered to

12 be a small employer with respect to such em13 ployees in the HPPC area (or other locality).

14 Such procedure shall be designed so as to pre15 vent the adverse selection of employees with re16 spect to which the previous sentence is applied.

17 (C) STATE ELECTION.—

18 (i) IN GENERAL.—Subject to section

19 1101(a)(3) and clause (ii), a State may by

20 law, with respect to employers in the State,

21 substitute for ‘‘101’’ in subparagraphs (A)

22 and (B) any greater number, so long as—

23 (I) such number is applied uni24 formly to all employers (other than
155

•S 1579 IS

1 employers described in clause (ii)) in

2 a State, and

3 (II) the State demonstrates, to

4 the satisfaction of the Board, that as

5 of the time of enactment of the State

6 law not more than 50 percent of all

7 employees in the State are employees

8 of small employers (as determined

9 based upon such substitution).

10 (ii) EXCEPTION FOR CERTAIN LARGE

11 MULTI-STATE EMPLOYERS.—Clause (i)

12 shall not apply to an employer that nor13 mally employed at least 100 employees

14 during a typical business day in the pre15 vious year in each of at least 2 different

16 States.

17 (3) PREMIUM CLASS.—The term ‘‘premium

18 class’’ means a class established under section

19 1205(a)(2).

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

21 the Secretary of Health and Human Services.

22 (5) STATE.—The term ‘‘State’’ includes the

23 District of Columbia, Puerto Rico, the Virgin Is24 lands, Guam, American Samoa, and the Northern

25 Mariana Islands.
156

•S 1579 IS

1 (6) TYPE OF ENROLLMENT.—There are 4

2 ‘‘types of enrollment’’:

3 (A) Coverage only of an individual (re4 ferred to in this title as enrollment ‘‘on an indi5 vidual basis’’).

6 (B) Coverage of an individual and the indi7 vidual’s spouse.

8 (C) Coverage of an individual and one

9 child.

10 (D) Coverage of an individual and more

11 than one eligible family member.

12 The types of coverage described in subparagraphs

13 (B) through (D) are collectively referred to in this

14 title as enrollment ‘‘on a family basis’’.

15 (7) UNIFORM SET OF EFFECTIVE BENEFITS.—

16 The term ‘‘uniform set of effective benefits’’ means,

17 for a year, such set of benefits as recommended by

18 the Board under section 1302(a), if not disapproved

19 under such section.
157

•S 1579 IS

1 TITLE II—LOW-INCOME ASSIST2 ANCE FOR HEALTH COV3 ERAGE.

4 Subtitle A—Low-Income Assistance

5 SEC. 2001. ELIGIBILITY.

6 (a) ENROLLEES UNDER ACCOUNTABLE HEALTH

7 PLANS.—Each low-income individual (as defined in sec8 tion 2009(a)(1)(A)) who is not a medicare-eligible individ9 ual is eligible—

10 (1) for assistance under section 2002(a) with

11 respect to premiums,

12 (2) for assistance under section 2003(a) with

13 respect to cost-sharing otherwise imposed by the

14 plan, and

15 (3) in the case of a very low-income individual,

16 for assistance under section 2004 with respect to

17 certain items and services.

18 (b) MEDICARE-ELIGIBLE INDIVIDUALS.—Each medi19 care-eligible individual who is a low-income individual is

20 eligible—

21 (1) for assistance under section 2002(b) with

22 premiums under the medicare program, and

23 (2) in the case of a very low-income individual,

24 for assistance under section 2003(b) with respect to

25 other medicare cost-sharing and for assistance under
158

•S 1579 IS

1 section 2004 with respect to certain items and serv2 ices.

3 SEC. 2002. PREMIUM ASSISTANCE.

4 (a) IN GENERAL.—

5 (1) VERY LOW-INCOME INDIVIDUALS.—In the

6 case of a very low-income individual (as defined in

7 section 2009(a)(3)) who is enrolled in an AHP, the

8 premium assistance under this section consists of—

9 (A) an adjustment in premiums charged

10 the individual under the plan, in accordance

11 with section 1205(c)(1); and

12 (B) payment to the accountable health

13 plan (on behalf of the individual and family

14 members) of the applicable Federal assistance

15 amount (as defined in section 2009(c)(1)) for

16 enrollment under the plan.

17 (2) MODERATELY LOW-INCOME INDIVIDUALS.—

18 In the case of a moderately low-income individual

19 (as defined in section 2009(a)(2)) who is enrolled in

20 an AHP, the premium assistance under this section

21 consists of—

22 (A) an adjustment in premiums charged

23 the individual under the plan, in accordance

24 with section 1205(c)(2); and
159

•S 1579 IS

1 (B) payment to the accountable health

2 plan (on behalf of the individual and family

3 members) of the applicable Federal assistance

4 amount (as defined in section 2009(c)(1)) for

5 enrollment under the plan.

6 (b) MEDICARE-ELIGIBLE INDIVIDUALS.—In the case

7 of a medicare-eligible individual described in section

8 2001(b), the premium assistance under this subsection

9 shall consist of payment for premiums imposed under part

10 A (if any) or part B of title XVIII of the Social Security

11 Act. Such assistance shall be provided in a manner so that

12 no such premium amount is deducted from monthly bene13 fits or transfers under section 1818 or 1840 of such Act.

14 SEC. 2003. COST-SHARING ASSISTANCE.

15 (a) NOMINAL COST-SHARING FOR LOW-INCOME IN16 DIVIDUALS.—

17 (1) IN GENERAL.—In the case of a low-income

18 individual described in section 2001(a) who is en19 rolled in an AHP in an enrollee unit, the cost-shar20 ing assistance under this subsection shall consist

21 of—

22 (A) an accountable health plan’s reduction,

23 in accordance with section 1202(c), in the cost24 sharing otherwise imposed to amounts that are
160

•S 1579 IS

1 nominal (as specified by the Board, consistent

2 with paragraph (2)); and

3 (B) payment to the accountable health

4 plan (on behalf of the individual and family

5 members) by the Board of the adjusted per en6 rollee cost-sharing assistance amount deter7 mined under paragraph (3).

8 (2) NOMINAL.—In establishing what is ‘‘nomi9 nal’’ for purposes of paragraph (1), the Board shall

10 consider regulations established to carry out section

11 1916(a)(3) of the Social Security Act (as in effect

12 before the date of the enactment of this Act).

13 (3) ADJUSTED PER ENROLLEE COST-SHARING

14 ASSISTANCE AMOUNT.—

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

16 section, the term ‘‘adjusted per enrollee cost17 sharing assistance amount’’ means, for a year,

18 the product of—

19 (i) the amount determined under sub20 paragraph (B)(i), divided by the number

21 determined under subparagraph (B)(ii);

22 and

23 (ii) the premium class assistance fac24 tor established under subparagraph (C).
161

•S 1579 IS

1 (B) DETERMINATION OF AVERAGE PER

2 ENROLLEE COST-SHARING AMOUNT.—Before

3 the beginning of each year the Board shall esti4 mate—

5 (i) the total amount of cost-sharing

6 assistance to be provided under this section

7 to enrollee units in the year, and

8 (ii) the average number of enrollee

9 units (as defined in section 1701(a)(5)) to

10 be provided such assistance in the year.

11 (C) PREMIUM CLASS ASSISTANCE FAC12 TOR.—The Board shall establish a factor, for

13 each premium class, that reflects the ratio of

14 the—

15 (i) the average value of the cost-shar16 ing assistance furnished under this section

17 to individuals within the premium class, to

18 (ii) the average value of the cost-shar19 ing assistance furnished under this sub20 section to individuals within all the pre21 mium classes.

22 (b) CERTAIN MEDICARE-ELIGIBLE INDIVIDUALS.—

23 In the case of a very low-income individual described in

24 section 2001(b), the cost-sharing assistance under this
162

•S 1579 IS

1 subsection shall consist of payment being made under title

2 XVIII of the Social Security Act—

3 (1) without regard to coinsurance under such

4 title (including coinsurance described in section 1813

5 of such title);

6 (2) without regard to deductibles established

7 under such title (including those described in section

8 1813 and section 1833(b) of such title); and

9 (3) as though any reference to ‘‘80 percent’’ in

10 section 1833(a) of such title were a reference to

11 ‘‘100 percent’’.

12 (c) APPROPRIATION TO COVER PART A ASSIST13 ANCE.—Section 1817(a) of the Social Security Act (42

14 U.S.C. 1395i(a)) is amended by adding at the end the fol15 lowing new sentence: ‘‘In addition to the amounts appro16 priated under this subsection, there are hereby appro17 priated to the Trust Fund, out of any moneys in the

18 Treasury not otherwise appropriated, amounts equivalent

19 to the reductions in the deductibles and coinsurance estab20 lished under section 1813 effected under section 2003(b)

21 of the Managed Competition Act of 1993.’’.

22 SEC. 2004. ASSISTANCE FOR CERTAIN ITEMS AND SERV23 ICES.

24 (a) IN GENERAL.—In the case of a very low-income

25 individual, the special assistance under this section con-
163

•S 1579 IS

1 sists of payment under this section with respect to items

2 and services described in subsection (b), subject to sub3 section (c).

4 (b) ITEMS AND SERVICES COVERED.—

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

6 the items and services described in this subsection

7 are—

8 (A) prescription drugs,

9 (B) eyeglasses and hearing aids, and

10 (C) such other items and services as the

11 Board determines were commonly provided to

12 individuals described in section

13 1902(a)(10)(A)(i) of the Social Security Act

14 under State medicaid plans under title XIX of

15 such Act (as in effect as of the date of the en16 actment of this Act).

17 (2) EXCLUSIONS.—Items and services described

18 in this subsection shall not include—

19 (A) items and services included in the uni20 form set of effective benefits, and

21 (B) services described in section

22 2101(c)(1)(A) and similar services.

23 (c) NOMINAL COPAYMENTS.—The Board shall pro24 vide for cost-sharing under this section in an amount that

25 is nominal (within the meaning of section 1916(a)(3) of
164

•S 1579 IS

1 the Social Security Act, as in effect as of the date of the

2 enactment of this Act).

3 (d) PAYMENT RULES.—The Board shall provide for

4 such rules relating to—

5 (1) qualifications of providers of items and serv6 ices, and

7 (2) use of carriers in the administration of this

8 section,

9 as may be appropriate to carry out this section.

10 SEC. 2005. COMPUTATION OF BASE FEDERAL PREMIUM

11 AMOUNT.

12 (a) FORMULA.—

13 (1) IN GENERAL.—For purposes of this Act,

14 the ‘‘base Federal premium amount’’ for an individ15 ual residing in a HPPC area is equal to the product

16 of—

17 (A) reference premium rate (as defined in

18 section 2009(c)(4)) for the individual, and

19 (B) the national subsidy percentage (com20 puted under paragraph (2)).

21 (2) NATIONAL SUBSIDY PERCENTAGE.—In

22 paragraph (1)(B), the term ‘‘national subsidy per23 centage’’ means, for a year—

24 (A) the amount specified under subsection

25 (b)(1), divided by
165

•S 1579 IS

1 (B) the total amount of low-income assist2 ance that would be provided if the national sub3 sidy percentage were equal to 100 percent;

4 expressed as a percentage.

5 (b) COMPUTATION OF TOTAL FEDERAL AMOUNT

6 AVAILABLE FOR LOW-INCOME ASSISTANCE.—

7 (1) IN GENERAL.—The amount specified in this

8 paragraph for a year is—

9 (A) the sum determined under paragraph

10 (2) for the year, reduced by

11 (B) the total amount of reductions under

12 paragraph (3) for the year.

13 (2) AVAILABLE FEDERAL FUNDS.—

14 (A) 1995 THROUGH 1999.—The National

15 Health Board shall compute, in consultation

16 with the Secretary of Health and Human Serv17 ices and the Director of of the Office of Man18 agement and Budget, before the beginning of

19 each of years 1995, 1996, 1997, 1998, and

20 1999, the sum of—

21 (i) the total dollar amount of Federal

22 financial participation that would have

23 been payable to States under section 1903

24 of the Social Security Act (including such

25 a plan operating under a waiver under sec-
166

•S 1579 IS

1 tion 1115 of such Act) for calendar quar2 ters during the year, based on their plans

3 in effect as of the date of the enactment of

4 this Act, taking into account changes

5 scheduled to occur in such a plan as of

6 such date; and

7 (ii) subject to paragraph (4)(A), the

8 total net amount of additional revenues es9 timated by the Secretary of the Treasury

10 to be received during the year due to the

11 amendments made by subtitle A of title I

12 and subtitle C of this title.

13 (B) AFTER 1999.—The National Health

14 Board shall compute, in consultation with the

15 Secretary of Health and Human Services and

16 the Director of the Office of Management and

17 Budget, before the beginning of 2000 and each

18 subsequent year the sum of—

19 (i) the total dollar amount computed

20 under subparagraph (A)(i) (or this clause)

21 for the previous year, increased by the per22 centage increase in the gross domestic

23 product (as determined by the Secretary of

24 Commerce) for the 4-quarter period ending

25 in June of the previous year; and
167

•S 1579 IS

1 (ii) subject to paragraph (4)(A), the

2 total net amount of additional revenues es3 timated by the Secretary of the Treasury

4 to be received during the year due to the

5 amendments made by subtitle A of title I

6 and subtitle C of this title.

7 (3) REDUCTIONS.—Subject to paragraph

8 (4)(B), the total amount of reductions described in

9 this paragraph for a year are the sum of the follow10 ing:

11 (A) LONG-TERM CARE PHASE-DOWN AS12 SISTANCE.—The total amount of long-term care

13 phase-down assistance to which States are enti14 tled under section 2101 for calendar quarters

15 during the year.

16 (B) MEDICARE LOW-INCOME ASSIST17 ANCE.—The total amount, estimated by the

18 Board, of the assistance to be provided under

19 sections 2002(b) and 2003(b) during the year.

20 (C) COST-SHARING.—The total amount,

21 estimated by the Board, of the cost-sharing as22 sistance to be provided under section 2003(a)

23 during the year.

24 (D) SPECIAL LOW-INCOME ASSISTANCE.—

25 The total amount, estimated by the Board, of
168

•S 1579 IS

1 the special assistance to be provided under sec2 tion 2004 during the year.

3 (E) GRANTS AND OTHER EXPENDI4 TURES.—In order to provide for grants under

5 section 2006(g) and additional expenditures

6 under subtitle E of title I, subtitle B of title

7 III, subtitle A of title IV, and title V,

8 $523,000,000.

9 (4) ADJUSTMENT FOR OVER- AND UNDER-ESTI10 MATES.—

11 (A) FUNDS AVAILABLE.—The amounts de12 termined under subparagraphs (A)(ii) and

13 (B)(ii) of paragraph (2) for a year shall be in14 creased or decreased by the amount by which

15 the amount estimated under such respective

16 subparagraph for the preceding year was below,

17 or above, the actual amount of revenues for

18 such year.

19 (B) REDUCTIONS.—The amounts specified

20 in subparagraphs (A) through (D) of paragraph

21 (3) for a year shall be increased or decreased

22 by the amount by which the respective amount

23 estimated under such subparagraph for the pre24 ceding year was below, or above, the actual
169

•S 1579 IS

1 amount described in such subparagraph for

2 such year.

3 SEC. 2006. APPLICATIONS FOR ASSISTANCE.

4 (a) IN GENERAL.—Subject to section 2008, any indi5 vidual who seeks assistance under this subtitle (with re6 spect to himself or herself or a family member) shall sub7 mit a written application, by person or mail, to the Board.

8 (b) BASIS FOR DETERMINATION.—Subject to section

9 2008 and reconciliation under section 2007(b), eligibility

10 for assistance under this subtitle shall be based on 4 times

11 the family adjusted total income (as defined in section

12 2009(b)(1)) during the 3 months preceding the month in

13 which the application is filed.

