II

★(Star Print)

103D CONGRESS

2D SESSION S. 1743

To provide Americans with secure, portable health insurance benefits and

greater choice of health insurance plans, and for other purposes.

IN THE SENATE OF THE UNITED STATES

NOVEMBER 20 (legislative day, NOVEMBER 2), 1993

Mr. NICKLES (for himself, Mr. HATCH, Mr. MACK, Mr. BENNETT, Mr.

BROWN, Mr. BURNS, Mr. COATS, Mr. COCHRAN, Mr. COVERDELL, Mr.

CRAIG, Mr. DOLE, Mr. FAIRCLOTH, Mr. GREGG, Mr. HELMS, Mrs.

HUTCHISON, Mr. KEMPTHORNE, Mr. LOTT, Mr. LUGAR, Mr. MURKOWSKI, Mr. SIMPSON, Mr. SMITH, Mr. STEVENS, Mr. THURMOND, Mr. WALLOP, and Mr. GRASSLEY) introduced the following bill; which was read

twice and referred to the Committee on Finance

A BILL

To provide Americans with secure, portable health insurance

benefits and greater choice of health insurance plans,

and for other purposes.

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 AND TABLE OF CONTENTS.

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

5 ‘‘Consumer Choice Health Security Act of 1994’’.

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

7 this Act is as follows:
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Sec. 1. Short title and table of contents.

Sec. 2. Purposes.

TITLE I—TAX AND INSURANCE PROVISIONS

Subtitle A—Tax Treatment of Health Care Expenses

Sec. 101. Refundable health care expenses tax credit.

Sec. 102. Medical savings accounts.

Sec. 103. Other tax provisions.

Subtitle B—Insurance Provisions

PART I—FEDERALLY QUALIFIED HEALTH INSURANCE PLAN

Sec. 111. Federally qualified health insurance plan.

Sec. 112. Family security benefits package.

Sec. 113. Rating practices.

Sec. 114. Guaranteed issue.

Sec. 115. Guaranteed renewability.

PART II—CERTIFICATION OF FEDERALLY QUALIFIED HEALTH INSURANCE

PLANS

Sec. 117. Establishment of regulatory program for certification of plans.

Sec. 118. Standards for regulatory programs.

Subtitle C—Employer Provisions

Sec. 121. General provisions relating to employers.

Sec. 122. Conversion of non-self-insured plans.

Sec. 123. Provisions relating to existing self-insured plans.

Sec. 124. Continuation of employer-provided health coverage required until effective date of new coverage under this Act.

Sec. 125. Requirements with respect to cashing out employer-sponsored plans.

Sec. 126. Enforcement.

Subtitle D—Federal Preemption

Sec. 131. Federal preemption of certain State laws.

Subtitle E—Report

Sec. 141. Report on health insurance coverage.

TITLE II—MEDICARE AND MEDICAID REFORMS

Subtitle A—Medicare

Sec. 201. Study of medicare private health insurance program.

Sec. 202. Elimination of medicare hospital disproportionate share adjustment

payments.

Sec. 203. Reduction in adjustment for indirect medical education.

Sec. 204. Imposition of copayment on laboratory services.

Sec. 205. Imposition of copayment for certain home health visits.

Sec. 206. Imposition of copayment for skilled nursing facility services.

Sec. 207. Shift payment updates to January for all payment rates under hospital insurance program.
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Sec. 208. Acceleration of transition to prospective rates for facility costs in hospital outpatient departments.

Subtitle B—Medicaid

Sec. 211. Cap on Federal payments made for acute medical services under the

medicaid program.

Sec. 212. Waivers for the furnishing of acute medical services under the medicaid program.

Sec. 213. Termination of disproportionate share payments.

Sec. 214. Grants for health insurance coverage, acute medical services, preventive care, and disease prevention.

TITLE III—HEALTH CARE LIABILITY REFORM

Sec. 301. Short title.

Sec. 302. Definitions.

Sec. 303. Health care malpractice.

Sec. 304. Health care product liability of manufacturer or seller.

Sec. 305. General provisions relating to health care liability.

Sec. 306. Punitive damages.

Sec. 307. Exceptions.

Sec. 308. Rules of construction.

TITLE IV—ADMINISTRATIVE COST SAVINGS

Subtitle A—Standardization of Claims Processing

Sec. 401. Adoption of data elements, uniform claims, and uniform electronic

transmission standards.

Sec. 402. Application of standards.

Sec. 403. Periodic review and revision of standards.

Sec. 404. Health insurance plan defined.

Subtitle B—Electronic Medical Data Standards

Sec. 411. Medical data standards for hospitals and other providers.

Sec. 412. Application of electronic data standards to certain hospitals.

Sec. 413. Electronic transmission to Federal agencies.

Sec. 414. Limitation on data requirements where standards in effect.

Sec. 415. Advisory commission.

Subtitle C—Development and Distribution of Comparative Value Information

Sec. 421. State comparative value information programs for health care purchasing.

Sec. 422. Federal implementation.

Sec. 423. Comparative value information concerning Federal programs.

Subtitle D—Preemption of State Quill Pen Laws

Sec. 431. Preemption of State quill pen laws.

TITLE V—ANTI-FRAUD

Subtitle A—Criminal Prosecution of Health Care Fraud

Sec. 501. Penalties for health care fraud.

Sec. 502. Rewards for information leading to prosecution and conviction.
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Subtitle B—Coordination of Health Care Anti-Fraud and Abuse Activities

Sec. 511. Application of Federal health anti-fraud and abuse sanctions to all

fraud and abuse against any health insurance plan.

TITLE VI—ANTITRUST PROVISIONS

Sec. 601. Exemption from antitrust laws for certain competitive and collaborative activities.

Sec. 602. Safe harbors.

Sec. 603. Designation of additional safe harbors.

Sec. 604. Certificates of review.

Sec. 605. Notifications providing reduction in certain penalties under antitrust

law for health care cooperative ventures.

Sec. 606. Review and reports on safe harbors and certificates of review.

Sec. 607. Rules, regulations, and guidelines.

Sec. 608. Definitions.

TITLE VII—LONG-TERM CARE

Sec. 701. Exclusion from gross income for amounts withdrawn from individual

retirement plans or 401(k) plans for long-term care insurance.

Sec. 702. Certain exchanges of life insurance contracts for long-term care insurance contracts not taxable.

Sec. 703. Tax treatment of accelerated death benefits under life insurance contracts.

Sec. 704. Effective date.

1 SEC. 2. PURPOSES.

2 The purposes of this Act are to—

3 (1) provide Americans with secure, portable

4 health insurance benefits and greater choice of

5 health insurance plans,

6 (2) make the American health care system re7 sponsive to consumer needs and encourage the provi8 sion of quality medical care at reasonable prices

9 through enhanced competition,

10 (3) provide more equitable tax treatment of

11 health insurance and medical care expenses, and
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1 (4) assist low-income and uninsured Americans

2 in purchasing health insurance and receiving pri3 mary medical care.

4 TITLE I—TAX AND INSURANCE

5 PROVISIONS

6 Subtitle A—Tax Treatment of

7 Health Care Expenses

8 SEC. 101. REFUNDABLE HEALTH CARE EXPENSES TAX

9 CREDIT.

10 (a) IN GENERAL.—Subpart C of part IV of sub11 chapter A of chapter 1 of the Internal Revenue Code of

12 1986 (relating to refundable personal credits) is amended

13 by inserting after section 34 the following new section:

14 ‘‘SEC. 34A. HEALTH CARE EXPENSES.

15 ‘‘(a) ALLOWANCE OF CREDIT.—In the case of a

16 qualified individual, there shall be allowed as a credit

17 against the tax imposed by this subtitle for the taxable

18 year an amount equal to the applicable percentage of the

19 sum of—

20 ‘‘(1) 25 percent of the sum of the qualified

21 health insurance premiums and the unreimbursed

22 expenses for medical care paid by such individual

23 during the taxable year which does not exceed 10

24 percent of the adjusted gross income of such individ25 ual for such year, plus
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1 ‘‘(2) 50 percent of the sum of such premiums

2 and such unreimbursed expenses so paid which ex3 ceeds 10 percent but does not exceed 20 percent of

4 such adjusted gross income, plus

5 ‘‘(3) 75 percent of the sum of such premiums

6 and such unreimbursed expenses so paid which ex7 ceeds 20 percent of such adjusted gross income.

8 ‘‘(b) QUALIFIED INDIVIDUALS.—For purposes of this

9 section—

10 ‘‘(1) IN GENERAL.—The term ‘qualified individ11 ual’ means the taxpayer, the spouse of the taxpayer,

12 and each dependent of the taxpayer (as defined in

13 section 152) who is enrolled in a federally qualified

14 health insurance plan.

15 ‘‘(2) FEDERALLY COVERED INDIVIDUALS.—The

16 term ‘qualified individual’ does not include any indi17 vidual whose medical care is covered under—

18 ‘‘(A) title XVIII or XIX of the Social Se19 curity Act,

20 ‘‘(B) chapter 55 of title 10, United States

21 Code,

22 ‘‘(C) chapter 17 of title 38, United States

23 Code, or

24 ‘‘(D) the Indian Health Care Improvement

25 Act.
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1 ‘‘(3) SPECIAL RULE IN THE CASE OF CHILD OF

2 DIVORCED PARENTS, ETC.—Any child to whom sec3 tion 152(e) applies shall be treated as a dependent

4 of both parents.

5 ‘‘(4) MARRIAGE RULES.—The determination of

6 whether an individual is married at any time during

7 the taxable year shall be made in accordance with

8 the provisions of section 6013(d) (relating to deter9 mination of status as husband and wife).

10 ‘‘(c) APPLICABLE PERCENTAGE.—For purposes of

11 subsection (a), the applicable percentage for any taxable

12 year is determined by the number of whole months in such

13 year in which the taxpayer is a qualified individual.

14 ‘‘(d) QUALIFIED HEALTH INSURANCE PREMIUMS.—

15 For purposes of this section, the term ‘qualified health in16 surance premiums’ means premiums for—

17 ‘‘(1) a federally qualified health insurance plan,

18 and

19 ‘‘(2) any other benefits or plans supplementary

20 to such a federally qualified health insurance plan.

21 ‘‘(e) FEDERALLY QUALIFIED HEALTH INSURANCE

22 PLAN.—For purposes of this section, the term ‘federally

23 qualified health insurance plan’ means a health insurance

24 plan which is described in section 111 of the Consumer

25 Choice Health Security Act of 1994.
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1 ‘‘(f) MEDICAL CARE.—For purposes of this section:

2 ‘‘(1) IN GENERAL.—The term ‘medical care’

3 means amounts paid—

4 ‘‘(A) for the diagnosis, cure, mitigation,

5 treatment, or prevention of disease, or for the

6 purpose of affecting any structure or function

7 of the body, and

8 ‘‘(B) for transportation primarily for and

9 essential to medical care referred to in subpara10 graph (A).

11 ‘‘(2) AMOUNTS PAID FOR CERTAIN LODGING

12 AWAY FROM HOME TREATED AS PAID FOR MEDICAL

13 CARE.—Amounts paid for lodging (not lavish or ex14 travagant under the circumstances) while away from

15 home primarily for and essential to medical care re16 ferred to in paragraph (1)(A) shall be treated as

17 amounts paid for medical care if—

18 ‘‘(A) the medical care referred to in para19 graph (1)(A) is provided by a physician in a li20 censed hospital (or in a medical care facility

21 which is related to, or the equivalent of, a li22 censed hospital), and

23 ‘‘(B) there is no significant element of per24 sonal pleasure, recreation, or vacation in the

25 travel away from home.
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1 The amount taken into account under the preceding

2 sentence shall not exceed $50 for each night for each

3 individual.

4 ‘‘(3) COSMETIC SURGERY.—

5 ‘‘(A) IN GENERAL.—The term ‘medical

6 care’ does not include cosmetic surgery or other

7 similar procedures, unless the surgery or proce8 dure is necessary to ameliorate a deformity

9 arising from, or directly related to, a congenital

10 abnormality, a personal injury resulting from

11 an accident or trauma, or disfiguring disease.

12 ‘‘(B) COSMETIC SURGERY DEFINED.—For

13 purposes of this paragraph, the term ‘cosmetic

14 surgery’ means any procedure which is directed

15 at improving the patient’s appearance and does

16 not meaningfully promote the proper function

17 of the body or prevent or treat illness or dis18 ease.

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

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

21 the Social Security Act (42 U.S.C. 1395x(r)).

22 ‘‘(g) SPECIAL RULES.—For purposes of this sec23 tion—

24 ‘‘(1) LIMITATION WITH RESPECT TO MEDICINE

25 AND DRUGS.—
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1 ‘‘(A) IN GENERAL.—An amount paid dur2 ing the taxable year for medicine or a drug

3 shall be taken into account under subsection (a)

4 only if such medicine or drug is a prescribed

5 drug or is insulin.

6 ‘‘(B) PRESCRIBED DRUG.—The term ‘pre7 scribed drug’ means a drug or biological which

8 requires a prescription of a physician for its use

9 by an individual.

10 ‘‘(2) SPECIAL RULE FOR DECEDENTS.—

11 ‘‘(A) TREATMENT OF EXPENSES PAID

12 AFTER DEATH.—Expenses for the medical care

13 of the taxpayer which are paid out of the tax14 payer’s estate during the 1-year period begin15 ning with the day after the date of the tax16 payer’s death shall be treated as paid by the

17 taxpayer at the time incurred.

18 ‘‘(B) LIMITATION.—Subparagraph (A)

19 shall not apply if the amount paid is allowable

20 under section 2053 as a deduction in computing

21 the taxable estate of the decedent, but this sub22 paragraph shall not apply if (within the time

23 and in the manner and form prescribed by the

24 Secretary) there is filed—
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1 ‘‘(i) a statement that such amount

2 has not been allowed as a deduction under

3 section 2053, and

4 ‘‘(ii) a waiver of the right to have

5 such amount allowed at any time as a de6 duction under section 2053.

7 ‘‘(3) FORM OF INSURANCE CONTRACT.—In the

8 case of an insurance contract under which amounts

9 are payable for other than medical care—

10 ‘‘(A) no amount shall be treated as paid

11 for insurance to which subsection (a) applies

12 unless the charge for such insurance is either

13 separately stated in the contract, or furnished

14 to the policyholder by the insurance company in

15 a separate statement,

16 ‘‘(B) the amount taken into account as the

17 amount paid for such insurance shall not exceed

18 such charge, and

19 ‘‘(C) no amount shall be treated as paid

20 for such insurance if the amount specified in

21 the contract (or furnished to the policyholder by

22 the insurance company in a separate statement)

23 as the charge for such insurance is unreason24 ably large in relation to the total charges under

25 the contract.
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1 ‘‘(4) EXCLUSION OF AMOUNTS ALLOWED FOR

2 CARE OF CERTAIN DEPENDENTS.—Any expense al3 lowed as a credit under section 21 shall not be

4 treated as an expense paid for medical care.

5 ‘‘(5) COORDINATION WITH ADVANCE PAYMENT

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

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

8 any credit to which this section applies.

9 ‘‘(6) SUBSIDIZED EXPENSES.—No expense shall

10 be taken into account under subsection (a), if—

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

12 subsidized (whether by being disregarded for

13 purposes of another program or otherwise) by

14 the Federal Government, a State or local gov15 ernment, or any agency or instrumentality

16 thereof, and

17 ‘‘(B) the payment, reimbursement, or sub18 sidy of such expense is not includable in the

19 gross income of the recipient.

20 ‘‘(7) COORDINATION WITH MEDICAL SAVINGS

21 ACCOUNTS.—The amount otherwise taken into ac22 count under subsection (a) shall be reduced by the

23 amount (if any) of the distributions from any medi24 cal savings account of the taxpayer during the tax25 able year which is not includible in gross income by
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1 reason of being used for qualified medical expenses

2 (as defined in section 25A(c)(2)).

3 ‘‘(h) INDEXING OF PERCENTAGES.—For each year

4 after 1997, the Secretary, in consultation with the Sec5 retary of Health and Human Services, shall adjust the ref6 erences to 10 percent and 20 percent in subsection (a)

7 by the ratio of—

8 ‘‘(1) the percentage increase in medical care in9 flation between 1996 and the year before the year

10 involved, to

11 ‘‘(2) the national average percentage increase in

12 adjusted gross income of individuals between such

13 years.

14 ‘‘(i) REGULATIONS.—The Secretary shall prescribe

15 such regulations as may be necessary to carry out the pur16 poses of this section.’’.

17 (b) ADVANCE PAYMENT OF CREDIT.—Chapter 25 of

18 the Internal Revenue Code of 1986 (relating to general

19 provisions relating to employment taxes) is amended by

20 inserting after section 3507 the following new section:

21 ‘‘SEC. 3507A. ADVANCE PAYMENT OF HEALTH EXPENSES

22 CREDIT.

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

24 in this section, every employer making payment of wages

25 with respect to whom a health care expenses eligibility cer-
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1 tificate is in effect shall, at the time of paying such wages,

2 make an additional payment equal to such employee’s

3 health care expenses advance amount.

4 ‘‘(b) HEALTH CARE EXPENSES ELIGIBILITY CER5 TIFICATE.—For purposes of this title, a health care ex6 penses eligibility certificate is a statement furnished by an

7 employee to the employer which—

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

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

10 taxable year,

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

12 a health care expenses eligibility certificate in effect

13 for the calendar year with respect to the payment of

14 wages by another employer,

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

16 spouse has a health care expenses eligibility certifi17 cate in effect, and

18 ‘‘(4) estimates the amount of premiums for a

19 federally qualified health insurance plan and unreim20 bursed expenses for medical care (as defined in sec21 tion 34A) for the calendar year.

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

23 as being in effect with respect to a spouse if such a certifi24 cate will be in effect on the first status determination date
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1 following the date on which the employee furnishes the

2 statement in question.

3 ‘‘(c) HEALTH CARE EXPENSES ADVANCE

4 AMOUNT.—

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

6 the term ‘health expenses advance amount’ means,

7 with respect to any payroll period, the amount deter8 mined—

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

10 from the employer for such period,

11 ‘‘(B) on the basis of the employee’s esti12 mated premiums for a federally qualified health

13 insurance plan and unreimbursed expenses for

14 medical care included in the health care ex15 penses eligibility certificate, and

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

17 the Secretary.

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

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

20 form to the tables prescribed under section 3402

21 and, to the maximum extent feasible, shall be coordi22 nated with such tables and the tables prescribed

23 under section 3507(c).
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1 ‘‘(d) OTHER RULES.—For purposes of this section,

2 rules similar to the rules of subsections (d) and (e) of sec3 tion 3507 shall apply.

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

5 such regulations as may be necessary to carry out the pur6 poses of this section.’’.

7 (c) CLERICAL AMENDMENTS.—

8 (1) The table of sections for subpart A of part

9 IV of subchapter A of chapter 1 of the Internal Rev10 enue Code of 1986 is amended by inserting after the

11 item relating to section 34 the following new item:

‘‘Sec. 34A. Health care expenses.’’.

12 (2) The table of sections for chapter 25 of such

13 Code is amended by adding after the item relating

14 to section 3507 the following new item:

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

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

16 this section shall apply to taxable years beginning after

17 December 31, 1997.

18 SEC. 102. MEDICAL SAVINGS ACCOUNTS.

19 (a) IN GENERAL.—Subpart A of part IV of sub20 chapter A of chapter 1 of the Internal Revenue Code of

21 1986 (relating to nonrefundable personal credits) is

22 amended by inserting after section 25 the following new

23 section:
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1 ‘‘SEC. 25A. MEDICAL SAVINGS ACCOUNTS.

2 ‘‘(a) ALLOWANCE OF CREDIT.—In the case of an in3 dividual, there shall be allowed as a credit against the tax

4 imposed by this subtitle for the taxable year an amount

5 equal to 25 percent of the amount paid in cash during

6 such year by or on behalf of such individual to a medical

7 savings account.

8 ‘‘(b) LIMITATIONS.—For purposes of this section:

9 ‘‘(1) ONLY 1 ACCOUNT PER FAMILY.—No credit

10 shall be allowed under subsection (a) for amounts

11 paid to any medical savings account for the benefit

12 of an individual, such individual’s spouse, or any de13 pendent (as defined in section 152) of such individ14 ual if such individual, spouse, or dependent is a ben15 eficiary of any other medical savings account.

16 ‘‘(2) DOLLAR LIMITATION.—The aggregate

17 amount of contributions which may be taken into ac18 count under subsection (a) with respect to any indi19 vidual for any taxable year shall not exceed the sum

20 of—

21 ‘‘(A) $3,000, plus

22 ‘‘(B) $500 for each individual who is a de23 pendent (as so defined) of the individual for

24 whose benefit the account is established.

25 ‘‘(c) DEFINITIONS AND SPECIAL RULES.—For pur26 poses of this section—
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1 ‘‘(1) MEDICAL SAVINGS ACCOUNT.—

2 ‘‘(A) IN GENERAL.—The term ‘medical

3 savings account’ means a trust created or orga4 nized in the United States exclusively for the

5 purpose of paying the qualified medical ex6 penses of the individual for whose benefit the

7 trust is established, but only if the written gov8 erning instrument creating the trust meets the

9 following requirements:

10 ‘‘(i) Except in the case of a rollover

11 contribution described in subsection (d)(4),

12 no contribution will be accepted unless it is

13 in cash and contributions will not be ac14 cepted for any taxable year in excess of the

15 amount determined under subsection

16 (b)(1).

17 ‘‘(ii) The trustee is a bank (as defined

18 in section 408(n)) or another person who

19 demonstrates to the satisfaction of the Sec20 retary that the manner in which such per21 son will administer the trust will be con22 sistent with the requirements of this sec23 tion.

24 ‘‘(iii) No part of the trust assets will

25 be invested in life insurance contracts.
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1 ‘‘(iv) The assets of the trust will not

2 be commingled with other property except

3 in a common trust fund or common invest4 ment fund.

5 ‘‘(v) The interest of an individual in

6 the balance in such individual’s account is

7 nonforfeitable.

8 ‘‘(vi) Under regulations prescribed by

9 the Secretary, rules similar to the rules of

10 section 401(a)(9) shall apply to the dis11 tribution of the entire interest of bene12 ficiaries of such trust.

13 ‘‘(B) TREATMENT OF COMPARABLE AC14 COUNTS HELD BY INSURANCE COMPANIES.—An

15 account held by an insurance company in the

16 United States shall be treated as a medical

17 savings account (and such company shall be

18 treated as a bank) if—

19 ‘‘(i) such account is part of a federally

20 qualified health insurance plan (as defined

21 in section 34A(e)),

22 ‘‘(ii) such account is exclusively for

23 the purpose of paying the medical expenses

24 of the beneficiaries of such account who
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1 are covered under such health insurance

2 plan, and

3 ‘‘(iii) the written instrument govern4 ing the account meets the requirements of

5 clauses (i), (v), and (vi) of subparagraph

6 (A).

7 ‘‘(2) QUALIFIED MEDICAL EXPENSES.—The

8 term ‘qualified medical expenses’ means amounts

9 paid by the individual for whose benefit the account

10 was established for premiums for a federally quali11 fied health insurance plan (as so defined) and the

12 unreimbursed expenses for medical care (as deter13 mined under section 34A) of such individual, the

14 spouse of such individual, and any dependent (as so

15 defined) of such individual.

16 ‘‘(3) TIME WHEN CONTRIBUTIONS DEEMED

17 MADE.—A contribution shall be deemed to be made

18 on the last day of the preceding taxable year if the

19 contribution is made on account of such taxable year

20 and is made not later than the time prescribed by

21 law for filing the return for such taxable year (not

22 including extensions thereof).

23 ‘‘(d) TAX TREATMENT OF DISTRIBUTIONS.—

24 ‘‘(1) IN GENERAL.—Except as otherwise pro25 vided in this subsection, any amount paid or distrib-
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1 uted out of a medical savings account shall be in2 cluded in the gross income of the individual for

3 whose benefit such account was established unless

4 such amount is used exclusively to pay the qualified

5 medical expenses of such individual.

6 ‘‘(2) EXCESS CONTRIBUTIONS RETURNED BE7 FORE DUE DATE OF RETURN.—Paragraph (1) shall

8 not apply to the distribution of any contribution paid

9 during a taxable year to a medical savings account

10 to the extent that such contribution exceeds the

11 amount allowable under subsection (b) if—

12 ‘‘(A) such distribution is received on or be13 fore the day prescribed by law (including exten14 sions of time) for filing such individual’s return

15 for such taxable year,

16 ‘‘(B) no credit is allowed under subsection

17 (a) with respect to such excess contribution,

18 and

19 ‘‘(C) such distribution is accompanied by

20 the amount of net income attributable to such

21 excess contribution.

22 Any net income described in subparagraph (C) shall

23 be included in the gross income of the individual for

24 the taxable year in which it is received.
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1 ‘‘(3) PENALTY FOR DISTRIBUTIONS NOT USED

2 FOR MEDICAL EXPENSES.—The tax imposed by this

3 chapter for any taxable year in which there is a pay4 ment or distribution from a medical savings account

5 which is not used to pay the medical expenses of the

6 individual for whose benefit the account was estab7 lished, shall be increased by 10 percent of the

8 amount of such payment or distribution which is in9 cludible in gross income under paragraph (1).

10 ‘‘(4) ROLLOVERS.—Paragraph (1) shall not

11 apply to any amount paid or distributed out of a

12 medical savings account to the individual for whose

13 benefit the account is maintained, if the entire

14 amount received (including money and any other

15 property) is paid into another medical savings ac16 count for the benefit of such individual not later

17 than the 60th day after the day on which the indi18 vidual received the payment or distribution.

19 ‘‘(e) TAX TREATMENT OF ACCOUNTS.—

20 ‘‘(1) EXEMPTION FROM TAX.—Any medical sav21 ings account is exempt from taxation under this sub22 title unless such account has ceased to be a medical

23 savings account by reason of paragraph (2) or (3).

24 Notwithstanding the preceding sentence, any such

25 account shall be subject to the taxes imposed by sec-
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1 tion 511 (relating to imposition of tax on unrelated

2 business income of charitable, etc. organizations).

3 ‘‘(2) LOSS OF EXEMPTION OF ACCOUNT WHERE

4 INDIVIDUAL ENGAGES IN PROHIBITED TRANS5 ACTION.—

6 ‘‘(A) IN GENERAL.—If, during any taxable

7 year of the individual for whose benefit the

8 medical savings account was established, such

9 individual engages in any transaction prohibited

10 by section 4975 with respect to the account, the

11 account ceases to be a medical savings account

12 as of the first day of that taxable year.

