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[Congressional Bills 103th Congress]
[From the U.S. Government Publishing Office]
[S. 1757 Introduced in Senate (IS)]

103d CONGRESS
  1st Session
                                S. 1757

 To ensure individual and family security through health care coverage 
   for all Americans in a manner that contains the rate of growth in 
health care costs and promotes responsible health insurance practices, 
to promote choice in health care, and to ensure and protect the health 
                         care of all Americans.

_______________________________________________________________________

                   IN THE SENATE OF THE UNITED STATES

            November 20 (legislative day, November 2), 1993

Mr. Mitchell (for himself, Mr. Moynihan, Mr. Kennedy, Mr. Daschle, Mr. 
    Rockefeller, Mr. Riegle, Mr. Akaka, Mr. Baucus, Mrs. Boxer, Mr. 
Bumpers, Mr. Campbell, Mr. Conrad, Mr. Dodd, Mrs. Feinstein, Mr. Glenn, 
Mr. Graham, Mr. Harkin, Mr. Inouye, Mr. Jeffords, Mr. Leahy, Mr. Levin, 
 Mr. Mathews, Ms. Mikulski, Ms. Moseley-Braun, Mrs. Murray, Mr. Pell, 
     Mr. Pryor, Mr. Reid, Mr. Simon, and Mr. Wofford) (by request) 
      introduced the following bill; which was read the first time

_______________________________________________________________________

                                 A BILL

 
 To ensure individual and family security through health care coverage 
   for all Americans in a manner that contains the rate of growth in 
health care costs and promotes responsible health insurance practices, 
to promote choice in health care, and to ensure and protect the health 
                         care of all Americans.

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

                                                                  Table

SECTION 1. SHORT TITLE; TABLE OF TITLES AND SUBTITLES.

    (a) Short Title.--This Act may be cited as the ``Health Security 
Act''.
    (b) Table of Titles and Subtitles in Act.--The following are the 
titles and subtitles contained in this Act:

                                                                   Page
                     TITLE I--HEALTH CARE SECURITY

Subtitle A--Universal Coverage and Individual Responsibility          8
Subtitle B--Benefits........................................         32
Subtitle C--State Responsibilities..........................         95
Subtitle D--Health Alliances................................        118
Subtitle E--Health Plans....................................        224
Subtitle F--Federal Responsibilities........................        256
Subtitle G--Employer Responsiblities........................        303
Subtitle J--General Definitions; Miscellaneous Provisions...        323
                         TITLE II--NEW BENEFITS

Subtitle A--Medicare Outpatient Prescription Drug Benefit...        343
Subtitle B--Long-Term Care..................................        389
                  TITLE III--PUBLIC HEALTH INITIATIVES

Subtitle A--Workforce Priorities Under Federal Payments.....        504
Subtitle B--Academic Health Centers.........................        548
Subtitle C--Health Research Initiatives.....................        560
Subtitle D--Core Functions of Public Health Programs;               564
                            National Initiatives Regarding 
                            Preventive Health.
Subtitle E--Health Services for Medically Underserved               578
                            Populations.
Subtitle F--Mental Health; Substance Abuse..................        615
Subtitle G--Comprehensive School Health Education; School-          627
                            Related Health Services.
Subtitle H--Public Health Service Initiative................        667
Subtitle I--Coordination With COBRA Continuation Coverage...        668
                    TITLE IV--MEDICARE AND MEDICAID

Subtitle A--Medicare and the Alliance System................        674
Subtitle B--Savings in Medicare Program.....................        752
Subtitle C--Medicaid........................................        807
Subtitle D--Increase in SSI Personal Needs Allowance........        832
                TITLE V--QUALITY AND CONSUMER PROTECTION

Subtitle A--Quality Management and Improvement..............        835
Subtitle B--Information Systems, Privacy, and Administrative        859
                            Simplification.
Subtitle C--Remedies and Enforcement........................        887
Subtitle D--Medical Malpractice.............................        933
Subtitle E--Fraud and Abuse.................................        948
Subtitle F--McCarran-Ferguson Reform........................        979
   TITLE VI--PREMIUM CAPS; PREMIUM-BASED FINANCING; AND PLAN PAYMENTS

Subtitle A--Premium Caps....................................        984
Subtitle B--Premium-Related Financing.......................       1025
Subtitle C--Payments to Regional Alliance Health Plans......       1086
                     TITLE VII--REVENUE PROVISIONS

Subtitle A--Financing Provisions............................       1094
Subtitle B--Tax Treatment of Employer-Provided Health Care..       1133
Subtitle C--Employment Status Provisions....................       1143
Subtitle D--Tax Treatment of Funding of Retiree Health             1153
                            Benefits.
Subtitle E--Coordination With COBRA Continuing Care                1157
                            Provisions.
Subtitle F--Tax Treatment of Organizations Providing Health        1159
                            Care Services and Related 
                            Organizations.
Subtitle G--Tax Treatment of Long-term Care Insurance and          1171
                            Services.
Subtitle H--Tax Incentives for Health Services Providers....       1192
Subtitle I--Miscellaneous Provisions........................       1199
     TITLE VIII--HEALTH AND HEALTH-RELATED PROGRAMS OF THE FEDERAL 
                               GOVERNMENT

Subtitle A--Military Health Care Reform.....................       1207
Subtitle B--Department of Veterans Affairs..................       1218
Subtitle C--Federal Employees Health Benefits Program.......       1233
Subtitle D--Indian Health Service...........................       1249
Subtitle E--Amendments to the Employee Retirement Income           1262
                            Security Act of 1974.
Subtitle F--Special Fund for WIC Program....................       1274
     TITLE IX--AGGREGATE GOVERNMENT PAYMENTS TO REGIONAL ALLIANCES

Subtitle A--Aggregate State Payments........................       1277
Subtitle B--Aggregate Federal Alliance Payments.............       1296
Subtitle C--Borrowing Authority to Cover Cash-Flow                 1308
                            Shortfalls.
 TITLE X--COORDINATION OF MEDICAL PORTION OF WORKERS COMPENSATION AND 
                          AUTOMOBILE INSURANCE

Subtitle A--Workers Compensation Insurance..................       1314
Subtitle B--Automobile Insurance............................       1326
Subtitle C--Commission on Integration of Health Benefits....       1331
Subtitle D--Federal Employees' Compensation Act.............       1333
Subtitle E--Davis-Bacon Act and Service Contract Act........       1333
Subtitle F--Effective Dates.................................       1334
                TITLE XI--TRANSITIONAL INSURANCE REFORM

                                                               Findings

SEC. 2. FINDINGS.

    The Congress finds as follows:
            (1) Under the current health care system in the United 
        States--
                    (A) individuals risk losing their health care 
                coverage when they move, when they lose or change jobs, 
                when they become seriously ill, or when the coverage 
                becomes unaffordable;
                    (B) continued escalation of health care costs 
                threatens the economy of the United States, undermines 
                the international competitiveness of the Nation, and 
                strains Federal, State, and local budgets;
                    (C) an excessive burden of forms, paperwork, and 
                bureaucratic procedures confuses consumers and 
                overwhelms health care providers;
                    (D) fraud and abuse sap the strength of the health 
                care system; and
                    (E) health care is a critical part of the economy 
                of the United States and interstate commerce, consumes 
                a significant percentage of public and private 
                spending, and affects all industries and individuals in 
                the United States.
            (2) Under any reform of the health care system--
                    (A) health insurance and high quality health care 
                should be secure, uninterrupted, and affordable for all 
                individuals in the United States;
                    (B) comprehensive health care benefits that meet 
                the full range of health needs, including primary, 
                preventive, and specialized care, should be available 
                to all individuals in the United States;
                    (C) the current high quality of health care in the 
                United States should be maintained;
                    (D) individuals in the United States should be 
                afforded a meaningful opportunity to choose among a 
                range of health plans, health care providers, and 
                treatments;
                    (E) regulatory and administrative burdens should be 
                reduced;
                    (F) the rapidly escalating costs of health care 
                should be contained without sacrificing high quality or 
                impeding technological improvements;
                    (G) competition in the health care industry should 
                ensure that health plans and health care providers are 
                efficient and charge reasonable prices;
                    (H) a partnership between the Federal Government 
                and each State should allow the State and its local 
                communities to design an effective, high-quality system 
                of care that serves the residents of the State;
                    (I) all individuals should have a responsibility to 
                pay their fair share of the costs of health care 
                coverage;
                    (J) a health care system should build on the 
                strength of the employment-based coverage arrangements 
                that now exist in the United States;
                    (K) the penalties for fraud and abuse should be 
                swift and severe; and
                    (L) an individual's medical information should 
                remain confidential and should be protected from 
                unauthorized disclosure and use.

                                                               Purposes

SEC. 3. PURPOSES.

    The purposes of this Act are as follows:
            (1) To guarantee comprehensive and secure health care 
        coverage.
            (2) To simplify the health care system for consumers and 
        health care professionals.
            (3) To control the cost of health care for employers, 
        employees, and others who pay for health care coverage.
            (4) To promote individual choice among health plans and 
        health care providers.
            (5) To ensure high quality health care.
            (6) To encourage all individuals to take responsibility for 
        their health care coverage.

                     TITLE I--HEALTH CARE SECURITY

                       table of contents of title

                                                                   Page
      Subtitle A--Universal Coverage and Individual Responsibility

                       Part 1--Universal Coverage

Sec. 1001. Entitlement to health benefits...................         14
Sec. 1002. Individual responsibilities......................         15
Sec. 1003. Protection of consumer choice....................         15
Sec. 1004. Applicable health plan providing coverage........         16
Sec. 1005. Treatment of other nonimmigrants.................         17
Sec. 1006. Effective date of entitlement....................         18
            Part 2--Treatment of Families and Special Rules

Sec. 1011. General rule of enrollment of family in same              21
                            health plan.
Sec. 1012. Treatment of certain families....................         25
Sec. 1013. Multiple employment situations...................         30
Sec. 1014. Treatment of residents of States with statewide           32
                            single-payer systems.
                          Subtitle B--Benefits

                 Part 1--Comprehensive Benefit Package

Sec. 1101. Provision of comprehensive benefits by plans.....         32
           Part 2--Description of Items and Services Covered

Sec. 1111. Hospital services................................         34
Sec. 1112. Services of health professionals.................         36
Sec. 1113. Emergency and ambulatory medical and surgical             38
                            services.
Sec. 1114. Clinical preventive services.....................         38
Sec. 1115. Mental illness and substance abuse services......         46
Sec. 1116. Family planning services and services for                 63
                            pregnant women.
Sec. 1117. Hospice care.....................................         63
Sec. 1118. Home health care.................................         64
Sec. 1119. Extended care services...........................         64
Sec. 1120. Ambulance services...............................         66
Sec. 1121. Outpatient laboratory, radiology, and diagnostic          67
                            services.
Sec. 1122. Outpatient prescription drugs and biologicals....         67
Sec. 1123. Outpatient rehabilitation services...............         69
Sec. 1124. Durable medical equipment and prosthetic and              70
                            orthotic devices.
Sec. 1125. Vision care......................................         71
Sec. 1126. Dental care......................................         71
Sec. 1127. Health education classes.........................         73
Sec. 1128. Investigational treatments.......................         74
                          Part 3--Cost Sharing

Sec. 1131. Cost sharing.....................................         76
Sec. 1132. Lower cost sharing...............................         80
Sec. 1133. Higher cost sharing..............................         82
Sec. 1134. Combination cost sharing.........................         85
Sec. 1135. Table of copayments and coinsurance..............         86
Sec. 1136. Indexing dollar amounts relating to cost sharing.         89
                           Part 4--Exclusions

Sec. 1141. Exclusions.......................................         90
               Part 5--Role of the National Health Board

Sec. 1151. Definition of benefits...........................         92
Sec. 1152. Acceleration of expanded benefits................         92
Sec. 1153. Authority with respect to clinical preventive             93
                            services.
Sec. 1154. Establishment of standards regarding medical              94
                            necessity.
    Part 6--Additional Provisions Relating to Health Care Providers

Sec. 1161. Override of restrictive State practice laws......         95
Sec. 1162. Provision of items or services contrary to                95
                            religious belief or moral 
                            conviction.
                   Subtitle C--State Responsibilities

Sec. 1200. Participating State..............................         95
                 Part 1--General State Responsibilities

Sec. 1201. General State responsibilities...................         97
Sec. 1202. State responsibilities with respect to alliances.         98
Sec. 1203. State responsibilities relating to health plans..        101
Sec. 1204. Financial solvency; fiscal oversight; guaranty           106
                            fund.
Sec. 1205. Restrictions on funding of additional benefits...        108
          Part 2--Requirements for State Single-payer Systems

Sec. 1221. Single-payer system described....................        109
Sec. 1222. General requirements for single-payer systems....        109
Sec. 1223. Special rules for States operating statewide             114
                            single-payer system.
Sec. 1224. Special rules for alliance-specific single-payer         117
                            systems.
                      Subtitle D--Health Alliances

Sec. 1300. Health alliance defined..........................        118
       Part 1--Establsubpart a--regional alliancesrate Alliances
Sec. 1301. Regional alliance defined........................        118
Sec. 1302. Board of directors...............................        119
Sec. 1303. Provider asubpart b--corporate alliancesliances..        120
Sec. 1311. Corporate alliance defined; individuals eligible         121
                            for coverage through corporate 
                            alliances; additional 
                            definitions.
Sec. 1312. Timing of elections..............................        127
Sec. 1313. Termination of alliance election.................        129
 Part 2--General Responsibilities and Authorities of Regional Alliances

Sec. 1321. Contracts with health plans......................        131
Sec. 1322. Offering choice of health plans for enrollment;          132
                            establishment of fee-for-service 
                            schedule.
Sec. 1323. Enrollment rules and procedures..................        138
Sec. 1324. Issuance of health security cards................        148
Sec. 1325. Consumer information and marketing...............        148
Sec. 1326. Ombudsman........................................        150
Sec. 1327. Data collection; quality.........................        150
Sec. 1328. Additional duties................................        150
Sec. 1329. Additional authorities for regional alliances to         151
                            address needs in areas with 
                            inadequate health services; 
                            prohibition of insurance role.
Sec. 1330. Prohibition against self-dealing and conflicts of        152
                            interest.
Part 3--Authorities and Responsibilities of Regional Alliances Relating 
                 to Fsubpart a--collection of fundsions
Sec. 1341. Information and negotiation and acceptance of            153
                            bids.
Sec. 1342. Calculation and publication of general family            156
                            share and general employer 
                            premium amounts.
Sec. 1343. Determination of family share for families.......        158
Sec. 1344. Notice of family payments due....................        163
Sec. 1345. Collections......................................        168
Sec. 1346. Coordination amsubpart b--paymentsces............        171
Sec. 1351. Payment to regional alliance health plans........        174
Sec. 1352. Alliance administrative allowance percentage.....        178
Sec. 1353. Payments subpart c--financial managementcademic          179
                            health centers and graduate 
                            medical education.
Sec. 1subpart d--reductions in cost sharing; income determinations  180
Sec. 1371. Reduction in cost sharing for low-income families        183
Sec. 1372. Application process for cost sharing reductions..        186
Sec. 1373. Application for premium discounts and reduction          191
                            in liabilities to alliances.
Sec. 1374. General provisions relating to application               193
                            process.
Sec. 1375. End-of-year reconciliation for premium discount          196
                            and repayment reduction with 
                            actual income.
    Part 4--Responsibilities and Authorities of Corporate Alliances

Sec. 1381. Contracts with health plans......................        199
Sec. 1382. Offering choice of health plans for enrollment...        200
Sec. 1383. Enrollment; issuance of health security card.....        201
Sec. 1384. Community-rated premiums within premium areas....        203
Sec. 1385. Assistance for low-wage families.................        205
Sec. 1386. Consumer information and marketing; data                 206
                            collection and quality; 
                            additional duties.
Sec. 1387. Plan and information requirements................        206
Sec. 1388. Management of funds; relations with employees....        207
Sec. 1389. Cost control.....................................        207
Sec. 1390. Payments by corporate alliance employers to              208
                            corporate alliances.
Sec. 1391. Coordination of payments.........................        208
Sec. 1392. Applicability of ERISA enforcement mechanisms for        209
                            enforcement of certain 
                            requirements.
Sec. 1393. Applicability of certain ERISA protections to            209
                            enrolled individuals.
Sec. 1394. Disclosure and reserve requirements..............        210
Sec. 1395. Trusteeship by the Secretary of insolvent                211
                            corporate alliance health plans.
Sec. 1396. Guaranteed benefits under trusteeship of the             216
                            Secretary.
Sec. 1397. Imposition and collection of periodic assessments        220
                            on self-insured corporate 
                            alliance plans.
Sec. 1398. Payments to Federal government by multiemployer          224
                            corporate alliances for academic 
                            health centers and graduate 
                            medical education.
                        Subtitle E--Health Plans

Sec. 1400. Health plan defined..............................        224
     Part 1--Requirements Relating to Comprehensive Benefit Package

Sec. 1401. Application of requirements......................        226
Sec. 1402. Requirements relating to enrollment and coverage.        226
Sec. 1403. Community rating.................................        231
Sec. 1404. Marketing of health plans; information...........        231
Sec. 1405. Grievance procedure..............................        233
Sec. 1406. Health plan arrangements with providers..........        234
Sec. 1407. Preemption of certain State laws relating to             237
                            health plans.
Sec. 1408. Financial solvency...............................        239
Sec. 1409. Requirement for offering cost sharing policy.....        239
Sec. 1410. Quality assurance................................        239
Sec. 1411. Provider verification............................        239
Sec. 1412. Consumer disclosures of utilization management           240
                            protocols.
Sec. 1413. Confidentiality, data management, and reporting..        240
Sec. 1414. Participation in reinsurance system..............        241
        Part 2--Requirements Relating to Supplemental Insurance

Sec. 1421. Imposition of requirements on supplemental               241
                            insurance.
Sec. 1422. Standards for supplemental health benefit                243
                            policies.
Sec. 1423. Standards for cost sharing policies..............        246
     Part 3--Requirements Relating to Essential Community Providers

Sec. 1431. Health plan requirement..........................        249
Sec. 1432. Sunset of requirement............................        252
 Part 4--Requirements Relating to Workers' Compensation and Automobile 
                       Medical Liability Coverage

Sec. 1441. Reference to requirements relating to workers            256
                            compensation services.
Sec. 1442. Reference to requirements relating to automobile         256
                            medical liability services.
                  Subtitle F--Federal Responsibilities

           subpart a--establishment of national health board
Sec. 1501. Creation of National Health Board; membership....        256
Sec. 1502. Qualifications of board members..................        258
Sec. 1503. General duties and responsibilities..............        259
Sec. 1504. Annual report....................................        262
Sec. 1505. Powers...........................................        263
Ssubpart b--responsibilities relating to review and approval of state 4
                                systems
Sec. 1511. Federal review and action on State systems.......        264
Sec. 1512. Failure of participating States to meet                  270
                            conditions for compliance.
Sec. 1513. Reduction in payments for health programs by             272
                            Secretary of Health and Human 
                            Services.
Sec. 1514. Review of Federal determinations.................        273
Sec. 151subpart c--responsibilities in absence of state systems     273
Sec. 1521. Application of subpart...........................        275
Sec. 1522. Federal assumption of responsibilities in non-           275
                            participating States.
Sec. 1523. Imposition of surcharge on premiums under                277
                            federally-operated system.
Sec.subpart d--establishment of class factors for charging premiums 278
Ssubpart e--risk adjustment and reinsurance methodology for payment of 
                                 plans
Sec. 1541. Development of a risk adjustment and reinsurance         279
                            methodology.
Sec. 1542. Incentives to enroll disadvantaged groups........        285
Sec. 1543. Advisory committee...............................        285
Sec. 1544. Research and demonstrations......................        286
Sec. 1545subpart f--responsibilities for financial requirements     286
Sec. 1551. Capital standards for regional alliance health           286
                            plan.
Sec. 1552. Standard for guaranty funds......................        287
  Part 2--Responsisubpart a--general responsibilitiesd Human Services
Sec. 1571. General responsibilities of Secretary of Health          289
                            and Human Services.
Sec. 15subpart b--certification of essential community providers    290
Sec. 1581. Certification....................................        293
Sec. 1582. Categories of providers automatically certified..        293
Sec. 1583. Standards for additional providers...............        296
Sec. 1584. Certification process; review; termination of            297
                            certifications.
Sec. 1585. Notification of health alliances and                     299
                            participating States.
        Part 3--Specific Responsibilities of Secretary of Labor

Sec. 1591. Responsibilities of Secretary of Labor...........        300
                 Subtitle G--Employer Responsibilities
Sec. 1601. Payment requirement..............................        303
Sec. 1602. Requirement for information reporting............        303
Sec. 1603. Requirements relating to new employees...........        314
Sec. 1604. Auditing of records..............................        315
Sec. 1605. Prohibition of certain employer discrimination...        316
Sec. 1606. Prohibition on self-funding of cost sharing              316
                            benefits by regional alliance 
                            employers.
Sec. 1607. Equal voluntary contribution requirement.........        317
Sec. 1608. Employer retiree obligation......................        321
Sec. 1609. Enforcement......................................        323
       Subtitle J--General Definitions; Miscellaneous Provisions
                      Part 1--General Definitions
Sec. 1901. Definitions relating to employment and income....        323
Sec. 1902. Other general definitions........................        331
                  Subtitle B--Miscellaneous Provisions

Sec. 1911. Use of interim, final regulations................        341
Sec. 1912. Social Security Act references...................        341

                                                    Title I, Subtitle A

                     TITLE I--HEALTH CARE SECURITY

      Subtitle A--Universal Coverage and Individual Responsibility

                       PART 1--UNIVERSAL COVERAGE

SEC. 1001. ENTITLEMENT TO HEALTH BENEFITS.

    (a) In General.--In accordance with this part, each eligible 
individual is entitled to the comprehensive benefit package under 
subtitle B through the applicable health plan in which the individual 
is enrolled consistent with this title.
    (b) Health Security Card.--Each eligible individual is entitled to 
a health security card to be issued by the alliance or other entity 
that offers the applicable health plan in which the individual is 
enrolled.
    (c) Eligible Individual Defined.--In this Act, the term ``eligible 
individual'' means an individual who is residing in the United States 
and who is--
            (1) a citizen or national of the United States;
            (2) an alien permanently residing in the United States 
        under color of law (as defined in section 1902(1)); or
            (3) a long-term nonimmigrant (as defined in section 
        1902(19)).
    (d) Treatment of Medicare-Eligible Individuals.--Subject to section 
1012(a), a medicare-eligible individual is entitled to health benefits 
under the medicare program instead of the entitlement under subsection 
(a).
    (e) Treatment of Prisoners.--A prisoner (as defined in section 
1902(26)) is entitled to health care services provided by the authority 
responsible for the prisoner instead of the entitlement under 
subsection (a).

SEC. 1002. INDIVIDUAL RESPONSIBILITIES.

    (a) In General.--In accordance with this Act, each eligible 
individual (other than a medicare-eligible individual)--
            (1) must enroll in an applicable health plan for the 
        individual, and
            (2) must pay any premium required, consistent with this 
        Act, with respect to such enrollment.
    (b) Limitation on Disenrollment.--No eligible individual shall be 
disenrolled from an applicable health plan until the individual--
            (1) is enrolled under another applicable health plan, or
            (2) becomes a medicare-eligible individual.

SEC. 1003. PROTECTION OF CONSUMER CHOICE.

    Nothing in this Act shall be construed as prohibiting the 
following:
            (1) An individual from purchasing any health care services.
            (2) An individual from purchasing supplemental insurance 
        (offered consistent with this Act) to cover health care 
        services not included within the comprehensive benefit package.
            (3) An individual who is not an eligible individual from 
        purchasing health insurance (other than through a regional 
        alliance).
            (4) Employers from providing coverage for benefits in 
        addition to the comprehensive benefit package (subject to part 
        2 of subtitle E).

SEC. 1004. APPLICABLE HEALTH PLAN PROVIDING COVERAGE.

    (a) Specification of Applicable Health Plan.--Except as otherwise 
provided:
            (1) General rule: regional alliance health plans.--The 
        applicable health plan for a family is a regional alliance 
        health plan for the alliance area in which the family resides.
            (2) Corporate alliance health plans.--In the case of a 
        family member that is eligible to enroll in a corporate 
        alliance health plan under section 1311(c), the applicable 
        health plan for the family is such a corporate alliance health 
        plan.
    (b) Choice of Plans for Certain Groups.--
            (1) Military personnel and families.--For military 
        personnel and families who elect a Uniformed Services Health 
        Plan of the Department of Defense under section 1073a(d) of 
        title 10, United States Code, as inserted by section 8001(a) of 
        this Act, that plan shall be the applicable health plan.
            (2) Veterans.--For veterans and families who elect to 
        enroll in a veterans health plan under section 1801 of title 
        38, United States Code, as inserted by section 8101(a) of this 
        Act, that plan shall be the applicable health plan.
            (3) Indians.--For those individuals who are eligible to 
        enroll, and who elect to enroll, in a health program of the 
        Indian Health Service under section 8302(b) or 8306(b), that 
        program shall be the applicable health plan.

SEC. 1005. TREATMENT OF OTHER NONIMMIGRANTS.

    (a) Undocumented Aliens Ineligible for Benefits.--An undocumented 
alien is not eligible to obtain the comprehensive benefit package 
through enrollment in a health plan pursuant to this Act.
    (b) Diplomats and Other Foreign Government Officials.--Subject to 
conditions established by the National Health Board in consultation 
with the Secretary of State, a nonimmigrant under subparagraph (A) or 
(G) of section 101(a)(15) of the Immigration and Nationality Act may 
obtain the comprehensive benefit package through enrollment in the 
regional alliance health plan for the alliance area in which the 
nonimmigrant resides.
    (c) Reciprocal Treatment of Other Nonimmigrants.--With respect to 
those classes of individuals who are lawful nonimmigrants but who are 
not long-term nonimmigrants (as defined in section 1902(19)) or 
described in subsection (b), such individuals may obtain such benefits 
through enrollment with regional alliance health plans only in 
accordance with such reciprocal agreements between the United States 
and foreign states as may be entered into.

SEC. 1006. EFFECTIVE DATE OF ENTITLEMENT.

    (a) Regional Alliance Eligible Individuals.--
            (1) In general.--In the case of regional alliance eligible 
        individuals residing in a State, the entitlement under this 
        part (and requirements under section 1002) shall not take 
        effect until the State becomes a participating State (as 
        defined in section 1200).
            (2) Transitional rule for corporate alliances.--
                    (A) In general.--In the case of a State that 
                becomes a participating State before the general 
                effective date (as defined in subsection (c)) and for 
                periods before such date, under rules established by 
                the Board, an individual who is covered under a plan 
                (described in subparagraph (C)) based on the individual 
                (or the individual's spouse) being a qualifying 
                employee of a qualifying employer, the individual shall 
                not be treated under this Act as a regional alliance 
                eligible individual.
                    (B) Qualifying employer defined.--In subparagraph 
                (A), the term ``qualifying employer'' means an employer 
                that--
                            (i) is described in section 1311(b)(1)(A), 
                        or is participating in a multiemployer plan 
                        described in section 1311(b)(1)(B) or plan 
                        described in section 1311(b)(1)(C), and
                            (ii) provides such notice to the regional 
                        alliance involved as the Board specifies.
                    (C) Benefits plan described.--A plan described in 
                this subparagraph is an employee benefit plan that--
                            (i) provides (through insurance or 
                        otherwise) the comprehensive benefit package, 
                        and
                            (ii) provides an employer contribution of 
                        at least 80 percent of the premium (or premium 
                        equivalent) for coverage.
    (b) Corporate Alliance Eligible Individuals.--
            (1) In general.--In the case of corporate alliance eligible 
        individuals, the entitlement under this part shall not take 
        effect until the general effective date.
            (2) Transition.--For purposes of this Act and before the 
        general effective date, in the case of an eligible individual 
        who resides in a participating State, the individual is deemed 
        a regional alliance eligible individual until the individual 
        becomes a corporate alliance eligible individual, unless 
        subsection (a)(2)(A) applies to the individual.
    (c) General Effective Date Defined.--In this Act, the term 
``general effective date'' means January 1, 1998.

            PART 2--TREATMENT OF FAMILIES AND SPECIAL RULES

SEC. 1011. GENERAL RULE OF ENROLLMENT OF FAMILY IN SAME HEALTH PLAN.

    (a) In General.--Except as provided in this part or otherwise, all 
members of the same family (as defined in subsection (b)) shall be 
enrolled in the same applicable health plan.
    (b) Family Defined.--In this Act, unless otherwise provided, the 
term ``family''--
            (1) means, with respect to an eligible individual who is 
        not a child (as defined in subsection (c)), the individual; and
            (2) includes the following persons (if any):
                    (A) The individual's spouse if the spouse is an 
                eligible individual.
                    (B) The individual's children (and, if applicable, 
                the children of the individual's spouse) if they are 
                eligible individuals.
    (c) Classes of Family Enrollment; Terminology.--
            (1) In general.--In this Act, each of the following is a 
        separate class of family enrollment:
                    (A) Coverage only of an individual (referred to in 
                this Act as the ``individual'' enrollment or class of 
                enrollment).
                    (B) Coverage of a married couple without children 
                (referred to in this Act as the ``couple-only'' 
                enrollment or class of enrollment).
                    (C) Coverage of an unmarried individual and one or 
                more children (referred to in this Act as the ``single 
                parent'' enrollment or class of enrollment).
                    (D) Coverage of a married couple and one or more 
                children (referred to in this Act as the ``dual 
                parent'' enrollment or class of enrollment).
            (2) References to family and couple classes of 
        enrollment.--In this Act:
                    (A) Family.--The terms ``family enrollment'' and 
                ``family class of enrollment'', refer to enrollment in 
                a class of enrollment described in subparagraph (B), 
                (C), or (D) of paragraph (1).
                    (B) Couple.--The term ``couple class of 
                enrollment'' refers to enrollment in a class of 
                enrollment described in subparagraph (B) or (D) of 
                paragraph (1).
    (d) Spouse; Married; Couple.--
            (1) In general.--In this Act, the terms ``spouse'' and 
        ``married'' mean, with respect to a person, another individual 
        who is the spouse of the person or married to the person, as 
        determined under applicable State law.
            (2) Couple.--The term ``couple'' means an individual and 
        the individual's spouse.
    (e) Child Defined.--
            (1) In general.--In this Act, except as otherwise provided, 
        the term ``child'' means an eligible individual who (consistent 
        with paragraph (3))--
                    (A) is under 18 years of age (or under 24 years of 
                age in the case of a full-time student), and
                    (B) is a dependent of an eligible individual.
            (2) Application of state law.--Subject to paragraph (3), 
        determinations of whether a person is the child of another 
        person shall be made in accordance with applicable State law.
            (3) National rules.--The National Health Board may 
        establish such national rules respecting individuals who will 
        be treated as children under this Act as the Board determines 
        to be necessary. Such rules shall be consistent with the 
        following principles:
                    (A) Step and foster child.--A child includes a step 
                child or foster child who is an eligible individual 
                living with an adult in a regular parent-child 
                relationship.
                    (B) Disabled child.--A child includes an unmarried 
                dependent eligible individual regardless of age who is 
                incapable of self-support because of mental or physical 
                disability which existed before age 21.
                    (C) Certain 3-generation families.--A child 
                includes the grandchild of an individual, if the parent 
                of the grandchild is a child and the parent and 
                grandchild are living with the grandparent.
                    (D) Treatment of emancipated minors and married 
                individuals.--An emancipated minor or married 
                individual shall not be treated as a child.
                    (E) Children placed for adoption.--A child includes 
                a child who is placed for adoption with an eligible 
                individual.
    (f) Additional Rules.--The Board shall provide for such additional 
exceptions and special rules, including rules relating to--
            (1) families in which members are not residing in the same 
        area or in which children are not residing with their parents,
            (2) the treatment of eligible individuals who are under 19 
        years of age and who are not a dependent of an eligible 
        individual,
            (3) changes in family composition occurring during a year, 
        and
            (4) treatment of children of parents who are separated or 
        divorced,
as the Board finds appropriate.

SEC. 1012. TREATMENT OF CERTAIN FAMILIES.

    (a) Treatment of Medicare-Eligible Individuals Who are Qualifying 
Employees or Spouses of Qualifying Employees.--
            (1) In general.--Except as specifically provided, in the 
        case of an individual who is an individual described in 
        paragraph (2) with respect to 2 consecutive months in a year 
        (and it is anticipated would be in the following month and in 
        such following month would be a medicare-eligible individual 
        but for this paragraph), the individual shall not be treated as 
        a medicare-eligible individual under this Act during such 
        following month and the remainder of the year.
            (2) Individual described.--An individual described in this 
        paragraph with respect to a month is an individual who is a 
        qualifying employee or the spouse or family member of a 
        qualifying employee in the month.
    (b) Separate Treatment for Certain Groups of Individuals.--In the 
case of a family that includes one or more individuals in a group 
described in subsection (c)--
            (1) all the individuals in each such group within the 
        family shall be treated collectively as a separate family, and
            (2) all the individuals not described in any such group 
        shall be treated collectively as a separate family.
    (c) Groups of Individuals Described.--Each of the following is a 
group of individuals described in this subsection:
            (1) AFDC recipients (as defined in section 1902(3)).
            (2) Disabled SSI recipients (as defined in section 
        1902(13)) .
            (3) SSI recipients (as defined in section 1902(33)) who are 
        not disabled SSI recipients.
            (4) Electing veterans (as defined in subsection (d)(1)).
            (5) Active duty military personnel (as defined in 
        subsection (d)(2)).
            (6) Electing Indians (as defined in subsection (d)(3)).
            (7) Prisoners (as defined in section 1902(26)).
    (d) Special Rules.--In this Act:
            (1) Electing veterans.--
                    (A) Defined.--Subject to subparagraph (B), the term 
                ``electing veteran'' means a veteran who makes an 
                election to enroll with a health plan of the Department 
                of Veterans Affairs under chapter 18 of title 38, 
                United States Code, as added by section 8101(a)(1).
                    (B) Family exception.--Subparagraph (A) shall not 
                apply with respect to coverage under a health plan 
                referred to in such subparagraph if, for the area in 
                which the electing veteran resides, such health plan 
                offers coverage to family members of an electing 
                veteran and the veteran elects family enrollment under 
                such plan (instead of individual enrollment).
            (2) Active duty military personnel.--
                    (A) In general.--Subject to subparagraph (B), the 
                term ``active duty military personnel'' means an 
                individual on active duty in the Uniformed Services of 
                the United States.
                    (B) Exception.--If an individual described in 
                subparagraph (A) elects family coverage under section 
                1073a(e)(2)(A) of title 10, United States Code (as 
                added by section 8001(a)), then paragraph (5) of 
                subsection (c) shall not apply with respect to such 
                coverage.
            (3) Electing indians.--
                    (A) In general.--Subject to subparagraph (B), the 
                term ``electing Indian'' means an eligible individual 
                who makes an election under section 8302(b) of this 
                Act.
                    (B) Family election for all individuals eligible to 
                elect.--No such election shall be made with respect to 
                an individual in a family (as defined without regard to 
                this section) unless such election is made for all 
                eligible individuals (described in section 8302(a)) who 
                are family members of the family.
            (4) Multiple choice.--Eligible individuals who are 
        permitted to elect coverage under more than one health plan or 
        program referred to in this subsection may elect which of such 
        plans or programs will be the applicable health plan under this 
        Act.
    (e) Qualifying Students.--
            (1) In general.--In the case of a qualifying student 
        (described in paragraph (2)), the student may elect to enroll 
        in a regional alliance health plan offered by the regional 
        alliance for the area in which the school is located.
            (2) Qualifying student.--In paragraph (1), the term 
        ``qualifying student'' means an individual who--
                    (A) but for this subsection would receive coverage 
                under a health plan as a child of another person, and
                    (B) is a full-time student at a school in an 
                alliance area that is different from the alliance area 
                (or, in the case of a corporate alliance, such coverage 
                area as the Board may specify) providing the coverage 
                described in subparagraph (A).
          (3) Payment rules.--
                    (A) Continued treatment as family.--Except as 
                provided in subparagraph (B), nothing in this 
                subsection shall be construed as affecting the payment 
                liabilities between families and health alliances or 
                between health alliances and health plans.
                    (B) Transfer payment.--In the case of an election 
                under paragraph (1), for transfer payments see section 
                1346(e).
    (f) Spouses Living in Different Alliance Areas.--The Board shall 
provide for such special rules in applying this Act in the case of a 
couple in which the spouses reside in different alliance areas as the 
Board finds appropriate.

SEC. 1013. MULTIPLE EMPLOYMENT SITUATIONS.

    (a) Multiple Employment of an Individual.--In the case of an 
individual who--
            (1)(A) is not married or (B) is married and whose spouse is 
        not a qualifying employee (as defined in section 1901(b)(1)),
            (2) is not a child, and
            (3) who is a qualifying employee both of a regional 
        alliance employer and of a corporate alliance employer (or of 2 
        corporate alliance employers),
the individual may elect the applicable health plan to be either a 
regional alliance health plan (for the alliance area in which the 
individual resides) or a corporate alliance health plan (for an 
employer employing the individual).
    (b) Multiple Employment Within a Family.--
            (1) Married couple with employment with a regional alliance 
        employer and with a corporate alliance employer.--In the case 
        of a married individual--
                    (A) who is a qualifying employee of a regional 
                alliance employer and whose spouse is a qualifying 
                employee of a corporate alliance employer, or
                    (B) who is a qualifying employee of a corporate 
                alliance employer and whose spouse is a qualifying 
                employee of a regional alliance employer,
        the individual and the individual's spouse may elect the 
        applicable health plan to be either a regional alliance health 
        plan (for the alliance area in which the couple resides) or a 
        corporate alliance health plan (for an employer employing the 
        individual or the spouse).
            (2) Married couple with different corporate alliance 
        employers.--In the case of a married individual--
                    (A) who is a qualifying employee of a corporate 
                alliance employer, and
                    (B) whose spouse is a qualifying employee of a 
                different corporate alliance employer,
        the individual and the individual's spouse may elect the 
        applicable health plan to be a corporate alliance health plan 
        for an employer employing either the individual or the spouse.

SEC. 1014. TREATMENT OF RESIDENTS OF STATES WITH STATEWIDE SINGLE-PAYER 
              SYSTEMS.

    (a) Universal Coverage.--Notwithstanding the previous provisions of 
this title, except as provided in part 2 of subtitle C, in the case of 
an individual who resides in a State that has a Statewide single-payer 
system under section 1223, universal coverage shall be provided 
consistent with section 1222(3).
    (b) Individual Responsibilities.--In the case of an individual who 
resides in a single-payer State, the responsibilities of such 
individual under such system shall supersede the obligations of the 
individual under section 1002.

                                                    Title I, Subtitle B

                          Subtitle B--Benefits

                 PART 1--COMPREHENSIVE BENEFIT PACKAGE

SEC. 1101. PROVISION OF COMPREHENSIVE BENEFITS BY PLANS.

    (a) In General.--The comprehensive benefit package shall consist of 
the following items and services (as described in part 2), subject to 
the cost sharing requirements described in part 3, the exclusions 
described in part 4, and the duties and authority of the National 
Health Board described in part 5:
            (1) Hospital services (described in section 1111).
            (2) Services of health professionals (described in section 
        1112).
            (3) Emergency and ambulatory medical and surgical services 
        (described in section 1113).
            (4) Clinical preventive services (described in section 
        1114).
            (5) Mental illness and substance abuse services (described 
        in section 1115).
            (6) Family planning services and services for pregnant 
        women (described in section 1116).
            (7) Hospice care (described in section 1117).
            (8) Home health care (described in section 1118).
            (9) Extended care services (described in section 1119).
            (10) Ambulance services (described in section 1120).
            (11) Outpatient laboratory, radiology, and diagnostic 
        services (described in section 1121).
            (12) Outpatient prescription drugs and biologicals 
        (described in section 1122).
            (13) Outpatient rehabilitation services (described in 
        section 1123).
            (14) Durable medical equipment and prosthetic and orthotic 
        devices (described in section 1124).
            (15) Vision care (described in section 1125).
            (16) Dental care (described in section 1126).
            (17) Health education classes (described in section 1127).
            (18) Investigational treatments (described in section 
        1128).
    (b) No Other Limitations or Cost Sharing.--The items and services 
in the comprehensive benefit package shall not be subject to any 
duration or scope limitation or any deductible, copayment, or 
coinsurance amount that is not required or authorized under this Act.
    (c) Health Plan.--Unless otherwise provided in this subtitle, for 
purposes of this subtitle, the term ``health plan'' has the meaning 
given such term in section 1400.

           PART 2--DESCRIPTION OF ITEMS AND SERVICES COVERED

SEC. 1111. HOSPITAL SERVICES.

    (a) Coverage.--The hospital services described in this section are 
the following items and services:
            (1) Inpatient hospital services.
            (2) Outpatient hospital services.
            (3) 24-hour a day hospital emergency services.
    (b) Limitation.--The hospital services described in this section do 
not include hospital services provided for the treatment of a mental or 
substance abuse disorder (which are subject to section 1115), except 
for medical detoxification as required for the management of medical 
conditions associated with withdrawal from alcohol or drugs (which is 
not covered under such section).
    (c) Definitions.--For purposes of this subtitle:
            (1) Hospital.--The term ``hospital'' has the meaning given 
        such term in section 1861(e) of the Social Security Act, except 
        that such term shall include--
                    (A) in the case of an item or service provided to 
                an individual whose applicable health plan is specified 
                pursuant to section 1004(b)(1), a facility of the 
                uniformed services under title 10, United States Code, 
                that is primarily engaged in providing services to 
                inpatients that are equivalent to the services provided 
                by a hospital defined in such section 1861(e);
                    (B) in the case of an item or service provided to 
                an individual whose applicable health plan is specified 
                pursuant to section 1004(b)(2), a facility operated by 
                the Department of Veterans Affairs that is primarily 
                engaged in providing services to inpatients that are 
                equivalent to the services provided by a hospital 
                defined in such section 1861(e); and
                    (C) in the case of an item or service provided to 
                an individual whose applicable health plan is specified 
                pursuant to section 1004(b)(3), a facility operated by 
                the Indian Health Service that is primarily engaged in 
                providing services to inpatients that are equivalent to 
                the services provided by a hospital defined in such 
                section 1861(e).
            (2) Inpatient hospital services.--The term ``inpatient 
        hospital services'' means items and services described in 
        paragraphs (1) through (3) of section 1861(b) of the Social 
        Security Act when provided to an inpatient of a hospital. The 
        National Health Board shall specify those health professional 
        services described in section 1112 that shall be treated as 
        inpatient hospital services when provided to an inpatient of a 
        hospital.

SEC. 1112. SERVICES OF HEALTH PROFESSIONALS.

    (a) Coverage.--The items and services described in this section 
are--
            (1) inpatient and outpatient health professional services, 
        including consultations, that are provided in--
                    (A) a home, office, or other ambulatory care 
                setting; or
                    (B) an institutional setting; and
            (2) services and supplies (including drugs and biologicals 
        which cannot be self-administered) furnished as an incident to 
        such health professional services, of kinds which are commonly 
        furnished in the office of a health professional and are 
        commonly either rendered without charge or included in the bill 
        of such professional.
    (b) Limitation.--The items and services described in this section 
do not include items or services that are described in any other 
section of this part. An item or service that is described in section 
1114 but is not provided consistent with a periodicity schedule for 
such item or service specified in such section or under section 1153 
may be covered under this section if the item or service otherwise 
meets the requirements of this section.
    (c) Definitions.--Unless otherwise provided in this Act, for 
purposes of this Act:
            (1) Health professional.--The term ``health professional'' 
        means an individual who provides health professional services.
            (2) Health professional services.--The term ``health 
        professional services'' means professional services that--
                    (A) are lawfully provided by a physician; or
                    (B) would be described in subparagraph (A) if 
                provided by a physician, but are provided by another 
                person who is legally authorized to provide such 
                services in the State in which the services are 
                provided.

SEC. 1113. EMERGENCY AND AMBULATORY MEDICAL AND SURGICAL SERVICES.

    The emergency and ambulatory medical and surgical services 
described in this section are the following items and services provided 
by a health facility that is not a hospital and that is legally 
authorized to provide the services in the State in which they are 
provided:
            (1) 24-hour a day emergency services.
            (2) Ambulatory medical and surgical services.

SEC. 1114. CLINICAL PREVENTIVE SERVICES.