14 (c) FORM AND CONTENTS.—An application for as15 sistance under this subtitle shall be in a form and manner

16 specified by the Board and shall require—

17 (1) the provision of information necessary to

18 make the determinations described in subsection (b),

19 (2) the provision of information respecting the

20 AHP in which the individual is enrolled (or is in the

21 process of enrolling), and

22 (3) the individual to assign rights to assistance

23 under section 2003 to such plan.
170

•S 1579 IS

1 Such form also shall include notice that the subsidies

2 under this subtitle will be made as a direct reduction of

3 premiums and cost-sharing under the AHP involved.

4 (d) FREQUENCY OF APPLICATIONS.—

5 (1) IN GENERAL.—An application for assistance

6 under this subtitle may be filed at any time during

7 the year and may be resubmitted (but, except as

8 provided in paragraph (3), not more frequently than

9 once every 3 months) based upon a change of in10 come or family composition.

11 (2) NEED TO REAPPLY.—In the case of an indi12 vidual who—

13 (A) is entitled to assistance under this sub14 title in September of a year, and

15 (B) wishes to remain eligible for assistance

16 for months beginning with January of the fol17 lowing year,

18 the individual (or a family member) must file with

19 the Board in October of that preceding year a new

20 application for assistance. If a new application under

21 this paragraph is not filed with respect to an individ22 ual, an application for such assistance with respect

23 to the individual may not be filed during November

24 or December of that preceding year.
171

•S 1579 IS

1 (3) CORRECTION OF INCOME.—Nothing in

2 paragraph (1) shall be construed as preventing an

3 individual or family from, at any time, submitting an

4 application to reduce the amount of assistance under

5 this subtitle based upon an increase in income from

6 that stated in the previous application.

7 (e) TIMING OF ASSISTANCE.—

8 (1) IN GENERAL.—If an application for assist9 ance under this subtitle is filed—

10 (A) on or before the 15th day of a month,

11 assistance under this subtitle shall be available

12 for premiums for months after such month and,

13 with respect to the cost-sharing, for expenses

14 incurred after such month, and, with respect to

15 special assistance, for items and services fur16 nished after such month; or

17 (B) after the 15th day of a month, assist18 ance under this subtitle shall be available for

19 premiums for months after the month following

20 such month and, with respect to the cost-shar21 ing, for expenses incurred after such following

22 month, and, with respect to special assistance,

23 for items and services furnished after such fol24 lowing month.
172

•S 1579 IS

1 (2) WELFARE RECIPIENTS.—In the case of an

2 individual or family with respect to whom an appli3 cation for assistance is not required because of sec4 tion 2008, in applying paragraph (1), the date of ap5 proval of aid or benefits described in such section

6 shall be considered the date of filing of an applica7 tion for assistance under this subtitle.

8 (f) VERIFICATION.—The Board shall provide for ver9 ification, on a sample basis or other basis, of the informa10 tion supplied in applications under this subtitle. This ver11 ification shall be separate from the reconciliation provided

12 under section 2007.

13 (g) HELP IN COMPLETING APPLICATIONS.—The

14 Board shall provide, from funds appropriated to carry out

15 this subtitle, for grants to public or private nonprofit enti16 ties that will make available assistance to individuals and

17 families in filing applications for assistance under this

18 subtitle. The Board shall make grants in a manner that

19 provides such assistance at a variety of sites (such as low20 income housing projects and shelters for homeless individ21 uals) that are readily accessible to individuals and families

22 eligible for assistance under this subtitle. The total

23 amount of the funds provided in any fiscal year under

24 grants under this subsection may not exceed $10,000,000.

25 (h) PENALTIES FOR INACCURATE INFORMATION.—
173

•S 1579 IS

1 (1) INTEREST FOR UNDERSTATEMENTS.—Each

2 individual who knowingly understates income re3 ported in an application for assistance under this

4 subtitle or otherwise makes a material misrepresen5 tation of information in such an application shall be

6 liable to the National Health Board for excess pay7 ments made based on such understatement or mis8 representation, and for interest on such excess pay9 ments at a rate specified by the Board.

10 (2) PENALTIES FOR MISREPRESENTATION.—

11 Each individual who knowingly misrepresents mate12 rial information in an application for assistance

13 under this subtitle shall be liable to the National

14 Health board for $1,000 or, if greater, three times

15 the excess payments made based on such misrepre16 sentation.

17 (i) FILING OF APPLICATION DEFINED.—Except as

18 provided in subsection (e)(2), for purposes of this subtitle,

19 an application under this subtitle is considered to be

20 ‘‘filed’’ on the date on which the complete application, in21 cluding all documentation required to act on the applica22 tion, has been filed with the Board.
174

•S 1579 IS

1 SEC. 2007. RECONCILIATION OF PREMIUM ASSISTANCE

2 THROUGH USE OF INCOME STATEMENTS.

3 (a) REQUIREMENT FOR FILING OF INCOME STATE4 MENT.—

5 (1) IN GENERAL.—Subject to section 2008, in

6 the case of a family which is receiving low-income

7 assistance under this subtitle for any month in a

8 year, a member of the family shall file with the

9 Board, by not later than April 15 of the following

10 year, a statement that verifies the family’s total ad11 justed family income for the taxable year ending

12 during the previous year. Such a statement shall

13 provide information necessary to determine the fam14 ily adjusted total income during the year and the

15 number of family members in the family as of the

16 last day of the year.

17 (2) USE OF INCOME TAX RETURN.—The Board

18 shall provide a process under which the filing of a

19 Federal income tax return shall constitute the filing

20 of a income statement under paragraph (2).

21 (3) EXTENSION.—The Board shall permit the

22 extension of the filing deadline under paragraph (1)

23 in such cases as the Board determines to be appro24 priate. The Board shall take into account the exten25 sions permitted for the filing of Federal income tax

26 returns.
175

•S 1579 IS

1 (b) RECONCILIATION OF PREMIUM ASSISTANCE

2 BASED ON ACTUAL INCOME.—Based on and using the in3 come reported in the statement filed under subsection (a)

4 with respect to a family or individual, subject to section

5 2008, the Board shall compute the amount of assistance

6 that should have been provided under section 2002 with

7 respect to premiums for the family in the year involved.

8 If the amount of such assistance computed is—

9 (1) greater than the amount of premium assist10 ance provided, the Board shall provide for payment

11 to the family or individual involved of an amount

12 equal to the amount of the deficit, or

13 (2) less than the amount of assistance provided,

14 the Board shall require the family or individual to

15 pay to the Board (to the credit of the program

16 under this subtitle) an amount equal to the amount

17 of the excess payment.

18 (c) DISQUALIFICATION FOR FAILURE TO FILE.—

19 Subject to section 2008, in the case of any individual with

20 respect to whom an information statement under sub21 section (a) is required to be filed in a year and that fails

22 to file such a statement by the deadline specified in such

23 subsection, the individual is not eligible for assistance

24 under this subtitle after May 1 of such year. The Board

25 shall waive the application of this subsection if there is
176

•S 1579 IS

1 established, to the satisfaction of the Board, good cause

2 for the failure to file the statement on a timely basis.

3 (d) PENALTIES FOR FALSE INFORMATION.—Any in4 dividual that provides false information in a statement

5 under subsection (a) is subject to a criminal penalty to

6 the same extent as a criminal penalty may be imposed

7 under section 1128B(a) of the Social Security Act with

8 respect to a person described in clause (ii) of such section.

9 (e) NOTICE OF REQUIREMENT.—The Board shall

10 provide for written notice, in March of each year, of the

11 requirement of subsection (a) to each family which re12 ceived assistance under this subtitle in any month during

13 the preceding year and to which such requirement applies.

14 (f) TRANSMITTAL OF INFORMATION.—The Board of

15 the Treasury shall transmit annually to the Board such

16 information relating to the adjusted total income of indi17 viduals for the taxable year ending in the previous year

18 as may be necessary to verify the reconciliation of assist19 ance under this section.

20 (g) CONSTRUCTION.—Nothing in this section shall be

21 construed as authorizing reconciliation of assistance pro22 vided with respect to cost-sharing assistance under section

23 2003 or special assistance under section 2004.
177

•S 1579 IS

1 SEC. 2008. TREATMENT OF CERTAIN CASH ASSISTANCE RE2 CIPIENTS.

3 In the case of a family that has been determined to

4 be eligible for aid under part A or E of title IV of the

5 Social Security Act or an individual who has been deter6 mined to be eligible for supplemental security income ben7 efits under title XVI of such Act—

8 (1) the family or individual is deemed, without

9 the need to file an application for assistance under

10 section 2006, to have adjusted total income below

11 100 percent of the State-adjusted poverty level for

12 the State,

13 (2) the family or individual need not file a

14 statement under section 2007(a), and

15 (3) the assistance received by the family is not

16 subject to reconciliation under section 2007(b).

17 SEC. 2009. DEFINITIONS.

18 (a) DEFINITIONS RELATING TO LOW-INCOME INDI19 VIDUALS.—In this subtitle:

20 (1) LOW-INCOME INDIVIDUAL.—

21 (A) IN GENERAL.—The term ‘‘low-income

22 individual’’ means, in the case of—

23 (i) a medicare-eligible individual resid24 ing in a State, such an individual whose

25 family adjusted total income (as defined in

26 subsection (b)(1)) is less than 120 percent
178

•S 1579 IS

1 of the State-adjusted poverty level for the

2 State; or

3 (ii) an individual who is not a medi4 care-eligible individual and who resides in

5 a State, an eligible individual (as defined

6 in section 1701(a)(1)) whose family ad7 justed total income is less than 200 per8 cent of the State-adjusted poverty level for

9 the State.

10 (2) MODERATELY LOW-INCOME INDIVIDUAL.—

11 The term ‘‘moderately low-income individual’’ means

12 a low-income individual (as defined in paragraph

13 (1)) who is not a very low-income individual (as de14 fined in paragraph (3).

15 (3) VERY LOW-INCOME INDIVIDUAL.—The term

16 ‘‘very low-income individual’’ means, with respect to

17 an individual residing in a State, a low-income indi18 vidual whose family adjusted total income is less

19 than 100 percent of the State-adjusted poverty level

20 for the State.

21 (b) DEFINITIONS RELATING TO INCOME AND POV22 ERTY LINE.—In this subtitle:

23 (1) FAMILY ADJUSTED TOTAL INCOME.—The

24 term ‘‘family adjusted total income’’ means, with re25 spect to an individual, the sum of the modified total
179

•S 1579 IS

1 income for the individual and all the other eligible

2 family members.

3 (2) MODIFIED FAMILY INCOME.—The term

4 ‘‘modified family income’’ means the sum of—

5 (A) the adjusted gross income (as defined

6 in section 62(a) of the Internal Revenue Code

7 of 1986) of the taxpayer and family members

8 for the taxable year determined without regard

9 to sections 911, 931, and 933 of such Code, de10 termined without the application of paragraphs

11 (6) and (7) of section 62(a) of such Code and

12 without the application of section 162(l) of such

13 Code, plus

14 (B) the interest received or accrued by the

15 taxpayer and family members during such tax16 able year which is exempt from income, plus

17 (C) the amount of social security benefits

18 (described in section 86(d) of such Code) which

19 is not includable in gross income of the tax20 payer and family members under section 86 of

21 such Code.

22 (3) STATE-ADJUSTED POVERTY LEVEL DE23 FINED.—

24 (A) IN GENERAL.—The term ‘‘State-ad25 justed poverty level’’ means, with respect to an
180

•S 1579 IS

1 individual resident in a State, the poverty line

2 (as defined in paragraph (4)) multiplied by the

3 State adjustment factor (established under sub4 paragraph (B)) for the State.

5 (B) STATE ADJUSTMENT FACTORS.—The

6 National Health Board shall establish, for each

7 State, a State adjustment factor that reflects

8 the relative cost-of-living in the State compared

9 to the cost-of-living in the continental United

10 States (including Alaska) and Hawaii. The

11 weighted average of such factors shall be 1.

12 Such factors shall be updated annually.

13 (4) POVERTY LINE.—The term ‘‘poverty line’’

14 means the income official poverty line as defined by

15 the Office of Management and Budget, and revised

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

17 Omnibus Budget Reconciliation Act of 1981.

18 (5) FAMILY SIZE.—The family size to be ap19 plied under this subtitle, with respect to family ad20 justed total income, is the number of eligible family

21 members (as defined in section 1701(a)(3)).

22 (c) DEFINITIONS RELATING TO ASSISTANCE AND

23 PREMIUM AMOUNTS.—In this Act:
181

•S 1579 IS

1 (1) APPLICABLE FEDERAL ASSISTANCE

2 AMOUNT.—The term ‘‘applicable Federal assistance

3 amount’’ means, with respect to—

4 (A) a very low-income individual, the base

5 Federal premium amount (as determined under

6 section 2005(a)(1)), or

7 (B) a moderately low-income individual,

8 the amount by which (i) the applicable low-in9 come premium amount (as defined in para10 graph (2)), exceeds (ii) the base individual pre11 mium (as defined in paragraph (3)),

12 reduced by the amount of any contribution made by

13 an employer with respect to coverage of the individ14 ual.

15 (2) APPLICABLE LOW-INCOME PREMIUM

16 AMOUNT.—The term ‘‘applicable low-income pre17 mium amount’’ means, with respect to a low-income

18 individual, the base Federal premium amount (deter19 mined under section 2005(a)(1)) plus the product

20 of—

21 (A) the individual responsibility percentage

22 (as defined in paragraph (5)), and

23 (B) the amount by which (i) the reference

24 premium rate (as defined in paragraph (4)), ex25 ceeds (ii) the base Federal premium amount.
182

•S 1579 IS

1 (3) BASE INDIVIDUAL PREMIUM.—The term

2 ‘‘base individual premium’’ means, with respect to

3 an individual, the product of—

4 (A) the individual responsibility percentage

5 (as defined in paragraph (5)), and

6 (B) the reference premium rate (as defined

7 in paragraph (4)).

8 (4) REFERENCE PREMIUM RATE.—The term

9 ‘‘reference premium rate’’ means, with respect to an

10 individual residing in a HPPC area, the lowest pre11 mium—

12 (A) established by an open AHP which en13 rolls at least such proportion of eligible individ14 uals in the HPPC area as the Board shall

15 specify, and

16 (B) offered in the area for the premium

17 class applicable to such individual (including

18 the HPPC overhead amount established under

19 section 1105(b)(3)).

20 (5) INDIVIDUAL RESPONSIBILITY PERCENT21 AGE.—The term ‘‘individual responsibility percent22 age’’ means—

23 (A) with respect to a very low-income indi24 vidual, 0 percentage points,
183

•S 1579 IS

1 (B) with respect to a moderately low-in2 come individual, the number of percentage

3 points by which the family’s family adjusted

4 total income (expressed as a percent of the ap5 plicable poverty line) exceeds 100 percentage

6 points, and

7 (C) with respect to any other individual,

8 100 percentage points.

9 Subtitle B—Long-Term Care Phase10 Down Assistance to States

11 SEC. 2101. LONG-TERM CARE PHASE-DOWN ASSISTANCE.

12 (a) IN GENERAL.—Subject to subsection (b), if the

13 excess percentage (as defined in subsection (c)(3)) for a

14 State is greater than 0 percentage points, the State is en15 titled for each calendar quarter in 1995 through 1998 to

payment equal to 1 16 ⁄4 of the product of—

17 (A) such excess percentage,

18 (B) the applicable phase-down percentage

19 for the year, described in subsection (c)(4)),

20 and

(C) 1 21 ⁄2 of the amount described in sub22 section (c)(1)(B).