13 ‘‘(B) ACCOUNT TREATED AS DISTRIBUTING

14 ALL ITS ASSETS.—In any case in which any ac15 count ceases to be a medical savings account by

16 reason of subparagraph (A) on the first day of

17 any taxable year, paragraph (1) of subsection

18 (d) applies as if there were a distribution on

19 such first day in an amount equal to the fair

20 market value (on such first day) of all assets in

21 the account (on such first day) and no portion

22 of such distribution were used to pay qualified

23 medical expenses.

24 ‘‘(3) EFFECT OF PLEDGING ACCOUNT AS SECU25 RITY.—If, during any taxable year, the individual for
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1 whose benefit a medical savings account was estab2 lished uses the account or any portion thereof as se3 curity for a loan, the portion so used is treated as

4 distributed to that individual and not used to pay

5 qualified medical expenses.

6 ‘‘(f) CUSTODIAL ACCOUNTS.—For purposes of this

7 section, a custodial account shall be treated as a trust if—

8 ‘‘(1) the assets of such account are held by a

9 bank (as defined in section 408(n)) or another per10 son who demonstrates to the satisfaction of the Sec11 retary that the manner in which he will administer

12 the account will be consistent with the requirements

13 of this section, and

14 ‘‘(2) the custodial account would, except for the

15 fact that it is not a trust, constitute a medical sav16 ings account described in subsection (c).

17 For purposes of this title, in the case of a custodial

18 account treated as a trust by reason of the preceding

19 sentence, the custodian of such account shall be

20 treated as the trustee thereof.

21 ‘‘(g) INFLATION ADJUSTMENT.—

22 ‘‘(1) IN GENERAL.—In the case of any taxable

23 year beginning in a calendar year after 1998, each

24 applicable dollar amount shall be increased by an

25 amount equal to—
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1 ‘‘(A) such dollar amount, multiplied by

2 ‘‘(B) the cost-of-living adjustment for the

3 calendar year in which the taxable year begins.

4 ‘‘(2) COST-OF-LIVING ADJUSTMENT.—For pur5 poses of paragraph (1), the cost-of-living adjustment

6 for any calendar year is the percentage (if any) by

7 which—

8 ‘‘(A) the deemed average total wages (as

9 defined in section 209(k) of the Social Security

10 Act) for the preceding calendar year, exceeds

11 ‘‘(B) the deemed average total wages (as

12 so defined) for calendar year 1997.

13 ‘‘(3) APPLICABLE DOLLAR AMOUNT.—For pur14 poses of paragraph (1), the term ‘applicable dollar

15 amount’ means the $3,000 and $500 amounts in

16 subsection (b)(2).

17 ‘‘(4) ROUNDING.—If any amount as adjusted

18 under paragraph (1) is not a multiple of $10, such

19 amount shall be rounded to the nearest multiple of

20 $10 (or, if such amount is a multiple of $5 and not

21 of $10, such amount shall be rounded to the next

22 highest multiple of $10).

23 ‘‘(h) REPORTS.—The trustee of a medical savings ac24 count shall make such reports regarding such account to

25 the Secretary and to the individual for whose benefit the
26

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1 account is maintained with respect to contributions, dis2 tributions, and such other matters as the Secretary may

3 require under regulations. The reports required by this

4 subsection shall be filed at such time and in such manner

5 and furnished to such individuals at such time and in such

6 manner as may be required by those regulations.’’.

7 (b) TAX ON EXCESS CONTRIBUTIONS.—Section 4973

8 of the Internal Revenue Code of 1986 (relating to tax on

9 excess contributions to individual retirement accounts, cer10 tain section 403(b) contracts, and certain individual re11 tirement annuities) is amended—

12 (1) by inserting ‘‘MEDICAL SAVINGS AC13 COUNTS,’’ after ‘‘ACCOUNTS,’’ in the heading of

14 such section,

15 (2) by redesignating paragraph (2) of sub16 section (a) as paragraph (3) and by inserting after

17 paragraph (1) the following:

18 ‘‘(2) a medical savings account (within the

19 meaning of section 25A(c)(1)),’’,

20 (3) by striking ‘‘or’’ at the end of paragraph

21 (1) of subsection (a), and

22 (4) by adding at the end thereof the following

23 new subsection:

24 ‘‘(d) EXCESS CONTRIBUTIONS TO MEDICAL SAVINGS

25 ACCOUNTS.—For purposes of this section, in the case of
27

•S 1743 IS1S

1 a medical savings account (within the meaning of section

2 25A(c)(1)), the term ‘excess contributions’ means the

3 amount by which the amount contributed for the taxable

4 year to the account exceeds the amount allowable under

5 section 25A(b)(2) for such taxable year. For purposes of

6 this subsection, any contribution which is distributed out

7 of the medical savings account and a distribution to which

8 section 25A(d)(2) applies shall be treated as an amount

9 not contributed.’’.

10 (c) TAX ON PROHIBITED TRANSACTIONS.—Section

11 4975 of the Internal Revenue Code of 1986 (relating to

12 prohibited transactions) is amended—

13 (1) by adding at the end of subsection (c) the

14 following new paragraph:

15 ‘‘(4) SPECIAL RULE FOR MEDICAL SAVINGS AC16 COUNTS.—An individual for whose benefit a medical

17 savings account (within the meaning of section

18 25A(c)(1)) is established shall be exempt from the

19 tax imposed by this section with respect to any

20 transaction concerning such account (which would

21 otherwise be taxable under this section) if, with re22 spect to such transaction, the account ceases to be

23 a medical savings account by reason of the applica24 tion of section 25A(e)(2)(A) to such account.’’, and
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1 (2) by inserting ‘‘or a medical savings account

2 described in section 25A(c)(1)’’ in subsection (e)(1)

3 after ‘‘described in section 408(a)’’.

4 (d) FAILURE TO PROVIDE REPORTS ON MEDICAL

5 SAVINGS ACCOUNTS.—Section 6693 of the Internal Reve6 nue Code of 1986 (relating to failure to provide reports

7 on individual retirement account or annuities) is amend8 ed—

9 (1) by inserting ‘‘OR ON MEDICAL SAVINGS

10 ACCOUNTS’’ after ‘‘ANNUITIES’’ in the heading of

11 such section, and

12 (2) by adding at the end of subsection (a) the

13 following: ‘‘The person required by section 25A(h) to

14 file a report regarding a medical savings account at

15 the time and in the manner required by such section

16 shall pay a penalty of $50 for each failure unless it

17 is shown that such failure is due to reasonable

18 cause.’’.

19 (e) CLERICAL AMENDMENTS.—

20 (1) The table of sections for subpart A of part

21 IV of subchapter A of chapter 1 of the Internal Rev22 enue Code of 1986 is amended by inserting after the

23 item relating to section 25 the following:

‘‘Sec. 25A. Medical savings accounts.’’.
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•S 1743 IS1S

1 (2) The table of sections for chapter 43 of such

2 Code is amended by striking the item relating to sec3 tion 4973 and inserting the following:

‘‘Sec. 4973. Tax on excess contributions to individual retirement

accounts, medical savings accounts, certain 403(b)

contracts, and certain individual retirement annuities.’’.

4 (3) The table of sections for subchapter B of

5 chapter 68 of such Code is amended by inserting ‘‘or

6 on medical savings accounts’’ after ‘‘annuities’’ in

7 the item relating to section 6693.

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

9 this section shall apply to taxable years beginning after

10 December 31, 1997.

11 SEC. 103. OTHER TAX PROVISIONS.

12 (a) TERMINATION OF MEDICAL EXPENSE DEDUC13 TION.—Section 213 of the Internal Revenue Code of 1986

14 (relating to medical, dental, etc., expenses) is amended by

15 adding at the end thereof the following new subsection:

16 ‘‘(g) TERMINATION.—No amount paid after Decem17 ber 31, 1997, shall be treated as an expense paid for medi18 cal care.’’.

19 (b) TERMINATION OF EXCLUSION FOR EMPLOYER20 PROVIDED HEALTH INSURANCE.—Section 106 of the In21 ternal Revenue Code of 1986 (relating to contributions by

22 employer to accident and health plans) is amended by add23 ing at the end the following new sentence: ‘‘The preceding
30

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1 sentence shall not apply to any amount paid after Decem2 ber 31, 1997.’’.

3 Subtitle B—Insurance Provisions

4 PART I—FEDERALLY QUALIFIED HEALTH

5 INSURANCE PLAN

6 SEC. 111. FEDERALLY QUALIFIED HEALTH INSURANCE

7 PLAN.

8 (a) IN GENERAL.—A federally qualified health insur9 ance plan is a health insurance plan offered, issued, or

10 renewed on or after January 1, 1998, which is certified

11 by the applicable regulatory authority as meeting, at a

12 minimum, the requirements of sections 112, 113, 114, and

13 115, and the regulatory program described in section 117.

14 (b) GENERAL DEFINITIONS.—As used in this Act:

15 (1) HEALTH INSURANCE PLAN.—The term

16 ‘‘health insurance plan’’ means any hospital or medi17 cal service policy or certificate, hospital or medical

18 service plan contract, or health maintenance organi19 zation group contract and, in States which have dis20 tinct licensure requirements, a multiple employer

21 welfare arrangement, but does not include any of the

22 following offered by an insurer:

23 (A) Accident only, dental only, disability

24 only, or long-term care only insurance.
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1 (B) Coverage issued as a supplement to li2 ability insurance.

3 (C) Workers’ compensation or similar in4 surance.

5 (D) Automobile medical-payment insur6 ance.

7 (2) APPLICABLE REGULATORY AUTHORITY.—

8 The term ‘applicable regulatory authority’ means—

9 (A) in the case of a State with a program

10 described in section 117, the State commis11 sioner or superintendent of insurance or other

12 State authority responsible for regulation of

13 health insurance; or

14 (B) if the State has not established such a

15 program or such program has been decertified

16 under section 117(b), the Secretary.

17 (3) SECRETARY.—The term ‘‘Secretary’’ means

18 the Secretary of Health and Human Services.

19 (4) STATE.—The term ‘‘State’’ means each of

20 the several States of the United States, the District

21 of Columbia, the Commonwealth of Puerto Rico, the

22 United States Virgin Islands, Guam, America

23 Samoa, and the Commonwealth of the Northern

24 Mariana Islands.
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1 SEC. 112. FAMILY SECURITY BENEFITS PACKAGE.

2 (a) IN GENERAL.—The requirements of this section

3 are met, if the health insurance plan—

4 (1) provides coverage for all medically necessary

5 acute medical care described in subsection (b),

6 (2) does not exclude coverage for selected ill7 nesses or selected treatments if consistent with

8 medically accepted practices, and

9 (3) meets the patient cost sharing requirements

10 of subsection (c).

11 (b) ACUTE MEDICAL CARE.—Coverage for all medi12 cally necessary acute medical care is described in this sub13 section if such coverage includes—

14 (1) physician services,

15 (2) inpatient, outpatient, and emergency hos16 pital services and appropriate alternatives to hos17 pitalization, and

18 (3) inpatient prescription drugs.

19 Nothing in this subsection may be construed to require

20 the inclusion of abortion services.

21 (c) LIMITATION ON COST SHARING.—

22 (1) IN GENERAL.—A health insurance plan may

23 not require the payment of any deductible,

24 copayment, or coinsurance for an item or service for

25 which coverage is required under this section after

26 an individual or a family covered under the plan has
33

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1 incurred out-of-pocket expenses under the plan that

2 are equal to the out-of-pocket limit for a plan year.

3 (2) LIMIT ON OUT-OF-POCKET EXPENSES.—As

4 used in this paragraph:

5 (A) OUT-OF-POCKET EXPENSES DE6 FINED.—The term ‘‘out-of-pocket expenses’’

7 means, with respect to an individual or a family

8 in a plan year, amounts payable under the plan

9 as deductibles, coinsurance, and copayments

10 with respect to items and services provided

11 under the plan and furnished in the plan year

12 on behalf of the individual or the family covered

13 under the plan.

14 (B) OUT-OF-POCKET LIMIT DEFINED.—

15 (i) IN GENERAL.—The term ‘‘out-of16 pocket limit’’ means—

17 (I) the amount specified under

18 clause (ii), or

19 (II) 10 percent of the adjusted

20 gross income of the family involved,

21 whichever is greater.

22 (ii) MINIMUM AMOUNT.—The amount

23 specified in this clause for a plan year be24 ginning in—
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•S 1743 IS1S

1 (I) a calendar year prior to 1998,

2 is $5,000; or

3 (II) for a subsequent calendar

4 year, is the amount specified in this

5 clause for the previous calendar year

6 increased by the percentage increase

7 in the consumer price index for all

8 urban consumers (United States city

9 average, as published by the Bureau

10 of Labor Statistics) for the 12-month

11 period ending on September 30 of the

12 preceding calendar year.

13 If the amount computed under subclause

14 (II) is not a multiple of $10, it shall be

15 rounded to the next highest multiple of

16 $10.

17 SEC. 113. RATING PRACTICES.

18 (a) IN GENERAL.—The requirements of this section

19 are met, if, except as provided in subsection (b), the health

20 insurance plan provides for—

21 (1) a variation in premium rates only on the

22 basis of age, sex, and geography, and

23 (2) a charge of the same premium rates to new

24 applicants and existing policyholders with the same

25 age, sex, and geographic characteristics.
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1 (b) INCENTIVE DISCOUNTS.—A plan may discount

2 an individual’s premium rate as an incentive for partici3 pating in a program, approved by the applicable regulatory

4 authority to be offered in conjunction with the coverage,

5 which has as its objective, 1 or more of the following:

6 (1) To promote healthy behavior.

7 (2) To prevent or delay the onset of illness.

8 (3) To provide for screening or early detection

9 of illness.

10 SEC. 114. GUARANTEED ISSUE.

11 (a) IN GENERAL.—Except as provided in paragraph

12 (2), in the case of applications made on and after January

13 1, 1999, the following rules apply:

14 (1) IN GENERAL.—The requirements of this

15 section are met, if, except as provided in paragraph

16 (2), the health insurance plan—

17 (A) provides guaranteed issue at standard

18 rates to all applicants, and

19 (B) does not exclude from coverage, or

20 limit coverage for, any preexisting medical con21 dition of any applicant who, on the date the ap22 plication is made, has been continuously insured

23 for a period of at least 1 year prior to the date

24 of the application under 1 or more of the fol25 lowing health insurance plans or programs:
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•S 1743 IS1S

1 (i) Another federally qualified health

2 insurance plan.

3 (ii) An employer-sponsored group

4 health insurance plan in effect before the

5 date of the enactment of this Act.

6 (iii) An individual health insurance

7 plan in effect before such date.

8 (iv) A program described in—

9 (I) title XVIII or XIX of the

10 Social Security Act,

11 (II) chapter 55 of title 10,

12 United States Code,

13 (III) chapter 17 of title 38,

14 United States Code,

15 (IV) chapter 89 of title 5, United

16 States Code, or

17 (V) the Indian Health Care

18 Improvement Act.

19 (2) BREAK IN COVERAGE.—In the case of an

20 applicant who has not been continuously insured for

21 a period of 1 year prior to the date the application

22 is made, the health insurance plan may exclude from

23 coverage, or limit coverage for, any preexisting medi24 cal condition for a period no greater than the lesser

25 of—
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•S 1743 IS1S

1 (A) the number of months immediately

2 prior to the date of the application during

3 which the individual was not insured since the

4 illness or condition in question was first diag5 nosed, or

6 (B) 1 year.

7 (b) TRANSITION RULE.—In the case of applications

8 made in 1998, the requirements of this section are met,

9 if the health insurance plan—

10 (1) provides guaranteed issue at standard rates

11 to all applicants, and

12 (2) does not exclude from coverage, or limit

13 coverage for, any preexisting medical condition of

14 any applicant.

15 SEC. 115. GUARANTEED RENEWABILITY.

16 The requirements of this section are met, if the

17 health insurance plan provides the policyholder with a con18 tractual right to renew the coverage which stipulates that

19 the insurer cannot cancel or refuse to renew the coverage

20 except for cases of—

21 (1) nonpayment of premiums by the policy22 holder, or

23 (2) fraud or misrepresentation by the policy24 holder.
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•S 1743 IS1S

1 PART II—CERTIFICATION OF FEDERALLY

2 QUALIFIED HEALTH INSURANCE PLANS

3 SEC. 117. ESTABLISHMENT OF REGULATORY PROGRAM

4 FOR CERTIFICATION OF PLANS.

5 (a) IN GENERAL.—Each State shall establish no later

6 than January 1, 1998, a regulatory program which meets

7 the standards referred to in section 118.

8 (b) PERIODIC SECRETARIAL REVIEW OF STATE REG9 ULATORY PROGRAM.—The Secretary periodically shall re10 view each State regulatory program to determine if such

11 program continues to meet and enforce the standards re12 ferred to in section 118. If the Secretary initially deter13 mines that a State regulatory program no longer meets

14 and enforces such standards, the Secretary shall provide

15 the State an opportunity to adopt a plan of correction that

16 would bring such program into compliance with such

17 standards. If the Secretary makes a final determination

18 that the State regulatory program fails to meet and en19 force such standards after such an opportunity, the Sec20 retary shall decertify such program and assume respon21 sibility with respect to health insurance plans in the State.

22 SEC. 118. STANDARDS FOR REGULATORY PROGRAMS.

23 (a) IN GENERAL.—The Secretary, in consultation

24 with the National Association of Insurance Commissioners

25 (hereafter in this section referred to as ‘‘NAIC’’) shall de26 velop by not later than 1 year after the date of the enact-
39

•S 1743 IS1S

1 ment of this Act, in the form of model Acts and model

2 regulations, State regulatory program standards which in3 clude—

4 (1) procedures for certifying that the require5 ments of part I of this subtitle have been met by a

6 health insurance plan applying for certification as a

7 federally qualified health insurance plan,

8 (2) the requirements described in subsections

9 (b), (c), and (d),

10 (3) requirements with respect to solvency stand11 ards and guaranty funds for carriers of federally

12 qualified health insurance plans, and

13 (4) reporting requirements under which carriers

14 report to the Internal Revenue Service regarding the

15 acquisition and termination by individuals of cov16 erage under federally qualified health insurance

17 plans.

18 (b) PASSBACK OF CLAIMS AND PREMIUMS.—The re19 quirements of this subsection are met, if, in the case of

20 an applicant who has been continuously insured, as de21 scribed in section 114(b)(1)(B), and is at the time of the

22 application receiving treatment for a preexisting medical

23 condition—

24 (1) the federally qualified health insurance plan

25 is allowed to pass back to the applicant’s previous
40

•S 1743 IS1S

1 plan any claims relating to such condition, together

2 with a portion of the premium, and

3 (2) such previous plan is required to pay such

4 claims and premium incurred during the lesser of—

5 (A) the duration of the course of the treat6 ment or spell of illness, or

7 (B) 2 years from the date at which cov8 erage commenced under the federally qualified

9 health insurance plan.

10 (c) MARKETING PRACTICES.—The requirements of

11 this subsection are met, if the carrier offering the federally

12 qualified health insurance plan retains the right to select

13 agents with whom such plan contracts and to determine

14 the amount and form of compensation to such agents, ex15 cept that—

16 (1) if the carrier chooses to contract with an

17 agent, the carrier may not terminate or refuse to

18 renew the agency contract for any reason related to

19 the age, sex, health status, claims experience, occu20 pation, or geographic location of the insureds placed

21 by the agent with such plan, and

22 (2) the carrier may not, directly or indirectly,

23 enter into any contract, agreement, or arrangement

24 with an agent that provides for, or results in, any

25 consideration provided to such agent for the issu-
41

•S 1743 IS1S

1 ance or renewal of such a plan to vary on account

2 of the age, sex, health status, claims experience, oc3 cupation, or geographic location of the insureds

4 placed by the agent with such plan.

5 (d) RISK ADJUSTMENT OR REINSURANCE PRO6 GRAMS.—The requirements of this subsection are met, if

7 the carrier offering the federally qualified health insurance

8 plan participates in a State-administered risk adjustment

9 program (or, at the option of the State, a reinsurance pro10 gram) designed to compensate for the potential occurrence

11 of grossly disproportionate distributions of above-standard

12 or below-standard insured risks among federally qualified

13 health insurance plans.

14 (e) NONBINDING STANDARDS.—The Secretary, in

15 consultation with NAIC, shall also develop within the 1-

16 year period described in subsection (a), nonbinding stand17 ards for premium rating practices and guaranteed renew18 ability of coverage which, if the insurer so elects, is more

19 generous (additional benefits or lower cost sharing or

20 both) than the requirements under part I of this subtitle

21 for federally qualified health insurance plans.

22 Subtitle C—Employer Provisions

23 SEC. 121. GENERAL PROVISIONS RELATING TO EMPLOY24 ERS.

25 (a) PREMIUMS WITHHELD.—Each employer shall—
42

•S 1743 IS1S

1 (1) withhold from each employee’s wages the

2 amount of the employee’s health insurance premium

3 and remit, directly or indirectly, such premium to

4 the insurance plan of the employee’s choice accord5 ing to an agreed upon schedule, and

6 (2) within the first 30 days of any calendar

7 year or the date of the hire of an employee, notify

8 each employee of the employee’s right to claim an

9 advance refundable tax credit for such premium

10 under section 34A of the Internal Revenue Code of

11 1986.

12 (b) EFFECTIVE DATE.—The requirements under

13 subsection (a) shall apply with respect to calendar year

14 1998 and thereafter.

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

16 In the case of an employer-sponsored health insur17 ance plan in force on the date of the enactment of this

18 Act, and which is not a self-insured plan, the insurer from

19 whom the plan was purchased (or, in the event such in20 surer refuses, any new subsidiary, corporation, insurer,

21 union, cooperative, or association willing to become the

22 new sponsor of the plan) shall—

23 (1) notify, not later than October 1, 1997, all

24 of the primary insured beneficiaries of the employer25 sponsored plan of their rights to convert their insur-
43

•S 1743 IS1S

1 ance coverage to a federally qualified health insur2 ance plan (as defined in section 111) offered by the

3 insurer with benefits identical to, or actuarially

4 equivalent to, those of the employer-sponsored plan

5 and the rates of that coverage, and provide such

6 beneficiaries 60 additional days to decline or accept

7 the new coverage, and

8 (2) offer such coverage beginning January 1,

9 1998, at premium rates which vary only by age, sex,

10 and geography, except that the combined total of the

11 new rates charged separately to the various bene12 ficiaries may not exceed the total group rate paid by

13 the employer or employees or both under the em14 ployer-sponsored plan on the last day it is, or was,

15 in force.

16 SEC. 123. PROVISIONS RELATING TO EXISTING SELF-IN17 SURED PLANS.

18 (a) IN GENERAL.—In the case of an employer-spon19 sored health insurance plan in force on the date of the

20 enactment of this Act, and which is a self-insured plan,

21 the employer sponsoring the plan may, at anytime follow22 ing such date sell, transfer, or assign the plan to any exist23 ing or new, subsidiary, corporation, insurer, union, cooper24 ative or association, willing to become the new sponsor of

25 the plan, except that—
44

•S 1743 IS1S

1 (1) such sale, transfer, or assignment may not

2 take effect unless first approved by a two-thirds ma3 jority vote of all the primary-insured beneficiaries of

4 the plan, and

5 (2) the terms or conditions and benefits or cov6 erage of the plan, and the eligibility criteria for par7 ticipation in the plan, may not be altered before

8 such date.

9 (b) PROVISIONS GOVERNING PLAN.—As of the date

10 of the enactment of this Act, the sponsor of the plan de11 scribed in subsection (a) becomes subject to all laws gov12 erning the operation of a corporation selling health insur13 ance in the applicable State or States and to the provisions

14 of section 122.

15 SEC. 124. CONTINUATION OF EMPLOYER-PROVIDED

16 HEALTH COVERAGE REQUIRED UNTIL EF17 FECTIVE DATE OF NEW COVERAGE UNDER

18 THIS ACT.

19 (a) IN GENERAL.—Clause (i) of section

20 4980B(f)(2)(B) of the Internal Revenue Code of 1986 (re21 lating to period of coverage) is amended by inserting after

22 subclause (V) the following new subclause:

23 ‘‘(VI) QUALIFYING EVENT IN24 VOLVING END OF PLAN.—In the case
45

•S 1743 IS1S

1 of an event described in paragraph

2 (3)(G), December 31, 1997.’’.

3 (b) QUALIFYING EVENT INVOLVING END OF

4 PLAN.—Paragraph (3) of section 4980B(f) of the Internal

5 Revenue Code of 1986 (defining qualifying event) is

6 amended by inserting after subparagraph (F) the follow7 ing new subparagraph:

8 ‘‘(G) The termination by the employer of

9 the group health plan after the date of the en10 actment of the Consumer Choice Health Secu11 rity Act of 1994.’’.

12 (c) CONFORMING AMENDMENT.—Clause (ii) of sec13 tion 4980B(f)(2)(B) of the Internal Revenue Code of 1986

14 is amended by striking ‘‘The date’’ and inserting ‘‘Except

15 in the case of a qualifying event described in paragraph

16 (3)(G), the date’’.

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

18 this section shall apply to qualifying events occurring after

19 the date of the enactment of this Act.

20 SEC. 125. REQUIREMENTS WITH RESPECT TO CASHING OUT

21 EMPLOYER-SPONSORED PLANS.

22 (a) NON-FEDERAL EMPLOYERS.—

23 (1) IN GENERAL.—Each employer contributing

24 in whole or in part to an employer-sponsored health
46

•S 1743 IS1S

1 insurance plan on December 1, 1997, shall, within

2 30 days after such date—

3 (A) notify each employee participating in

4 the plan of the amount spent by the employer

5 on the employee’s health insurance, as deter6 mined under paragraph (2),

7 (B) add such amount to the cash wages of

8 the employee commencing with pay periods be9 ginning on and after January 1, 1998, and

10 (C) hold each employee harmless for the

11 employer’s share of any payroll taxes due under

12 chapter 31 of the Internal Revenue Code of

13 1986 on such amount.

14 (2) AMOUNT OF INCLUSION.—The amount de15 scribed in paragraph (1)(A) shall equal the actuarial

16 value of the employer’s contribution for group health

17 insurance coverage apportioned to the plan’s bene18 ficiaries according to the new premiums for individ19 ual and family coverage determined by the insurer.

20 (3) PRIOR TERMINATION.—Any beneficiary of

21 an employer-sponsored health insurance plan who

22 voluntarily terminates coverage under such a plan

23 before December 1, 1997, forfeits the right to re24 ceive the value of the beneficiary’s coverage in cash.
47

•S 1743 IS1S

1 (b) COMMISSION ON CASHING OUT FEHBP BENE2 FITS.—

3 (1) ESTABLISHMENT.—

4 (A) IN GENERAL.—There is established an

5 independent board to be known as the ‘‘Bene6 fits Cash Out Commission’’ (in this subtitle, re7 ferred to as the ‘‘Commission’’).