    (a) Coverage.--The clinical preventive services described in this 
section are--
            (1) an item or service for high risk populations (as 
        defined by the National Health Board) that is specified and 
        defined by the Board under section 1153, but only when the item 
        or service is provided consistent with any periodicity schedule 
        for the item or service promulgated by the Board;
            (2) except as modified by the National Health Board under 
        section 1153, an age-appropriate immunization, test, or 
        clinician visit specified in one of subsections (b) through (h) 
        that is provided consistent with any periodicity schedule for 
        the item or service specified in the applicable subsection or 
        by the National Health Board under section 1153; and
            (3) an immunization, test, or clinician visit that is 
        provided to an individual during an age range other than the 
        age range for such immunization, test, or clinician visit that 
        is specified in one of subsections (b) through (h), but only 
        when provided consistent with any requirements for such 
        immunizations, tests, and clinician visits established by the 
        National Health Board under section 1153.
    (b) Individuals Under 3.--For an individual under 3 years of age:
            (1) Immunizations.--The immunizations specified in this 
        subsection are age-appropriate immunizations for the following 
        illnesses:
                    (A) Diphtheria.
                    (B) Tetanus.
                    (C) Pertussis.
                    (D) Polio.
                    (E) Haemophilus influenzae type B.
                    (F) Measles.
                    (G) Mumps.
                    (H) Rubella.
                    (I) Hepatitis B.
            (2) Tests.--The tests specified in this subsection are as 
        follows:
                    (A) 1 hematocrit.
                    (B) 2 blood tests to screen for blood lead levels 
                for individuals who are at risk for lead exposure.
            (3) Clinician visits.--The clinician visits specified in 
        this subsection are 1 clinician visit for an individual who is 
        newborn and 7 other clinician visits.
    (c) Individuals Age 3 to 5.--For an individual at least 3 years of 
age, but less than 6 years of age:
            (1) Immunizations.--The immunizations specified in this 
        subsection are age-appropriate immunizations for the following 
        illnesses:
                    (A) Diphtheria.
                    (B) Tetanus.
                    (C) Pertussis.
                    (D) Polio.
                    (E) Measles.
                    (F) Mumps.
                    (G) Rubella.
            (2) Tests.--The tests specified in this subsection are 1 
        urinalysis.
            (3) Clinician visits.--The clinician visits specified in 
        this subsection are 3 clinician visits.
    (d) Individuals Age 6 to 12.--For an individual at least 6 years of 
age, but less than 13 years of age, the clinician visits specified in 
this subsection are 3 clinician visits.
    (e) Individuals Age 13 to 19.--For an individual at least 13 years 
of age, but less than 20 years of age:
            (1) Immunizations.--The immunizations specified in this 
        subsection are age-appropriate immunizations for the following 
        illnesses:
                    (A) Tetanus.
                    (B) Diphtheria.
            (2) Tests.--The tests specified in this subsection are as 
        follows:
                    (A) Papanicolaou smears and pelvic exams, for 
                females who have reached childbearing age and are at 
                risk for cervical cancer, every 3 years, but--
                            (i) annually until 3 consecutive negative 
                        smears have been obtained, if medically 
                        necessary; and
                            (ii) annually for females who are at risk 
                        for fertility related infectious illnesses.
                    (B) Annual screening for chlamydia and gonorrhea 
                for females who have reached childbearing age and are 
                at risk for fertility related infectious illnesses.
            (3) Clinician visits.--The clinician visits specified in 
        this subsection are 3 clinician visits.
    (f) Individuals Age 20 to 39.--For an individual at least 20 years 
of age, but less than 40 years of age:
            (1) Immunizations.--The immunizations specified in this 
        subsection are booster immunizations against tetanus and 
        diphtheria every 10 years.
            (2) Tests.--The tests specified in this subsection are as 
        follows:
                    (A) Papanicolaou smears and pelvic exams for 
                females every 3 years, but--
                            (i) annually if an abnormal smear has been 
                        obtained, until 3 consecutive negative smears 
                        have been obtained; and
                            (ii) annually for females who are at risk 
                        for fertility related infectious illnesses.
                    (B) Annual screening for chlamydia and gonorrhea 
                for females who are at risk for fertility related 
                infectious illnesses.
                    (C) Cholesterol every 5 years.
            (3) Clinician visits.--The clinician visits specified in 
        this subsection are 1 clinician visit every 3 years.
    (g) Individuals Age 40 to 49.--For an individual at least 40 years 
of age, but less than 50 years of age:
            (1) Immunizations.--The immunizations specified in this 
        subsection are booster immunizations against tetanus and 
        diphtheria every 10 years.
            (2) Tests.--The tests specified in this subsection are as 
        follows:
                    (A) Papanicolaou smears and pelvic exams for 
                females every 2 years, but--
                            (i) annually if an abnormal smear has been 
                        obtained, until 3 consecutive negative smears 
                        have been obtained; and
                            (ii) annually for females who are at risk 
                        for fertility related infectious illnesses.
                    (B) Annual screening for chlamydia and gonorrhea 
                for females who are at risk for fertility related 
                infectious illnesses.
                    (C) Cholesterol every 5 years.
            (3) Clinician visits.--The clinician visits specified in 
        this subsection are 1 clinician visit every 2 years.
    (h) Individuals Age 50 to 65.--For an individual at least 50 years 
of age, but less than 65 years of age:
            (1) Immunizations.--The immunizations specified in this 
        subsection are booster immunizations against tetanus and 
        diphtheria every 10 years.
            (2) Tests.--The tests specified in this subsection are as 
        follows:
                    (A) Papanicolaou smears and pelvic exams for 
                females every 2 years.
                    (B) Mammograms for females every 2 years.
                    (C) Cholesterol every 5 years.
            (3) Clinician visits.--The clinician visits specified in 
        this subsection are 1 clinician visit every 2 years.
    (i) Individuals Age 65 or Older.--For an individual at least 65 
years of age who is enrolled under a health plan:
            (1) Immunizations.--The immunizations specified in this 
        subsection are as follows:
                    (A) Booster immunizations against tetanus and 
                diphtheria every 10 years.
                    (B) Age-appropriate immunizations for the following 
                illnesses:
                            (i) Influenza.
                            (ii) Pneumococcal invasive disease.
            (2) Tests.--The tests specified in this subsection are as 
        follows:
                    (A) Papanicolaou smears and pelvic exams for 
                females who are at risk for cervical cancer every 2 
                years.
                    (B) Mammograms for females every 2 years.
                    (C) Cholesterol every 5 years.
            (3) Clinician visits.--The clinician visits specified in 
        this subsection are 1 clinician visit every year.
    (j) Clinician Visit.--For purposes of this section, the term 
``clinician visit'' includes the following health professional services 
(as defined in section 1112(c)):
            (1) A complete medical history.
            (2) An appropriate physical examination.
            (3) Risk assessment.
            (4) Targeted health advice and counseling, including 
        nutrition counseling.
            (5) The administration of age-appropriate immunizations and 
        tests specified in subsections (b) through (h).
    (k) Immunizations and Tests Not Administered During Clinician 
Visit.--Notwithstanding subsection (i)(5), the clinical preventive 
services described in this section include an immunization or test 
described in this section that is administered to an individual 
consistent with any periodicity schedule for the immunization or test 
during the age range specified for the immunization or test, and any 
administration fee for such immunization or test, even if the 
immunization or test is not administered during a clinician visit.

SEC. 1115. MENTAL ILLNESS AND SUBSTANCE ABUSE SERVICES.

    (a) Coverage.--The mental illness and substance abuse services that 
are described in this section are the following items and services for 
eligible individuals, as defined in section 1001(c), who satisfy the 
eligibility requirements in subsection (b):
            (1) Inpatient and residential mental illness and substance 
        abuse treatment (described in subsection (c)).
            (2) Intensive nonresidential mental illness and substance 
        abuse treatment (described in subsection (d)).
            (3) Outpatient mental illness and substance abuse treatment 
        (described in subsection (e)), including case management, 
        screening and assessment, crisis services, and collateral 
        services.
    (b) Eligibility.--The eligibility requirements referred to in 
subsection (a) are as follows:
            (1) Inpatient, residential, nonresidential, and outpatient 
        treatment.--An eligible individual is eligible to receive 
        coverage for inpatient and residential mental illness and 
        substance abuse treatment, intensive nonresidential mental 
        illness and substance abuse treatment, or outpatient mental 
        illness and substance abuse treatment (except case management 
        and collateral services) if the individual--
                    (A) has, or has had during the 1-year period 
                preceding the date of such treatment, a diagnosable 
                mental disorder or a diagnosable substance abuse 
                disorder; and
                    (B) is experiencing, or is at significant risk of 
                experiencing, functional impairment in family, work, 
                school, or community activities.
        For purposes of this paragraph, an individual who has a 
        diagnosable mental disorder or a diagnosable substance abuse 
        disorder, is receiving treatment for such disorder, but does 
        not satisfy the functional impairment criterion in subparagraph 
        (B) shall be treated as satisfying such criterion if the 
        individual would satisfy such criterion without such treatment.
            (2) Case management.--An eligible individual is eligible to 
        receive coverage for case management if--
                    (A) a health professional designated by the health 
                plan in which the individual is enrolled determines 
                that the individual should receive such services; and
                    (B) the individual is eligible to receive coverage 
                for, and is receiving, outpatient mental illness and 
                substance abuse treatment with respect to a diagnosable 
                mental disorder or a diagnosable substance abuse 
                disorder.
            (3) Screening and assessment and crisis services.--All 
        eligible individuals enrolled under a health plan are eligible 
        to receive coverage for outpatient mental illness and substance 
        abuse treatment consisting of screening and assessment and 
        crisis services.
            (4) Collateral services.--An eligible individual is 
        eligible to receive coverage for outpatient mental illness and 
        substance abuse treatment consisting of collateral services if 
        the individual is a family member (described in section 
        1011(b)) of an individual who is receiving inpatient and 
        residential mental illness and substance abuse treatment, 
        intensive nonresidential mental illness and substance abuse 
        treatment, or outpatient mental illness and substance abuse 
        treatment.
    (c) Inpatient and Residential Treatment.--
            (1) Definition.--For purposes of this subtitle, the term 
        ``inpatient and residential mental illness and substance abuse 
        treatment'' means the items and services described in 
        paragraphs (1) through (3) of section 1861(b) of the Social 
        Security Act when provided with respect to a diagnosable mental 
        disorder or a diagnosable substance abuse disorder to--
                    (A) an inpatient of a hospital, psychiatric 
                hospital, residential treatment center, residential 
                detoxification center, crisis residential program, or 
                mental illness residential treatment program; or
                    (B) a resident of a therapeutic family or group 
                treatment home or community residential treatment and 
                recovery center for substance abuse.
        The National Health Board shall specify those health 
        professional services described in section 1112 that shall be 
        treated as inpatient and residential mental illness and 
        substance abuse treatment when provided to such an inpatient or 
        resident.
            (2) Limitations.--Coverage for inpatient and residential 
        mental illness and substance abuse treatment is subject to the 
        following limitations:
                    (A) Residential mental illness treatment.--Such 
                treatment, when provided with respect to a diagnosable 
                mental disorder in a setting that is not a hospital or 
                a psychiatric hospital, is covered only to avert the 
                need for, or as an alternative to, treatment in a 
                hospital or a psychiatric hospital, as determined by a 
                health professional designated by the health plan in 
                which the individual receiving such treatment is 
                enrolled.
                    (B) Residential substance abuse treatment.--Such 
                treatment, when provided with respect to a diagnosable 
                substance abuse disorder in a setting that is not a 
                hospital or a psychiatric hospital, is covered only if 
                a health professional designated by the health plan in 
                which the individual receiving such treatment is 
                enrolled determines (based on criteria that the plan 
                may choose to employ) that the individual should 
                receive such treatment.
                    (C) Least restrictive setting.--Such treatment is 
                covered only when--
                            (i) provided to an individual in the least 
                        restrictive inpatient or residential setting 
                        that is effective and appropriate for the 
                        individual; and
                            (ii) less restrictive intensive 
                        nonresidential or outpatient treatment would be 
                        ineffective or inappropriate.
                    (D) Annual limit.--Prior to January 1, 2001, such 
                treatment is subject to an aggregate annual limit of 30 
                days. A maximum of 30 additional days of such treatment 
                shall be covered for an individual if a health 
                professional designated by the health plan in which the 
                individual is enrolled determines in advance that--
                            (i) the individual poses a threat to his or 
                        her own life or the life of another individual; 
                        or
                            (ii) the medical condition of the 
                        individual requires inpatient treatment in a 
                        hospital or a psychiatric hospital in order to 
                        initiate, change, or adjust pharmacological or 
                        somatic therapy.
                    (E) Inpatient hospital treatment for substance 
                abuse.--Such treatment, when provided in a hospital or 
                a psychiatric hospital with respect to a diagnosable 
                substance abuse disorder, is covered under this section 
                only for detoxification requiring the management of 
                psychiatric conditions associated with withdrawal from 
                alcohol or drugs. The items and services described in 
                this section do not include medical detoxification as 
                required for the management of medical conditions 
                associated with withdrawal from alcohol or drugs (which 
                is covered under section 1111).
    (d) Intensive Nonresidential Treatment.--
            (1) Definition.--For purposes of this subtitle, the term 
        ``intensive nonresidential mental illness and substance abuse 
        treatment'' means diagnostic or therapeutic items or services 
        provided with respect to a diagnosable mental disorder or a 
        diagnosable substance abuse disorder to an individual--
                    (A) participating in a partial hospitalization 
                program, a day treatment program, a psychiatric 
                rehabilitation program, or an ambulatory detoxification 
                program; or
                    (B) receiving home-based mental illness services or 
                behavioral aide mental illness services.
        The National Health Board shall specify those health 
        professional services described in section 1112 that shall be 
        treated as intensive nonresidential mental illness and 
        substance abuse treatment when provided to such an individual.
            (2) Limitations.--Coverage for intensive nonresidential 
        mental illness and substance abuse treatment is subject to the 
        following limitations:
                    (A) Discretion of plan.--An individual shall 
                receive coverage for such treatment if a health 
                professional designated by the health plan in which the 
                individual is enrolled determines (based on criteria 
                that the plan may choose to employ) that the individual 
                should receive such treatment.
                    (B) Treatment purposes.--Such treatment is covered 
                only when provided--
                            (i) to avert the need for, or as an 
                        alternative to, treatment in residential or 
                        inpatient settings;
                            (ii) to facilitate the earlier discharge of 
                        an individual receiving inpatient or 
                        residential care;
                            (iii) to restore the functioning of an 
                        individual with a diagnosable mental disorder 
                        or a diagnosable substance abuse disorder; or
                            (iv) to assist such an individual to 
                        develop the skills and gain access to the 
                        support services the individual needs to 
                        achieve the maximum level of functioning of the 
                        individual within the community.
                    (C) Annual limit.--
                            (i) In general.--Prior to January 1, 2001, 
                        the number of covered days of inpatient and 
                        residential mental illness and substance abuse 
                        treatment that are available to an individual 
                        under the 30-day limit described in the first 
                        sentence of subsection (c)(2)(D) shall be 
                        reduced by 1 day for each 2 covered days of 
                        intensive nonresidential mental illness and 
                        substance abuse treatment that are provided to 
                        the individual, until such number is reduced to 
                        zero.
                            (ii) Additional days.--After the number of 
                        covered days referred to in clause (i) has been 
                        reduced to zero with respect to an individual, 
                        the individual shall receive coverage for a 
                        maximum of 60 days of intensive nonresidential 
                        mental illness and substance abuse treatment if 
                        a health professional designated by the health 
                        plan in which the individual is enrolled 
                        determines that the individual should receive 
                        such treatment.
                    (D) Detoxification.--Intensive nonresidential 
                mental illness and substance abuse treatment consisting 
                of detoxification is covered only if it is provided in 
                the context of a treatment program.
                    (E) Out-of-pocket maximum.--Prior to January 1, 
                2001, expenses for intensive nonresidential mental 
                illness and substance abuse treatment that an 
                individual incurs prior to satisfying a deductible 
                applicable to such treatment, and copayments and 
                coinsurance paid by or on behalf of the individual for 
                such treatment, may not be applied toward any annual 
                out-of-pocket limit on cost sharing under any cost 
                sharing schedule described in part 3 of this subtitle 
                if such treatment is provided--
                            (i) with respect to a diagnosable substance 
                        abuse disorder; or
                            (ii) pursuant to subparagraph (C)(ii).
    (e) Outpatient Treatment.--
            (1) Definition.--For purposes of this subtitle, the term 
        ``outpatient mental illness and substance abuse treatment'' 
        means the following services provided with respect to a 
        diagnosable mental disorder or a diagnosable substance abuse 
        disorder in an outpatient setting:
                    (A) Screening and assessment.
                    (B) Diagnosis.
                    (C) Medical management.
                    (D) Substance abuse counseling and relapse 
                prevention.
                    (E) Crisis services.
                    (F) Somatic treatment services.
                    (G) Psychotherapy.
                    (H) Case management.
                    (I) Collateral services.
            (2) Limitations.--Coverage for outpatient mental illness 
        and substance abuse treatment is subject to the following 
        limitations:
                    (A) Health professional services.--Such treatment 
                is covered only when it constitutes health professional 
                services (as defined in section 1112(c)(2)).
                    (B) Discretion of plan.--An individual shall 
                receive coverage for outpatient mental illness and 
                substance abuse treatment consisting of substance abuse 
                counseling and relapse prevention if a health 
                professional designated by the health plan in which the 
                individual is enrolled determines (based on criteria 
                that the plan may choose to employ) that the individual 
                should receive such treatment. This subparagraph does 
                not apply to group therapy covered pursuant to 
                subparagraph (C)(ii)(II).
                    (C) Annual limits.--
                            (i) Psychotherapy and collateral 
                        services.--Prior to January 1, 2001, 
                        psychotherapy and collateral services are 
                        subject to an aggregate annual limit of 30 
                        visits per individual. Additional visits may be 
                        covered, at the discretion of the health plan 
                        in which the individual receiving treatment is 
                        enrolled, to prevent hospitalization or to 
                        facilitate earlier hospital release, for which 
                        the number of covered days of inpatient and 
                        residential mental illness and substance abuse 
                        treatment that are available to an individual 
                        under the 30-day limit described in the first 
                        sentence of subsection (c)(2)(D) shall be 
                        reduced by 1 day for each 4 visits. After such 
                        number has been reduced to zero, no additional 
                        visits under the preceding sentence may be 
                        covered.
                            (ii) Substance abuse counseling and relapse 
                        prevention.--
                                    (I) In general.--Except as provided 
                                in subclause (II), the number of 
                                covered days of inpatient and 
                                residential mental illness and 
                                substance abuse treatment that are 
                                available to an individual under the 
                                30-day limit described in the first 
                                sentence of subsection (c)(2)(D) shall 
                                be reduced by 1 day for each 4 visits 
                                for substance abuse counseling and 
                                relapse prevention that are covered for 
                                the individual under subparagraph (B). 
                                After such number has been reduced to 
                                zero, no visits for substance abuse 
                                counseling and relapse prevention may 
                                be covered, except as provided in 
                                subclause (II).
                                    (II) Group therapy.--Prior to 
                                January 1, 2001, substance abuse 
                                counseling and relapse prevention 
                                consisting of group therapy is subject 
                                to a separate aggregate annual limit of 
                                30 visits, if such therapy occurs 
                                within 12 months after the individual 
                                has received, with respect to a 
                                diagnosable substance abuse disorder, 
                                inpatient and residential mental 
                                illness and substance abuse treatment 
                                or intensive nonresidential mental 
                                illness and substance abuse treatment. 
                                The provisions of clause (i) and 
                                subclause (I) do not apply to therapy 
                                that is described in the preceding 
                                sentence.
                    (D) Detoxification.--Outpatient mental illness and 
                substance abuse treatment consisting of detoxification 
                is covered only if it is provided in the context of a 
                treatment program.
                    (E) Out-of-pocket maximum.--Prior to January 1, 
                2001, expenses for outpatient mental illness and 
                substance abuse treatment that an individual incurs 
                prior to satisfying a deductible applicable to such 
                treatment, and copayments and coinsurance paid by or on 
                behalf of the individual for such treatment, may not be 
                applied toward any annual out-of-pocket limit on cost 
                sharing under any cost sharing schedule described in 
                part 3 of this subtitle.
    (f) Other Definitions.--For purposes of this subtitle:
            (1) Case management.--The term ``case management'' means 
        services that assist individuals in gaining access to needed 
        medical, social, educational, and other services.
            (2) Diagnosable mental disorder and diagnosable substance 
        abuse disorder.--The terms ``diagnosable mental disorder'' and 
        ``diagnosable substance abuse disorder'' mean a disorder that--
                    (A) is listed in the Diagnostic and Statistical 
                Manual of Mental Disorders, Third Edition, Revised or a 
                revised version of such manual (except V Codes for 
                Conditions Not Attributable to a Mental Disorder That 
                Are a Focus of Attention or Treatment);
                    (B) is the equivalent of a disorder described in 
                subparagraph (A), but is listed in the International 
                Classification of Diseases, 9th Revision, Clinical 
                Modification, Third Edition or a revised version of 
                such text; or
                    (C) is listed in any authoritative text specifying 
                diagnostic criteria for mental disorders or substance 
                abuse disorders that is identified by the National 
                Health Board.
            (3) Psychiatric hospital.--The term ``psychiatric 
        hospital'' has the meaning given such term in section 1861(f) 
        of the Social Security Act, except that such term shall 
        include--
                    (A) in the case of an item or service provided to 
                an individual whose applicable health plan is specified 
                pursuant to section 1004(b)(1), a facility of the 
                uniformed services under title 10, United States Code, 
                that is engaged in providing services to inpatients 
                that are equivalent to the services provided by a 
                psychiatric hospital;
                    (B) in the case of an item or service provided to 
                an individual whose applicable health plan is specified 
                pursuant to section 1004(b)(2), a facility operated by 
                the Department of Veterans Affairs that is engaged in 
                providing services to inpatients that are equivalent to 
                the services provided by a psychiatric hospital; and
                    (C) in the case of an item or service provided to 
                an individual whose applicable health plan is specified 
                pursuant to section 1004(b)(3), a facility operated by 
                the Indian Health Service that is engaged in providing 
                services to inpatients that are equivalent to the 
                services provided by a psychiatric hospital.

SEC. 1116. FAMILY PLANNING SERVICES AND SERVICES FOR PREGNANT WOMEN.

    The services described in this section are the following items and 
services:
            (1) Voluntary family planning services.
            (2) Contraceptive devices that--
                    (A) may only be dispensed upon prescription; and
                    (B) are subject to approval by the Secretary of 
                Health and Human Services under the Federal Food, Drug, 
                and Cosmetic Act.
            (3) Services for pregnant women.

SEC. 1117. HOSPICE CARE.

    The hospice care described in this section is the items and 
services described in paragraph (1) of section 1861(dd) of the Social 
Security Act, as defined in paragraphs (2), (3), and (4)(A) of such 
section (with the exception of paragraph (2)(A)(iii)), except that all 
references to the Secretary of Health and Human Services in such 
paragraphs shall be treated as references to the National Health Board.

SEC. 1118. HOME HEALTH CARE.

    (a) Coverage.--The home health care described in this section is--
            (1) the items and services described in section 1861(m) of 
        the Social Security Act; and
            (2) home infusion drug therapy services described in 
        section 1861(ll) of the Social Security Act (as inserted by 
        section 2005).
    (b) Limitations.--Coverage for home health care is subject to the 
following limitations:
            (1) Inpatient treatment alternative.--Such care is covered 
        only as an alternative to inpatient treatment in a hospital, 
        skilled nursing facility, or rehabilitation facility after an 
        illness or injury.
            (2) Reevaluation.--At the end of each 60-day period of home 
        health care, the need for continued care shall be reevaluated 
        by the person who is primarily responsible for providing the 
        home health care. Additional periods of care are covered only 
        if such person determines that the requirement in paragraph (1) 
        is satisfied.

SEC. 1119. EXTENDED CARE SERVICES.

    (a) Coverage.--The extended care services described in this section 
are the items and services described in section 1861(h) of the Social 
Security Act when provided to an inpatient of a skilled nursing 
facility or a rehabilitation facility.
    (b) Limitations.--Coverage for extended care services is subject to 
the following limitations:
            (1) Hospital alternative.--Such services are covered only 
        as an alternative to inpatient treatment in a hospital after an 
        illness or injury.
            (2) Annual limit.--Such services are subject to an 
        aggregate annual limit of 100 days.
    (c) Definitions.--For purposes of this subtitle:
            (1) Rehabilitation facility.--The term ``rehabilitation 
        facility'' means an institution (or a distinct part of an 
        institution) which is established and operated for the purpose 
        of providing diagnostic, therapeutic, and rehabilitation 
        services to individuals for rehabilitation from illness or 
        injury.
            (2) Skilled nursing facility.--The term ``skilled nursing 
        facility'' means an institution (or a distinct part of an 
        institution) which is primarily engaged in providing to 
        residents--
                    (A) skilled nursing care and related services for 
                residents who require medical or nursing care; or
                    (B) rehabilitation services to residents for 
                rehabilitation from illness or injury.

SEC. 1120. AMBULANCE SERVICES.

    (a) Coverage.--The ambulance services described in this section are 
the following items and services:
            (1) Ground transportation by ambulance.
            (2) Air transportation by an aircraft equipped for 
        transporting an injured or sick individual.
            (3) Water transportation by a vessel equipped for 
        transporting an injured or sick individual.
    (b) Limitations.--Coverage for ambulance services is subject to the 
following limitations:
            (1) Medical indication.--Ambulance services are covered 
        only in cases in which the use of an ambulance is indicated by 
        the medical condition of the individual concerned.
            (2) Air transport.--Air transportation is covered only in 
        cases in which there is no other method of transportation or 
        where the use of another method of transportation is contra-
        indicated by the medical condition of the individual concerned.
            (3) Water transport.--Water transportation is covered only 
        in cases in which there is no other method of transportation or 
        where the use of another method of transportation is contra-
        indicated by the medical condition of the individual concerned.

SEC. 1121. OUTPATIENT LABORATORY, RADIOLOGY, AND DIAGNOSTIC SERVICES.

    The items and services described in this section are laboratory, 
radiology, and diagnostic services provided upon prescription to 
individuals who are not inpatients of a hospital, hospice, skilled 
nursing facility, or rehabilitation facility.

SEC. 1122. OUTPATIENT PRESCRIPTION DRUGS AND BIOLOGICALS.

    (a) Coverage.--The items described in this section are the 
following:
            (1) Covered outpatient drugs described in section 1861(t) 
        of the Social Security Act (as amended by section 2001(b))--
                    (A) except that, for purposes of this section, a 
                medically accepted indication with respect to the use 
                of a covered outpatient drug includes any use which has 
                been approved by the Food and Drug Administration for 
                the drug, and includes another use of the drug if--
                            (i) the drug has been approved by the Food 
                        and Drug Administration; and
                            (ii) such use is supported by one or more 
                        citations which are included (or approved for 
                        inclusion) in one or more of the following 
                        compendia: the American Hospital Formulary 
                        Service-Drug Information, the American Medical 
                        Association Drug Evaluations, the United States 
                        Pharmacopoeia-Drug Information, and other 
                        authoritative compendia as identified by the 
                        Secretary, unless the Secretary has determined 
                        that the use is not medically appropriate or 
                        the use is identified as not indicated in one 
                        or more such compendia; or
                            (iii) such use is medically accepted based 
                        on supportive clinical evidence in peer 
                        reviewed medical literature appearing in 
                        publications which have been identified for 
                        purposes of this clause by the Secretary; and
                    (B) notwithstanding any exclusion from coverage 
                that may be made with respect to such a drug under 
                title XVIII of such Act pursuant to section 1862(a)(18) 
                of such Act.
            (2) Blood clotting factors when provided on an outpatient 
        basis.
    (b) Revision of Compendia List.--The Secretary may revise the list 
of compendia in subsection (a)(1)(A)(ii) designated as appropriate for 
identifying medically accepted indications for drugs.
    (c) Blood Clotting Factors.--For purposes of this subtitle, the 
term ``blood clotting factors'' has the meaning given such term in 
section 1861(s)(2)(I) of the Social Security Act.

SEC. 1123. OUTPATIENT REHABILITATION SERVICES.

    (a) Coverage.--The outpatient rehabilitation services described in 
this section are--
            (1) outpatient occupational therapy;
            (2) outpatient physical therapy; and
            (3) outpatient speech pathology services for the purpose of 
        attaining or restoring speech.
    (b) Limitations.--Coverage for outpatient rehabilitation services 
is subject to the following limitations:
            (1) Restoration of capacity or minimization of 
        limitations.--Such services include only items or services used 
        to restore functional capacity or minimize limitations on 
        physical and cognitive functions as a result of an illness or 
        injury.
            (2) Reevaluation.--At the end of each 60-day period of 
        outpatient rehabilitation services, the need for continued 
        services shall be reevaluated by the person who is primarily 
        responsible for providing the services. Additional periods of 
        services are covered only if such person determines that 
        functioning is improving.

SEC. 1124. DURABLE MEDICAL EQUIPMENT AND PROSTHETIC AND ORTHOTIC 
              DEVICES.

    (a) Coverage.--The items and services described in this section 
are--
            (1) durable medical equipment, including accessories and 
        supplies necessary for repair, function, and maintenance of 
        such equipment;
            (2) prosthetic devices (other than dental devices) which 
        replace all or part of the function of an internal body organ 
        (including colostomy bags and supplies directly related to 
        colostomy care), including replacement of such devices;
            (3) accessories and supplies which are used directly with a 
        prosthetic device to achieve the therapeutic benefits of the 
        prosthesis or to assure the proper functioning of the device;
            (4) leg, arm, back, and neck braces;
            (5) artificial legs, arms, and eyes, including replacements 
        if required because of a change in the patient's physical 
        condition; and
            (6) fitting and training for use of the items described in 
        paragraphs (1) through (5).
    (b) Limitation.--An item or service described in this section is 
covered only if it improves functional ability or prevents further 
deterioration in function.
    (c) Durable Medical Equipment.--For purposes of this subtitle, the 
term ``durable medical equipment'' has the meaning given such term in 
section 1861(n) of the Social Security Act.

SEC. 1125. VISION CARE.

    (a) Coverage.--The vision care described in this section is routine 
eye examinations, diagnosis, and treatment for defects in vision.
    (b) Limitation.--Eyeglasses and contact lenses are covered only for 
individuals less than 18 years of age, according to a periodicity 
schedule established by the Board.

SEC. 1126. DENTAL CARE.

    (a) Coverage.--The dental care described in this section is the 
following:
            (1) Emergency dental treatment, including simple 
        extractions, for acute infections, bleeding, and injuries to 
        natural teeth and oral structures for conditions requiring 
        immediate attention to prevent risks to life or significant 
        medical complications, as specified by the National Health 
        Board.
            (2) Prevention and diagnosis of dental disease, including 
        oral dental examinations, radiographs, dental sealants, 
        fluoride application, and dental prophylaxis.
            (3) Treatment of dental disease, including routine 
        fillings, prosthetics for genetic defects, periodontal 
        maintenance, and endodontic services.
            (4) Space maintenance procedures to prevent orthodontic 
        complications.
            (5) Interceptive orthodontic treatment to prevent severe 
        malocclusion.
    (b) Limitations.--Coverage for dental care is subject to the 
following limitations:
            (1) Prevention and diagnosis.--Prior to January 1, 2001, 
        the items and services described in subsection (a)(2) are 
        covered only for individuals less than 18 years of age. On or 
        after such date, such items and services are covered for all 
        eligible individuals enrolled under a health plan, except that 
        dental sealants are not covered for individuals 18 years of age 
        or older.
            (2) Treatment of dental disease.--Prior to January 1, 2001, 
        the items and services described in subsection (a)(3) are 
        covered only for individuals less than 18 years of age. On or 
        after such date, such items and services are covered for all 
        eligible individuals enrolled under a health plan, except that 
        endodontic services are not covered for individuals 18 years of 
        age or older.
            (3) Space maintenance.--The items and services described in 
        subsection (a)(4) are covered only for individuals at least 3 
        years of age, but less than 13 years of age and--
                    (A) are limited to posterior teeth;
                    (B) involve maintenance of a space or spaces for 
                permanent posterior teeth that would otherwise be 
                prevented from normal eruption if the space were not 
                maintained; and
                    (C) do not include a space maintainer that is 
                placed within 6 months of the expected eruption of the 
                permanent posterior tooth concerned.
            (4) Interceptive orthodontic treatment.--Prior to January 
        1, 2001, the items and services described in subsection (a)(5) 
        are not covered. On or after such date, such items and services 
        are covered only for individuals at least 6 years of age, but 
        less than 12 years of age.

SEC. 1127. HEALTH EDUCATION CLASSES.

    (a) Coverage.--Subject to subsection (b), the items and services 
described in this section are health education and training classes to 
encourage the reduction of behavioral risk factors and to promote 
healthy activities. Such education and training classes may include 
smoking cessation, nutrition counseling, stress management, support 
groups, and physical training classes.
    (b) Discretion of Plan.--A health plan may offer education and 
training classes at its discretion.
    (c) Construction.--This section shall not be construed to include 
or limit education or training that is provided in the course of the 
delivery of health professional services (as defined in section 
1112(c)).

SEC. 1128. INVESTIGATIONAL TREATMENTS.

    (a) Coverage.--Subject to subsection (b), the items and services 
described in this subsection are qualifying investigational treatments 
that are administered for a life-threatening disease, disorder, or 
other health condition (as defined by the National Health Board).
    (b) Discretion of Plan.--A health plan may cover an investigational 
treatment described in subsection (a) at its discretion.
    (c) Routine Care During Investigational Treatments.--The 
comprehensive benefit package includes an item or service described in 
any other section of this part, subject to the limitations and cost 
sharing requirements applicable to the item or service, when the item 
or service is provided to an individual in the course of an 
investigational treatment, if--
            (1) the treatment is a qualifying investigational 
        treatment; and
            (2) the item or service would have been provided to the 
        individual even if the individual were not receiving the 
        investigational treatment.
    (d) Definitions.--For purposes of this subtitle:
            (1) Qualifying investigational treatment.--The term 
        ``qualifying investigational treatment'' means a treatment--
                    (A) the effectiveness of which has not been 
                determined; and
                    (B) that is under clinical investigation as part of 
                an approved research trial.
            (2) Approved research trial.--The term ``approved research 
        trial'' means--
                    (A) a research trial approved by the Secretary of 
                Health and Human Services, the Director of the National 
                Institutes of Health, the Commissioner of the Food and 
                Drug Administration, the Secretary of Veterans Affairs, 
                the Secretary of Defense, or a qualified 
                nongovernmental research entity as defined in 
                guidelines of the National Institutes of Health; or
                    (B) a peer-reviewed and approved research program, 
                as defined by the Secretary of Health and Human 
                Services, conducted for the primary purpose of 
                determining whether or not a treatment is safe, 
                efficacious, or having any other characteristic of a 
                treatment which must be demonstrated in order for the 
                treatment to be medically necessary or appropriate.

                          PART 3--COST SHARING

SEC. 1131. COST SHARING.

    (a) In General.--Each health plan shall offer to individuals 
enrolled under the plan one, but not more than one, of the following 
cost sharing schedules, which schedule shall be offered to all such 
enrollees:
            (1) Lower cost sharing (described in section 1132).
            (2) Higher cost sharing (described in section 1133).
            (3) Combination cost sharing (described in section 1134).
    (b) Cost Sharing for Low-Income Families.--For provisions relating 
to reducing cost sharing for certain low-income families, see section 
1371.
    (c) Deductibles, Cost Sharing, and Out-of-Pocket Limits on Cost 
Sharing.--
            (1) Application on an annual basis.--The deductibles and 
        out-of-pocket limits on cost sharing for a year under the 
        schedules referred to in subsection (a) shall be applied based 
        upon expenses incurred for items and services furnished in the 
        year.
            (2) Individual and family general deductibles.--
                    (A) Individual.--Subject to subparagraph (B), with 
                respect to an individual enrolled under a health plan 
                (regardless of the class of enrollment), any individual 
                general deductible in the cost sharing schedule offered 
                by the plan represents the amount of countable expenses 
                (as defined in subparagraph (C)) that the individual 
                may be required to incur in a year before the plan 
                incurs liability for expenses for such items and 
                services furnished to the individual.
                    (B) Family.--In the case of an individual enrolled 
                under a health plan under a family class of enrollment 
                (as defined in section 1011(c)(2)(A)), the individual 
                general deductible under subparagraph (A) shall not 
                apply to countable expenses incurred by any member of 
                the individual's family in a year at such time as the 
                family has incurred, in the aggregate, countable 
                expenses in the amount of the family general deductible 
                for the year.
                    (C) Countable expense.--In this paragraph, the term 
                ``countable expense'' means, with respect to an 
                individual for a year, an expense for an item or 
                service covered by the comprehensive benefit package 
                that is subject to the general deductible and for 
                which, but for such deductible and any other cost 
                sharing under this subtitle, a health plan is liable 
                for payment. The amount of countable expenses for an 
                individual for a year under this paragraph shall not 
                exceed the individual general deductible for the year.
            (3) Coinsurance and copayments.--After a general or 
        separate deductible that applies to an item or service covered 
        by the comprehensive benefit package has been satisfied for a 
        year, subject to paragraph (4), coinsurance and copayments are 
        amounts (expressed as a percentage of an amount otherwise 
        payable or as a dollar amount, respectively) that an individual 
        may be required to pay with respect to the item or service.
            (4) Individual and family limits on cost sharing.--
                    (A) Individual.--Subject to subparagraph (B), with 
                respect to an individual enrolled under a health plan 
                (regardless of the class of enrollment), the individual 
                out-of-pocket limit on cost sharing in the cost sharing 
                schedule offered by the plan represents the amount of 
                expenses that the individual may be required to incur 
                under the plan in a year because of a general 
                deductible, separate deductibles, copayments, and 
                coinsurance before the plan may no longer impose any 
                cost sharing with respect to items or services covered 
                by the comprehensive benefit package that are provided 
                to the individual, except as provided in subsections 
                (d)(2)(E) and (e)(2)(E) of section 1115.
                    (B) Family.--In the case of an individual enrolled 
                under a health plan under a family class of enrollment 
                (as defined in section 1011(c)(2)(A)), the family out-
                of-pocket limit on cost sharing in the cost sharing 
                schedule offered by the plan represents the amount of 
                expenses that members of the individual's family, in 
                the aggregate, may be required to incur under the plan 
                in a year because of a general deductible, separate 
                deductibles, copayments, and coinsurance before the 
                plan may no longer impose any cost sharing with respect 
                to items or services covered by the comprehensive 
                benefit package that are provided to any member of the 
                individual's family, except as provided in subsections 
                (d)(2)(E) and (e)(2)(E) of section 1115.

SEC. 1132. LOWER COST SHARING.

    (a) In General.--The lower cost sharing schedule referred to in 
section 1131 that is offered by a health plan--
            (1) may not include a deductible;
            (2) shall have--
                    (A) an annual individual out-of-pocket limit on 
                cost sharing of $1500; and
                    (B) an annual family out-of-pocket limit on cost 
                sharing of $3000;
            (3) except as provided in paragraph (4)--
                    (A) shall prohibit payment of any coinsurance; and
                    (B) subject to section 1152, shall require payment 
                of the copayment for an item or service (if any) that 
                is specified for the item or service in the table under 
                section 1135; and
            (4) shall require payment of coinsurance for an out-of-
        network item or service (as defined in section 1402(f)) in an 
        amount that is a percentage (determined under subsection (b)) 
        of the applicable payment rate for the item or service 
        established under section 1322(c), but only if the item or 
        service is subject to coinsurance under the higher cost sharing 
        schedule described in section 1133.
    (b) Out-of-Network Coinsurance Percentage.--
            (1) In general.--The National Health Board shall determine 
        a percentage referred to in subsection (a)(4). The percentage--
                    (A) may not be less than 20 percent; and
                    (B) shall be the same with respect to all out-of-
                network items and services that are subject to 
                coinsurance, except as provided in paragraph (2).
            (2) Exception.--The National Health Board may provide for a 
        percentage that is greater than a percentage determined under 
        paragraph (1) in the case of an out-of-network item or service 
        for which, under the higher cost sharing schedule described in 
        section 1133, the coinsurance is greater than 20 percent of the 
        applicable payment rate.

SEC. 1133. HIGHER COST SHARING.

    (a) In General.--The higher cost sharing schedule referred to in 
section 1131 that is offered by a health plan--
            (1) shall have an annual individual general deductible of 
        $200 and an annual family general deductible of $400 that apply 
        with respect to expenses incurred for all items and services in 
        the comprehensive benefit package except--
                    (A) an item or service with respect to which a 
                separate individual deductible applies under paragraph 
                (2), (3), or (4); or
                    (B) an item or service described in paragraph (5), 
                (6), or (7) with respect to which a deductible does not 
                apply;
            (2) shall require an individual to incur expenses during 
        each episode of inpatient and residential mental illness and 
        substance abuse treatment (described in section 1115(c)) equal 
        to the cost of one day of such treatment before the plan 
        provides benefits for such treatment to the individual;
            (3) shall require an individual to incur expenses during 
        each episode of intensive nonresidential mental illness and 
        substance abuse treatment (described in section 1115(d)) equal 
        to the cost of one day of such treatment before the plan 
        provides benefits for such treatment to the individual;
            (4) shall require an individual to incur expenses in a year 
        for outpatient prescription drugs and biologicals (described in 
        section 1122) equal to $250 before the plan provides benefits 
        for such items to the individual;
            (5) shall require an individual to incur expenses in a year 
        for dental care described in section 1126, except the items and 
        services for prevention and diagnosis of dental disease 
        described in section 1126(a)(2), equal to $50 before the plan 
        provides benefits for such care to the individual;
            (6) may not require any deductible for clinical preventive 
        services (described in section 1114);
            (7) may not require any deductible for clinician visits and 
        associated services related to prenatal care or 1 post-partum 
        visit under section 1116;
            (8) may not require any deductible for the items and 
        services for prevention and diagnosis of dental disease 
        described in section 1126(a)(2);
            (9) shall have--
                    (A) an annual individual out-of-pocket limit on 
                cost sharing of $1500; and
                    (B) an annual family out-of-pocket limit on cost 
                sharing of $3000;
            (10) shall prohibit payment of any copayment; and
            (11) subject to section 1152, shall require payment of the 
        coinsurance for an item or service (if any) that is specified 
        for the item or service in the table under section 1135.
    (b) Episodes of Treatment.--
            (1) Inpatient and residential treatment.--For purposes of 
        subsection (a)(2), an episode of inpatient and residential 
        mental illness and substance abuse treatment shall be 
        considered to begin on the date an individual is admitted to a 
        facility for such treatment and to end on the date the 
        individual is discharged from the facility.
            (2) Intensive nonresidential treatment.--For purposes of 
        subsection (a)(3), an episode of intensive nonresidential 
        mental illness and substance abuse treatment--
                    (A) shall be considered to begin on the date an 
                individual begins participating in a program described 
                in section 1115(d)(1)(A) and to end on the date the 
                individual ceases such participation; or
                    (B) shall be considered to begin on the date an 
                individual begins receiving home-based or behavioral 
                aide services described in section 1115(d)(1)(B) and to 
                end on the date the individual ceases to receive such 
                services.

SEC. 1134. COMBINATION COST SHARING.

    (a) In General.--The combination cost sharing schedule referred to 
in section 1131 that is offered by a health plan--
            (1) shall have--
                    (A) an annual individual out-of-pocket limit on 
                cost sharing of $1500; and
                    (B) an annual family out-of-pocket limit on cost 
                sharing of $3000; and
            (2) otherwise shall require different cost sharing for in-
        network items and services than for out-of-network items and 
        services.
    (b) In-Network Items and Services.--With respect to an in-network 
item or service (as defined in section 1402(f)(1)), the combination 
cost sharing schedule that is offered by a health plan--
            (1) may not apply a deductible;
            (2) shall prohibit payment of any coinsurance; and
            (3) shall require payment of a copayment in accordance with 
        the lower cost sharing schedule described in section 1132.
    (c) Out-of-Network Items and Services.--With respect to an out-of-
network item or service (as defined in section 1402(f)(2)), the 
combination cost sharing schedule that is offered by a health plan--
            (1) shall require an individual and a family to incur 
        expenses before the plan provides benefits for the item or 
        service in accordance with the deductibles under the higher 
        cost sharing schedule described in section 1133;
            (2) shall prohibit payment of any copayment; and
            (3) shall require payment of coinsurance in accordance with 
        such schedule.

SEC. 1135. TABLE OF COPAYMENTS AND COINSURANCE.