23 (b) MAINTENANCE OF EFFORT REQUIRED.—A State

24 is not eligible for assistance under subsection (a) for a

25 calendar quarter unless the State provides assurances sat-
184

•S 1579 IS

1 isfactory to the Board that the State is incurring expenses

2 (for services described in subsection (c)(1)(A)) in an

3 amount not less than the sum of—

4 (1) the amount of assistance under subsection

5 (a), and

(2) 1 6 ⁄4 of the product of—

7 (A) the State’s effective State medicaid

8 percentage (as defined in subsection (c)(2)),

9 and

(B) 1 10 ⁄2 of the amount described in sub11 section (c)(1)(B).

12 (c) DEFINITIONS.—For purposes of this section:

13 (1) LONG-TERM CARE PERCENTAGE.—The

14 ‘‘long-term care percentage’’ for a State is—

15 (A) the portion of the amount described in

16 subparagraph (B) that is are attributable to

17 medical assistance for nursing facility services,

18 intermediate care facility services for the men19 tally retarded, home health care services, and

20 home and community-based services, divided by

21 (B) the total amount of Federal and State

22 expenditures for medical assistance under the

23 State plan under title XIX of the Social Secu24 rity Act for calendar quarters during fiscal

25 years 1992 and 1993;
185

•S 1579 IS

1 expressed as a percentage.

2 (2) EFFECTIVE STATE MEDICAID PERCENT3 AGE.—The ‘‘effective State medicaid percentage’’ for

4 a State is—

5 (A)(i) the amount described in subpara6 graph (B), reduced by (ii) the sum of the

7 amount of the Federal financial participation

8 under section 1903(a) of the Social Security

9 Act paid to the State for calendar quarters dur10 ing fiscal years 1992 and 1993 and the amount

11 of health-care related taxes (as defined in sec12 tion 1903(w)(3)(A) of such Act) received by the

13 State during such fiscal years, divided by

14 (B) the total amount of the Federal and

15 State expenditures under its plan under title

16 XIX of the Social Security Act during calendar

17 quarters in fiscal years 1992 and 1993.

18 (3) EXCESS PERCENTAGE.—The term ‘‘excess

19 percentage’’ means, for a State, percentage by which

20 (A) the long-term care percentage (as defined in

21 paragraph (1)) exceeds (B) 2 percentage points plus

22 the effective State medicaid percentage (as defined

23 in paragraph (2)).

24 (4) APPLICABLE PHASE-DOWN PERCENTAGE.—

25 The ‘‘applicable phase-down percentage’’ for—
186

•S 1579 IS

1 (A) 1995, is 80 percent,

2 (B) 1996, is 60 percent,

3 (C) 1997, is 40 percent, and

4 (D) 1998, is 20 percent.

5 Subtitle C—Financing

6 PART 1—MEDICARE SAVINGS

7 SEC. 2201. REDUCTION IN UPDATE FOR INPATIENT HOS8 PITAL SERVICES.

9 (a) PPS HOSPITALS.—Section 1886(b)(3)(B)(i) of

10 the Social Security Act (42 U.S.C. 1395ww(b)(3)(B)(i)),

11 as amended by section 13501(a)(1) of the Omnibus Budg12 et Reconciliation Act of 1993 (hereafter in this part re13 ferred to as ‘‘OBRA–1993’’), is amended—

14 (1) in subclause (XII), by striking ‘‘fiscal year

15 1997, the market basket percentage increase minus

16 0.5 percentage point’’ and inserting ‘‘each of the fis17 cal years 1997, 1998, and 1999, the market basket

18 percentage increase minus 2.5 percentage points’’;

19 and

20 (2) in subclause (XIII), by striking ‘‘fiscal year

21 1998’’ and inserting ‘‘fiscal year 2000’’.

22 (b) PPS-EXEMPT HOSPITALS.—Section

23 1886(b)(3)(B)(ii)(V) of such Act (42 U.S.C.

24 1395ww(b)(3)(B)(ii)(V)), as amended by section
187

•S 1579 IS

1 13502(a)(1) of OBRA–1993, is amended by striking

2 ‘‘through 1997’’ and inserting ‘‘through 1999’’.

3 SEC. 2202. REDUCTION IN CONVERSION FACTOR FOR PHY4 SICIAN FEE SCHEDULE FOR NON-PRIMARY

5 CARE SERVICES.

6 Section 1848(d)(3)(A) of the Social Security Act (42

7 U.S.C. 1395w–4(d)(3)(A)), as amended by section

8 13511(a)(1) of OBRA–1993, is amended—

9 (1) in clause (i), by striking ‘‘through (v)’’ and

10 inserting ‘‘through (vi)’’;

11 (2) in clause (vi), by striking ‘‘(iv) and (v)’’ and

12 inserting ‘‘(iv), (v), and (vi)’’;

13 (3) by redesignating clause (vi) as clause (vii);

14 and

15 (4) by inserting after clause (v) the following

16 new clause:

17 ‘‘(vi) ADJUSTMENT IN PERCENTAGE

18 INCREASE FOR YEARS FROM 1996

19 THROUGH 1999.—In applying clause (i) for

20 services furnished during the period begin21 ning January 1, 1996, and ending Decem22 ber 31, 1999, the percentage increase in

23 the appropriate update index shall be re24 duced by such percent as the Secretary de25 termines will result in a reduction in ag-
188

•S 1579 IS

1 gregate payments for physicians’ services

2 under this part during such period of at

3 least $6,300,000,000 from the amount of

4 aggregate payments for such services that

5 would otherwise have been made during

6 the period.’’.

7 SEC. 2203. REDUCTION IN HOSPITAL OUTPATIENT SERV8 ICES THROUGH ESTABLISHMENT OF PRO9 SPECTIVE PAYMENT SYSTEM.

10 (a) IN GENERAL.—Section 1833(a)(2)(B) of the So11 cial Security Act (42 U.S.C. 1395l(a)(2)(B)) is amended

12 by striking ‘‘section 1886)—’’ and all that follows and in13 serting the following: ‘‘section 1886), an amount equal to

14 a prospectively determined payment rate established by

15 the Secretary that provides for payments for such items

16 and services to be based upon a national rate adjusted

17 to take into account the relative costs of furnishing such

18 items and services in various geographic areas, except that

19 for items and services furnished during cost reporting pe20 riods (or portions thereof) in years beginning with 1995,

21 such amount shall be equal to 90 percent of the amount

22 that would otherwise have been determined;’’.

23 (b) ESTABLISHMENT OF PROSPECTIVE PAYMENT

24 SYSTEM.—Not later than July 1, 1994, the Secretary of

25 Health and Human Services shall establish the prospective
189

•S 1579 IS

1 payment system for hospital outpatient services necessary

2 to carry out section 1833(a)(2)(B) of the Social Security

3 Act (as amended by subsection (a)).

4 (c) EFFECTIVE DATE.—The amendment made by

5 subsection (a) shall apply to items and services furnished

6 on or after January 1, 1995.

7 SEC. 2204. INCREASE IN MEDICARE PART B PREMIUM FOR

8 INDIVIDUALS WITH HIGH INCOME.

9 (a) IN GENERAL.—Subchapter A of chapter 1 of the

10 Internal Revenue Code of 1986 is amended by adding at

11 the end thereof the following new part:

12 ‘‘PART VIII—MEDICARE PART B PREMIUMS FOR

13 HIGH-INCOME INDIVIDUALS

‘‘Sec. 59B. Medicare part B premium tax.

14 ‘‘SEC. 59B. MEDICARE PART B PREMIUM TAX.

15 ‘‘(a) IMPOSITION OF TAX.—In the case of an individ16 ual to whom this section applies for the taxable year, there

17 is hereby imposed (in addition to any other tax imposed

18 by this subtitle) a tax for such taxable year equal to the

19 aggregate of the Medicare part B premium taxes for each

20 of the months during such year that such individual is

21 covered by Medicare part B.

22 ‘‘(b) INDIVIDUALS TO WHOM SECTION APPLIES.—

23 This section shall apply to any individual for any taxable

24 year if—
190

•S 1579 IS

1 ‘‘(1) such individual is covered under Medicare

2 part B for any month during such year, and

3 ‘‘(2) the modified adjusted gross income of the

4 taxpayer for such taxable year exceeds the threshold

5 amount.

6 ‘‘(c) MEDICARE PART B PREMIUM TAX FOR

7 MONTH.—

8 ‘‘(1) IN GENERAL.—The Medicare part B pre9 mium tax for any month is the applicable percentage

10 (as defined in paragraph (2)) of the amount equal

11 to the excess of—

12 ‘‘(A) 150 percent of the monthly actuarial

13 rate for enrollees age 65 and over determined

14 for that calendar year under section 1839(b) of

15 the Social Security Act, over

16 ‘‘(B) the total monthly premium under sec17 tion 1839 of the Social Security Act (deter18 mined without regard to subsections (b) and (f)

19 of section 1839 of such Act).

20 ‘‘(2) PHASE-IN OF TAX.—If the modified ad21 justed gross income of the taxpayer for any taxable

22 years exceeds the threshold amount by—

23 ‘‘(A) less than $25,000, the applicable percentage under this paragraph is 331 24 ⁄3 percent;
191

•S 1579 IS

1 ‘‘(B) at least $25,000, but less than

2 $50,000, the applicable percentage under this

paragraph is 662 3 ⁄3 percent,

4 ‘‘(C) at least $50,000, but less than

5 $75,000, the applicable percentage under this

6 paragraph is 65/75 (expressed as a percent), or

7 ‘‘(D) at least $75,000, the applicable per8 centage under this paragraph is 100 percent.

9 ‘‘(d) OTHER DEFINITIONS AND SPECIAL RULES.—

10 For purposes of this section—

11 ‘‘(1) THRESHOLD AMOUNT.—The term ‘thresh12 old amount’ means—

13 ‘‘(A) except as otherwise provided in this

14 paragraph, $75,000,

15 ‘‘(B) $100,000 in the case of a joint re16 turn, and

17 ‘‘(C) zero in the case of a taxpayer who—

18 ‘‘(i) is married at the close of the tax19 able year but does not file a joint return

20 for such year, and

21 ‘‘(ii) does not live apart from his

22 spouse at all times during the taxable year.

23 ‘‘(2) MODIFIED ADJUSTED GROSS INCOME.—

24 The term ‘modified adjusted gross income’ means

25 adjusted gross income—
192

•S 1579 IS

1 ‘‘(A) determined without regard to sections

2 135, 911, 931, and 933, and

3 ‘‘(B) increased by the amount of interest

4 received or accrued by the taxpayer during the

5 taxable year which is exempt from tax.

6 ‘‘(3) MEDICARE PART B COVERAGE.—An indi7 vidual shall be treated as covered under Medicare

8 part B for any month if a premium is paid under

9 part B of title XVIII of the Social Security Act for

10 the coverage of the individual under such part for

11 the month.

12 ‘‘(4) MARRIED INDIVIDUAL.—The determina13 tion of whether an individual is married shall be

14 made in accordance with section 7703.’’.

15 (b) CLERICAL AMENDMENT.—The table of parts for

16 subchapter A of chapter 1 of such Code is amended by

17 adding at the end thereof the following new item:

‘‘Part VIII. Medicare Part B Premiums For High-Income Individuals.’’.

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

19 this section shall apply to months after December 1993

20 in taxable years ending after December 31, 1993.
193

•S 1579 IS

1 SEC. 2205. PHASED-IN ELIMINATION OF MEDICARE HOS2 PITAL DISPROPORTIONATE SHARE ADJUST3 MENT PAYMENTS.

4 Section 1886(d)(5)(F) of the Social Security Act (42

5 U.S.C. 1395ww(d)(5)(F)) is amended—

6 (1) in clause (i), by inserting ‘‘and before Sep7 tember 30, 1998,’’ after ‘‘1986,’’;

8 (2) in clause (ii), by striking ‘‘The amount of

9 such payment’’ and inserting ‘‘Subject to clause (ix),

10 the amount of such payment’’; and

11 (3) by adding at the end the following new

12 clause:

13 ‘‘(ix) The amount of the additional payment made

14 under this paragraph for a discharge shall be equal to—

15 ‘‘(I) for discharges occurring during fiscal year

16 1995, 80 percent of the amount otherwise deter17 mined for the discharge under clause (ii);

18 ‘‘(II) for discharges occurring during fiscal year

19 1996, 60 percent of the amount otherwise deter20 mined for the discharge under clause (ii);

21 ‘‘(III) for discharges occurring during fiscal

22 year 1997, 40 percent of the amount otherwise de23 termined for the discharge under clause (ii); and

24 ‘‘(IV) for discharges occurring during fiscal

25 year 1998, 20 percent of the amount otherwise de26 termined for the discharge under clause (ii).’’.
194

•S 1579 IS

1 SEC. 2206. REDUCTION IN ROUTINE COST LIMITS FOR

2 HOME HEALTH SERVICES.

3 Section 1861(v)(1)(L)(i) of the Social Security Act

4 (42 U.S.C. 1395x(v)(1)(L)(i)) is amended—

5 (1) in subclause (II), by striking ‘‘or’’ at the

6 end;

7 (2) in subclause (III)—

8 (A) by inserting ‘‘and before July 1,

9 1995,’’ after ‘‘1977,’’, and

10 (B) by adding ‘‘or’’ at the end; and

11 (3) by inserting after subclause (III) the follow12 ing new subclause:

13 ‘‘(IV) July 1, 1995, 103 percent,’’.

14 SEC. 2207. REDUCTION IN ROUTINE COST LIMITS FOR EX15 TENDED CARE SERVICES.

16 (a) IN GENERAL.—Section 1888(a) of the Social Se17 curity Act (42 U.S.C. 1395yy(a)) is amended by striking

18 ‘‘112 percent’’ and inserting ‘‘102 percent’’ each place it

19 appears.

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

21 subsection (a) shall apply to cost reporting periods begin22 ning on or after October 1, 1994.
195

•S 1579 IS

1 SEC. 2208. REDUCTIONS IN PAYMENTS FOR HOSPICE SERV2 ICES.

3 Section 1814(i)(1)(C)(ii) of the Social Security Act

4 (42 U.S.C. 1395f(i)(1)(C)(ii)), as amended by section

5 13504 of OBRA–1993, is amended—

6 (1) in subclause (III), by striking ‘‘1.5 percent7 age points’’ and inserting ‘‘2.5 percentage points’’;

8 (2) in subclause (IV), by striking ‘‘1.5 percent9 age points’’ and inserting ‘‘2.5 percentage points’’;

10 (3) in subclause (V), by striking ‘‘0.5 percent11 age point’’ and inserting ‘‘1.5 percentage points’’

12 and by striking ‘‘and’’ at the end;

13 (4) by redesignating subclause (VI) as

14 subclause (VIII); and

15 (5) by inserting after subclause (V) the follow16 ing new subclauses:

17 ‘‘(VI) for fiscal year 1998, the market basket

18 percentage increase for the fiscal year minus 1.0

19 percentage point;

20 ‘‘(VII) for fiscal year 1999, the market basket

21 percentage increase for the fiscal year minus 1.0

22 percentage point; and’’.
196

•S 1579 IS

1 PART 2—OTHER SAVINGS

2 SEC. 2211. REQUIREMENT THAT CERTAIN AGENCIES

3 PREFUND GOVERNMENT HEALTH BENEFITS

4 CONTRIBUTIONS FOR THEIR ANNUITANTS.

5 (a) DEFINITIONS.—For the purpose of this section—

6 (1) the term ‘‘agency’’ means any agency or

7 other instrumentality within the executive branch of

8 the Government, the receipts and disbursements of

9 which are not generally included in the totals of the

10 budget of the United States Government submitted

11 by the President;

12 (2) the term ‘‘health benefits plan’’ means, with

13 respect to an agency, a health benefits plan, estab14 lished by or under Federal law, in which employees

15 or annuitants of such agency may participate;

16 (3) the term ‘‘health-benefits coverage’’ means

17 coverage under a health benefits plan’’;

18 (4) an individual shall be considered to be an

19 ‘‘annuitant of an agency’’ if such individual is enti20 tled to an annuity, under a retirement system estab21 lished by or under Federal law, by virtue of—

22 (A) such individual’s service with, and sep23 aration from, such agency; or

24 (B) being the survivor of an annuitant

25 under subparagraph (A) or of an individual who

26 died while employed by such agency; and
197

•S 1579 IS

1 (5) the term ‘‘Office’’ means the Office of Per2 sonnel Management.