8 (B) DUTIES.—The Commission shall study

9 and propose a procedure under which individ10 uals may cash out health benefits under chapter

11 89 of title 5, United States Code, and pay

12 scales and retirement benefits would be ad13 justed accordingly. The Commission shall report

14 to Congress regarding such study and proposal

15 not later than 1 year after the date of the en16 actment of this Act.

17 (C) MEMBERSHIP.—

18 (i) IN GENERAL.—The Commission

19 shall be composed of 13 members ap20 pointed by the President by and with the

21 advice and consent of the Senate.

22 (ii) CONSULTATION.—In selecting in23 dividuals for nominations for appointments

24 for the Commission, the President should

25 consult with—
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•S 1743 IS1S

1 (I) the Speaker of the House of

2 Representatives concerning the ap3 pointment of 3 members;

4 (II) the Majority Leader of the

5 Senate concerning the appointment of

6 3 members;

7 (III) the Minority Leader of the

8 House of Representatives concerning

9 the appointment of 3 members; and

10 (IV) the Minority Leader of the

11 Senate concerning the appointment of

12 3 members.

13 (iii) CHAIR.—The President shall des14 ignate 1 individual described in clause (ii)

15 who shall serve as Chair of the Commis16 sion.

17 (iv) COMPOSITION OF COMMISSION.—

18 The membership of the Commission shall

19 include individuals with national recogni20 tion for expertise in the valuation of health

21 insurance benefits and of Federal civilian

22 pay and retirement benefits.

23 (D) ADMINISTRATIVE PROVISIONS.—

24 (i) MEETINGS.—Each meeting of the

25 Commission shall be open to the public.
49

•S 1743 IS1S

1 (ii) PAY AND TRAVEL EXPENSES.—

2 (I) IN GENERAL.—Each member,

3 other than the Chair, shall be paid at

4 a rate equal to the daily equivalent of

5 the minimum annual rate of basic pay

6 payable for level IV of the Executive

7 Schedule under section 5315 of title

8 5, United States Code, for each day

9 (including travel time) during which

10 the member is engaged in the actual

11 performance of duties vested in the

12 Commission.

13 (II) CHAIR.—The Chair shall be

14 paid for each day referred to in

15 subclause (I) at a rate equal to the

16 daily equivalent of the minimum an17 nual rate of basic pay payable for

18 level III of the Executive Schedule

19 under section 5314 of title 5, United

20 States Code.

21 (III) TRAVEL EXPENSES.—Mem22 bers shall receive travel expenses, in23 cluding per diem in lieu of subsist24 ence, in accordance with sections
50

•S 1743 IS1S

1 5702 and 5703 of title 5, United

2 States Code.

3 (iii) STAFF.—

4 (I) IN GENERAL.—Subject to

5 subclauses (II) and (III), the Chair,

6 with the approval of the Commission,

7 may appoint and fix the pay of addi8 tional personnel.

9 (II) PAY.—The Chair may make

10 such appointments without regard to

11 the provisions of title 5, United States

12 Code, governing appointments in the

13 competitive service, and any personnel

14 so appointed may be paid without re15 gard to the provisions of chapter 51

16 and subchapter III of chapter 53 of

17 such title, relating to classification

18 and General Schedule pay rates, ex19 cept that an individual so appointed

20 may not receive pay in excess of 120

21 percent of the annual rate of basic

22 pay payable for GS–15 of the General

23 Schedule.

24 (III) DETAILED PERSONNEL.—

25 Upon request of the Chair, the head
51

•S 1743 IS1S

1 of any Federal department or agency

2 may detail any of the personnel of

3 that department or agency to the

4 Commission to assist the Commission

5 in carrying out its duties under this

6 Act.

7 (iv) OTHER AUTHORITY.—

8 (I) CONTRACT SERVICES.—The

9 Commission may procure by contract,

10 to the extent funds are available, the

11 temporary or intermittent services of

12 experts or consultants pursuant to

13 section 3109 of title 5, United States

14 Code.

15 (II) LEASES, ETC.—The Com16 mission may lease space and acquire

17 personal property to the extent funds

18 are available.

19 (2) CONSIDERATION.—

20 (A) IN GENERAL.—The proposal described

21 in paragraph (1)(B) shall be considered by the

22 Congress under the procedures for consider23 ation of an ‘‘approval resolution’’ as described

24 in subparagraph (D).
52

•S 1743 IS1S

1 (B) EFFECTIVE DATE OF IMPLEMENTA2 TION.—The provisions of the proposal shall be3 come effective on January 1, 1997.

4 (C) PERIOD FOR RESUBMISSION OF PRO5 POSAL IN CASE OF NONAPPROVAL.—If the pro6 posal of the Commission described in subpara7 graph (A) is not approved by Congress, the

8 Commission shall by not later than January 1,

9 1996, submit a new proposal to Congress.

10 (D) RULES GOVERNING CONGRESSIONAL

11 CONSIDERATION.—

12 (i) RULES OF HOUSE OF REPRESENT13 ATIVES AND SENATE.—This subparagraph

14 is enacted by the Congress—

15 (I) as an exercise of the rule16 making power of the House of Rep17 resentatives and the Senate, respec18 tively, and as such is deemed a part

19 of the rules of each House, respec20 tively, but applicable only with respect

21 to the procedure to be followed in that

22 House in the case of approval resolu23 tions described in clause (ii), and su24 persedes other rules only to the extent
53

•S 1743 IS1S

1 that such rules are inconsistent there2 with; and

3 (II) with full recognition of the

4 constitutional right of either House to

5 change the rules (so far as relating to

6 the procedure of that House) at any

7 time, in the same manner and to the

8 same extent as in the case of any

9 other rule of that House.

10 (ii) TERMS OF THE RESOLUTION.—

11 For purposes of subparagraph (A), the

12 term ‘‘approval resolution’’ means only a

13 joint resolution of the 2 Houses of the

14 Congress, providing in—

15 (I) the matter after the resolving

16 clause of which is as follows: ‘‘That

17 the Congress approves the rec18 ommendations of the Benefits Cash

19 Out Commission as submitted by the

20 Commission on

21 llllllllllllll’’,

22 the blank space being filled in with

23 the appropriate date; and

24 (II) the title of which is as fol25 lows: ‘‘Joint Resolution approving the
54

•S 1743 IS1S

1 recommendation of the Benefits Cash

2 Out Commission’’.

3 (iii) INTRODUCTION AND REFER4 RAL.—On the day on which the rec5 ommendation of the Commission is trans6 mitted to the House of Representatives

7 and the Senate, an approval resolution

8 with respect to such recommendation shall

9 be introduced (by request) in the House of

10 Representatives by the Majority Leader of

11 the House, for himself or herself and the

12 Minority Leader of the House, or by Mem13 bers of the House designated by the Ma14 jority Leader and Minority Leader of the

15 House; and shall be introduced (by re16 quest) in the Senate by the Majority Lead17 er of the Senate, for himself or herself and

18 the Minority Leader of the Senate, or by

19 Members of the Senate designated by the

20 Majority Leader and Minority Leader of

21 the Senate. If either House is not in ses22 sion on the day on which such rec23 ommendation is transmitted, the approval

24 resolution with respect to such rec25 ommendation shall be introduced in the
55

•S 1743 IS1S

1 House, as provided in the preceding sen2 tence, on the first day thereafter on which

3 the House is in session. The approval reso4 lution introduced in the House of Rep5 resentatives and the Senate shall be re6 ferred to the appropriate committees of

7 each House.

8 (iv) AMENDMENTS PROHIBITED.—No

9 amendment to an approval resolution shall

10 be in order in either the House of Rep11 resentatives or the Senate; and no motion

12 to suspend the application of this clause

13 shall be in order in either House, nor shall

14 it be in order in either House for the Pre15 siding Officer to entertain a request to sus16 pend the application of this clause by

17 unanimous consent.

18 (v) PERIOD FOR COMMITTEE AND

19 FLOOR CONSIDERATION.—

20 (I) IN GENERAL.—Except as pro21 vided in subclause (II), if the commit22 tee or committees of either House to

23 which an approval resolution has been

24 referred have not reported it at the

25 close of the 30th day after its intro-
56

•S 1743 IS1S

1 duction, such committee or commit2 tees shall be automatically discharged

3 from further consideration of the ap4 proval resolution and it shall be

5 placed on the appropriation calendar.

6 A vote on final passage of the ap7 proval resolution shall be taken in

8 each House on or before the close of

9 the 30th day after the approval reso10 lution is reported by the committees

11 or committee of that House to which

12 it was referred, or after such commit13 tee or committees have been dis14 charged from further consideration of

15 the approval resolution. If prior to the

16 passage by 1 House of an approval

17 resolution of that House, that House

18 receives the same approval resolution

19 from the other House then the proce20 dure in that House shall be the same

21 as if no approval resolution had been

22 received from the other House, but

23 the vote on final passage shall be on

24 the approval resolution of the other

25 House.
57

•S 1743 IS1S

1 (II) COMPUTATION OF DAYS.—

2 For purposes of subclause (I), in com3 puting a number of days in either

4 House, there shall be excluded any

5 day on which the House is not in

6 session.

7 (vi) FLOOR CONSIDERATION IN THE

8 HOUSE OF REPRESENTATIVES.—

9 (I) MOTION TO PROCEED.—A

10 motion in the House of Representa11 tives to proceed to the consideration

12 of an approval resolution shall be

13 highly privileged and not debatable.

14 An amendment to the motion shall

15 not be in order, nor shall it be in

16 order to move to reconsider the vote

17 by which the motion is agreed to or

18 disagreed to.

19 (II) DEBATE.—Debate in the

20 House of Representatives on an ap21 proval resolution shall be limited to

22 not more than 20 hours, which shall

23 be divided equally between those fa24 voring and those opposing the bill or

25 resolution. A motion further to limit
58

•S 1743 IS1S

1 debate shall not be debatable. It shall

2 not be in order to move to recommit

3 an approval resolution or to move to

4 reconsider the vote by which an ap5 proval resolution is agreed to or dis6 agreed to.

7 (III) MOTION TO POSTPONE.—

8 Motions to postpone, made in the

9 House of Representatives with respect

10 to the consideration of an approval

11 resolution, and motions to proceed to

12 the consideration of other business,

13 shall be decided without debate.

14 (IV) APPEALS.—All appeals from

15 the decisions of the Chair relating to

16 the application of the Rules of the

17 House of Representatives to the pro18 cedure relating to an approval resolu19 tion shall be decided without debate.

20 (V) GENERAL RULES APPLY.—

21 Except to the extent specifically pro22 vided in the preceding provisions of

23 this clause, consideration of an ap24 proval resolution shall be governed by

25 the Rules of the House of Representa-
59

•S 1743 IS1S

1 tives applicable to other bills and reso2 lutions in similar circumstances.

3 (vii) FLOOR CONSIDERATION IN THE

4 SENATE.—

5 (I) MOTION TO PROCEED.—A

6 motion in the Senate to proceed to the

7 consideration of an approval resolu8 tion shall be privileged and not debat9 able. An amendment to the motion

10 shall not be in order, nor shall it be

11 in order to move to reconsider the

12 vote by which the motion is agreed to

13 or disagreed to.

14 (II) GENERAL DEBATE.—Debate

15 in the Senate on an approval resolu16 tion, and all debatable motions and

17 appeals in connection therewith, shall

18 be limited to not more than 20 hours.

19 The time shall be equally divided be20 tween, and controlled by, the Majority

21 Leader and the Minority Leader or

22 their designees.

23 (III) DEBATE OF MOTIONS AND

24 APPEALS.—Debate in the Senate on

25 any debatable motion or appeal in
60

•S 1743 IS1S

1 connection with an approval resolution

2 shall be limited to not more than 1

3 hour, to be equally divided between,

4 and controlled by, the mover and the

5 manager of the approval resolution,

6 except that in the event the manager

7 of the approval resolution is in favor

8 of any such motion or appeal, the

9 time in opposition thereto, shall be

10 controlled by the Minority Leader or

11 his designee. Such leaders, or either of

12 them, may, from time under their

13 control on the passage of an approval

14 resolution, allot additional time to any

15 Senator during the consideration of

16 any debatable motion or appeal.

17 (IV) OTHER MOTIONS.—A mo18 tion in the Senate to further limit de19 bate is not debatable. A motion to re20 commit an approval resolution is not

21 in order.

22 SEC. 126. ENFORCEMENT.

23 (a) IN GENERAL.—Chapter 47 of the Internal Reve24 nue Code of 1986 (relating to excise taxes on qualified
61

•S 1743 IS1S

1 pension, etc. plans) is amended by inserting after section

2 5000 the following new sections:

3 ‘‘SEC. 5000A. FAILURE OF EMPLOYERS WITH RESPECT TO

4 HEALTH INSURANCE.

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

6 tax on the failure of any person to comply with the re7 quirements of sections 121 and 125(a) of the Consumer

8 Choice Health Security Act of 1994 with respect to any

9 employee of the person.

10 ‘‘(b) AMOUNT OF TAX.—

11 ‘‘(1) IN GENERAL.—The amount of the tax im12 posed by subsection (a) on any failure with respect

13 to an employee shall be $50 for each day in the non14 compliance period with respect to such failure.

15 ‘‘(2) NONCOMPLIANCE PERIOD.—For purposes

16 of this section, the term ‘noncompliance period’

17 means, with respect to any failure, the period—

18 ‘‘(A) beginning on the date such failure

19 first occurs, and

20 ‘‘(B) ending on the date such failure is

21 corrected.

22 ‘‘(3) CORRECTION.—A failure of a person to

23 comply with the requirements of section 121 or

24 125(a) of the Consumer Choice Health Security Act
62

•S 1743 IS1S

1 of 1994 with respect to any employee of the person

2 shall be treated as corrected if—

3 ‘‘(A) such failure is retroactively undone to

4 the extent possible, and

5 ‘‘(B) the employee is placed in a financial

6 position which is as good as such employee

7 would have been in had such failure not

8 occurred.

9 ‘‘(c) LIMITATIONS ON AMOUNT OF TAX.—

10 ‘‘(1) TAX NOT TO APPLY WHERE FAILURE NOT

11 DISCOVERED EXERCISING REASONABLE DILI12 GENCE.—No tax shall be imposed by subsection (a)

13 on any failure during any period for which it is es14 tablished to the satisfaction of the Secretary that

15 none of the persons referred to in subsection (d)

16 knew, or exercising reasonable diligence would have

17 known, that such failure existed.

18 ‘‘(2) TAX NOT TO APPLY TO FAILURES COR19 RECTED WITHIN 30 DAYS.—No tax shall be imposed

20 by subsection (a) on any failure if—

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

22 cause and not to willful neglect, and

23 ‘‘(B) such failure is corrected during the

24 30-day period beginning on the first date any of

25 the persons referred to in subsection (d) knew,
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•S 1743 IS1S

1 or exercising reasonable diligence would have

2 known, that such failure existed.

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

4 failure which is due to reasonable cause and not to

5 willful neglect, the Secretary may waive part or all

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

7 that the payment of such tax would be excessive rel8 ative to the failure involved.

9 ‘‘(d) LIABILITY FOR TAX.—

10 ‘‘(1) IN GENERAL.—Except as otherwise pro11 vided in this subsection, the following shall be liable

12 for the tax imposed by subsection (a) on a failure:

13 ‘‘(A) In the case of a health insurance plan

14 other than a multiemployer plan, the employer.

15 ‘‘(B) In the case of a multiemployer plan,

16 the plan.

17 ‘‘(C) Each person who is responsible (other

18 than in a capacity as an employee) for admin19 istering or providing benefits under the health

20 insurance plan and whose act or failure to act

21 caused (in whole or in part) the failure.

22 ‘‘(2) SPECIAL RULES FOR PERSONS DESCRIBED

23 IN PARAGRAPH (1)(C).—A person described in sub24 paragraph (C) (and not in subparagraphs (A) and

25 (B)) of paragraph (1) shall be liable for the tax im-
64

•S 1743 IS1S

1 posed by subsection (a) on any failure only if such

2 person assumed (under a legally enforceable written

3 agreement) responsibility for the performance of the

4 act to which the failure relates.

5 ‘‘SEC. 5000B. FAILURE OF CARRIERS WITH RESPECT TO

6 HEALTH INSURANCE.

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

8 tax on the failure of any carrier offering any health insur9 ance plan to comply with the requirements of sections 122

10 and 123 of the Consumer Choice Health Security Act of

11 1994.

12 ‘‘(b) AMOUNT OF TAX.—

13 ‘‘(1) IN GENERAL.—The amount of tax imposed

14 by subsection (a) by reason of 1 or more failures

15 during a taxable year shall be equal to 50 percent

16 of the gross premiums received during such taxable

17 year with respect to all health insurance plans issued

18 by the carrier on whom such tax is imposed.

19 ‘‘(2) GROSS PREMIUMS.—For purposes of para20 graph (1), gross premiums shall include any consid21 eration received with respect to any health insurance

22 contract.

23 ‘‘(3) CONTROLLED GROUPS.—For purposes of

24 paragraph (1)—
65

•S 1743 IS1S

1 ‘‘(A) CONTROLLED GROUP OF CORPORA2 TIONS.—All corporations which are members of

3 the same controlled group of corporations shall

4 be treated as 1 carrier. For purposes of the pre5 ceding sentence, the term ‘controlled group of

6 corporations’ has the meaning given to such

7 term by section 1563(a), except that—

8 ‘‘(i) ‘more than 50 percent’ shall be

9 substituted for ‘at least 80 percent’ each

10 place it appears in section 1563(a)(1), and

11 ‘‘(ii) the determination shall be made

12 without regard to subsections (a)(4) and

13 (e)(3)(C) of section 1563.

14 ‘‘(B) PARTNERSHIPS, PROPRIETORSHIPS,

15 ETC., WHICH ARE UNDER COMMON CONTROL.—

16 Under regulations prescribed by the Secretary,

17 all trades or business (whether or not incor18 porated) which are under common control shall

19 be treated as 1 carrier. The regulations pre20 scribed under this subparagraph shall be based

21 on principles similar to the principles which

22 apply in the case of subparagraph (A).

23 ‘‘(c) LIMITATION ON TAX.—

24 ‘‘(1) TAX NOT TO APPLY WHERE FAILURE NOT

25 DISCOVERED EXERCISING REASONABLE DILI-
66

•S 1743 IS1S

1 GENCE.—No tax shall be imposed by subsection (a)

2 with respect to any failure for which it is established

3 to the satisfaction of the Secretary that the carrier

4 on whom the tax is imposed did not know, and exer5 cising reasonable diligence would not have known,

6 that such failure existed.

7 ‘‘(2) TAX NOT TO APPLY WHERE FAILURES

8 CORRECTED WITHIN 30 DAYS.—No tax shall be im9 posed by subsection (a) with respect to any failure

10 if—

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

12 cause and not to willful neglect, and

13 ‘‘(B) such failure is corrected during the

14 30-day period beginning on the 1st date any of

15 the carriers on whom the tax is imposed knew,

16 or exercising reasonable diligence would have

17 known, that such failure existed.

18 ‘‘(3) WAIVER BY SECRETARY.—In the case of a

19 failure which is due to reasonable cause and not to

20 willful neglect, the Secretary may waive part or all

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

22 that the payment of such tax would be excessive rel23 ative to the failure involved.’’.
67

•S 1743 IS1S

1 (b) CLERICAL AMENDMENTS.—The table of sections

2 for such chapter 47 is amended by adding at the end

3 thereof the following new items:

‘‘Sec. 5000A. Failure of employers with respect to health insurance.

‘‘Sec. 5000B. Failure of carriers with respect to health insurance.’’.

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

5 this section shall take effect on January 1, 1998.

6 Subtitle D—Federal Preemption

7 SEC. 131. FEDERAL PREEMPTION OF CERTAIN STATE LAWS.

8 All State laws in existence on January 1, 1998, in

9 the following areas are preempted:

10 (1) MANDATED INSURANCE BENEFIT LAWS.—

11 Laws requiring health insurance policies to cover

12 specific diseases, services, or providers.

13 (2) ANTI-MANAGED CARE LAWS.—Laws re14 stricting the ability of managed care plans to selec15 tively contract with providers of their choice.

16 (3) MANDATED COST-SHARING LAWS.—Laws

17 restricting the extent to which insurers may require

18 enrollee cost sharing as part of their plans, or re19 stricting the extent to which managed care plans

20 may impose different levels of cost sharing on en21 rollee claims for treatment by providers not partici22 pating in the plan.
68

•S 1743 IS1S

1 Subtitle E—Report

2 SEC. 141. REPORT ON HEALTH INSURANCE COVERAGE.

3 The Secretary shall submit to the Congress, not later

4 than 5 years after the date of the enactment of this Act,

5 a report on the following:

6 (1) The number and demographic profile of

7 Americans who have purchased health insurance

8 pursuant to the provisions of this Act, including in9 formation concerning the type of coverage purchased

10 and its cost.

11 (2) The number and demographic profile of

12 Americans who have chosen to forgo health insur13 ance coverage.

14 (3) The estimated health care costs incurred by

15 the insured and the extent to which such costs have

16 been—

17 (A) paid for directly by the uninsured, or

18 (B) shifted to individuals with health in19 surance coverage and to Federal, State, and

20 local governmental entities.
69

•S 1743 IS1S

1 TITLE II—MEDICARE AND

2 MEDICAID REFORMS

3 Subtitle A—Medicare

4 SEC. 201. STUDY OF MEDICARE PRIVATE HEALTH INSUR5 ANCE PROGRAM.

6 (a) STUDY.—The Secretary shall conduct a study of

7 the feasibility of permitting future medicare beneficiaries

8 to elect, upon attaining medicare eligibility, to retain pri9 vate health insurance coverage and receive, in lieu of the

10 medicare benefits such beneficiaries would otherwise be

11 entitled to, certificates for use in purchasing private health

12 insurance coverage. The study shall recommend—

13 (1) certificate amounts which—

14 (A) provide the maximum assistance pos15 sible to eligible individuals,

16 (B) are adjusted for different classes of

17 beneficiaries on the basis of age, sex, and geog18 raphy to reflect actuarial differences in the cost

19 of insurance, and

20 (C) will not further jeopardize the future

21 solvency of the medicare program, as projected

22 by the trustees of the medicare trust funds as

23 of the date of the report of the study,

24 (2) a mechanism for annually adjusting such

25 amounts, and
70

•S 1743 IS1S

1 (3) legislative, regulatory, and administrative

2 reforms necessary or desirable for establishing such

3 a program.

4 (b) REPORT.—The Secretary shall submit a report

5 regarding the study described in subsection (a) to the Con6 gress no later than January 1, 1997.

7 SEC. 202. ELIMINATION OF MEDICARE HOSPITAL DIS8 PROPORTIONATE SHARE ADJUSTMENT PAY9 MENTS.

10 Section 1886(d)(5)(F)(i) of the Social Security Act

11 (42 U.S.C. 1395ww(d)(5)(F)(i)) is amended by inserting

12 ‘‘and before September 30, 1994,’’ after ‘‘1986,’’.

13 SEC. 203. REDUCTION IN ADJUSTMENT FOR INDIRECT MED14 ICAL EDUCATION.

15 Section 1886(d)(5)(B)(ii) of the Social Security Act

16 (42 U.S.C. 1395ww(d)(5)(B)(ii)) is amended to read as

17 follows:

18 ‘‘(ii) For purposes of clause (i)(II), the indirect

19 teaching adjustment factor is equal to c * (((1+r)

20 to the nth power) - 1), where ‘r’ is the ratio of the

21 hospital’s full-time equivalent interns and residents

22 to beds and ‘n’ equals .405. For discharges occur23 ring on or after—

24 ‘‘(I) May 1, 1986, and before October 1,

25 1994, ‘c’ is equal to 1.89,
71

•S 1743 IS1S

1 ‘‘(II) October 1, 1994, and before October

2 1, 1995, ‘c’ is equal to 1.395, and

3 ‘‘(III) October 1, 1995, ‘c’ is equal to

4 0.74.’’.

5 SEC. 204. IMPOSITION OF COPAYMENT ON LABORATORY

6 SERVICES.

7 (a) IN GENERAL.—Paragraphs (1)(D) and (2)(D) of

8 section 1833(a) of the Social Security Act (42 U.S.C.

9 1395l(a)) are each amended—

10 (1) by striking ‘‘(or 100 percent’’ and all that

11 follows through ‘‘the first opinion))’’; and

12 (2) by striking ‘‘100 percent of such negotiated

13 rate’’ and inserting ‘‘80 percent of such negotiated

14 rate’’.

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

16 subsection (a) shall apply to tests furnished on or after

17 October 1, 1994.

18 SEC. 205. IMPOSITION OF COPAYMENT FOR CERTAIN HOME

19 HEALTH VISITS.

20 (a) IN GENERAL.—

21 (1) PART A.—Section 1813(a) of the Social Se22 curity Act (42 U.S.C. 1395e(a)) is amended by add23 ing at the end the following new paragraph:

24 ‘‘(5) The amount payable for home health services

25 furnished to an individual under this part shall be reduced
72

•S 1743 IS1S

1 by a copayment amount equal to 20 percent of the average

2 of all per visit costs for home health services furnished

3 under this title determined under section 1861(v)(1)(L)

4 (as determined by the Secretary on a prospective basis for

5 services furnished during a calendar year), unless such

6 services were furnished to the individual during the 30-

7 day period that begins on the date the individual is dis8 charged as an inpatient from a hospital.’’.

9 (2) PART B.—Section 1833(a)(2) of such Act

10 (42 U.S.C. 1395l(a)(2)) is amended—

11 (A) in subparagraph (A), by striking ‘‘to

12 home health services,’’ and by striking the

13 comma after ‘‘opinion)’’;

14 (B) in subparagraph (D), by striking

15 ‘‘and’’ at the end;

16 (C) in subparagraph (E), by striking the

17 semicolon at the end and inserting ‘‘; and’’; and

18 (D) by adding at the end the following new

19 subparagraph:

20 ‘‘(F) with respect to home health serv21 ices—

22 ‘‘(i) the lesser of —

23 ‘‘(I) the reasonable cost of such

24 services, as determined under section

25 1861(v), or
73

•S 1743 IS1S

1 ‘‘(II) the customary charges with

2 respect to such services,

3 less the amount a provider may charge as

4 described in clause (ii) of section

5 1866(a)(2)(A),

6 ‘‘(ii) if such services are furnished by

7 a public provider of services, or by another

8 provider which demonstrates to the satis9 faction of the Secretary that a significant

10 portion of its patients are low-income (and

11 requests that payment be made under this

12 clause), free of charge or at nominal

13 charges to the public, the amount deter14 mined in accordance with section

15 1814(b)(2), or

16 ‘‘(iii) if (and for so long as) the condi17 tions described in section 1814(b)(3) are

18 met, the amounts determined under the re19 imbursement system described in such sec20 tion,

21 less a copayment amount equal to 20 percent of

22 the average of all per visit costs for home

23 health services furnished under this title deter24 mined under section 1861(v)(1)(L) (as deter25 mined by the Secretary on a prospective basis
74

•S 1743 IS1S

1 for services furnished during a calendar year),

2 unless such services were furnished to the indi3 vidual during the 30-day period that begins on

4 the date the individual is discharged as an inpa5 tient from a hospital;’’.