    (a) In General.--The following table specifies, for different items 
and services, the copayments and coinsurance referred to in sections 
1132 and 1133:
  

                                Copayments and Coinsurance for Items and Services                               
----------------------------------------------------------------------------------------------------------------
             Benefit               Section     Lower Cost Sharing Schedule        Higher Cost Sharing Schedule  
----------------------------------------------------------------------------------------------------------------
Inpatient hospital services......     1111  No copayment                       20 percent of applicable payment 
                                                                                rate                            
----------------------------------------------------------------------------------------------------------------
Outpatient hospital services.....     1111  $10 per visit                      20 percent of applicable payment 
                                                                                rate                            
----------------------------------------------------------------------------------------------------------------
Hospital emergency room services.     1111  $25 per visit (unless patient has  20 percent of applicable payment 
                                             an emergency medical condition     rate                            
                                             as defined in section 1867(e)(1)                                   
                                             of the Social Security Act)                                        
----------------------------------------------------------------------------------------------------------------
Services of health professionals.     1112  $10 per visit                      20 percent of applicable payment 
                                                                                rate                            
----------------------------------------------------------------------------------------------------------------
Emergency services other than               $25 per visit (unless patient has  20 percent of applicable payment 
 hospital emergency room services     1113   an emergency medical condition     rate                            
                                             as defined in section 1867(e)(1)                                   
                                             of the Social Security Act)                                        
----------------------------------------------------------------------------------------------------------------
Ambulatory medical and surgical             $10 per visit                      20 percent of applicable payment 
 services........................     1113                                      rate                            
----------------------------------------------------------------------------------------------------------------
Clinical preventive services.....     1114  No copayment                       No coinsurance                   
----------------------------------------------------------------------------------------------------------------
Inpatient and residential mental            No copayment                       20 percent of applicable payment 
 illness and substance abuse                                                    rate                            
 treatment.......................     1115                                                                      
----------------------------------------------------------------------------------------------------------------
Intensive nonresidential mental             No copayment                       20 percent of applicable payment 
 illness and substance abuse                                                    rate                            
 treatment (except treatment                                                                                    
 provided pursuant to section                                                                                   
 1115(d)(2)(C)(ii))..............     1115                                                                      
----------------------------------------------------------------------------------------------------------------
Intensive nonresidential mental             $25 per visit                      50 percent of applicable payment 
 illness and substance abuse                                                    rate                            
 treatment provided pursuant to                                                                                 
 section 1115(d)(2)(C)(ii).......     1115                                                                      
----------------------------------------------------------------------------------------------------------------
Outpatient mental illness and               $10 per visit                      20 percent of applicable payment 
 substance abuse treatment                                                      rate                            
 (except psychotherapy,                                                                                         
 collateral services, and case                                                                                  
 management).....................     1115                                                                      
----------------------------------------------------------------------------------------------------------------
Outpatient psychotherapy and                $25 per visit until January 1,     50 percent of applicable payment 
 collateral services.............     1115   2001, and $10 per visit            rate until January 1, 2001, and 
                                             thereafter                         20 percent thereafter           
----------------------------------------------------------------------------------------------------------------
Case management..................     1115  No copayment                       No coinsurance                   
----------------------------------------------------------------------------------------------------------------
Family planning and services for            $10 per visit                      20 percent of applicable payment 
 pregnant women (except clinician                                               rate                            
 visits and associated services                                                                                 
 related to prenatal care and 1                                                                                 
 post-partum visit)..............     1116                                                                      
----------------------------------------------------------------------------------------------------------------
Clinician visits and associated             No copayment                       No coinsurance                   
 services related to prenatal                                                                                   
 care and 1 post-partum visit....     1116                                                                      
----------------------------------------------------------------------------------------------------------------
Hospice care.....................     1117  No copayment                       20 percent of applicable payment 
                                                                                rate                            
----------------------------------------------------------------------------------------------------------------
Home health care.................     1118  No copayment                       20 percent of applicable payment 
                                                                                rate                            
----------------------------------------------------------------------------------------------------------------
Extended care services...........     1119  No copayment                       20 percent of applicable payment 
                                                                                rate                            
----------------------------------------------------------------------------------------------------------------
Ambulance services...............     1120  No copayment                       20 percent of applicable payment 
                                                                                rate                            
----------------------------------------------------------------------------------------------------------------
Outpatient laboratory, radiology,           No copayment                       20 percent of applicable payment 
 and diagnostic services.........     1121                                      rate                            
----------------------------------------------------------------------------------------------------------------
Outpatient prescription drugs and           $5 per prescription                20 percent of applicable payment 
 biologicals.....................     1122                                      rate                            
----------------------------------------------------------------------------------------------------------------
Outpatient rehabilitation                   $10 per visit                      20 percent of applicable payment 
 services........................     1123                                      rate                            
----------------------------------------------------------------------------------------------------------------
Durable medical equipment and               No copayment                       20 percent of applicable payment 
 prosthetic and orthotic devices.     1124                                      rate                            
----------------------------------------------------------------------------------------------------------------
Vision care......................     1125  $10 per visit (No additional       20 percent of applicable payment 
                                             charge for 1 set of necessary      rate                            
                                             eyeglasses for an individual                                       
                                             less than 18 years of age)                                         
----------------------------------------------------------------------------------------------------------------
Dental care (except space                   $10 per visit                      20 percent of applicable payment 
 maintenance procedures and                                                     rate                            
 interceptive orthodontic                                                                                       
 treatment)......................     1126                                                                      
----------------------------------------------------------------------------------------------------------------
Space maintenance procedures and            $20 per visit                      40 percent of applicable payment 
 interceptive orthodontic                                                       rate                            
 treatment.......................     1126                                                                      
----------------------------------------------------------------------------------------------------------------
Health education classes.........     1127  All cost sharing rules determined  All cost sharing rules determined
                                             by plans                           by plans                        
----------------------------------------------------------------------------------------------------------------
Investigational treatment for               All cost sharing rules determined  All cost sharing rules determined
 life-threatening condition......     1128   by plans                           by plans                        
----------------------------------------------------------------------------------------------------------------

    (b) Applicable Payment Rate.--For purposes of this section, the 
term ``applicable payment rate'', when used with respect to an item or 
service, means the applicable payment rate for the item or service 
established under section 1322(c).

SEC. 1136. INDEXING DOLLAR AMOUNTS RELATING TO COST SHARING.

    (a) In General.--Any deductible, copayment, out-of-pocket limit on 
cost sharing, or other amount expressed in dollars in this subtitle for 
items or services provided in a year after 1994 shall be such amount 
increased by the percentage specified in subsection (b) for the year.
    (b) Percentage.--The percentage specified in this subsection for a 
year is equal to the product of the factors described in subsection (d) 
for the year and for each previous year after 1994, minus 1.
    (c) Rounding.--Any increase (or decrease) under subsection (a) 
shall be rounded, in the case of an amount specified in this subtitle 
of--
            (1) $200 or less, to the nearest multiple of $1,
            (2) more than $200, but less than $500, to the nearest 
        multiple of $5, or
            (3) $500 or more, to the nearest multiple of $10.
    (d) Factor.--
            (1) In general.--The factor described in this subsection 
        for a year is 1 plus the general health care inflation factor 
        (as specified in section 6001(a)(3) and determined under 
        paragraph (2)) for the year.
            (2) Determination.--In computing such factor for a year, 
        the percentage increase in the CPI for a year (referred to in 
        section 6001(b)) shall be determined based upon the percentage 
        increase in the average of the CPI for the 12-month period 
        ending with August 31 of the previous year over such average 
        for the preceding 12-month period.

                           PART 4--EXCLUSIONS

SEC. 1141. EXCLUSIONS.

    (a) Medical Necessity.--The comprehensive benefit package does not 
include--
            (1) an item or service that is not medically necessary or 
        appropriate; or
            (2) an item or service that the National Health Board may 
        determine is not medically necessary or appropriate in a 
        regulation promulgated under section 1154.
    (b) Additional Exclusions.--The comprehensive benefit package does 
not include the following items and services:
            (1) Custodial care, except in the case of hospice care 
        under section 1117.
            (2) Surgery and other procedures performed solely for 
        cosmetic purposes and hospital or other services incident 
        thereto, unless--
                    (A) required to correct a congenital anomaly; or
                    (B) required to restore or correct a part of the 
                body that has been altered as a result of--
                            (i) accidental injury;
                            (ii) disease; or
                            (iii) surgery that is otherwise covered 
                        under this subtitle.
            (3) Hearing aids.
            (4) Eyeglasses and contact lenses for individuals at least 
        18 years of age.
            (5) In vitro fertilization services.
            (6) Sex change surgery and related services.
            (7) Private duty nursing.
            (8) Personal comfort items, except in the case of hospice 
        care under section 1117.
            (9) Any dental procedures involving orthodontic care, 
        inlays, gold or platinum fillings, bridges, crowns, pin/post 
        retention, dental implants, surgical periodontal procedures, or 
        the preparation of the mouth for the fitting or continued use 
        of dentures, except as specifically described in section 1126.

               PART 5--ROLE OF THE NATIONAL HEALTH BOARD

SEC. 1151. DEFINITION OF BENEFITS.

    (a) In General.--The National Health Board may promulgate such 
regulations or establish such guidelines as may be necessary to assure 
uniformity in the application of the comprehensive benefit package 
across all health plans.
    (b) Flexibility in Delivery.--The regulations or guidelines under 
subsection (a) shall permit a health plan to deliver covered items and 
services to individuals enrolled under the plan using the providers and 
methods that the plan determines to be appropriate.

SEC. 1152. ACCELERATION OF EXPANDED BENEFITS.

    (a) In General.--Subject to subsection (b), at any time prior to 
January 1, 2001, the National Health Board, in its discretion, may by 
regulation expand the comprehensive benefit package by--
            (1) adding any item or service that is added to the package 
        as of January 1, 2001; and
            (2) requiring that a cost sharing schedule described in 
        part 3 of this subtitle reflect (wholly or in part) any of the 
        cost sharing requirements that apply to the schedule as of 
        January 1, 2001.
No such expansion shall be effective except as of January 1 of a year.
    (b) Condition.--The Board may not expand the benefit package under 
subsection (a) which is to become effective with respect to a year, by 
adding any item or service or altering any cost sharing schedule, 
unless the Board estimates that the additional increase in per capita 
health care expenditures resulting from the addition or alteration, for 
each regional alliance for the year, will not cause any regional 
alliance to exceed its per capita target (as determined under section 
6003).

SEC. 1153. AUTHORITY WITH RESPECT TO CLINICAL PREVENTIVE SERVICES.

    (a) In General.--With respect to clinical preventive services 
described in section 1114, the National Health Board--
            (1) shall specify and define specific items and services as 
        clinical preventive services for high risk populations and 
        shall establish and update a periodicity schedule for such 
        items and services;
            (2) shall update the periodicity schedules for the age-
        appropriate immunizations, tests, and clinician visits 
        specified in subsections (b) through (h) of such section;
            (3) shall establish rules with respect to coverage for an 
        immunization, test, or clinician visit that is not provided to 
        an individual during the age range for such immunization, test, 
        or clinician visit that is specified in one of subsections (b) 
        through (h) of such section; and
            (4) may otherwise modify the items and services described 
        in such section, taking into account age and other risk 
        factors, but may not modify the cost sharing for any such item 
        or service.
    (b) Consultation.--In performing the functions described in 
subsection (a), the National Health Board shall consult with experts in 
clinical preventive services.

SEC. 1154. ESTABLISHMENT OF STANDARDS REGARDING MEDICAL NECESSITY.

    The National Health Board may promulgate such regulations as may be 
necessary to carry out section 1141(a)(2) (relating to the exclusion of 
certain services that are not medically necessary or appropriate).

    PART 6--ADDITIONAL PROVISIONS RELATING TO HEALTH CARE PROVIDERS

SEC. 1161. OVERRIDE OF RESTRICTIVE STATE PRACTICE LAWS.

    No State may, through licensure or otherwise, restrict the practice 
of any class of health professionals beyond what is justified by the 
skills and training of such professionals.

SEC. 1162. PROVISION OF ITEMS OR SERVICES CONTRARY TO RELIGIOUS BELIEF 
              OR MORAL CONVICTION.

    A health professional or a health facility may not be required to 
provide an item or service in the comprehensive benefit package if the 
professional or facility objects to doing so on the basis of a 
religious belief or moral conviction.

                                                    Title I, Subtitle C

                   Subtitle C--State Responsibilities

SEC. 1200. PARTICIPATING STATE.

    (a) In General.--For purposes of the approval of a State health 
care system by the Board under section 1511, a State is a 
``participating State'' if the State meets the applicable requirements 
of this subtitle.
    (b) Submission of System Document.--
            (1) In general.--In order to be approved as a participating 
        State under section 1511, a State shall submit to the National 
        Health Board a document (in a form and manner specified by the 
        Board) that describes the State health care system that the 
        State is establishing (or has established).
            (2) Deadline.--If a State is not a participating State with 
        a State health care system in operation by January 1, 1998, the 
        provisions of subpart C of part 1 of subtitle F (relating to 
        responsibilities in absence of State systems) shall take 
        effect.
            (3) Submission of information subsequent to approval.--A 
        State approved as a participating State under section 1511 
        shall submit to the Board an annual update to the State health 
        care system not later than February 15 of each year following 
        the first year for which the State is a participating State. 
        The update shall contain--
                    (A) such information as the Board may require to 
                determine that the system shall meet the applicable 
                requirements of this Act for the succeeding year; and
                    (B) such information as the Board may require to 
                determine that the State operated the system during the 
                previous year in accordance with the Board's approval 
                of the system for such previous year.

                 PART 1--GENERAL STATE RESPONSIBILITIES

SEC. 1201. GENERAL STATE RESPONSIBILITIES.

    The responsibilities for a participating State are as follows:
            (1) Regional alliances.--Establishing one or more regional 
        alliances (in accordance with section 1202).
            (2) Health plans.--Certifying health plans (in accordance 
        with section 1203).
            (3) Financial solvency of plans.--Assuring the financial 
        solvency of health plans (in accordance with section 1204).
            (4) Administration.--Designating an agency or official 
        charged with coordinating the State responsibilities under this 
        Act.
            (5) Workers compensation and automobile insurance.--
        Conforming State laws to meet the requirements of subtitles A 
        and B of title X (relating to medical benefits under workers 
        compensation and automobile insurance).
            (6) Other responsibilities.--Carrying out other 
        responsibilities of participating States specified under this 
        Act.

SEC. 1202. STATE RESPONSIBILITIES WITH RESPECT TO ALLIANCES.

    (a) Establishment of Alliances.--
            (1) In general.--A participating State shall--
                    (A) establish and maintain one or more regional 
                alliances in accordance with this section and subtitle 
                D, and ensure that such alliances meet the requirements 
                of this Act; and
                    (B) designate alliance areas in accordance with 
                subsection (b).
            (2) Deadline.--A State may not be a participating State for 
        a year unless the State has established such alliances by March 
        1 of the previous year.
    (b) Alliance Areas.--
            (1) In general.--In accordance with this subsection, each 
        State shall designate a geographic area assigned to each 
        regional alliance. Each such area is referred to in this Act as 
        an ``alliance area''.
            (2) Population required.--
                    (A) In general.--Each alliance area shall encompass 
                a population large enough to ensure that the alliance 
                has adequate market share to negotiate effectively with 
                health plans providing the comprehensive benefit 
                package to eligible individuals who reside in the area.
                    (B) Treatment of consolidated metropolitan 
                statistical areas.--An alliance area that includes a 
                Consolidated Metropolitan Statistical Area within a 
                State is presumed to meet the requirement of 
                subparagraph (A).
            (3) Single alliance in each area.--No geographic area may 
        be assigned to more than one regional alliance.
            (4) Boundaries.--In establishing boundaries for alliance 
        areas, the State may not discriminate on the basis of or 
        otherwise take into account race, age, language, religion, 
        national origin, socio-economic status, disability, or 
        perceived health status.
            (5) Treatment of metropolitan areas.--The entire portion of 
        a metropolitan statistical area located in a State shall be 
        included in the same alliance area.
            (6) No portions of State permitted to be outside alliance 
        area.--Each portion of the State shall be assigned to a 
        regional alliance under this subsection.
    (c) State Coordination of Regional Alliances.--One or more States 
may allow or require two or more regional alliances to coordinate their 
operations, whether such alliances are in the same or different States. 
Such coordination may include adoption of joint operating rules, 
contracting with health plans, enforcement activities, and 
establishment of fee schedules for health providers.
    (d) Assistance in Collection of Amounts Owed to Alliances.--Each 
State shall assure that the amounts owed to regional alliances in the 
State are collected and paid to such alliances.
    (e) Assistance in Eligibility Verifications.--
            (1) In general.--Each State shall assure that the 
        determinations of eligibility for cost sharing assistance (and 
        premium discounts and cost sharing reductions for families) are 
        made by regional alliances in the State on the basis of the 
        best information available to the alliances and the State.
            (2) Provision of information.--Each State shall use the 
        information available to the State under section 
        6103(l)(7)(D)(x) of the Internal Revenue Code of 1986 to assist 
        regional alliances in verifying such eligibility status.
    (f) Special Requirements for Alliances With Single-Payer System.--
If the State operates an alliance-specific single-payer system (as 
described in part 2), the State shall assure that the regional alliance 
in which the system is operated meets the requirements for such an 
alliance described in section 1224(b).
    (g) Payment of Shortfalls for Certain Administrative Errors.--Each 
participating State is financially responsible, under section 
9201(c)(2), for administrative errors described in section 9201(e)(2).

SEC. 1203. STATE RESPONSIBILITIES RELATING TO HEALTH PLANS.

    (a) Criteria for Certification.--
            (1) In general.--For purposes of this section, a 
        participating State shall establish and publish the criteria 
        that are used in the certification of health plans under this 
        section.
            (2) Requirements.--Such criteria shall be established with 
        respect to--
                    (A) the quality of the plan,
                    (B) the financial stability of the plan,
                    (C) the plan's capacity to deliver the 
                comprehensive benefit package in the designated service 
                area,
                    (D) other applicable requirements for health plans 
                under parts 1, 3, and 4 of subtitle E, and
                    (E) other requirements imposed by the State 
                consistent with this part.
    (b) Certification of Health Plans.--A participating State shall 
certify each plan as a regional alliance health plan that it determines 
meets the criteria for certification established and published under 
subsection (a).
    (c) Monitoring.--A participating State shall monitor the 
performance of each State-certified regional alliance health plan to 
ensure that it continues to meet the criteria for certification.
    (d) Limitations on Authority.--A participating State may not--
            (1) discriminate against a plan based on the domicile of 
        the entity offering of the plan; and
            (2) regulate premium rates charged by health plans, except 
        as may be required under title VI (relating to the enforcement 
        of cost containment rules for plans in the State) or as may be 
        necessary to ensure that plans meet financial solvency 
        requirements under section 1408.
    (e) Assuring Adequate Access to a Choice of Health Plans.--
            (1) General access.--
                    (A) In general.--Each participating State shall 
                ensure that--
                            (i) each regional alliance eligible family 
                        has adequate access to enroll in a choice of 
                        regional alliance health plans providing 
                        services in the area in which the individual 
                        resides, including (to the maximum extent 
                        practicable) adequate access to a plan whose 
                        premium is at or below the weighted average 
                        premium for plans in the regional alliance, and
                            (ii) each such family that is eligible for 
                        a premium discount under section 6104(b) is 
                        provided a discount in accordance with such 
                        section (including an increase in such discount 
                        described in section 6104(b)(2)).
                    (B) Authority.--In order to carry out its 
                responsibility under subparagraph (A), a participating 
                State may require, as a condition of entering into a 
                contract with a regional alliance under section 1321, 
                that one or more certified regional alliance health 
                plans cover all (or selected portions) of the alliance 
                area.
            (2) Access to plans using centers of excellence.--Each 
        participating State may require, as a condition of entering 
        into a contract with a regional alliance under section 1321, 
        that one or more certified health plans provide access (through 
        reimbursement, contracts, or otherwise) of enrolled individuals 
        to services of centers of excellence (as designated by the 
        State in accordance with rules promulgated by the Secretary).
            (3) Use of incentives to enroll and serve disadvantaged 
        groups.--A State may provide--
                    (A) for an adjustment to the risk-adjustment 
                methodology under section 1541(b) and other financial 
                incentives to regional alliance health plans to ensure 
                that such plans enroll individuals who are members of 
                disadvantaged groups, and
                    (B) for appropriate extra services, such as 
                outreach to encourage enrollment and transportation and 
                interpreting services to ensure access to care, for 
                certain population groups that face barriers to access 
                because of geographic location, income levels, or 
                racial or cultural differences.
    (f) Coordination of Workers' Compensation Services and Automobile 
Insurance.--Each participating State shall comply with the 
responsibilities regarding workers' compensation and automobile 
insurance specified in subtitles A and B of title X.
    (g) Implementation of Mandatory Reinsurance System.--If the risk 
adjustment and reinsurance methodology developed under section 1541 
includes a mandatory reinsurance system, each participating State shall 
establish a reinsurance program consistent with such methodology and 
any additional standards established by the Board.
    (h) Requirements for Plans Offering Supplemental Insurance.--
Notwithstanding any other provision of this Act a State may not certify 
a regional alliance health plan under this section if--
            (1) the plan (or any entity with which the plan is 
        affiliated under such rules as the Board may establish) offers 
        a supplemental health benefit policy (as defined in section 
        1421(b)(1)) that fails to meet the applicable requirements for 
        such a policy under part 2 of subtitle E (without regard to the 
        State in which the policy is offered); or
            (2) the plan offers a cost sharing policy (as defined in 
        section 1421(b)(2)) that fails to meet the applicable 
        requirements for such a policy under part 2 of subtitle E.

SEC. 1204. FINANCIAL SOLVENCY; FISCAL OVERSIGHT; GUARANTY FUND.

    (a) Capital Standards.--A participating State shall establish 
capital standards for health plans that meet minimum Federal 
requirements established by the National Health Board under sections 
1503(i) and 1551(a).
    (b) Reporting and Auditing Requirements.--Each participating State 
shall define financial reporting and auditing requirements and 
requirements for fund reserves adequate to monitor the financial status 
of plans.
    (c) Guaranty Fund.--
            (1) Establishment.--Each participating State shall ensure 
        that there is a guaranty fund that meets the requirements 
        established by the Board under sections 1503(i) and 1552, in 
        order to provide financial protection to health care providers 
        and others in the case of a failure of a regional alliance 
        health plan.
            (2) Assessments to provide funds.--In the case of a failure 
        of one or more regional alliance health plans, the State may 
        require each regional alliance health plan within the State to 
        pay an assessment to the State in an amount not to exceed 2 
        percent of the premiums of such plans paid by or on behalf of 
        regional alliance eligible individuals during a year for so 
        long as necessary to generate sufficient revenue to cover any 
        outstanding claims against the failed plan.
    (d) Procedures in Event of Plan Failure.--
            (1) In general.--A participating State shall assure that, 
        in the event of the failure of a regional alliance health plan 
        in the State, eligible individuals enrolled in the plan will be 
        assured continuity of coverage for the comprehensive benefit 
        package.
            (2) Designation of state agency.--A participating State 
        shall designate an agency of State government that supervises 
        or assumes control of the operation of a regional alliance 
        health plan in the case of the failure of the plan.
            (3) Protections for health care providers and enrollees.--
        Each participating State shall assure that in the case of a 
        plan failure--
                    (A) the guaranty fund shall pay health care 
                providers for items and services covered under the 
                comprehensive benefit package for enrollees of the plan 
                for which the plan is otherwise obligated to make 
                payment;
                    (B) after making all payments required to be made 
                to providers under subparagraph (A), the guaranty fund 
                shall make payments for the operational, 
                administrative, and other costs and debts of the plan 
                (in accordance with requirements imposed by the State 
                based on rules promulgated by the Board);
                    (C) such health care providers have no legal right 
                to seek payment from eligible individuals enrolled in 
                the plan for any such covered items or services (other 
                than the enrollees' obligations under cost sharing 
                arrangements); and
                    (D) health care providers are required to continue 
                caring for such eligible individuals until such 
                individuals are enrolled in a new health plan.
            (4) Plan failure.--For purposes of this section, the 
        failure of a health plan means the current or imminent 
        inability of the plan to pay claims.

SEC. 1205. RESTRICTIONS ON FUNDING OF ADDITIONAL BENEFITS.

    If a participating State provides benefits (either directly or 
through regional alliance health plans or otherwise) in addition to 
those covered under the comprehensive benefit package, the State may 
not provide for payment for such benefits through funds provided under 
this Act.

          PART 2--REQUIREMENTS FOR STATE SINGLE-PAYER SYSTEMS

SEC. 1221. SINGLE-PAYER SYSTEM DESCRIBED.

    The Board shall approve the application of a State to operate a 
single-payer system if the Board finds that the system--
            (1) meets the requirements of section 1222;
            (2)(A) meets the requirements for a Statewide single-payer 
        system under section 1223, in the case of a system offered 
        throughout a State; or
            (B) meets the requirements for an alliance-specific single-
        payer system under section 1224, in the case of a system 
        offered in a single alliance of a State.

SEC. 1222. GENERAL REQUIREMENTS FOR SINGLE-PAYER SYSTEMS.

    Each single-payer system shall meet the following requirements:
            (1) Establishment by state.--The system is established 
        under State law, and State law provides for mechanisms to 
        enforce the requirements of the system.
            (2) Operation by state.--The system is operated by the 
        State or a designated agency of the State.
            (3) Enrollment of eligible individuals.--
                    (A) Mandatory enrollment of all regional alliance 
                individuals.--The system provides for the enrollment of 
                all eligible individuals residing in the State (or, in 
                the case of an alliance-specific single-payer system, 
                in the alliance area) for whom the applicable health 
                plan would otherwise be a regional alliance health 
                plan.
                    (B) Optional enrollment of medicare-eligible 
                individuals.--At the option of the State, the system 
                may provide for the enrollment of medicare-individuals 
                residing in the State (or, in the case of an alliance-
                specific single-payer system, in the alliance area) if 
                the Secretary of Health and Human Services has approved 
                an application submitted by the State under section 
                1893 of the Social Security Act (as added by section 
                4001(a)) for the integration of medicare beneficiaries 
                into plans of the State. Nothing in this subparagraph 
                shall be construed as requiring that a State have a 
                single-payer system in order to provide for such 
                integration.
                    (C) Optional enrollment of corporate alliance 
                individuals in statewide plans.--At the option of the 
                State, a Statewide single-payer system may provide for 
                the enrollment of individuals residing in the State who 
                are otherwise eligible to enroll in a corporate 
                alliance health plan under section 1311.
                    (D) Options included in state system document.--A 
                State may not exercise any of the options described in 
                subparagraphs (A) or (B) for a year unless the State 
                included a description of the option in the submission 
                of its system document to the Board for the year under 
                section 1200(b).
                    (E) Exclusion of certain individuals.--A single-
                payer system may not require the enrollment of electing 
                veterans, active duty military personnel, and electing 
                Indians (as defined in 1012(d)).
            (4) Direct payment to providers.--
                    (A) In general.--With respect to providers who 
                furnish items and services included in the 
                comprehensive benefit package to individuals enrolled 
                in the system, the State shall make payments directly 
                to such providers and assume (subject to subparagraph 
                (B)) all financial risk associated with making such 
                payments.
                    (B) Capitated payments permitted.--Nothing in 
                subparagraph (A) shall be construed to prohibit 
                providers furnishing items and services under the 
                system from receiving payments from the plan on a 
                capitated, at-risk basis based on prospectively 
                determined rates.
            (5) Provision of comprehensive benefit package.--
                    (A) In general.--The system shall provide for 
                coverage of the comprehensive benefit package, 
                including the cost sharing provided under the package 
                (subject to subparagraph (B)), to all individuals 
                enrolled in the system.
                    (B) Imposition of reduced cost sharing.--The system 
                may decrease the cost sharing otherwise provided in the 
                comprehensive benefit package with respect to any class 
                of individuals enrolled in the system or any class of 
                services included in the package, so long as the system 
                does not increase the cost sharing otherwise imposed 
                with respect to any other class of individuals or 
                services.
            (6) Cost containment.--The system shall provide for 
        mechanisms to ensure, in a manner satisfactory to the Board, 
        that--
                    (A) per capita expenditures for items and services 
                in the comprehensive benefit package under the system 
                for a year (beginning with the first year) do not 
                exceed an amount equivalent to the regional alliance 
                per capita premium target that is determined under 
                section 6003 (based on the State being a single 
                regional alliance) for the year;
                    (B) the per capita expenditures described in 
                subparagraph (A) are computed and effectively 
                monitored; and
                    (C) automatic, mandatory, nondiscretionary 
                reductions in payments to health care providers will be 
                imposed to the extent required to assure that such per 
                capita expenditures do not exceed the applicable target 
                referred to in subparagraph (A).
            (7) Requirements generally applicable to health plans.--The 
        system shall meet the requirements applicable to a health plan 
        under section 1400(a), except that--
                    (A) the system does not have the authority provided 
                to health plans under section 1402(a)(2) (relating to 
                permissible limitations on the enrollment of eligible 
                individuals on the basis of limits on the plan's 
                capacity);
                    (B) the system is not required to meet the 
                requirements of section 1404(a) (relating to 
                restrictions on the marketing of plan materials); and
                    (C) the system is not required to meet the 
                requirements of section 1408 (relating to plan 
                solvency).

SEC. 1223. SPECIAL RULES FOR STATES OPERATING STATEWIDE SINGLE-PAYER 
              SYSTEM.

    (a) In General.--In the case of a State operating a Statewide 
single-payer system--
            (1) the State shall operate the system throughout the State 
        through a single alliance;
            (2) except as provided in subsection (b), the State shall 
        meet the requirements for participating States under part 1; 
        and
            (3) the State shall assume the functions described in 
        subsection (c) that are otherwise required to be performed by 
        regional alliances in participating States that do not operate 
        a Statewide single-payer system.
    (b) Exceptions to Certain Requirements for Participating States.--
In the case of a State operating a Statewide single-payer system, the 
State is not required to meet the following requirements otherwise 
applicable to participating States under part 1:
            (1) Establishment of alliances.--The requirements of 
        section 1202 (relating to the establishment of alliances).
            (2) Health plans.--The requirements of section 1203 
        (relating to health plans), other than the requirement of 
        subsection (f) of such section (relating to coordination of 
        workers' compensation services and automobile liability 
        insurance).
            (3) Financial solvency.--The requirements of section 1204 
        (relating to the financial solvency of health plans in the 
        State).
    (c) Assumption by State of Certain Requirements Applicable to 
Regional Alliances.--A State operating a Statewide single-payer system 
shall be subject to the following requirements otherwise applicable to 
regional alliances in other participating States:
            (1) Enrollment; issuance of health security cards.--The 
        requirements of subsections (a) and (c) of section 1323 and 
        section 1324 shall apply to the State, eligible individuals 
        residing in the State, and the single-payer system operated by 
        the State in the same manner as such requirements apply to a 
        regional alliance, alliance eligible individuals, and regional 
        alliance health plans.
            (2) Reductions in cost sharing for low-income 
        individuals.--The requirement of section 1371 shall apply to 
        the State in the same manner as such requirement applies to a 
        regional alliance.
            (3) Data collection; quality.--The requirements of section 
        1327 shall apply to the State and the single-payer system 
        operated by the State in the same manner as such requirement 
        applies to a regional alliance and health plans offered through 
        a regional alliance.
            (4) Anti-discrimination; coordination.--The requirements of 
        section 1328 shall apply to the State in the same manner as 
        such requirements apply with respect to a regional alliance.
    (d) Financing.--
            (1) In general.--A State operating a Statewide single-payer 
        system shall provide for the financing of the system using, at 
        least in part, a payroll-based financing system that requires 
        employers to pay at least the amount that the employers would 
        be required to pay if the employers were subject to the 
        requirements of subtitle B of title VI.
            (2) Use of financing methods.--Such a State may use, 
        consistent with paragraph (1), any other method of financing.
    (e) Single-Payer State Defined.--In this Act, the term ``single-
payer State'' means a State with a Statewide single-payer system in 
effect that has been approved by the Board in accordance with this 
part.

SEC. 1224. SPECIAL RULES FOR ALLIANCE-SPECIFIC SINGLE-PAYER SYSTEMS.

    (a) In General.--In the case of a State operating an alliance-
specific single-payer system--
            (1) the State shall meet the requirements for participating 
        States under part 1; and
            (2) the regional alliance in which the system is operated 
        shall meet the requirements of subsection (b).
    (b) Requirements for Alliance in Which System Operates.--A regional 
alliance in which an alliance-specific single payer system is operated 
shall meet the requirements applicable to regional alliances under 
subtitle D, except that the alliance is not required to meet the 
following requirements of such subtitle:
            (1) Contracts with health plans.--The requirements of 
        section 1321 (relating to contracts with health plans).
            (2) Choice of health plans offered.--The requirements of 
        subsections (a) or (b) of section 1322 (relating to offering a 
        choice of health plans to eligible enrollees).
            (3) Establishment of ombudsman office.--The requirements of 
        section 1326(a) (relating to the establishment of an office of 
        ombudsman).
            (4) Addressing needs of areas with inadequate health 
        services.--The regional alliance does not have any of the 
        authorities described in subsections (a) and (b) of section 
        1329 (relating to adjusting payments to plans and encouraging 
        the establishment of new plans).

                                                    Title I, Subtitle D

                      Subtitle D--Health Alliances

SEC. 1300. HEALTH ALLIANCE DEFINED.

    In this Act, the term ``health alliance'' means a regional alliance 
(as defined in section 1301) and a corporate alliance (as defined in 
section 1311).

       PART 1--ESTABLISHMENT OF REGIONAL AND CORPORATE ALLIANCES

                     Subpart A--Regional Alliances

SEC. 1301. REGIONAL ALLIANCE DEFINED.

    In this Act, the term ``regional alliance'' means a non-profit 
organization, an independent state agency, or an agency of the State 
which--
            (1) meets the applicable organizational requirements of 
        this subpart, and
            (2) is carrying out activities consistent with part 2.

SEC. 1302. BOARD OF DIRECTORS.

    (a) In General.--A regional alliance must be governed by a Board of 
Directors appointed consistent with the provisions of this subpart. All 
powers vested in a regional alliance under this Act shall be vested in 
the Board of Directors.
    (b) Membership.--
            (1) In general.--Such a Board of Directors shall consist 
        of--
                    (A) members who represent employers whose employees 
                purchase health coverage through the alliance, 
                including self-employed individuals who purchase such 
                coverage; and
                    (B) members who represent individuals who purchase 
                such coverage, including employees who purchase such 
                coverage.
            (2) Equal representation of employers and consumers.--The 
        number of members of the Board described under subparagraph (A) 
        of paragraph (1) shall be the same as the number of members 
        described in subparagraph (B) of such paragraph.
    (c) No Conflict of Interest Permitted.--An individual may not serve 
as a member of the Board of Directors if the individual is one of the 
following (or an immediate family member of one of the following):
            (1) A health care provider.
            (2) An individual who is an employee or member of the Board 
        of Directors of, has a substantial ownership in, or derives 
        substantial income from, a health care provider, health plan, 
        pharmaceutical company, or a supplier of medical equipment, 
        devices, or services.
            (3) A person who derives substantial income from the 
        provision of health care.
            (4)(A) A member or employee of an association, law firm, or 
        other institution or organization that represents the interests 
        of one or more health care providers, health plans or others 
        involved in the health care field, or (B) an individual who 
        practices as a professional in an area involving health care.

SEC. 1303. PROVIDER ADVISORY BOARDS FOR REGIONAL ALLIANCES.

    Each regional alliance must establish a provider advisory board 
consisting of representatives of health care providers and 
professionals who provide covered services through health plans offered 
by the alliance.

                     Subpart B--Corporate Alliances

SEC. 1311. CORPORATE ALLIANCE DEFINED; INDIVIDUALS ELIGIBLE FOR 
              COVERAGE THROUGH CORPORATE ALLIANCES; ADDITIONAL 
              DEFINITIONS.

    (a) Corporate Alliance Defined.--In this Act, the term ``corporate 
alliance'' means an eligible sponsor (as defined in subsection (b)) 
if--
            (1) the sponsor elects, in a form and manner specified by 
        the Secretary of Labor consistent with this subpart, to be 
        treated as a corporate alliance under this title and such 
        election has not been terminated under section 1313; and
            (2) the sponsor has filed with the Secretary of Labor a 
        document describing how the sponsor shall carry out activities 
        as such an alliance consistent with part 4.
    (b) Eligible Sponsors.--
            (1) In general.--In this subpart, each of the following is 
        an eligible sponsor:
                    (A) Large employer.--An employer that--
                            (i) is a large employer (as defined in 
                        subsection (e)(2)) as of the date of an 
                        election under subsection (a)(1), and
                            (ii) is not an excluded employer described 
                        in paragraph (2).
                    (B) Plan sponsor of a multiemployer plan.--A plan 
                sponsor described in section 3(16)(B)(iii) of Employee 
                Retirement Income Security Act of 1974, but only with 
                respect to a group health plan that is a multiemployer 
                plan (as defined in subsection (e)(3)) maintained by 
                the sponsor and only if--
                            (i) such plan offered health benefits as of 
                        September 1, 1993, and
                            (ii) as of both September 1, 1993, and 
                        January 1, 1996, such plan has more than 5,000 
                        active participants in the United States, or 
                        the plan is maintained by one or more 
                        affiliates of the same labor organization, or 
                        one or more affiliates of labor organizations 
                        representing employees in the same industry, 
                        covering more than 5,000 employees.
                    (C) Rural electric cooperative and rural telephone 
                cooperative association.--A rural electric cooperative 
                or a rural telephone cooperative association, but only 
                with respect to a group health plan that is maintained 
                by such cooperative or association (or members of such 
                cooperative or association) and only if such plan--
                            (i) offered health benefits as of September 
                        1, 1993, and
                            (ii) as of both September 1, 1993, and 
                        January 1, 1996, has more than 5,000 full-time 
                        employees in the United States entitled to 
                        health benefits under the plan.
            (2) Excluded employers.--For purposes of paragraph (1)(A), 
        any of the following are excluded employers described in this 
        paragraph:
                    (A) An employer whose primary business is employee 
                leasing.
                    (B) The Federal government (other than the United 
                States Postal Service).
                    (C) A State government, a unit of local government, 
                and an agency or instrumentality of government, 
                including any special purpose unit of government.
    (c) Individuals Eligible To Enroll in Corporate Alliance Health 
Plans.--For purposes of part 1 of subtitle A, subject to subsection 
(d)--
            (1) Full-time employees of large employers.--Each eligible 
        individual who is a full-time employee (as defined in section 
        1901(b)(2)(C)) of a large employer that has an election in 
        effect as a corporate alliance is eligible to enroll in a 
        corporate alliance health plan offered by such corporate 
        alliance.
            (2) Multiemployer alliances.--
                    (A) Participants.--Each participant and beneficiary 
                (as defined in subparagraph (B)) under a multiemployer 
                plan, with respect to which an eligible sponsor of the 
                plan described in subsection (b)(1)(B) has an election 
                in effect as a corporate alliance, is eligible to 
                enroll in a corporate alliance health plan offered by 
                such corporate alliance.
                    (B) Participant and beneficiary defined.--In 
                subparagraph (A), the terms ``participant'' and 
                ``beneficiary'' have the meaning given such terms in 
                section 3 of the Employee Retirement Income Security 
                Act of 1974.
            (3) Full-time employees of rural cooperative alliances.--
        Each full-time employee of a member of a rural electric 
        cooperative or rural telephone cooperative association which 
        has an election in effect as a corporate alliance (and each 
        full-time employee of such a cooperative or association) is 
        eligible to enroll in a corporate alliance health plan offered 
        by such corporate alliance.
            (4) Ineligible to enroll in regional alliance health 
        plan.--Except as provided in section 1013, a corporate alliance 
        eligible individual is not eligible to enroll under a regional 
        alliance health plan.
    (d) Exclusion of Certain Individuals.--In accordance with rules of 
the Board, the following individuals shall not be treated as corporate 
alliance eligible individuals:
            (1) AFDC recipients.
            (2) SSI recipients.
            (3) Individuals who are described in section 1004(b) 
        (relating to veterans, military personnel, and Indians) and who 
        elect an applicable health plan described in such section.
            (4) Employees who are seasonal or temporary workers (as 
        defined by the Board), other than such workers who are treated 
        as corporate alliance eligible individuals pursuant to a 
        collective bargaining agreement (as defined by the Secretary of 
        Labor).
    (e) Definitions Relating to Corporate Alliances.--In this subtitle, 
except as otherwise provided:
            (1) Group health plan.--The term ``group health plan'' 
        means an employee welfare benefit plan (as defined in section 
        3(1) of the Employee Retirement Income Security Act of 1974) 
        providing medical care (as defined in section 213(d) of the 
        Internal Revenue Code of 1986) to participants or beneficiaries 
        (as defined in section 3 of the Employee Retirement Income 
        Security Act of 1974) directly or through insurance, 
        reimbursement, or otherwise.
            (2) Large employer.--The term ``large employer'' means an 
        employer that has more than 5,000 full-time employees in the 
        United States. Such term includes the United States Postal 
        Service.
            (3) Multiemployer plan.--The term ``multiemployer plan'' 
        has the meaning given such term in section 3(37) of the 
        Employee Retirement Income Security Act of 1974, and includes 
        any plan that is treated as such a plan under title I of such 
        Act.
            (4) Rural electric cooperative.--The term ``rural electric 
        cooperative'' has the meaning given such term in section 
        3(40)(A)(iv) of the Employee Retirement Income Security Act of 
        1974.
            (5) Rural telephone cooperative associations.--The term 
        ``rural telephone cooperative association'' has the meaning 
        given such term in section 3(40)(A)(v) of the Employee 
        Retirement Income Security Act of 1974.

SEC. 1312. TIMING OF ELECTIONS.

    (a) For Large Employers.--
            (1) Current large employers.--
                    (A) In general.--In the case of an employer that is 
                an eligible sponsor described in section 1311(b)(1)(A) 
                as of the most recent January 1 prior to the general 
                effective date, the sponsor's election to be a 
                corporate alliance under such section must be made and 
                filed with the Secretary of Labor not later than the 
                date specified in subparagraph (B).
                    (B) Deadline for notice.--The date specified in 
                this subparagraph is January 1 of the second year 
                preceding the general effective date or, in the case of 
                a State that elects to become a participating State 
                before the general effective date, not later than one 
                month later than the date specified for States under 
                section 1202(a)(2).
            (2) New large employers.--In the case of an employer that 
        is not an eligible sponsor described in section 1311(b)(1)(A) 
        as of the most recent January 1 prior to the general effective 
        date, but first becomes such a sponsor as of a subsequent date, 
        the election to be a corporate alliance under such section must 
        be made and filed with the Secretary of Labor not later than 
        March 1 of the year following the year in which the employer 
        first becomes such a sponsor.
            (3) Application of option.--The Secretary of Labor shall 
        promulgate rules regarding how the option described in section 
        1311(c)(1)(B) will be applied to the determination of whether 
        an employer is a large employer before an election is made 
        under section 1311.
    (b) For Multiemployer Plans and Rural Cooperatives.--In the case of 
an eligible sponsor described in section 1311(b)(1) (B) or (C), the 
sponsor's election to be a corporate alliance under such section must 
be made and filed with the Secretary of Labor not later than March 1, 
1996.
    (c) Effective Date of Election.--An election made under subsection 
(a) or (b) shall be effective for coverage provided under health plans 
on and after January 1 of the year following the year in which the 
election is made.
    (d) One-time Election.--If an eligible sponsor fails to make the 
election on a timely manner under subsection (a) or (b), the sponsor 
may not make such election at any other time.

SEC. 1313. TERMINATION OF ALLIANCE ELECTION.

    (a) Termination for Insufficient Number of Full-Time Employees or 
Participants.--If a corporate alliance reports under section 1387(c), 
that there were fewer than 4,800 full-time employees (or, active 
participants, in the case of one or more plans offered by a corporate 
alliance which is an eligible sponsor described in section 
1311(b)(1)(B)) who are enrolled in a health plan through the alliance, 
the election under this part with respect to the alliance shall 
terminate.
    (b) Termination for Failure to Meet Requirements.--
            (1) In general.--If the Secretary of Labor finds that a 
        corporate alliance has failed substantially to meet the 
        applicable requirements of this subtitle, the Secretary shall 
        terminate the election under this part with respect to the 
        alliance
            (2) Excess increase in premium equivalent.--If the 
        Secretary of Labor finds that the alliance is in violation of 
        the requirements of section 6022 (relating to prohibition 
        against excess increase in premium expenditures), the Secretary 
        shall terminate the alliance in accordance with such section.
    (c) Elective Termination.--A corporate alliance may terminate an 
election under this part by filing with the National Health Board and 
the Secretary of Labor a notice of intent to terminate.
    (d) Effective Date of Termination.--In the case of a termination of 
an election under this section, in accordance with rules established by 
the Secretary of Labor--
            (1) subject to section 6022(a)(1), the termination shall 
        take effect as of the effective date of enrollments in regional 
        alliance health plans made during the next open enrollment 
        period (as provided in section 1323(d)), and
            (2) the enrollment of eligible individuals in corporate 
        alliance health plans of the corporate alliance shall be 
        terminated as of such date and such individuals shall be 
        enrolled in other applicable health plans effective on such 
        date.
    (e) Notice to Board.--If an election with respect to a corporate 
alliance is terminated pursuant to subsection (a) or subsection (b), 
the Secretary of Labor shall notify the National Health Board of the 
termination of the election.