3 (b) PREFUNDING REQUIREMENT.—

4 (1) IN GENERAL.—Effective as of October 1,

5 1994, each agency (or February 1, 1995, in the case

6 of the agency with the greatest number of employ7 ees, as determined by the Office) shall be required

8 to prepay the Government contributions which are

9 or will be required in connection with providing

10 health-benefits coverage for annuitants of such agen11 cy.

12 (2) REGULATIONS.—The Office shall prescribe

13 such regulations as may be necessary to carry out

14 this section. The regulations shall be designed to en15 sure at least the following:

16 (A) Amounts paid by each agency shall be

17 sufficient to cover the amounts which would

18 otherwise be payable by such agency (on a

19 ‘‘pay-as-you-go’’ basis), on or after the applica20 ble effective date under paragraph (1), on be21 half of—

22 (i) individuals who are annuitants of

23 the agency as of such effective date; and

24 (ii) individuals who are employed by

25 the agency as of such effective date, or
198

•S 1579 IS

1 who become employed by the agency after

2 such effective date, after such individuals

3 have become annuitants of the agency (in4 cluding their survivors).

5 (B)(i) For purposes of determining any

6 amounts payable by an agency—

7 (I) this section shall be treated as if

8 it had taken effect at the beginning of the

9 20-year period which ends on the effective

10 date applicable under paragraph (1) with

11 respect to such agency; and

12 (II) in addition to any amounts pay13 able under subparagraph (A), each agency

14 shall also be responsible for paying any

15 amounts for which it would have been re16 sponsible, with respect to the 20-year pe17 riod described in subclause (I), in connec18 tion with any individuals who are annu19 itants or employees of the agency as of the

20 applicable effective date under paragraph

21 (1).

22 (ii) Any amounts payable under this sub23 paragraph for periods preceding the applicable

24 effective date under paragraph (1) shall be pay-
199

•S 1579 IS

1 able in equal installments over the 20-year pe2 riod beginning on such effective date.

3 (c) FASB STANDARDS.—Regulations under sub4 section (b) shall be in conformance with the provisions of

5 standard 106 of the Financial Accounting Standards

6 Board, issued in December 1990.

7 (d) CLARIFICATION.—Nothing in this section shall be

8 considered to permit or require duplicative payments on

9 behalf of any individuals.

10 (e) DRAFT LEGISLATION.—The Office shall prepare

11 and submit to Congress any draft legislation which may

12 be necessary in order to carry out this section.

13 Subtitle D—Repeal of Medicaid

14 Program

15 SEC. 2301. REPEAL OF MEDICAID PROGRAM.

16 (a) IN GENERAL.—Title XIX of the Social Security

17 Act is repealed.

18 (b) REPORT ON CONFORMING CHANGES.—By not

19 later than May 1, 1994, the National Health Board shall

20 submit to Congress a report on—

21 (1) changes in laws that should be made in

22 order to conform those laws to the repeal in the

23 medicaid program effected under subsection (a), and

24 (2) the need for any special or transitional pro25 visions that should be made in order to ensure con-
200

•S 1579 IS

1 tinuous assistance for the medical needs of the med2 icaid population.

3 (c) EFFECTIVE DATE.—The repeal made by sub4 section (a) shall take apply to items and service furnished

5 on or after January 1, 1995.

6 TITLE III—TRAINING AND EDU7 CATION OF HEALTH CARE

8 PROFESSIONALS

9 Subtitle A—Reform of Federal

10 Funding for Medical Residency

11 Training

12 SEC. 3001. DEFINITIONS.

13 In this subtitle, the following definitions shall apply:

14 (1) The term ‘‘entry position’’ means, with re15 spect to a medical residency training program, a po16 sition as a resident in the initial year of study in the

17 program.

18 (2) The term ‘‘Fund’’ means the National Med19 ical Education Fund established under section 3005.

20 (3) The term ‘‘medical residency training pro21 gram’’ means a residency or other postgraduate

22 medical training program participation in which may

23 be counted toward certification in a specialty or sub24 specialty and includes formal postgraduate training
201

•S 1579 IS

1 programs in geriatric medicine approved by the Na2 tional Health Board.

3 (4) The term ‘‘primary care resident’’ means a

4 resident enrolled in a medical residency training pro5 gram in family medicine, general internal medicine,

6 general pediatrics, preventive medicine, geriatric

7 medicine, or osteopathic general practice.

8 (5) The term ‘‘resident’’ includes any partici9 pant in a medical residency training program (or,

10 for purposes of section 3003, a physician retraining

11 program).

12 (6) The term ‘‘United States medical graduate’’

13 means a resident who is a graduate of—

14 (A) a school of medicine accredited by the

15 Liaison Committee on Medical Education of the

16 American Medical Association (or approved by

17 such Committee as meeting the standards nec18 essary for such accreditation); or

19 (B) a school of osteopathy accredited by

20 the American Osteopathic Association (or ap21 proved by such Association as meeting the

22 standards necessary for such accreditation).
202

•S 1579 IS

1 SEC. 3002. APPROVAL OF MEDICAL RESIDENCY TRAINING

2 POSITIONS.

3 (a) IN GENERAL.—The National Health Board shall

4 approve a resident training position in a medical residency

5 training program for purposes of funding under section

6 3003(a) if—

7 (1) the program submits an application for ap8 proval of the position to the Board (at such time

9 and in such manner as the Board may require); and

10 (2) the Board determines that the entry posi11 tion relating to such resident training position in the

12 program has been allocated to the program under

13 subsection (b).

14 (b) ALLOCATION OF ENTRY POSITIONS AMONG PRO15 GRAMS.—

16 (1) IN GENERAL.—For purposes of subsection

17 (a)(2), the Board shall establish a process for the al18 location of entry positions among medical residency

19 training programs consistent with this subsection.

20 (2) TOTAL NUMBER OF FUNDED POSITIONS.—

21 (A) IN GENERAL.—In consultation with ac22 countable health plans, medical societies, and

23 medical specialty societies, the Board shall de24 termine the appropriate total number of entry

25 positions that will be allocated to medical resi26 dency training programs under this subsection
203

•S 1579 IS

1 in the United States for each residency year. In

2 this subsection, the term ‘‘residency year’’

3 means a 12-month period beginning with July

4 of the year in which the program begins.

5 (B) BASIS FOR TOTAL NUMBER OF ENTRY

6 POSITIONS.—Subject to subparagraph (C), such

7 total number of entry positions shall be based

8 on the need for health care professionals to pro9 vide cost effective health care services in the

10 United States. In determining such number the

11 Board shall take into account the population-to12 physician ratio, consistent with demand for

13 health care services.

14 (C) LIMIT ON TOTAL NUMBER OF ENTRY

15 POSITIONS.—The total number of entry posi16 tions determined under this paragraph for any

17 residency year shall not exceed 110 percent of

18 the number of United States medical graduates

19 who complete undergraduate medical education

20 in the previous year.

21 (D) NO APPLICATION TO RESIDENTS WHO

22 HAVE COMPLETED ANOTHER TRAINING PRO23 GRAM.—The total number determined under

24 this paragraph shall only apply to residents who

25 may enroll in a program without having pre-
204

•S 1579 IS

1 viously completed another medical residency

2 training program.

3 (3) GENERAL DISTRIBUTION OF POSITIONS

4 AMONG SPECIALITIES.—

5 (A) IN GENERAL.—In consultation with ac6 countable health plans, medical societies, and

7 medical specialty societies, the Board shall de8 termine the appropriate distribution of the total

9 number of entry positions determined under

10 paragraph (2) among the various medical spe11 cialties.

12 (B) BASIS FOR DISTRIBUTION.—Such dis13 tribution shall be based on the need for health

14 care professionals in different medical speciali15 ties to provide cost effective health care services

16 in the United States. In determining such dis17 tribution the Board shall take into account the

18 population-to-physician ratio with respect to

19 each medical specialty, consistent with demand

20 for health care services, and the specific needs

21 of accountable health plans.

22 (4) ALLOCATION AMONG PROGRAMS.—

23 (A) IN GENERAL.—The Board shall allo24 cate entry positions, distributed among medical
205

•S 1579 IS

1 specialties under paragraph (3), among specific

2 medical residency training programs.

3 (B) BASIS FOR ALLOCATION.—Such alloca4 tion shall be based on the recommendations (if

5 any) submitted by the Accreditation Council for

6 Graduate Medical Education and the Residency

7 Review Committees of such Council and the fol8 lowing objectives:

9 (i) Allocating positions among pro10 grams on the basis of quality.

11 (ii) Allocating positions among pro12 grams to avoid an inappropriate geo13 graphic distribution of physicians.

14 (iii) Allocating positions among pro15 grams to assure a sufficient number of

16 residents in outpatient settings.

17 SEC. 3003. FUNDING FOR APPROVED MEDICAL RESIDENCY

18 TRAINING PROGRAMS AND PHYSICIAN RE19 TRAINING PROGRAMS.

20 (a) IN GENERAL.—In the case of an entry position

21 in a medical residency training program that is approved

22 by the Board under section 3002(a) and in the case of

23 a entry position in a physician retraining program de24 scribed in subsection (d)(1) for a residency year, the

25 Board shall provide a payment to the program on the first
206

•S 1579 IS

1 day of each month of the year from the National Medical

2 Education Fund established under section 3005 in the

3 amount determined under subsection (b). This subsection

4 constitutes budget authority in advance of appropriations

5 Acts, and represents the obligation of the Federal Govern6 ment to make payments to such programs in accordance

7 with this subtitle. No payment shall be made under this

8 subsection for a month before July 1995.

9 (b) PAYMENT AMOUNT.—

10 (1) IN GENERAL.—Subject to subsection (e),

11 the amount of payment made to an approved medi12 cal residency training program or a physician re13 training program for each approved entry position

14 for a full-time equivalent resident, shall be equal to

15 the applicable percentage (as defined in paragraph

16 (3)) of the base per resident amount established by

17 the Board for the year under paragraph (2) for that

18 resident.

19 (2) BASE PER RESIDENT AMOUNT.—The Board

20 shall establish a base per resident amount for each

21 year (beginning with 1995) that reflects an appro22 priate measure of the salary and benefits paid to

23 residents in medical residency training programs

24 during the year. The Board may vary such amount

25 for residents to take into account—
207

•S 1579 IS

1 (A) increases provided in the salaries and

2 benefits of residents on the basis of the length

3 of service in the program; and

4 (B) the relative wages and other costs of

5 goods and services among the various geo6 graphic areas in which such programs are oper7 ated.

8 (3) APPLICABLE PERCENTAGE DEFINED.—In

9 paragraph (1), the ‘‘applicable percentage’’ with re10 spect to a resident is equal to—

11 (A) 175 percent, in the case of a primary

12 care resident; and

13 (B) 150 percent, in the case of a resident

14 who is not a primary care resident.

15 (c) LIMIT ON LENGTH OF SERVICE OF RESIDENT.—

16 (1) IN GENERAL.—No payment shall be made

17 under subsection (a) for any resident who has com18 pleted 4 years of medical residency training in any

19 program.

20 (2) EXCEPTION.—Paragraph (1) shall not

21 apply to a resident enrolled in a physician retraining

22 program described in subsection (d)(1).

23 (d) FUNDING OF PHYSICIAN RETRAINING PRO24 GRAMS.—
208

•S 1579 IS

1 (1) PROGRAM DESCRIBED.—A physician re2 training program described in this paragraph is a

3 program that—

4 (A) provides training over a period of not

5 to exceed 2 years for primary care residents for

6 physicians who have completed training in a

7 medical residency training program (other than

8 as a primary care resident); and

9 (B) meets such other requirements as the

10 Board (in consultation with the Accreditation

11 Council for Graduate Medical Education) may

12 impose.

13 (2) FUNDING FOR PILOT PROGRAMS.—The Na14 tional Health Board shall make payments from the

15 Fund to assist the development of physician retrain16 ing programs described in paragraph (1).

17 (e) LIMIT ON EXPENDITURES FOR PROGRAMS.—The

18 amounts otherwise payable under this section shall be re19 duced, in a pro rata manner, to the extent necessary to

20 assure that the total amount expended by the National

21 Health Board during a year for payments under this sec22 tion do not exceed the Board’s estimate of the amount

23 of funds available for expenditure from the Fund in the

24 year.
209

•S 1579 IS

1 SEC. 3004. FINANCING.

2 (a) ASSESSMENT AGAINST PREMIUMS OF ACCOUNT3 ABLE HEALTH PLANS.—For requirement of payment by

4 accountable health plans to the National Medical Edu5 cation Fund of 1 percent of gross premium receipts, see

6 section 1211.

7 (b) PAYMENTS FROM MEDICARE.—Title XVIII of

8 the Social Security Act (42 U.S.C. 1395 et seq.) is amend9 ed by inserting after section 1889 the following new sec10 tion:

11 ‘‘PAYMENTS TO NATIONAL MEDICAL EDUCATION FUND

12 ‘‘SEC. 1890. (a) ANNUAL PAYMENT REQUIRED.—

13 For each month (beginning with July 1995), the Secretary

14 shall make a payment to the National Medical Education

15 Fund established under section 3005 of the Managed

16 Competition Act of 1993 in an amount that is equal, for

a month in a fiscal year, to 1 17 ⁄12 of 1 percent of the Sec18 retary’s estimate of the total expenditures made by the

19 Secretary under this title during the preceding fiscal year,

20 adjusted to the extent of any overpayment or

21 underpayment which the Secretary determines was made

22 under this section for any prior fiscal year and with re23 spect to which adjustment has not already been made

24 under this subsection.

25 ‘‘(b) ALLOCATION AMONG TRUST FUNDS.—The Sec26 retary shall provide for an allocation of the payment made
210

•S 1579 IS

1 under subsection (a) between the Federal Hospital Insur2 ance Trust Fund and the Federal Supplementary Medical

3 Insurance Trust Fund in a proportion that reasonably re4 flects the proportion of medical education costs of hos5 pitals for which payment was made under this title for

6 cost reporting periods during fiscal year 1993 that are as7 sociated with the provision of services under part A and

8 part B.’’.

9 SEC. 3005. NATIONAL MEDICAL EDUCATION FUND.

10 (a) ESTABLISHMENT.—There is hereby established in

11 the Treasury of the United States a fund to be known

12 as the ‘‘National Medical Education Fund’’, which shall

13 consist of—

14 (1) amounts paid into the Fund by (or on be15 half of) accountable health plans pursuant to section

16 1211;

17 (2) amounts paid into the Fund by the Sec18 retary of Health and Human Services under section

19 1890 of the Social Security Act (as added by section

20 3004(b)); and

21 (3) such other amounts that may otherwise be

22 deposited in or appropriated to the Fund.

23 (b) USE OF AMOUNTS IN FUND.—Amounts in the

24 Fund shall be used by the National Health Board to make
211

•S 1579 IS

1 payments to medical residency training programs and phy2 sician retraining programs under section 3003(b).

3 (c) MANAGEMENT OF FUND.—

4 (1) IN GENERAL; REPORTS ON OPERATION.—

5 The Secretary of the Treasury shall, in consultation

6 with the National Health Board, manage the Fund,

7 and shall report to Congress each year on the finan8 cial condition and the results of the operation of the

9 Fund during the preceding year and on the expected

10 condition and operations of the Fund during the

11 next 5 years.