6 (3) PROVIDER CHARGES.—Section

7 1866(a)(2)(A)(i) of such Act (42 U.S.C.

8 1395cc(a)(2)(A)(i)) is amended—

9 (A) by striking ‘‘deduction or coinsurance’’

10 and inserting ‘‘deduction, coinsurance, or

11 copayment’’; and

12 (B) by striking ‘‘or (a)(4)’’ and inserting

13 ‘‘(a)(4), or (a)(5)’’.

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

15 subsection (a) shall apply to home health services fur16 nished on or after October 1, 1994.

17 SEC. 206. IMPOSITION OF COPAYMENT FOR SKILLED NURS18 ING FACILITY SERVICES.

19 (a) IN GENERAL.—Paragraph (3) of section 1813(b)

20 of the Social Security Act (42 U.S.C. 1395e(b)) is amend21 ed to read as follows:

22 ‘‘(3) The amount payable for post-hospital extended

23 care services furnished an individual during any spell of

24 illness shall be reduced by a copayment amount equal to

25 20 percent of the average of all per day costs for such
75

•S 1743 IS1S

1 services furnished under this title (as determined by the

2 Secretary on a prospective basis for services furnished

3 during a calendar year).’’.

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

5 subsection (a) shall apply to post-hospital extended care

6 services furnished on or after October 1, 1994.

7 SEC. 207. SHIFT PAYMENT UPDATES TO JANUARY FOR ALL

8 PAYMENT RATES UNDER HOSPITAL INSUR9 ANCE PROGRAM.

10 (a) PPS HOSPITALS.—

11 (1) IN GENERAL.—Section 1886(b)(3)(B)(i) of

12 the Social Security Act (42 U.S.C.

13 1395ww(b)(3)(B)(i)) is amended—

14 (A) in the matter preceding subclause (I),

15 by striking ‘‘fiscal year’’ and inserting ‘‘particu16 lar time period’’,

17 (B) in subclause (IX), by striking ‘‘fiscal

18 year 1994’’, and inserting ‘‘the 15-month pe19 riod beginning on October 1, 1993’’,

20 (C) in subclauses (X), (XI), and (XII), by

21 striking ‘‘fiscal year’’, and

22 (D) in subclause (XIII), by striking ‘‘fiscal

23 year 1998 and each subsequent fiscal year’’ and

24 inserting ‘‘1998 and each subsequent calendar

25 year’’.
76

•S 1743 IS1S

1 (2) OTHER HOSPITALS.—

2 (A) IN GENERAL.—Section

3 1886(b)(3)(B)(ii) of such Act (42 U.S.C.

4 1395ww(b)(3)(B)(ii)) is amended—

5 (A) in subclause (V)—

6 (i) by striking ‘‘fiscal years 1994

7 through 1997’’ and inserting ‘‘the 15-

8 month period beginning on October 1,

9 1993,’’, and

10 (ii) by striking ‘‘and’’ at the end, and

11 (B) by striking subclause (VI) and insert

12 the following:

13 ‘‘(VI) 1995 through 1997, is the market basket

14 percentage increase minus the applicable reduction

15 (as defined in clause (vi)(II)), or in the case of a

16 hospital for a calendar year for which the hospital’s

17 update adjustment percentage (as defined in clause

18 (vi)(I)) is at least 10 percent, the market basket per19 centage increase, and

20 ‘‘(VII) subsequent calendar years is the market

21 basket percentage increase.’’.

22 (B) CONFORMING AMENDMENT.—Section

23 1886(b)(3)(B) of such Act (42 U.S.C.

24 1395ww(b)(3)(B)) is amended by adding at the

25 end the following new clause:
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1 ‘‘(vi) For purposes of clause (ii)(VI)—

2 ‘‘(I) a hospital’s ‘update adjustment percentage’

3 for a calendar year is the percentage by which the

4 hospital’s allowable operating cost of inpatient hos5 pital services recognized under this title for the cost

6 reporting period beginning in fiscal year 1990 ex7 ceeds the hospital’s target amount (as determined

8 under subparagraph (A)) for such cost reporting pe9 riod, increased for each calendar year (beginning

10 with 1995) by the sum of any of the hospital’s appli11 cable reductions under subclause (VI) for previous

12 years; and

13 ‘‘(II) the ‘applicable reduction’ with respect to

14 a hospital for a calendar year is the lesser of 1 per15 centage point or the percentage point difference be16 tween 10 percent and the hospital’s update adjust17 ment percentage for the calendar year.’’.

18 (3) SOLE COMMUNITY AND MEDICARE-DEPEND19 ENT, SMALL RURAL HOSPITALS.—

20 (A) IN GENERAL.—Section

21 1886(b)(3)(B)(iv) of such Act (42 U.S.C.

22 1395ww(b)(3)(B)(iv)) is amended—

23 (i) in subclause (II), by striking ‘‘fis24 cal year 1994’’ and inserting ‘‘the 15-
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1 month period beginning on October 1,

2 1993’’,

3 (ii) in subclause (III), by striking ‘‘fis4 cal year’’, and

5 (iii) in subclause (IV), by striking

6 ‘‘fiscal year 1996 and each subsequent fis7 cal year’’ and inserting ‘‘1996 and each

8 subsequent calendar year’’.

9 (B) TARGET AMOUNT ADJUSTMENT.—Sec10 tion 1886(b)(3)(C) of such Act (42 U.S.C.

11 1395ww(b)(3)(C)) is amended—

12 (i) in clause (iii), by inserting ‘‘or por13 tion of a cost reporting period occurring

14 before December 31, 1994,’’ before ‘‘the

15 target amount’’, and

16 (ii) in clause (iv), by striking ‘‘fiscal

17 year 1995 and each subsequent fiscal

18 year’’ and inserting ‘‘1995 and each subse19 quent year’’.

20 (C) EXTENSION OF REGIONAL FLOOR.—

21 Section 1886(d)(1)(A)(iii)(II) of such Act (42

22 U.S.C. 1395ww(d)(1)(A)(iii)(II)) is amended—

23 (i) by striking ‘‘for discharges occur24 ring during a fiscal year ending on or be25 fore September 30, 1996’’ and inserting
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1 ‘‘for discharges occurring during the 15-

2 month period beginning on October 1,

3 1993, and during any calendar year ending

4 on or before December 31, 1996’’, and

5 (ii) by striking ‘‘such fiscal year’’ and

6 inserting ‘‘such 15-month period or such

7 calendar year, as the case may be’’.

8 (4) CONFORMING AMENDMENTS.—

9 (A) Section 1886(b)(3)(B)(iii) of such Act

10 (42 U.S.C. 1395ww(b)(3)(B)(iii)) is amended—

11 (i) by inserting ‘‘beginning in’’ after

12 ‘‘cost reporting periods’’,

13 (ii) by striking ‘‘fiscal year’’ the first

14 place it appears and inserting ‘‘particular

15 time period’’,

16 (iii) by striking ‘‘or fiscal year’’ the

17 first and second place it appears, and

18 (iv) by striking ‘‘cost reporting period

19 or fiscal year’’ and inserting ‘‘period’’.

20 (B) Section 1886(d)(1)(A) of such Act (42

21 U.S.C. 1395ww(d)(1)(A)) is amended in the

22 matter preceding clause (i) by inserting ‘‘or cal23 endar’’ after ‘‘fiscal’’.

24 (C) Section 1886(d)(2)(D) of such Act (42

25 U.S.C. 1395ww(d)(2)(D)) is amended by insert-
80

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1 ing ‘‘or calendar’’ after ‘‘fiscal’’ each place it

2 appears.

3 (D) Section 1886(d)(3) of such Act (42

4 U.S.C. 1395ww(d)(3)) is amended in the first

5 sentence by inserting ‘‘or calendar’’ after ‘‘fis6 cal’’ the first place it appears and by inserting

7 ‘‘for each fiscal year through 1994’’ after ‘‘in

8 the United States, and’’.

9 (E) Section 1886(d)(3)(A)(ii) of such Act

10 (42 U.S.C. 1395ww(d)(3)(A)(ii)) is amended—

11 (i) by striking ‘‘1994,’’ and inserting

12 ‘‘1993, and occurring in the 15-month pe13 riod beginning on October 1, 1993,’’, and

14 (ii) by striking ‘‘fiscal year’’ the sec15 ond and last place it appears and inserting

16 ‘‘time period’’.

17 (F) Section 1886(d)(3)(A)(iii) of such Act

18 (42 U.S.C. 1395ww(d)(3)(A)(iii)) is amended

19 by striking ‘‘the fiscal year beginning on Octo20 ber 1, 1994’’ and inserting ‘‘1995’’.

21 (G) Section 1886(d)(3)(A)(iv) of such Act

22 (42 U.S.C. 1395ww(d)(3)(A)(iv)) is amended—

23 (i) by striking ‘‘fiscal year beginning

24 on or after October 1, 1995’’ and inserting
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1 ‘‘year beginning on or after January 1,

2 1996’’,

3 (ii) by striking ‘‘and within each re4 gion’’, and

5 (iii) by striking ‘‘fiscal’’ each place it

6 appears.

7 (H) Section 1886(d)(3)(D) of such Act (42

8 U.S.C. 1395ww(d)(3)(D)) is amended—

9 (i) by inserting ‘‘or calendar’’ after

10 ‘‘fiscal’’ each place it appears, and

11 (ii) by inserting ‘‘for each fiscal year

12 through 1994’’ after ‘‘and shall establish’’.

13 (I) Section 1886(d)(3)(E) of such Act (42

14 U.S.C. 1395ww(d)(3)(E)) is amended—

15 (i) in the second sentence, by striking

16 ‘‘at least every 12 months thereafter’’ and

17 inserting ‘‘beginning January 1, 1995, at

18 least every 12 months thereafter’’, and

19 (ii) in the last sentence, by inserting

20 ‘‘or calendar’’ after ‘‘fiscal’’ the first and

21 last place it appears.

22 (J)(i) Section 1886(d)(4)(C)(iii) of such

23 Act (42 U.S.C. 1395ww(d)(4)(C)(iii)) is amend24 ed—
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1 (I) by inserting ‘‘or calendar’’ after

2 ‘‘fiscal’’ the first place it appears, and

3 (II) by deleting ‘‘fiscal’’ the last place

4 it appears.

5 (ii) The requirements of paragraphs (3)(E)

6 and (4)(C)(iii) of section 1886(d) of the Social

7 Security Act (42 U.S.C. 1395ww(d)(4)(C)(iii))

8 shall be applied on a 15-month basis for the pe9 riod beginning on October 1, 1993, and ending

10 on December 31, 1994.

11 (K)(i) Section 1886(d)(5)(A) of such Act

12 (42 U.S.C. 1395ww(d)(5)(A)) is amended—

13 (I) in clause (i), by striking ‘‘fiscal

14 years ending on or before September 30,

15 1997’’ and inserting ‘‘calendar years end16 ing on or before December 31, 1997’’,

17 (II) in clause (ii), by striking ‘‘fiscal

18 years beginning on or after October 1,

19 1994’’ and inserting ‘‘calendar years begin20 ning on or after January 1, 1995’’,

21 (III) in clause (iv), by inserting ‘‘or

22 calendar’’ after ‘‘fiscal’’,

23 (IV) in clause (v), by striking ‘‘fiscal

24 year’’ each place it appears, and
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•S 1743 IS1S

1 (V) in clause (vi), by striking ‘‘fiscal’’

2 and inserting ‘‘calendar’’.

3 (ii) The requirement of section

4 1886(d)(5)(A)(iv) of the Social Security Act

5 (42 U.S.C. 1395ww(d)(5)(A)(iv)) shall be ap6 plied on a 15-month basis for the period begin7 ning on October 1, 1993, and ending on De8 cember 31, 1994.

9 (L) Section 1886(d)(5)(E)(ii) of such Act

10 (42 U.S.C. 1395ww(d)(5)(E)(ii)) is amended by

11 inserting ‘‘or calendar’’ after ‘‘fiscal’’.

12 (M) Section 1886(d)(6) of such Act (42

13 U.S.C. 1395ww(d)(6)) is amended by inserting

14 ‘‘or December 1 of each calendar year (begin15 ning with calendar year 1995)’’ after ‘‘1984)’’.

16 (N) Section 1886(d)(9)(A) of such Act (42

17 U.S.C. 1395ww(d)(9)(A)) is amended in the

18 matter preceding clause (i) by striking ‘‘fiscal

19 year’’ and inserting ‘‘particular time period’’.

20 (O) Section 1886(d)(9)(C)(i) of such Act

21 (42 U.S.C. 1395ww(d)(9)(C)(i)) is amended—

22 (i) by striking ‘‘fiscal year’’ the first

23 place it appears and inserting ‘‘time pe24 riod’’,
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1 (ii) by striking ‘‘for fiscal year 1989’’,

2 and

3 (iii) by striking ‘‘fiscal years’’ and in4 serting ‘‘time periods’’.

5 (P) Section 1886(d)(10)(C) of such Act

6 (42 U.S.C. 1395ww(d)(10)(C)) is amended—

7 (i) in clause (i), by striking ‘‘fiscal

8 year’’ and inserting ‘‘particular time pe9 riod’’, and

10 (ii) in clause (ii), by inserting ‘‘or cal11 endar’’ after ‘‘fiscal’’ the first place it ap12 pears and striking ‘‘fiscal’’ the last place it

13 appears.

14 (Q) Section 1886(e)(2) of such Act (42

15 U.S.C. 1395ww(e)(2)) is amended—

16 (i) in subparagraph (A), by striking

17 ‘‘fiscal years’’ and inserting ‘‘particular

18 time periods’’, and

19 (ii) in subparagraph (B), by striking

20 ‘‘fiscal year’’ each place it appears and in21 serting ‘‘particular time period’’.

22 (R) Section 1886(e)(3) of such Act (42

23 U.S.C. 1395ww(e)(3)) is amended—

24 (i) in subparagraph (A)—
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1 (I) by striking ‘‘before the begin2 ning of each fiscal year (beginning

3 with fiscal year 1986)’’, and

4 (II) by striking ‘‘that fiscal year’’

5 and inserting ‘‘the succeeding year’’,

6 and

7 (ii) in subparagraph (B)—

8 (I) by striking ‘‘before the begin9 ning of each fiscal year (beginning

10 with fiscal year 1989)’’, and

11 (II) by striking ‘‘that fiscal year’’

12 and inserting ‘‘the succeeding year’’.

13 (S) Section 1886(e)(4)(A) of such Act (42

14 U.S.C. 1395ww(e)(4)(A)) is amended in the

15 first sentence by striking ‘‘fiscal’’ the first and

16 last place it appears and by striking ‘‘(begin17 ning with fiscal year 1988)’’.

18 (T) Section 1886(e)(4)(B) of such Act (42

19 U.S.C. 1395ww(e)(4)(B)) is amended by strik20 ing ‘‘fiscal’’ the first place it appears and by

21 striking ‘‘(beginning with fiscal year 1992)’’.

22 (U) Section 1886(e)(5) of such Act (42

23 U.S.C. 1395ww(e)(5)) is amended—

24 (i) in subparagraph (A), by striking

25 ‘‘the May 1 before each fiscal year (begin-
86

•S 1743 IS1S

1 ning with fiscal year 1986) and inserting

2 ‘‘May 1’’ and by striking ‘‘that fiscal year’’

3 and inserting ‘‘the succeeding year’’, and

4 (ii) in subparagraph (B), by striking

5 ‘‘fiscal’’.

6 (V) The second and third sentences of sec7 tion 1886(e)(5) of such Act (42 U.S.C.

8 1395ww(e)(5)) are each amended by striking

9 ‘‘fiscal’’ each place it appears.

10 (W) Section 1886(g)(1)(A) of such Act (42

11 U.S.C. 1395ww(g)(1)(A)) is amended—

12 (i) by striking ‘‘fiscal years 1992,

13 through 1995’’ and inserting ‘‘fiscal years

14 1992 and 1993, the 15-month period be15 ginning on October 1, 1993, and calendar

16 year 1995’’, and

17 (ii) by striking ‘‘such fiscal year’’ and

18 inserting ‘‘such period’’.

19 (5) CLERICAL AMENDMENTS CONCERNING

20 TRANSITIONAL PAYMENTS FOR A RECLASSIFIED

21 HOSPITAL.—

22 (A) Section 1886(d)(8)(A) of such Act (42

23 U.S.C. 1395ww(d)(8)(A)) is amended in the

24 matter preceding clause (i), by striking ‘‘cost

25 reporting periods’’ and inserting ‘‘years’’.
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1 (B) Section 1886(d)(8)(A)(i) of such Act

2 (42 U.S.C. 1395ww(d)(8)(A)(i)) is amended—

3 (i) in the matter preceding subclause

4 (I), by striking ‘‘cost reporting period’’ and

5 inserting ‘‘year’’ and by striking ‘‘reporting

6 period’’ and inserting ‘‘year’’,

7 (ii) in subclause (I), by striking ‘‘re8 porting period’’ and inserting ‘‘year’’, and

9 (iii) in subclause (II), by striking ‘‘re10 porting period’’ and inserting ‘‘year’’.

11 (C) Section 1886(d)(8)(A)(ii) of such Act

12 (42 U.S.C. 1395ww(d)(8)(A)(ii)) is amended—

13 (i) in the matter preceding subclause

14 (I), by striking ‘‘cost reporting period’’ and

15 inserting ‘‘year’’ and by striking ‘‘reporting

16 period’’ and inserting ‘‘year’’,

17 (ii) in subclause (I), by striking ‘‘re18 porting period’’ and inserting ‘‘year’’, and

19 (iii) in subclause (II), by striking ‘‘re20 porting period’’ and inserting ‘‘year’’.

21 (b) HOME HEALTH AGENCIES.—Clause (iii) of sec22 tion 1861(v)(1)(L) of such Act (42 U.S.C.

23 1395x(v)(1)(L)) is amended by striking ‘‘July 1, 1991,

24 and annually thereafter (but not for cost reporting periods

25 beginning on and after July 1, 1994, and before July 1,
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•S 1743 IS1S

1 1996)’’ and inserting ‘‘July 1 of 1991, 1992, and 1993

2 (but not for cost reporting periods beginning on and after

3 July 1, 1994, and before January 1, 1997), and annually

4 thereafter ’’.

5 (c) HOSPICE CARE.—

6 (1) IN GENERAL.—Clause (ii) of section

7 1814(i)(1)(C) of such Act (42 U.S.C.

8 1395f(i)(1)(C)) is amended—

9 (A) in subclause (II), by striking ‘‘fiscal

10 year 1994’’ and inserting ‘‘the 15-month period

11 beginning on October 1, 1993’’, and

12 (B) in subclauses (III), (IV), (V), and

13 (VI), by striking ‘‘fiscal year’’ each place it ap14 pears and inserting ‘‘calendar year’’.

15 (2) CONFORMING AMENDMENT.—Section

16 1814(i)(2) of such Act (42 U.S.C. 1395f(i)(2)) is

17 amended by adding at the end the following new

18 subparagraph:

19 ‘‘(D) For purposes of subparagraph (A), the term

20 ‘accounting year’ means—

21 ‘‘(i) fiscal years 1985 through 1993,

22 ‘‘(ii) the 15-month period beginning on October

23 1, 1993, and

24 ‘‘(iii) calendar years beginning on or after Jan25 uary 1, 1995.’’.
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1 (d) SKILLED NURSING FACILITY SERVICES.—

2 (1) IN GENERAL.—The last sentence of section

3 1888(a) of such Act (42 U.S.C. 1395yy(b)) is

4 amended by striking ‘‘October 1, 1995’’ and insert5 ing ‘‘January 1, 1996’’.

6 (2) CONFORMING AMENDMENTS.—

7 (A) Section 1888(d)(4) of such Act (42

8 U.S.C. 1395yy(d)(4)) is amended by striking

9 ‘‘fiscal’’ each place it appears.

10 (B) Subsections (a)(1) and (b) of section

11 13503 of the Omnibus Budget Reconciliation

12 Act of 1993 are amended by striking ‘‘fiscal

13 years 1994 and 1995’’ each place it appears

14 and inserting ‘‘the 15-month period beginning

15 on October 1, 1993, and calendar year 1995’’.

16 SEC. 208. ACCELERATION OF TRANSITION TO PROSPEC17 TIVE RATES FOR FACILITY COSTS IN HOS18 PITAL OUTPATIENT DEPARTMENTS.

19 (a) OUTPATIENT SURGERY.—Section

20 1833(i)(3)(B)(ii) of the Social Security Act (42 U.S.C.

21 1395l(i)(3)(B)(ii)) is amended—

22 (1) in subclause (I)—

23 (A) by striking ‘‘and 42 percent’’ and in24 serting ‘‘42 percent’’, and
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1 (B) by striking ‘‘1991’’ and inserting

2 ‘‘1991, and beginning on or before September

3 30, 1994, 25 percent for portions of cost re4 porting periods beginning in fiscal year 1995,

5 and 0 percent for portions of cost reporting pe6 riods beginning on or after October 1, 1995’’,

7 and

8 (2) in subclause (II)—

9 (A) by striking ‘‘and 58 percent’’ and in10 serting ‘‘58 percent’’, and

11 (B) by striking ‘‘1991’’ and inserting

12 ‘‘1991, and beginning on or before September

13 30, 1994, 75 percent for portions of cost re14 porting periods beginning in fiscal year 1995,

15 and 100 percent for portions of cost reporting

16 periods beginning on or after October 1, 1995’’.

17 (b) OUTPATIENT RADIOLOGY AND DIAGNOSTIC

18 SERVICES.—Section 1833(n)(1)(B)(ii)(I) of the Social Se19 curity Act (42 U.S.C. 1395l(n)(1)(B)(ii)(I)) is amended

20 by striking ‘‘January 1, 1991.’’ and inserting ‘‘January

21 1, 1991, and beginning on or before September 30, 1994.

22 The term means 25 percent for portions of cost reporting

23 periods beginning in fiscal year 1995 and 0 percent for

24 portions of cost reporting periods beginning on or after

25 October 1, 1995.’’.
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1 Subtitle B—Medicaid

2 SEC. 211. CAP ON FEDERAL PAYMENTS MADE FOR ACUTE

3 MEDICAL SERVICES UNDER THE MEDICAID

4 PROGRAM.

5 (a) IN GENERAL.—Title XIX of the Social Security

6 Act (42 U.S.C. 1396 et seq.) is amended by redesignating

7 section 1931 as section 1932 and by inserting after section

8 1930 the following new section:

9 ‘‘CAP ON FEDERAL PAYMENT MADE FOR ACUTE MEDICAL

10 SERVICES FURNISHED UNDER THE MEDICAID PROGRAM

11 ‘‘SEC. 1931. (a) ANNUAL FEDERAL CAP.—For pur12 poses of furnishing acute medical services to eligible indi13 viduals, the Secretary shall pay to a State for a fiscal year

14 under section 1903 an amount that does not exceed the

15 State’s total funding amount for such fiscal year deter16 mined under subsection (b).

17 ‘‘(b) STATE TOTAL FUNDING AMOUNT.—

18 ‘‘(1) IN GENERAL.—A State’s total funding

19 amount for a fiscal year is an amount equal to the

20 lesser of—

21 ‘‘(A) the sum of—

22 ‘‘(i) the product of—

23 ‘‘(I) the per-adult funding

24 amount for the State for such fiscal

25 year, and
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1 ‘‘(II) the total number of eligible

2 individuals who are at least 21 years

3 of age who will receive acute medical

4 services in the State during the fiscal

5 year; and

6 ‘‘(ii) the product of—

7 ‘‘(I) the per-child funding

8 amount for the State for such fiscal

9 year, and

10 ‘‘(II) the total number of eligible

11 individuals who are under 21 years of

12 age who will receive acute medical

13 services in the State during the fiscal

14 year; or

15 ‘‘(B) the maximum Federal amount for

16 such State (as determined under paragraph

17 (3)).

18 ‘‘(2) PER-ADULT AND PER-CHILD FUNDING

19 AMOUNTS.—The Secretary shall calculate for each

20 State a per-adult funding amount and a per-child

21 funding amount for each fiscal year as follows:

22 ‘‘(A) IN GENERAL.—

23 ‘‘(i) FISCAL YEAR 1995.—For fiscal

24 year 1995—
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•S 1743 IS1S

1 ‘‘(I) the per-adult funding

2 amount for a State shall be an

3 amount equal to the base per-adult

4 funding amount determined under

5 subparagraph (B) increased by 20

6 percent of such amount; and

7 ‘‘(II) the per-child funding

8 amount for the State shall be an

9 amount equal to the base per-child

10 funding amount for the State deter11 mined under subparagraph (C) in12 creased by 20 percent of such amount.

13 ‘‘(ii) SUBSEQUENT FISCAL YEARS.—

14 For fiscal year 1996 and subsequent fiscal

15 years, the per-adult funding amount for a

16 State and the per-child funding amount for

17 a State, respectively, shall be an amount

18 equal to the amount determined under this

19 subparagraph for the previous fiscal year

20 updated, through the midpoint of the pe21 riod, by the estimated percentage change

22 in the Consumer Price Index during the

23 12-month period ending at that midpoint,

24 with appropriate adjustments to reflect

25 previous underestimations or overesti-
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1 mations under this clause in the projected

2 percentage change in the Consumer Price

3 Index, plus 1 percentage point.

4 ‘‘(B) BASE PER-ADULT FUNDING

5 AMOUNT.—The base per-adult funding amount

6 for a State is an amount equal to—

7 ‘‘(i) the total amount of Federal funds

8 paid to such State under section 1903(a)

9 for fiscal year 1993 for providing acute

10 medical services to eligible individuals who

11 were at least 21 years of age; divided by

12 ‘‘(ii) the total number of eligible indi13 viduals who were at least 21 years of age

14 who received acute medical services in such

15 State during fiscal year 1993.

16 ‘‘(C) BASE PER-CHILD FUNDING

17 AMOUNT.—The base per-child funding amount

18 for a State is an amount equal to—

19 ‘‘(i) the total amount of Federal funds

20 paid to such State under section 1903(a)

21 for fiscal year 1993 for providing acute

22 medical services to eligible individuals who

23 were under 21 years of age; divided by

24 ‘‘(ii) the total number of eligible indi25 viduals who were under 21 years of age
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•S 1743 IS1S

1 who received acute medical services in such

2 State during fiscal year 1993.

3 ‘‘(3) MAXIMUM FEDERAL AMOUNT.—The Sec4 retary shall calculate for each State a maximum

5 Federal amount for each fiscal year as follows:

6 ‘‘(A) IN GENERAL.—

7 ‘‘(i) FISCAL YEAR 1995.—For fiscal

8 year 1995, the maximum Federal amount

9 for a State shall be an amount equal to the

10 base maximum Federal amount determined

11 under subparagraph (C) increased by 20

12 percent of such amount.