 PART 2--GENERAL RESPONSIBILITIES AND AUTHORITIES OF REGIONAL ALLIANCES

SEC. 1321. CONTRACTS WITH HEALTH PLANS.

    (a) Contracts with Plans.--
            (1) In general.--In order to assure the availability of the 
        comprehensive benefit package to eligible individuals residing 
        in the alliance area in a cost-effective manner, except as 
        provided in this section, each regional alliance shall 
        negotiate with any willing State-certified health plan to enter 
        into a contract with the alliance for the enrollment under the 
        plan of eligible individuals in the alliance area. Subject to 
        paragraph (2), a regional alliance shall not enter into any 
        such contract with a health plan that is not a State-certified 
        health plan.
            (2) Treatment of certain plans.--Each regional alliance 
        shall enter into a contract under this section with any 
        veterans health plan of the Department of Veterans Affairs and 
        with a Uniformed Services Health Plan of the Department of 
        Defense, that offers the comprehensive benefit package to 
        eligible individuals residing in the alliance area if the 
        appropriate official requests to enter into such a contract.
    (b) General Conditions for Denial of Contract by a Regional 
Alliance.--A regional alliance is not required under this section to 
offer a contract with a health plan if--
            (1) the alliance finds that the proposed bid exceeds 120 
        percent of the regional alliance per capita prremium target (as 
        determined under section 6003); or
            (2) the plan has failed to comply with requirements under 
        prior contracts with the alliance, including failing to offer 
        coverage for all the services in the comprehensive benefit 
        package in the entire service area of the plan.

SEC. 1322. OFFERING CHOICE OF HEALTH PLANS FOR ENROLLMENT; 
              ESTABLISHMENT OF FEE-FOR-SERVICE SCHEDULE.

    (a) In General.--Each regional alliance must provide to each 
eligible enrollee (as defined in section 1902(14)) with respect to the 
alliance a choice of health plans among the plans which have contracts 
in effect with the alliance under section 1321 (in the case of a 
regional alliance) or section 1341 (in the case of a corporate 
alliance).
    (b) Offering of Plans by Regional Alliances.--
            (1) In general.--Each regional alliance shall include among 
        its health plan offerings at least one fee-for-service plan (as 
        defined in paragraph (2)).
            (2) Fee-for-service plan defined.--
                    (A) In general.--For purposes of this Act, the term 
                ``fee-for-service plan'' means a health plan that--
                            (i) provides coverage for all items and 
                        services included in the comprehensive benefit 
                        package that are furnished by any lawful health 
                        care provider of the enrollee's choice, subject 
                        to reasonable restrictions (described in 
                        subparagraph (B)), and
                            (ii) makes payment to such a provider 
                        without regard to whether or not there is a 
                        contractual arrangement between the plan and 
                        the provider.
                    (B) Reasonable restrictions described.--The 
                reasonable restrictions on coverage permitted under a 
                fee-for-service plan (as specified by the National 
                Health Board) are as follows:
                            (i) Utilization review.
                            (ii) Prior approval for specified services.
                            (iii) Exclusion of providers on the basis 
                        of poor quality of care, based on evidence 
                        obtainable by the plan.
                Clause (ii) shall not be construed as permitting a plan 
                to require prior approval for non-primary health care 
                services through a gatekeeper or other process.
    (c) Establishment of Fee-for-Service Schedule.--
            (1) In general.--Except in the case of regional alliances 
        of a State that has established a Statewide fee schedule under 
        paragraph (3), each regional alliance shall establish a fee 
        schedule setting forth the payment rates applicable to services 
        furnished during a year to individuals enrolled in fee-for-
        service plans (or to services furnished under the fee-for-
        service component of any regional alliance health plan) for use 
        by regional alliance health plans under section 1406(c) and 
        corporate alliance health plans providing services subject to 
        the schedule in the regional alliance area.
            (2) Negotiation with providers.--The fee schedule under 
        paragraph (1) shall be established after negotiations with 
        providers, and (subject to paragraphs (5) and (6)) providers 
        may collectively negotiate the fee schedule with the regional 
        alliance.
            (3) Use of statewide schedule.--At the option of a State, 
        the State may establish its own statewide fee schedule which 
        shall apply to all fee-for-service plans offered by regional 
        alliances and corporate alliances in the State instead of 
        alliance-specific schedules established under paragraph (1).
            (4) Annual revision.--A regional alliance or State (as the 
        case may be) shall annually update the payment rates provided 
        under the fee schedule established pursuant to paragraph (1) or 
        paragraph (3).
            (5) Activities treated as State action or efforts intended 
        to influence government action.--The establishment of a fee 
        schedule under this subsection by a regional alliance of a 
        State shall be considered to be pursuant to a clearly 
        articulated and affirmatively expressed State policy to 
        displace competition and to be actively supervised by the 
        State, and conduct by providers respecting the establishment of 
        the fee schedule, including collective negotiations by 
        providers with the regional alliance (or the State) pursuant to 
        paragraph (2), shall be considered as efforts intended to 
        influence governmental action.
            (6) No boycott permitted.--Nothing in this subsection shall 
        be construed to permit providers to threaten or engage in any 
        boycott.
            (7) Negotiations defined.--In this subsection, 
        ``negotiations'' are the process by which providers 
        collectively and jointly meet, confer, consult, discuss, share 
        information, among and between themselves in order to agree on 
        information to be provided, presentations to be made, and other 
        such activities with respect to regional alliances (or States) 
        relating to the establishment of the fee schedule (but not 
        including any activity that constitutes engaging in or 
        threatening to engage in a boycott), as well as any and all 
        collective and joint meetings, discussions, presentations, 
        conferences, and consultations between or among providers and 
        any regional alliance (or State) for the purpose of 
        establishing the fee schedule described in this subsection.
    (d) Prospective Budgeting of Fee-for-Service.--
            (1) In general.--The fee schedule established by a regional 
        alliance or a State under subsection (c) may be based on 
        prospective budgeting described in paragraph (2).
            (2) Prospective budgeting described.--Under prospective 
        budgeting--
                    (A) the regional alliance or State (as the case may 
                be) shall negotiate with health providers annually to 
                develop a budget for the designated fee-for-service 
                plan;
                    (B) the negotiated budget shall establish spending 
                targets for each sector of health expenditures made by 
                the plan; and
                    (C) if the regional alliance or State (as the case 
                may be) determines that the utilization of services 
                under the plan is at a level that will result in 
                expenditures under the plan exceeding the negotiated 
                budget, the plan shall reduce the amount of payments 
                otherwise made to providers (through a withhold or 
                delay in payments or adjustments) in such a manner and 
                by such amounts as necessary to assure that 
                expenditures will not exceed the budget.
            (3) Use of prospective budgeting exclusive.--If a regional 
        alliance or State establishes the fee schedule for fee-for-
        service plans on the basis of prospective budgeting under this 
        subsection, payment for all services provided by fee-for-
        service plans in the alliance or State shall be determined on 
        such basis.

SEC. 1323. ENROLLMENT RULES AND PROCEDURES.

    (a) In General.--Each regional alliance shall assure that each 
regional alliance eligible individual who resides in the alliance area 
is enrolled in a regional alliance health plan and shall establish and 
maintain methods and procedures, consistent with this section, 
sufficient to assure such enrollment. Such methods and procedures shall 
assure the enrollment of alliance eligible individuals at the time they 
first become eligible enrollees in the alliance area, including 
individuals at the time of birth, at the time they move into the 
alliance area, and at the time of reaching the age of individual 
eligibility as an eligible enrollee (and not merely as a family 
member). Each regional alliance shall establish procedures, consistent 
with subtitle A, for the selection of a single health plan in which all 
members of a family are enrolled.
    (b) Point of Service Enrollment Mechanism.--
            (1) In general.--Each regional alliance shall establish a 
        point-of-service enrollment mechanism (meeting the requirements 
        of this subsection) for enrolling eligible individuals who are 
        not enrolled in a health plan of the alliance when the 
        individual seeks health services.
            (2) Requirements of mechanism.--Under such a mechanism, if 
        an eligible individual seeks to receive services (included in 
        the comprehensive benefit package) from a provider in an 
        alliance area and does not present evidence of enrollment under 
        any applicable health plan, or if the provider has no evidence 
        of the individual's enrollment under any such plan, the 
        following rules shall apply:
                    (A) Notice to alliance.--Consistent with part 2 of 
                subtitle B of title V, the provider--
                            (i) shall provide the regional alliance 
                        with information relating to the identity of 
                        the eligible individual, and
                            (ii) may request payment from the regional 
                        alliance for the furnishing of such services.
                    (B) Initial determination of eligibility and 
                enrollment status.--The regional alliance shall 
                determine--
                            (i) if the individual is an alliance 
                        eligible individual for the alliance, and
                            (ii) if the individual is enrolled under an 
                        applicable health plan (including a corporate 
                        alliance health plan).
                    (C) Treatment of alliance eligible individuals.--If 
                the regional alliance determines that the individual is 
                an alliance eligible individual with respect to the 
                alliance and--
                            (i) is enrolled under a regional alliance 
                        health plan of the alliance, the alliance shall 
                        forward the claim to the health plan involved 
                        and shall notify the provider (and the 
                        individual) of the fact of such enrollment and 
                        the forwarding of such claim (and the plan 
                        shall make payment to the provider for the 
                        services furnished to the individual as 
                        described in paragraph (3)(C));
                            (ii) is not enrolled under a regional 
                        alliance health plan of the alliance but is 
                        required to be so enrolled in a specific health 
                        plan as a family member under section 1011, the 
                        alliance shall record the individual's 
                        enrollment under such specific plan, shall 
                        forward the claim to such plan, and shall 
                        notify the provider (and the individual) of the 
                        fact of such enrollment and the forwarding of 
                        such claim (and the plan shall make payment to 
                        the provider for the services furnished to the 
                        individual as described in paragraph (3)(C)); 
                        or
                            (iii) is not enrolled under such a plan and 
                        is not described in clause (ii), the point-of-
                        service enrollment procedures described in 
                        paragraph (3) shall apply.
                    (D) Treatment of individuals enrolled under health 
                plans of other alliances.--If the regional alliance 
                determines that the individual is not an alliance 
                eligible individual with respect to the alliance but 
                the individual is enrolled--
                            (i) under a regional alliance health plan 
                        of another alliance, the alliance shall forward 
                        the claim to the other regional alliance and 
                        shall notify the provider (and the individual) 
                        of the fact of such enrollment and the 
                        forwarding of such claim (and the plan shall 
                        make payment to the provider for the services 
                        furnished to the individual as described in 
                        paragraph (3)(C)); or
                            (ii) under a corporate alliance health 
                        plan, the alliance shall forward the claim to 
                        the corporate alliance involved and shall 
                        notify the provider (and the individual) of the 
                        fact of such enrollment and the forwarding of 
                        such claim (and the plan shall make payment to 
                        the provider for the services furnished to the 
                        individual as described in section 
                        1383(b)(2)(B)).
                    (E) Treatment of other alliance eligible 
                individuals not enrolled in health plan.--If the 
                regional alliance determines that the individual is not 
                an alliance eligible individual with respect to the 
                alliance and the individual is an alliance eligible 
                individual with respect to another health alliance but 
                is not enrolled in a health plan of such alliance, the 
                regional alliance shall forward the claim to the other 
                alliance involved and shall notify the provider (and 
                the individual) of the forwarding of such claim and the 
                requirement for prompt enrollment of the individual 
                under an applicable health plan of such alliance 
                pursuant to the procedures described in paragraph (3) 
                (in the case of a regional alliance) or in section 
                1383(b) (in the case of a corporate alliance).
                    (F) Treatment of all other individuals.--The 
                National Board shall promulgate rules regarding the 
                responsibilities of regional alliances relating to 
                individuals whose applicable health plan is not an 
                alliance plan and other individuals the alliance is 
                unable to identify as eligible individuals.
            (3) Point-of-service enrollment procedures described.--The 
        point-of-service enrollment procedures under this paragraph are 
        as follows:
                    (A) Not later than 10 days after the date an 
                alliance is notified of the receipt of services by an 
                unenrolled eligible individual, the alliance provides 
                the individual with materials describing health plans 
                offered through the alliance.
                    (B) The individual shall be provided a period of 30 
                days in which to enroll in a health plan of the 
                individual's choice. If the individual fails to so 
                enroll during such period, the alliance shall enroll 
                the individual in a health plan of the alliance 
                selected on a random basis.
                    (C) Using the fee-for-service schedule adopted by 
                the alliance under section 1322(c), the health plan in 
                which the individual is enrolled under this 
                subparagraph shall reimburse the provider who provided 
                the services referred to in subparagraph (A) to the 
                same extent as if the individual had been enrolled 
                under the plan at the time of provision of the 
                services.
    (c) Enrollment of New Residents.--
            (1) In general.--Each regional alliance shall establish 
        procedures for enrolling regional alliance eligible individuals 
        who move into the alliance area.
            (2) Long-term residents.--Such procedures shall assure that 
        regional alliance eligible individuals who intend to reside in 
        the alliance area for longer than 6 months shall register with 
        the regional alliance for the area and shall enroll in a 
        regional alliance health plan offered by the alliance.
            (3) Short-term residents.--Such procedures shall permit 
        eligible individuals who intend to reside in the alliance area 
        for more than 3 months but less than 6 months to choose among 
        the following options:
                    (A) To continue coverage through the health plan in 
                which such individual is previously enrolled, in which 
                case coverage for care in the area of temporary 
                residence may be limited to emergency services and 
                urgent care.
                    (B) To register with the regional alliance and 
                enroll in a regional alliance health plan offered by 
                the alliance.
                    (C) To change enrollment in the previous alliance 
                area to enrollment in a health plan of such alliance 
                that provides for coverage on a fee-for-service basis 
                of services provided outside the area of that alliance.
    (d) Changes in Enrollment.--
            (1) Annual open enrollment period to change plan 
        enrollment.--Each regional alliance shall hold an annual open 
        enrollment period during which each eligible enrollee in the 
        alliance has the opportunity to choose among health plans 
        offered through the alliance, according to rules to be 
        promulgated by the National Health Board.
            (2) Disenrollment for cause.--In addition to the annual 
        open enrollment period held under paragraph (1), each regional 
        alliance shall establish procedures under which alliance 
        eligible individuals enrolled in a plan may disenroll from the 
        plan for good cause at any time during a year and enroll in 
        another plan of the alliance. Such procedures shall be 
        implemented in a manner that ensures continuity of coverage for 
        the comprehensive benefit package for such individuals during 
        the year.
    (e) Enrollment of Family Members.--Each regional alliance shall 
provide for the enrollment of all family members in the same plan, 
consistent with part 2 of subtitle A.
    (f) Oversubscription of Plans.--
            (1) In general.--Each regional alliance shall establish a 
        method for establishing enrollment priorities in the case of a 
        health plan that does not have sufficient capacity to enroll 
        all eligible individuals seeking enrollment.
            (2) Preference for current members.--Such method shall 
        provide that in the case of such an oversubscribed plan--
                    (A) individuals already enrolled in the plan are 
                given priority in continuing enrollment in the plan, 
                and
                    (B) other individuals who seek enrollment during an 
                applicable enrollment period are permitted to enroll in 
                accordance with a random selection method, up to the 
                enrollment capacity of the plan.
    (g) Termination of Enrollment.--
            (1) In general.--Each regional alliance shall establish 
        special enrollment procedures to permit alliance eligible 
        individuals to change the plan in which they are enrolled in 
        the case of the termination of coverage under a plan, in a 
        manner that ensures the individuals' continuation of coverage 
        for the comprehensive benefit package.
            (2) Failure of a corporate alliance.--Each regional 
        alliance shall establish special enrollment procedures to 
        permit individuals, who become alliance eligible individuals as 
        a result of the failure of a corporate alliance, to enroll 
        promptly in regional alliance health plans in a manner that 
        ensures the individuals' continuation of coverage for the 
        comprehensive benefit package.
    (h) Limitation on Offering of Coverage to Ineligible Individuals.--
A regional alliance may not knowingly offer coverage under a regional 
alliance health plan or other health insurance or health benefits to an 
individual who is not an eligible individual. Nothing in this section 
shall be construed as affecting the ability of a regional alliance 
health plan or other health plan to offer coverage to such individuals 
without any financial payment or participation by a regional alliance.
    (i) Enforcement of Enrollment Requirement.--In the case of a 
regional alliance eligible individual who fails to enroll in an 
applicable health plan as required under section 1002(a)--
            (1) the applicable regional alliance shall enroll the 
        individual in a regional alliance health plan (selected by the 
        alliance consistent with this Act and with any rules 
        established by the Board), and
            (2) such alliance shall require the payment of twice the 
        amount of the family share of premiums that would have been 
        payable under subtitle B of title VI if the individual had 
        enrolled on a timely basis in the plan, unless the individual 
        has established to the satisfaction of the alliance good cause 
        for the failure to enroll on a timely basis.

SEC. 1324. ISSUANCE OF HEALTH SECURITY CARDS.

    A regional alliance is responsible for the issuance of health 
security cards to regional alliance eligible individuals under section 
1001(b).

SEC. 1325. CONSUMER INFORMATION AND MARKETING.

    (a) Consumer Information.--
            (1) In general.--Before each open enrollment period, each 
        regional alliance shall make available to eligible enrollees 
        information, in an easily understood and useful form, that 
        allows such enrollees (and other alliance eligible individuals) 
        to make valid comparisons among health plans offered by the 
        alliance.
            (2) Information to be included.--Such information must 
        include, in the same format for each plan, such information as 
        the National Health Board shall require, including at least the 
        following:
                    (A) The cost of the plan, including premiums and 
                average out-of-pocket expenses.
                    (B) The characteristics and availability of health 
                care professionals and institutions participating in 
                the plan.
                    (C) Any restrictions on access to providers and 
                services under the plan.
                    (D) A summary of the annual quality performance 
                report, established pursuant to section 5005(c)(1), 
                which contains measures of quality presented in a 
                standard format.
    (b) Marketing.--Each regional alliance shall, consistent with 
section 1404, review and approve or disapprove the distribution of any 
materials used to market health plans offered through the alliance.

SEC. 1326. OMBUDSMAN.

    (a) Establishment.--Each regional alliance must establish and 
maintain an office of an ombudsman to assist consumers in dealing with 
problems that arise with health plans and the alliance.
    (b) Optional Financing Through Voluntary Contribution.--At the 
option of the State in which a regional alliance is located, the 
alliance--
            (1) shall permit alliance eligible individuals to designate 
        that one dollar of the premium paid for enrollment in the 
        individual's regional alliance health plan for the operation of 
        the office of the alliance's ombudsman; and
            (2) shall apply any such amounts towards the establishment 
        and operation of such office.

SEC. 1327. DATA COLLECTION; QUALITY.

    Each regional alliance shall comply with requirements of subtitles 
A and B of title V (relating to quality, information systems, and 
privacy), and shall take appropriate steps to ensure that health plans 
offered through the alliance comply with such requirements.

SEC. 1328. ADDITIONAL DUTIES.

    (a) Anti-Discrimination.--In carrying out its activities under this 
part, a regional alliance may not discriminate against health plans on 
the basis of race, sex, national origin, religion, mix of health 
professionals, location of the plan's headquarters, or (except as 
specifically provided in this part) organizational arrangement.
    (b) Coordination of Enrollment Activities.--Each regional alliance 
shall coordinate, in a manner specified by the National Health Board, 
with other health alliances its activities, including enrollment and 
disenrollment activities, in a manner that ensures continuous, 
nonduplicative coverage of alliance eligible individuals in health 
plans and that minimizes administrative procedures and paperwork.

SEC. 1329. ADDITIONAL AUTHORITIES FOR REGIONAL ALLIANCES TO ADDRESS 
              NEEDS IN AREAS WITH INADEQUATE HEALTH SERVICES; 
              PROHIBITION OF INSURANCE ROLE.

    (a) Payment Adjustment.--In order to ensure that plans are 
available to all eligible individuals residing in all portions of the 
alliance area, a regional alliance may adjust payments to plans or use 
other financial incentives to encourage health plans to expand into 
areas that have inadequate health services.
    (b) Encouraging New Plans.--Subject to subsection (c), in order to 
encourage the establishment of a new health plan in an area that has 
inadequate health services, an alliance may--
            (1) organize health providers to create such a plan in such 
        an area a new health plan targeted at such an area,
            (2) provide assistance with setting up and administering 
        such a plan, and
            (3) arrange favorable financing for such a plan.
    (c) Prohibition of Regional Alliances Bearing Risk.--A regional 
alliance may not bear insurance risk.

SEC. 1330. PROHIBITION AGAINST SELF-DEALING AND CONFLICTS OF INTEREST.

    (a) Promulgation of Standards.--The Board shall promulgate 
standards of conduct in accordance with subsection (b) for any 
administrator, officer, trustee, fiduciary, custodian, counsel, agent, 
or employee of any regional alliance.
    (b) Requirements for Standards.--The standards of conduct referred 
to in subsection (a) shall set forth--
            (1) the types of investment interests, ownership interests, 
        affiliations or other employment that would be improper for an 
        individual described in subsection (a) to hold during the time 
        of the individual's service or employment with an alliance; and
            (2) the circumstances that will constitute impermissible 
        conflicts of interest or self-dealing by such employees in 
        performing their official duties and functions for any regional 
        alliance.
    (c) Civil Monetary Penalty.--Any individual who engages in an 
activity that the individual knows or has reason to know is in 
violation of the regulations and standards promulgated by the Board 
pursuant to subsections (a) and (b) shall be subject, in addition to 
any other penalties that may be prescribed by law, to a civil money 
penalty of not more than $10,000 for each such violation. The 
provisions of section 1128A of the Social Security Act (other than 
subsections (a) and (b)) shall apply to civil money penalties under 
this subsection in the same manner as they apply to a penalty or 
proceeding under section 1128A(a) of such Act.

PART 3--AUTHORITIES AND RESPONSIBILITIES OF REGIONAL ALLIANCES RELATING 
                 TO FINANCING AND INCOME DETERMINATIONS

                     Subpart A--Collection of Funds

SEC. 1341. INFORMATION AND NEGOTIATION AND ACCEPTANCE OF BIDS.

    (a) Information Provided to Plans Before Soliciting Bids.--
            (1) In general.--Each regional alliance shall make 
        available, by April 1 of each year, to each plan that indicates 
        an interest in submitting a premium bid under section 6004 in 
        the year, information (including information described in 
        paragraph (2)) that the Board specifies as being necessary to 
        enable a plan to estimate, based upon an accepted bid, the 
        amounts payable to such a plan under section 1351.
            (2) Information to be included.--Such information shall 
        include the following:
                    (A) The demographic and other characteristics of 
                regional alliance eligible individuals for the regional 
                alliance.
                    (B) The uniform per capita conversion factor for 
                the regional alliance (established under subsection 
                (b)).
                    (C) The premium class factors (established by the 
                Board under section 1531).
                    (D) The regional alliance inflation factor 
                (determined under section 6001(a)).
                    (E) The risk-adjustment factors and reinsurance 
                methodology and payment amounts (published under 
                subsection (c)) to be used by the regional alliance in 
                computing blended plan per capita rates (in accordance 
                with section 6201).
                    (F) The plan bid proportion, the AFDC proportion, 
                the SSI proportion, the AFDC per capita premium amount, 
                and the SSI per capita premium amount, for the year, as 
                computed under subtitle D of title VI.
                    (G) The alliance administrative allowance 
                percentage, computed under section 1352(b).
    (b) Determination of Uniform Per Capita Conversion Factor.--Each 
regional alliance shall specify, not later than April 1 of each year 
(beginning with the year before the first year) a uniform per capita 
conversion factor to be used under section 6102(a)(2) in converting the 
accepted bid for each plan for the year into the premium for an 
individual enrollment for such plan for the year. SSI or AFDC 
recipients shall not be included for purposes of computing the 
conversion factor.
    (c) Determination of Risk-Adjustment Factors and Reinsurance 
Payment Amounts.--Each regional alliance shall compute and publish the 
risk-adjustment factors and reinsurance payment amounts to be used by 
the regional alliance in computing blended plan per capita rates under 
section 6201.
    (d) Solicitation of Bids.--Each regional alliance shall solicit and 
negotiate, consistent with section 6004, with each regional alliance 
health plan a bid for the payment rate on a per capita basis for the 
comprehensive benefit package for all alliance eligible individuals in 
the alliance area.

SEC. 1342. CALCULATION AND PUBLICATION OF GENERAL FAMILY SHARE AND 
              GENERAL EMPLOYER PREMIUM AMOUNTS.

    (a) Calculation of Components in General Family Share and General 
Employer Premiums.--
            (1) Family share.--Each regional alliance shall compute the 
        following components of the general family share of premiums 
        (as defined in subsection (b)(1)(B)):
                    (A) Plan premiums.--For each plan offered, the 
                premium for the plan for each class of family 
                enrollment (including the amount of any family 
                collection shortfall).
                    (B) Alliance credit.--The alliance credit amount 
                for each class of family enrollment, under section 
                6103.
                    (C) Excess premium credit.--The amount of any 
                excess premium credit provided under section 6105 for 
                each class of family enrollment.
                    (D) Corporate alliance opt-in credit.--The amount 
                of any corporate alliance opt-in credit provided under 
                section 6106 for each class of family enrollment.
            (2) Employer premiums.--Each regional alliance shall 
        compute the following components of the general employer 
        premium payment amount (as defined in subsection (b)(2)(B)):
                    (A) Base employer monthly premium per worker.--The 
                base employer monthly premium determined under section 
                6122 for each class of family enrollment.
                    (B) Employer collection shortfall add-on.--The 
                employer collection shortfall add-on computed under 
                section 6125(b).
    (b) Publication.--
            (1) Family share.--
                    (A) In general.--Each regional alliance shall 
                publish, before the open enrollment period in each 
                year, the general family share of the premium (as 
                defined in subparagraph (B)) for each class of family 
                enrollment for each regional alliance health plan to be 
                offered by the alliance in the following year.
                    (B) General family share of premium defined.--In 
                this subpart, the term ``general family share of 
                premium'' means the family share of premium under 
                section 6101 computed without regard to section 6104 
                and without regard to section 6101(b)(2)(C)(v).
            (2) Employer premium.--
                    (A) In general.--Each regional alliance shall 
                publish, in December before each year (beginning with 
                December before the first year) the general employer 
                premium payment amount (as defined in subparagraph (B)) 
                for each class of family enrollment for the following 
                year.
                    (B) General employer premium payment amount 
                defined.--In this subpart, the term ``general employer 
                premium payment amount'' means the employer premium 
                payment under section 6121 computed, as an amount per 
                full-time equivalent worker, without regard to sections 
                6124 through 6126.

SEC. 1343. DETERMINATION OF FAMILY SHARE FOR FAMILIES.

    (a) Amount of Family Share.--The amount charged by a regional 
alliance to a family for a class of family enrollment (specified under 
section 1011(c)) under a regional alliance health plan is equal to the 
family share of premium established under section 6101(a) for the 
family. Based upon the information described in this section, each 
regional alliance shall determine the amount required to be paid under 
section 6101 and under section 6111 for each year for families 
enrolling in regional alliance health plans.
    (b) Family Share Amount.--The amount required to be paid under 
section 6101, with respect to each family, takes into account--
            (1) the general family share of premium (as defined in 
        section 1342(b)(1)(B)) for the class of enrollment involved;
            (2) any income-related discount provided under section 
        6104(a)(1) for the family; and
            (3) whether or not the family is an SSI or AFDC family.
    (c) Alliance Credit Repayment Amount.--The amount of the alliance 
credit repayment amount under section 6111, with respect to each 
family, takes into account the following:
            (1) The number of months of enrollment, and class of 
        enrollment, in regional alliance health plans, used in 
        determining the amount of the alliance credit under section 
        6103 for the family.
            (2) Reductions in liability under section 6111(b) based on 
        employer premium payments based on net earnings from self-
        employment for the family.
            (3) Reductions in liability under section 6112 based on 
        months of employment for the family.
            (4) Limitations in liability under section 6113 on the 
        basis of the adjusted family income for the family.
            (5) The elimination of liability in the case of certain 
        retirees and qualified spouses and children under section 6114.
            (6) The elimination of liability in the case of certain 
        working medicare beneficiaries under section 6115.
    (d) Access to Necessary Information to Make Determination.--
Information required for an alliance to make the determination under 
subsection (a) shall be based on information obtained or maintained by 
the alliance in the conduct of its business, including the following:
            (1) Information required for income-related determinations 
        shall be obtained under subpart B.
            (2) Information on SSI and AFDC recipients under subsection 
        (e).
            (3) Information submitted on a monthly and annual basis by 
        employers under section 1602.
            (4) Information submitted by self-employed individuals on 
        net earnings from self-employment under section 1602(d).
            (5) Applications for premium reductions under section 6114.
            (6) Information concerning medicare-eligible individuals 
        under subsection (f).
            (7) Any income-related discount provided under section 
        6104(a)(1) for the family.
            (8) Whether or not the family is an SSI or AFDC family.
    (e) Information Concerning Cash Assistance Status.--Each 
participating State and the Secretary shall make available (in a time 
and manner specified by the Secretary) to each regional alliance such 
information as may be necessary to determine and verify whether an 
individual is an AFDC or SSI recipient for a month in a year.
    (f) Information Concerning Medicare-Eligible Individuals.--
            (1) Information to regional alliances.--The Secretary shall 
        make available to regional alliances (through regional 
        information centers or otherwise) information necessary to 
        determine--
                    (A) whether an individual is a medicare-eligible 
                individual,
                    (B) the eligibility of individuals for the special 
                treatment under section 6115,
                    (C) if medicare-eligible individuals are described 
                in section 1012(a), and
                    (D) the amounts of payments owed the alliance under 
                section 1894 of the Social Security Act, added by 
                section 4003.
            (2) Information to secretary.--Each regional alliance shall 
        make available to the Secretary (through the national 
        information system under section 5101 or otherwise) information 
        relating to the enrollment of individuals who would be 
        medicare-eligible individuals but for section 1012(a).
    (g) Alliance Accounting System.--
            (1) In general.--Each regional alliance shall establish an 
        accounting system that meets standards established by the 
        Secretary.
            (2) Specifics.--Such system shall collect information, on a 
        timely basis for each individual enrolled (and, to the extent 
        required by the Secretary, identified and required to be 
        enrolled) in a regional alliance health plan regarding--
                    (A) the applicable premium for such enrollment,
                    (B) family members covered under such enrollment,
                    (C) the premium payments made by (or on behalf of) 
                the individual for such enrollment,
                    (D) employer premium payments made respecting the 
                employment of the individual and other employer 
                contributions made respecting such enrollment, and
                    (E) any government contributions made with respect 
                to such enrollment (including contributions for 
                electing veterans and active duty military personnel).
            (3) End-of-year reporting.--Such system shall provide for a 
        report, at the end of each year, regarding the total premiums 
        imposed, and total amounts collected, for individuals enrolled 
        under regional health alliance plans, in such manner as 
        identifies net amounts that may be owed to the regional 
        alliance.

SEC. 1344. NOTICE OF FAMILY PAYMENTS DUE.

    (a) Family Statements.--
            (1) Notice of no amount owed.--If the regional alliance 
        determines under section 1343 that a family has paid any family 
        share required under section 6101 and is not required to repay 
        any amount under section 6111 for a year, the alliance shall 
        provide notice of such determination to the family. Such notice 
        shall include a prominent statement that the family is not 
        required to make any additional payment and is not required to 
        file any additional information with the regional alliance.
            (2) Notice of amount owed.--
                    (A) In general.--If the regional alliance 
                determines that a family has not paid the entire family 
                share required under section 6101 or is required to 
                repay an amount under section 6111 for a year, the 
                alliance shall provide to the family a notice of such 
                determination.
                    (B) Information on amount due.--Such notice shall 
                include detailed information regarding the amount owed, 
                the basis for the computation (including the amount of 
                any reductions that have been made in the family's 
                liability under subtitle B of title VI), and the date 
                the amount is due and the manner in which such amount 
                is payable.
                    (C) Information on discounts and reductions 
                available.--Such notice shall include--
                            (i) information regarding the discounts and 
                        reductions available (under sections 6104, 
                        6112, 6113, 6114, and 6115) to reduce or 
                        eliminate any liability, and
                            (ii) a worksheet which may be used to 
                        calculate reductions in liability based on 
                        income under sections 6104 and 6113.
            (3) Inclusion of income reconciliation form for families 
        provided premium discounts.--
                    (A) In general.--A notice under this subsection 
                shall include, in the case of a family that has been 
                provided a premium discount under section 6104 (or 
                section 6113) for the previous year, an income 
                reconciliation statement (for use under section 1375) 
                to be completed and returned to the regional alliance 
                (along with any additional amounts owed) by the 
                deadline specified in subsection (b). Such form shall 
                require the submission of such information as the 
                Secretary specifies to establish or verify eligibility 
                for such premium discount.
                    (B) Other families.--Any family which has not been 
                provided such a discount but may be eligible for such a 
                discount may submit such an income reconciliation 
                statement and, if eligible, receive a rebate of the 
                amount of excess family share paid for the previous 
                year.
                    (C) Additional information.--The alliance shall 
                permit a family to provide additional information 
                relating to the amount of such reductions or the income 
                of the family (insofar as it may relate to a premium 
                discount or reduction in liability under section 6104 
                or 6113).
            (4) Timing of notice.--Notices under this subsection shall 
        be mailed to each family at least 45 days before the deadline 
        specified in subsection (b).
    (b) Deadline for Payment.--The deadline specified in this 
subsection for amounts owed for a year is such date as the Secretary 
may specify, taking into account the dates when the information 
specified in section 1343 becomes available to compute the amounts owed 
and to file income reconciliation statements under section 1375. 
Amounts not paid by such deadline are subject to interest and penalty.
    (c) Change in Regional Alliance.--In the case of a family that 
during a year changes the regional alliance through which the family 
obtains coverage under a regional alliance health plan, the Secretary 
shall establish rules which provide that the regional alliance in which 
the family last obtained such coverage in a year--
            (1) is responsible for recovering amounts due under this 
        subpart for the year (whether or not attributable to periods of 
        coverage obtained through that alliance);
            (2) shall obtain such information, through the health 
        information system implemented under section 5101, as the 
        alliance may require in order to compute the amount of any 
        liability owed under this subpart (taking into account any 
        reduction in such amount under this section), and
            (3) shall provide for the payment to other regional 
        alliances of such amounts collected as may be attributable to 
        amounts owed for periods of coverage obtained through such 
        alliances.
    (d) No Loss of Coverage.--In no case shall the failure to pay 
amounts owed under this subsection result in an individual's or 
family's loss of coverage under this Act.
    (e) Dispute Resolution.--Each regional alliance shall establish a 
fair hearing mechanism for the resolution of disputes concerning 
amounts owed the alliance under this subpart.

SEC. 1345. COLLECTIONS.

    (a) In General.--Each regional alliance is responsible for the 
collection of all amounts owed the alliance (whether by individuals, 
employers, or others and whether on the basis of premiums owed, 
incorrect amounts of discounts or premium, cost sharing, or other 
reductions made, or otherwise). No amounts are payable by the Federal 
Government under this Act (including section 9102) with respect to the 
failure to collect any such amounts. Each regional alliance shall use 
credit and collection procedures, including the imposition of interest 
charges and late fees for failure to make timely payment, as may be 
necessary to collect amounts owed to the alliance. States assist 
regional alliances in such collection process under section 1202(d).
    (b) Collection of Family Share.--
            (1) Withholding.--
                    (A) in general.--In the case of a family that 
                includes a qualifying employee of an employer, the 
                employer shall deduct from the wages of the qualifying 
                employee (in a manner consistent with any rules of the 
                Secretary of Labor) the amount of the family share of 
                the premium for the plan in which the family is 
                enrolled.
                    (B) Multiple employment.--In the case of a family 
                that includes more than one qualifying employee, the 
                family shall choose the employer to which subparagraph 
                (A) will apply.
                    (C) Payment.--Amounts withheld under this paragraph 
                shall be maintained in a manner consistent with 
                standards established by the Secretary of Labor and 
                paid to the regional alliance involved in a manner 
                consistent with the payment of employer premiums under 
                subsection (c).
                    (D) Satisfaction of liability.--An amount deducted 
                from wages of a qualifying employee by an employer is 
                deemed to have been paid by the employee and to have 
                satisfied the employee's obligation under subsection 
                (a) to the extent of such amount.
            (2) Other methods.--In the case of a family that does not 
        include a qualifying employee, the regional alliance shall 
        require payment to be made prospectively. Such payment may be 
        required to be made not less frequently than monthly. The 
        Secretary may issue regulations in order to assure the timely 
        and accurate collection of the family share due.
    (c) Timing and Method of Payment of Employer Premiums.--
            (1) Frequency of payment.--Payment of employer premiums 
        under section 6121 for a month shall be made not less 
        frequently than monthly (or quarterly in the case of such 
        payments made by virtue of section 6126). The Secretary of 
        Labor may establish a method under which employers that pay 
        wages on a weekly or biweekly basis are permitted to make such 
        employer payments on such a weekly or biweekly basis.
            (2) Electronic transfer.--A regional alliance may require 
        those employers that have the capacity to make payments by 
        electronic transfer to make payments under this subsection by 
        electronic transfer.
    (d) Assistance.--
            (1) Employer collections.--The Secretary of Labor shall 
        provide regional alliances with such technical and other 
        assistance as may promote the efficient collection of all 
        amounts owed such alliances under this Act by employers. Such 
        assistance may include the assessment of civil monetary 
        penalties, not to exceed $5,000 or three times the amount of 
        the liability owed, whichever is greater, in the case of 
        repeated failure to pay (as specified in rules of the Secretary 
        of Labor).
            (2) Family collections.--Except as provided in paragraph 
        (1), the Secretary shall provide regional alliances with such 
        technical and other assistance as may promote the efficient 
        collection of other amounts owed such alliances under this Act. 
        Such assistance may include the assessment of civil monetary 
        penalties, not to exceed $5,000 or three times the amount of 
        the liability owed, whichever is greater, in the case of 
        repeated failure to pay (as specified in rules of the 
        Secretary).
    (e) Receipt of Miscellaneous Amounts.--For payments to regional 
alliances by--
            (1) States, see subtitle A of title IX, and
            (2) the Federal Government, see subtitle B of such title 
        and section 1894 of the Social Security Act (as added by 
        section 4003).

SEC. 1346. COORDINATION AMONG REGIONAL ALLIANCES.

    (a) In General.--The regional alliance which offers the regional 
alliance health plan in which a family is enrolled in December of each 
year (in this section referred to as the ``final alliance'') is 
responsible for the collection of any amounts owed by the family under 
this subpart, without regard to whether the family resided in the 
alliance area during the entire year.
    (b) Provision of Information in the Case of Change of Residence.--
In the case of a family that moves from one alliance area to another 
alliance area during a year, each regional alliance (other than the 
final alliance) is responsible for providing to the final alliance 
(through the national information system under section 5101 or 
otherwise) such information as the final alliance may require in order 
to determine the liability (and reductions in liability under section 
6112) attributable to alliance credits provided by such regional 
alliance.
    (c) Distribution of Proceeds.--In accordance with rules established 
by the Secretary, in consultation with the Secretary of Labor, the 
final alliance shall provide for the distribution of amounts collected 
under this subpart with respect to families in a year in an equitable 
manner among the regional alliances that provided health plan coverage 
to the families in the year.
    (d) Expediting Process.--In order to reduce paperwork and promote 
efficiency in the collection of amounts owed regional alliances under 
this subpart, the Secretary may require or permit regional alliances to 
share such information (through the national information system under 
section 5101 or otherwise) as the Secretary determines to be cost-
effective, subject to such confidentiality restrictions as may 
otherwise apply.
    (e) Students.--In the case of a qualifying student who makes an 
election described in section 1012(e)(1) (relating to certain full-time 
students who are covered under the plan of a parent but enrolled in a 
health plan offered by a different regional alliance from the one in 
which the parent is enrolled), the regional alliance that offered the 
plan to the parent shall provide for transfers of an appropriate 
portion of the premium (determined in accordance with procedures 
specified by the Board) to the other regional alliance in order to 
compensate that alliance for the provision of such coverage.
    (f) Payments of Certain Amounts to Corporate Alliances.--In the 
case of a married couple in which one spouse is a qualifying employee 
of a regional alliance employer and the other spouse is a qualifying 
employee of a corporate alliance employer, if the couple is enrolled 
with a corporate alliance health plan the regional alliance (which 
receives employer premium payments from such regional alliance employer 
with respect to such employee) shall pay to the corporate alliance the 
amounts so paid (or would be payable by the employer if section 6123 
did not apply).

                          Subpart B--Payments

SEC. 1351. PAYMENT TO REGIONAL ALLIANCE HEALTH PLANS.

    (a) Computation of Blended Plan Per Capita Payment Amount.--For 
purposes of making payments to plans under this section, each regional 
alliance shall compute, under section 6201(a), a blended plan per 
capita payment amount for each regional alliance health plan for 
enrollment in the alliance for a year.
    (b) Amount of Payment to Plans.--
            (1) In general.--Subject to subsection (e) and section 
        6121(b)(5)(B), each regional alliance shall provide for payment 
        to each regional alliance health plan, in which an alliance 
        eligible individual is enrolled, an amount equal to the net 
        blended rate (described in paragraph (2)) adjusted (consistent 
        with subsection (c)) to take into account the relative 
        actuarial risk associated with the coverage with respect to the 
        individual.
            (2) Net blended rate.--The net blended rate described in 
        this paragraph is the blended plan per capita payment amount 
        (determined under section 6201(a)), reduced by--
                    (A) such amount multiplied by the sum of--
                            (i) the administrative allowance percentage 
                        for the regional alliance, computed by the 
                        alliance under section 1352(b), and
                            (ii) 1.5 percentage points; and
                    (B) any plan payment reduction imposed under 
                section 6011 for the plan for the year.
    (c) Application of Risk Adjustment and Reinsurance Methodology.--
Each regional alliance shall use the risk adjustment methodology 
developed under section 1541 in making payments to regional alliance 
health plans under this section, except as provided in section 1542.
    (d) Application of Portion of Set Aside.--Amounts attributable to 
subsection (b)(2)(A)(ii) are paid to the Federal Government (for 
academic health centers and graduate medical education) under section 
1353.
    (e) Treatment of Veterans, Military, and Indian Health Plans and 
Programs.--
            (1) Veterans health plan.--In applying this subtitle (and 
        title VI) in the case of a regional alliance health plan that 
        is a veterans health plan of the Department of Veterans 
        Affairs, the following rules apply:
                    (A) For purposes of applying subtitle A of title 
                VI, families enrolled under the plan shall not be taken 
                into account.
                    (B) The provisions of subtitle A of title VI shall 
                not apply to the plan, other than such provisions as 
                require the plan to submit a per capita amount for each 
                regional alliance area on a timely basis, which amount 
                shall be treated as the final accepted bid of the plan 
                for the area for purposes of subtitle B of such title 
                and this subtitle. This amount shall not be subject to 
                negotiation and not subject to reduction under section 
                6011.
                    (C) For purposes of computing the blended plan per 
                capita payment amount under section 6201(a), the AFDC 
                and SSI proportions (under section 6202(a)) are deemed 
                to be 0 percent.
            (2) Uniformed services health plan.--In applying this 
        subtitle (and title VI) in the case of a regional alliance 
        health plan that is a Uniformed Services Health Plan of the 
        Department of Defense, the following rules apply:
                    (A) For purposes of applying subtitle A of title 
                VI, families enrolled under the plan shall not be taken 
                into account.
                    (B) The provisions of subtitle A of title VI shall 
                not apply to the plan, other than such provisions as 
                require the plan to submit a per capita amount on a 
                timely basis, which amount shall be treated as the 
                final accepted bid of the plan for the area involved 
                for purposes of subtitle B of such title and this 
                subtitle. This amount shall not be subject to 
                negotiation and not subject to reduction under section 
                6011. The Board, in consultation with the Secretary of 
                Defense, shall establish rules relating to the area (or 
                areas) in which such a bid shall apply.
                    (C) For purposes of computing the blended plan per 
                capita payment amount under section 6201(a), the AFDC 
                and SSI proportions (under section 6202(a)) are deemed 
                to be 0 percent.
            (3) Indian health programs.--In applying this subtitle (and 
        title VI) in the case of a health program of the Indian Health 
        Service, the following rules apply:
                    (A) Except as provided in this paragraph, the plan 
                shall not be considered or treated to be a regional 
                alliance health plan and for purposes of applying title 
                VI, families enrolled under the program shall not be 
                taken into account.
                    (B) In accordance with rules established by the 
                Secretary, regional alliances shall act as agents for 
                the collection of employer premium payments (including 
                payments of corporate alliance employers) required 
                under subtitle B of title VI with respect to qualifying 
                employees who are enrolled under a health program of 
                the Indian Health Service. The Secretary shall permit 
                such alliances to retain a nominal fee to compensate 
                them for such collection activities. In applying this 
                subparagraph, the family share of premium for such 
                employees is deemed to be zero for electing Indians (as 
                defined in section 1012(d)(3)) and for other employees 
                is the amount of the premium established under section 
                8306(b)(4)(A), employees are deemed to be residing in 
                the area of residence (or area of employment), as 
                specified under rules of the Secretary, and the class 
                of enrollment shall be such class (or classes) as 
                specified under rules of the Secretary.