12 (2) INVESTMENT.—The Secretary of the Treas13 ury shall invest the portion of the Fund that is not,

14 in the judgment of the Secretary and of the National

15 Health Board, required to meet current withdrawals.

16 Any investments of monies in the Fund may be

17 made only in interest-bearing obligations of the

18 United States.

19 SEC. 3006. REPEAL OF SEPARATE MEDICAL EDUCATION

20 PAYMENTS UNDER MEDICARE.

21 (a) PROHIBITING RECOGNITION OF MEDICAL EDU22 CATION COSTS UNDER PART B.—Section 1861(v)(1) of

23 the Social Security Act (42 U.S.C. 1395x(v)(1)) is amend24 ed by adding at the end the following new subparagraph:
212

•S 1579 IS

1 ‘‘(T) In determining such reasonable costs, the Sec2 retary may not include any costs incurred by a provider

3 for graduate medical education.’’.

4 (b) REPEAL OF ADJUSTMENT FOR INDIRECT MEDI5 CAL EDUCATION COSTS.—Section 1886(d)(5) of such Act

6 (42 U.S.C. 1395ww(d)(5)) is amended by striking sub7 paragraph (B).

8 (c) REPEAL OF PAYMENTS FOR DIRECT GRADUATE

9 MEDICAL EDUCATION COSTS.—Section 1886 of such Act

10 (42 U.S.C. 1395ww) is amended by striking subsection (h)

11 and redesignating subsection (i) as subsection (h).

12 (d) CONFORMING AMENDMENTS.—Section 1886(d)

13 of such Act (42 U.S.C. 1395ww(d)) is amended—

14 (1) in paragraph (3)(C)(ii)—

15 (A) by inserting ‘‘and before October 1,

16 1994,’’ after ‘‘September 30, 1986,’’; and

17 (B) by inserting ‘‘and on or before Sep18 tember 30, 1994,’’ after ‘‘October 1, 1986,’’;

19 and

20 (2) in paragraph (9)(D), by striking clause (ii)

21 and redesignating clauses (iii) and (iv) as clauses (ii)

22 and (iii).

23 (e) EFFECTIVE DATES.—
213

•S 1579 IS

1 (1) REASONABLE COSTS.—The amendment

2 made by subsection (a) shall apply to costs incurred

3 on or after July 1, 1995.

4 (2) INDIRECT MEDICAL EDUCATION ADJUST5 MENT.—The amendments made by subsections (b)

6 and (d) shall apply to discharges occurring on or

7 after July 1, 1995.

8 (3) DIRECT MEDICAL EDUCATION.—The

9 amendment made by subsection (c) shall apply to

10 portions of cost reporting periods beginning on or

11 after July 1, 1995.

12 Subtitle B—Other Medical

13 Education Grants and Programs

14 SEC. 3101. SCHOLARSHIP AND LOAN REPAYMENT PRO15 GRAMS OF NATIONAL HEALTH SERVICE

16 CORPS.

17 Section 338H(b)(1) of the Public Health Service Act

18 (42 U.S.C. 254q(b)(1)) is amended—

19 (1) by striking ‘‘and’’ after ‘‘1991,’’; and

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

21 ‘‘through 1994, $150,000,000 for fiscal year 1995,

22 $175,000,000 for fiscal year 1996, $200,000,000 for

23 fiscal year 1997, $225,000,000 for fiscal year 1998,

24 and $250,000,000 for fiscal year 1999.’’.
214

•S 1579 IS

1 SEC. 3102. AREA HEALTH EDUCATION CENTERS.

2 Section 746(i)(1)(A) of the Public Health Service Act

3 (42 U.S.C. 293j(i)(1)(A)) is amended by striking

4 ‘‘through 1995’’ and inserting ‘‘through 1994 and

5 $30,000,000 for each of the fiscal years 1995 through

6 1999’’.

7 SEC. 3103. PUBLIC HEALTH AND PREVENTIVE MEDICINE.

8 Section 765(a) of the Public Health Service Act (42

9 U.S.C. 294c(a)) is amended by striking ‘‘through 1995’’

10 and inserting ‘‘through 1999’’.

11 SEC. 3104. FAMILY MEDICINE.

12 Section 747(d)(1) of the Public Health Service Act

13 (42 U.S.C. 293k(d)(1)) is amended by striking ‘‘through

14 1995’’ and inserting ‘‘through 1999’’.

15 SEC. 3105. GENERAL INTERNAL MEDICINE AND PEDIAT16 RICS.

17 Section 748(c) of the Public Health Service Act (42

18 U.S.C. 293l(c)) is amended by striking ‘‘through 1995’’

19 and inserting ‘‘through 1999’’.

20 SEC. 3106. PHYSICIAN ASSISTANTS.

21 Section 750(d)(1) of the Public Health Service Act

22 (42 U.S.C. 293n(d)(1)) is amended by striking ‘‘through

23 1995’’ and inserting ‘‘through 1999’’.
215

•S 1579 IS

1 SEC. 3107. ALLIED HEALTH PROJECT GRANTS AND CON2 TRACTS.

3 Section 767(d) of the Public Health Service Act (42

4 U.S.C. 294e(d)) is amended by striking ‘‘through 1995’’

5 and inserting ‘‘through 1999’’.

6 SEC. 3108. NURSE ALLIED HEALTH PROJECT GRANTS AND

7 CONTRACTS.

8 Section 767(d) of the Public Health Service Act (42

9 U.S.C. 294e(d)) is amended by striking ‘‘through 1995’’

10 and inserting ‘‘through 1999’’.

11 SEC. 3109. NURSE PRACTITIONER AND NURSE MIDWIFE

12 PROGRAMS.

13 Section 822(d) of the Public Health Service Act (42

14 U.S.C. 296m(d)) is amended by striking ‘‘and 1994’’ and

15 inserting ‘‘through 1999’’.

16 SEC. 3110. USE OF HEALTH CARE POLICY AND RESEARCH

17 FUNDS FOR PRIMARY CARE.

18 Section 926 of the Public Health Service Act (42

19 U.S.C. 299c-5), as amended by section 10 of Public Law

20 102-410 (106 Stat. 2101), is amended by adding at the

21 end the following subsection:

22 ‘‘(f) ALLOCATION REGARDING PRIMARY CARE.—Of

23 the amounts made available for a fiscal year for carrying

24 out this title, the Secretary shall obligate not less than

25 15 percent for carrying out section 902 with respect to

26 primary care.’’.
216

•S 1579 IS

1 TITLE IV—PREVENTIVE HEALTH

2 AND INDIVIDUAL RESPON3 SIBILITY

4 Subtitle A—Expansion of Public

5 Health Programs

6 SEC. 4001. IMMUNIZATIONS AGAINST VACCINE-PREVENT7 ABLE DISEASES.

8 Section 317(j)(1)(A) of the Public Health Service Act

9 (42 U.S.C. 247b(j)(1)(A)) is amended by striking

10 ‘‘through 1995’’ and inserting ‘‘through 1999’’.

11 SEC. 4002. PREVENTION, CONTROL, AND ELIMINATION OF

12 TUBERCULOSIS.

13 Section 317(j)(2) of the Public Health Service Act

14 (42 U.S.C. 247b(j)(2)) is amended by striking ‘‘through

15 1995’’ and inserting ‘‘through 1999’’.

16 SEC. 4003. LEAD POISONING PREVENTION.

17 Section 317A(l)(1 of the Public Health Service Act

18 (42 U.S.C. 247b-1(l)(1)) is amended by striking ‘‘through

19 1997’’ and inserting ‘‘through 1999’’.

20 SEC. 4004. PREVENTIVE HEALTH MEASURES WITH RE21 SPECT TO BREAST AND CERVICAL CANCERS.

22 Section 1509(a) of the Public Health Service Act (42

23 U.S.C. 300n-5(a)) is amended—

24 (1) by striking ‘‘and’’ after ‘‘1991,’’, and
217

•S 1579 IS

1 (2) by striking ‘‘1993.’’ and inserting ‘‘1993,

2 $100,000,000 for each of the fiscal years 1994

3 through 1996, and such sums as may be necessary

4 for each of the fiscal years 1997 through 1999.’’.

5 SEC. 4005. OFFICE OF DISEASE PREVENTION AND HEALTH

6 PROMOTION.

7 (a) IN GENERAL.—Section 1701(b) of the Public

8 Health Service Act (42 U.S.C. 300u(b)) is amended by

9 striking ‘‘through 1996’’ and inserting ‘‘through 1999’’.

10 (b) PROMOTION OF INDIVIDUAL RESPONSIBILITY.—

11 Section 1701(a)(11) of such Act (42 U.S.C. 300u(a)(11))

12 is amended—

13 (1) by striking ‘‘and’’ at the end of subpara14 graph (C),

15 (2) by redesignating subparagraph (D) as sub16 paragraph (E), and

17 (3) by inserting after subparagraph (C) the fol18 lowing new subparagraph:

19 ‘‘(D) promote individual responsibility in

20 personal health care and in the use of valuable

21 health care resources; and’’.

22 (c) MINORITY HEALTH.—Section 1707(f) of such Act

23 (42 U.S.C. 300u-6(f)) is amended by striking ‘‘1993.’’ and

24 inserting ‘‘1993, $35,000,000 for each of the fiscal years
218

•S 1579 IS

1 1994 through 1996, and such sums as may be necessary

2 for each of the fiscal years 1997 through 1999.’’.

3 SEC. 4006. PREVENTIVE HEALTH AND HEALTH SERVICES

4 BLOCK GRANT.

5 Section 1901(a) of the Public Health Service Act (42

6 U.S.C. 300w(a)) is amended by striking ‘‘through 1997’’

7 and inserting ‘‘through 1999’’.

8 SEC. 4007. CATEGORICAL GRANTS FOR EARLY INTERVEN9 TION REGARDING ACQUIRED IMMUNE DEFI10 CIENCY SYNDROME.

11 Section 2655 of the Public Health Service Act (42

12 U.S.C. 300ff-55) is amended by striking ‘‘through 1995’’

13 and inserting ‘‘through 1999’’.

14 SEC. 4008. PROGRAMS OF OFFICE OF SMOKING AND

15 HEALTH.

16 In addition to any other authorization of appropria17 tions that is available for programs of the Centers for Dis18 ease Control regarding the smoking of tobacco products,

19 there is authorized to be appropriated for such programs

20 $10,000,000 for each of the fiscal years 1995 through

21 1999.
219

•S 1579 IS

1 Subtitle B—Medicare

2 PART 1—COVERAGE OF PREVENTIVE SERVICES

3 SEC. 4101. COVERAGE OF COLORECTAL SCREENING.

4 (a) IN GENERAL.—Section 1834 of the Social Secu5 rity Act (42 U.S.C. 1395m) is amended by inserting after

6 subsection (c) the following new subsection:

7 ‘‘(d) FREQUENCY AND PAYMENT LIMITS FOR

8 SCREENING FECAL-OCCULT BLOOD TESTS AND SCREEN9 ING FLEXIBLE SIGMOIDOSCOPIES.—

10 ‘‘(1) SCREENING FECAL-OCCULT BLOOD

11 TESTS.—

12 ‘‘(A) PAYMENT LIMIT.—In establishing fee

13 schedules under section 1833(h) with respect to

14 screening fecal-occult blood tests provided for

15 the purpose of early detection of colon cancer,

16 except as provided by the Secretary under para17 graph (3)(A), the payment amount established

18 for tests performed—

19 ‘‘(i) in 1995 shall not exceed $5; and

20 ‘‘(ii) in a subsequent year, shall not

21 exceed the limit on the payment amount

22 established under this subsection for such

23 tests for the preceding year, adjusted by

24 the applicable adjustment under section

25 1833(h) for tests performed in such year.
220

•S 1579 IS

1 ‘‘(B) FREQUENCY LIMIT.—Subject to revi2 sion by the Secretary under paragraph (3)(B),

3 no payment may be made under this part for

4 a screening fecal-occult blood test provided to

5 an individual for the purpose of early detection

6 of colon cancer—

7 ‘‘(i) if the individual is under 50 years

8 of age; or

9 ‘‘(ii) if the test is performed within

10 the 11 months after a previous screening

11 fecal-occult blood test.

12 ‘‘(2) SCREENING FLEXIBLE SIGMOIDOS13 COPIES.—

14 ‘‘(A) PAYMENT AMOUNT.—The Secretary

15 shall establish a payment amount under section

16 1848 with respect to screening flexible

17 sigmoidoscopies provided for the purpose of

18 early detection of colon cancer that is consistent

19 with payment amounts under such section for

20 similar or related services, except that such

21 payment amount shall be established without

22 regard to subsection (a)(2)(A) of such section.

23 ‘‘(B) FREQUENCY LIMIT.—Subject to revi24 sion by the Secretary under paragraph (3)(B),

25 no payment may be made under this part for
221

•S 1579 IS

1 a screening flexible sigmoidoscopy provided to

2 an individual for the purpose of early detection

3 of colon cancer—

4 ‘‘(i) if the individual is under 50 years

5 of age; or

6 ‘‘(ii) if the procedure is performed

7 within the 59 months after a previous

8 screening flexible sigmoidoscopy.

9 ‘‘(3) REDUCTIONS IN PAYMENT LIMIT AND RE10 VISION OF FREQUENCY.—

11 ‘‘(A) REDUCTIONS IN PAYMENT LIMIT.—

12 The Secretary shall review from time to time

13 the appropriateness of the amount of the pay14 ment limit established for screening fecal-occult

15 blood tests under paragraph (1)(A). The Sec16 retary may, with respect to tests performed in

17 a year after 1997, reduce the amount of such

18 limit as it applies nationally or in any area to

19 the amount that the Secretary estimates is re20 quired to assure that such tests of an appro21 priate quality are readily and conveniently

22 available during the year.

23 ‘‘(B) REVISION OF FREQUENCY.—

24 ‘‘(i) REVIEW.—The Secretary, in con25 sultation with the Director of the National
222

•S 1579 IS

1 Cancer Institute, shall review periodically

2 the appropriate frequency for performing

3 screening fecal-occult blood tests and

4 screening flexible sigmoidoscopies based on

5 age and such other factors as the Sec6 retary believes to be pertinent.

7 ‘‘(ii) REVISION OF FREQUENCY.—The

8 Secretary, taking into consideration the re9 view made under clause (i), may revise

10 from time to time the frequency with

11 which such tests and procedures may be

12 paid for under this subsection, but no such

13 revision shall apply to tests or procedures

14 performed before January 1, 1998.

15 ‘‘(4) LIMITING CHARGES OF NONPARTICIPATING

16 PHYSICIANS.—

17 ‘‘(A) IN GENERAL.—In the case of a

18 screening flexible sigmoidoscopy provided to an

19 individual for the purpose of early detection of

20 colon cancer for which payment may be made

21 under this part, if a nonparticipating physician

22 provides the procedure to an individual enrolled

23 under this part, the physician may not charge

24 the individual more than the limiting charge (as
223

•S 1579 IS

1 defined in subparagraph (B), or, if less, as de2 fined in section 1848(g)(2)).

3 ‘‘(B) LIMITING CHARGE DEFINED.—In

4 subparagraph (A), the term ‘limiting charge’

5 means 115 percent of the payment limit estab6 lished under paragraph (2)(A).

7 ‘‘(C) ENFORCEMENT.—If a physician or

8 supplier knowing and willfully imposes a charge

9 in violation of subparagraph (A), the Secretary

10 may apply sanctions against such physician or

11 supplier in accordance with section

12 1842(j)(2).’’.

13 (b) CONFORMING AMENDMENTS.—(1) Paragraphs

14 (1)(D) and (2)(D) of section 1833(a) of such Act (42

15 U.S.C. 1395l(a)) are each amended by striking ‘‘sub16 section (h)(1),’’ and inserting ‘‘subsection (h)(1) or section

17 1834(d)(1),’’.