13 ‘‘(ii) SUBSEQUENT FISCAL YEARS.—

14 For fiscal year 1996 and subsequent fiscal

15 years, the maximum Federal amount for a

16 State shall be an amount equal to the

17 amount determined under this subpara18 graph for the previous fiscal year updated,

19 through the midpoint of the period, by the

20 estimated percentage change in the

21 Consumer Price Index during the 12-

22 month period ending at that midpoint,

23 with appropriate adjustments to reflect

24 previous underestimations or overesti25 mations under this clause in the projected
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•S 1743 IS1S

1 percentage change in the Consumer Price

2 Index, plus 2.5 percentage points.

3 ‘‘(B) BASE MAXIMUM FEDERAL

4 AMOUNT.—

5 ‘‘(i) IN GENERAL.—The base maxi6 mum Federal amount for a State is an

7 amount equal to the State’s applicable per8 centage (as determined under clause (ii))

9 of the State’s total maximum amount (as

10 determined under clause (iii)).

11 ‘‘(ii) STATE’S APPLICABLE PERCENT12 AGE.—A State’s applicable percentage de13 termined under this clause is a percentage

14 equal to the quotient of—

15 ‘‘(I) the amount of Federal funds

16 paid to the State for the furnishing of

17 acute medical services to eligible indi18 viduals and the provision of adminis19 trative services to such individuals in

20 fiscal year 1993, divided by

21 ‘‘(II) the amount of Federal

22 funds paid to all States for the fur23 nishing of acute medical services to el24 igible individuals and the provision of
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1 administrative services to such indi2 viduals in fiscal year 1993.

3 ‘‘(iii) STATE’S TOTAL MAXIMUM

4 AMOUNT.—A State’s total maximum

5 amount determined under this clause is an

6 amount equal to the applicable percentage

7 of the total amount of Federal funds paid

8 to all States for the furnishing of acute

9 medical services to eligible individuals and

10 the provision of administrative services to

11 such individuals in fiscal year 1993.

12 ‘‘(c) MINIMUM EXPENDITURE BY STATES.—

13 ‘‘(1) IN GENERAL.—For the purpose of furnish14 ing acute medical services to eligible individuals and

15 providing administrative services to such individuals

16 in a fiscal year, a State shall incur expenditures

17 which are at least equal to the product of—

18 ‘‘(A) the State’s updated per capita

19 amount, and

20 ‘‘(B) the total number of eligible individ21 ual’s receiving acute medical services in the

22 State during such fiscal year.

23 ‘‘(2) UPDATED PER CAPITA AMOUNT.—For pur24 poses of paragraph (1)(A)—
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•S 1743 IS1S

1 ‘‘(A) IN GENERAL.—The updated per cap2 ita amount for a State shall be—

3 ‘‘(i) for fiscal year 1995, an amount

4 equal to the State’s base per capita

5 amount, and

6 ‘‘(ii) for fiscal year 1996 and each

7 succeeding fiscal year, an amount equal to

8 the amount determined under this sub9 paragraph for the first preceding fiscal

10 year updated by the percentage change in

11 the consumer price index between such

12 first preceding fiscal year and the second

13 preceding fiscal year (as determined by the

14 Secretary of Commerce).

15 ‘‘(B) BASE PER CAPITA AMOUNT.—The

16 base per capita amount for a State shall be an

17 amount equal to the quotient of—

18 ‘‘(i) the total amount of State expend19 itures in fiscal year 1993 for the furnish20 ing of acute medical services to eligible in21 dividuals and the provision of administra22 tive services to such individuals, divided by

23 ‘‘(ii) the total number of eligible indi24 viduals receiving acute medical services

25 during fiscal year 1993.
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1 ‘‘(d) DEFINITIONS.—For purposes of this section—

2 ‘‘(1) ACUTE MEDICAL SERVICES.—The term

3 ‘acute medical services’ means all of the care and

4 services furnished to individuals eligible under a

5 State plan under this title except the following:

6 ‘‘(A) Nursing facility services (as defined

7 in section 1905(f)).

8 ‘‘(B) Intermediate care facility for the

9 mentally retarded services (as defined in section

10 1905(d)).

11 ‘‘(C) Personal care services (as described

12 in section 1905(a)(24)).

13 ‘‘(D) Private duty nursing services (as re14 ferred to in section 1905(a)(8)).

15 ‘‘(E) Home or community-based services

16 furnished under a waiver granted under sub17 section (c), (d), or (e) of section 1915.

18 ‘‘(F) Home and community care furnished

19 to functionally disabled elderly individuals

20 under section 1929.

21 ‘‘(G) Community supported living arrange22 ments services under section 1930.

23 ‘‘(H) Case-management services (as de24 scribed in section 1915(g)(2)).
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1 ‘‘(I) Home health care services (as referred

2 to in section 1905(a)(7)).

3 ‘‘(J) Hospice care (as defined in section

4 1905(o)).

5 ‘‘(2) ELIGIBLE INDIVIDUAL.—The term ‘eligible

6 individual’ means an individual who is eligible to re7 ceive medical assistance under the State plan under

8 this title.

9 ‘‘(3) FEDERAL FUNDS.—The term ‘Federal

10 funds’ means funds paid to a State under section

11 1903, excluding funds paid under such section with

12 respect to expenditures by such State in the form of

13 payment adjustments made by such State in order

14 to comply with the requirement under section

15 1902(a)(13)(A) (as in effect on the date of the en16 actment of this section) that payments to hospitals

17 to take into account the situation of hospitals which

18 serve a disproportionate number of low income pa19 tients with special needs.

20 ‘‘(4) STATE EXPENDITURES.—The term ‘State

21 expenditures’ means expenditures by a State under

22 its plan under this title, excluding expenditures in

23 the form of payment adjustments made by such

24 State in order to comply with the requirement under

25 section 1902(a)(13)(A) (as in effect on the date of
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1 the enactment of this section) that payments made

2 by the State to hospitals take into account the situa3 tion of hospitals which serve a disproportionate

4 number of low income patients with special needs.’’.

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

6 subsection (a) shall be effective with respect to fiscal years

7 beginning after September 30, 1994.

8 SEC. 212. WAIVERS FOR THE FURNISHING OF ACUTE MEDI9 CAL SERVICES UNDER THE MEDICAID PRO10 GRAM.

11 (a) IN GENERAL.—Title XIX of the Social Security

12 Act (42 U.S.C. 1396 et seq.) is amended by redesignating

13 section 1932 as section 1933 and by inserting after section

14 1931 the following new section:

15 ‘‘WAIVERS FOR THE FURNISHING OF ACUTE MEDICAL

16 SERVICES UNDER THE MEDICAID PROGRAM

17 ‘‘SEC. 1932. (a) IN GENERAL.—The Secretary shall

18 establish a process under which a State with a State plan

19 approved under this title may apply for waivers of any

20 of the requirements under this title in order to establish

21 innovative and cost effective programs for furnishing acute

22 medical services (as defined in section 1931(d)(1)) to eligi23 ble individuals (as defined in section 1931(d)(2)).

24 ‘‘(b) APPLICATION FOR WAIVERS.—

25 ‘‘(1) IN GENERAL.—In order to receive a waiver

26 under subsection (a), a State shall submit an appli-
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1 cation to the Secretary at such time and containing

2 such information as the Secretary determines appro3 priate.

4 ‘‘(2) APPROVAL OF APPLICATION.—

5 ‘‘(A) INITIAL REVIEW.—Within 60 days

6 after an application is submitted by the State

7 under this subsection, the Secretary shall review

8 and approve such application or provide the

9 State with a list of the modifications that are

10 necessary for such application to be approved.

11 ‘‘(B) ADDITIONAL REVIEW.—Within 60

12 days after a State resubmits any application

13 under this subsection, the Secretary shall review

14 and approve such application or provide the

15 State with a summary of which items included

16 on the list provided to the State under subpara17 graph (A) remain unsatisfied. A State may re18 submit an application under this subparagraph

19 as many times as necessary to gain approval.

20 ‘‘(c) DURATION OF WAIVERS.—Except as provided in

21 subsection (d), any waiver under this section shall be

22 granted for a period of 5 years, and renewed for subse23 quent 5-year periods, unless the Secretary determines that

24 the State has failed to furnish acute medical services in

25 accordance with the terms of the waiver and any provi-
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1 sions of this title with respect to which the Secretary has

2 not granted a waiver.

3 ‘‘(d) TERMINATION OF WAIVERS.—The Secretary

4 may terminate a waiver granted under this section at any

5 time if the Secretary determines that the State has failed

6 to furnish acute medical services in accordance with the

7 terms of the waiver and any provisions of this title with

8 respect to which the Secretary has not granted a waiver.

9 ‘‘(e) REPORTS.—

10 ‘‘(1) IN GENERAL.—The State shall, through

11 an independent entity, evaluate the programs oper12 ated under a waiver granted under this section and

13 submit interim and final reports to the Secretary at

14 such times and containing such information as the

15 Secretary shall require.

16 ‘‘(2) REPORT TO CONGRESS.—Not later than

17 60 days after the receipt of a final report by the

18 State regarding a waiver granted under this section,

19 the Secretary shall submit a report to Congress.’’.

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

21 subsection (a) shall be effective with respect to fiscal years

22 beginning after September 30, 1994.

23 SEC. 213. TERMINATION OF DISPROPORTIONATE SHARE

24 PAYMENTS.

25 (a) IN GENERAL.—
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1 (1) ELIMINATION OF STATE PLAN REQUIRE2 MENT.—Section 1902(a)(13) of the Social Security

3 Act (42 U.S.C. 1396a(a)(13)) is amended by strik4 ing ‘‘which, in the case of hospitals, take into ac5 count the situation of hospitals which serve a dis6 proportionate number of low income patients with

7 special needs and’’.

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

9 1923 of such Act (42 U.S.C. 1396r–4) is repealed.

10 (B) Section 1902(a)(55) of such Act (42 U.S.C.

11 1396a(a)(55)) is amended by striking ‘‘facilities de12 fined as disproportionate share hospitals under sec13 tion 1923(a)(1)(A) and’’.

14 (C) Section 1902(s) of such Act (42 U.S.C.

15 1396a(s)) is amended by striking ‘‘, and to children

16 who have not attained the age of 6 years and who

17 receive such services in a disproportionate share hos18 pital described in section 1923(b)(1),’’.

19 (D) Section 1903(a)(1) of such Act (42 U.S.C.

20 1396b(a)(1)) is amended by striking ‘‘and sub21 section 1923(f)’’.

22 (E) Section 1903(d)(6) of such Act (42 U.S.C.

23 1396b(d)(6)) is amended—

24 (i) by striking ‘‘(6)(A)’’ and inserting

25 ‘‘(6)’’,
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1 (ii) by striking ‘‘(i)’’ and ‘‘(ii)’’ and insert2 ing ‘‘(A)’’ and ‘‘(B)’’, respectively, and

3 (iii) by striking subparagraph (B).

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

5 this section shall be effective on and after October 1,

6 1996.

7 SEC. 214. GRANTS FOR HEALTH INSURANCE COVERAGE,

8 ACUTE MEDICAL SERVICES, PREVENTIVE

9 CARE, AND DISEASE PREVENTION.

10 (a) IN GENERAL.—Title XIX of the Social Security

11 Act (42 U.S.C. 1396 et seq.) is amended by redesignating

12 section 1933 as section 1934 and by inserting after section

13 1932 the following new section:

14 ‘‘GRANTS FOR HEALTH INSURANCE COVERAGE, ACUTE

15 MEDICAL SERVICES, PREVENTIVE CARE, AND DIS16 EASE PREVENTION

17 ‘‘SEC. 1933. (a) IN GENERAL.—The Secretary shall

18 provide grants to States for the purpose of conducting

19 State programs under which individuals with incomes

20 below 150 percent of the income official poverty line are

21 provided health insurance coverage, acute medical serv22 ices, preventive care, and disease prevention services. A

23 State receiving a grant under this section shall conduct

24 a program described in this section in consultation with

25 the Secretary and in any manner determined appropriate

26 by the State which is in accordance with subsection (b).
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1 ‘‘(b) REQUIREMENTS ON PROGRAMS.—

2 ‘‘(1) PRIORITY OF BENEFITS.—A State pro3 gram conducted under this section shall give priority

4 to individuals who—

5 ‘‘(A) are ineligible for benefits under a

6 State plan under this title,

7 ‘‘(B) are eligible for the tax credit estab8 lished under section 34A of the Internal Reve9 nue Code of 1986, and

10 ‘‘(C) have unreimbursed expenses for

11 health insurance coverage and medical care—

12 ‘‘(i) exceeding 5 percent of the indi13 vidual’s adjusted gross income, and

14 ‘‘(ii) not otherwise taken into account

15 in determining the credit under section

16 34A of the Internal Revenue Code of 1986

17 for such individual.

18 ‘‘(2) SERVICES.—

19 ‘‘(A) MANDATORY.—A State program con20 ducted under this section shall provide financial

21 assistance as determined by the State for pur22 chasing health insurance coverage and paying

23 medical bills to individuals described in para24 graph (1).
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1 ‘‘(B) OPTIONAL.— A State program con2 ducted under this section may provide—

3 ‘‘(i) medical services directly to eligi4 ble individuals,

5 ‘‘(ii) primary and preventive care serv6 ices to underserved populations,

7 ‘‘(iii) funding for community and mi8 grant health centers,

9 ‘‘(iv) delivery of outpatient primary

10 and preventive health services,

11 ‘‘(v) improvements to the availability

12 and quality of emergency medical services

13 and trauma care,

14 ‘‘(vi) transportation of victims of med15 ical emergencies, including air transpor16 tation for victims of medical emergencies

17 in rural areas, and

18 ‘‘(vii) telecommunications systems be19 tween rural medical facilities and other

20 medical facilities which have expertise in

21 certain areas or equipment that can be uti22 lized by rural facilities through such sys23 tems.

24 ‘‘(c) FEDERAL FUNDS AVAILABLE FOR GRANTS.—
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1 ‘‘(1) IN GENERAL.—The total amount of Fed2 eral funds available under this title for grants to

3 States under this section shall be—

4 ‘‘(A) $8,500,000,000 for fiscal year 1998,

5 and

6 ‘‘(B) for each fiscal year thereafter, the

7 amount for the preceding fiscal year increased

8 by 10 percent of such amount.

9 ‘‘(2) FORMULA FOR DISTRIBUTION OF

10 GRANTS.—

11 ‘‘(A) IN GENERAL.—The Secretary shall

12 pay to each State conducting a program under

13 this section for a fiscal year an amount equal

14 to the State’s percentage (as determined under

15 subparagraph (B)) of the total amount available

16 for grants under this section as provided in

17 paragraph (1).

18 ‘‘(B) STATE PERCENTAGE.—

19 ‘‘(i) IN GENERAL.—A State’s percent20 age determined under this subparagraph

21 for a fiscal year is a percentage equal to

22 the quotient of—

23 ‘‘(I) the number of individuals in

24 the State’s needy population (as de-
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•S 1743 IS1S

1 fined in clause (ii)) for such fiscal

2 year, divided by

3 ‘‘(II) the total number of individ4 uals in the needy populations of all

5 States for the fiscal year.

6 ‘‘(ii) STATE NEEDY POPULATION.—

7 The term (State’s needy population)

8 means, with respect to a fiscal year, the

9 number of individuals equal to the product

10 of—

11 ‘‘(I) the average number of indi12 viduals in the State with incomes

13 below the income official poverty line

14 during the 3 preceding fiscal years (as

15 determined by the Secretary), and

16 (II) the State’s Federal percent17 age (as determined under clause (iii)).

18 ‘‘(iii) STATE FEDERAL PERCENT19 AGE.—

20 ‘‘(I) IN GENERAL.—A State’s

21 Federal percentage for a fiscal year is

22 the greater of—

23 ‘‘(aa) 1 minus the percent24 age determined under subclause

25 (II), or
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•S 1743 IS1S

1 ‘‘(bb) 25 percent.

2 ‘‘(II) PERCENTAGE DETER3 MINED.—The percentage determined

4 under this subclause is the product

5 of—

6 ‘‘(aa) .5157, and

7 ‘‘(bb) the amount deter8 mined under subclause (III).

9 ‘‘(III) AMOUNT DETERMINED.—

10 The amount determined under this

11 subclause is the quotient of—

12 ‘‘(aa) the State’s share of

13 total taxable resources, divided

14 by

15 ‘‘(bb) the State’s share of

16 need.

17 ‘‘(d) STATE EXPENDITURES.—

18 ‘‘(1) IN GENERAL.—For a fiscal year, a State

19 shall expend for purposes of conducting the State

20 program described in subsection (a) an amount at

21 least equal to the State share percentage for the

22 State (determined under paragraph (2)) of the

23 amount the State is eligible to receive under sub24 section (c)(2) for the fiscal year.
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1 ‘‘(2) STATE SHARE PERCENTAGE.—The State

2 share percentage for a State determined under this

3 paragraph for a fiscal year is a percentage equal to

4 the quotient of—

5 ‘‘(A) the percentage determined under sub6 section (c)(2)(B)(iii)(II) for the fiscal year, di7 vided by

8 ‘‘(B) the State’s Federal percentage deter9 mined under subsection (c)(2)(B)(iii) for the

10 fiscal year.

11 ‘‘(e) OTHER DEFINITIONS.—

12 ‘‘(1) INCOME OFFICIAL POVERTY LINE.—For

13 purposes of this section, the term ‘income official

14 poverty line’ means the income official poverty line

15 (as defined by the Office of Management and Budg16 et, and revised annually in accordance with section

17 673(2) of the Omnibus Budget Reconciliation Act of

18 1981).

19 ‘‘(2) STATE’S SHARE OF TOTAL TAXABLE RE20 SOURCES.—

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

22 subparagraph (B), the term ‘State share of

23 total taxable resources’ for a fiscal year means

24 an amount equal to the quotient of—
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•S 1743 IS1S

1 ‘‘(i) the average of total taxable re2 sources for the State (as determined by the

3 Secretary of the Treasury based on data

4 available for the 3 most recent calendar

5 years), divided by

6 ‘‘(ii) the average of the total taxable

7 resources for all States (as determined by

8 the Secretary of the Treasury based on

9 data available for the 3 most recent cal10 endar years).

11 ‘‘(B) SPECIAL RULE FOR THE DISTRICT OF

12 COLUMBIA.—Notwithstanding subparagraph

13 (A), with respect to the District of Columbia,

14 the term ‘State share of total taxable resources’

15 for a fiscal year means an amount equal to the

16 quotient of—

17 ‘‘(i) the average of the total personal

18 income in such District for the 3 preceding

19 calendar years (as determined by the Sec20 retary of Commerce), divided by

21 ‘‘(ii) the average of the total personal

22 income for all States for the 3 preceding

23 calendar years (as determined by the Sec24 retary of Commerce).
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•S 1743 IS1S

1 ‘‘(3) STATE’S SHARE OF NEED.—The term

2 ‘State’s share of need’ for a fiscal year means the

3 quotient of—

4 ‘‘(A) the average number of individuals in

5 the State with incomes below the income official

6 poverty line for the 3 preceding fiscal years (as

7 determined by the Secretary), divided by

8 ‘‘(B) the average number of individuals in

9 all States with incomes below the income offi10 cial poverty line for the 3 preceding fiscal years

11 (as determined by the Secretary).’’.

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

13 subsection (a) shall be effective with respect to fiscal years

14 beginning after September 30, 1997.

15 TITLE III—HEALTH CARE

16 LIABILITY REFORM

17 SEC. 301. SHORT TITLE.

18 This title may be cited as the ‘‘Health Care Liability

19 Reform Act of 1994’’.

20 SEC. 302. DEFINITIONS.

21 For purposes of this title the term—

22 (1) ‘‘approved by the Food and Drug Adminis23 tration’’ means, with respect to a health care prod24 uct, that the health care product—
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1 (A) was subject to premarket approval by

2 the Food and Drug Administration with respect

3 to the safety of the formulation or performance

4 of the aspect of such drug or device which

5 caused the claimant’s harm or the adequacy of

6 the packaging or labeling of such drug or de7 vice, and such drug or device was approved by

8 the Food and Drug Administration; or

9 (B) is generally recognized as safe and ef10 fective under conditions established by the Food

11 and Drug Administration and applicable regula12 tions, including packaging and labeling regula13 tions;

14 (2) ‘‘arbitration’’ means a dispute resolution

15 process in which the parties submit the dispute out16 side of a Federal or State civil justice system for

17 resolution by a person or panel of persons;

18 (3) ‘‘economic losses’’ means losses for hospital

19 and medical expenses, lost wages, lost employment,

20 and other pecuniary losses;

21 (4) ‘‘health care malpractice action’’ means a

22 civil action alleging a health care malpractice claim

23 against a health care provider or health care profes24 sional;
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•S 1743 IS1S

1 (5) ‘‘health care malpractice claim’’ means any

2 claim relating to the provision of (or the failure to

3 provide) health care services based on negligence or

4 gross negligence, breach of express or implied war5 ranty or contract, or failure to discharge a duty to

6 warn or instruct to obtain consent;

7 (6) ‘‘health care product’’ means a drug, as de8 fined under section 201(g)(1) of the Federal Food,

9 Drug, and Cosmetic Act (21 U.S.C. 321(g)(1)) or a

10 medical device, as defined under section 201(h) of

11 the Federal Food, Drug, and Cosmetic Act (21

12 U.S.C. 321(h)), or any combination thereof;

13 (7) ‘‘health care product liability action’’ means

14 a civil action alleging a health care product liability

15 claim against a manufacturer or seller of a health

16 care product or against a health care provider or

17 health care professional;

18 (8) ‘‘health care product liability claim’’ means

19 any claim relating to harm alleged to have been

20 caused by a health care product;

21 (9) ‘‘health care professional’’ means any indi22 vidual who provides health care services in a State

23 and who is required by State law or regulation to be

24 licensed or certified by the State to provide such

25 services in the State, including a physician, nurse,
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•S 1743 IS1S

1 chiropractor, nurse midwife, physical therapist, so2 cial worker, or physician assistant;

3 (10) ‘‘health care provider’’ means any organi4 zation or institution that is engaged in the delivery

5 of health care services in a State and that is re6 quired by State law or regulation to be licensed or

7 certified by the State to engage in the delivery of

8 such services in the State;

9 (11) ‘‘injury’’ means any injury, illness, disease,

10 or other harm that is the subject of a health care

11 malpractice claim; and

12 (12) ‘‘noneconomic losses’’ means losses for

13 physical and emotional pain, suffering, inconven14 ience, physical impairment, mental anguish, dis15 figurement, loss of enjoyment of life, and other

16 nonpecuniary losses.

17 SEC. 303. HEALTH CARE MALPRACTICE.

18 (a) APPLICATION.—The provisions of this section

19 shall apply to any health care malpractice action filed in

20 any Federal or State court and any health care mal21 practice claim resolved through arbitration.

22 (b) PAYMENTS.—No person may be required to pay

23 more than $100,000 in a single payment in damages for

24 expenses to be incurred in the future, but such person

25 shall be permitted to make such payments on a periodic
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1 basis. The periods for such payments shall be determined

2 by the court, based on projections of when expenses are

3 likely to be incurred.

4 (c) DAMAGES.—(1) The total amount of damages re5 ceived by an individual shall be reduced, in accordance

6 with paragraph (2), by any other payment which has been

7 made or which will be made to such individual to com8 pensate such individual for an injury, including payments

9 under—

10 (A) Federal or State disability or sickness pro11 grams;

12 (B) Federal, State, or private health insurance

13 programs;

14 (C) private disability insurance programs;

15 (D) employer wage continuation programs; and

16 (E) any other source of payment intended to

17 compensate such individual for such injury.

18 (2) The amount by which an award of damages to

19 an individual for an injury shall be reduced under para20 graph (1) shall be—

21 (A) the total amount of any payments (other

22 than such award) which have been made or which

23 will be made to such individual to compensate such

24 individual for such injury; minus
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1 (B) the amount paid by such individual (or by

2 the spouse, parent, or legal guardian of such individ3 ual) to secure the payments described under sub4 paragraph (A).

5 (d) STATUTE OF LIMITATIONS.—(1) Except as pro6 vided under paragraph (2), no health care malpractice

7 claim may be initiated after the expiration of the 2-year

8 period that begins on the date the alleged injury should

9 reasonably have been discovered, or the expiration of the

10 4-year period that begins on the date the alleged injury

11 occurred, whichever is later.

12 (2) In the case of an alleged injury suffered by a

13 minor who has not attained 6 years of age, no health care

14 malpractice claim may be initiated after the expiration of

15 the 2-year period that begins on the date the alleged injury

16 should reasonably have been discovered, or the date on

17 which the minor attains 10 years of age, whichever is

18 later.

19 (e) ATTORNEYS’ FEES.—With respect to any health

20 care malpractice action or any health care malpractice

21 claim, attorneys’ fees may not exceed—

22 (1) 25 percent of the first $150,000 of any

23 award or settlement under such action or claim; and

24 (2) 15 percent of any additional amounts in ex25 cess of $150,000.
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1 SEC. 304. HEALTH CARE PRODUCT LIABILITY OF MANUFAC2 TURER OR SELLER.

3 (a) NONAPPLICATION OF STRICT LIABILITY.—A

4 manufacturer or seller of a health care product approved

5 by the Food and Drug Administration shall not be strictly

6 liable for any injury alleged to have resulted from—

7 (1) a defect in the design of the health care

8 product; or

9 (2) a failure to warn or instruct regarding a

10 risk posed by the health care product that was nei11 ther known nor reasonably knowable at the time the

12 health care product left the control of the manufac13 turer or seller.

14 (b) DUTY TO WARN.—(1) A manufacturer or seller

15 of a health care product that is to be prescribed by, or

16 used at the direction of, a health care professional shall

17 not be liable for harm allegedly caused by a failure to warn

18 or instruct the ultimate user or recipient of the product

19 about a risk if the manufacturer or seller provided ade20 quate warning or instruction to the user’s or recipient’s

21 health care professional.

22 (2) This subsection shall not apply to any health care

23 product to which the Food and Drug Administration spe24 cifically provides that a warning or instruction regarding

25 such product shall be given by the manufacturer or seller

26 directly to the ultimate user or recipient.
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1 SEC. 305. GENERAL PROVISIONS RELATING TO HEALTH

2 CARE LIABILITY.

3 (a) LIMITATION ON NONECONOMIC DAMAGES.—(1)

4 Except as provided under paragraph (2), the total amount

5 of damages which may be awarded to an individual and

6 the family members of such individual for noneconomic

7 losses resulting from an injury which is the subject of a

8 health care malpractice claim or a health care product li9 ability claim may not exceed $250,000, regardless of the

10 number of defendants against whom the claim is brought,

11 the number of claims brought with respect to the injury,

12 or the number of actions brought with respect to the in13 jury.