SEC. 1352. ALLIANCE ADMINISTRATIVE ALLOWANCE PERCENTAGE.

    (a) Specification by Alliance.--Before obtaining bids under section 
6004 from health plans for a year, each regional alliance shall 
establish the administrative allowance for the operation of the 
regional alliance in the year.
    (b) Administrative Allowance Percentage.--Subject to subsection 
(c), the regional alliance shall compute an administrative allowance 
percentage for each year equal to--
            (1) the administrative allowance determined under 
        subsection (a) for the year, divided by
            (2) the total of the amounts payable to regional alliance 
        health plans under subpart A (as estimated by the alliance and 
        determined without regard to section 1345(d)).
    (c) Limitation to 2\1/2\ percent.--In no case shall an 
administrative allowance percentage exceed 2.5 percent.

SEC. 1353. PAYMENTS TO THE FEDERAL GOVERNMENT FOR ACADEMIC HEALTH 
              CENTERS AND GRADUATE MEDICAL EDUCATION.

    Each regional alliance shall make payment to the Secretary of an 
amount equal to the reduction in payments by the alliance to regional 
alliance health plans attributable to section 1351(b)(2)(A)(ii).

                    Subpart C--Financial Management

SEC. 1361. MANAGEMENT OF FINANCES AND RECORDS.

    (a) In General.--Each regional alliance shall comply with standards 
established under section 1571(b) (relating to the management of 
finances, maintenance of records, accounting practices, auditing 
procedures, and financial reporting) and under section 1591(d) 
(relating to employer payments).
    (b) Specific Provisions.--In accordance with such standards--
            (1) Financial statements.--
                    (A) In general.--Each regional alliance shall 
                publish periodic audited financial statements.
                    (B) Annual financial audit.--
                            (i) In general.--Each regional alliance 
                        shall have an annual financial audit conducted 
                        by an independent auditor in accordance with 
                        generally accepted auditing standards.
                            (ii) Publication.--A report on each such 
                        audit shall be made available to the public at 
                        nominal cost.
                            (iii) Required actions for deficiencies.--
                        If the report from such an audit does not bear 
                        an unqualified opinion, the alliance shall take 
                        such steps on a timely basis as may be 
                        necessary to correct any material deficiency 
                        identified in the report.
                    (C) Eligibility error rates.--Each regional 
                alliance shall make eligibility determinations for 
                premium discounts, liability reductions, and cost 
                sharing reductions under sections 6104 and 6123, 
                section 6113, and section 1371, respectively, in a 
                manner that maintains the error rates below an 
                applicable maximum permissible error rate specified by 
                the Secretary (or the Secretary of Labor with respect 
                to section 6123). In specifying such a rate, the 
                Secretary shall take into account maximum permissible 
                error rates recognized by the Federal Government under 
                comparable State-administered programs.
            (2) Safeguarding of funds.--Each regional alliance shall 
        safeguard family, employer, State, and Federal government 
        payments to the alliance in accordance with fiduciary standards 
        and shall hold such payments in financial institutions and 
        instruments that meet standards recognized or established by 
        the Secretary, in consultation with the Secretaries of Labor 
        and the Treasury and taking into account current Federal laws 
        and regulations relating to fiduciary responsibilities and 
        financial management of public funds.
            (3) Contingencies.--Each regional alliance shall provide 
        that any surplus of funds resulting from an estimation 
        discrepancy described in section 9201(e)(1), up to a reasonable 
        amount specified by the Secretary, shall be held in a 
        contingency fund established by the alliance and used to fund 
        any future shortfalls resulting from such a discrepancy.
            (4) Auditing of employer payments.--
                    (A) In general.--Each regional alliance is 
                responsible for auditing the records of regional 
                alliance employers to assure that employer payments 
                (including the payment of amounts withheld) were made 
                in the appropriate amount as provided under subpart A 
                of part 2 of subtitle B of title VI.
                    (B) Employers with employees residing in different 
                alliance areas.--In the case of a regional alliance 
                employer which has employees who reside in more than 
                one alliance area, the Secretary of Labor, in 
                consultation with the Secretary, shall establish a 
                process for the coordination of regional alliance 
                auditing activities among the regional alliances 
                involved.
                    (C) Appeal.--In the case of an audit conducted by a 
                regional alliance on an employer under this paragraph, 
                an employer or other regional alliance that is 
                aggrieved by the determination in the audit is entitled 
                to review of such audit by the Secretary of Labor in a 
                manner to be provided by such Secretary.

      Subpart D--Reductions in Cost Sharing; Income Determinations

SEC. 1371. REDUCTION IN COST SHARING FOR LOW-INCOME FAMILIES.

    (a) Reduction.--
            (1) In general.--Subject to subsection (b), in the case of 
        a family that is enrolled in a regional alliance health plan 
        and that is either (A) an AFDC or SSI family or (B) is 
        determined under this subpart to have family adjusted income 
        below 150 percent of the applicable poverty level, the family 
        is entitled to a reduction in cost sharing in accordance with 
        this section.
            (2) Timing of reduction.--The reduction in cost sharing 
        shall only apply to items and services furnished after the date 
        the application for such reduction is approved under section 
        1372(c) and before the date of termination of the reduction 
        under this subpart, or, in the case of an AFDC or SSI family, 
        during the period in which the family is such a family.
            (3) Information to providers and plans.--Each regional 
        alliance shall provide, through electronic means and otherwise, 
        health care providers and regional alliance health plans with 
        access to such information as may be necessary in order to 
        provide for the cost sharing reductions under this section.
    (b) Limitation.--No reduction in cost sharing under subsection 
(c)(1) shall be available for families residing in an alliance area if 
the regional alliance for the area determines that there are sufficient 
low-cost plans (as defined in section 6104(b)(3)) that are lower or 
combination cost sharing plans available in the alliance area to enroll 
AFDC and SSI families and families with family adjusted income below 
150 percent of the applicable poverty level.
    (c) Amount of Cost Sharing Reduction.--
            (1) In general.--Subject to paragraph (2), the reduction in 
        cost sharing under this section shall be such reduction as will 
        reduce cost sharing to the level of a lower or combination cost 
        sharing plan.
            (2) Special treatment of certain afdc and ssi families.--In 
        the case of an AFDC or SSI family enrolled in a lower or 
        combination cost sharing plan or receiving a reduction in cost 
        sharing under paragraph (1), the amount of copayment applied 
        with respect to an item or service (other than with respect to 
        hospital emergency room services for which there is no 
        emergency medical condition, as defined in section 1867(e)(1) 
        of the Social Security Act) shall be an amount equal to 20 
        percent of the copayment amount otherwise applicable under 
        sections 1135 and 1136, rounded to the nearest dollar.
    (d) Administration.--
            (1) In general.--In the case of an approved family (as 
        defined in section 1372(b)(3)) enrolled in a regional alliance 
        health plan, the regional alliance shall pay the plan for cost 
        sharing reductions (other than cost sharing reductions under 
        subsection (c)(2)) provided under this section and included in 
        payments made by the plan to its providers.
            (2) Estimated payments, subject to reconciliation.--Such 
        payment shall be made initially on the basis of reasonable 
        estimates of cost sharing reductions incurred by such a plan 
        with respect to approved families and shall be reconciled not 
        less often than quarterly based on actual claims for items and 
        services provided.
    (e) No Cost Sharing for Indians and Certain Veterans and Military 
Personnel.--The provisions of section 6104(a)(3) shall apply to cost 
sharing reductions under this section in the same manner as such 
provisions apply to premium discounts under section 6104.

SEC. 1372. APPLICATION PROCESS FOR COST SHARING REDUCTIONS.

    (a) Application.--
            (1) In general.--A regional alliance eligible family may 
        apply for a determination of the family adjusted income of the 
        family, for the purpose of establishing eligibility for cost 
        sharing reductions under section 1371.
            (2) Form.--An application under this section shall include 
        such information as may be determined by the regional alliance 
        (consistent with rules developed by the Secretary) and shall 
        include at least information about the family's employment 
        status and income.
    (b) Timing.--
            (1) In general.--An application under this section may be 
        filed at such times as the Secretary may provide, including 
        during any open enrollment period, at the time of a move, or 
        after a change in life circumstances (such as unemployment or 
        divorce) affecting class of enrollment or amount of family 
        share or repayment amount.
            (2) Consideration.--Each regional alliance shall approve or 
        disapprove an application under this section, and notify the 
        applicant of such decision, within such period (specified by 
        the Secretary) after the date of the filing of the application.
            (3) Approved family defined.--In this section and section 
        1371, the term ``approved family'' means a family for which an 
        application under this section is approved, until the date of 
        termination of such approval under this section.
    (c) Approval of Application.--
            (1) In general.--A regional alliance shall approve an 
        application of a family under this section filed in a month if 
        the application demonstrates that the family adjusted income of 
        the family (as defined in subsection (d) and determined under 
        paragraph (2)) is (or is expected to be) less than 150 percent 
        of the applicable poverty level.
            (2) Use of current income.--In making the determination 
        under paragraph (1), a regional alliance shall take into 
        account the income for the previous 3-month period and current 
        wages from employment (if any), consistent with rules specified 
        by the Secretary.
    (d) Family Adjusted Income.--
            (1) In general.--Except as provided in paragraph (4), in 
        this Act the term ``family adjusted income'' means, with 
        respect to a family, the sum of the adjusted incomes (as 
        defined in paragraph (2)) for all members of the family 
        (determined without regard to section 1012).
            (2) Adjusted income.--In paragraph (1), the term ``adjusted 
        income'' means, with respect to an individual, adjusted gross 
        income (as defined in section 62(a) of the Internal Revenue 
        Code of 1986)--
                    (A) determined without regard to sections 135, 
                162(l), 911, 931, and 933 of such Code, and
                    (B) increased by the amount of interest received or 
                accrued by the individual which is exempt from tax.
            (3) Presence of additional dependents.--At the option of an 
        individual, a family may include (and not be required to 
        separate out) the income of other individuals who are claimed 
        as dependents of the family for income tax purposes, but such 
        individuals shall not be counted as part of the family for 
        purposes of determining the size of the family.
    (e) Requirement for Periodic Confirmation and Verification and 
Notices.--
            (1) Confirmation and verification requirement.--The 
        continued eligibility of a family for cost sharing reductions 
        under this section is conditioned upon the family's eligibility 
        being--
                    (A) confirmed periodically by the regional 
                alliance, and
                    (B) verified (through the filing of a new 
                application under this section) by the regional 
                alliance at the time income reconciliation statements 
                are required to be filed under section 1375.
            (2) Rules.--The Secretary shall issue rules related to the 
        manner in which alliances confirm and verify eligibility under 
        this section.
            (3) Notices of changes in income and employment status.--
                    (A) In general.--Each approved family shall 
                promptly notify the regional alliance of any material 
                increase (as defined by the Secretary) in the family 
                adjusted income.
                    (B) Response.--If a regional alliance receives 
                notice under subparagraph (A) (or from an employer 
                under section 1602(b)(3)(A)(i)) or otherwise receives 
                information indicating a potential significant change 
                in the family's employment status or increase in 
                adjusted family income, the regional alliance shall 
                promptly take steps necessary to reconfirm the family's 
                eligibility.
    (f) Termination of Cost Sharing Reduction.--The regional alliance 
shall, after notice to the family, terminate the reduction of cost 
sharing under this subpart for an approved family if the family fails 
to provide for confirmation or verification or notice required under 
subsection (c) on a timely basis or the alliance otherwise determines 
that the family is no longer eligible for such reduction. The previous 
sentence shall not prevent the family from subsequently reapplying for 
cost sharing reduction under this section.
    (g) Treatment of AFDC and SSI Recipients.--
            (1) No application required.--AFDC and SSI families are not 
        required to make an application under this section.
            (2) Notice requirement.--Each State (and the Secretary) 
        shall notify each regional alliance, in a manner specified by 
        the Secretary, of the identity (and period of eligibility under 
        the AFDC or SSI programs) of each AFDC and SSI recipient, 
        unless such a recipient elects (in a manner specified by the 
        Secretary) not to accept the reduction of cost sharing under 
        this section.

SEC. 1373. APPLICATION FOR PREMIUM DISCOUNTS AND REDUCTION IN 
              LIABILITIES TO ALLIANCES.

    (a) In General.--Any regional alliance eligible family may apply 
for a determination of the family adjusted income of the family, for 
the purpose of establishing eligibility for a premium discount under 
section 6104 or a reduction in liability under section 6113.
    (b) Timing.--Such an application may be filed at such times as an 
application for a cost sharing reduction may be filed under section 
1372(b) and also may be filed after the end of the year to obtain a 
rebate for excess premium payments made during a year.
    (c) Approval of Application.--
            (1) In general.--A regional alliance shall approve an 
        application of a family under this section filed in a month--
                    (A) for a premium discount under section 6104, if 
                the application demonstrates that family adjusted 
                income of the family (as determined under paragraph 
                (2)) is (or is expected to be) less than 150 percent of 
                the applicable poverty level, or
                    (B) for a reduction in liability under section 
                6113, if the application demonstrates that the wage-
                adjusted income (as defined in subsection 6113(d)) of 
                the family (as determined under paragraph (2)) is (or 
                is expected to be) less than 250 percent of the 
                applicable poverty level.
            (2) Use of current income.--In making the determination 
        under paragraph (1), a regional alliance shall take into 
        account the income for the previous 3-month period and current 
        wages from employment (if any) and the statement of estimated 
        income for the year (filed under section 1374(c)), consistent 
        with rules specified by the Secretary.
    (d) Requirement for Periodic Confirmation and Verification and 
Notices.--The provisions of subsection (e) of section 1372 shall apply 
under this section in the same manner as it applies under such section, 
except that any reference to family adjusted income is deemed a 
reference to wage-adjusted income.

SEC. 1374. GENERAL PROVISIONS RELATING TO APPLICATION PROCESS.

    (a) Distribution of Applications.--Each regional alliance shall 
distribute applications under this subpart directly to consumers and 
through employers, banks, and designated public agencies.
    (b) To Whom Application Made.--Applications under this subpart 
shall be filed, by person or mail, with a regional alliance or an 
agency designated by the State for this purpose. The application may be 
submitted with an application to enroll with a health plan under this 
subtitle or separately.
    (c) Income Statement.--Each application shall include a declaration 
of estimated annual income for the year involved.
    (d) Form and Contents.--An application for a discount or reduction 
under this subpart shall be in a form and manner specified by the 
Secretary and shall require the provision of information necessary to 
make the determinations required under this subpart.
    (e) Frequency of Applications.--
            (1) In general.--An application under this subpart may be 
        filed at any time during the year (including, in the case of 
        section 1373, during the reconciliation process).
            (2) Correction of income.--Nothing in paragraph (1) shall 
        be construed as preventing an individual or family from, at any 
        time, submitting an application to reduce the amount of premium 
        discount or reduction of liability under this subpart based 
        upon an increase in income from that stated in the previous 
        application.
    (f) Timing of Reductions and Discounts.--
            (1) In general.--Subject to reconciliation under section 
        1375, premium discounts and cost sharing reductions under this 
        subpart shall be applied to premium payments required (and for 
        expenses incurred) after the date of approval of the 
        application under this subpart.
            (2) AFDC and ssi recipients.--In the case of an AFDC or SSI 
        family, in applying paragraph (1), the date of approval of 
        benefits under the AFDC or SSI program shall be considered the 
        date of approval of an application under this subpart.
    (g) Verification.--The Secretary shall provide for verification, on 
a sample basis or other basis, of the information supplied in 
applications under this part. This verification shall be separate from 
the reconciliation provided under section 1375.
    (h) Help in Completing Applications.--Each regional alliance shall 
assist individuals in the filing of applications and income 
reconciliation statements under this subpart.
    (i) Penalties for Inaccurate Information.--
            (1) Interest for understatements.--Each individual who 
        knowingly understates income reported in an application to a 
        regional alliance under this subpart or otherwise makes a 
        material misrepresentation of information in such an 
        application shall be liable to the alliance for excess payments 
        made based on such understatement or misrepresentation, and for 
        interest on such excess payments at a rate specified by the 
        Secretary.
            (2) Penalties for misrepresentation.--In addition to the 
        liability established under paragraph (1), each individual who 
        knowingly misrepresents material information in an application 
        under this subpart to a regional alliance shall be liable to 
        the State in which the alliance is located for $2,000 or, if 
        greater, three times the excess payments made based on such 
        misrepresentation. The State shall provide for the transfer of 
        a significant portion of such amount to the regional alliance 
        involved.

SEC. 1375. END-OF-YEAR RECONCILIATION FOR PREMIUM DISCOUNT AND 
              REPAYMENT REDUCTION WITH ACTUAL INCOME.

    (a) In General.--In the case of a family whose application for a 
premium discount or reduction of liability for a year has been approved 
before the end of the year under this subpart, the family shall, 
subject to subsection (c) and by the deadline specified in section 
1344(b) file with the regional alliance an income reconciliation 
statement to verify the family's adjusted income or wage-adjusted 
income, as the case may be, for the previous year. Such a statement 
shall contain such information as the Secretary may specify. Each 
regional alliance shall coordinate the submission of such statements 
with the notice and payment of family payments due under section 1344.
    (b) Reconciliation of Premium Discount and Liability Assistance 
Based on Actual Income.--Based on and using the income reported in the 
reconciliation statement filed under subsection (a) with respect to a 
family, the regional alliance shall compute the amount of premium 
discount or reduction in liability that should have been provided under 
section 6104 or section 6113 with respect for the family for the year 
involved. If the amount of such discount or liability reduction 
computed is--
            (1) greater than the amount that has been provided, the 
        family is liable to the regional alliance to pay (directly or 
        through an increase in future family share of premiums or other 
        payments) a total amount equal to the amount of the excess 
        payment, or
            (2) less than the amount that has been provided, the 
        regional alliance shall pay to the family (directly or through 
        a reduction in future family share of premiums or other 
        payments) a total amount equal to the amount of the deficit.
    (c) No Reconciliation for AFDC and SSI Families; No Reconciliation 
for Cost Sharing Reductions.--No reconciliation statement is required 
under this section--
            (1) with respect to cost sharing reductions provided under 
        section 1372, or
            (2) for a family that only claims a premium discount or 
        liability reduction under this subpart on the basis of being an 
        AFDC or SSI family.
    (d) Disqualification for Failure to File.--In the case of any 
family that is required to file a statement under this section in a 
year and that fails to file such a statement by the deadline specified, 
members of the family shall not be eligible for premium reductions 
under section 6104 or reductions in liability under section 6113 until 
such statement is filed. A regional alliance, using rules established 
by the Secretary, shall waive the application of this subsection if the 
family establishes, to the satisfaction of the alliance under such 
rules, good cause for the failure to file the statement on a timely 
basis.
    (e) Penalties for False Information.--Any individual that provides 
false information in a statement under subsection (a) is subject to the 
same liabilities as are provided under section 1374(h) for a 
misrepresentation of material fact described in such section.
    (f) Notice of Requirement.--Each regional alliance (directly or in 
coordination with other regional alliances) shall provide for written 
notice, at the end of each year, of the requirement of this section to 
each family which had received premium discount or reduction in 
liability under this subpart in any month during the preceding year and 
to which such requirement applies.
    (g) Transmittal of Information; Verification.--
            (1) In general.--Each participating State shall transmit 
        annually to the Secretary such information relating to the 
        income of families for the previous year as the Secretary may 
        require to verify such income under this subpart.
            (2) Verification.--Each participating State may use such 
        information as it has available to it to assist regional 
        alliances in verifying income of families with applications 
        filed under this subpart. The Secretary of the Treasury may, 
        consistent with section 6103 of the Internal Revenue Code of 
        1986, permit return information to be disclosed and used by a 
        participating State in verifying such income but only in 
        accordance with such section and only if the information is not 
        directly disclosed to a regional alliance.
    (h) Construction.--Nothing in this section shall be construed as 
authorizing reconciliation of any cost sharing reduction provided under 
this subpart.

    PART 4--RESPONSIBILITIES AND AUTHORITIES OF CORPORATE ALLIANCES

SEC. 1381. CONTRACTS WITH HEALTH PLANS.

    (a) Contracts with Plans.--Subject to section 1382, each corporate 
alliance may--
            (1) offer to individuals eligible to enroll under section 
        1311(c) coverage under an appropriate self-insured health plan 
        (as defined in section 1400(b)), or
            (2) negotiate with a State-certified health plan to enter 
        into a contract with the plan for the enrollment of such 
        individuals under the plan,
or do both.
    (b) Terms of Contracts with State-Certified Health Plans.--
Contracts under this section between a corporate alliance and a State-
certified health plan may contain such provisions (not inconsistent 
with the requirements of this title) as the alliance and plan may 
provide, except that in no case does such contract remove the 
obligation of the sponsor of the corporate alliance to provide for 
health benefits to corporate alliance eligible individuals consistent 
with this part.

SEC. 1382. OFFERING CHOICE OF HEALTH PLANS FOR ENROLLMENT.

    (a) In General.--Each corporate alliance must provide to each 
eligible enrollee with respect to the alliance a choice of health plans 
among the plans which have contracts with the alliance under section 
1381.
    (b) Offering of Plans by Alliances.--A corporate alliance shall 
include among its health plan offerings for any eligible enrollee at 
least 3 health plans to enrollees, of which the alliance must offer--
            (1) at least one fee-for-service plan (as defined in 
        section 1322(b)(2)); and
            (2) at least two health plans that are not fee-for-service 
        plans.

SEC. 1383. ENROLLMENT; ISSUANCE OF HEALTH SECURITY CARD.

    (a) In General.--
            (1) Enrollment of alliance eligible individuals.--Each 
        corporate alliance shall assure that each alliance eligible 
        individual with respect to the alliance is enrolled in a 
        corporate alliance health plan offered by the alliance, and 
        shall establish and maintain methods and procedures consistent 
        with this section sufficient to assure such enrollment. Such 
        methods and procedures shall assure the enrollment of such 
        individuals at the time they first become alliance eligible 
        individuals with respect to the alliance.
            (2) Issuance of health security cards.--A corporate 
        alliance is responsible for the issuance of health security 
        cards to corporate alliance eligible individuals under section 
        1001(b).
    (b) Response to Point-of-Service Notices.--If a corporate alliance 
is notified under section 1323(b)(2) regarding an individual who has 
received services and appears to be a corporate alliance eligible 
individual--
            (1) the alliance shall promptly ascertain the individual's 
        eligibility as a corporate alliance eligible individual; and
            (2) if the alliance determines that the individual is a 
        corporate alliance eligible individual--
                    (A) the alliance shall promptly provide for the 
                enrollment of the individual in a health plan offered 
                by the alliance (and notify the Secretary of Labor of 
                such enrollment), and
                    (B) the alliance shall forward the claim for 
                payment for the services to the health plan in which 
                the individual is so enrolled and the plan shall make 
                payment to the provider for such claim (in a manner 
                consistent with requirements of the Secretary of 
                Labor).
    (c) Annual Open Enrollment; Enrollment of Family Members; 
Oversubscription of Plans.--The provisions of subsections (d) through 
(f) of section 1323 shall apply to a corporate alliance in the same 
manner as such provisions apply to a regional alliance.
    (d) Termination.--
            (1) In general.--The provisions of section 1323(g)(1) shall 
        apply to a corporate alliance in the same manner as such 
        provisions apply to a regional alliance.
            (2) Failure to pay premiums.--If a corporate alliance fails 
        to make premium payments to a health plan, the plan, after 
        reasonable written notice to the alliance and the Secretary of 
        Labor, may terminate coverage (and any contract with the 
        alliance under this part). If such coverage is terminated the 
        corporate alliance is responsible for the prompt enrollment of 
        alliance eligible individuals whose coverage is terminated in 
        another corporate alliance health plan.
    (e) Corporate Alliance Transition.--Each corporate alliance must 
provide coverage--
            (1) as of the first day of any month in which an individual 
        first becomes a corporate alliance eligible individual, and
            (2) through the end of the month in the case of a corporate 
        alliance eligible individual who loses such eligibility during 
        the month.

SEC. 1384. COMMUNITY-RATED PREMIUMS WITHIN PREMIUM AREAS.

    (a) Application of Community-Rated Premiums.--The premiums charged 
by a corporate alliance for enrollment in a corporate alliance health 
plan (not taking into account any employer premium payment required 
under section 6131) shall vary only by class of family enrollment 
(specified in section 1011(c)) and by premium area.
    (b) Designation of Premium Areas.--
            (1) Designation.--Each corporate alliance shall designate 
        premium areas to be used for the imposition of premiums (and 
        calculation of employer premium payments) under this Act.
            (2) Conditions.--The boundaries of such areas shall 
        reasonably reflect labor market areas or health care delivery 
        areas and shall be consistent with rules the Secretary of Labor 
        establishes (consistent with paragraph (3)) so that within such 
        areas there are not substantial differences in average per 
        capita health care expenditures.
            (3) Anti-redlining.--The provisions of paragraphs (4) and 
        (5) of section 1202(b) (relating to redlining and metropolitan 
        statistical areas) shall apply to the establishment of premium 
        areas in the same manner as they apply to the establishment of 
        the boundaries of regional alliance areas.
    (c) Applications of Classes of Enrollment.--
            (1) In general.--The premiums shall be applied under this 
        section based on class of family enrollment and shall vary 
        based on such class in accordance with factors specified by the 
        corporate alliance.
            (2) Basis for factors.--Such factors shall be the same in 
        each premium area and shall take into account such appropriate 
        considerations (including the considerations the Board takes 
        into account in the establishment of premium class factors 
        under section 1531 and the costs of regional alliance health 
        plans providing the comprehensive benefit package for families 
        enrolled in the different classes) as the alliance considers 
        appropriate, consistent with rules the Secretary of Labor 
        establishes.
    (d) Special Treatment of Multiemployer Alliances.--The Secretary of 
Labor shall provide for such exceptions to the requirements of this 
section in the case of a corporate alliance with a sponsor described in 
section 1311(b)(1)(B) as may be appropriate to reflect the unique and 
historical relationship between the employers and employees under such 
alliances.

SEC. 1385. ASSISTANCE FOR LOW-WAGE FAMILIES.

    Each corporate alliance shall make an additional contribution 
towards the enrollment in health plans of the alliance by certain low-
wage families in accordance with section 6131(b)(2).

SEC. 1386. CONSUMER INFORMATION AND MARKETING; DATA COLLECTION AND 
              QUALITY; ADDITIONAL DUTIES.

    The provisions of sections 1325(a), 1327, and 1328 shall apply to a 
corporate alliance in the same manner as such provisions apply to a 
regional alliance.

SEC. 1387. PLAN AND INFORMATION REQUIREMENTS.

    (a) In General.--A corporate alliance shall provide a written 
submission to the Secretary of Labor (in such form as the Secretary may 
require) detailing how the corporate alliance will carry out its 
activities under this part.
    (b) Annual Information.--A corporate alliance shall provide to the 
Secretary of Labor each year, in such form and manner as the Secretary 
may require, such information as the Secretary may require in order to 
monitor the compliance of the alliance with the requirements of this 
part.
    (c) Annual Notice of Employees or Participants.--
            (1) Corporate alliance.--Each corporate alliance shall 
        submit to the Secretary of Labor, by not later than March 1 of 
        each year, information on the number of full-time employees or 
        participants obtaining coverage through the alliance as of 
        January 1 of that year.
            (2) Employers that become large employers.--Each employer 
        that is not a corporate alliance but employs 5,000 full-time 
        employees as of January 1 of a year, shall submit to the 
        Secretary of Labor, by not later than March 1 of the year, 
        information on the number of such employees.

SEC. 1388. MANAGEMENT OF FUNDS; RELATIONS WITH EMPLOYEES.

    (a) Management of Funds.--The management of funds by a corporate 
alliance shall be subject to the applicable fiduciary requirements of 
part 4 of subtitle B of title I of the Employee Retirement Income 
Security Act of 1974, together with the applicable enforcement 
provisions of part 5 of subtitle B of title I of such Act.
    (b) Management of Finances and Records; Accounting System.--Each 
corporate alliance shall comply with standards relating to the 
management of finances and records and accounting systems as the 
Secretary of Labor shall specify.

SEC. 1389. COST CONTROL.

    Each corporate alliance shall control covered expenditures in a 
manner that meets the requirements of part 2 of subtitle A of title VI.

SEC. 1390. PAYMENTS BY CORPORATE ALLIANCE EMPLOYERS TO CORPORATE 
              ALLIANCES.

    (a) Large Employer Alliances.--In the case of a corporate alliance 
with a sponsor described in section 1311(b)(1)(A), the sponsor shall 
provide for the funding of benefits, through insurance or otherwise, 
consistent with section 6131, the applicable solvency requirements of 
sections 1394, 1395, and 1396, and any rules established by the 
Secretary of Labor.
    (b) Other Alliances.--In the case of a corporate alliance with a 
sponsor described in subparagraph (B) or (C) of section 1311(b)(1), a 
corporate alliance employer shall make payment of the employer premiums 
required under section 6131 under rules established by the corporate 
alliance, which rules shall be consistent with rules established by the 
Secretary of Labor.

SEC. 1391. COORDINATION OF PAYMENTS.

    (a) Payments of Certain Amounts to Regional Alliances.--In the case 
of a married couple in which one spouse is a qualifying employee of a 
regional alliance employer and the other spouse is a qualifying 
employee of a corporate alliance employer, if the couple is enrolled 
with a regional alliance health plan, the corporate alliance (which 
receives employer premium payments from such corporate alliance 
employer with respect to such employee) shall pay to the regional 
alliance the amounts so paid.
    (b) Payments of Certain Amounts to Corporate Alliances.--In the 
case of a married couple in which one spouse is a qualifying employee 
of a corporate alliance employer and the other spouse is a qualifying 
employee of another corporate alliance employer, the corporate alliance 
of the corporate alliance health plan in which the couple is not 
enrolled shall pay to the corporate alliance of the plan in which the 
couple is enrolled any employer premium payments received from such 
corporate alliance employer with respect to such employee.

SEC. 1392. APPLICABILITY OF ERISA ENFORCEMENT MECHANISMS FOR 
              ENFORCEMENT OF CERTAIN REQUIREMENTS.

    The provisions of sections 502 (relating to civil enforcement) and 
504 (relating to investigative authority) of the Employee Retirement 
Income Security Act of 1974 shall apply to enforcement by the Secretary 
of Labor of this part in the same manner and to same extent as such 
provisions apply to enforcement of title I of such Act.

SEC. 1393. APPLICABILITY OF CERTAIN ERISA PROTECTIONS TO ENROLLED 
              INDIVIDUALS.

    The provisions of sections 510 (relating to interference with 
rights protected under Act) and 511 (relating to coercive interference) 
of the Employee Retirement Income Security Act of 1974 shall apply, in 
relation to the provisions of this Act, with respect to individuals 
enrolled under corporate alliance health plans in the same manner and 
to the same extent as such provisions apply, in relation to the 
provisions of the Employee Retirement Income Security Act of 1974, with 
respect to participants and beneficiaries under employee welfare 
benefit plans covered by title I of such Act.

SEC. 1394. DISCLOSURE AND RESERVE REQUIREMENTS.

    (a) In General.--The Secretary of Labor shall ensure that each 
corporate alliance health plan which is a self-insured plan maintains 
plan assets in trust as provided in section 403 of the Employee 
Retirement Income Security Act of 1974--
            (1) without any exemption under section 403(b)(4) of such 
        Act, and
            (2) in amounts which the Secretary determines are 
        sufficient to provide at any time for payment to health care 
        providers of all outstanding balances owed by the plan at such 
        time.
The requirements of the preceding sentence may be met through letters 
of credit, bonds, or other appropriate security to the extent provided 
in regulations of the Secretary.
    (b) Disclosure.--Each self-insured corporate alliance health plan 
shall notify the Secretary at such time as the financial reserve 
requirements of this section are not being met. The Secretary may 
assess a civil money penalty of not more than $100,000 against any 
corporate alliance for any failure to provide such notification in such 
form and manner and within such time periods as the Secretary may 
prescribe by regulation.

SEC. 1395. TRUSTEESHIP BY THE SECRETARY OF INSOLVENT CORPORATE ALLIANCE 
              HEALTH PLANS.

    (a) Appointment of Secretary as Trustee for Insolvent Plans.--
Whenever the Secretary of Labor determines that a corporate alliance 
health plan which is a self-insured plan will be unable to provide 
benefits when due or is otherwise in a financially hazardous condition 
as defined in regulations of the Secretary, the Secretary shall, upon 
notice to the plan, apply to the appropriate United States district 
court for appointment of the Secretary as trustee to administer the 
plan for the duration of the insolvency. The plan may appear as a party 
and other interested persons may intervene in the proceedings at the 
discretion of the court. The court shall appoint the Secretary trustee 
if the court determines that the trusteeship is necessary to protect 
the interests of the enrolled individuals or health care providers or 
to avoid any unreasonable deterioration of the financial condition of 
the plan or any unreasonable increase in the liability of the Corporate 
Alliance Health Plan Insolvency Fund. The trusteeship of the Secretary 
shall continue until the conditions described in the first sentence of 
this subsection are remedied or the plan is terminated.
    (b) Powers as Trustee.--The Secretary of Labor, upon appointment as 
trustee under subsection (a), shall have the power--
            (1) to do any act authorized by the plan, this Act, or 
        other applicable provisions of law to be done by the plan 
        administrator or any trustee of the plan,
            (2) to require the transfer of all (or any part) of the 
        assets and records of the plan to the Secretary as trustee,
            (3) to invest any assets of the plan which the Secretary 
        holds in accordance with the provisions of the plan, 
        regulations of the Secretary, and applicable provisions of law,
            (4) to do such other acts as the Secretary deems necessary 
        to continue operation of the plan without increasing the 
        potential liability of the Corporate Alliance Health Plan 
        Insolvency Fund, if such acts may be done under the provisions 
        of the plan,
            (5) to require the corporate alliance, the plan 
        administrator, any contributing employer, and any employee 
        organization representing covered individuals to furnish any 
        information with respect to the plan which the Secretary as 
        trustee may reasonably need in order to administer the plan,
            (6) to collect for the plan any amounts due the plan and to 
        recover reasonable expenses of the trusteeship,
            (7) to commence, prosecute, or defend on behalf of the plan 
        any suit or proceeding involving the plan,
            (8) to issue, publish, or file such notices, statements, 
        and reports as may be required under regulations of the 
        Secretary or by any order of the court,
            (9) to terminate the plan and liquidate the plan assets in 
        accordance with applicable provisions of this Act and other 
        provisions of law, to restore the plan to the responsibility of 
        the corporate alliance, or to continue the trusteeship,
            (10) to provide for the enrollment of individuals covered 
        under the plan in an appropriate regional alliance health plan, 
        and
            (11) to do such other acts as may be necessary to comply 
        with this Act or any order of the court and to protect the 
        interests of enrolled individuals and health care providers.
    (c) Notice of Appointment.--As soon as practicable after the 
Secretary's appointment as trustee, the Secretary shall give notice of 
such appointment to--
            (1) the plan administrator,
            (2) each enrolled individual,
            (3) each employer who may be liable for contributions to 
        the plan, and
            (4) each employee organization which, for purposes of 
        collective bargaining, represents enrolled individuals.
    (d) Additional Duties.--Except to the extent inconsistent with the 
provisions of this Act or part 4 of subtitle B of title I of the 
Employee Retirement Income Security Act of 1974, or as may be otherwise 
ordered by the court, the Secretary of Labor, upon appointment as 
trustee under this section, shall be subject to the same duties as 
those of a trustee under section 704 of title 11, United States Code, 
and shall have the duties of a fiduciary for purposes of such part 4.
    (e) Other Proceedings.--An application by the Secretary of Labor 
under this subsection may be filed notwithstanding the pendency in the 
same or any other court of any bankruptcy, mortgage foreclosure, or 
equity receivership proceeding, or any proceeding to reorganize, 
conserve, or liquidate such plan or its property, or any proceeding to 
enforce a lien against property of the plan.
    (f) Jurisdiction of Court.--
            (1) In general.--Upon the filing of an application for the 
        appointment as trustee or the issuance of a decree under this 
        subsection, the court to which the application is made shall 
        have exclusive jurisdiction of the plan involved and its 
        property wherever located with the powers, to the extent 
        consistent with the purposes of this subsection, of a court of 
        the United States having jurisdiction over cases under chapter 
        11 of title 11, United States Code. Pending an adjudication 
        under this section such court shall stay, and upon appointment 
        by it of the Secretary of Labor as trustee, such court shall 
        continue the stay of, any pending mortgage foreclosure, equity 
        receivership, or other proceeding to reorganize, conserve, or 
        liquidate the plan, the sponsoring alliance, or property of 
        such plan or alliance, and any other suit against any receiver, 
        conservator, or trustee of the plan, the sponsoring alliance, 
        or property of the plan or alliance. Pending such adjudication 
        and upon the appointment by it of the Secretary as trustee, the 
        court may stay any proceeding to enforce a lien against 
        property of the plan or the sponsoring alliance or any other 
        suit against the plan or the alliance.
            (2) Venue.--An action under this subsection may be brought 
        in the judicial district where the plan administrator resides 
        or does business or where any asset of the plan is situated. A 
        district court in which such action is brought may issue 
        process with respect to such action in any other judicial 
        district.
    (g) Personnel.--In accordance with regulations of the Secretary of 
Labor, the Secretary shall appoint, retain, and compensate accountants, 
actuaries, and other professional service personnel as may be necessary 
in connection with the Secretary's service as trustee under this 
section.

SEC. 1396. GUARANTEED BENEFITS UNDER TRUSTEESHIP OF THE SECRETARY.

    (a) In General.--Subject to subsection (b), the Secretary of Labor 
shall guarantee the payment of all benefits under a corporate alliance 
health plan which is a self-insured plan while such plan is under the 
Secretary's trusteeship under section 1395.
    (b) Limitations.--Any increase in the amount of benefits under the 
plan resulting from a plan amendment which was made, or became 
effective, whichever is later, within 180 days (or such other 
reasonable time as may be prescribed in regulations of the Secretary of 
Labor) before the date of the Secretary's appointment as trustee of the 
plan shall be disregarded for purposes of determining the guarantee 
under this section.
    (c) Corporate Alliance Health Plan Insolvency Fund.--
            (1) Establishment.--The Secretary of Labor shall establish 
        a Corporate Alliance Health Plan Insolvency Fund (hereinafter 
        in this part referred to as the ``Fund'') from which the 
        Secretary shall authorize payment of all guaranteed benefits 
        under this section.
            (2) Receipts and disbursements.--
                    (A) Receipts.--The Fund shall be credited with--
                            (i) funds borrowed under paragraph (3),
                            (ii) assessments collected under section 
                        1397, and
                            (iii) earnings on investment of the Fund.
                    (B) Disbursements.--The Fund shall be available--
                            (i) for making such payments as the 
                        Secretary of Labor determines are necessary to 
                        pay benefits guaranteed under this section,
                            (ii) to repay the Secretary of the Treasury 
                        such sums as may be borrowed (together with 
                        interest thereon) under paragraph (3), and
                            (iii) to pay the operational and 
                        administrative expenses of the Fund.
            (3) Borrowing authority.--At the direction of the Secretary 
        of Labor, the Fund may, to the extent necessary to carry out 
        the purposes of paragraph (1), issue to the Secretary of the 
        Treasury notes or other obligations, in such forms and 
        denominations, bearing such maturities, and subject to such 
        terms and conditions as may be prescribed by the Secretary of 
        the Treasury. The total balance of the Fund obligations 
        outstanding at any time shall not exceed $500,000,000. Such 
        notes or other obligations shall bear interest at a rate 
        determined by the Secretary of the Treasury, taking into 
        consideration the current average market yield on outstanding 
        marketable obligations of the United States of comparable 
        maturities during the month preceding the issuance of such 
        notes or other obligations by the Fund. The Secretary of the 
        Treasury shall purchase any notes or other obligations issued 
        by the Fund under this paragraph, and for that purpose the 
        Secretary of the Treasury may use as a public debt transaction 
        the proceeds from the sale of any securities issued under 
        chapter 31 of title 31, United States Code and the purposes for 
        which securities may be issued under such chapter are extended 
        to include any purchase of such notes and obligations. The 
        Secretary of the Treasury may at any time sell any of the notes 
        or other obligations acquired by such Secretary under this 
        paragraph. All redemptions, purchases, and sales by the 
        Secretary of the Treasury of such notes or other obligations 
        shall be treated as public debt transactions of the United 
        States.
            (4) Investment authority.--Whenever the Secretary of Labor 
        determines that the moneys of the Fund are in excess of current 
        needs, such Secretary may request the investment of such 
        amounts as such Secretary determines advisable by the Secretary 
        of the Treasury in obligations issued or guaranteed by the 
        United States, but, until all borrowings under paragraph (3) 
        have been repaid, the obligations in which such excess moneys 
        are invested may not yield a rate of return in excess of the 
        rate of interest payable on such borrowings.

SEC. 1397. IMPOSITION AND COLLECTION OF PERIODIC ASSESSMENTS ON SELF-
              INSURED CORPORATE ALLIANCE PLANS.

    (a) Imposition of Assessments.--Upon a determination that 
additional receipts to the Fund are necessary in order to enable the 
Fund to repay amounts borrowed by the Fund under section 1396(c)(3) 
while maintaining a balance sufficient to ensure the solvency of the 
Fund, the Secretary of Labor may impose assessments under this section. 
The Secretary shall prescribe from time to time such schedules of 
assessment rates and bases for the application of such rates as may be 
necessary to provide for such repayments.
    (b) Uniformity of Assessments.--The assessment rates so prescribed 
by the Secretary for any period shall be uniform for all plans, except 
that the Secretary may vary the amount of such assessments by category, 
or waive the application of such assessments by category, taking into 
account differences in the financial solvency of, and financial 
reserves maintained by, plans in each category.
    (c) Limitation on Amount of Assessment.--The total amount assessed 
against a corporate alliance health plan under this section during a 
year may not exceed 2 percent of the total premiums paid to the plan 
with respect to corporate alliance eligible individuals enrolled with 
the plan during the year.
    (d) Payment of Assessments.--
            (1) Obligation to pay.--The designated payor of each plan 
        shall pay the assessments imposed by the Secretary of Labor 
        under this section with respect to that plan when they are due. 
        Assessments under this section are payable at the time, and on 
        an estimated, advance, or other basis, as determined by the 
        Secretary. Assessments shall continue to accrue until the 
        plan's assets are distributed pursuant to a termination 
        procedure or the Secretary is appointed to serve as trustee of 
        the plan under section 1395.
            (2) Late payment charges and interest.--
                    (A) Late payment charges.--If any assessment is not 
                paid when it is due, the Secretary of Labor may assess 
                a late payment charge of not more than 100 percent of 
                the assessment payment which was not timely paid.
                    (B) Waivers.--Subparagraph (A) shall not apply to 
                any assessment payment made within 60 days after the 
                date on which payment is due, if before such date, the 
                designated payor obtains a waiver from the Secretary of 
                Labor based upon a showing of substantial hardship 
                arising from the timely payment of the assessment. The 
                Secretary may grant a waiver under this subparagraph 
                upon application made by the designated payor, but the 
                Secretary may not grant a waiver if it appears that the 
                designated payor will be unable to pay the assessment 
                within 60 days after the date on which it is due.
                    (C) Interest.--If any assessment is not paid by the 
                last date prescribed for a payment, interest on the 
                amount of such assessment at the rate imposed under 
                section 6601(a) of the Internal Revenue Code of 1986 
                shall be paid for the period from such last date to the 
                date paid.
    (e) Civil Action upon Nonpayment.--If any designated payor fails to 
pay an assessment when due, the Secretary of Labor may bring a civil 
action in any district court of the United States within the 
jurisdiction of which the plan assets are located, the plan is 
administered, or in which a defendant resides or is found, for the 
recovery of the amount of the unpaid assessment, any late payment 
charge, and interest, and process may be served in any other district. 
The district courts of the United States shall have jurisdiction over 
actions brought under this subsection by the Secretary without regard 
to the amount in controversy.
    (f) Guarantee Held Harmless.--The Secretary of Labor shall not 
cease to guarantee benefits on account of the failure of a designated 
payor to pay any assessment when due.
    (g) Designated Payor Defined.--
            (1) In general.--For purposes of this section, the term 
        ``designated payor'' means--
                    (A) the employer or plan administrator in any case 
                in which the eligible sponsor of the corporate alliance 
                health plan is described in subparagraph (A) of section 
                1311(b)(1); and
                    (B) the contributing employers or the plan 
                administrator in any case in which the eligible sponsor 
                of the corporate alliance is described in subparagraph 
                (B) or (C) of section 1311(b)(1).
            (2) Controlled groups.--If an employer is a member of a 
        controlled group, each member of such group shall be jointly 
        and severally liable for any assessments required to be paid by 
        such employer. For purposes of the preceding sentence, the term 
        ``controlled group'' means any group treated as a single 
        employer under subsection (b), (c), (m), or (o) of section 414 
        of the Internal Revenue Code of 1986.