18 (2) Section 1833(h)(1)(A) of such Act (42 U.S.C.

19 1395l(h)(1)(A)) is amended by striking ‘‘The Secretary’’

20 and inserting ‘‘Subject to paragraphs (1) and (3)(A) of

21 section 1834(d), the Secretary’’.

22 (3) Clauses (i) and (ii) of section 1848(a)(2)(A) of

23 such Act (42 U.S.C. 1395w–4(a)(2)(A)) are each amended

24 by striking ‘‘a service’’ and inserting ‘‘a service (other

25 than a screening flexible sigmoidoscopy provided to an in-
224

•S 1579 IS

1 dividual for the purpose of early detection of colon can2 cer)’’.

3 (4) Section 1862(a) of such Act (42 U.S.C. 1395y(a))

4 is amended—

5 (A) in paragraph (1)—

6 (i) in subparagraph (E), by striking ‘‘and’’

7 at the end,

8 (ii) in subparagraph (F), by striking the

9 semicolon at the end and inserting ‘‘, and’’, and

10 (iii) by adding at the end the following new

11 subparagraph:

12 ‘‘(G) in the case of screening fecal-occult blood

13 tests and screening flexible sigmoidoscopies provided

14 for the purpose of early detection of colon cancer,

15 which are performed more frequently than is covered

16 under section 1834(d);’’; and

17 (B) in paragraph (7), by striking ‘‘paragraph

18 (1)(B) or under paragraph (1)(F)’’ and inserting

19 ‘‘subparagraphs (B), (F), or (G) of paragraph (1)’’.

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

21 this section shall apply to screening fecal-occult blood tests

22 and screening flexible sigmoidoscopies performed on or

23 after January 1, 1995.
225

•S 1579 IS

1 SEC. 4102. COVERAGE OF CERTAIN IMMUNIZATIONS.

2 (a) IN GENERAL.—Section 1861(s)(10) of the Social

3 Security Act (42 U.S.C. 1395x(s)(10)) is amended—

4 (1) in subparagraph (A)—

5 (A) by striking ‘‘, subject to section

6 4071(b) of the Omnibus Budget Reconciliation

7 Act of 1987,’’, and

8 (B) by striking ‘‘; and’’ and inserting a

9 comma;

10 (2) in subparagraph (B), by striking the semi11 colon at the end and inserting ‘‘, and’’; and

12 (3) by adding at the end the following new sub13 paragraph:

14 ‘‘(C) tetanus-diphtheria booster and its admin15 istration;’’.

16 (b) LIMITATION ON FREQUENCY.—Section

17 1862(a)(1) of such Act (42 U.S.C. 1395y(a)(1)), as

18 amended by section 4101(b)(4)(A) of this Act, is amend19 ed—

20 (1) in subparagraph (F), by striking ‘‘and’’ at

21 the end;

22 (2) in subparagraph (G), by striking the semi23 colon at the end and inserting ‘‘, and’’; and

24 (3) by adding at the end the following new sub25 paragraph:
226

•S 1579 IS

1 ‘‘(H) in the case of an influenza vaccine, which

2 is administered within the 11 months after a pre3 vious influenza vaccine, and, in the case of a teta4 nus-diphtheria booster, which is administered within

5 the 119 months after a previous tetanus-diphtheria

6 booster;’’.

7 (c) CONFORMING AMENDMENT.—Section 1862(a)(7)

8 of such Act (42 U.S.C. 1395y(a)(7)), as amended by sec9 tion 4101(b)(4)(B) of this Act, is amended by striking ‘‘or

10 (G)’’ and inserting ‘‘(G), or (H)’’.

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

12 this section shall apply to influenza vaccines and tetanus13 diphtheria boosters administered on or after January 1,

14 1995.

15 SEC. 4103. COVERAGE OF WELL-CHILD CARE.

16 (a) IN GENERAL.—Section 1861(s)(2) of the Social

17 Security Act (42 U.S.C. 1395x(s)(2)), as amended by sec18 tion 13553(a) of the Omnibus Budget Reconciliation Act

19 of 1993, is amended—

20 (1) by striking ‘‘and’’ at the end of subpara21 graph (P);

22 (2) by striking the semicolon at the end of sub23 paragraph (Q) and inserting ‘‘; and’’; and

24 (3) by adding at the end the following new sub25 paragraph:
227

•S 1579 IS

1 ‘‘(R) well-child services (as defined in sub2 section (ll)(1)) provided to an individual entitled to

3 benefits under this title who is under 7 years of

4 age;’’.

5 (b) SERVICES DEFINED.—Section 1861 of such Act

6 (42 U.S.C. 1395x) is amended—

7 (1) by redesignating the subsection (jj) added

8 by section 4156(a)(2) of the Omnibus Budget Rec9 onciliation Act of 1990 as subsection (kk); and

10 (2) by inserting after subsection (kk) (as so re11 designated) the following new subsection:

12 ‘‘Well-Child Services

13 ‘‘(ll)(1) The term ‘well-child services’ means well14 child care, including routine office visits, routine immuni15 zations (including the vaccine itself), routine laboratory

16 tests, and preventive dental care, provided in accordance

17 with the periodicity schedule established with respect to

18 the services under paragraph (2).

19 ‘‘(2) The Secretary, in consultation with the Amer20 ican Academy of Pediatrics, the Advisory Committee on

21 Immunization Practices, and other entities considered ap22 propriate by the Secretary, shall establish a schedule of

23 periodicity which reflects the appropriate frequency with

24 which the services referred to in paragraph (1) should be

25 provided to healthy children.’’.
228

•S 1579 IS

1 (c) CONFORMING AMENDMENTS.—(1) Section

2 1861(s)(2)(O) of such Act (42 U.S.C. 1395x(s)(2)(O)) is

3 amended by striking ‘‘subsection (jj)’’ and inserting ‘‘sub4 section (kk)’’.

5 (2) Section 1862(a)(1) of such Act (42 U.S.C.

6 1395y(a)(1)), as amended by sections 4101(b)(4)(A) and

7 4102(b) of this Act, is amended—

8 (A) in subparagraph (G), by striking ‘‘and’’ at

9 the end;

10 (B) in subparagraph (H), by striking the semi11 colon at the end and inserting ‘‘, and’’; and

12 (C) by adding at the end the following new sub13 paragraph:

14 ‘‘(I) in the case of well-child services, which are

15 provided more frequently than is provided under the

16 schedule of periodicity established by the Secretary

17 under section 1861(ll)(2) for such services;’’.

18 (3) Section 1862(a)(7) of such Act (42 U.S.C.

19 1395y(a)(7)), as amended by sections 4101(b)(4)(B) and

20 4102(c) of this Act, is amended by striking ‘‘or (H)’’ and

21 inserting ‘‘(H), or (I)’’.

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

23 this section shall apply to well-child services provided on

24 or after January 1, 1995.
229

•S 1579 IS

1 SEC. 4104. ANNUAL SCREENING MAMMOGRAPHY.

2 (a) ANNUAL SCREENING MAMMOGRAPHY FOR

3 WOMEN OVER AGE 64.—Section 1834(c)(2)(A) of the So4 cial Security Act (42 U.S.C. 1395m(b)(2)(A)) is amend5 ed—

6 (1) in clause (iv), by striking ‘‘but under 65

7 years of age,’’, and

8 (2) by striking clause (v).

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

10 subsection (a) shall apply to screening mammography per11 formed on or after January 1, 1995.

12 SEC. 4105. FINANCING OF ADDITIONAL BENEFITS.

13 (a) PREMIUM FOR 1995.—Section 1839(e)(1)(B)(v)

14 of the Social Security Act (42 U.S.C. 1395r(e)(1)(B)(v))

15 is amended by striking ‘‘$46.10’’ and inserting ‘‘$47.50’’.

16 (b) PREMIUMS FOR 1996–1998.—(1) Section 1839 of

17 such Act (42 U.S.C. 1395r) is amended by adding at the

18 end the following new subsection:

19 ‘‘(g) Except as provided in subsections (b) and (f),

20 the monthly premium otherwise determined, without re21 gard to this subsection, for each individual enrolled under

22 this part shall be increased by $1.40 for each month in

23 1996, 1997, and 1998.’’.

24 (2) Section 1839 of such Act (42 U.S.C. 1395r) is

25 amended—
230

•S 1579 IS

1 (A) in subsection (a)(2), by striking ‘‘(b) and

2 (e)’’ and inserting ‘‘(b), (e), and (g)’’,

3 (B) in subsection (a)(3), by striking ‘‘subsection

4 (e)’’ and inserting ‘‘subsections (e) and (g)’’, and

5 (C) in subsection (b), by striking ‘‘determined

6 under subsection (a) or (e)’’ and inserting ‘‘other7 wise determined under this section (without regard

8 to subsection (f))’’.

9 PART 2—NOTICE OF ADVANCE DIRECTIVE

10 RIGHTS

11 SEC. 4111. PROVIDING NOTICE OF RIGHTS REGARDING

12 MEDICAL CARE TO INDIVIDUALS ENTERING

13 MEDICARE.

14 (a) IN GENERAL.—Section 1804 of the Social Secu15 rity Act (42 U.S.C. 1395b–2) is amended—

16 (1) in paragraph (2), by striking ‘‘and’’ at the

17 end;

18 (2) in paragraph (3), by striking the period at

19 the end and inserting ‘‘, and’’; and

20 (3) by inserting after paragraph (3) the follow21 ing new paragraph:

22 ‘‘(4) a description of an individual’s rights

23 under State law to make decisions concerning medi24 cal care, including the right to accept or refuse med25 ical or surgical treatment and the right to formulate
231

•S 1579 IS

1 advance directives (as defined in section

2 1866(f)(3)).’’.

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

4 subsection (a) shall apply to notices provided under section

5 1804 of the Social Security Act on or after January 1

6 of the first year beginning after the date of the enactment

7 of this Act.

8 TITLE V—MALPRACTICE

9 REFORM

10 Subtitle A—Findings; Purpose;

11 Definitions

12 SEC. 5001. FINDINGS; PURPOSE.

13 (a) FINDINGS.—Congress finds that—

14 (1) the health care and insurance industries are

15 industries affecting interstate commerce and the

16 medical malpractice litigation systems existing

17 throughout the United States affect interstate com18 merce by contributing to the high cost of health care

19 and premiums for malpractice insurance purchased

20 by health care providers; and

21 (2) the Federal Government has a major inter22 est in health care as a direct provider of health care

23 and as a source of payment for health care, and has

24 a demonstrated interest in assessing the quality of
232

•S 1579 IS

1 care, access to care, and the costs of care through

2 the evaluative activities of several Federal agencies.

3 (b) PURPOSE.—It is the purpose of this title to—

4 (1) provide incentives to States to develop alter5 native dispute resolution procedures to attain a more

6 efficient, expeditious, and equitable resolution of

7 health care malpractice disputes;

8 (2) enhance general knowledge concerning the

9 benefits of different forms of alternative dispute res10 olution mechanisms; and

11 (3) establish uniformity and curb excesses in

12 the State-based medical liability systems through

13 Federally mandated reforms.

14 SEC. 5002. DEFINITIONS.

15 As used in this title:

16 (1) ALTERNATIVE DISPUTE RESOLUTION SYS17 TEM.—The term ‘‘alternative dispute resolution sys18 tem’’ means a system that is enacted or adopted by

19 a State to resolve medical malpractice claims other

20 than through a medical malpractice liability action.

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

22 any person who brings a health care liability action

23 and, in the case of an individual who is deceased, in24 competent, or a minor, the person on whose behalf

25 such an action is brought.
233

•S 1579 IS

1 (3) CLEAR AND CONVINCING EVIDENCE.—The

2 term ‘‘clear and convincing evidence’’ is that meas3 ure or degree of proof that will produce in the mind

4 of the trier of fact a firm belief or conviction as to

5 the truth of the allegations sought to be established,

6 except that such measure or degree of proof is more

7 than that required under preponderance of the evi8 dence, but less than that required for proof beyond

9 a reasonable doubt.

10 (4) ECONOMIC DAMAGES.—The term ‘‘economic

11 damages’’ means damages paid to compensate an in12 dividual for losses for hospital and other medical ex13 penses, lost wages, lost employment, and other pecu14 niary losses.

15 (5) HEALTH CARE PROFESSIONAL.—The term

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

17 provides health care services in a State and who is

18 required by State law or regulation to be licensed or

19 certified by the State to provide such services in the

20 State.

21 (6) HEALTH CARE PROVIDER.—The term

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

23 institution that is engaged in the delivery of health

24 care services in a State that is required by State law

25 or regulation to be licensed or certified by the State
234

•S 1579 IS

1 to engage in the delivery of such services in the

2 State.

3 (7) INJURY.—The term ‘‘injury’’ means any ill4 ness, disease, or other harm that is the subject of

5 a medical malpractice claim.

6 (8) MEDICAL MALPRACTICE CLAIM.—The term

7 ‘‘medical malpractice claim’’ means any claim relat8 ing to the provision of (or the failure to provide)

9 health care services without regard to the theory of

10 liability asserted, and includes any third-party claim,

11 cross-claim, counterclaim, or contribution claim in a

12 medical malpractice liability action.

13 (9) MEDICAL MALPRACTICE LIABILITY AC14 TION.—The term ‘‘medical malpractice liability ac15 tion’’ means any civil action brought pursuant to

16 State law in which a plaintiff alleges a medical mal17 practice claim against a health care provider or

18 health care professional.

19 (10) MEDICAL PRODUCT.—The term ‘‘medical

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

21 201(h) of the Federal Food, Drug, and Cosmetic

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

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

24 (11) NONECONOMIC DAMAGES.—The term

25 ‘‘noneconomic damages’’ means damages paid to
235

•S 1579 IS

1 compensate an individual for losses for physical and

2 emotional pain, suffering, inconvenience, physical

3 impairment, mental anguish, disfigurement, loss of

4 enjoyment of life, loss of consortium, and other

5 nonpecuniary losses, but does not include punitive

6 damages.

7 (12) PUNITIVE DAMAGES.—The term ‘‘punitive

8 damages’’ means compensation, in addition to com9 pensation for actual harm suffered, that is awarded

10 for the purpose of punishing a person for conduct

11 deemed to be malicious, wanton, willful, or exces12 sively reckless.

13 (13) SECRETARY.—The term ‘‘Secretary’’

14 means the Secretary of Health and Human Services.

15 (14) STATE.—The term ‘‘State’’ means each of

16 the several States, the District of Columbia, the

17 Commonwealth of Puerto Rico, the Virgin Islands,

18 and Guam.

19 Subtitle B—Grants to States for Al20 ternative Dispute Resolution

21 Systems

22 SEC. 5101. GRANTS TO STATES.

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

24 to States for a 2-year period for the implementation and

25 evaluation of alternative dispute resolution systems.
236

•S 1579 IS

1 (b) ELIGIBILITY.—A State is eligible to receive a

2 grant under this section if the State submits to the Sec3 retary an application at such time, in such form, and con4 taining such information and assurances as the Secretary

5 may require, including—

6 (1) a description of the alternative dispute reso7 lution system that the State intends to implement

8 with amounts received under the grant;

9 (2) assurances that the State will comply with

10 all data gathering requirements promulgated by the

11 Secretary under section 5102(a); and

12 (3) any information and assurances necessary

13 to enable the Secretary to determine whether the

14 State’s alternative dispute resolution system meets

15 the qualification standards for such systems devel16 oped by the Secretary under section 5102(a).

17 (c) NUMBER OF GRANTS.—

18 (1) IN GENERAL.—Except as provided in para19 graph (2), the Secretary shall award not less than

20 10 grants under this section.