14 (2)(A) In any jury trial, the jury shall not be in15 formed of the limitation established under paragraph (1).

16 If the jury awards an amount for noneconomic damages

17 that exceeds $250,000, the court shall reduce the award

18 to $250,000 unless the court finds that special cir19 cumstances (such as egregious injury) would make such

20 reduction unjust.

21 (B) In any case in which the court finds a reduction

22 under subparagraph (A) would be unjust, the court may—

23 (i) decline to reduce such award; or

24 (ii) reduce such award by a lesser amount than

25 provided for under subparagraph (A).
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1 (b) SEVERAL LIABILITY FOR NONECONOMIC LOSS.—

2 (1) In any health care malpractice action or health care

3 product liability action the liability of each defendant for

4 noneconomic loss and for punitive damages shall be sev5 eral only and shall not be joint. Each defendant shall be

6 liable only for the amount of noneconomic loss and puni7 tive damages allocated to such defendant in direct propor8 tion to such defendant’s percentage of responsibility as de9 termined under paragraph (2). A separate judgment shall

10 be rendered against such defendant for that amount.

11 (2) For purposes of this subsection, the trier of fact

12 shall determine the proportion of responsibility of each

13 party for the claimant’s harm.

14 SEC. 306. PUNITIVE DAMAGES.

15 (a) IN GENERAL.—Punitive damages may, if other16 wise permitted by applicable law, be awarded against a

17 defendant in a health care malpractice action or a health

18 care product liability action only if the claimant estab19 lishes by clear and convincing evidence that the harm suf20 fered by the claimant was the result of conduct manifest21 ing conscious, flagrant indifference to the health of the

22 claimant or to the health of those persons who might be

23 harmed by the health care product.

24 (b) DETERMINATION OF AMOUNT.—The amount of

25 any punitive damages award shall be determined (subject
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•S 1743 IS1S

1 to appellate review as permitted by applicable law) by the

2 trial judge.

3 (c) LIMITATION CONCERNING CERTAIN HEALTH

4 CARE PRODUCTS.—Punitive damages shall not be award5 ed against a manufacturer or seller of a health care prod6 uct approved by the Food and Drug Administration where

7 that health care product caused the claimant’s harm.

8 SEC. 307. EXCEPTIONS.

9 The provisions of sections 304(a) and 306(c) shall

10 not apply in any case in which—

11 (1) the defendant, before or after premarket ap12 proval of a drug or device, withheld from or mis13 represented to the Food and Drug Administration or

14 any other agency or official of the Federal Govern15 ment required information that is material and rel16 evant to the performance of such drug or device and

17 is causally related to the harm which the claimant

18 allegedly suffered; or

19 (2) the defendant made an illegal payment to

20 an official of the Food and Drug Administration for

21 the purpose of either securing or maintaining ap22 proval of such drug or device.

23 SEC. 308. RULES OF CONSTRUCTION.

24 Nothing in this title shall be construed to—
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1 (1) waive or affect any defense of sovereign im2 munity asserted by any State under any provision of

3 law;

4 (2) waive or affect any defense of sovereign im5 munity asserted by the United States;

6 (3) affect the applicability of any provision of

7 the Foreign Sovereign Immunities Act of 1976;

8 (4) preempt State choice-of-law rules with re9 spect to claims brought by a foreign nation or a citi10 zen of a foreign nation;

11 (5) affect the right of any court to transfer

12 venue or to apply the law of a foreign nation or to

13 dismiss a claim of a foreign nation or of a citizen

14 of a foreign nation on the grounds of inconvenient

15 forum;

16 (6) restrict or limit the preemptive effect of any

17 other Federal law; or

18 (7) create any cause of action under Federal

19 law.
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1 TITLE IV—ADMINISTRATIVE

2 COST SAVINGS

3 Subtitle A—Standardization of

4 Claims Processing

5 SEC. 401. ADOPTION OF DATA ELEMENTS, UNIFORM

6 CLAIMS, AND UNIFORM ELECTRONIC TRANS7 MISSION STANDARDS.

8 (a) IN GENERAL.—The Secretary shall adopt stand9 ards relating to each of the following:

10 (1) Data elements for use in paper and elec11 tronic claims processing under health insurance

12 plans, as well as for use in utilization review and

13 management of care (including data fields, formats,

14 and medical nomenclature, and including plan bene15 fit and insurance information).

16 (2) Uniform claims forms (including uniform

17 procedure and billing codes for uses with such forms

18 and including information on other health insurance

19 plans that may be liable for benefits).

20 (3) Uniform electronic transmission of the data

21 elements (for purposes of billing and utilization re22 view).

23 Standards under paragraph (3) relating to electronic

24 transmission of data elements for claims for services shall

25 supersede (to the extent specified in such standards) the
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1 standards adopted under paragraph (2) relating to the

2 submission of paper claims for such services. Standards

3 under paragraph (3) shall include protections to assure

4 the confidentiality of patient-specific information and to

5 protect against the unauthorized use and disclosure of in6 formation.

7 (b) USE OF TASK FORCES.—In adopting standards

8 under this section—

9 (1) the Secretary shall take into account the

10 recommendations of current task forces, including at

11 least the Workgroup on Electronic Data Inter12 change, National Uniform Billing Committee, the

13 Uniform Claim Task Force, and the Computer-based

14 Patient Record Institute;

15 (2) the Secretary shall consult with the Na16 tional Association of Insurance Commissioners (and,

17 with respect to standards under subsection (a)(3),

18 the American National Standards Institute); and

19 (3) the Secretary shall, to the maximum extent

20 practicable, seek to make the standards consistent

21 with any uniform clinical data sets which have been

22 adopted and are widely recognized.

23 (c) DEADLINES FOR PROMULGATION.—The Sec24 retary shall promulgate the standards under—
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1 (1) subsection (a)(1) relating to claims process2 ing data, by not later than 12 months after the date

3 of the enactment of this Act;

4 (2) subsection (a)(2) (relating to uniform

5 claims forms) by not later than 12 months after the

6 date of the enactment of this Act; and

7 (3)(A) subsection (a)(3) relating to trans8 mission of information concerning hospital and phy9 sicians services, by not later than 24 months after

10 the date of the enactment of this Act, and

11 (B) subsection (a)(3) relating to transmission

12 of information on other services, by such later date

13 as the Secretary may determine it to be feasible.

14 (d) REPORT TO CONGRESS.—Not later than 3 years

15 after the date of the enactment of this Act, the Secretary

16 shall report to Congress recommendations regarding re17 structuring the medicare peer review quality assurance

18 program given the availability of hospital data in elec19 tronic form.

20 SEC. 402. APPLICATION OF STANDARDS.

21 (a) IN GENERAL.—If the Secretary determines, at

22 the end of the 2-year period beginning on the date that

23 standards are adopted under section 401 with respect to

24 classes of services, that a significant number of claims for

25 benefits for such services under health insurance plans are
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1 not being submitted in accordance with such standards,

2 the Secretary may require, after notice in the Federal

3 Register of not less than 6 months, that all providers of

4 such services must submit claims to health insurance plans

5 in accordance with such standards. The Secretary may

6 waive the application of such a requirement in such cases

7 as the Secretary finds that the imposition of the require8 ment would not be economically practicable.

9 (b) SIGNIFICANT NUMBER.—The Secretary shall

10 make an affirmative determination described in subsection

11 (a) for a class of services only if the Secretary finds that

12 there would be a significant, measurable additional gain

13 in efficiencies in the health care system that would be ob14 tained by imposing the requirement described in such

15 paragraph with respect to such services.

16 (c) APPLICATION OF REQUIREMENT.—

17 (1) IN GENERAL.—If the Secretary imposes the

18 requirement under subsection (a)—

19 (A) in the case of a requirement that im20 poses the standards relating to electronic trans21 mission of claims for a class of services, each

22 health care provider that furnishes such services

23 for which benefits are payable under a health

24 insurance plan shall transmit electronically and

25 directly to the plan on behalf of the beneficiary
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1 involved a claim for such services in accordance

2 with such standards;

3 (B) any health insurance plan may reject

4 any claim subject to the standards adopted

5 under section 401 but which is not submitted in

6 accordance with such standards;

7 (C) it is unlawful for a health insurance

8 plan (i) to reject any such claim on the basis

9 of the form in which it is submitted if it is sub10 mitted in accordance with such standards or (ii)

11 to require, for the purpose of utilization review

12 or as a condition of providing benefits under

13 the plan, a provider to transmit medical data

14 elements that are inconsistent with the stand15 ards established under section 401(a)(1); and

16 (D) the Secretary may impose a civil

17 money penalty on any provider that knowingly

18 and repeatedly submits claims in violation of

19 such standards or on any health insurance plan

20 (other than a health insurance plan described in

21 paragraph (2)) that knowingly and repeatedly

22 rejects claims in violation of subparagraph (B),

23 in an amount not to exceed $100 for each such

24 claim.
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1 The provisions of section 1128A of the Social Secu2 rity Act (other than the first sentence of subsection

3 (a) and other than subsection (b)) shall apply to a

4 civil money penalty under subparagraph (D) in the

5 same manner as such provisions apply to a penalty

6 or proceeding under section 1128A(a) of such Act.

7 (2) PLANS SUBJECT TO EFFECTIVE STATE REG8 ULATION.—A plan described in this paragraph is a

9 health insurance plan—

10 (A) that is subject to regulation by a

11 State, and

12 (B) with respect to which the Secretary

13 finds that—

14 (i) the State provides for application

15 of the standards established under section

16 401, and

17 (ii) the State regulatory program pro18 vides for the appropriate and effective en19 forcement of such standards.

20 (d) TREATMENT OF REJECTIONS.—If a plan rejects

21 a claim pursuant to subsection (c)(1), the plan shall per22 mit the person submitting the claim a reasonable oppor23 tunity to resubmit the claim on a form or in an electronic

24 manner that meets the requirements for acceptance of the

25 claim under such subsection.
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1 SEC. 403. PERIODIC REVIEW AND REVISION OF STAND2 ARDS.

3 (a) IN GENERAL.—The Secretary shall—

4 (1) provide for the ongoing receipt and review

5 of comments and suggestions for changes in the

6 standards adopted and promulgated under section

7 401;

8 (2) establish a schedule for the periodic review

9 of such standards; and

10 (3) based upon such comments, suggestions,

11 and review, revise such standards and promulgate

12 such revisions.

13 (b) APPLICATION OF REVISED STANDARDS.—If the

14 Secretary under subsection (a) revises the standards de15 scribed in 401, then, in the case of any claim for benefits

16 submitted under a health insurance plan more than the

17 minimum period (of not less than 6 months specified by

18 the Secretary) after the date the revision is promulgated

19 under subsection (a)(3), such standards shall apply under

20 section 402 instead of the standards previously promul21 gated.

22 SEC. 404. HEALTH INSURANCE PLAN DEFINED.

23 In this title, the term ‘‘health insurance plan’’ has

24 the meaning given such term in section 111(b) and in25 cludes—
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1 (1) the medicare program (under title XVIII of

2 the Social Security Act) and medicare supplemental

3 health insurance, and

4 (2) a State medicaid plan (approved under title

5 XIX of such Act).

6 Subtitle B—Electronic Medical

7 Data Standards

8 SEC. 411. MEDICAL DATA STANDARDS FOR HOSPITALS AND

9 OTHER PROVIDERS.

10 (a) PROMULGATION OF HOSPITAL DATA STAND11 ARDS.—

12 (1) IN GENERAL.—Between July 1, 1995, and

13 January 1, 1996, the Secretary shall promulgate

14 standards described in subsection (b) for hospitals

15 concerning electronic medical data.

16 (2) REVISION.—The Secretary may from time

17 to time revise the standards promulgated under this

18 subsection.

19 (b) CONTENTS OF DATA STANDARDS.—The stand20 ards promulgated under subsection (a) shall include at

21 least the following:

22 (1) A definition of a standard set of data ele23 ments for use by utilization and quality control peer

24 review organizations.
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1 (2) A definition of the set of comprehensive

2 data elements, which set shall include for hospitals

3 the standard set of data elements defined under

4 paragraph (1).

5 (3) Standards for an electronic patient care in6 formation system with data obtained at the point of

7 care, including standards to protect against the un8 authorized use and disclosure of information.

9 (4) A specification of, and manner of presen10 tation of, the individual data elements of the sets

11 and system under this subsection.

12 (5) Standards concerning the transmission of

13 electronic medical data.

14 (6) Standards relating to confidentiality of pa15 tient-specific information.

16 The standards under this section shall be consistent with

17 standards for data elements established under section 401.

18 (c) OPTIONAL DATA STANDARDS FOR OTHER PRO19 VIDERS.—

20 (1) IN GENERAL.—The Secretary may promul21 gate standards described in paragraph (2) concern22 ing electronic medical data for providers that are not

23 hospitals. The Secretary may from time to time re24 vise the standards promulgated under this sub25 section.
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1 (2) CONTENTS OF DATA STANDARDS.—The

2 standards promulgated under paragraph (1) for non3 hospital providers may include standards comparable

4 to the standards described in paragraphs (2), (4),

5 and (5) of subsection (b) for hospitals.

6 (d) CONSULTATION.—In promulgating and revising

7 standards under this section, the Secretary shall—

8 (1) consult with the American National Stand9 ards Institute, hospitals, with the advisory commis10 sion established under section 415, and with other

11 affected providers, health insurance plans, and other

12 interested parties, and

13 (2) take into consideration, in developing stand14 ards under subsection (b)(1), the data set used by

15 the utilization and quality control peer review pro16 gram under part B of title XI of the Social Security

17 Act.

18 SEC. 412. APPLICATION OF ELECTRONIC DATA STANDARDS

19 TO CERTAIN HOSPITALS.

20 (a) MEDICARE REQUIREMENT FOR SHARING OF

21 HOSPITAL INFORMATION.—As of January 1, 1996, sub22 ject to paragraph (2), each hospital, as a requirement of

23 each participation agreement under section 1866 of the

24 Social Security Act, shall—
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1 (1) maintain clinical data included in the set of

2 comprehensive data elements under section

3 411(b)(2) in electronic form on all inpatients,

4 (2) upon request of the Secretary or of a utili5 zation and quality control peer review organization

6 (with which the Secretary has entered into a con7 tract under part B of title XI of such Act), transmit

8 electronically the data set, and

9 (3) upon request of the Secretary, or of a fiscal

10 intermediary or carrier, transmit electronically any

11 data (with respect to a claim) from such data set,

12 in accordance with the standards promulgated under sec13 tion 411(a).

14 (b) WAIVER AUTHORITY.—Until January 1, 2000:

15 (1) The Secretary may waive the application of

16 the requirements of subsection (a) for a hospital

17 that is a small rural hospital, for such period as the

18 hospital demonstrates compliance with such require19 ments would constitute an undue financial hardship.

20 (2) The Secretary may waive the application of

21 the requirements of subsection (a) for a hospital

22 that is in the process of developing a system to pro23 vide the required data set and executes agreements

24 with its fiscal intermediary and its utilization and

25 quality control peer review organization that the hos-
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1 pital will meet the requirements of subsection (a) by

2 a specified date (not later than January 1, 2000).

3 (3) The Secretary may waive the application of

4 the requirement of subsection (a)(1) for a hospital

5 that agrees to obtain from its records the data ele6 ments that are needed to meet the requirements of

7 paragraphs (2) and (3) of subsection (a) and agrees

8 to subject its data transfer process to a quality as9 surance program specified by the Secretary.

10 (c) APPLICATION TO HOSPITALS OF THE DEPART11 MENT OF VETERANS AFFAIRS.—

12 (1) IN GENERAL.—The Secretary of Veterans

13 Affairs shall provide that each hospital of the De14 partment of Veterans Affairs shall comply with the

15 requirements of subsection (a) in the same manner

16 as such requirements would apply to the hospital if

17 it were participating in the Medicare program.

18 (2) WAIVER.—The Secretary of Veterans Af19 fairs may waive the application of such requirements

20 to a hospital in the same manner as the Secretary

21 of Health and Human Services may waive under

22 subsection (b) the application of the requirements of

23 subsection (a).
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1 SEC. 413. ELECTRONIC TRANSMISSION TO FEDERAL AGEN2 CIES.

3 (a) IN GENERAL.—Effective January 1, 2000, if a

4 provider is required under a Federal program to transmit

5 a data element that is subject to a presentation or trans6 mission standard (as defined in subsection (b)), the head

7 of the Federal agency responsible for such program (if not

8 otherwise authorized) is authorized to require the provider

9 to present and transmit the data element electronically in

10 accordance with such a standard.

11 (b) PRESENTATION OR TRANSMISSION STANDARD

12 DEFINED.—In subsection (a), the term ‘‘presentation or

13 transmission standard’’ means a standard, promulgated

14 under subsection (b) or (c) of section 411, described in

15 paragraph (4) or (5) of section 411(b).

16 SEC. 414. LIMITATION ON DATA REQUIREMENTS WHERE

17 STANDARDS IN EFFECT.

18 (a) IN GENERAL.—If standards with respect to data

19 elements are promulgated under section 411 with respect

20 to a class of provider, a health insurance plan may not

21 require, for the purpose of utilization review or as a condi22 tion of providing benefits under the plan, that a provider

23 in the class—

24 (1) provide any data element not in the set of

25 comprehensive data elements specified under such

26 standards, or
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1 (2) transmit or present any such data element

2 in a manner inconsistent with the applicable stand3 ards for such transmission or presentation.

4 (b) COMPLIANCE.—

5 (1) IN GENERAL.—The Secretary may impose a

6 civil money penalty on any health insurance plan

7 (other than a health insurance plan described in

8 paragraph (2)) that fails to comply with subsection

9 (a) in an amount not to exceed $100 for each such

10 failure. The provisions of section 1128A of the So11 cial Security Act (other than the first sentence of

12 subsection (a) and other than subsection (b)) shall

13 apply to a civil money penalty under this paragraph

14 in the same manner as such provisions apply to a

15 penalty or proceeding under section 1128A(a) of

16 such Act.

17 (2) PLANS SUBJECT TO EFFECTIVE STATE REG18 ULATION.—A plan described in this paragraph is a

19 health insurance plan that is subject to regulation by

20 a State, if the Secretary finds that—

21 (A) the State provides for application of

22 the requirement of subsection (a), and

23 (B) the State regulatory program provides

24 for the appropriate and effective enforcement of

25 such requirement with respect to such plans.
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1 SEC. 415. ADVISORY COMMISSION.

2 (a) IN GENERAL.—The Secretary shall establish an

3 advisory commission including hospital executives, hospital

4 data base managers, physicians, health services research5 ers, and technical experts in collection and use of data

6 and operation of data systems. Such commission shall in7 clude, as ex officio members, a representative of the Direc8 tor of the National Institutes of Health, the Administrator

9 for Health Care Policy and Research, the Secretary of

10 Veterans Affairs, and the Director of the Centers for

11 Disease Control.

12 (b) FUNCTIONS.—The advisory commission shall

13 monitor and advise the Secretary concerning—

14 (1) the standards established under this sub15 title, and

16 (2) operational concerns about the implementa17 tion of such standards under this subtitle.

18 (c) STAFF.—From the amounts appropriated under

19 subsection (d), the Secretary shall provide sufficient staff

20 to assist the advisory commission in its activities under

21 this section.

22 (d) AUTHORIZATION OF APPROPRIATIONS.—There

23 are authorized to be appropriated $2,000,000 for each of

24 fiscal years 1995 through 2000 to carry out this section.
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1 Subtitle C—Development and Dis2 tribution of Comparative Value

3 Information

4 SEC. 421. STATE COMPARATIVE VALUE INFORMATION PRO5 GRAMS FOR HEALTH CARE PURCHASING.

6 (a) PURPOSE.—In order to assure the availability of

7 comparative value information to purchasers of health

8 care in each State, the Secretary shall determine whether

9 each State is developing and implementing a health care

10 value information program that meets the criteria and

11 schedule set forth in subsection (b).

12 (b) CRITERIA AND SCHEDULE FOR STATE PRO13 GRAMS.—The criteria and schedule for a State health care

14 value information program in this subsection shall be spec15 ified by the Secretary as follows:

16 (1) The State begins promptly after enactment

17 of this Act to develop (directly or through contrac18 tual or other arrangements with 1 or more States,

19 coalitions of health insurance purchasers, other enti20 ties, or any combination of such arrangements)

21 information systems regarding comparative health

22 values.

23 (2) The information contained in such systems

24 covers at least the average prices of common health

25 care services (as defined in subsection (d)) and
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1 health insurance plans, and, where available, meas2 ures of the variability of these prices within a State

3 or other market areas.

4 (3) The information described in paragraph (2)

5 is made available within the State beginning not

6 later than 1 year after the date of the enactment of

7 this Act, and is revised as frequently as reasonably

8 necessary, but at intervals of no greater than 1 year.

9 (4) Not later than 6 years after the date of the

10 enactment of this Act the State has developed infor11 mation systems that provide comparative costs, qual12 ity, and outcomes data with respect to health insur13 ance plans and hospitals and made the information

14 broadly available within the relevant market areas.

15 Nothing in this section shall preclude a State from provid16 ing additional information, such as information on prices

17 and benefits of different health insurance plans, available.

18 (c) GRANTS TO STATES FOR THE DEVELOPMENT OF

19 STATE PROGRAMS.—

20 (1) GRANT AUTHORITY.—The Secretary may

21 make grants to each State to enable such State to

22 plan the development of its health care value infor23 mation program and, if necessary, to initiate the im24 plementation of such program. Each State seeking

25 such a grant shall submit an application therefor,
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1 containing such information as the Secretary finds

2 necessary to assure that the State is likely to de3 velop and implement a program in accordance with

4 the criteria and schedule in subsection (b).

5 (2) OFFSET AUTHORITY.—If, at any time with6 in the 3-year period following the receipt by a State

7 of a grant under this subsection, the Secretary is re8 quired by section 422 to implement a health care in9 formation program in the State, the Secretary may

10 recover the amount of the grant under this sub11 section by offset against any other amount payable

12 to the State under the Social Security Act. The

13 amount of the offset shall be made available (from

14 the appropriation account with respect to which the

15 offset was taken) to the Secretary to carry out such

16 section.

17 (3) AUTHORIZATION OF APPROPRIATIONS.—

18 There are authorized to be appropriated such sums

19 as are necessary to make grants under this sub20 section, to remain available until expended.

21 (d) COMMON HEALTH CARE SERVICES DEFINED.—

22 In this section, the term ‘‘common health care services’’

23 includes such procedures as the Secretary may specify and

24 any additional health care services which a State may wish

25 to include in its comparative value information program.
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1 (e) STATE DEFINED.—In this title, the term ‘‘State’’

2 includes the District of Columbia, Puerto Rico, the Virgin

3 Islands, Guam, and American Samoa.

4 SEC. 422. FEDERAL IMPLEMENTATION.

5 (a) IN GENERAL.—If the Secretary finds, at any

6 time, that a State has failed to develop or to continue to

7 implement a health care value information program in ac8 cordance with the criteria and schedule in section 421(b),

9 the Secretary shall take the actions necessary, directly or

10 through grants or contract, to implement a comparable

11 program in the State.

12 (b) FEES.—Fees may be charged by the Secretary

13 for the information materials provided pursuant to a pro14 gram under this section. Any amounts so collected shall

15 be deposited in the appropriation account from which the

16 Secretary’s costs of providing such materials were met,

17 and shall remain available for such purposes until

18 expended.

19 SEC. 423. COMPARATIVE VALUE INFORMATION CONCERN20 ING FEDERAL PROGRAMS.

21 (a) DEVELOPMENT.—The head of each Federal agen22 cy with responsibility for the provision of health insurance

23 or of health care services to individuals shall promptly de24 velop health care value information relating to each pro25 gram that such head administers and covering the same
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1 types of data that a State program meeting the criteria

2 of section 421(b) would provide.

3 (b) DISSEMINATION OF INFORMATION.—Such infor4 mation shall be made generally available to States and to

5 providers and consumers of health care services.

6 Subtitle D—Preemption of State

7 Quill Pen Laws

8 SEC. 431. PREEMPTION OF STATE QUILL PEN LAWS.

9 (a) IN GENERAL.—Effective January 1, 1996, no ef10 fect shall be given to any provision of State law that re11 quires medical or health insurance records (including bill12 ing information) to be maintained in written, rather than

13 electronic form.

14 (b) SECRETARIAL AUTHORITY.—The Secretary may

15 issue regulations to carry out subsection (a). Such regula16 tions may provide for such exceptions to subsection (a)

17 as the Secretary determines to be necessary to prevent

18 fraud and abuse, with respect to controlled substances,

19 and in such other cases as the Secretary deems appro20 priate.
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1 TITLE V—ANTI-FRAUD

2 Subtitle A—Criminal Prosecution

3 of Health Care Fraud

4 SEC. 501. PENALTIES FOR HEALTH CARE FRAUD.

5 (a) IN GENERAL.—Chapter 63 of title 18, United

6 States Code, is amended by adding at the end the follow7 ing:

8 ‘‘§ 1347. Health care fraud

9 ‘‘(a) OFFENSE.—Whoever, being a health care pro10 vider, knowingly engages in any scheme or artifice to de11 fraud any person in connection with the provision of

12 health care shall be fined under this title or imprisoned

13 not more than 5 years, or both.

14 ‘‘(b) DEFINITION.—In this section, the term ‘health

15 care provider’ means—

16 ‘‘(1) a physician, nurse, dentist, therapist, phar17 macist, or other professional provider of health care;

18 and

19 ‘‘(2) a hospital, health maintenance organiza20 tion, pharmacy, laboratory, clinic, or other health

21 care facility or a provider of medical services, medi22 cal devices, medical equipment, or other medical sup23 plies.’’.

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

25 at the beginning of chapter 63 of title 18, United States
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1 Code, is amended by adding at the end the following new

2 item:

‘‘1347. Health care fraud.’’.

3 SEC. 502. REWARDS FOR INFORMATION LEADING TO PROS4 ECUTION AND CONVICTION.

5 Section 3059 of title 18, United States Code, is

6 amended by adding at the end the following new sub7 section:

8 ‘‘(c)(1) In special circumstances and in the Attorney

9 General’s sole discretion, the Attorney General may make

10 a payment of up to $10,000 to a person who furnishes

11 information unknown to the Government relating to a pos12 sible prosecution under section 1101.