SEC. 1398. PAYMENTS TO FEDERAL GOVERNMENT BY MULTIEMPLOYER CORPORATE 
              ALLIANCES FOR ACADEMIC HEALTH CENTERS AND GRADUATE 
              MEDICAL EDUCATION.

    (a) In General.--A corporate alliance with an eligible sponsor 
described in section 1311(b)(1)(B) shall make payment to the Secretary 
of an amount equivalent to the amount (as estimated based on rules 
established by the Secretary and based on the annual per capita 
expenditure equivalent calculated under section 6021) that would have 
been payable by the alliance under section 1353 if the alliance were a 
regional alliance.
    (b) Reference to Exemption from Assessment.--For provision 
exempting certain corporate alliance employers participating in an 
alliance described in subsection (a) from an assessment under section 
3461 of the Internal Revenue Code of 1986, as added by section 7121 of 
this Act, see section 3461(c)(1) of such Code.

                                                    Title I, Subtitle E

                        Subtitle E--Health Plans

SEC. 1400. HEALTH PLAN DEFINED.

    (a) In General.--In this Act, the term ``health plan'' means a plan 
that provides the comprehensive benefit package and meets the 
requirements of parts 1, 3, and 4 applicable to health plans.
    (b) Appropriate Self-Insured Health Plan.--In this Act, the term 
``appropriate self-insured health plan'' means a group health plan (as 
defined in section 3(42) of the Employee Retirement Income Security Act 
of 1974) which is a self-insured health plan and with respect to which 
the applicable requirements of title I of the Employee Retirement 
Income Security Act of 1974 are met.
    (c) State-Certified Health Plan.--In this Act, the term ``State-
certified health plan'' means a health plan that has been certified by 
a State under section 1203(a) (or, in the case in which the Board is 
exercising certification authority under section 1522(b), that has been 
certified by the Board).
    (d) Applicable Regulatory Authority Defined.--In this subtitle, the 
term ``applicable regulatory authority'' means--
            (1) with respect to a self-insured health plan, the 
        Secretary of Labor, or
            (2) with respect to a State-certified health plan, the 
        State authority responsible for certification of the plan.

     PART 1--REQUIREMENTS RELATING TO COMPREHENSIVE BENEFIT PACKAGE

SEC. 1401. APPLICATION OF REQUIREMENTS.

    No plan shall be treated under this Act as a health plan--
            (1) unless the plan is a self-insured plan or a State-
        certified plan; or
            (2) on and after the effective date of a finding by the 
        applicable regulatory authority that the plan has failed to 
        comply with such applicable requirements.

SEC. 1402. REQUIREMENTS RELATING TO ENROLLMENT AND COVERAGE.

    (a) No Underwriting.--
            (1) In general.--Subject to paragraph (2), each health plan 
        offered by a regional alliance or a corporate alliance must 
        accept for enrollment every alliance eligible individual who 
        seeks such enrollment. No plan may engage in any practice that 
        has the effect of attracting or limiting enrollees on the basis 
        of personal characteristics, such as health status, anticipated 
        need for health care, age, occupation, or affiliation with any 
        person or entity.
            (2) Capacity limitations.--With the approval of the 
        applicable regulatory authority, a health plan may limit 
        enrollment because of the plan's capacity to deliver services 
        or to maintain financial stability. If such a limitation is 
        imposed, the limitation may not be imposed on a basis referred 
        to in paragraph (1).
    (b) No Limits on Coverage; No Pre-Existing Condition Limits.--A 
health plan may not--
            (1) terminate, restrict, or limit coverage for the 
        comprehensive benefit package in any portion of the plan's 
        service area for any reason, including nonpayment of premiums;
            (2) cancel coverage for any alliance eligible individual 
        until that individual is enrolled in another applicable health 
        plan;
            (3) exclude coverage of an alliance eligible individual 
        because of existing medical conditions;
            (4) impose waiting periods before coverage begins; or
            (5) impose a rider that serves to exclude coverage of 
        particular eligible individuals.
    (c) Antidiscrimination.--
            (1) In general.--No health plan may discriminate, or engage 
        (directly or through contractual arrangements) in any activity, 
        including the selection of a service area, that has the effect 
        of discriminating, against an individual on the basis of race, 
        national origin, sex, language, socio-economic status, age, 
        disability, health status, or anticipated need for health 
        services.
            (2) Selection of providers for plan network.--In selecting 
        among providers of health services for membership in a provider 
        network, or in establishing the terms and conditions of such 
        membership, a health plan may not engage in any practice that 
        has the effect of discriminating against a provider--
                    (A) based on the race, national origin, sex, 
                language, age, or disability of the provider; or
                    (B) based on the socio-economic status, disability, 
                health status, or anticipated need for health services 
                of a patient of the provider.
            (3) Business necessity.--Except in the case of intentional 
        discrimination, it shall not be a violation of this subsection, 
        or of any regulation issued under this subsection, for any 
        person to take any action otherwise prohibited under this 
        subsection, if the action is required by business necessity.
            (4) Regulations.--Not later than 1 year after the date of 
        the enactment of this Act, the Secretary of Health and Human 
        Services shall issue regulations to carry out this subsection.
    (d) Requirements for Plans Offering Lower Cost Sharing.--Each 
health plan that offers enrollees the lower cost sharing schedule 
referred to in section 1131--
            (1) shall apply such schedule to all items and services in 
        the comprehensive benefit package;
            (2) shall offer enrollees the opportunity to obtain 
        coverage for out-of-network items and services (as described in 
        subsection (f)(2)); and
            (3) notwithstanding section 1403, in the case of an 
        enrollee who obtains coverage for such items and services, may 
        charge an alternative premium to take into account such 
        coverage.
    (e) Treatment of Cost Sharing.--Each health plan, in providing 
benefits in the comprehensive benefit package--
            (1) shall include in its payments to providers, such 
        additional reimbursement as may be necessary to reflect cost 
        sharing reductions to which individuals are entitled under 
        section 1371, and
            (2) shall maintain such claims or encounter records as may 
        be necessary to audit the amount of such additional 
        reimbursements and the individuals for which such reimbursement 
        is provided.
    (f) In-Network and Out-of-Network Items and Services Defined.--
            (1) In-network items and services.--For purposes of this 
        Act, the term ``in-network'', when used with respect to items 
        or services described in this subtitle, means items or services 
        provided to an individual enrolled under a health plan by a 
        health care provider who is a member of a provider network of 
        the plan (as defined in paragraph (3)).
            (2) Out-of-network items and services.--For purposes of 
        this Act, the term ``out-of network'', when used with respect 
        to items or services described in this subtitle, means items or 
        services provided to an individual enrolled under a health plan 
        by a health care provider who is not a member of a provider 
        network of the plan (as defined in paragraph (3)).
            (3) Provider network defined.--A ``provider network'' 
        means, with respect to a health plan, providers who have 
        entered into an agreement with the plan under which such 
        providers are obligated to provide items and services in the 
        comprehensive benefit package to individuals enrolled in the 
        plan, or have an agreement to provide services on a fee-for-
        service basis.
    (g) Relation to Detention.--A health plan is not required to 
provide any reimbursement to any detention facility for services 
performed in that facility for detainees in the facility.

SEC. 1403. COMMUNITY RATING.

    (a) Regional Alliance Health Plans.--Each regional alliance health 
plan may not vary the premium imposed with respect to residents of an 
alliance area, except as may be required under section 6102(a) with 
respect to different types of individual and family coverage under the 
plan.
    (b) Corporate Alliance Health Plans.--Each corporate alliance 
health plan may not vary the premium imposed with respect to 
individuals enrolled in the plan, except as may be required under 
section 1384 with respect to different types of individual and family 
coverage under the plan.

SEC. 1404. MARKETING OF HEALTH PLANS; INFORMATION.

    (a) Regional Alliance Marketing Restrictions.--
            (1) In general.--The contract entered into between a 
        regional alliance and a regional alliance health plan shall 
        prohibit the distribution by the health plan of marketing 
        materials within the regional alliance that contain false or 
        materially misleading information and shall provide for prior 
        approval by the regional alliance of any marketing materials to 
        be distributed by the plan.
            (2) Entire market.--A health plan offered by a regional 
        alliance may not distribute marketing materials to an area 
        smaller than the entire area served by the plan.
            (3) Prohibition of tie-ins.--A regional alliance health 
        plan, and any agency of such a plan, may not seek to influence 
        an individual's choice of plans in conjunction with the sale of 
        any other insurance.
    (b) Information Available.--
            (1) In general.--Each regional alliance health plan must 
        provide to the regional alliance and make available to alliance 
        eligible individuals and health care professionals complete and 
        timely information concerning the following:
                    (A) Costs.
                    (B) The identity, locations, qualifications, and 
                availability of participating providers.
                    (C) Procedures used to control utilization of 
                services and expenditures.
                    (D) Procedures for assuring and improving the 
                quality of care.
                    (E) Rights and responsibilities of enrollees.
                    (F) Information on the number of plan members who 
                disenroll from the plan.
            (2) Prohibition against certification of plans providing 
        inaccurate information.--No regional alliance health plan may 
        be a State-certified health plan under this title if the State 
        determines that the plan submitted materially inaccurate 
        information under paragraph (1).
    (c) Advance Directives.--Each self-insured health plan and each 
State-certified health plan shall meet the requirement of section 
1866(f) of the Social Security Act (relating to maintaining written 
policies and procedures respecting advance directives) in the same 
manner as such requirement relates to organizations with contracts 
under section 1876 of such Act.

SEC. 1405. GRIEVANCE PROCEDURE.

    (a) In General.--Each health plan must establish a grievance 
procedure for enrollees to use in pursuing complaints. Such procedure 
shall be consistent with subtitle C of title V.
    (b) Additional Remedies.--If the grievance procedure fails to 
resolve an enrollee's complaint--
            (1) in the case of an enrollee of a regional alliance 
        health plan, the enrollee has the option of seeking assistance 
        from the office of the ombudsman for the regional alliance 
        established under section 1326(a), and
            (2) the enrollee may pursue additional legal remedies, 
        including those provided under subtitle C of title V.

SEC. 1406. HEALTH PLAN ARRANGEMENTS WITH PROVIDERS.

    (a) Requirement.--Each health plan must enter into such agreements 
with health care providers or have such other arrangements as may be 
necessary to assure the provision of all services covered by the 
comprehensive benefit package to eligible individuals enrolled with the 
plan.
    (b) Emergency and Urgent Care Services.--
            (1) In general.--Each health plan must cover emergency and 
        urgent care services provided to enrollees, without regard to 
        whether or not the provider furnishing such services has a 
        contractual (or other) arrangement with the plan to provide 
        items or services to enrollees of the plan and in the case of 
        emergency services without regard to prior authorization.
            (2) Payment amounts.--In the case of emergency and urgent 
        care provided to an enrollee outside of a health plan's service 
        area, the payment amounts of the plan shall be based on the fee 
        for service rate schedule established by the regional alliance 
        for the alliance area where the services were provided.
    (c) Application of Fee Schedule.--
            (1) In general.--Subject to paragraph (2), each regional 
        alliance health plan or corporate alliance health plan that 
        provides for payment for services on a fee-for-service basis 
        shall make such payment in the amounts provided under the fee 
        schedule established by the regional alliance under section 
        1322(c) (or, in the case of a plan offered in a State that has 
        established a Statewide fee schedule under section 1322(c)(3), 
        under such Statewide fee schedule).
            (2) Reduction for providers voluntarily reducing charges.--
        If a provider under a health plan voluntarily agrees to reduce 
        the amount charged to an individual enrolled under the plan, 
        the plan shall reduce the amount otherwise determined under the 
        fee schedule applicable under paragraph (1) by the proportion 
        of the reduction in such amount charged.
            (3) Reduction for noncomplying plan.--Each regional 
        alliance health plan that is a noncomplying plan shall provide 
        for reductions in payments under the fee schedule to providers 
        that are not participating providers in accordance with section 
        6012(b).
    (d) Prohibition Against Balance Billing; Requirement of Direct 
Billing.--
            (1) Prohibition of balance billing.--A provider may not 
        charge or collect from an enrollee a fee in excess of the 
        applicable payment amount under the applicable fee schedule 
        under subsection (c), and the health plan and its enrollees are 
        not legally responsible for payment of any amount in excess of 
        such applicable payment amount for items and services covered 
        under the comprehensive benefits package.
            (2) Direct billing.--A provider may not charge or collect 
        from an enrollee amounts that are payable by the health plan 
        (including any cost sharing reduction assistance payable by the 
        plan) and shall submit charges to such plan in accordance with 
        any applicable requirements of part 1 of subtitle B of title V 
        (relating to health information systems).
            (3) Coverage under agreements with plans.--The agreements 
        or other arrangements entered into under subsection (a) between 
        a health plan and the health care providers providing the 
        comprehensive benefit package to individuals enrolled with the 
        plan shall prohibit a provider from engaging in balance billing 
        described in paragraph (1).
    (e) Imposition of Participating Provider Assessment in Case of a 
Noncomplying Plan.--Each regional alliance health plan shall provide 
that if the plan is a noncomplying plan for a year under section 6012, 
payments to participating providers shall be reduced by the applicable 
network reduction percentage under such section.

SEC. 1407. PREEMPTION OF CERTAIN STATE LAWS RELATING TO HEALTH PLANS.

    (a) Laws Restricting Plans Other Than Fee-for-Service Plans.--
Except as may otherwise be provided in this section, no State law shall 
apply to any services provided under a health plan that is not a fee-
for-service plan (or a fee-for-service component of a plan) if such law 
has the effect of prohibiting or otherwise restricting plans from--
            (1) except as provided in section 1203, limiting the number 
        and type of health care providers who participate in the plan;
            (2) requiring enrollees to obtain health services (other 
        than emergency services) from participating providers or from 
        providers authorized by the plan;
            (3) requiring enrollees to obtain a referral for treatment 
        by a specialized physician or health institution;
            (4) establishing different payment rates for participating 
        providers and providers outside the plan;
            (5) creating incentives to encourage the use of 
        participating providers; or
            (6) requiring the use of single-source suppliers for 
        pharmacy, medical equipment, and other health products and 
        services.
    (b) Preemption of State Corporate Practice Acts.--Any State law 
related to the corporate practice of medicine and to provider ownership 
of health plans or other providers shall not apply to arrangements 
between health plans that are not fee-for-service plans and their 
participating providers.
    (c) Participating Provider Defined.--In this title, a 
``participating provider'' means, with respect to a health plan, a 
provider of health care services who is a member of a provider network 
of the plan (as described in section 1402(f)(3)).

SEC. 1408. FINANCIAL SOLVENCY.

    Each regional alliance health plan must--
            (1) meet or exceed minimum capital requirements established 
        by States under section 1204(a);
            (2) in the case of a plan operating in a State, must 
        participate in the guaranty fund established by the State under 
        section 1204(c); and
            (3) meet such other requirements relating to fiscal 
        soundness as the State may establish (subject to the 
        establishment of any alternative standards by the Board).

SEC. 1409. REQUIREMENT FOR OFFERING COST SHARING POLICY.

    Each regional alliance health plan shall offer a cost sharing 
policy (as defined in section 1421(b)(2)) to each eligible family 
enrolled under the plan.

SEC. 1410. QUALITY ASSURANCE.

    Each health plan shall comply with such quality assurance 
requirements as are imposed under subtitle A of title V with respect to 
such a plan.

SEC. 1411. PROVIDER VERIFICATION.

    Each health plan shall--
            (1) verify the credentials of practitioners and facilities;
            (2) ensure that all providers participating in the plan 
        meet applicable State licensing and certification standards;
            (3) oversee the quality and performance of participating 
        providers, consistent with section 1410; and
            (4) investigate and resolve consumer complaints against 
        participating providers.

SEC. 1412. CONSUMER DISCLOSURES OF UTILIZATION MANAGEMENT PROTOCOLS.

    Each health plan shall disclose to enrollees (and prospective 
enrollees) the protocols used by the plan for controlling utilization 
and costs.

SEC. 1413. CONFIDENTIALITY, DATA MANAGEMENT, AND REPORTING.

    (a) In General.--Each health plan shall comply with the 
confidentiality, data management, and reporting requirements imposed 
under subtitle B of title V.
    (b) Treatment of Electronic Information.--
            (1) Accuracy and reliability.--Each health plan shall take 
        such measures as may be necessary to ensure that health care 
        information in electronic form that the plan, or a member of a 
        provider network of the plan, collects for or transmits to the 
        Board under subtitle B of title V is accurate and reliable.
            (2) Privacy and security.--Each health plan shall take such 
        measures as may be necessary to ensure that health care 
        information described in paragraph (1) is not distributed to 
        any individual or entity in violation of a standard promulgated 
        by the Board under part 2 of subtitle B of title V.

SEC. 1414. PARTICIPATION IN REINSURANCE SYSTEM.

    Each regional alliance health plan of a State that has established 
a reinsurance system under section 1203(g) shall participate in the 
system in the manner specified by the State.

        PART 2--REQUIREMENTS RELATING TO SUPPLEMENTAL INSURANCE

SEC. 1421. IMPOSITION OF REQUIREMENTS ON SUPPLEMENTAL INSURANCE.

    (a) In General.--An entity may offer a supplemental insurance 
policy but only if--
            (1) in the case of a supplemental health benefit policy (as 
        defined in subsection (b)(1)), the entity and the policy meet 
        the requirements of section 1422; and
            (2) in the case of a cost sharing policy (as defined in 
        subsection (b)(2)), the entity and the policy meet the 
        requirements of section 1423.
    (b) Policies Defined.--
            (1) Supplemental health benefit policy.--
                    (A) In general.--In this part, the term 
                ``supplemental health benefit policy'' means a health 
                insurance policy or health benefit plan offered to an 
                alliance eligible individual which provides--
                            (i) coverage for services and items not 
                        included in the comprehensive benefit package, 
                        or
                            (ii) coverage for items and services 
                        included in such package but not covered 
                        because of a limitation in amount, duration, or 
                        scope provided under this title,
                or both.
                    (B) Exclusions.--Such term does not include the 
                following:
                            (i) A cost sharing policy (as defined in 
                        paragraph (2)).
                            (ii) A long-term care insurance policy (as 
                        defined in section 2304(10)).
                            (iii) Insurance that limits benefits with 
                        respect to specific diseases (or conditions).
                            (iv) Hospital or nursing home indemnity 
                        insurance.
                            (v) A medicare supplemental policy (as 
                        defined in section 1882(g) of the Social 
                        Security Act).
                            (vi) Insurance with respect to accidents.
            (2) Cost sharing policy.--In this part, the term ``cost 
        sharing policy'' means a health insurance policy or health 
        benefit plan offered to an alliance eligible individual which 
        provides coverage for deductibles, coinsurance, and copayments 
        imposed as part of the comprehensive benefit package under 
        subtitle B, whether imposed under a higher cost sharing plan or 
        with respect to out-of-network providers.

SEC. 1422. STANDARDS FOR SUPPLEMENTAL HEALTH BENEFIT POLICIES.

    (a) Prohibiting Duplication of Coverage.--
            (1) In general.--No health plan, insurer, or any other 
        person may offer--
                    (A) to any eligible individual a supplemental 
                health benefit policy that duplicates any coverage 
                provided in the comprehensive benefit package; or
                    (B) to any medicare-eligible individual a 
                supplemental health benefit policy that duplicates any 
                coverage provided under the medicare program.
            (2) Exception for medicare-eligible individuals.--For 
        purposes of this subsection, for the period in which an 
        individual is a medicare-eligible individual and also is an 
        alliance eligible individual (and is enrolled under a regional 
        alliance or corporate alliance health plan), paragraph (1)(A) 
        (and not paragraph (1)(B)) shall apply.
    (b) No Limitation on Individuals Offered Policy.--
            (1) In general.--Except as provided in paragraph (2), each 
        entity offering a supplemental health benefit policy must 
        accept for enrollment every individual who seeks such 
        enrollment, subject to capacity and financial limits.
            (2) Exception for certain offerors.--Paragraph (1) shall 
        not apply to any supplemental health benefit policy offered to 
        an individual only on the basis of--
                    (A) the individual's employment (in the case of a 
                policy offered by the individual's employer); or
                    (B) the individual's membership or enrollment in a 
                fraternal, religious, professional, educational, or 
                other similar organization.
    (c) Restrictions on Marketing Abuses.--Not later than January 1, 
1996, the Board shall develop (in consultation with the States) minimum 
standards that prohibit marketing practices by entities offering 
supplemental health benefit policies that involve:
            (1) Providing monetary incentives for or tying or otherwise 
        conditioning the sale of the policy to enrollment in a regional 
        alliance health plan of the entity.
            (2) Using or disclosing to any party information about the 
        health status or claims experience of participants in a 
        regional alliance health plan for the purpose of marketing such 
        a policy.
    (d) Civil Monetary Penalty.--An entity that knowingly and willfully 
violates any provision of this section with respect to the offering of 
a supplemental health benefit policy to any individual shall be subject 
to a civil monetary penalty (not to exceed $10,000) for each such 
violation. The provisions of section 1128A of the Social Security Act 
(other than subsections (a) and (b)) shall apply to civil money 
penalties under this subsection in the same manner as they apply to a 
penalty or proceeding under section 1128A(a) of such Act.

SEC. 1423. STANDARDS FOR COST SHARING POLICIES.

    (a) Rules for Offering of Policies.--Subject to subsection (f), a 
cost sharing policy may be offered to an individual only if--
            (1) the policy is offered by the regional alliance health 
        plan in which the individual is enrolled;
            (2) the regional alliance health plan offers the policy to 
        all individuals enrolled in the plan;
            (3) the plan offers each such individual a choice of a 
        policy that provides standard coverage and a policy that 
        provides maximum coverage (in accordance with standards 
        established by the Board); and
            (4) the policy is offered only during the annual open 
        enrollment period for regional alliance health plans (described 
        in section 1323(d)(1)).
    (b) Prohibition of Coverage of Copayments.--Each cost sharing 
policy may not provide any benefits relating to any copayments 
established under the table of copayments and coinsurance under section 
1135.
    (c) Equivalent Coverage for All Services.--Each cost sharing policy 
must provide coverage for items and services in the comprehensive 
benefit package to the same extent as the policy provides coverage for 
all items and services in the package.
    (d) Requirements for Pricing.--
            (1) In general.--The price of any cost sharing policy 
        shall--
                    (A) be the same for each individual to whom the 
                policy is offered;
                    (B) take into account any expected increase in 
                utilization resulting from the purchase of the policy 
                by individuals enrolled in the regional alliance health 
                plan; and
                    (C) not result in a loss-ratio of less than 90 
                percent.
            (2) Loss-ratio defined.--In paragraph (1)(C), a ``loss-
        ratio'' is the ratio of the premium returned to the consumer in 
        payout relative to the total premium collected.
    (e) Loss of State Certification for Regional Alliance Health Plans 
Failing to Meet Standards.--A State may not certify a regional alliance 
health plan that offers a cost sharing policy unless the plan and the 
policy meet the standards described in this section.
    (f) Special Rules for FEHBP Supplemental Plans.--Subsection (a) 
shall not apply to an FEHBP supplemental plan described in section 
8203(f)(1), but only if the plan meets the following requirements:
            (1) The plan must be offered to all individuals to whom 
        such a plan is required to be offered under section 8203.
            (2) The plan must offer each such individual a choice of a 
        policy that provides standard coverage and a policy that 
        provides maximum coverage (in accordance with standards 
        established by the Board under subsection (a)(3)).
            (3) The plan is offered only during the annual open 
        enrollment period for regional alliance health plans (described 
        in section 1323(d)(1)).
            (4)(A) The price of the plan shall include an amount, 
        established in accordance with rules established by the Board 
        in consultation with the Office of Personnel Management, that 
        takes into account any expected increase in utilization of the 
        items and services in the comprehensive benefit package 
        resulting from the purchase of the plan by individuals enrolled 
        in a regional alliance health plan.
            (B) The plan provides for payment, in a manner specified by 
        the Board in the case of an individual enrolled in the plan and 
        in a regional alliance health plan, to the regional alliance 
        health plan of an amount equivalent to the additional amount 
        described in subparagraph (A).

     PART 3--REQUIREMENTS RELATING TO ESSENTIAL COMMUNITY PROVIDERS

SEC. 1431. HEALTH PLAN REQUIREMENT.

    (a) In General.--Subject to section 1432, each health plan shall, 
with respect to each electing essential community provider (as defined 
in subsection (d), other than a provider of school health services) 
located within the plan's service area, either--
            (1) enter into a written provider participation agreement 
        (described in subsection (b)) with the provider, or
            (2) enter into a written agreement under which the plan 
        shall make payment to the provider in accordance with 
        subsection (c).
    (b) Participation Agreement.--A participation agreement between a 
health plan and an electing essential community provider under this 
subsection shall provide that the health plan agrees to treat the 
provider in accordance with terms and conditions at least as favorable 
as those that are applicable to other providers participating in the 
health plan with respect to each of the following:
            (1) The scope of services for which payment is made by the 
        plan to the provider.
            (2) The rate of payment for covered care and services.
            (3) The availability of financial incentives to 
        participating providers.
            (4) Limitations on financial risk provided to other 
        participating providers.
            (5) Assignment of enrollees to participating providers.
            (6) Access by the provider's patients to providers in 
        medical specialties or subspecialties participating in the 
        plan.
    (c) Payments for Providers Without Participation Agreements.--
            (1) In general.--Payment in accordance with this subsection 
        is payment based, as elected by the electing essential 
        community provider, either--
                    (A) on the fee schedule developed by the applicable 
                regional alliance (or the State) under section 1322(c), 
                or
                    (B) on payment methodologies and rates used under 
                the applicable Medicare payment methodology and rates 
                (or the most closely applicable methodology under such 
                program as the Secretary of Health and Human Services 
                specifies in regulations).
            (2) No application of gate-keeper limitations.--Payment in 
        accordance with this subsection may be subject to utilization 
        review, but may not be subject to otherwise applicable gate-
        keeper requirements under the plan.
    (d) Election.--
            (1) In general.--In this part, the term ``electing 
        essential community provider'' means, with respect to a health 
        plan, an essential community provider that elects this subpart 
        to apply to the health plan.
            (2) Form of election.--An election under this subsection 
        shall be made in a form and manner specified by the Secretary, 
        and shall include notice to the health plan involved. Such an 
        election may be made annually with respect to a health plan, 
        except that the plan and provider may agree to make such an 
        election on a more frequent basis.
    (e) Special Rule for Providers of School Health Services.--A health 
plan shall pay, to each provider of school health services located in 
the plan's service area an amount determined by the Secretary for such 
services furnished to enrollees of the plan.

SEC. 1432. SUNSET OF REQUIREMENT.

    (a) In General.--Subject to subsection (d), the requirement of 
section 1431 shall only apply to health plans offered by a health 
alliance during the 5-year period beginning with the first year in 
which any health plan is offered by the alliance.
    (b) Studies.--In order to prepare recommendations under subsection 
(c), the Secretary shall conduct studies regarding essential community 
providers, including studies that assess--
            (1) the definition of essential community provider,
            (2) the sufficiency of the funding levels for providers, 
        for both covered and uncovered benefits under this Act,
            (3) the effects of contracting requirements relating to 
        such providers on such providers, health plans, and enrollees,
            (4) the impact of the payment rules for such providers, and
            (5) the impact of national health reform on such providers.
    (c) Recommendations to Congress.--The Secretary shall submit to 
Congress, by not later than March 1, 2001, specific recommendations 
respecting whether, and to what extent, section 1431 should continue to 
apply to some or all essential community providers. Such 
recommendations may include a description of the particular types of 
such providers and circumstances under which such section should 
continue to apply.
    (d) Congressional Consideration.--
            (1) In general.--Recommendations submitted under subsection 
        (c) shall apply under this part (and may supersede the 
        provisions of subsection (a)) unless a joint resolution 
        (described in paragraph (2)) disapproving such recommendations 
        is enacted, in accordance with the provisions of paragraph (3), 
        before the end of the 60-day period beginning on the date on 
        which such recommendations were submitted. For purposes of 
        applying the preceding sentence and paragraphs (2) and (3), the 
        days on which either House of Congress is not in session 
        because of an adjournment of more than three days to a day 
        certain shall be excluded in the computation of a period.
            (2) Joint resolution of disapproval.--A joint resolution 
        described in this paragraph means only a joint resolution which 
        is introduced within the 10-day period beginning on the date on 
        which the Secretary submits recommendations under subsection 
        (c) and--
                    (A) which does not have a preamble;
                    (B) the matter after the resolving clause of which 
                is as follows: ``That Congress disapproves the 
                recommendations of the Secretary of Health and Human 
                Services concerning the continued application of 
                certain essential community provider requirements under 
                section 1431 of the Health Security Act, as submitted 
                by the Secretary on ______________.'', the blank space 
                being filled in with the appropriate date; and
                    (C) the title of which is as follows: ``Joint 
                resolution disapproving recommendations of the 
                Secretary of Health and Human Services concerning the 
                continued application of certain essential community 
                provider requirements under section 1431 of the Health 
                Security Act, as submitted by the Secretary on 
                ______________.'', the blank space being filled in with 
                the appropriate date.
            (3) Procedures for consideration of resolution of 
        disapproval.--Subject to paragraph (4), the provisions of 
        section 2908 (other than subsection (a)) of the Defense Base 
        Closure and Realignment Act of 1990 shall apply to the 
        consideration of a joint resolution described in paragraph (2) 
        in the same manner as such provisions apply to a joint 
        resolution described in section 2908(a) of such Act.
            (4) Special rules.--For purposes of applying paragraph (3) 
        with respect to such provisions--
                    (A) any reference to the Committee on Armed 
                Services of the House of Representatives shall be 
                deemed a reference to an appropriate Committee of the 
                House of Representatives (specified by the Speaker of 
                the House of Representatives at the time of submission 
                of recommendations under subsection (c)) and any 
                reference to the Committee on Armed Services of the 
                Senate shall be deemed a reference to an appropriate 
                Committee of the Senate (specified by the Majority 
                Leader of the Senate at the time of submission of 
                recommendations under subsection (c)); and
                    (B) any reference to the date on which the 
                President transmits a report shall be deemed a 
                reference to the date on which the Secretary submits 
                recommendations under subsection (c).

 PART 4--REQUIREMENTS RELATING TO WORKERS' COMPENSATION AND AUTOMOBILE 
                       MEDICAL LIABILITY COVERAGE

SEC. 1441. REFERENCE TO REQUIREMENTS RELATING TO WORKERS COMPENSATION 
              SERVICES.

    Each health plan shall meet the applicable requirements of part 2 
of subtitle A of title X (relating to provision of workers compensation 
services to enrollees).

SEC. 1442. REFERENCE TO REQUIREMENTS RELATING TO AUTOMOBILE MEDICAL 
              LIABILITY SERVICES.

    Each health plan shall meet the applicable requirements of part 2 
of subtitle B of title X (relating to provision of automobile medical 
liability services to enrollees).

                                                    Title I, Subtitle F

                  Subtitle F--Federal Responsibilities

                     PART 1--NATIONAL HEALTH BOARD

           Subpart A--Establishment of National Health Board

SEC. 1501. CREATION OF NATIONAL HEALTH BOARD; MEMBERSHIP.

    (a) In General.--There is hereby created in the Executive Branch a 
National Health Board.
    (b) Composition.--The Board is composed of 7 members appointed by 
the President, by and with the advice and consent of the Senate.
    (c) Chair.--The President shall designate one of the members as 
chair. The chair serves a term concurrent with that of the President. 
The chair may serve a maximum of 3 terms. The chair shall serve as the 
chief executive officer of the Board.
    (d) Terms.--
            (1) In general.--Except as provided in paragraphs (2) and 
        (4), the term of each member of the Board, except the chair, is 
        4 years and begins when the term of the predecessor of that 
        member ends.
            (2) Initial terms.--The initial terms of the members of the 
        Board (other than the chair) first taking office after the date 
        of the enactment of this Act, shall expire as designated by the 
        President, two at the end of one year, two at the end of two 
        years, and two at the end of three years.
            (3) Reappointment.--A member (other than the chair) may be 
        reappointed for one additional term.
            (4) Continuation in office.--Upon the expiration of a term 
        of office, a member shall continue to serve until a successor 
        is appointed and qualified.
    (e) Vacancies.--
            (1) In general.--Whenever a vacancy shall occur, other than 
        by expiration of term, a successor shall be appointed by the 
        President, by and with the consent of the Senate, to fill such 
        vacancy, and is appointed for the remainder of the term of the 
        predecessor.
            (2) No impairment of function.--A vacancy in the membership 
        of the Board does not impair the authority of the remaining 
        members to exercise all of the powers of the Board.
            (3) Acting chair.--The Board may designate a Member to act 
        as chair during any period in which there is no chair 
        designated by the President.
    (f) Meetings; Quorum.--
            (1) Meetings.--At meetings of the Board the chair shall 
        preside, and in the absence of the chair, the Board shall elect 
        a member to act as chair pro tempore.
            (2) Quorum.--Four members of the Board shall constitute a 
        quorum thereof.

SEC. 1502. QUALIFICATIONS OF BOARD MEMBERS.

    (a) Citizenship.--Each member of the Board shall be a citizen of 
the United States.
    (b) Basis of Selection.--Board members will be selected on the 
basis of their experience and expertise in relevant subjects, including 
the practice of medicine, nursing, or other clinical practices, health 
care financing and delivery, state health systems, consumer protection, 
business, law, and delivery of care to vulnerable populations.
    (c) Exclusive Employment.--During the term of appointment, Board 
members shall serve as employees of the Federal Government and shall 
hold no other employment.
    (d) Prohibition of Conflict of Interest.--A member of the Board may 
not have a pecuniary interest in or hold an official relation to any 
health care plan, health care provider, insurance company, 
pharmaceutical company, medical equipment company, or other affected 
industry. Before entering upon the duties as a member of the Board, the 
member shall certify under oath compliance with this requirement.
    (e) Post-Employment Restrictions.--After leaving the Board, former 
members are subject to post-employment restrictions applicable to 
comparable Federal employees.
    (f) Compensation of Board Members.--Each member of the Board (other 
than the chair) shall receive an annual salary at the annual rate 
payable from time to time for level IV of the Executive Schedule. The 
chair of the Board, during the period of service as chair, shall 
receive an annual salary at the annual rate payable from time to time 
for level III of the Executive Schedule.

SEC. 1503. GENERAL DUTIES AND RESPONSIBILITIES.

    (a) Comprehensive Benefit Package.--
            (1) Interpretation.--The Board shall interpret the 
        comprehensive benefit package, adjust the delivery of 
        preventive services under section 1153, and take such steps as 
        may be necessary to assure that the comprehensive benefit 
        package is available on a uniform national basis to all 
        eligible individuals.
            (2) Recommendations.--The Board may recommend to the 
        President and the Congress appropriate revisions to such 
        package. Such recommendations may reflect changes in 
        technology, health care needs, health care costs, and methods 
        of service delivery.
    (b) Administration of Cost Containment Provisions.--The Board shall 
oversee the cost containment requirements of subtitle A of title VI and 
certify compliance with such requirements.
    (c) Coverage and Families.--The Board shall develop and implement 
standards relating to the eligibility of individuals for coverage in 
applicable health plans under subtitle A of title I and may provide 
such additional exceptions and special rules relating to the treatment 
of family members under section 1012 as the Board finds appropriate.
    (d) Quality Management and Improvement.--The Board shall establish 
and have ultimate responsibility for a performance-based system of 
quality management and improvement as required by section 5001.
    (e) Information Standards.--The Board shall develop and implement 
standards to establish national health information system to measure 
quality as required by section 5101.
    (f) Participating State Requirements.--Consistent with the 
provisions of subtitle C, the Board shall--
            (1) establish requirements for participating States,
            (2) monitor State compliance with those requirements,
            (3) provide technical assistance, and
in a manner that ensures access to the comprehensive benefit package 
for all eligible individuals.
    (g) Development of Premium Class Factors.--The Board shall 
establish premium class factors under subpart D of this part.
    (h) Development of Risk-Adjustment Methodology.--The Board shall 
develop a methodology for the risk-adjustment of premium payments to 
regional alliance health plans in accordance with subpart E of this 
part.
    (i) Financial Requirements.--The Board shall establish minimum 
capital requirements and requirements for guaranty funds under subpart 
F of this part.
    (j) Standards for Health Plan Grievance Procedures.--The Board 
shall establish standards for health plan grievance procedures that are 
used by enrollees in pursuing complaints.

SEC. 1504. ANNUAL REPORT.

    (a) In General.--The Board shall prepare and send to the President 
and Congress an annual report addressing the overall implementation of 
the new health care system.
    (b) Matters To Be Included.--The Board shall include in each annual 
report under this section the following:
            (1) Information on Federal and State implementation.
            (2) Data related to quality improvement.
            (3) Recommendations or changes in the administration, 
        regulation and laws related to health care and coverage.
            (4) A full account of all actions taken during the previous 
        year.

SEC. 1505. POWERS.

    (a) Staff; Contract Authority.--The Board shall have authority, 
subject to the provisions of the civil-service laws and chapter 51 and 
subchapter III of chapter 53 of title 5, United States Code, to appoint 
such officers and employees as are necessary to carry out its 
functions. To the extent provided in advance in appropriations Acts, 
the Board may contract with any person (including an agency of the 
Federal Government) for studies and analysis as required to execute its 
functions. Any employee of the Executive Branch may be detailed to the 
Board to assist the Board in carrying out its duties.
    (b) Establishment of Advisory Committees.--The Board may establish 
advisory committees.
    (c) Access to Information.--The Board may secure directly from any 
department or agency of the United States information necessary to 
enable it to carry out its functions, to the extent such information is 
otherwise available to a department or agency of the United States. 
Upon request of the chair, the head of that department or agency shall 
furnish that information to the Board.
    (d) Delegation of Authority.--Except as otherwise provided in this 
Act, the Board may delegate any function to such officers and employees 
as the Board may designate and may authorize such successive 
redelegations of such functions with the Board as the Board deems to be 
necessary or appropriate. No delegation of functions by the Board shall 
relieve the Board of responsibility for the administration of such 
functions.
    (e) Rulemaking.--The National Health Board is authorized to 
establish such rules as may be necessary to carry out this Act.

SEC. 1506. FUNDING.

    (a) Authorization of Appropriations.--There are authorized to be 
appropriated to the Board such sums as may be necessary for fiscal 
years 1994, 1995, 1996, 1997, and 1998.
    (b) Submission of Budget.--Under the procedures of chapter 11 of 
title 31, United States Code, the budget for the Board for a fiscal 
year shall be reviewed by the Director of the Office of Management and 
Budget and submitted to the Congress as part of the President's 
submission of the Budget of the United States for the fiscal year.

 Subpart B--Responsibilities Relating to Review and Approval of State 
                                Systems

SEC. 1511. FEDERAL REVIEW AND ACTION ON STATE SYSTEMS.

    (a) Approval of State Systems by National Board.--
            (1) In general.--The National Health Board shall approve a 
        State health care system for which a document is submitted 
        under section 1200(b) unless the Board finds that the system 
        (as set forth in the document) does not (or will not) provide 
        for the State meeting the responsibilities for participating 
        States under this Act.
            (2) Regulations.--The Board shall issue regulations, not 
        later than July 1, 1995, prescribing the requirements for State 
        health care systems under parts 2 and 3 of subtitle C, except 
        that in the case of a document submitted under section 1200(b) 
        before the date of issuance of such regulations, the Board 
        shall take action on such document notwithstanding the fact 
        that such regulations have not been issued.
            (3) No approval permitted for years prior to 1996.--The 
        Board may not approve a State health care system under this 
        subpart for any year prior to 1996.
    (b) Review of Completeness of Documents.--
            (1) In general.--If a State submits a document under 
        subsection (a)(1), the Board shall notify the State, not later 
        than 7 working days after the date of submission, whether or 
        not the document is complete and provides the Board with 
        sufficient information to approve or disapprove the document.
            (2) Additional information on incomplete document.--If the 
        Board notifies a State that the State's document is not 
        complete, the State shall be provided such additional period 
        (not to exceed 45 days) as the Board may by regulation 
        establish in which to submit such additional information as the 
        Board may require. Not later than 7 working days after the 
        State submits the additional information, the Board shall 
        notify the State respecting the completeness of the document.
    (c) Action on Completed Documents.--
            (1) In general.--The Board shall make a determination (and 
        notify the State) on whether the State's document provides for 
        implementation of a State system that meets the applicable 
        requirements of subtitle C--
                    (A) in the case of a State that did not require the 
                additional period described in subsection (b)(2) to 
                file a complete document, not later than 90 days after 
                notifying a State under subsection (b) that the State's 
                document is complete, or
                    (B) in the case of a State that required the 
                additional period described in subsection (b)(2) to 
                file a complete document, not later than 90 days after 
                notifying a State under subsection (b) that the State's 
                document is complete.
            (2) Plans deemed approved.--If the Board does not meet the 
        applicable deadline for making a determination and providing 
        notice under paragraph (1) with respect to a State's document, 
        the Board shall be deemed to have approved the State's document 
        for purposes of this Act.
    (d) Opportunity to Respond to Rejected Document.--
            (1) In general.--If (within the applicable deadline under 
        subsection (c)(1)) the Board notifies a State that its document 
        does not provide for implementation of a State system that 
        meets the applicable requirements of subtitle C, the Board 
        shall provide the State with a period of 30 days in which to 
        submit such additional information and assurances as the Board 
        may require.
            (2) Deadline for response.--Not later than 30 days after 
        receiving such additional information and assurances, the Board 
        shall make a determination (and notify the State) on whether 
        the State's document provides for implementation of a State 
        system that meets the applicable requirements of subtitle C.
            (3) Plan deemed approved.--If the Board does not meet the 
        deadline established under paragraph (2) with respect to a 
        State, the Board shall be deemed to have approved the State's 
        document for purposes of this Act.
    (e) Approval of Previously Terminated States.--If the Board has 
approved a State system under this part for a year but subsequently 
terminated the approval of the system under section 1512(b)(2), the 
Board shall approve the system for a succeeding year if the State--
            (1) demonstrates to the satisfaction of the Board that the 
        failure that formed the basis for the termination no longer 
        exists, and
            (2) provides reasonable assurances that the types of 
        actions (or inactions) which formed the basis for such 
        termination will not recur.
    (f) Revisions to State System.--
            (1) Submission.--A State may revise a system approved for a 
        year under this section, except that such revision shall not 
        take effect unless the State has submitted to the Board a 
        document describing such revision and the Board has approved 
        such revision.
            (2) Actions on amendments.--Not later than 60 days after a 
        document is submitted under paragraph (1), the Board shall make 
        a determination (and notify the State) on whether the 
        implementation of the State system, as proposed to be revised, 
        meets the applicable requirements of subtitle C. If the Board 
        fails to meet the requirement of the preceding sentence, the 
        Board shall be deemed to have approved the implementation of 
        the State system as proposed to be revised.
            (3) Rejection of amendments.--Subsection (d) shall apply to 
        an amendment submitted under this subsection in the same manner 
        as it applies to a completed document submitted under 
        subsection (b).
    (g) Notification of Non-Participating States.--If a State fails to 
submit a document for a State system by the deadline referred to in 
section 1200, or such a document is not approved under subsection (c), 
the Board shall immediately notify the Secretary of Health and Human 
Services of the State's failure for purposes of applying subpart C in 
that State.

SEC. 1512. FAILURE OF PARTICIPATING STATES TO MEET CONDITIONS FOR 
              COMPLIANCE.

    (a) In General.--In the case of a participating State, if the Board 
determines that the operation of the State system under subtitle C 
fails to meet the applicable requirements of this Act, sanctions shall 
apply against the State in accordance with subsection (b).
    (b) Type of Sanction Applicable.--The sanctions applicable under 
this part are as follows:
            (1) If the Board determines that the State's failure does 
        not substantially jeopardize the ability of eligible 
        individuals in the State to obtain coverage for the 
        comprehensive benefit package--
                    (A) the Board may order a regional alliance in the 
                State to comply with applicable requirements of this 
                Act and take such additional measures to assure 
                compliance with such requirements as the Board may 
                impose, if the Board determines that the State's 
                failure relates to a requirement applicable to a 
                regional alliance in the State, or
                    (B) if the Board does not take the action described 
                in subparagraph (A) (or if the Board takes the action 
                and determines that the action has not remedied the 
                violation that led to the imposition of the sanction), 
                the Board shall notify the Secretary of Health and 
                Human Services, who shall reduce payments with respect 
                to the State in accordance with section 1513.
            (2) If the Board determines that the failure substantially 
        jeopardizes the ability of eligible individuals in the State to 
        obtain coverage for the comprehensive benefit package--
                    (A) the Board shall terminate its approval of the 
                State system; and
                    (B) the Board shall notify the Secretary of Health 
                and Human Services, who shall assume the 
                responsibilities described in section 1522.
    (c) Termination of Sanction.--
            (1) Compliance by State.--A State against which a sanction 
        is imposed may submit information at any time to the Board to 
        demonstrate that the failure that led to the imposition of the 
        sanction has been corrected.
            (2) Termination of sanction.--If the Board determines that 
        the failure that led to the imposition of a sanction has been 
        corrected--
                    (A) in the case of the sanction described in 
                subsection (b)(1)(A), the Board shall notify the 
                regional alliance against which the sanction is 
                imposed; or
                    (B) in the case of any other sanction described in 
                subsection (b), the Board shall notify the Secretary of 
                Health and Human Services.
    (d) Protection of Access to Benefits.--The Board and the Secretary 
of Health and Human Services shall exercise authority to take actions 
under this section with respect to a State only in a manner that 
assures the continuous coverage of eligible individuals under regional 
alliance health plans.