21 (2) EXCEPTION.—Notwithstanding paragraph

22 (1), the Secretary may award less than 10 grants

23 under this section if the Secretary determines that

24 there are an inadequate number of applications sub-
237

•S 1579 IS

1 mitted that meet the eligibility and approval require2 ments of this section.

3 (d) LIMITATION ON AMOUNT OF GRANT.—The

4 amount of funds provided to a State under a grant under

5 this section may not exceed $5,000,000 during the 2-year

6 period of the grant.

7 (e) DESIGNATION OF MODEL STATES.—

8 (1) IN GENERAL.—The Secretary shall des9 ignate each State receiving a grant under this sec10 tion as a model alternative dispute resolution State.

11 (2) EXTENSION OF PERIOD OF GRANT.—Upon

12 application to the Secretary, a State designated

13 under paragraph (1) shall be eligible for a 2-year ex14 tension of the grant received under this section.

15 (3) DISSEMINATION OF INFORMATION TO

16 OTHER STATES.—The Secretary shall disseminate

17 information on the alternative dispute resolution sys18 tems implemented by the States designated under

19 paragraph (1) to other States, health care profes20 sionals, health care providers, and other interested

21 parties.

22 SEC. 5102. ADMINISTRATION.

23 (a) STANDARDS AND REGULATIONS FOR ALTER24 NATIVE DISPUTE RESOLUTION GRANT PROGRAM.—
238

•S 1579 IS

1 (1) IN GENERAL.—In consultation with the Di2 rector of the Agency for Health Care Policy and Re3 search, the Secretary shall develop and promulgate

4 standards and regulations necessary to carry out the

5 grant program established under section 5101, in6 cluding—

7 (A) qualification standards for alternative

8 dispute resolution systems that States must

9 meet in order to receive grants under such sec10 tion; and

11 (B) regulations establishing data gathering

12 requirements for States receiving grants under

13 such section.

14 (2) CRITERIA FOR PROGRAMS.—In developing

15 qualification standards for alternative dispute resolu16 tion systems under paragraph (1)(A), the Secretary

17 shall take into account the effectiveness of such sys18 tems in—

19 (A) supporting access to health care;

20 (B) encouraging improvements in the qual21 ity of health care;

22 (C) enhancing and not impairing the physi23 cian-patient relationship;

24 (D) encouraging innovation that leads to

25 an improved level of health care;
239

•S 1579 IS

1 (E) compensating for avoidable medical in2 jury due to provider fault and not compensating

3 for injury which is unavoidable by standard

4 medical practice;

5 (F) resolving claims promptly and in

6 amounts proportional to the injury;

7 (G) providing predictable outcomes; and

8 (H) operating efficiently in terms of finan9 cial costs, professional energies, and govern10 mental processes.

11 (b) TECHNICAL ASSISTANCE.—The Secretary shall

12 provide States with technical assistance to enable States

13 to submit applications for grants under section 5101, in14 cluding information on the establishment and operation of

15 alternative dispute resolution systems.

16 (c) EVALUATION OF ALTERNATIVE DISPUTE RESO17 LUTION SYSTEMS.—Not later than 4 years after awarding

18 the first grant to a State under section 5101, the Sec19 retary shall prepare and submit to Congress a report de20 scribing and evaluating the alternative dispute resolution

21 systems implemented by States with funds provided under

22 such grants, and shall include in the report—

23 (1) information on—

24 (A) the effect of such systems on the cost

25 of health care within the State,
240

•S 1579 IS

1 (B) the impact of such systems on the ac2 cess of individuals to health care within the

3 State, and

4 (C) the effect of such systems on the qual5 ity of health care provided within such State;

6 and

7 (2) an analysis of the feasibility and desirability

8 of establishing a national alternative dispute resolu9 tion system.

10 Subtitle C—Uniform Standards for

11 Malpractice Claims

12 SEC. 5201. APPLICABILITY.

13 Except as provided in section 5208, this subtitle shall

14 apply to any medical malpractice liability action brought

15 in a Federal or State court, and to any medical mal16 practice claim subject to an alternative dispute resolution

17 system, that is initiated on or after January 1, 1995, ex18 cept that this subtitle shall not apply to any action or

19 claim in which the plaintiff’s sole allegation is an allega20 tion of an injury arising from the use of a medical product.

21 SEC. 5202. TREATMENT OF NONECONOMIC AND PUNITIVE

22 DAMAGES.

23 (a) UNITED STATES COMMISSION ON MALPRACTICE

24 AWARDS.—
241

•S 1579 IS

1 (1) ESTABLISHMENT.—There is established as

2 an independent commission in the judicial branch of

3 the United States the United States Commission on

4 Malpractice Awards (hereafter in this subtitle re5 ferred to as the ‘‘Commission’’).

6 (2) MEMBERSHIP.—

7 (A) COMPOSITION.—The Commission shall

8 consist of 7 voting members, one nonvoting

9 member, and the Attorney General (or the At10 torney General’s designee), who shall serve as

11 an ex officio, nonvoting member. Not more than

12 4 of the members of the Commission shall be

13 members of the same political party.

14 (B) APPOINTMENT PROCESS.—Each voting

15 member of the Commission shall be appointed

16 by the President with the advice and consent of

17 the Senate not later than March 1, 1994. The

18 President shall appoint members of the Com19 mission after consultation with representatives

20 of the following:

21 (i) Attorneys who represent plaintiffs

22 in medical malpractice liability actions.

23 (ii) Attorneys who represent health

24 care professionals and health care provid25 ers in medical malpractice liability actions.
242

•S 1579 IS

1 (iii) Physicians and other health care

2 professionals and providers.

3 (iv) Individuals who have suffered in4 jury as a result of medical malpractice.

5 (v) Judges who preside over medical

6 malpractice liability actions.

7 (vi) Medical ethicists.

8 (C) CHAIRPERSON.—The President shall

9 appoint, with the advice and consent of the

10 Senate, one of the voting members of the Com11 mission to serve as Chairperson.

12 (3) TERMS OF OFFICE.—

13 (A) INITIAL APPOINTMENT.—The voting

14 members of the Commission shall be appointed

15 for 6-year terms, except that the initial terms

16 of the first members appointed shall be stag17 gered so that—

18 (i) 2 members, including the Chair19 person, serve terms of 6 years;

20 (ii) 3 members serve terms of 4 years;

21 and

22 (iii) 2 members serve terms of 2

23 years.

24 (B) LIMIT ON NUMBER OF TERMS.—No

25 voting member may serve more than 2 full
243

•S 1579 IS

1 terms. A voting member appointed to fill a va2 cancy that occurs before the expiration of the

3 term for which the member’s predecessor was

4 appointed shall be appointed only for the re5 mainder of such term.

6 (4) COMPENSATION.—

7 (A) CHAIRPERSON.—The Chairperson shall

8 hold a full-time position and shall be com9 pensated during the term of office at the an10 nual rate at which judges of the United States

11 courts of appeals are compensated.

12 (B) OTHER VOTING MEMBERS.—The vot13 ing members of the Commission (other than the

14 Chairperson) shall hold full-time positions until

15 January 1, 2001, and shall be compensated at

16 the annual rate at which judges of the United

17 States courts of appeals are compensated. After

18 January 1, 2001, such members shall hold

19 part-time positions and shall be paid at the

20 daily rate at which judges of the United States

21 courts of appeals are compensated.

22 (5) DUTY TO PROMULGATE GUIDELINES RE23 LATING TO LIMITS ON NONECONOMIC AND PUNITIVE

24 DAMAGES.—
244

•S 1579 IS

1 (A) IN GENERAL.—Not later than Novem2 ber 1, 1994, the Commission shall promulgate

3 guidelines that provide limits on the amount of

4 noneconomic damages and the amount of puni5 tive damages that may be awarded with respect

6 to medical malpractice liability claims. The pur7 pose of the guidelines is to provide certainty

8 and fairness in malpractice awards and to avoid

9 unwarranted disparities among health care pro10 viders and health care professionals who have

11 engaged in similar conduct.

12 (B) FACTORS CONSIDERED.—In promul13 gating guidelines under this subsection, the

14 Commission shall—

15 (i) vary the limits applicable with re16 spect to various types of claimants and in17 juries on the basis of the status of the

18 claimant, the severity of the injury that is

19 the subject of the claim, the nature of the

20 conduct of the party against whom the

21 claim is filed, and other factors the Com22 mission considers appropriate; and

23 (ii) examine the most recent available

24 data on the amount of damages awarded

25 with respect to such claims.
245

•S 1579 IS

1 (C) PERIODIC REVISION.—Not less often

2 than every 2 years after promulgating the ini3 tial guidelines under this subsection, the Com4 mission shall promulgate updated guidelines.

5 (D) NOTICE AND HEARING.—The provi6 sions of section 553 of title 5, United States

7 Code, shall apply to the promulgation of guide8 lines by the Commission pursuant to this sub9 section.

10 (6) DIRECTOR AND STAFF.—

11 (A) DIRECTOR.—The Commission shall

12 have a Director who shall be appointed by the

13 Chairperson (with the approval of the Commis14 sion).

15 (B) STAFF.—With the approval of the

16 Commission, the Director may appoint such ad17 ditional personnel as the Director considers ap18 propriate.

19 (C) APPLICABILITY OF CERTAIN CIVIL

20 SERVICE LAWS.—The Director and staff of the

21 Commission shall be appointed subject to the

22 provisions of title 5, United States Code, gov23 erning appointments in the competitive service,

24 and shall be paid in accordance with the provi25 sions of chapter 51 and subchapter III of chap-
246

•S 1579 IS

1 ter 53 of that title relating to classification and

2 General Schedule pay rates.

3 (D) EXPERTS AND CONSULTANTS.—With

4 the approval of the Commission, the Director

5 may procure temporary and intermittent serv6 ices under section 3109(b) of title 5, United

7 States Code.

8 (E) STAFF OF FEDERAL AGENCIES.—Upon

9 request of the Chairperson, the head of any

10 Federal department or agency may detail, on a

11 reimbursable basis, any of the personnel of that

12 department or agency to the Commission to as13 sist it in carrying out its duties under this sub14 section.

15 (7) ANNUAL REPORT.—The Commission shall

16 report annually to Congress and the President on its

17 activities.

18 (b) LIMITATION ON NONECONOMIC AND PUNITIVE

19 DAMAGES.—The amount of noneconomic damages and the

20 amount of punitive damages that may be awarded to an

21 individual and the family members of such individual for

22 losses resulting from an injury which is the subject of a

23 medical malpractice liability action or claim may not ex24 ceed the limit provided under the applicable guidelines es-
247

•S 1579 IS

1 tablished by the United States Commission on Malpractice

2 Awards pursuant to subsection (a).

3 (c) SEVERAL LIABILITY FOR NONECONOMIC DAM4 AGES.—The liability of each defendant for noneconomic

5 shall be several only and shall not be joint, and each de6 fendant shall be liable only for the amount of noneconomic

7 damages allocated to the defendant in direct proportion

8 to the defendant’s percentage of responsibility (as deter9 mined by the trier of fact).

10 (d) ALLOCATION OF PUNITIVE DAMAGE AWARDS

11 FOR PROVIDER LICENSING AND DISCIPLINARY ACTIVI12 TIES.—

13 (1) IN GENERAL.—The total amount of any pu14 nitive damages awarded in a medical malpractice li15 ability action shall be paid to the State in which the

16 action is brought (or, in a case brought in Federal

17 court, in the State in which the health care services

18 that caused the injury that is the subject of the ac19 tion were provided) for the purposes of carrying out

20 the activities described in paragraph (2).

21 (2) ACTIVITIES DESCRIBED.—A State shall use

22 amounts paid pursuant to paragraph (1) to carry

23 out activities to assure the safety and quality of

24 health care services provided in the State, including

25 (but not limited to)—
248

•S 1579 IS

1 (A) licensing or certifying health care pro2 fessionals and health care providers in the

3 State;

4 (B) implementing health care quality as5 surance programs;

6 (C) carrying out public education programs

7 to increase awareness of the availability of com8 parative quality information on accountable

9 health plans; and

10 (D) carrying out programs to reduce mal11 practice-related costs for providers volunteering

12 to provide services in medically underserved

13 areas.

14 (3) MAINTENANCE OF EFFORT.—A State shall

15 use any amounts paid pursuant to paragraph (1) to

16 supplement and not to replace amounts spent by the

17 State for the activities described in paragraph (2).

18 SEC. 5203. PERIODIC PAYMENTS FOR FUTURE LOSSES.

19 In any medical malpractice liability action in which

20 the damages awarded for future economic loss exceeds

21 $100,000, a defendant may not be required to pay such

22 damages in a single, lump-sum payment, but may be per23 mitted to make such payments on a periodic basis. The

24 periods for such payments shall be determined by the
249

•S 1579 IS

1 court, based upon projections of when such expenses are

2 likely to be incurred.

3 SEC. 5204. UNIFORM STATUTE OF LIMITATIONS.

4 (a) IN GENERAL.—No medical malpractice claim

5 may be initiated after the expiration of the 2-year period

6 that begins on the date on which the alleged injury that

7 is the subject of such claim was discovered or the date

8 on which such injury should reasonably have been discov9 ered, whichever is earlier.

10 (b) EXCEPTION FOR MINORS.—In the case of an al11 leged injury suffered by a minor who has not attained 6

12 years of age, a medical malpractice claim may be initiated

13 after the expiration of the period described in subsection

14 (a) if the claim is initiated before the minor attains 8

15 years of age.

16 SEC. 5205. SPECIAL PROVISION FOR CERTAIN OBSTETRIC

17 SERVICES.

18 (a) IN GENERAL.—In the case of a medical mal19 practice claim relating to services provided during labor

20 or the delivery of a baby, if the health care professional

21 or health care provider against whom the claim is brought

22 did not previously treat the claimant for the pregnancy,

23 the trier of fact may not find that such professional or

24 provider committed malpractice and may not assess dam-
250

•S 1579 IS

1 ages against such professional or provider unless the mal2 practice is proven by clear and convincing evidence.

3 (b) APPLICABILITY TO GROUP PRACTICES OR

4 AGREEMENTS AMONG PROVIDERS.—For purposes of sub5 section (a), a health care professional shall be considered

6 to have previously treated an individual for a pregnancy

7 if the professional is a member of a group practice whose

8 members previously treated the individual for the preg9 nancy or is providing services to the individual during

10 labor or the delivery of a baby pursuant to an agreement

11 with another professional.

12 SEC. 5206. UNIFORM STANDARD FOR DETERMINING LIABIL13 ITY IN ACTIONS BASED ON NEGLIGENCE.

14 (a) STANDARD OF REASONABLENESS.—Except as

15 provided in subsection (b), a defendant in a medical mal16 practice liability action may not be found to have commit17 ted malpractice unless the defendant’s conduct at the time

18 of providing the health care services that are the subject

19 of the action was not reasonable.

20 (b) ACTIONS BROUGHT UNDER STRICT LIABILITY.—

21 Subsection (a) shall not apply with respect to a medical

22 malpractice action if (in accordance with applicable State

23 law) the theory of liability upon which the action is based

24 is a theory of strict liability.
251

•S 1579 IS

1 SEC. 5207. JURISDICTION OF FEDERAL COURTS.

2 Nothing in this subtitle shall be construed to estab3 lish jurisdiction over any medical malpractice liability ac4 tion in the district courts of the United States on the basis

5 of sections 1331 or 1337 of title 28, United States Code.

6 SEC. 5208. PREEMPTION.

7 (a) IN GENERAL.—This subtitle supersedes any State

8 law only to the extent that the State law permits the recov9 ery by a claimant or the assessment against a defendant

10 of a greater amount of damages, establishes a longer pe11 riod during which a medical malpractice claim may be ini12 tiated, or establishes a less strict standard of proof for

13 determining whether a defendant has committed mal14 practice, than the provisions of this subtitle.