13 ‘‘(2) A person is not eligible for a payment under

14 paragraph (1) if—

15 ‘‘(A) the person is a current or former officer

16 or employee of a Federal or State government agen17 cy or instrumentality who furnishes information dis18 covered or gathered in the course of government em19 ployment;

20 ‘‘(B) the person knowingly participated in the

21 offense;

22 ‘‘(C) the information furnished by the person

23 consists of allegations or transactions that have been

24 disclosed to the public—
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1 ‘‘(i) in a criminal, civil, or administrative

2 proceeding;

3 ‘‘(ii) in a congressional, administrative or

4 General Accounting Office report, hearing,

5 audit, or investigation; or

6 ‘‘(iii) by the news media, unless the person

7 is the original source of the information; or

8 ‘‘(D) when, in the judgment of the Attorney

9 General, it appears that a person whose illegal ac10 tivities are being prosecuted or investigated could

11 benefit from the award.

12 ‘‘(3) For the purposes of paragraph (2)(C)(iii), the

13 term ‘original source’ means a person who has direct and

14 independent knowledge of the information that is fur15 nished and has voluntarily provided the information to the

16 Government prior to disclosure by the news media.

17 ‘‘(4) Neither the failure of the Attorney General to

18 authorize a payment under paragraph (1) nor the amount

19 authorized shall be subject to judicial review.’’.
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1 Subtitle B—Coordination of Health

2 Care Anti-Fraud and Abuse Ac3 tivities

4 SEC. 511. APPLICATION OF FEDERAL HEALTH ANTI-FRAUD

5 AND ABUSE SANCTIONS TO ALL FRAUD AND

6 ABUSE AGAINST ANY HEALTH INSURANCE

7 PLAN.

8 (a) CIVIL MONETARY PENALTIES.—Section 1128A

9 of the Social Security Act (42 U.S.C. 1320a–7a) is

10 amended as follows:

11 (1) In subsection (a)(1), in the matter before

12 subparagraph (A), by inserting ‘‘or of any health in13 surance plan,’’ after ‘‘subsection (i)(1)),’’.

14 (2) In subsection (b)(1)(A), by inserting ‘‘or

15 under a health insurance plan’’ after ‘‘title XIX’’.

16 (3) In subsection (f)—

17 (A) by redesignating paragraph (3) as

18 paragraph (4); and

19 (B) by inserting after paragraph (2) the

20 following new paragraph:

21 ‘‘(3) With respect to amounts recovered arising

22 out of a claim under a health insurance plan, the

23 portion of such amounts as is determined to have

24 been paid by the plan shall be repaid to the plan.’’.

25 (4) In subsection (i)—
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1 (A) in paragraph (2), by inserting ‘‘or

2 under a health insurance plan’’ before the pe3 riod at the end, and

4 (B) in paragraph (5), by inserting ‘‘or

5 under a health insurance plan’’ after ‘‘or XX’’.

6 (b) CRIMES.—

7 (1) SOCIAL SECURITY ACT.—Section 1128B of

8 such Act (42 U.S.C. 1320a–7b) is amended as fol9 lows:

10 (A) In the heading, by adding at the end

11 the following: ‘‘OR HEALTH INSURANCE PLANS’’.

12 (B) In subsection (a)(1)—

13 (i) by striking ‘‘title XVIII or’’ and

14 inserting ‘‘title XVIII,’’, and

15 (ii) by adding at the end the follow16 ing: ‘‘or a health insurance plan (as de17 fined in section 1128(i)),’’.

18 (C) In subsection (a)(5), by striking ‘‘title

19 XVIII or a State health care program’’ and in20 serting ‘‘title XVIII, a State health care pro21 gram, or a health insurance plan’’.

22 (D) In the second sentence of subsection

23 (a)—
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1 (i) by inserting after ‘‘title XIX’’ the

2 following: ‘‘or a health insurance plan’’,

3 and

4 (ii) by inserting after ‘‘the State’’ the

5 following: ‘‘or the plan’’.

6 (E) In subsection (b)(1), by striking ‘‘title

7 XVIII or a State health care program’’ each

8 place it appears and inserting ‘‘title XVIII, a

9 State health care program, or a health insur10 ance plan’’.

11 (F) In subsection (b)(2), by striking ‘‘title

12 XVIII or a State health care program’’ each

13 place it appears and inserting ‘‘title XVIII, a

14 State health care program, or a health insur15 ance plan’’.

16 (G) In subsection (b)(3), by striking ‘‘title

17 XVIII or a State health care program’’ each

18 place it appears in subparagraphs (A) and (C)

19 and inserting ‘‘title XVIII, a State health care

20 program, or a health insurance plan’’.

21 (H) In subsection (d)(2)—

22 (i) by striking ‘‘title XIX,’’ and insert23 ing ‘‘title XIX or under a health insurance

24 plan,’’, and
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1 (ii) by striking ‘‘State plan,’’ and in2 serting ‘‘State plan or the health insurance

3 plan,’’.

4 (2) TREBLE DAMAGES FOR CRIMINAL SANC5 TIONS.—Section 1128B of such Act (42 U.S.C.

6 1320a–7b) is amended by adding at the end the fol7 lowing new subsection:

8 ‘‘(f) In addition to the fines that may be imposed

9 under subsection (a), (b), or (c), any individual found to

10 have violated the provisions of any of such subsections

11 may be subject to treble damages.’’.

12 (3) IDENTIFICATION OF COMMUNITY SERVICE

13 OPPORTUNITIES.—Section 1128B of such Act (42

14 U.S.C. 1320a–7b) is further amended by adding at

15 the end the following new subsection:

16 ‘‘(g) The Secretary shall—

17 ‘‘(1) in consultation with State and local health

18 care officials, identify opportunities for the satisfac19 tion of community service obligations that a court

20 may impose upon the conviction of an offense under

21 this section, and

22 ‘‘(2) make information concerning such oppor23 tunities available to Federal and State law enforce24 ment officers and State and local health care offi25 cials.’’.
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1 (c) HEALTH INSURANCE PLAN DEFINED.—Section

2 1128 of such Act (42 U.S.C. 1320a–7) is amended by re3 designating subsection (i) as subsection (j) and by insert4 ing after subsection (h) the following new subsection:

5 ‘‘(i) HEALTH INSURANCE PLAN DEFINED.—For pur6 poses of sections 1128A and 1128B, the term ‘health in7 surance plan’ means a health insurance program other

8 than the medicare program, the medicaid program, or a

9 State health care program.’’.

10 (d) CONFORMING AMENDMENT.—Section

11 1128(b)(8)(B)(ii) of such Act (42 U.S.C. 1320a–

12 7(b)(8)(B)(ii)) is amended by striking ‘‘1128A’’ and in13 serting ‘‘1128A (other than a penalty arising from a

14 health insurance plan, as defined in subsection (i))’’.

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

16 this section shall take effect January 1, 1995.

17 TITLE VI—ANTITRUST

18 PROVISIONS

19 SEC. 601. EXEMPTION FROM ANTITRUST LAWS FOR CER20 TAIN COMPETITIVE AND COLLABORATIVE

21 ACTIVITIES.

22 (a) EXEMPTION DESCRIBED.—An activity relating to

23 the provision of health care services shall be exempt from

24 the antitrust laws if—
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1 (1) the activity is within one of the categories

2 of safe harbors described in section 602;

3 (2) the activity is within an additional safe har4 bor designated by the Attorney General under sec5 tion 603; or

6 (3) the activity is specified in and in compliance

7 with the terms of a certificate of review issued by

8 the Attorney General under section 604 and the ac9 tivity occurs—

10 (A) while the certificate is in effect, or

11 (B) in the case of a certificate issued dur12 ing the 2-year period beginning on the date of

13 the enactment of this Act, at any time on or

14 after the first day of the 2-year period that

15 ends on the date the certificate takes effect.

16 (b) AWARD OF ATTORNEY’S FEES AND COSTS OF

17 SUIT.—

18 (1) IN GENERAL.—If any person brings an ac19 tion alleging a claim under the antitrust laws and

20 the activity on which the claim is based is found by

21 the court to be exempt from such laws under sub22 section (a), the court shall, at the conclusion of the

23 action—
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1 (A) award to a substantially prevailing

2 claimant the cost of suit attributable to such

3 claim, including a reasonable attorney’s fee, or

4 (B) award to a substantially prevailing

5 party defending against such claim the cost of

6 such suit attributable to such claim, including

7 reasonable attorney’s fee, if the claim, or the

8 claimant’s conduct during litigation of the

9 claim, was frivolous, unreasonable, without

10 foundation, or in bad faith.

11 (2) OFFSET IN CASES OF BAD FAITH.—The

12 court may reduce an award made pursuant to para13 graph (1) in whole or in part by an award in favor

14 of another party for any part of the cost of suit (in15 cluding a reasonable attorney’s fee) attributable to

16 conduct during the litigation by any prevailing party

17 that the court finds to be frivolous, unreasonable,

18 without foundation, or in bad faith.

19 SEC. 602. SAFE HARBORS.

20 The following activities are safe harbors for purposes

21 of section 601(a)(1):

22 (1) COMBINATIONS WITH MARKET SHARE

23 BELOW THRESHOLD.—Activities relating to health

24 care services of any combination of health care pro25 viders if the number of each type or specialty of pro-
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1 vider in question does not exceed 20 percent of the

2 total number of such type or specialty of provider in

3 the relevant market area.

4 (2) ACTIVITIES OF MEDICAL SELF-REGULATORY

5 ENTITIES.—

6 (A) IN GENERAL.—Subject to subpara7 graph (B), any activity of a medical self-regu8 latory entity relating to standard setting or

9 standard enforcement activities that are de10 signed to promote the quality of health care

11 provided to patients.

12 (B) EXCEPTION.—No activity of a medical

13 self-regulatory entity may be deemed to fall

14 under the safe harbor established under this

15 paragraph if the activity is conducted for pur16 poses of financial gain.

17 (3) PARTICIPATION IN SURVEYS.—The partici18 pation of a provider of health care services in a writ19 ten survey of the prices of services, reimbursement

20 levels, or the compensation and benefits of employ21 ees and personnel, but only if—

22 (A) the survey is conducted by a third

23 party, such as a purchaser of health care serv24 ices, governmental entity, institution of higher

25 education, or trade association;
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1 (B) the information provided by partici2 pants in the survey is based on prices charged,

3 reimbursements received, or compensation and

4 benefits paid prior to the third month preceding

5 the month in which the information is provided;

6 and

7 (C) if the results of the survey are dissemi8 nated, the results are aggregated in a manner

9 that ensures that no recipient of the results

10 may identify the prices charged, reimbursement

11 received, or compensation and benefits paid by

12 any particular provider.

13 (4) JOINT VENTURES FOR HIGH TECHNOLOGY

14 AND COSTLY EQUIPMENT AND SERVICES.—Any ac15 tivity of a health care cooperative venture relating to

16 the purchase, operation, or marketing of high tech17 nology or other expensive medical equipment, or the

18 provision of high cost or complex services, but only

19 if the number of participants in the venture does not

20 exceed the lowest number needed to support the ven21 ture. Other providers may be included in the ven22 ture, but only if such other providers could not pur23 chase, operate, or market such equipment or provide

24 a competing service either alone or through the for25 mation of a competing venture.
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1 (5) HOSPITAL MERGERS.—Activities relating to

2 a merger of 2 hospitals if, during the 3-year period

3 preceding the merger, one of the hospitals had an

4 average of 150 or fewer operational beds and an av5 erage daily inpatient census of less than 50 percent

6 of such beds.

7 (6) JOINT PURCHASING ARRANGEMENTS.—Any

8 joint purchasing arrangement among health care

9 providers if—

10 (A) the purchases under the arrangement

11 represent less than 35 percent of the total sales

12 of the product or service purchased in the rel13 evant market; and

14 (B) the cost of the products and services

15 purchased jointly accounts for less than 20 per16 cent of the total revenues from all products or

17 services sold by each participant in the joint

18 purchasing arrangement.

19 (7) NEGOTIATIONS.—Activities consisting of

20 good faith negotiations to carry out any activity—

21 (A) described in this section,

22 (B) within an additional safe harbor des23 ignated by the Attorney General under section

24 603,
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1 (C) that is the subject of an application for

2 a certificate of review under section 604, or

3 (D) that is deemed a submission of a noti4 fication under section 605(a)(2)(B),

5 without regard to whether such an activity is carried

6 out.

7 SEC. 603. DESIGNATION OF ADDITIONAL SAFE HARBORS.

8 (a) IN GENERAL.—

9 (1) SOLICITATION OF PROPOSALS.—Not later

10 than 30 days after the date of the enactment of this

11 Act, the Attorney General shall publish a notice in

12 the Federal Register soliciting proposals for addi13 tional safe harbors.

14 (2) REVIEW AND REPORT ON PROPOSED SAFE

15 HARBORS.—Not later than 180 days after the date

16 of the enactment of this Act, the Attorney General

17 (in consultation with the Secretary and the Chair)

18 shall—

19 (A) review the proposed safe harbors sub20 mitted under paragraph (1); and

21 (B) submit a report to Congress describing

22 the proposals to be included in the publication

23 of additional safe harbors described in para24 graph (3) and the proposals that are not to be
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1 so included, together with explanations there2 fore.

3 (3) PUBLICATION OF ADDITIONAL SAFE HAR4 BORS.—Not later than 180 days after the date of

5 the enactment of this Act, the Attorney General (in

6 consultation with the Secretary and the Chair) shall

7 publish in the Federal Register proposed additional

8 safe harbors for purposes of section 601(a)(2) for

9 providers of health care services. Not later than 180

10 days after publishing such proposed safe harbors in

11 the Federal Register, the Attorney General shall

12 issue final rules establishing such safe harbors.

13 (b) CRITERIA FOR SAFE HARBORS.—In establishing

14 safe harbors under subsection (a), the Attorney General

15 shall take into account the following:

16 (1) The extent to which a competitive or col17 laborative activity will accomplish any of the follow18 ing:

19 (A) An increase in access to health care

20 services.

21 (B) The enhancement of the quality of

22 health care services.

23 (C) The establishment of cost efficiencies

24 that will be passed on to consumers, including
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•S 1743 IS1S

1 economies of scale and reduced transaction and

2 administrative costs.

3 (D) An increase in the ability of health

4 care facilities to provide services in medically

5 underserved areas or to medically underserved

6 populations.

7 (E) An improvement in the utilization of

8 health care resources or the reduction in the in9 efficient duplication of the use of such re10 sources.

11 (2) Whether the designation of an activity as a

12 safe harbor under subsection (a) will result in the

13 following outcomes:

14 (A) Health plans and other health care in15 surers, consumers of health care services, and

16 health care providers will be better able to ne17 gotiate payment and service arrangements

18 which will reduce costs to consumers.

19 (B) Taking into consideration the charac20 teristics of the particular purchasers and pro21 viders involved, competition will not be unduly

22 restricted.

23 (C) Equally efficient and less restrictive al24 ternatives do not exist to meet the criteria de25 scribed in paragraph (1).
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1 (D) The activity will not unreasonably

2 foreclose competition by denying competitors a

3 necessary element of competition.

4 SEC. 604. CERTIFICATES OF REVIEW.

5 (a) ESTABLISHMENT OF PROGRAM.—In consultation

6 with the Secretary and the Chair, the Attorney General

7 shall (not later than 180 days after the date of the enact8 ment of this Act) issue certificates of review in accordance

9 with this section for providers of health care services and

10 advise and assist any person with respect to applying for

11 such a certificate of review.

12 (b) PROCEDURES FOR APPLICATION FOR CERTIFI13 CATE.—

14 (1) FORM; CONTENT.—To apply for a certifi15 cate of review, a person shall submit to the Attorney

16 General a written application which—

17 (A) specifies the activities relating to the

18 provision of health care services which satisfy

19 the criteria described in section 603(b) and

20 which will be included in the certificate; and

21 (B) is in a form and contains any informa22 tion, including information pertaining to the

23 overall market in which the applicant operates,

24 required by rule or regulation promulgated

25 under section 607.
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1 (2) PUBLICATION OF NOTICE IN FEDERAL REG2 ISTER.—Within 10 days after an application submit3 ted under paragraph (1) is received by the Attorney

4 General, the Attorney General shall publish in the

5 Federal Register a notice that announces that an

6 application for a certificate of review has been sub7 mitted, identifies each person submitting the appli8 cation, and describes the conduct for which the ap9 plication is submitted.

10 (3) ESTABLISHMENT OF PROCEDURES FOR IS11 SUANCE OF CERTIFICATE.—In consultation with the

12 Chair and the Secretary, the Attorney General shall

13 establish procedures to be used in applying for and

14 in determining whether to approve an application for

15 a certificate of review under this title. Under such

16 procedures the Attorney General shall approve an

17 application if the Attorney General determines that

18 the activities to be covered under the certificate will

19 satisfy the criteria described in section 603(b) for

20 additional safe harbors designated under such sec21 tion and that the benefits of the issuance of the cer22 tificate will outweigh any disadvantages that may re23 sult from reduced competition.

24 (4) TIMING FOR DECISION ON APPLICATION.—
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1 (A) IN GENERAL.—Within 90 days after

2 the Attorney General receives an application for

3 a certificate of review, the Attorney General

4 shall determine whether the applicant’s health

5 care market activities are in accordance with

6 the procedures described in paragraph (3). If

7 the Attorney General, with the concurrence of

8 the Secretary, determines that such procedures

9 are met, the Attorney General shall issue to the

10 applicant a certificate of review. The certificate

11 of review shall specify—

12 (i) the health care market activities to

13 which the certificate applies,

14 (ii) the person to whom the certificate

15 of review is issued, and

16 (iii) any terms and conditions the At17 torney General or the Secretary deems nec18 essary to assure compliance with the appli19 cable procedures described in paragraph

20 (3).

21 (B) APPLICATIONS DEEMED APPROVED.—

22 If the Attorney General does not reject an ap23 plication before the expiration of the 90-period

24 beginning on the date the Attorney General re25 ceives the application, the Attorney General
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1 shall be deemed to have approved the applica2 tion and to have issued a certificate of review

3 relating to the applicant’s health care market

4 activities covered under the application.

5 (5) EXPEDITED ACTION.—If the applicant indi6 cates a special need for prompt disposition, the At7 torney General and the Secretary may expedite ac8 tion on the application, except that no certificate of

9 review may be issued within 30 days of publication

10 of notice in the Federal Register under subsection

11 (b)(2).

12 (6) ACTIONS UPON DENIAL.—

13 (A) NOTIFICATION.—If the Attorney Gen14 eral denies in whole or in part an application

15 for a certificate, the Attorney General shall no16 tify the applicant of the Attorney General’s de17 termination and the reasons for it.

18 (B) REQUEST FOR RECONSIDERATION.—

19 An applicant may, within 30 days of receipt of

20 notification that the application has been denied

21 in whole or in part, request the Attorney Gen22 eral to reconsider the determination. The Attor23 ney General, with the concurrence of the Sec24 retary, shall notify the applicant of the deter-
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1 mination upon reconsideration within 30 days

2 of receipt of the request.

3 (C) RETURN OF DOCUMENTS.—If the At4 torney General denies an application for the is5 suance of a certificate of review and thereafter

6 receives from the applicant a request for the re7 turn of documents submitted by the applicant

8 in connection with the application for the cer9 tificate, the Attorney General and the Secretary

10 shall return to the applicant, not later than 30

11 days after receipt of the request, the documents

12 and all copies of the documents available to the

13 Attorney General and the Secretary, except to

14 the extent that the information has been made

15 public under an exception to the rule against

16 public disclosure described in subsection

17 (g)(2)(B).

18 (7) FRAUDULENT PROCUREMENT.—A certifi19 cate of review shall be void ab initio with respect to

20 any health care market activities for which the cer21 tificate was procured by fraud.

22 (c) AMENDMENT AND REVOCATION OF CERTIFI23 CATES.—

24 (1) NOTIFICATION OF CHANGES.—Any appli25 cant who receives a certificate of review—
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1 (A) shall promptly report to the Attorney

2 General any change relevant to the matters

3 specified in the certificate; and

4 (B) may submit to the Attorney General

5 an application to amend the certificate to re6 flect the effect of the change on the conduct

7 specified in the certificate.

8 (2) AMENDMENT TO CERTIFICATE.—An appli9 cation for an amendment to a certificate of review

10 shall be treated as an application for the issuance of

11 a certificate. The effective date of an amendment

12 shall be the date on which the application for the

13 amendment is submitted to the Attorney General.

14 (3) REVOCATION.—

15 (A) GROUNDS FOR REVOCATION.—In ac16 cordance with this paragraph, the Attorney

17 General may revoke in whole or in part a cer18 tificate of review issued under this section. The

19 following shall be considered grounds for the

20 revocation of a certificate:

21 (i) After the expiration of the 2-year

22 period beginning on the date a person’s

23 certificate is issued, the activities of the

24 person have not substantially accomplished
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1 the purposes for the issuance of the certifi2 cate.

3 (ii) The person has failed to comply

4 with any of the terms or conditions im5 posed under the certificate by the Attorney

6 General or the Secretary under subsection

7 (b)(4).

8 (iii) The activities covered under the

9 certificate no longer satisfy the criteria set

10 forth in section 603(b).

11 (B) REQUEST FOR COMPLIANCE INFORMA12 TION.—If the Attorney General or Secretary

13 has reason to believe that any of the grounds

14 for revocation of a certificate of review de15 scribed in subparagraph (A) may apply to a

16 person holding the certificate, the Attorney

17 General shall request such information from

18 such person as the Attorney General or the Sec19 retary deems necessary to resolve the matter of

20 compliance. Failure to comply with such request

21 shall be grounds for revocation of the certificate

22 under this paragraph.

23 (C) PROCEDURES FOR REVOCATION.—If

24 the Attorney General or the Secretary deter25 mines that any of the grounds for revocation of
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•S 1743 IS1S

1 a certificate of review described in subpara2 graph (A) apply to a person holding the certifi3 cate, or that such person has failed to comply

4 with a request made under subparagraph (B),

5 the Attorney General shall give written notice of

6 the determination to such person. The notice

7 shall include a statement of the circumstances

8 underlying, and the reasons in support of, the

9 determination. In the 60-day period beginning

10 30 days after the notice is given, the Attorney

11 General shall revoke the certificate or modify it

12 as the Attorney General or the Secretary deems

13 necessary to cause the certificate to apply only

14 to activities that meet the procedures for the is15 suance of certificates described in subsection

16 (b)(2).

17 (D) INVESTIGATION AUTHORITY.—For

18 purposes of carrying out this paragraph, the

19 Attorney General may conduct investigations in

20 the same manner as the Attorney General con21 ducts investigations under section 3 of the Anti22 trust Civil Process Act, except that no civil in23 vestigative demand may be issued to a person

24 to whom a certificate of review is issued if such

25 person is the target of such investigation.
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1 (d) REVIEW OF DETERMINATIONS.—

2 (1) AVAILABILITY OF REVIEW FOR CERTAIN AC3 TIONS.—If the Attorney General denies, in whole or

4 in part, an application for a certificate of review or

5 for an amendment to a certificate, or revokes or

6 modifies a certificate pursuant to paragraph (3), the

7 applicant or certificate holder (as the case may be)

8 may, within 30 days of the denial or revocation,

9 bring an action in any appropriate district court of

10 the United States to set aside the determination on

11 the ground that such determination is erroneous

12 based on the preponderance of the evidence.

13 (2) NO OTHER REVIEW PERMITTED.—Except

14 as provided in paragraph (1), no action by the At15 torney General or the Secretary pursuant to this

16 title shall be subject to judicial review.

17 (3) EFFECT OF REJECTED APPLICATION.—If

18 the Attorney General denies, in whole or in part, an

19 application for a certificate of review or for an

20 amendment to a certificate, or revokes or amends a

21 certificate, neither the negative determination nor

22 the statement of reasons therefore shall be admissi23 ble in evidence, in any administrative or judicial pro24 ceeding, concerning any claim under the antitrust

25 laws.
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1 (e) PUBLICATION OF DECISIONS.—The Attorney

2 General shall publish a notice in the Federal Register on

3 a timely basis of each decision made with respect to an

4 application for a certificate of review under this section

5 or the amendment or revocation of such a certificate, in

6 a manner that protects the confidentiality of any propri7 etary information relating to the application.

8 (f) ANNUAL REPORTS.—Every person to whom a cer9 tificate of review is issued shall submit to the Attorney

10 General an annual report, in such form and at such time

11 as the Attorney General may require, that contains any

12 necessary updates to the information required under sub13 section (b) and a description of the activities of the holder

14 under the certificate during the preceding year.

15 (g) RESTRICTIONS ON DISCLOSURE OF INFORMA16 TION.—

17 (1) WAIVER OF DISCLOSURE REQUIREMENTS

18 UNDER ADMINISTRATIVE PROCEDURE ACT.—Infor19 mation submitted by any person in connection with

20 the issuance, amendment, or revocation of a certifi21 cate of review shall be exempt from disclosure under

22 section 552 of title 5, United States Code.

23 (2) RESTRICTIONS ON DISCLOSURE OF COM24 MERCIAL OR FINANCIAL INFORMATION.—
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1 (A) IN GENERAL.—Except as provided in

2 subparagraph (B), no officer or employee of the

3 United States shall disclose commercial or fi4 nancial information submitted in connection

5 with the issuance, amendment, or revocation of

6 a certificate of review if the information is priv7 ileged or confidential and if disclosure of the in8 formation would cause harm to the person who

9 submitted the information.

10 (B) EXCEPTIONS.—Subparagraph (A)

11 shall not apply with respect to information dis12 closed—

13 (i) upon a request made by the Con14 gress or any committee of the Congress,

15 (ii) in a judicial or administrative pro16 ceeding, subject to appropriate protective

17 orders,

18 (iii) with the consent of the person

19 who submitted the information,

20 (iv) in the course of making a deter21 mination with respect to the issuance,

22 amendment, or revocation of a certificate

23 of review, if the Attorney General deems

24 disclosure of the information to be nec-
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1 essary in connection with making the de2 termination,

3 (v) in accordance with any require4 ment imposed by a statute of the United

5 States, or

6 (vi) in accordance with any rule or

7 regulation promulgated under subsection

8 (i) permitting the disclosure of the infor9 mation to an agency of the United States

10 or of a State on the condition that the

11 agency will disclose the information only

12 under the circumstances specified in

13 clauses (i) through (v).