SEC. 1513. REDUCTION IN PAYMENTS FOR HEALTH PROGRAMS BY SECRETARY OF 
              HEALTH AND HUMAN SERVICES.

    (a) In General.--Upon receiving notice from the Board under section 
1512(b)(1)(B), the Secretary of Health and Human Services shall reduce 
the amount of any of the payments described in subsection (b) that 
would otherwise be made to individuals and entities in the State by 
such amount as the Secretary determines to be appropriate.
    (b) Payments Described.--The payments described in this subsection 
are as follows:
            (1) Payments to academic health centers in the State under 
        subtitle B of title III.
            (2) Payments to individuals and entities in the State for 
        health research activities under section 301 and title IV of 
        the Public Health Service Act.
            (3) Payments to hospitals in the State under part 4 of 
        subtitle E of title III (relating to payments to hospitals 
        serving vulnerable populations)

SEC. 1514. REVIEW OF FEDERAL DETERMINATIONS.

    Any State or alliance affected by a determination by the Board 
under this subpart may appeal such determination in accordance with 
section 5231.

SEC. 1515. FEDERAL SUPPORT FOR STATE IMPLEMENTATION.

    (a) Planning Grants.--
            (1) In general.--Not later than 90 days after the date of 
        the enactment of this Act, the Secretary shall make available 
        to each State a planning grant to assist a State in the 
        development of a health care system to become a participating 
        State under subtitle C.
            (2) Formula.--The Secretary shall establish a formula for 
        the distribution of funds made available under this subsection.
            (3) Authorization of appropriations.--There are authorized 
        to be appropriated $50,000,000 in each of fiscal years 1995 and 
        1996 for grants under this subsection.
    (b) Grants for Start-up Support.--
            (1) In general.--The Secretary shall make available to 
        States, upon their enacting enabling legislation to become 
        participating States, grants to assist in the establishment of 
        regional alliances.
            (2) Formula.--The Secretary shall establish a formula for 
        the distribution of funds made available under this subsection.
            (3) State matching funds required.--Funds are payable to a 
        State under this subsection only if the State provides 
        assurances, satisfactory to the Secretary, that amounts of 
        State funds (at least equal to the amount made available under 
        this subsection) are expended for the purposes described in 
        paragraph (1).
            (4) Authorization of appropriations.--There are authorized 
        to be appropriated $313,000,000 for fiscal year 1996, 
        $625,000,000 for fiscal year 1997, and $313,000,000 for fiscal 
        year 1998 for grants under this subsection.

        Subpart C--Responsibilities in Absence of State Systems

SEC. 1521. APPLICATION OF SUBPART.

    (a) Initial Application.--This subpart shall apply with respect to 
a State as of January 1, 1998, unless--
            (1) the State submits a document for a State system under 
        section 1511(a)(1) by July 1, 1997, and
            (2) the Board determines under section 1511 that such 
        system meets the requirements of part 1 of subtitle C.
    (b) Termination of Approval of System of Participating State.--In 
the case of a participating State for which the Board terminates 
approval of the State system under section 1512(b)(2), this subpart 
shall apply with respect to the State as of such date as is appropriate 
to assure the continuity of coverage for the comprehensive benefit 
package for eligible individuals in the State.

SEC. 1522. FEDERAL ASSUMPTION OF RESPONSIBILITIES IN NON-PARTICIPATING 
              STATES.

    (a) Notice.--When the Board determines that this subpart will apply 
to a State for a calendar year, the Board shall notify the Secretary of 
Health and Human Services.
    (b) Establishment of Regional Alliance System.--Upon receiving 
notice under subsection (a), the Secretary shall take such steps, 
including the establishment of regional alliances, and compliance with 
other requirements applicable to participating States under subtitle C, 
as are necessary to ensure that the comprehensive benefit package is 
provided to eligible individuals in the State during the year.
    (c) Requirements for Alliances.--Subject to section 1523, any 
regional alliance established by the Secretary pursuant to this section 
must meet all the requirements applicable under subtitle D to a 
regional alliance established and operated by a participating State, 
and the Secretary shall have the authority to fulfill all the functions 
of such an alliance.
    (d) Establishment of Guaranty Fund.--
            (1) Establishment.--The Secretary must ensure that there is 
        a guaranty fund that meets the requirements established by the 
        Board under section 1552, in order to provide financial 
        protection to health care providers and others in the case of a 
        failure of a regional alliance health plan under a regional 
        alliance established and operated by the Secretary under this 
        section.
            (2) Assessments to provide guaranty funds.--In the case of 
        a failure of one or more regional alliance health plans under a 
        regional alliance established and operated by the Secretary 
        under this section, the Secretary may require each regional 
        alliance health plan under the alliance to pay an assessment to 
        the Secretary in an amount not to exceed 2 percent of the 
        premiums of such plans paid by or on behalf of regional 
        alliance eligible individuals during a year for so long as 
        necessary to generate sufficient revenue to cover any 
        outstanding claims against the failed plan.

SEC. 1523. IMPOSITION OF SURCHARGE ON PREMIUMS UNDER FEDERALLY-OPERATED 
              SYSTEM.

    (a) In General.--If this subpart applies to a State for a calendar 
year, the premiums charged under the regional alliance established and 
operated by the Secretary in the State shall be equal to premiums that 
would otherwise be charged under a regional alliance established and 
operated by the State, increased by 15 percent. Such 15 percent 
increase shall be used to reimburse the Secretary for any 
administrative or other expenses incurred as a result of establishing 
and operating the system.
    (b) Treatment of Surcharge as Part of Premium.--For purposes of 
determining the compliance of a State for which this subpart applies in 
a year with the requirements for budgeting under subtitle A of title VI 
for the year, the 15 percent increase described in subsection (a) shall 
be treated as part of the premium for payment to a regional alliance.

SEC. 1524. RETURN TO STATE OPERATION.

    (a) Application Process.--After the establishment and operation of 
an alliance system by the Secretary in a State under section 1522, the 
State may at any time apply to the Board for the approval of a State 
system in accordance with the procedures described in section 1511.
    (b) Timing.--If the Board approves the system of a State for which 
the Secretary has operated an alliance system during a year, the 
Secretary shall terminate the operation of the system, and the State 
shall establish and operate its approved system, as of January 1 of the 
first year beginning after the Board approves the State system. The 
termination of the Secretary's system and the operation of the State's 
system shall be conducted in a manner that assures the continuous 
coverage of eligible individuals in the State under regional alliance 
health plans.

    Subpart D--Establishment of Class Factors for Charging Premiums

SEC. 1531. PREMIUM CLASS FACTORS.

    (a) In General.--For each class of family enrollment (as specified 
in section 1011(c)), for purposes of title VI, the Board shall 
establish a premium class factor that reflects, subject to subsection 
(b), the relative actuarial value of the comprehensive benefit package 
of the class of family enrollment compared to such value of such 
package for individual enrollment.
    (b) Conditions.--In establishing such factors, the factor for the 
class of individual enrollment shall be 1 and the factor for the 
couple-only class of family enrollment shall be 2.

 Subpart E--Risk Adjustment and Reinsurance Methodology for Payment of 
                                 Plans

SEC. 1541. DEVELOPMENT OF A RISK ADJUSTMENT AND REINSURANCE 
              METHODOLOGY.

    (a) Development.--
            (1) Initial development.--Not later than April 1, 1995, the 
        Board shall develop a risk adjustment and reinsurance 
        methodology in accordance with this subpart.
            (2) Improvements.--The Board shall make such improvements 
        in such methodology as may be appropriate to achieve the 
        purposes described in subsection (b)(1).
    (b) Methodology.--
            (1) Purposes.--Such methodology shall provide for the 
        adjustment of payments to regional alliance health plans for 
        the purposes of--
                    (A) assuring that payments to such plans reflect 
                the expected relative utilization and expenditures for 
                such services by each plan's enrollees compared to the 
                average utilization and expenditures for regional 
                alliance eligible individuals, and
                    (B) protecting health plans that enroll a 
                disproportionate share of regional alliance eligible 
                individuals with respect to whom expected utilization 
                of health care services (included in the comprehensive 
                benefit package) and expected health care expenditures 
                for such services are greater than the average level of 
                such utilization and expenditures for regional alliance 
                eligible individuals.
            (2) Factors to be considered.--In developing such 
        methodology, the Board shall take into account the following 
        factors:
                    (A) Demographic characteristics.
                    (B) Health status.
                    (C) Geographic area of residence.
                    (D) Socio-economic status.
                    (E) Subject to paragraph (5), (i) the proportion of 
                enrollees who are SSI recipients and (ii) the 
                proportion of enrollees who are AFDC recipients.
                    (F) Any other factors determined by the Board to be 
                material to the purposes described in paragraph (1).
            (3) Zero sum.--The methodology shall assure that the total 
        payments to health plans by the regional alliance after 
        application of the methodology are the same as the amount of 
        payments that would have been made without application of the 
        methodology.
            (4) Prospective adjustment of payments.--The methodology, 
        to the extent possible and except in the case of a mandatory 
        reinsurance system described in subsection (c), shall be 
        applied in a manner that provides for the prospective 
        adjustment of payments to health plans.
            (5) Treatment of ssi/afdc adjustment.--The Board is not 
        required to apply the factor described in clause (i) or (ii) of 
        paragraph (2)(E) if the Board determines that the application 
        of the other risk adjustment factors described in paragraph (2) 
        is sufficient to adjust premiums to take into account the 
        enrollment in plans of AFDC recipients and SSI recipients.
            (6) Special consideration for mental illness.--In 
        developing the methodology under this section, the Board shall 
        give consideration to the unique problems of adjusting payments 
        to health plans with respect to individuals with mental 
        illness.
            (7) Special consideration for veterans, military, and 
        indian health plans.--In developing the methodology under this 
        section, the Board shall give consideration to the special 
        enrollment and funding provisions relating to plans described 
        in section 1004(b).
            (8) Adjustment to account for use of estimates.--Subject to 
        section 1361(b)(3) (relating to establishment of regional 
        alliance reserve funds), if the total payments made by a 
        regional alliance to all regional alliance health plans in a 
        year under section 1351(b) exceeds, or is less than, the total 
        of such payments estimated by the alliance in the application 
        of the methodology under this subsection, because of a 
        difference between--
                    (A) the alliance's estimate of the distribution of 
                enrolled families in different risk categories (assumed 
                in the application of risk factors under this 
                subsection in making payments to regional alliance 
                health plans), and
                    (B) the actual distribution of such enrolled 
                families in such categories,
        the methodology under this subsection shall provide for an 
        adjustment in the application of such methodology in the second 
        succeeding year in a manner that would reduce, or increase, 
        respectively, by the amount of such excess (or deficit) the 
        total of such payments made by the alliance to all such plans.
    (c) Mandatory Reinsurance.--
            (1) In general.--The methodology developed under this 
        section may include a system of mandatory reinsurance, but may 
        not include a system of voluntary reinsurance.
            (2) Requirement in certain cases.--If the Board determines 
        that an adequate system of prospective adjustment of payments 
        to health plans to account for the health status of individuals 
        enrolled by regional alliance health plans cannot be developed 
        (and ready for implementation) by the date specified in 
        subsection (a)(1), the Board shall include a mandatory 
        reinsurance system as a component of the methodology. The Board 
        may thereafter reduce or eliminate such a system at such time 
        as the Board determines that an adequate prospective payment 
        adjustment for health status has been developed and is ready 
        for implementation.
            (3) Reinsurance system.--The Board, in developing the 
        methodology for a mandatory reinsurance system under this 
        subsection, shall--
                    (A) provide for health plans to make payments to 
                state-established reinsurance programs for the purpose 
                of reinsuring part or all of the health care expenses 
                for items and services included in the comprehensive 
                benefit package for specified classes of high-cost 
                enrollees or specified high-cost treatments or 
                diagnoses; and
                    (B) specify the manner of creation, structure, and 
                operation of the system in each State, including--
                            (i) the manner (which may be prospective or 
                        retrospective) in which health plans make 
                        payments to the system, and
                            (ii) the type and level of reinsurance 
                        coverage provided by the system.
    (d) Confidentiality of Information.--The methodology shall be 
developed in a manner consistent with privacy standards promulgated 
under section 5120(a). In developing such standards, the Board shall 
take into account any potential need of alliances for certain 
individually identifiable health information in order to carry out 
risk-adjustment and reinsurance activities under this Act, but only to 
the minimum extent necessary to carry out such activities and with 
protections provided to minimize the identification of the individuals 
to whom the information relates.

SEC. 1542. INCENTIVES TO ENROLL DISADVANTAGED GROUPS.

    The Board shall establish standards under which States may provide 
(under section 1203(e)(3)) for an adjustment in the risk-adjustment 
methodology developed under section 1541 in order to provide a 
financial incentive for regional alliance health plans to enroll 
individuals who are members of disadvantaged groups.

SEC. 1543. ADVISORY COMMITTEE.

    (a) In General.--The Board shall establish an advisory committee to 
provide technical advice and recommendations regarding the development 
and modification of the risk adjustment and reinsurance methodology 
developed under this subpart.
    (b) Composition.--Such advisory committee shall consist of 15 
individuals and shall include individuals who are representative of 
health plans, regional alliances, consumers, experts, employers, and 
health providers.

SEC. 1544. RESEARCH AND DEMONSTRATIONS.

    The Secretary shall conduct and support research and demonstration 
projects to develop and improve, on a continuing basis, the risk 
adjustment and reinsurance methodology under this subpart.

SEC. 1545. TECHNICAL ASSISTANCE TO STATES AND ALLIANCES.

    The Board shall provide technical assistance to States and regional 
alliances in implementing the methodology developed under this subpart.

         Subpart F--Responsibilities for Financial Requirements

SEC. 1551. CAPITAL STANDARDS FOR REGIONAL ALLIANCE HEALTH PLAN.

    (a) In General.--The Board shall establish, in consultation with 
the States, minimum capital requirements for regional alliance health 
plans, for purposes of section 1204(a).
    (b) $500,000 Minimum.--Subject to subsection (c), under such 
requirements there shall be not less than $500,000 of capital 
maintained for each plan offered in each alliance area, regardless of 
whether or not the same sponsor offered more than one of such plans.
    (c) Additional Capital Requirements.--The Board may require 
additional capital for factors likely to affect the financial stability 
of health plans, including the following:
            (1) Projected plan enrollment and number of providers 
        participating in the plan.
            (2) Market share and strength of competition.
            (3) Extent and nature of risk-sharing with participating 
        providers and the financial stability of risk-sharing 
        providers.
            (4) Prior performance of the plan, risk history, and 
        liquidity of assets.
    (d) Development of Standards by NAIC.--The Board may request the 
National Association of Insurance Commissioners to develop model 
standards for the additional capital requirements described in 
subsection (c) and to present such standards to the Board not later 
than July 1, 1995. The Board may accept such standards as the standards 
to be applied under subsection (c) or modify the standards in any 
manner it finds appropriate.

SEC. 1552. STANDARD FOR GUARANTY FUNDS.

    (a) In General.--In consultation with the States, the Board shall 
establish standards for guaranty funds established by States under 
section 1204(c).
    (b) Guaranty Fund Standards.--The standards established under 
subsection (a) for a guaranty fund shall include the following:
            (1) Each fund must have a method to generate sufficient 
        resources to pay health providers and others in the case of a 
        failure of a health plan (as described in section 1204(d)(4)) 
        in order to meet obligations with respect to--
                    (A) services rendered by the health plan for the 
                comprehensive benefit package, including any 
                supplemental coverage for cost sharing provided by the 
                health plan, and
                    (B) services rendered prior to health plan 
                insolvency and services to patients after the 
                insolvency but prior to their enrollment in other 
                health plans.
            (2) The fund is liable for all claims against the plan by 
        health care providers with respect to their provision of items 
        and services covered under the comprehensive benefit package to 
        enrollees of the failed plan. Such claims, in full, shall take 
        priority over all other claims. The fund also is liable, to the 
        extent and in the manner provided in accordance with rules 
        established by the Board, for other claims, including other 
        claims of such providers and the claims of contractors, 
        employees, governments, or any other claimants.
            (3) The fund stands as a creditor for any payments owed the 
        plan to the extent of the payments made by the fund for 
        obligations of the plan.
            (4) The fund has authority to borrow against future 
        assessments (payable under section 1204(c)(2)) in order to meet 
        the obligations of failed plans participating in the fund.

  PART 2--RESPONSIBILITIES OF DEPARTMENT OF HEALTH AND HUMAN SERVICES

                  Subpart A--General Responsibilities

SEC. 1571. GENERAL RESPONSIBILITIES OF SECRETARY OF HEALTH AND HUMAN 
              SERVICES.

    (a) In General.--Except as otherwise specifically provided under 
this Act (or with respect to administration of provisions in the 
Internal Revenue Code of 1986 or in the Employee Retirement Income 
Security Act of 1974), the Secretary of Health and Human Services shall 
administer and implement all of the provisions of this Act, except 
those duties delegated to the National Health Board, any other 
executive agency, or to any State.
    (b) Financial Management Standards.--The Secretary, in consultation 
with the Secretaries of Labor and the Treasury, shall establish, for 
purposes of section 1361, standards relating to the management of 
finances, maintenance of records, accounting practices, auditing 
procedures, and financial reporting for health alliances. Such 
standards shall take into account current Federal laws and regulations 
relating to fiduciary responsibilities and financial management of 
funds.
    (c) Auditing Regional Alliance Performance.--The Secretary shall 
perform periodic financial and other audits of regional alliances to 
assure that such alliances are carrying out their responsibilities 
under this Act consistent with this Act. Such audits shall include 
audits of alliance performance in the areas of--
            (1) assuring enrollment of all regional alliance eligible 
        individuals in health plans,
            (2) management of premium and cost sharing discounts and 
        reductions provided; and
            (3) financial management of the alliance, including 
        allocation of collection shortfalls.

SEC. 1572. ADVISORY COUNCIL ON BREAKTHROUGH DRUGS.

    (a) In General.--The Secretary shall appoint an Advisory Council on 
Breakthrough Drugs (in this section referred to as the ``Council'') 
that will examine the reasonableness of launch prices of new drugs that 
represent a breakthrough or significant advance over existing 
therapies.
    (b) Duties.--(1) At the request of the Secretary, or a member of 
the Council, the Council shall make a determination regarding the 
reasonableness of launch prices of a breakthrough drug. Such a 
determination shall be based on--
            (A) prices of other drugs in the same therapeutic class;
            (B) cost information supplied by the manufacturer;
            (C) prices of the drug in countries specified in section 
        802(b)(4)(A) of the Federal Food, Drug, and Cosmetic Act;
            (D) projected prescription volume, economies of scale, 
        product stability, special manufacturing requirements and 
        research costs;
            (E) cost effectiveness relative to the cost of alternative 
        course of treatment options, including non-pharmacological 
        medical interventions; and
            (F) improvements in quality of life offered by the new 
        product, including ability to return to work, ability to 
        perform activities of daily living, freedom from attached 
        medical devices, and other appropriate measurements of quality 
        of life improvements.
    (2) The Secretary shall review the determinations of the Council 
and publish the results of such review along with the Council's 
determination (including minority opinions) as a notice in the Federal 
Register.
    (c) Membership.--The Council shall consist of a chair and 12 other 
persons, appointed without regard to the provisions of title 5, United 
States Code, governing appointments in the competitive service. The 
Council shall include a representative from the pharmaceutical 
industry, consumer organizations, physician organizations, the hospital 
industry, and the managed care industry. Other individuals appointed by 
the Secretary shall be recognized experts in the fields of health care 
economics, pharmacology, pharmacy, and prescription drug reimbursement. 
Only one member of the Council may have direct or indirect financial 
ties to the pharmaceutical industry.
    (d) Term of Appointments.--Appointments shall be for a term of 3 
years, except that the Secretary may provide initially for such shorter 
terms as will ensure that the terms of not more than 5 members expire 
in any one year.
    (e) Compensation.--Members of the Council shall be entitled to 
receive reimbursement of expenses and per diem in lieu of subsistence 
in the same manner as other members of advisory councils appointed by 
the Secretary are provided such reimbursements under the Social 
Security Act.
    (f) No Termination.--Notwithstanding the provisions of the Federal 
Advisory Committee Act, the Council shall continue in existence until 
otherwise specified in law.

       Subpart B--Certification of Essential Community Providers

SEC. 1581. CERTIFICATION.

    (a) In General.--For purposes of this Act, the Secretary shall 
certify as an ``essential community provider'' any health care provider 
or organization that--
            (1) is within any of the categories of providers and 
        organizations specified in section 1582(a), or
            (2) meets the standards for certification under section 
        1583(a).
    (b) Timely Establishment of Process.--The Secretary shall take such 
actions as may be necessary to permit health care providers and 
organizations to be certified as essential community providers in a 
State before the beginning of the first year for the State.

SEC. 1582. CATEGORIES OF PROVIDERS AUTOMATICALLY CERTIFIED.

    (a) In General.--The categories of providers and organizations 
specified in this subsection are as follows:
            (1) Migrant health centers.--A recipient or subrecipient of 
        a grant under section 329 of the Public Health Service Act.
            (2) Community health centers.--A recipient or subrecipient 
        of a grant under section 330 of the Public Health Service Act.
            (3) Homeless program providers.--A recipient or 
        subrecipient of a grant under section 340 of the Public Health 
        Service Act.
            (4) Public housing providers.--A recipient or subrecipient 
        of a grant under section 340A of the Public Health Service Act.
            (5) Family planning clinics.--A recipient or subrecipient 
        of a grant under title X of the Public Health Service Act.
            (6) Indian health programs.--A service unit of the Indian 
        Health Service, a tribal organization, or an urban Indian 
        program, as defined in the Indian Health Care Improvement Act.
            (7) AIDS providers under ryan white act.--A public or 
        private nonprofit health care provider that is a recipient or 
        subrecipient of a grant under title XXVI of the Public Health 
        Service Act.
            (8) Maternal and child health providers.--A public or 
        private nonprofit entity that provides prenatal care, pediatric 
        care, or ambulatory services to children, including children 
        with special health care needs, and that receives funding for 
        such care or services under title V of the Social Security Act.
            (9) Federally qualified health center; rural health 
        clinic.--A Federally-qualified health center or a rural health 
        clinic (as such terms are defined in section 1861(aa) of the 
        Social Security Act).
            (10) Provider of school health services.--A provider of 
        school health services that receives funding for such services 
        under subtitle G of title III.
            (11) Community practice network.--A qualified community 
        practice network receiving development funds under subtitle E 
        of title III.
    (b) Subrecipient Defined.--In this subpart, the term 
``subrecipient'' means, with respect to a recipient of a grant under a 
particular authority, an entity that--
            (1) is receiving funding from such a grant under a contract 
        with the principal recipient of such a grant, and
            (2) meets the requirements established to be a recipient of 
        such a grant.
    (c) Health Professional Defined.--In this subpart, the term 
``health professional'' means a physician, nurse, nurse practitioner, 
certified nurse midwife, physician assistant, psychologist, dentist, 
pharmacist, and other health care professional recognized by the 
Secretary.

SEC. 1583. STANDARDS FOR ADDITIONAL PROVIDERS.

    (a) Standards.--The Secretary shall publish standards for the 
certification of additional categories of health care providers and 
organizations as essential community providers, including the 
categories described in subsection (b). Such a health care provider or 
organization shall not be certified unless the Secretary determines, 
under such standards, that health plans operating in the area served by 
the applicant would not otherwise be able to assure adequate access to 
items and services included in the comprehensive benefit package if 
such a provider was not so certified.
    (b) Categories To Be Included.--The categories described in this 
subsection are as follows:
            (1) Health professionals.--Health professionals--
                    (A) located in an area designated as a health 
                professional shortage area (under section 332 of the 
                Public Health Service Act), or
                    (B) providing a substantial amount of health 
                services (as determined in accordance with standards 
                established by the Secretary) to a medically 
                underserved population (as designated under section 330 
                of such Act).
            (2) Institutional providers.--Public and private nonprofit 
        hospitals and other institutional health care providers located 
        in such an area or providing health services to such a 
        population.
            (3) Other providers.--Other public and private nonprofit 
        agencies and organizations that--
                    (A) are located in such an area or providing health 
                services to such a population, and
                    (B) provide health care and services essential to 
                residents of such an area or such populations.

SEC. 1584. CERTIFICATION PROCESS; REVIEW; TERMINATION OF 
              CERTIFICATIONS.

    (a) Certification Process.--
            (1) Publication of procedures.--The Secretary shall 
        publish, not later than 6 months after the date of the 
        enactment of this Act, the procedures to be used by health care 
        professionals, providers, agencies, and organizations seeking 
        certification under this subpart, including the form and manner 
        in which an application for such certification is to be made.
            (2) Timely determination.--The Secretary shall make a 
        determination upon such an application not later than 60 days 
        (or 15 days in the case of a certification for an entity 
        described in section 1582) after the date the complete 
        application has been submitted. The determination on an 
        application for certification of an entity described in section 
        1582 shall only involve the verification that the entity is an 
        entity described in such section.
    (b) Review of Certifications.--The Secretary shall periodically 
review whether professionals, providers, agencies, and organizations 
certified under this subpart continue to meet the requirements for such 
certification.
    (c) Termination or Denial of Certification.--
            (1) Preliminary finding.--If the Secretary preliminarily 
        finds that an entity seeking certification under this section 
        does not meet the requirements for such certification or such 
        an entity certified under this subpart fails to continue to 
        meet the requirements for such certification, the Secretary 
        shall notify the entity of such preliminary finding and permit 
        the entity an opportunity, under subtitle C of title V, to 
        rebut such findings.
            (2) Final determination.--If, after such opportunity, the 
        Secretary continues to find that such an entity continues to 
        fail to meet such requirements, the Secretary shall terminate 
        the certification and shall notify the entity, regional 
        alliances, and corporate alliances of such termination and the 
        effective date of the termination.

SEC. 1585. NOTIFICATION OF HEALTH ALLIANCES AND PARTICIPATING STATES.

    (a) In General.--Not less often than annually the Secretary shall 
notify each participating State and each health alliance of essential 
community providers that have been certified under this subpart.
    (b) Contents.--Such notice shall include sufficient information to 
permit each health alliance to notify health plans of the identify of 
each entity certified as an essential community provider, including--
            (1) the location of the provider within each plan's service 
        area,
            (2) the health services furnished by the provider, and
            (3) other information necessary for health plans to carry 
        out part 3 of subtitle E.

        PART 3--SPECIFIC RESPONSIBILITIES OF SECRETARY OF LABOR.

SEC. 1591. RESPONSIBILITIES OF SECRETARY OF LABOR.

    (a) In General.--The Secretary of Labor is responsible--
            (1) under subtitle G, for the enforcement of requirements 
        applicable to employers under regional alliances (including 
        requirements relating to payment of premiums) and the 
        administration of corporate alliances;
            (2) under subtitle D, with respect to elections by eligible 
        sponsors to become corporate alliances and the termination of 
        such elections;
            (3) under section 1395, for the temporary assumption of the 
        operation of self-insured corporate alliance health plans that 
        are insolvent;
            (4) under section 1396, for the establishment and 
        administration of Corporate Alliance Health Plan Insolvency 
        Fund;
            (5) for carrying out any other responsibilities assigned to 
        the Secretary under this Act; and
            (6) for administering title I of the Employee Retirement 
        Income Security Act of 1974 as it relates to group health plans 
        maintained by corporate alliances.
    (b) Agreements with States.--The Secretary of Labor may enter into 
agreements with States in order to enforce responsibilities of 
employers and corporate alliances, and requirements of corporate 
alliance health plans, under subtitle B of title I of the Employee 
Retirement Income Security Act of 1974.
    (c) Consultation with Board.--In carrying out activities under this 
Act with respect to corporate alliances, corporate alliance health 
plans, and employers, the Secretary of Labor shall consult with the 
National Health Board.
    (d) Employer-Related Requirements.--
            (1) In general.--The Secretary of Labor, in consultation 
        with the Secretary, shall be responsible for assuring that 
        employers--
                    (A) make payments of any employer premiums (and 
                withhold and make payment of the family share of 
                premiums with respect to qualifying employees) as 
                required under this Act, including auditing of regional 
                alliance collection activities with respect to such 
                payments,
                    (B) submit timely reports as required under this 
                Act, and
                    (C) otherwise comply with requirements imposed on 
                employers under this Act.
            (2) Audit and similar authorities.--The Secretary of 
        Labor--
                    (A) may carry out such audits (directly or through 
                contract) and such investigations of employers and 
                health alliances,
                    (B) may exercise such authorities under section 504 
                of Employee Retirement Income Security Act of 1974 (in 
                relation to activities under this Act),
                    (C) may, with the permission of the Board, provide 
                (through contract or otherwise) for such collection 
                activities (in relation to amounts owed to regional 
                alliances and for the benefit of such alliances), and
                    (D) may impose such civil penalties under section 
                1345(d)(1),
        as may be necessary to carry out such Secretary's 
        responsibilities under this section.
    (e) Authority.--The Secretary of Labor is authorized to issue such 
regulations as may be necessary to carry out section 1607 and 
responsibilities of the Secretary under this Act (including under title 
XI).

                                                    Title I, Subtitle G

                 Subtitle G--Employer Responsibilities

SEC. 1601. PAYMENT REQUIREMENT.

    (a) In General.--Each employer shall provide for payments required 
under section 6121 or 6131 in accordance with the applicable provisions 
of this Act.
    (b) Employers in Single-Payer States.--In the case of an employer 
with respect to employees who reside in a single-payer State, the 
responsibilities of such employer under such system shall supersede the 
obligations of the employer under subsection (a), except as the Board 
may provide.
    (c) Employers Participating in Regional Alliances Through 
Multiemployer Plans.--In the case of an employer participating in a 
multiemployer plan, which plan elects to serve as a regional alliance 
employer on behalf of its participating employers, the employer's 
payment obligation under section 6121 shall be deemed satisfied if the 
employer pays to the multiemployer plan at least the premium payment 
amount specified in section 6121(b) and the plan has assumed legal 
obligations of such an employer under such section.

SEC. 1602. REQUIREMENT FOR INFORMATION REPORTING.

    (a) Reporting of End-of-Year Information to Qualifying Employees.--
            (1) In general.--Each employer shall provide to each 
        individual who was a qualifying employee of the employer during 
        any month in the previous year information described in 
        paragraph (2) with respect to the employee.
            (2) Information to be supplied.--The information described 
        in this paragraph, with respect to a qualifying employee, is 
        the following (as specified by the Secretary):
                    (A) Regional alliance information.--With respect to 
                each regional alliance through which the individual 
                obtained health coverage:
                            (i) The total number of months of full-time 
                        equivalent employment (as determined under 
                        section 1901(b)(2)) for each class of 
                        enrollment.
                            (ii) The amount of wages attributable to 
                        qualified employment and the amount of covered 
                        wages (as defined in paragraph (4)).
                            (iii) The total amount deducted from wages 
                        and paid for the family share of the premium.
                            (iv) Such other information as the 
                        Secretary of Labor may specify.
                    (B) Corporate alliance information.--With respect 
                to a qualifying employee who obtains coverage through a 
                corporate alliance health plan:
                            (i) The total number of months of full-time 
                        equivalent employees (as determined under 
                        section 1901(b)(2)) for each class of 
                        enrollment.
                            (ii) Such other information as the 
                        Secretary of Labor may specify.
            (3) Alliance specific information.--In the case of a 
        qualifying employee with respect to whom an employer made 
        employer premium payments during the year to more than one 
        regional alliance, the information under this subsection shall 
        be reported separately with respect to each such alliance.
            (4) Covered wages defined.--In this section, the term 
        ``covered wages'' means wages paid an employee of an employer 
        during a month in which the employee was a qualifying employee 
        of the employer.
    (b) Reporting of Information for Use of Regional Alliances.--
            (1) In general.--Each employer (including corporate 
        alliance employers) shall provide under subsection (f) on 
        behalf of each regional alliance information described in 
        paragraph (2) on an annual basis, information described in 
        paragraph (3) on a monthly basis, and information described in 
        paragraph (4) on a one-time basis, with respect to the 
        employment of qualifying employees in each year, month, or 
        other time, respectively.
            (2) Information to be supplied on an annual basis.--The 
        information described in this paragraph, with respect to an 
        employer, is the following (as specified by the Secretary of 
        Labor):
                    (A) Regional alliance information.--With respect to 
                each regional alliance to which employer premium 
                payments were payable in the year:
                            (i) For each qualifying employee in the 
                        year--
                                    (I) The total number of months of 
                                full-time equivalent employment (as 
                                determined under section 1901(b)(2)) 
                                for the employee for each class of 
                                enrollment.
                                    (II) The total amount deducted from 
                                wages and paid for the family share of 
                                the premium of the qualifying employee.
                            (ii) The total employer premium payment 
                        made under section 6121 for the year with 
                        respect to the employment of all qualifying 
                        employees residing in the alliance area and, in 
                        the case of an employer that has obtained (or 
                        seeks to obtain) a premium discount under 
                        section 6123, the total employer premium 
                        payment that would have been owed for such 
                        employment for the year but for such section.
                            (iii) The number of full-time equivalent 
                        employees (determined under section 1901(b)(2)) 
                        for each class of family enrollment in the year 
                        (and for each month in the year in the case of 
                        an employer that has obtained or is seeking a 
                        premium discount under section 6123).
                            (iv) In the case of an employer to which 
                        section 6124 applies in a year, such additional 
                        information as the Secretary of Labor may 
                        require for purposes of that section.
                            (v) The amounts paid (and payable) pursuant 
                        to section 6125.
                            (vi) The amount of covered wages for each 
                        qualifying employee.
            (3) Information on a monthly basis.--
                    (A) In general.--The information described in this 
                paragraph for a month for an employer is such 
                information as the Secretary of Labor may specify 
                regarding--
                            (i) the identity of each eligible 
                        individual who changed qualifying employee 
                        status with respect to the employer in the 
                        month; and
                            (ii) in the case of such an individual 
                        described in subparagraph (B)(i)--
                                    (I) the regional alliance for the 
                                alliance area in which the individual 
                                resides, and
                                    (II) the individual's class of 
                                family enrollment.
                    (B) Changes in qualifying employee status 
                described.--For purposes of subparagraph (A), an 
                individual is considered to have changed qualifying 
                employee status in a month if the individual either (i) 
                is a qualifying employee of the employer in the month 
                and was not a qualifying employee of the employer in 
                the previous month, or (ii) is not a qualifying 
                employee of the employer in the month but was a 
                qualifying employee of the employer in the previous 
                month.
            (4) Initial information.--Each employer, at such time 
        before the first year in which qualifying employees of the 
        employer are enrolled in regional alliance health plans as the 
        Board may specify, shall provide for the reporting of such 
        information relating to employment of eligible individuals as 
        the Board may specify.
    (c) Reconciliation of Employer Premium Payments.--
            (1) Provision of information.--Each employer (whether or 
        not the employer claimed (or claims) an employer premium 
        discount under section 6123 for a year) that is liable for 
        employer premium payments to a regional alliance for any month 
        in a year shall provide the alliance with such information as 
        the alliance may require (consistent with rules of the 
        Secretary of Labor) to determine the appropriate amount of 
        employer premium payments that should have been made for all 
        months in the year (taking into account any employer premium 
        discount under section 6123 for the employer).
            (2) Deadline.--Such information shall be provided not later 
        than the beginning of February of the following year with the 
        payment to be made for that month.
            (3) Reconciliation.--
                    (A) Continuing employers.--Based on such 
                information, the employer shall adjust the amount of 
                employer premium payment made in the month in which the 
                information is provided to reflect the amount by which 
                the payments in the previous year were greater or less 
                than the amount of payments that should have been made.
                    (B) Discontinuing employers.--In the case of a 
                person that ceases to be an employer in a year, such 
                adjustment shall be made in the form of a payment to, 
                or from, the alliance involved.
            (4) Special treatment of self-employed individuals.--Except 
        as the Secretary of Labor may provide, individuals who are 
        employers only by virtue of the operation of section 6126 shall 
        have employer premium payments attributable to such section 
        reconciled (in the manner previously described in this 
        subsection) under the process for the collection of the family 
        share of premiums under section 1344 rather than under this 
        subsection.
    (d) Special Rules for Self-Employed.--
            (1) In general.--In the case of an individual who is 
        treated as an employer under section 6126, the individual shall 
        provide, under subsection (f) on behalf of each regional 
        alliance, information described in paragraph (2) with respect 
        to net earnings from self-employment income of the individual 
        in each year.
            (2) Information to be supplied.--The information described 
        in this paragraph, with respect to an individual, is such 
        information as may be necessary to compute the amount payable 
        under section 6131 by virtue of section 6126.
    (e) Form.--Information shall be provided under this section in such 
electronic or other form as the Secretary specifies. Such 
specifications shall be done in a manner that, to the maximum extent 
practicable, simplifies administration for small employers.
    (f) Information Clearinghouse Functions.--
            (1) Designation.--The Board shall provide for the use of 
        the regional centers (which are part of the electronic data 
        network under section 5103) to perform information 
        clearinghouse functions under this section with respect to 
        employers and regional and corporate alliances.
            (2) Functions.--The functions referred to in paragraph (1) 
        shall include--
                    (A) receipt of information submitted by employers 
                under subsection (b) on an annual (or one-time) basis,
                    (B) from the information received, transmittal of 
                information required to regional alliances, and
                    (C) such other functions as the Board specifies.
    (g) Deadline.--Information required to be provided by an employer 
for a year under this section--
            (1) to a qualifying employee shall be provided not later 
        than the date the employer is required under law to provide for 
        statements under section 6051 of the Internal Revenue Code of 
        1986 for that year, or
            (2) to a health alliance (through a regional center) shall 
        be provided not later than the date by which information is 
        required to be filed with the Secretary pursuant to agreements 
        under section 232 of the Social Security Act for that year.
    (h) Notice to Certain Individuals Who Are Not Employees.--
            (1) In general.--A person that carries on a trade or 
        business shall notify in writing each individual described in 
        paragraph (2) that the person is not obligated to make any 
        employer health care premium payment (under section 6121) in 
        relation to the services performed by the individual for the 
        person.
            (2) Individual described.--An individual described in this 
        paragraph, with respect to a person, is an individual who 
        normally performs services for the person in the person's trade 
        or business for more than 40 hours per month but who is not an 
        employee of the person (within the meaning of section 1901(a)).
            (3) Timing; effective date.--Such notice shall be provided 
        within a reasonable time after the individual begins performing 
        services for the person, except that in no event is such a 
        notice required to be provided with respect to services 
        performed before January 1, 1998.
            (4) Exceptions.--The Secretary shall issue regulations 
        providing exceptions to the notice requirement of paragraph (1) 
        with respect to individuals performing services on an 
        irregular, incidental, or casual basis.
            (5) Model notice.--The Secretary shall publish a model 
        notice that is easily understood by the average reader and that 
        persons may use to satisfy the requirements of paragraph (1).

SEC. 1603. REQUIREMENTS RELATING TO NEW EMPLOYEES.

    (a) Completion of Enrollment Information Form.--At the time an 
individual is hired as a qualifying employee of a regional alliance 
employer, the employer shall obtain from the individual the following 
information (pursuant to rules established by the Secretary of Labor):
            (1) The identity of the individual.
            (2) The individual's alliance area of residence and whether 
        the individual has moved from another alliance area.
            (3) The class of family enrollment applicable to the 
        individual.
            (4) The health plan (and health alliance) in which the 
        individual is enrolled at that time.
            (5) If the individual has moved from another alliance area, 
        whether the individual intends to enroll in a regional alliance 
        health plan.
    (b) Transmittal of Information to Alliance.--
            (1) In general.--Each employer shall transmit the 
        information obtained under subsection (a) to the regional 
        alliance for the alliance area in which the qualifying employee 
        resides (or will reside at the time of initial employment).
            (2) Deadline.--Such information shall be transmitted within 
        30 days of the date of hiring of the employee.
            (3) Form.--Information under this section may be forwarded 
        in electronic form to a regional alliance.
    (c) Provision of Enrollment Form and Information.--In the case of 
an individual described in subsection (a)(5), the employer shall 
provide the individual, at the time of hiring, with--
            (1) such information regarding the choice of, and 
        enrollment in, regional alliance health plans, and
            (2) such enrollment form,
as the regional alliance provides to the employer.

SEC. 1604. AUDITING OF RECORDS.

    Each regional alliance employer shall maintain such records, and 
provide the regional alliance for the area in which the employer 
maintains the principal place of employment (as specified by the 
Secretary of Labor) with access to such records, as may be necessary to 
verify and audit the information reported under this subtitle.

SEC. 1605. PROHIBITION OF CERTAIN EMPLOYER DISCRIMINATION.

    No employer may discriminate with respect to an employee on the 
basis of the family status of the employee or on the basis of the class 
of family enrollment selected with respect to the employee.

SEC. 1606. PROHIBITION ON SELF-FUNDING OF COST SHARING BENEFITS BY 
              REGIONAL ALLIANCE EMPLOYERS.

    (a) Prohibition.--A regional alliance employer (and a corporate 
alliance employer with respect to employees who are regional alliance 
eligible individuals) may provide benefits to employees that consist of 
the benefits included in a cost sharing policy (as defined in section 
1421(b)(2)) only through a contribution toward the purchase of a cost 
sharing policy which is funded primarily through insurance.
    (b) Individual and Employer Responsibilities.--In the case of an 
individual who resides in a single-payer State and an employer with 
respect to employees who reside in such a State, the responsibilities 
of such individual and employer under such system shall supersede the 
obligations of the individual and employer under this subtitle.

SEC. 1607. EQUAL VOLUNTARY CONTRIBUTION REQUIREMENT.

    (a) In General.--
            (1) Equal voluntary employer premium payment requirement.--
                    (A) Regional alliance health plans.--If an employer 
                makes available a voluntary employer premium payment 
                (as defined in subsection (d)) on behalf of a full-time 
                employee (as defined in section 1901(b)(2)(C)) who is 
                enrolled in a regional alliance health plan of a 
                regional alliance in a class of family enrollment, the 
                employer shall make available such a voluntary employer 
                premium payment in the same dollar amount to all 
                qualifying employees (as defined in section 1901(b)(1)) 
                of the employer who are enrolled in any regional 
                alliance health plan of the same alliance in the same 
                class of family enrollment.
                    (B) Corporate alliance health plans.--If a 
                corporate alliance employer makes available a voluntary 
                employer premium payment on behalf of a full-time 
                employee who is enrolled in a corporate alliance health 
                plan of a corporate alliance in a class of family 
                enrollment in a premium area (designated under section 
                1384(b)), the employer shall make available such a 
                voluntary employer premium payment in the same dollar 
                amount to all qualifying employees of the employer 
                enrolled in any corporate alliance health plan of the 
                same alliance in the same class of family enrollment in 
                the same premium area.
                    (C) Treatment of part-time employees.--In applying 
                subparagraphs (A) and (B) in the case of a qualifying 
                employee employed on a part-time basis (within the 
                meaning of section 1901(b)(2)(A)(ii)), the dollar 
                amount shall be equal to the full-time employment ratio 
                (as defined in section 1901(b)(2)(B)) multiplied by the 
                dollar amount otherwise required.
            (2) Limit on voluntary employer premium payments.--
                    (A) Regional alliance health plans.--An employer 
                may not make available a voluntary employer premium 
                payment on behalf of an employee (enrolled in a 
                regional alliance health plan of a regional alliance in 
                a class of family enrollment) in an amount that exceeds 
                the maximum amount that could be payable as the family 
                share of premium (described in section 6101(b)(2)) for 
                the most expensive regional alliance health plan of the 
                same alliance for the same class of family enrollment.
                    (B) Corporate alliance health plans.--An employer 
                may not make available a voluntary employer premium 
                payment on behalf of an employee (enrolled in a 
                corporate alliance health plan of a corporate alliance 
                in a class of family enrollment in a premium area, 
                designated under section 1384) in an amount that 
                exceeds the maximum amount that could be payable as the 
                family share of premium (described in section 
                6101(b)(3)) for the most expensive corporate alliance 
                health plan of the same alliance for the same class of 
                family enrollment in the same premium area.
                    (C) Exclusion of plans without material 
                enrollment.--Subparagraphs (A) and (B) shall not take 
                into account any health plan that does not have 
                material enrollment (as determined in accordance with 
                regulations of the Secretary of Labor).
            (3) Nondiscrimination among plans selected.--An employer 
        may not discriminate in the wages or compensation paid, or 
        other terms or conditions of employment, with respect to an 
        employee based on the health plan (or premium of such a plan) 
        in which the employee is enrolled.
    (b) Rebate Required in Certain Cases.--
            (1) In general.--Subject to subsection (c), if--
                    (A) an employer makes available a voluntary 
                employer premium payment on behalf of an employee, and
                    (B)(i) the sum of the amount of the applicable 
                alliance credit (under section 6103) and the voluntary 
                employer premium payment, exceeds (ii) the premium for 
                the plan selected,
        the employer must rebate to the employee an amount equal to the 
        excess described in subparagraph (B).
            (2) Rebates.--
                    (A) In general.--Any rebate provided under 
                paragraph (1) shall be treated, for purposes of the 
                Internal Revenue Code of 1986, as wages described in 
                section 3121(a) of such Act.
                    (B) Treatment of multiple full-time employment in a 
                family.--In the case of--
                            (i) an individual who is an employee of 
                        more than one employer, or
                            (ii) a couple for which both spouses are 
                        employees,
                if more than one employer provides for voluntary 
                employer premium payments, the individual or couple may 
                elect to have paragraph (1) applied with respect to all 
                employment.
    (c) Exception for Collective Bargaining Agreement.--Subsections (a) 
and (b) (other than subsection (a)(2)) shall not apply with respect to 
voluntary employer premium payments made pursuant to a bona fide 
collective bargaining agreement.
    (d) Voluntary Employer Premium Payment.--In this section, the term 
``voluntary employer premium payment'' means any payment designed to be 
used exclusively (or primarily) towards the cost of the family share of 
premiums for a health plan. Such term does not include any employer 
premiums required to be paid under part 3 of subtitle B of title VI.