15 (b) EFFECT ON SOVEREIGN IMMUNITY AND CHOICE

16 OF LAW OR VENUE.—Nothing in this subtitle shall be con17 strued to—

18 (1) waive or affect any defense of sovereign im19 munity asserted by any State under any provision of

20 law;

21 (2) waive or affect any defense of sovereign im22 munity asserted by the United States;

23 (3) affect the applicability of any provision of

24 the Foreign Sovereign Immunities Act of 1976;
252

•S 1579 IS

1 (4) preempt State choice-of-law rules with re2 spect to claims brought by a foreign nation or a citi3 zen of a foreign nation; or

4 (5) affect the right of any court to transfer

5 venue or to apply the law of a foreign nation or to

6 dismiss a claim of a foreign nation or of a citizen

7 of a foreign nation on the ground in inconvenient

8 forum.

9 Subtitle D—Grants to States for

10 Development of Practice Guide11 lines

12 SEC. 5301. GRANTS TO STATES.

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

14 to States for a 2-year period for the development of medi15 cal practice guidelines that may be applied to resolve medi16 cal malpractice liability claims and actions in the State.

17 (b) ELIGIBILITY.—A State is eligible to receive a

18 grant under this section if the State submits to the Sec19 retary an application at such time, in such form, and con20 taining such information and assurances as the Secretary

21 may require, including assurances that the State will sub22 mit such periodic reports on the development and applica23 tion of the State’s medical practice guidelines as the Sec24 retary may require.

25 (c) NUMBER OF GRANTS.—
253

•S 1579 IS

1 (1) IN GENERAL.—Except as provided in para2 graph (2), the Secretary shall award not less than

3 10 grants under this section.

4 (2) EXCEPTION.—Notwithstanding paragraph

5 (1), the Secretary may award less than 10 grants

6 under this section if the Secretary determines that

7 there are an inadequate number of applications sub8 mitted that meet the eligibility and approval require9 ments of this section.

10 (d) LIMITATION ON AMOUNT OF GRANT.—The

11 amount of funds provided to a State under a grant under

12 this section may not exceed $5,000,000 during the 2-year

13 period of the grant.

14 TITLE VI—PAPERWORK REDUC15 TION AND ADMINISTRATIVE

16 SIMPLIFICATION

17 SEC. 6001. PREEMPTION OF STATE QUILL PEN LAWS.

18 After 1994, no effect shall be given to any provision

19 of State law that requires medical or health insurance

20 records (including billing information) to be maintained

21 in written, rather than electronic, form.

22 SEC. 6002. CONFIDENTIALITY OF ELECTRONIC HEALTH

23 CARE INFORMATION.

24 (a) PROMULGATION OF REQUIREMENTS.—
254

•S 1579 IS

1 (1) IN GENERAL.—The National Health Board

2 shall promulgate, and may modify from time to

3 time, requirements to facilitate and ensure the uni4 form, confidential treatment of individually identifi5 able health care information in electronic environ6 ments.

7 (2) ITEMS TO BE INCLUDED.—The require8 ments under this subsection shall—

9 (A) provide for the preservation of con10 fidentiality and privacy rights in electronic

11 health care claims processing and payment;

12 (B) apply to the collection, storage, han13 dling, and transmission of individually identifi14 able health care data (including initial and sub15 sequent disclosures) in electronic form by all ac16 countable health plans, public and private third17 party payers, providers of health care, and all

18 other entities involved in the transactions;

19 (C) not apply to public health reporting re20 quired under State or Federal law;

21 (D) delineate protocols for securing elec22 tronic storage, processing, and transmission of

23 health care data;
255

•S 1579 IS

1 (E) specify fair information practices that

2 assure a proper balance between required dis3 closures and use of data, including—

4 (i) creating a proper balance between

5 what an individual is expected to divulge to

6 a record-keeping organization and what the

7 individual seeks in return,

8 (ii) minimizing the extent to which in9 formation concerning an individual is itself

10 a source of unfairness in any decision

11 made on the basis of such information, and

12 (iii) creating and defining obligations

13 respecting the uses and disclosures that

14 will be made of recorded information about

15 an individual;

16 (F) require publication of the existence of

17 health care data banks;

18 (G) establish appropriate protections for

19 highly sensitive data (such as data concerning

20 mental health, substance abuse, and commu21 nicable and genetic diseases);

22 (H) encourage the use of alternative dis23 pute resolution mechanisms (where appro24 priate); and
256

•S 1579 IS

1 (I) provide for the deletion of information

2 that is no longer needed to carry out the pur3 pose for which it was collected.

4 (3) CONSULTATION WITH WORKING GROUP.—In

5 promulgating and modifying requirements under this

6 subsection, the Board shall consult with a working

7 group of knowledgeable individuals representing all

8 interested parties (including third-party payers, pro9 viders, consumers, employers, information managers,

10 and technical experts).

11 (4) DEADLINE.—The Board shall first promul12 gate requirements under this subsection by not later

13 than six months after the date of the enactment of

14 this Act.

15 (b) APPLICATION OF REQUIREMENTS.—

16 (1) STATE ENFORCEMENT OF SIMILAR RE17 QUIREMENTS.—The requirements promulgated

18 under subsection (a) shall not apply to health care

19 information in a State if—

20 (A) the State has applied to the National

21 Health Board for a determination that the

22 State has in effect a law that provides for the

23 application of requirements with respect to such

24 information (and enforcement provisions with

25 respect to such requirements) consistent with
257

•S 1579 IS

1 such requirements (and with the enforcement

2 provisions of subsection (c)), and

3 (B) the Board determines that the State

4 has such a law in effect.

5 (2) APPLICATION TO CURRENT INFORMA6 TION.—The National Health Board shall specify the

7 extent to which (and manner in which) the require8 ments promulgated under subsection (a) apply to in9 formation collected before the effective date of the

10 requirements.

11 (c) DEFENSE FOR PROPER DISCLOSURES.—An en12 tity that establishes that is has disclosed health care infor13 mation in accordance with the requirements promulgated

14 under subsection (a) has established a defense in an action

15 brought for improper disclosure of such information.

16 (d) PENALTIES FOR VIOLATIONS.—An entity that

17 collects, stores, handles, transmits, or discloses health care

18 information in violation of the requirements promulgated

19 under subsection (a) is liable for civil damages, equitable

20 remedies, and attorneys’ fees (if appropriate), in accord21 ance with regulations of the National Health Board.
258

•S 1579 IS

1 SEC. 6003. STANDARDIZATION FOR THE ELECTRONIC RE2 CEIPT AND TRANSMISSION OF HEALTH PLAN

3 INFORMATION.

4 (a) GOALS.—The National Health Board shall estab5 lish national goals, and time frameworks, respecting the

6 progress to be made by the health care industry in elimi7 nating unnecessary paperwork and achieving appropriate

8 standardization in the areas of electronic receipt and

9 transmission of health care claims and health plan infor10 mation and eligibility verification (consistent with the re11 quirements promulgated under section 6002(a)).

12 (b) CONTINGENT REQUIREMENTS.—If the Board de13 termines that the health care industry has failed to meet

14 the goals established under subsection (a) by the deadlines

15 established by the Board under such subsection, the Board

16 shall promulgate (and may, from time to time, modify)

17 standards and requirements concerning the electronic re18 ceipt and transmission of health plan claims forms and

19 other health plan information.

20 (c) CONSULTATION.—The Board shall conduct activi21 ties under this section in consultation with the Accredited

22 Standards Committee X–12 of the American National

23 Standards Institute, insurers, providers, and others.
259

•S 1579 IS

1 SEC. 6004. USE OF UNIFORM HEALTH CLAIMS FORMS AND

2 IDENTIFICATION NUMBERS.

3 (a) GOALS.—The National Health Board shall estab4 lish national goals, and time frameworks, respecting the

5 progress to be made by the health care industry in achiev6 ing uniformity—

7 (1) in the format and content of basic claims

8 forms under health plans, and

9 (2) in the use of common identification num10 bers for beneficiaries and providers of health care

11 items or services under health plans.

12 (b) CONTINGENT REQUIREMENTS.—If the Board de13 termines that the health care industry has failed to meet

14 the goals established under subsection (a) by the deadlines

15 established by the Board under such subsection, the Board

16 shall promulgate (and may, from time to time, modify)

17 standards and requirements concerning—

18 (1) the format and content of basic claims

19 forms under health plans, and

20 (2) the common identification numbers to be

21 used by health plans to identify health plan bene22 ficiaries and health care providers.

23 (c) CONSULTATION.—The Board shall conduct activi24 ties under this section in consultation with the Workgroup

25 for Electronic Data Interchange and with insurers, provid26 ers, and others.
260

•S 1579 IS

1 SEC. 6005. PRIORITY AMONG INSURERS.

2 (a) GOALS.—The National Health Board shall estab3 lish national goals, and time frameworks, respecting the

4 progress to be made by the health care industry in achiev5 ing uniformity in the rules for determining the liability

6 of insurers when benefits are payable under two or more

7 health plans.

8 (b) CONTINGENT REQUIREMENTS.—If the Board de9 termines that the health care industry has failed to meet

10 the goals established under subsection (a) by the deadlines

11 established by the Board under such subsection, the Board

12 shall promulgate (and may, from time to time, modify)

13 rules for determining the liability of health plans when

14 benefits are payable under two or more health plans.

15 (c) CONSULTATION.—The Board shall conduct activi16 ties under this section in consultation with health plans.

17 SEC. 6006. FURNISHING OF INFORMATION AMONG HEALTH

18 PLANS.

19 (a) GOALS.—The National Health Board shall estab20 lish national goals, and time frameworks, respecting the

21 progress to be made by the health care industry in achiev22 ing uniformity in the availability of information among

23 health plans when benefits are payable under two or more

24 health plans.

25 (b) CONTINGENT REQUIREMENTS.—If the Board de26 termines that the health care industry has failed to meet
261

•S 1579 IS

1 the goals established under subsection (a) by the deadlines

2 established by the Board under such subsection, the Board

3 shall promulgate (and may, from time to time, modify)

4 requirements concerning the transfer among health plans

5 (and annual updating) of appropriate information (which

6 may include requirements for the use of unique identifiers,

7 and for the listing of all individuals covered under a health

8 plan).

9 (c) CONSULTATION.—The Board shall conduct activi10 ties under this section in consultation with health plans.

11 SEC. 6007. FAILURE TO SATISFY CERTAIN HEALTH PLAN

12 REQUIREMENTS.

13 (a) IN GENERAL.—Chapter 47 of the Internal Reve14 nue Code of 1986 (relating to taxes on group health plans)

15 is amended by adding at the end the following new section:

16 ‘‘SEC. 5000A. FAILURE TO SATISFY CERTAIN HEALTH PLAN

17 REQUIREMENTS.

18 ‘‘(a) GENERAL RULE.—There is hereby imposed, on

19 any administrator of a health plan, a tax on any failure

20 to comply with an applicable requirement of sections 6003

21 through 6006 of the Managed Competition Act of 1993.

22 The National Health Board shall determine whether any

23 such administrator meets the requirements of those sec24 tions.
262

•S 1579 IS

1 ‘‘(b) AMOUNT OF TAX.—The amount of tax imposed

2 by subsection (a) for a taxable year in which an adminis3 trator fails to comply with a requirement described in that

4 subsection shall be equal to $100 for each such failure.

5 ‘‘(c) CONTROLLED GROUPS.—

6 ‘‘(1) EMPLOYERS.—In the case of an adminis7 trator that is an employer, for purposes of this sec8 tion all persons that are treated as part of the same

9 employer (within the meaning of section 414) as the

10 administrator shall be treated as the same person.

11 ‘‘(2) OTHER ADMINISTRATORS.—In the case of

12 an administrator that is not an employer, for pur13 poses of this section—

14 ‘‘(A) CONTROLLED GROUP OF CORPORA15 TIONS.—All corporations which are members of

16 the same controlled group of corporations shall

17 be treated as 1 person. For purposes of the pre18 ceding sentence, the term ‘controlled group of

19 corporations’ has the meaning given to such

20 term by section 1563(a), except that—

21 ‘‘(i) ‘more than 50 percent’ shall be

22 substituted for ‘at least 80 percent’ each

23 place it appears in section 1563(a)(1), and
263

•S 1579 IS

1 ‘‘(ii) the determination shall be made

2 without regard to subsections (a)(4) and

3 (e)(3)(C) of section 1563.

4 ‘‘(B) PARTNERSHIPS, PROPRIETORSHIPS,

5 ETC., WHICH ARE UNDER COMMON CONTROL.—

6 Under regulations prescribed by the Secretary,

7 all trades or businesses (whether or not incor8 porated) which are under common control shall

9 be treated as 1 person. The regulations pre10 scribed under this subparagraph shall be based

11 on principles similar to the principles which

12 apply in the case of subparagraph (A).

13 ‘‘(d) LIMITATIONS ON TAX.—

14 ‘‘(1) TAX NOT TO APPLY WHERE FAILURE NOT

15 DISCOVERED EXERCISING REASONABLE DILI16 GENCE.—No tax shall be imposed by subsection (a)

17 with respect to any failure for which it is established

18 to the satisfaction of the Secretary that the person

19 liable for tax did not know, and by exercising rea20 sonable diligence would not have known, that the

21 failure existed.

22 ‘‘(2) TAX NOT TO APPLY TO FAILURES COR23 RECTED WITHIN 30 DAYS.—No tax shall be imposed

24 by subsection (a) on any failure if—
264

•S 1579 IS

1 ‘‘(A) the failure was due to reasonable

2 cause and not to willful neglect, and

3 ‘‘(B) the failure is corrected during the 30-

4 day period beginning on the 1st date the person

5 liable for the tax knew, or by exercising reason6 able diligence would have known, that the fail7 ure existed.

8 ‘‘(3) WAIVER BY SECRETARY.—In the case of a

9 failure which is due to reasonable cause and not to

10 willful neglect, the Secretary may waive part or all

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

12 that the payment of that tax would be excessive rel13 ative to the failure involved.’’.

14 (b) NONDEDUCTIBILITY OF TAX.—Paragraph (6) of

15 section 275(a) of that Code (relating to nondeductibility

16 of certain taxes) is amended by inserting ‘‘47,’’ after

17 ‘‘46,’’.

18 (c) CLERICAL AMENDMENTS.—The table of sections

19 for chapter 47 of that Code is amended by adding at the

20 end the following new item:

‘‘5000A. Failure to satisfy certain health plan requirements.’’.

21 SEC. 6008. DEFINITIONS.

22 For purposes of this title—

23 (1) The term ‘‘health plan’’ means any contract

24 or arrangement under which an entity bears all or

25 part of the cost of providing health care items and
265

•S 1579 IS

1 services, including a hospital or medical expense in2 curred policy or certificate, hospital or medical serv3 ice plan contract, or health maintenance subscriber

4 contract (including any closed accountable health

5 plan), but does not include (except for purposes of

6 sections 6005 and 6006)—

7 (A) coverage only for accident, dental, vi8 sion, disability, or long term care, medicare

9 supplemental health insurance, or any combina10 tion thereof,

11 (B) coverage issued as a supplement to li12 ability insurance,

13 (C) workers’ compensation or similar in14 surance, or

15 (D) automobile medical-payment insur16 ance.

17 (2) The term ‘‘provider’’ means a physician,

18 hospital, pharmacy, laboratory, or other person li19 censed or otherwise authorized under applicable

20 State laws to furnish health care items or services.

Æ

S 1579 IS——2

S 1579 IS——3

S 1579 IS——4

S 1579 IS——5
266

•S 1579 IS

S 1579 IS——6

S 1579 IS——7

S 1579 IS——8

S 1579 IS——9

S 1579 IS——10

S 1579 IS——11

S 1579 IS——12

S 1579 IS——13

S 1579 IS——14

S 1579 IS——15

S 1579 IS——16

S 1579 IS——17