14 (3) PROHIBITION AGAINST USE OF INFORMA15 TION TO SUPPORT OR ANSWER CLAIMS UNDER ANTI16 TRUST LAWS.—Any information disclosed in an ap17 plication for a certificate of review under this section

18 shall only be admissible into evidence in a judicial or

19 administrative proceeding for the sole purpose of es20 tablishing that a person is entitled to the protections

21 provided by such a certificate.
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1 SEC. 605. NOTIFICATIONS PROVIDING REDUCTION IN CER2 TAIN PENALTIES UNDER ANTITRUST LAW

3 FOR HEALTH CARE COOPERATIVE VEN4 TURES.

5 (a) NOTIFICATIONS DESCRIBED.—

6 (1) SUBMISSION OF NOTIFICATION BY VEN7 TURE.—Any party to a health care cooperative ven8 ture, acting on such venture’s behalf, may, not later

9 than 90 days after entering into a written agreement

10 to form such venture or not later than 90 days after

11 the date of the enactment of this Act, whichever is

12 later, file with the Attorney General a written notifi13 cation disclosing—

14 (A) the identities of the parties to such

15 venture,

16 (B) the nature and objectives of such ven17 ture, and

18 (C) such additional information as the At19 torney General may require by regulation.

20 (2) ACTIVITIES DEEMED SUBMISSION OF NOTI21 FICATION.—The following health care cooperative

22 ventures shall be deemed to have filed a written noti23 fication with respect to the venture under paragraph

24 (1):

25 (A) SUBMISSION OF APPLICATION FOR

26 CERTIFICATE OF REVIEW.—Any health care co-
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1 operative venture for which an application for a

2 certificate of review is filed with the Attorney

3 General under section 603.

4 (B) CERTAIN VENTURES.—Any health care

5 cooperative venture meeting the following re6 quirements:

7 (i) The venture consists of a network

8 of non-institutional providers not greater

9 than—

10 (I) in the case of a nonexclusive

11 network in which the participating

12 members are permitted to create or

13 join other competing networks, 50

14 percent of the providers of health care

15 services in the relevant geographic

16 area and 50 percent of the members

17 of the provider specialty group in the

18 relevant market; or

19 (II) in the case of an exclusive

20 network in which the participating

21 members are not permitted to create

22 or join other competing networks, 35

23 percent of the providers of health care

24 services in the relevant geographic

25 area and 35 percent of the members
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1 of the provider specialty group in the

2 relevant market.

3 (ii) Each member of the venture as4 sumes substantial financial risk for the op5 eration of the venture through risk-sharing

6 arrangements, including (but not limited

7 to)—

8 (I) the acceptance of capitation

9 contracts;

10 (II) the acceptance of contracts

11 with fee withholding mechanisms re12 lating to the ability to meet estab13 lished goals for utilization review and

14 management; and

15 (III) the holding by members of

16 significant ownership or equity inter17 ests in the venture, where the capital

18 contributed by the members is used to

19 fund the operational costs of the ven20 ture such as administration, market21 ing, and computer-operated medical

22 information, if the venture develops

23 and operates comprehensive programs

24 for utilization management and qual25 ity assurance that include controls
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1 over the use of institutional, special2 ized, and ancillary medical services.

3 (3) SUBMISSION OF ADDITIONAL INFORMA4 TION.—

5 (A) REQUEST OF ATTORNEY GENERAL.—

6 At any time after receiving a notification filed

7 under paragraph (1), the Attorney General may

8 require the submission of additional information

9 or documentary material relevant to the pro10 posed health care cooperative venture.

11 (B) PARTIES TO VENTURE.—Any party to

12 a health care cooperative venture may submit

13 such additional information on the venture’s be14 half as may be appropriate to ensure that the

15 venture will receive the protections provided

16 under subsection (b).

17 (C) REQUIRED SUBMISSION OF INFORMA18 TION ON CHANGES TO VENTURE.—A health

19 care cooperative venture for which a notification

20 is in effect under this section shall submit infor21 mation on any change in the membership of the

22 venture not later than 90 days after such

23 change occurs.

24 (4) PUBLICATION OF NOTIFICATION.—
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1 (A) INFORMATION MADE PUBLICLY AVAIL2 ABLE.—Not later than 30 days after receiving

3 a notification with respect to a venture under

4 paragraph (1), the Attorney General shall pub5 lish in the Federal Register a notice with re6 spect to the venture that identifies the parties

7 to the venture and generally describes the pur8 pose and planned activity of the venture. Prior

9 to its publication, the contents of the notice

10 shall be made available to the parties to the

11 venture.

12 (B) RESTRICTION ON DISCLOSURE OF

13 OTHER INFORMATION.—All information and

14 documentary material submitted pursuant to

15 this section and all information obtained by the

16 Attorney General in the course of any investiga17 tion or case with respect to a potential violation

18 of the antitrust laws by the health care coopera19 tive venture (other than information and mate20 rial described in subparagraph (A)) shall be ex21 empt from disclosure under section 552 of title

22 5, United States Code, and shall not be made

23 publicly available by any agency of the United

24 States to which such section applies except in
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•S 1743 IS1S

1 a judicial proceeding in which such information

2 and material is subject to any protective order.

3 (5) WITHDRAWAL OF NOTIFICATION.—Any per4 son who files a notification pursuant to this section

5 may withdraw such notification before a publication

6 by the Attorney General pursuant to paragraph (4).

7 Any person who is deemed to have filed a notifica8 tion under paragraph (2)(A) shall be deemed to have

9 withdrawn the notification if the certificate of review

10 in question is revoked or withdrawn under section

11 604.

12 (6) NO JUDICIAL REVIEW PERMITTED.—Any

13 action taken or not taken by the Attorney General

14 with respect to notifications filed pursuant to this

15 subsection shall not be subject to judicial review.

16 (b) PROTECTIONS FOR VENTURES SUBJECT TO NO17 TIFICATION.—

18 (1) IN GENERAL.—

19 (A) PROTECTIONS DESCRIBED.—The pro20 visions of paragraphs (2), (3), (4), and (5) shall

21 apply with respect to any action under the anti22 trust laws challenging conduct within the scope

23 of a notification which is in effect pursuant to

24 subsection (a)(1).
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1 (B) TIMING OF PROTECTIONS.—The pro2 tections described in this subsection shall apply

3 to the venture that is the subject of a notifica4 tion under subsection (a)(1) as of the earlier

5 of—

6 (i) the date of the publication in the

7 Federal Register of the notice published

8 with respect to the notification; or

9 (ii) if such notice is not published dur10 ing the period required under subsection

11 (a)(4), the expiration of the 30-day period

12 that begins on the date the Attorney Gen13 eral receives any necessary information re14 quired to be submitted under subsection

15 (a)(1) or any additional information re16 quired by the Attorney General under sub17 section (a)(3)(A).

18 (2) APPLICABILITY OF RULE OF REASON

19 STANDARD.—In any action under the antitrust laws,

20 the conduct of any person which is within the scope

21 of a notification filed under subsection (a) shall not

22 be deemed illegal per se, but shall be judged on the

23 basis of its reasonableness, taking into account all

24 relevant factors affecting competition, including, but
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1 not limited to, effects on competition in relevant

2 markets.

3 (3) LIMITATION ON RECOVERY TO ACTUAL

4 DAMAGES AND INTEREST.—Notwithstanding section

5 4 of the Clayton Act, any person who is entitled to

6 recovery under the antitrust laws for conduct that is

7 within the scope of a notification filed under sub8 section (a) shall recover the actual damages sus9 tained by such person and interest calculated at the

10 rate specified in section 1961 of title 28, United

11 States Code, for the period beginning on the earliest

12 date for which injury can be established and ending

13 on the date of judgment, unless the court finds that

14 the award of all or part of such interest is unjust

15 under the circumstances.

16 (4) AWARD OF ATTORNEY’S FEES AND COSTS

17 OF SUIT.—

18 (A) IN GENERAL.—In any action under the

19 antitrust laws brought against a health care co20 operative venture for conduct that is within the

21 scope of a notification filed under subsection

22 (a), the court shall, at the conclusion of the ac23 tion—

24 (i) award to a substantially prevailing

25 claimant the cost of suit attributable to
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1 such claim, including a reasonable attor2 ney’s fee, or

3 (ii) award to a substantially prevailing

4 party defending against such claim the

5 cost of such suit attributable to such claim,

6 including reasonable attorney’s fee, if the

7 claim, or the claimant’s conduct during

8 litigation of the claim, was frivolous, un9 reasonable, without foundation, or in bad

10 faith.

11 (B) OFFSET IN CASES OF BAD FAITH.—

12 The court may reduce an award made pursuant

13 to subparagraph (A) in whole or in part by an

14 award in favor of another party for any part of

15 the cost of suit (including a reasonable attor16 ney’s fee) attributable to conduct during the

17 litigation by any prevailing party that the court

18 finds to be frivolous, unreasonable, without

19 foundation, or in bad faith.

20 (5) RESTRICTIONS ON ADMISSIBILITY OF IN21 FORMATION.—

22 (A) IN GENERAL.—Any information dis23 closed in a notification submitted under sub24 section (a)(1) and the fact of the publication of

25 a notification by the Attorney General under
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1 subsection (a)(4) shall only be admissible into

2 evidence in a judicial or administrative proceed3 ing for the sole purpose of establishing that a

4 party to a health care cooperative venture is en5 titled to the protections described in this sub6 section.

7 (B) ACTIONS OF ATTORNEY GENERAL.—

8 No action taken by the Attorney General pursu9 ant to this section shall be admissible into evi10 dence in any judicial or administrative proceed11 ing for the purpose of supporting or answering

12 any claim under the antitrust laws.

13 SEC. 606. REVIEW AND REPORTS ON SAFE HARBORS AND

14 CERTIFICATES OF REVIEW.

15 (a) IN GENERAL.—The Attorney General (in con16 sultation with the Secretary and the Chair) shall periodi17 cally review the safe harbors described in section 602, the

18 additional safe harbors designated under section 603, and

19 the certificates of review issued under section 604, and—

20 (1) with respect to the safe harbors described in

21 section 602, submit such recommendations to Con22 gress as the Attorney General considers appropriate

23 for modifications of such safe harbors;

24 (2) with respect to the additional safe harbors

25 under designated under section 603, issue proposed
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1 revisions to such activities and publish the revisions

2 in the Federal Register; and

3 (3) with respect to the certificates of review,

4 submit a report to Congress on the issuance of such

5 certificates, and shall include in the report a descrip6 tion of the effect of such certificates on increasing

7 access to high quality health care services at reduced

8 costs.

9 (b) RECOMMENDATIONS FOR LEGISLATION.—The

10 Attorney General shall include in the reports submitted

11 under subsection (a)(3) any recommendations of the At12 torney General for legislation to improve the program for

13 the issuance of certificates of review established under this

14 title.

15 SEC. 607. RULES, REGULATIONS, AND GUIDELINES.

16 (a) SAFE HARBORS, CERTIFICATES, AND NOTIFICA17 TIONS.—The Attorney General, with the concurrence of

18 the Secretary, shall promulgate such rules, regulations,

19 and guidelines as are necessary to carry out sections 602,

20 603, 604, and 605, including guidelines defining or relat21 ing to relevant geographic and product markets for health

22 care services and providers of health care services.

23 (b) GUIDANCE FOR PROVIDERS.—

24 (1) IN GENERAL.—To promote greater cer25 tainty regarding the application of the antitrust laws
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1 to activities in the health care market, the Attorney

2 General, in consultation with the Secretary and the

3 Chair, shall (not later than 1 year after the date of

4 the enactment of this Act), taking into account the

5 criteria used to designate additional safe harbors

6 under section 603 and grant certificates of review

7 under section 604, publish guidelines—

8 (A) to assist providers of health care serv9 ices in analyzing whether the activities of such

10 providers may be subject to a safe harbor under

11 sections 602 or 603; and

12 (B) describing specific types of activities

13 which would meet the requirements for a cer14 tificate of review under section 604, and sum15 marizing the factual and legal bases on which

16 the activities would meet the requirements.

17 (2) PERIODIC UPDATE.—The Attorney General

18 shall periodically update the guidelines published

19 under paragraph (1) as the Attorney General consid20 ers appropriate.

21 (3) WAIVER OF ADMINISTRATIVE PROCEDURE

22 ACT.—Section 553 of title 5, United States Code,

23 shall not apply to the issuance of guidelines under

24 paragraph (1).
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1 SEC. 608. DEFINITIONS.

2 In this title, the following definitions shall apply:

3 (1) The term ‘‘antitrust laws’’—

4 (A) has the meaning given it in subsection

5 (a) of the first section of the Clayton Act (15

6 U.S.C. 12(a)), except that such term includes

7 section 5 of the Federal Trade Commission Act

8 (15 U.S.C. 45) to the extent such section ap9 plies to unfair methods of competition; and

10 (B) includes any State law similar to the

11 laws referred to in subparagraph (A).

12 (2) The term ‘‘Chair’’ means the Chair of the

13 Federal Trade Commission.

14 (3) The term ‘‘health insurance plan’’ has the

15 meaning given such term in section 111(b).

16 (4) The term ‘‘health care cooperative venture’’

17 means any activities, including attempts to enter

18 into or perform a contract or agreement, carried out

19 by 2 or more persons for the purpose of providing

20 health care services.

21 (5) The term ‘‘health care services’’ means any

22 services for which payment may be made under a

23 health insurance plan, including services related to

24 the delivery or administration of such services.

25 (6) The term ‘‘medical self-regulatory entity’’

26 means a medical society or association, a specialty
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1 board, a recognized accrediting agency, or a hospital

2 medical staff, and includes the members, officers,

3 employees, consultants, and volunteers or commit4 tees of such an entity.

5 (7) The term ‘‘person’’ includes a State or unit

6 of local government.

7 (8) The term ‘‘provider of health care services’’

8 means any individual or entity that is engaged in the

9 delivery of health care services in a State and that

10 is required by State law or regulation to be licensed

11 or certified by the State to engage in the delivery of

12 such services in the State.

13 (9) The term ‘‘specialty group’’ means a medi14 cal specialty or subspecialty in which a provider of

15 health care services may be licensed to practice by

16 a State (as determined by the Secretary in consulta17 tion with the certification boards for such specialties

18 and subspecialties).

19 (10) The term ‘‘standard setting and enforce20 ment activities’’ means—

21 (A) accreditation of health care practition22 ers, health care providers, medical education in23 stitutions, or medical education programs,

24 (B) technology assessment and risk man25 agement activities,
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1 (C) the development and implementation of

2 practice guidelines or practice parameters, or

3 (D) official peer review proceedings under4 taken by a hospital medical staff (or committee

5 thereof) or a medical society or association for

6 purposes of evaluating the professional conduct

7 or quality of health care provided by a medical

8 professional.

9 TITLE VII—LONG-TERM CARE

10 SEC. 701. EXCLUSION FROM GROSS INCOME FOR AMOUNTS

11 WITHDRAWN FROM INDIVIDUAL RETIRE12 MENT PLANS OR 401(k) PLANS FOR LONG13 TERM CARE INSURANCE.

14 (a) IN GENERAL.—Part III of subchapter B of chap15 ter 1 of the Internal Revenue Code of 1986 (relating to

16 items specifically excluded from gross income) is amended

17 by redesignating section 137 as section 138 and by insert18 ing after section 136 the following new section:

19 ‘‘SEC. 137. DISTRIBUTIONS FROM INDIVIDUAL RETIREMENT

20 ACCOUNTS AND SECTION 401(k) PLANS FOR

21 LONG-TERM CARE INSURANCE.

22 ‘‘(a) GENERAL RULE.—The amount includible in the

23 gross income of an individual for the taxable year by rea24 son of qualified distributions during such taxable year

25 shall not exceed the excess of—
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1 ‘‘(1) the amount which would (but for this sec2 tion) be so includible by reason of such distributions,

3 over

4 ‘‘(2) the aggregate premiums paid by such indi5 vidual during such taxable year for any long-term

6 care insurance contract for the benefit of such indi7 vidual or the spouse of such individual.

8 ‘‘(b) QUALIFIED DISTRIBUTION.—For purposes of

9 this section, the term ‘qualified distribution’ means any

10 distribution to an individual from an individual retirement

11 account or a section 401(k) plan if such individual has

attained age 591 12 ⁄2 on or before the date of the distribution

13 (and, in the case of a distribution used to pay premiums

14 for the benefit of the spouse of such individual, such

spouse has attained age 591 15 ⁄2 on or before the date of the

16 distribution).

17 ‘‘(c) DEFINITIONS AND SPECIAL RULES RELATING

18 TO LONG-TERM INSURANCE CONTRACTS.—

19 ‘‘(1) LONG-TERM CARE INSURANCE CON20 TRACT.—

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

22 section, the term ‘long-term care insurance con23 tract’ means any insurance contract issued if—

24 ‘‘(i) the only insurance protection pro25 vided under such contract is coverage of
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1 qualified long-term care services and bene2 fits incidental to such coverage,

3 ‘‘(ii) the maximum benefit under the

4 policy for expenses incurred for any day

5 does not exceed $200,

6 ‘‘(iii) such contract does not cover ex7 penses incurred for services or items to the

8 extent that such expenses are reimbursable

9 under title XVIII of the Social Security

10 Act or would be so reimbursable but for

11 the application of a deductible or coinsur12 ance amount,

13 ‘‘(iv) such contract is guaranteed re14 newable,

15 ‘‘(v) such contract does not have any

16 cash surrender value, and

17 ‘‘(vi) all refunds of premiums, and all

18 policyholder dividends or similar amounts,

19 under such contract are to be applied as a

20 reduction in future premiums or to in21 crease future benefits.

22 ‘‘(B) SPECIAL RULES.—

23 ‘‘(i) PER DIEM, ETC. PAYMENTS PER24 MITTED.—A contract shall not fail to be

25 treated as described in subparagraph
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1 (A)(i) by reason of payments being made

2 on a per diem or other periodic basis with3 out regard to the expenses incurred during

4 the period to which the payments relate.

5 ‘‘(ii) CONTRACT MAY COVER MEDI6 CARE REIMBURSABLE EXPENSES WHERE

7 MEDICARE IS SECONDARY PAYOR.—Sub8 paragraph (A)(iii) shall not apply to ex9 penses which are reimbursable under title

10 XVIII of the Social Security Act only as a

11 secondary payor.

12 ‘‘(iii) REFUNDS OF PREMIUMS.—Sub13 paragraph (A)(vi) shall not apply to any

14 refund of premiums on surrender or can15 cellation of the contract.

16 ‘‘(2) QUALIFIED LONG-TERM CARE SERVICES.—

17 For purposes of this subsection—

18 ‘‘(A) IN GENERAL.—The term ‘qualified

19 long-term care services’ means necessary diag20 nostic, preventive, therapeutic, and rehabilita21 tive services, and maintenance or personal care

22 services, which—

23 ‘‘(i) are required by a chronically ill

24 individual in a qualified facility, and
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1 ‘‘(ii) are provided pursuant to a plan

2 of care prescribed by a licensed health care

3 practitioner.

4 ‘‘(B) CHRONICALLY ILL INDIVIDUAL.—

5 ‘‘(i) IN GENERAL.—The term ‘chron6 ically ill individual’ means any individual

7 who has been certified by a licensed health

8 care practitioner as—

9 ‘‘(I) being unable to perform

10 (without substantial assistance from

11 another individual) at least 2 activi12 ties of daily living (as defined in

13 clause (ii)) for a period of at least 90

14 days due to a loss of functional capac15 ity, or having a similar level of disabil16 ity (as determined by the Secretary in

17 consultation with the Secretary of

18 Health and Human Services), or

19 ‘‘(II) having a similar level of

20 disability due to cognitive impairment.

21 ‘‘(ii) ACTIVITIES OF DAILY LIVING.—

22 For purposes of clause (i), each of the fol23 lowing is an activity of daily living:

24 ‘‘(I) MOBILITY.—The process of

25 walking or wheeling on a level surface
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1 which may include the use of an

2 assistive device such as a cane, walk3 er, wheelchair, or brace.

4 ‘‘(II) DRESSING.—The overall

5 complex behavior of getting clothes

6 from closets and drawers and then

7 getting dressed.

8 ‘‘(III) TOILETING.—The act of

9 going to the toilet room for bowel and

10 bladder function, transferring on and

11 off the toilet, cleaning after elimi12 nation, and arranging clothes or the

13 ability to voluntarily control bowel and

14 bladder function, or in the event of in15 continence, the ability to maintain a

16 reasonable level of personal hygiene.

17 ‘‘(IV) TRANSFER.—The process

18 of getting in and out of bed or in and

19 out of a chair or wheelchair.

20 ‘‘(V) EATING.—The process of

21 getting food from a plate or its equiv22 alent into the mouth.

23 ‘‘(C) QUALIFIED FACILITY.—The term

24 ‘qualified facility’ means—
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1 ‘‘(i) a nursing, rehabilitative, hospice,

2 or adult day care facility (including a hos3 pital, retirement home, nursing home,

4 skilled nursing facility, intermediate care

5 facility, or similar institution)—

6 ‘‘(I) which is licensed under

7 State law, or

8 ‘‘(II) which is a certified facility

9 for purposes of title XVIII or XIX of

10 the Social Security Act, or

11 ‘‘(ii) an individual’s home if a licensed

12 health care practitioner certifies that with13 out home care the individual would have to

14 be cared for in a facility described in

15 clause (i).

16 ‘‘(D) MAINTENANCE OR PERSONAL CARE

17 SERVICES.—The term ‘maintenance or personal

18 care services’ means any care the primary pur19 pose of which is to provide needed assistance

20 with any of the activities of daily living de21 scribed in subparagraph (B)(ii).

22 ‘‘(E) LICENSED HEALTH CARE PRACTI23 TIONER.—The term ‘licensed health care practi24 tioner’ means any physician (as defined in sec25 tion 1861(r) of the Social Security Act) and
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1 any registered professional nurse, licensed social

2 worker, or other individual who meets such re3 quirements as may be prescribed by the Sec4 retary.

5 ‘‘(3) INFLATION ADJUSTMENT OF $200 BENEFIT

6 LIMIT.—

7 ‘‘(A) IN GENERAL.—In the case of a cal8 endar year after 1995, the $200 amount con9 tained in paragraph (1)(A)(ii) shall be in10 creased for such calendar year by the medical

11 care cost adjustment for such calendar year. If

12 any increase determined under the preceding

13 sentence is not a multiple of $10, such increase

14 shall be rounded to the nearest multiple of $10.

15 ‘‘(B) MEDICAL CARE COST ADJUST16 MENT.—For purposes of subparagraph (A), the

17 medical care cost adjustment for any calendar

18 year is the percentage (if any) by which—

19 ‘‘(i) the medical care component of

20 the Consumer Price Index (as defined in

21 section 1(f)(5)) for August of the preced22 ing calendar year, exceeds

23 ‘‘(ii) such component for August of

24 1994.’’
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1 ‘‘(d) OTHER DEFINITIONS.—For purposes of this

2 section—

3 ‘‘(1) INDIVIDUAL RETIREMENT ACCOUNT.—The

4 term ‘individual retirement account’ has the mean5 ing given such term by section 408(a).

6 ‘‘(2) SECTION 401(k) PLAN.—The term ‘section

7 401(k) plan’ means any employer plan which meets

8 the requirements of section 401(a) and which in9 cludes a qualified cash or deferred arrangement (as

10 defined in section 401(k)).

11 ‘‘(e) SPECIAL RULES FOR SECTION 401(k) PLANS.—

12 ‘‘(1) WITHDRAWALS CANNOT EXCEED ELEC13 TIVE CONTRIBUTIONS UNDER QUALIFIED CASH OR

14 DEFERRED ARRANGEMENT.—This section shall not

15 apply to any distribution from a section 401(k) plan

16 to the extent the aggregate amount of such distribu17 tions for the use described in subsection (a) exceeds

18 the aggregate employer contributions made pursuant

19 to the employee’s election under section 401(k)(2).

20 ‘‘(2) WITHDRAWALS NOT TO CAUSE DISQUALI21 FICATION.—A plan shall not be treated as failing to

22 satisfy the requirements of section 401, and an ar23 rangement shall not be treated as failing to be a

24 qualified cash or deferred arrangement (as defined

25 in section 401(k)(2)), merely because under the plan
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1 or arrangement distributions are permitted which

2 are excludable from gross income by reason of this

3 section.’’

4 (b) CONFORMING AMENDMENTS.—

5 (1) Section 401(k) of such Code is amended by

6 adding at the end the following new paragraph:

7 ‘‘(11) CROSS REFERENCE.—

‘‘For provision permitting tax-free withdrawals

for payment of long-term care premiums, see section

137.’’

8 (2) Section 408(d) of such Code is amended by

9 adding at the end the following new paragraph:

10 ‘‘(8) CROSS REFERENCE.—

‘‘For provision permitting tax-free withdrawals

from individual retirement accounts for payment of

long-term care premiums, see section 137.’’

11 (3) The table of sections for such part III is

12 amended by striking the last item and inserting the

13 following new items:

‘‘Sec. 137. Distributions from individual retirement accounts and

section 401(k) plans for long-term care insurance.

‘‘Sec. 138. Cross references to other Acts.’’

14 SEC. 702. CERTAIN EXCHANGES OF LIFE INSURANCE CON15 TRACTS FOR LONG-TERM CARE INSURANCE

16 CONTRACTS NOT TAXABLE.

17 Subsection (a) of section 1035 of the Internal Reve18 nue Code of 1986 (relating to certain exchanges of insur19 ance contracts) is amended by striking the period at the
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1 end of paragraph (3) and inserting ‘‘; or’’, and by adding

2 at the end thereof the following new paragraph:

3 ‘‘(4) a contract of life insurance or an endow4 ment or annuity contract for a long-term care insur5 ance contract (as defined in section 137(c)(1)).’’

6 SEC. 703. TAX TREATMENT OF ACCELERATED DEATH BENE7 FITS UNDER LIFE INSURANCE CONTRACTS.

8 Section 101 of the Internal Revenue Code of 1986

9 (relating to certain death benefits) is amended by adding

10 at the end thereof the following new subsection:

11 ‘‘(g) TREATMENT OF CERTAIN ACCELERATED

12 DEATH BENEFITS.—

13 ‘‘(1) IN GENERAL.—For purposes of this sec14 tion, any amount paid or advanced to an individual

15 under a life insurance contract on the life of an in16 sured—

17 ‘‘(A) who is a terminally ill individual, or

18 ‘‘(B) who is a chronically ill individual (as

19 defined in section 137(c)(2)(B)) who is confined

20 to a qualified facility (as defined in section

21 137(c)(2)(C)(i)),

22 shall be treated as an amount paid by reason of the

23 death of such insured.

24 ‘‘(2) TERMINALLY ILL INDIVIDUAL.—For pur25 poses of this subsection, the term ‘terminally ill indi-
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1 vidual’ means an individual who has been certified

2 by a physician as having an illness or physical condi3 tion which can reasonably be expected to result in

4 death in 12 months or less.

5 ‘‘(3) PHYSICIAN.—For purposes of this sub6 section, the term ‘physician’ has the meaning given

7 to such term by section 137(c)(2)(E).’’

8 SEC. 704. EFFECTIVE DATE.

9 The amendments made by this subtitle shall apply to

10 taxable years beginning after December 31, 1994.

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