SEC. 1608. EMPLOYER RETIREE OBLIGATION.

    (a) In General.--If an employer was providing, as of October 1, 
1993, a threshold payment (specified in subsection (c)) for a person 
who was a qualifying retired beneficiary (as defined in subsection (b)) 
as of such date, the employer shall pay, to or on behalf of that 
beneficiary for each month beginning with January 1998, an amount that 
is not less than the amount specified in subsection (d), but only if 
and for so long as the person remains a qualifying retired beneficiary.
    (b) Qualifying Retired Beneficiary.--In this section, the term 
``qualifying retired beneficiary'' means a person who is an eligible 
retiree or qualified spouse or child (as such terms are defined in 
subsections (b) and (c) of section 6114).
    (c) Threshold Payment.--The term ``threshold payment'' means, for 
an employer with respect to a health benefit plan providing coverage to 
a qualifying retired beneficiary, a payment--
            (1) for coverage of any item or service described in 
        section 1101, and
            (2) the amount of which is at least 20 percent of the 
        amount of the premium (or premium equivalent) for such coverage 
        with respect to the beneficiary (and dependents).
    (d) Amount.--The amount specified in this subsection is 20 percent 
of the weighted average premium for the regional alliance in which the 
beneficiary resides and for the applicable class of family enrollment.
    (e) Nature of Obligation.--The requirement of this section shall be 
in addition to any other requirement imposed on an employer under this 
Act or otherwise.
    (f) Protection of Collective Bargaining Rights.--Nothing in this 
Act (including this section) shall be construed as affecting collective 
bargaining rights or rights under collective bargaining agreements.

SEC. 1609. ENFORCEMENT.

    In the case of a person that violates a requirement of this 
subtitle, the Secretary of Labor may impose a civil money penalty, in 
an amount not to exceed $10,000, for each violation with respect to 
each individual.

       Subtitle J--General Definitions; Miscellaneous Provisions

                      PART 1--GENERAL DEFINITIONS

SEC. 1901. DEFINITIONS RELATING TO EMPLOYMENT AND INCOME.

    (a) In General.--Except as otherwise specifically provided, in this 
Act the following definitions and rules apply:
            (1) Employer, employee, employment, and wages defined.--
        Except as provided in this section--
                    (A) the terms ``wages'' and ``employment'' have the 
                meanings given such terms under section 3121 of the 
                Internal Revenue Code of 1986,
                    (B) the term ``employee'' has the meaning given 
                such term under section 3121 of such Code, subject to 
                the provisions of chapter 25 of such Code, and
                    (C) the term ``employer'' has the same meaning as 
                the term ``employer'' as used in such section 3121.
            (2) Exceptions.--For purposes of paragraph (1)--
                    (A) Employment.--
                            (i) Employment included.--Paragraphs (1), 
                        (2), (5), (7) (other than clauses (i) through 
                        (iv) of subparagraph (C) and clauses (i) 
                        through (v) of subparagraph (F)), (8), (9), 
                        (10), (11), (13), (15), (18), and (19) of 
                        section 3121(b) of the Internal Revenue Code of 
                        1986 shall not apply.
                            (ii) Exclusion of inmates as employees.--
                        Employment shall not include services performed 
                        in a penal institution by an inmate thereof or 
                        in a hospital or other health care institution 
                        by a patient thereof.
                    (B) Wages.--
                            (i) In general.--Paragraph (1) of section 
                        3121(a) of the Internal Revenue Code of 1986 
                        shall not apply.
                            (ii) Tips not included.--The term ``wages'' 
                        does not include cash tips.
                    (C) Exclusion of employees outside the united 
                states.--The term ``employee'' does not include an 
                individual who does not reside in the United States.
                    (D) Exclusion of foreign employment.--The term 
                ``employee'' does not include an individual--
                            (i) with respect to service, if the 
                        individual is not a citizen or resident of the 
                        United States and the service is performed 
                        outside the United States, or
                            (ii) with respect to service, if the 
                        individual is a citizen or resident of the 
                        United States and the service is performed 
                        outside the United States for an employer other 
                        than an American employer (as defined in 
                        section 3121(h) of the Internal Revenue Code of 
                        1986).
            (3) Aggregation rules for employers.--For purposes of this 
        Act--
                    (A) all employers treated as a single employer 
                under subsection (a) or (b) of section 52 of the 
                Internal Revenue Code of 1986 shall be treated as a 
                single employer, and
                    (B) under regulations of the Secretary of Labor, 
                all employees of organizations which are under common 
                control with one or more organizations which are exempt 
                from income tax under subtitle A of the Internal 
                Revenue Code of 1986 shall be treated as employed by a 
                single employer.
        The regulations prescribed under subparagraph (B) shall be 
        based on principles similar to the principles which apply to 
        taxable organizations under subparagraph (A).
            (4) Employer premium.--The term ``employer premium'' refers 
        to the premium established and imposed under part 2 of subtitle 
        B of title VI.
    (b) Qualifying Employee; Full-Time Employment.--
            (1) Qualifying employee.--
                    (A) In general.--In this Act, the term ``qualifying 
                employee'' means, with respect to an employer for a 
                month, an employee (other than a covered child, as 
                defined in subparagraph (C)) who is employed by the 
                employer for at least 40 hours (as determined under 
                paragraph (3)) in the month.
                    (B) No special treatment of medicare beneficiaries, 
                ssi recipients, afdc recipients, and others.--
                Subparagraph (A) shall apply regardless of whether or 
                not the employee is a medicare-eligible individual, an 
                SSI recipient, an AFDC recipient, an individual 
                described in section 1004(b), an eligible individual or 
                is authorized to be so employed.
                    (C) Covered child defined.--In subparagraph (A), 
                the term ``covered child'' means an eligible individual 
                who is a child and is enrolled under a health plan as a 
                family member described in section 1011(b)(2)(B).
            (2) Full-time equivalent employees; part-time employees.--
                    (A) In general.--For purposes of this Act, a 
                qualifying employee who is employed by an employer--
                            (i) for at least 120 hours in a month, is 
                        counted as 1 full-time equivalent employee for 
                        the month and shall be deemed to be employed on 
                        a full-time basis, or
                            (ii) for at least 40 hours, but less than 
                        120 hours, in a month, is counted as a fraction 
                        of a full-time equivalent employee in the month 
                        equal to the full-time employment ratio (as 
                        defined in subparagraph (B)) for the employee 
                        and shall be deemed to be employed on a part-
                        time basis.
                    (B) Full-time employment ratio defined.--For 
                purposes of this Act, the term ``full-time employment 
                ratio'' means, with respect to a qualifying employee of 
                an employer in a month, the lesser of 1 or the ratio 
                of--
                            (i) the number of hours of employment such 
                        employee is employed by such employer for the 
                        month (as determined under paragraph (3)), to
                            (ii) 120 hours.
                    (C) Full-time employee.--For purposes of this Act, 
                the term ``full-time employee'' means, with respect to 
                an employer, an employee who is employed on a full-time 
                basis (as specified in subparagraph (A)) by the 
                employer.
                    (D) Consideration of industry practice.--As 
                provided under rules established by the Board, an 
                employee who is not described in subparagraph (C) shall 
                be considered to be employed on a full-time basis by an 
                employer (and to be a full-time employee of an 
                employer) for a month (or for all months in a 12-month 
                period) if the employee is employed by that employer on 
                a continuing basis that, taking into account the 
                structure or nature of the employment in the industry, 
                represents full time employment.
            (3) Hours of employment.--
                    (A) In general.--For purposes of this Act, the 
                Board shall specify the method for computing hours of 
                employment for employees of an employer consistent with 
                this paragraph. The Board shall take into account rules 
                used for purposes of applying the Fair Labor Standards 
                Act.
                    (B) Hourly wage earners.--In the case of an 
                individual who receives compensation (in the form of 
                hourly wages or compensation) for the performance of 
                services, the individual is considered to be 
                ``employed'' by an employer for an hour if compensation 
                is payable with respect to that hour of employment, 
                without regard to whether or not the employee is 
                actually performing services during such hours.
            (4) Treatment of salaried employees and employees paid on 
        contingent or bonus arrangements.--In the case of an employee 
        who receives compensation on a salaried basis or on the basis 
        of a commission (or other contingent or bonus basis), rather 
        than an hourly wage, the Board shall establish rules for the 
        conversion of the compensation to hours of employment, taking 
        into account the minimum monthly compensation levels for 
        workers employed on a full-time basis under the Fair Labor 
        Standards Act and other factors the Board considers relevant.
    (c) Definitions Relating to Self-Employment.--In this Act:
            (1) Net earnings from self-employment.--The term ``net 
        earnings from self-employment'' has the meaning given such term 
        under section 1402(a) of the Internal Revenue Code of 1986.
            (2) Self-employed individual.--The term ``self-employed 
        individual'' means, for a year, an individual who has net 
        earnings from self-employment for the year.

SEC. 1902. OTHER GENERAL DEFINITIONS.

    Except as otherwise specifically provided, in this Act the 
following definitions apply:
            (1) Alien permanently residing in the united states under 
        color of law.--The term ``alien permanently residing in the 
        United States under color of law'' means an alien lawfully 
        admitted for permanent residence (within the meaning of section 
        101(a)(20) of the Immigration and Nationality Act), and 
        includes any of the following:
                    (A) An alien who is admitted as a refugee under 
                section 207 of the Immigration and Nationality Act.
                    (B) An alien who is granted asylum under section 
                208 of such Act.
                    (C) An alien whose deportation is withheld under 
                section 243(h) of such Act.
                    (D) An alien who is admitted for temporary 
                residence under section 210, 210A, or 245A of such Act.
                    (E) An alien who has been paroled into the United 
                States under section 212(d)(5) of such Act for an 
                indefinite period or who has been granted extended 
                voluntary departure as a member of a nationality group.
                    (F) An alien who is the spouse or unmarried child 
                under 21 years of age of a citizen of the United 
                States, or the parent of such a citizen if the citizen 
                is over 21 years of age, and with respect to whom an 
                application for adjustment to lawful permanent 
                residence is pending.
                    (G) An alien within such other classification of 
                permanent resident aliens as the National Health Board 
                may establish by regulation.
            (2) AFDC family.--The term ``AFDC family'' means a family 
        composed entirely of one or more AFDC recipients.
            (3) AFDC recipient.--The term ``AFDC recipient'' means, for 
        a month, an individual who is receiving aid or assistance under 
        any plan of the State approved under title I, X, XIV, or XVI, 
        or part A or part E of title IV, of the Social Security Act for 
        the month.
            (4) Alliance area.--The term ``alliance area'' means the 
        area served by a regional alliance and specified under section 
        1202(b).
            (5) Alliance eligible individual.--The term ``alliance 
        eligible individual'' means, with respect to a health alliance, 
        an eligible individual with respect to whom the applicable 
        health plan is a health plan offered by or through such 
        alliance and does not include a prisoner.
            (6) Applicable health plan.--The term ``applicable health 
        plan'' means, with respect to an eligible individual, the 
        health plan specified pursuant to section 1004 and part 2 of 
        subtitle A.
            (7) Combination cost sharing plan.--The term ``combination 
        cost sharing plan'' means a health plan that provides 
        combination cost sharing schedule (consistent with section 
        1134).
            (8) Comprehensive benefit package.--The term 
        ``comprehensive benefit package'' means the package of health 
        benefits provided under subtitle B.
            (9) Consumer price index; cpi.--The terms ``consumer price 
        index'' and ``CPI'' mean the Consumer Price Index for all urban 
        consumers (U.S. city average), as published by the Bureau of 
        Labor Statistics.
            (10) Corporate alliance eligible individual.--The term 
        ``corporate alliance eligible individual'' means, with respect 
        to a corporate alliance, an eligible individual with respect to 
        whom the corporate alliance is the applicable health plan.
            (11) Corporate alliance employer.--The term ``corporate 
        alliance employer'' means, with respect to a corporate 
        alliance, an employer of an individual who is a participant in 
        a corporate alliance health plan of that alliance.
            (12) Corporate alliance health plan.--The term ``corporate 
        alliance health plan'' means a health plan offered by a 
        corporate alliance.
            (13) Disabled ssi recipient.--The term ``disabled SSI 
        recipient'' means an individual who--
                    (A) is an SSI recipient, and
                    (B) has been determined to be disabled for purposes 
                of the supplemental security income program (under 
                title XVI of the Social Security Act).
            (14) Eligible enrollee.--The term ``eligible enrollee'' 
        means, with respect to a health plan offered by a health 
        alliance, an alliance eligible individual, but does not include 
        such an individual if the individual is enrolled under such a 
        plan as the family member of another alliance eligible 
        individual.
            (15) Essential community provider.--The term ``essential 
        community provider'' means an entity certified as such a 
        provider under subpart B of part 2 of subtitle F.
            (16) Fee-for-service plan.--The term ``fee-for-service 
        plan'' means a health plan described in section 1322(b)(2)(A).
            (17) First year.--The term ``first year'' means, with 
        respect to--
                    (A) a State that is a participating State in a year 
                before 1998, the year in which the State first is a 
                participating State, or
                    (B) any other State, 1998.
            (18) Higher cost sharing plan.--The term ``higher cost 
        sharing plan'' means a health plan that provides a higher cost 
        sharing schedule (consistent with section 1133).
            (19) Long-term nonimmigrant.--The term ``long-term 
        nonimmigrant'' means a nonimmigrant described in subparagraph 
        (E), (H), (I), (J), (K), (L), (M), (N), (O), (Q), or (R) of 
        section 101(a)(15) of the Immigration and Nationality Act or an 
        alien within such other classification of nonimmigrant as the 
        National Health Board may establish by regulation.
            (20) Lower cost sharing plan.--The term ``lower cost 
        sharing plan'' means a health plan that provides a lower cost 
        sharing schedule (consistent with section 1132).
            (21) Medicare program.--The term ``medicare program'' means 
        the health insurance program under title XVIII of the Social 
        Security Act.
            (22) Medicare-eligible individual.--The term ``medicare-
        eligible individual'' means, subject to section 1012(a), an 
        individual who is entitled to benefits under part A of the 
        medicare program.
            (23) Move.--The term ``move'' means, respect to an 
        individual, a change of residence of the individual from one 
        alliance area to another alliance area.
            (24) National health board; board.--The terms ``National 
        Health Board'' and ``Board'' mean the National Health Board 
        created under section 1501.
            (25) Poverty level.--
                    (A) In general.--The term ``applicable poverty 
                level'' means, for a family for a year, the official 
                poverty line (as defined by the Office of Management 
                and Budget, and revised annually in accordance with 
                section 673(2) of the Omnibus Budget Reconciliation Act 
                of 1981) applicable to a family of the size involved 
                (as determined under subparagraph (B)) for 1994 
                adjusted by the percentage increase or decrease 
                described in subparagraph (C) for the year involved.
                    (B) Family size.--In applying the applicable 
                poverty level to--
                            (i) an individual enrollment, the family 
                        size is deemed to be one person;
                            (ii) a couple-only enrollment, the family 
                        size is deemed to be two persons;
                            (iii) a single parent enrollment, the 
                        family size is deemed to be three persons; or
                            (iv) a dual parent enrollment, the family 
                        size is deemed to be four persons.
                    (C) Percentage adjustment.--The percentage increase 
                or decrease described in this subparagraph for a year 
                is the percentage increase or decrease by which the 
                average CPI for the 12-month-period ending with August 
                31 of the preceding year exceeds such average for the 
                12-month period ending with August 31, 1993.
                    (D) Rounding.--Any adjustment made under 
                subparagraph (A) for a year shall be rounded to the 
                nearest multiple of $100.
            (26) Prisoner.--The term ``prisoner'' means, as specified 
        by the Board, an eligible individual during a period of 
        imprisonment under Federal, State, or local authority after 
        conviction as an adult.
            (27) Regional alliance eligible individual.--The term 
        ``regional alliance eligible individual'' means an eligible 
        individual with respect to whom a regional alliance health plan 
        is an applicable health plan.
            (28) Regional alliance employer.--The term ``regional 
        alliance employer'' means, with respect to an employee, an 
        employer that is not a corporate alliance employer with respect 
        to such employee.
            (29) Regional alliance health plan.--The term ``regional 
        alliance health plan'' means a health plan offered by a 
        regional alliance.
            (30) Reside.--
                    (A) An individual is considered to reside in the 
                location in which the individual maintains a primary 
                residence (as established under rules of the National 
                Health Board).
                    (B) Under such rules and subject to section 
                1323(c), in the case of an individual who maintains 
                more than one residence, the primary residence of the 
                individual shall be determined taking into account the 
                proportion of time spent at each residence.
                    (C) In the case of a couple only one spouse of 
                which is a qualifying employee, except as the Board may 
                provide, the residence of the employee shall be the 
                residence of the couple.
            (31) Secretary.--The term ``Secretary'' means the Secretary 
        of Health and Human Services.
            (32) SSI family.--The term ``SSI family'' means a family 
        composed entirely of one or more SSI recipients.
            (33) SSI recipient.--The term ``SSI recipient'' means, for 
        a month, an individual--
                    (A) with respect to whom supplemental security 
                income benefits are being paid under title XVI of the 
                Social Security Act for the month,
                    (B) who is receiving a supplementary payment under 
                section 1616 of such Act or under section 212 of Public 
                Law 93-66 for the month, or
                    (C) who is receiving monthly benefits under section 
                1619(a) of the Social Security Act (whether or not 
                pursuant to section 1616(c)(3) of such Act) for the 
                month.
            (34) State.--The term ``State'' includes the District of 
        Columbia, Puerto Rico, the Virgin Islands, Guam, American 
        Samoa, and the Northern Mariana Islands.
            (35) State medicaid plan.--The term ``State medicaid plan'' 
        means a plan of medical assistance of a State approved under 
        title XIX of the Social Security Act.
            (36) Undocumented alien.--The term ``undocumented alien'' 
        means an alien who is not a long-term nonimmigrant, a diplomat, 
        or described in section 1005(c).
            (37) United States.--The term ``United States'' means the 
        50 States, the District of Columbia, Puerto Rico, the Virgin 
        Islands, Guam, American Samoa, and Northern Mariana Islands.

                  Subtitle B--Miscellaneous Provisions

SEC. 1911. USE OF INTERIM, FINAL REGULATIONS.

    In order to permit the timely implementation of the provisions of 
this Act, the National Health Board, the Secretary of Health and Human 
Services, the Secretary of Labor are each authorized to issue 
regulations under this Act on an interim basis that become final on the 
date of publication, subject to change based on subsequent public 
comment.

SEC. 1912. SOCIAL SECURITY ACT REFERENCES.

    Except as may otherwise be provided, any reference in this title, 
or in title V or VI, to a provision of the Social Security Act shall be 
to that provision of the Social Security Act as in effect on the date 
of the enactment of this Act.

                                                               Title II

                         TITLE II--NEW BENEFITS

                       table of contents of title

                                                                   Page
       Subtitle A--Medicare Outpatient Prescription Drug Benefit

Sec. 2001. Coverage of outpatient prescription drugs........        343
Sec. 2002. Payment rules and related requirements for               349
                            covered outpatient drugs.
Sec. 2003. Medicare rebates for covered outpatient drugs....        365
Sec. 2004. Extension of 25 percent rule for portion of              379
                            premium attributable to covered 
                            outpatient drugs.
Sec. 2005. Coverage of home infusion drug therapy services..        380
Sec. 2006. Conforming amendments to medicaid program........        387
Sec. 2007. Effective date...................................        389
                       Subtitle B--Long-Term Care

   Part 1--State Programs for Home and Community-based Services for 
                     Individuals With Disabilities

Sec. 2101. State programs for home and community-based              389
                            services for individuals with 
                            disabilities.
Sec. 2102. State plans......................................        390
Sec. 2103. Individuals with disabilities defined............        398
Sec. 2104. Home and community-based services covered under          402
                            State plan.
Sec. 2105. Cost sharing.....................................        408
Sec. 2106. Quality assurance and safeguards.................        409
Sec. 2107. Advisory groups..................................        410
Sec. 2108. Payments to States...............................        412
Sec. 2109. Total Federal budget; allotments to States.......        415
               Part 2--Medicaid Nursing Home Improvements

Sec. 2201. Reference to amendments..........................        425
                Part subpart a--general provisionsurance
Sec. 2301. Federal regulations; prior application or certain        426
                            requirements.
Sec. 2302. National Long-Term Care Insurance Advisory               430
                            Council.
Sec. 2303. Relation to State law............................        438
Sec. 2304. Desubpart b--federal standards and requirements..        438
Sec. 2321. Requirements to facilitate understanding and             443
                            comparison of benefits.
Sec. 2322. Requirements relating to coverage................        449
Sec. 2323. Requirements relating to premiums................        454
Sec. 2324. Requirements relating to sales practices.........        455
Sec. 2325. Continuation, renewal, replacement, conversion,          461
                            and cancellation of policies.
Sec. 2326. Requirements rsubpart c--enforcementbenefits.....        470
Sec. 2342. State programs for enforcement of standards......        474
Sec. 2342. Authorization of appropriations for State                480
                            programs.
Sec. 2343. Allotments to States.............................        481
Sec. 2344. Payments to States...............................        481
Sec. 2345. Federal oversight of State enforcement...........        482
Sec. 2346. Effect subpart d--consumer education grantsogram.        483
Sec. 2361. Grants for consumer education....................        485
     Part 4--Tax Treatment of Long-term Care Insurance and Services

Sec. 2401. Reference to tax provisions......................        488
   Part 5--Tax Incentives for Individuals With Disabilities Who Work

Sec. 2501. Reference to tax provision.......................        489
                  Part 6--Demonstration and Evaluation

Sec. 2601. Demonstration on acute and long-term care                489
                            integration.
Sec. 2602. Performance review of the long-term care programs        497
                                             Title II, Subtitle A

       Subtitle A--Medicare Outpatient Prescription Drug Benefit

SEC. 2001. COVERAGE OF OUTPATIENT PRESCRIPTION DRUGS.

    (a) Covered Outpatient Drugs as Medical and Other Health 
Services.--Section 1861(s)(2)(J) of the Social Security Act (42 U.S.C. 
1395x(s)(2)(J)) is amended to read as follows:
            ``(J) covered outpatient drugs;''.
    (b) Definition of Covered Outpatient Drug.--Section 1861(t) of such 
Act (42 U.S.C. 1395x(t)), as amended by section 13553(b) of the Omnibus 
Budget Reconciliation Act of 1993 (hereafter in this subtitle referred 
to as ``OBRA-1993''), is amended--
            (1) in the heading, by adding at the end the following: ``; 
        Covered Outpatient Drugs'';
            (2) in paragraph (1), by striking ``paragraph (2)'' and 
        inserting ``the succeeding paragraphs of this subsection''; and
            (3) by striking paragraph (2) and inserting the following:
    ``(2) Except as otherwise provided in paragraph (3), the term 
`covered outpatient drug' means any of the following products used for 
a medically accepted indication (as described in paragraph (4)):
            ``(A) A drug which may be dispensed only upon prescription 
        and--
                    ``(i) which is approved for safety and 
                effectiveness as a prescription drug under section 505 
                or 507 of the Federal Food, Drug, and Cosmetic Act or 
                which is approved under section 505(j) of such Act;
                    ``(ii)(I) which was commercially used or sold in 
                the United States before the date of the enactment of 
                the Drug Amendments of 1962 or which is identical, 
                similar, or related (within the meaning of section 
                310.6(b)(1) of title 21 of the Code of Federal 
                Regulations) to such a drug, and (II) which has not 
                been the subject of a final determination by the 
                Secretary that it is a `new drug' (within the meaning 
                of section 201(p) of the Federal Food, Drug, and 
                Cosmetic Act) or an action brought by the Secretary 
                under section 301, 302(a), or 304(a) of such Act to 
                enforce section 502(f) or 505(a) of such Act; or
                    ``(iii)(I) which is described in section 107(c)(3) 
                of the Drug Amendments of 1962 and for which the 
                Secretary has determined there is a compelling 
                justification for its medical need, or is identical, 
                similar, or related (within the meaning of section 
                310.6(b)(1) of title 21 of the Code of Federal 
                Regulations) to such a drug, and (II) for which the 
                Secretary has not issued a notice of an opportunity for 
                a hearing under section 505(e) of the Federal Food, 
                Drug, and Cosmetic Act on a proposed order of the 
                Secretary to withdraw approval of an application for 
                such drug under such section because the Secretary has 
                determined that the drug is less than effective for all 
                conditions of use prescribed, recommended, or suggested 
                in the labeling.
            ``(B) A biological product which--
                    ``(i) may only be dispensed upon prescription,
                    ``(ii) is licensed under section 351 of the Public 
                Health Service Act, and
                    ``(iii) is produced at an establishment licensed 
                under such section to produce such product.
            ``(C) Insulin certified under section 506 of the Federal 
        Food, Drug, and Cosmetic Act.
    ``(3) The term `covered outpatient drug' does not include any 
product--
            ``(A) which is administered through infusion in a home 
        setting unless the product is a covered home infusion drug (as 
        defined in paragraph (5));
            ``(B) when furnished as part of, or as incident to, any 
        other item or service for which payment may be made under this 
        title; or
            ``(C) which is listed under paragraph (2) of section 
        1927(d) (other than subparagraph (I) or (J) of such 
        subparagraph) as a drug which may be excluded from coverage 
        under a State plan under title XIX and which the Secretary 
        elects to exclude from coverage under part B.
    ``(4) For purposes of paragraph (2), the term `medically accepted 
indication', with respect to the use of an outpatient drug, includes 
any use which has been approved by the Food and Drug Administration for 
the drug, and includes another use of the drug if--
            ``(A) the drug has been approved by the Food and Drug 
        Administration; and
            ``(B)(i) such use is supported by one or more citations 
        which are included (or approved for inclusion) in one or more 
        of the following compendia: the American Hospital Formulary 
        Service-Drug Information, the American Medical Association Drug 
        Evaluations, the United States Pharmacopoeia-Drug Information, 
        and other authoritative compendia as identified by the 
        Secretary, unless the Secretary has determined that the use is 
        not medically appropriate or the use is identified as not 
        indicated in one or more such compendia, or
            ``(ii) the carrier involved determines, based upon guidance 
        provided by the Secretary to carriers for determining accepted 
        uses of drugs, that such use is medically accepted based on 
        supportive clinical evidence in peer reviewed medical 
        literature appearing in publications which have been identified 
        for purposes of this clause by the Secretary.
The Secretary may revise the list of compendia in subparagraph (B)(i) 
designated as appropriate for identifying medically accepted 
indications for drugs.
    ``(5)(A) For purposes of paragraph (3), the term `covered home 
infusion drug' means a covered outpatient drug or an enteral or 
parenteral nutrient dispensed to an individual that--
            ``(i) is administered intravenously, subcutaneously, 
        epidurally, or through other means determined by the Secretary, 
        using an access device that is inserted in to the body and an 
        infusion device to control the rate of flow of the drug,
            ``(ii) is administered in the individual's home (including 
        an institution used as the individual's home, other than a 
        hospital under subsection (e) or a skilled nursing facility 
        that meets the requirements of section 1819(a)), and
            ``(iii)(I) is an antibiotic drug and the Secretary has not 
        determined, for the specific drug or the indication to which 
        the drug is applied, that the drug cannot generally be 
        administered safely and effectively in a home setting, or
            ``(II) is not an antibiotic drug and the Secretary has 
        determined, for the specific drug or the indication to which 
        the drug is applied, that the drug can generally be 
        administered safely and effectively in a home setting.
    ``(B) Not later than January 1, 1996, (and periodically 
thereafter), the Secretary shall publish a list of the drugs, and 
indications for such drugs, that are covered home infusion drugs, with 
respect to which home infusion drug therapy may be provided under this 
title.''.
    (c) Other Conforming Amendments.--(1) Section 1861 of such Act (42 
U.S.C. 1395x) is amended--
            (A) in subsection (s)(2), as amended by section 13553 of 
        OBRA-1993--
                    (i) by striking subparagraphs (O) and (Q),
                    (ii) by adding ``and'' at the end of subparagraph 
                (N),
                    (iii) by striking ``; and'' at the end of 
                subparagraph (P) and inserting a period, and
                    (iv) by redesignating subparagraph (P) as 
                subparagraph (O); and
            (B) by striking the subsection (jj) added by section 
        4156(a)(2) of the Omnibus Budget Reconciliation Act of 1990.
    (2) Section 1881(b)(1)(C) of such Act (42 U.S.C. 1395rr(b)(1)(C)), 
as amended by section 13566(a) of OBRA-1993, is amended by striking 
``section 1861(s)(2)(P)'' and inserting ``section 1861(s)(2)(O)''.

SEC. 2002. PAYMENT RULES AND RELATED REQUIREMENTS FOR COVERED 
              OUTPATIENT DRUGS.

    (a) In General.--Section 1834 of the Social Security Act (42 U.S.C. 
1395m) is amended by inserting after subsection (c) the following new 
subsection:
    ``(d) Payment for and Certain Requirements Concerning Covered 
Outpatient Drugs.--
            ``(1) Deductible.--
                    ``(A) In general.--Payment shall be made under 
                paragraph (2) only for expenses incurred by an 
                individual for a covered outpatient drug during a 
                calendar year after the individual has incurred 
                expenses in the year for such drugs (during a period in 
                which the individual is entitled to benefits under this 
                part) equal to the deductible amount for that year.
                    ``(B) Deductible amount.--
                            ``(i) For purposes of subparagraph (A), the 
                        deductible amount is--
                                    ``(I) for 1996, $250, and
                                    ``(II) for any succeeding year, the 
                                amount (rounded to the nearest dollar) 
                                that the Secretary estimates will 
                                ensure that the percentage of the 
                                average number of individuals covered 
                                under this part (other than individuals 
                                enrolled with an eligible organization 
                                under section 1876 or an organization 
                                described in section 1833(a)(1)(A)) 
                                during the year who will incur expenses 
                                for covered outpatient drugs equal to 
                                or greater than such amount will be the 
                                same as the percentage for the previous 
                                year.
                            ``(ii) The Secretary shall promulgate the 
                        deductible amount for 1997 and each succeeding 
                        year during September of the previous year.
                    ``(C) Special rule for determination of expenses 
                incurred.--In determining the amount of expenses 
                incurred by an individual for covered outpatient drugs 
                during a year for purposes of subparagraph (A), there 
                shall not be included any expenses incurred with 
                respect to a drug to the extent such expenses exceed 
                the payment basis for such drug under paragraph (3).
            ``(2) Payment amount.--
                    ``(A) In general.--Subject to the deductible 
                established under paragraph (1), the amount payable 
                under this part for a covered outpatient drug furnished 
                to an individual during a calendar year shall be equal 
                to--
                            ``(i) 80 percent of the payment basis 
                        described in paragraph (3), in the case of an 
                        individual who has not incurred expenses for 
                        covered outpatient drugs during the year 
                        (including the deductible imposed under 
                        paragraph (1)) in excess of the out-of-pocket 
                        limit for the year under subparagraph (B); and
                            ``(ii) 100 percent of the payment basis 
                        described in paragraph (3), in the case of any 
                        other individual.
                    ``(B) Out-of-pocket limit described.--
                            ``(i) For purposes of subparagraph (A), the 
                        out-of-pocket limit for a year is equal to--
                                    ``(I) for 1996, $1000, and
                                    ``(II) for any succeeding year, the 
                                amount (rounded to the nearest dollar) 
                                that the Secretary estimates will 
                                ensure that the percentage of the 
                                average number of individuals covered 
                                under this part (other than individuals 
                                enrolled with an eligible organization 
                                under section 1876 or an organization 
                                described in section 1833(a)(1)(A)) 
                                during the year who will incur expenses 
                                for covered outpatient drugs equal to 
                                or greater than such amount will be the 
                                same as the percentage for the previous 
                                year.
                            ``(ii) The Secretary shall promulgate the 
                        out-of-pocket limit for 1997 and each 
                        succeeding year during September of the 
                        previous year.
                    ``(C) Special rule for determination of expenses 
                incurred.--In determining the amount of expenses 
                incurred by an individual for covered outpatient drugs 
                during a year for purposes of subparagraph (A), there 
                shall not be included any expenses incurred with 
                respect to a drug to the extent such expenses exceed 
                the payment basis for such drug under paragraph (3).
            ``(3) Payment basis.--For purposes of paragraph (2), the 
        payment basis is the lesser of--
                    ``(A) the actual charge for a covered outpatient 
                drug, or
                    ``(B) the applicable payment limit established 
                under paragraph (4).
            ``(4) Payment limits.--
                    ``(A) Payment limit for single source drugs and 
                multiple source drugs with restrictive prescriptions.--
                In the case of a covered outpatient drug that is a 
                multiple source drug which has a restrictive 
                prescription, or that is single source drug, the 
                payment limit for a payment calculation period is equal 
                to--
                            ``(i) the 90th percentile of the actual 
                        charges (computed on the geographic basis 
                        specified by the Secretary) for the drug 
                        product for the second previous payment 
                        calculation period, or
                            ``(ii) the amount of the administrative 
                        allowance (established under paragraph (5)) 
                        plus the product of the number of dosage units 
                        dispensed and the per unit estimated 
                        acquisition cost for the drug product 
                        (determined under subparagraph (C)) for the 
                        period,
                whichever is less.
                    ``(B) Payment limit for multiple source drugs 
                without restrictive prescriptions.--In the case of a 
                drug that is a multiple source drug which does not have 
                a restrictive prescription, the payment limit for a 
                payment calculation period is equal to the amount of 
                the administrative allowance (established under 
                paragraph (5)) plus the product of the number of dosage 
                units dispensed and the unweighted median of the unit 
                estimated acquisition cost (determined under 
                subparagraph (C)) for the drug products for the period.
                    ``(C) Determination of unit price.--
                            ``(i) In general.--The Secretary shall 
                        determine, for the dispensing of a covered 
                        outpatient drug product in a payment 
                        calculation period, the estimated acquisition 
                        cost for the drug product. With respect to any 
                        covered outpatient drug product, such cost may 
                        not exceed 93 percent of the published average 
                        wholesale price for the drug during the period.
                            ``(ii) Compliance with request for 
                        information.--If a wholesaler or direct seller 
                        of a covered outpatient drug refuses, after 
                        being requested by the Secretary, to provide 
                        price information requested to carry out clause 
                        (i), or deliberately provides information that 
                        is false, the Secretary may impose a civil 
                        money penalty of not to exceed $10,000 for each 
                        such refusal or provision of false information. 
                        The provisions of section 1128A (other than 
                        subsections (a) and (b)) shall apply to civil 
                        money penalties under the previous sentence in 
                        the same manner as they apply to a penalty or 
                        proceeding under section 1128A(a). Information 
                        gathered pursuant to clause (i) shall not be 
                        disclosed except as the Secretary determines to 
                        be necessary to carry out the purposes of this 
                        part.
            ``(5) Administrative allowance for purposes of payment 
        limit.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), the administrative allowance 
                established under this paragraph is--
                            ``(i) for 1996, $5, and
                            ``(ii) for each succeeding year, the amount 
                        for the previous year adjusted by the 
                        percentage change in the consumer price index 
                        for all urban consumers (U.S. city average) for 
                        the 12-month period ending with June of that 
                        previous year.
                    ``(B) Reduction for mail order pharmacies.--The 
                Secretary may, after consulting with representatives of 
                pharmacists, individuals enrolled under this part, and 
                of private insurers, reduce the administrative 
                allowances established under subparagraph (A) for any 
                covered outpatient drug dispensed by a mail order 
                pharmacy, based on differences between such pharmacies 
                and other pharmacies with respect to operating costs 
                and other economies.
            ``(6) Assuring appropriate prescribing and dispensing 
        practices.--
                    ``(A) In general.--The Secretary shall establish a 
                program to identify (and to educate physicians and 
                pharmacists concerning)--
                            ``(i) instances or patterns of unnecessary 
                        or inappropriate prescribing or dispensing 
                        practices for covered outpatient drugs,
                            ``(ii) instances or patterns of substandard 
                        care with respect to such drugs,
                            ``(iii) potential adverse reactions, and
                            ``(iv) appropriate use of generic products.
                    ``(B) Prior authorization.--The Secretary may 
                require advance approval for a covered outpatient drug 
                which the Secretary finds is subject to misuse or 
                inappropriate use, is not cost effective, which is a 
                multiple source drug with a restrictive prescription, 
                or is subject to negotiation under section 1850(c)(3). 
                The Secretary may also establish maximum quantities per 
                prescription and limits on the number of prescription 
                refills. The Secretary shall ensure that any advance 
                approval requirements imposed under this subparagraph 
                do not restrict the access of patients to medically 
                necessary covered outpatient drugs on a timely basis, 
                and assure prompt determinations of approval or 
                disapproval and provide a means for providers and 
                patients to appeal a decision to disapprove a drug.
                    ``(C) Drug use review.--The Secretary may provide 
                for a drug use review program with respect to covered 
                outpatient drugs dispensed to individuals eligible for 
                benefits under this part. Such program may include such 
                elements as the Secretary determines to be necessary to 
                assure that prescriptions (i) are appropriate, (ii) are 
                medically necessary, and (iii) are not likely to result 
                in adverse medical results, including any elements of 
                the State drug use review programs required under 
                section 1927(g) that the Secretary determines to be 
                appropriate.
            ``(7) Administrative improvements.--The Secretary shall 
        develop, in consultation with representatives of pharmacies and 
        of other interested persons, a standard claims form for covered 
        outpatient drugs in accordance with title V of the Health 
        Security Act.
            ``(8) Counseling requirements for pharmacies.--A pharmacy 
        may not receive any payment under this part for a covered 
        outpatient drug unless the pharmacy agrees to answer questions 
        of individuals enrolled under this part who receive a covered 
        outpatient drug from the pharmacy regarding the appropriate use 
        of the drug, potential interactions between the drug and other 
        drugs dispensed to the individual, and other matters relating 
        to the dispensing of such drugs.
            ``(9) Definitions.--In this subsection:
                    ``(A) Multiple and single source drugs.--The terms 
                `multiple source drug' and `single source drug' have 
                the meanings of those terms under section 1927(k)(7).
                    ``(B) Restrictive prescription.--A drug has a 
                `restrictive prescription' only if--
                            ``(i) in the case of a written 
                        prescription, the prescription for the drug 
                        indicates, in the handwriting of the physician 
                        or other person prescribing the drug and with 
                        an appropriate phrase (such as `brand medically 
                        necessary') recognized by the Secretary, that a 
                        particular drug product must be dispensed, or
                            ``(ii) in the case of a prescription issued 
                        by telephone--
                                    ``(I) the physician or other person 
                                prescribing the drug (through use of 
                                such an appropriate phrase) states that 
                                a particular drug product must be 
                                dispensed, and
                                    ``(II) the physician or other 
                                person submits to the pharmacy 
                                involved, within 30 days after the date 
                                of the telephone prescription, a 
                                written confirmation which is in the 
                                handwriting of the physician or other 
                                person prescribing the drug and which 
                                indicates with such appropriate phrase 
                                that the particular drug product was 
                                required to have been dispensed.
                    ``(C) Payment calculation period.--The term 
                `payment calculation period' means the 6-month period 
                beginning with January of each year and the 6-month 
                period beginning with July of each year.''.
    (b) Submission of Claims by Pharmacies.--Section 1848(g)(4) of such 
Act (42 U.S.C. 1395w-4(g)(4)) is amended--
            (1) in the heading--
                    (A) by striking ``Physician'', and
                    (B) by inserting ``by physicians and suppliers'' 
                after ``claims'',
            (2) in the matter in subparagraph (A) preceding clause 
        (i)--
                    (A) by striking ``For services furnished on or 
                after September 1, 1990, within 1 year'' and inserting 
                ``Within 1 year (90 days in the case of covered 
                outpatient drugs)'',
                    (B) by striking ``a service'' and inserting ``an 
                item or service'', and
                    (C) by inserting ``or of providing a covered 
                outpatient drug,'' after ``basis,'' and
            (3) in subparagraph (A)(i), by inserting ``item or'' before 
        ``service.
    (c) Special Rules for Carriers.--
            (1) Use of regional carriers.--Section 1842(b)(2) of such 
        Act (42 U.S.C. 1395u(b)(2)) is amended by adding at the end the 
        following:
    ``(D) With respect to activities related to covered outpatient 
drugs, the Secretary may enter into contracts with carriers under this 
section to perform the activities on a regional basis.''.
            (2) Payment on other than a cost basis.--Section 
        1842(c)(1)(A) of such Act (42 U.S.C. 1395u(c)(1)(A)) is 
        amended--
                    (A) by inserting ``(i)'' after ``(c)(1)(A)'',
                    (B) in the first sentence, by inserting ``, except 
                as otherwise provided in clause (ii),'' after ``under 
                this part, and'', and
                    (C) by adding at the end the following:
    ``(ii) To the extent that a contract under this section provides 
for activities related to covered outpatient drugs, the Secretary may 
provide for payment for those activities based on any method of payment 
determined by the Secretary to be appropriate.''.
            (3) Use of other entities for covered outpatient drugs.--
        Section 1842(f) of such Act (42 U.S.C. 1395u(f)) is amended--
                    (A) by striking ``and'' at the end of paragraph 
                (1),
                    (B) by striking the period at the end of paragraph 
                (2) and inserting ``; and'', and
                    (C) by adding at the end the following:
            ``(3) with respect to activities related to covered 
        outpatient drugs, any other private entity which the Secretary 
        determines is qualified to conduct such activities.''.
            (4) Designated carriers to process claims of railroad 
        retirees.--Section 1842(g) of such Act (42 U.S.C. 1395u(g)) is 
        amended by inserting ``(other than functions related to covered 
        outpatient drugs)'' after ``functions''.
    (d) Contracts for Automatic Data Processing Equipment.--Actions 
taken before 1996 that affect contracts related to the processing of 
claims for covered outpatient drugs (as defined in section 1861(t) of 
the Social Security Act) shall not be subject to section 111 of the 
Federal Property and Administrative Services Act of 1949, and shall not 
be subject to administrative or judicial review.
    (e) Conforming Amendments.--
            (1)(A) Section 1833(a)(1) of such Act (42 U.S.C. 
        1395l(a)(1)), as amended by section 13544(b)(2) of OBRA-1993, 
        is amended--
                    (i) by striking ``and'' at the end of clause (O), 
                and
                    (ii) by inserting before the semicolon at the end 
                the following: ``, and (Q) with respect to covered 
                outpatient drugs, the amounts paid shall be as 
                prescribed by section 1834(d)''.
            (B) Section 1833(a)(2) of such Act (42 U.S.C. 1395l(a)(2)) 
        is amended in the matter preceding subparagraph (A) by 
        inserting ``, except for covered outpatient drugs,'' after 
        ``and (I) of such section''.
            (2) Section 1833(b)(2) of such Act (42 U.S.C. 1395l(b)(2)) 
        is amended by inserting ``or with respect to covered outpatient 
        drugs'' before the comma.
            (3) The first sentence of section 1842(h)(2) of such Act 
        (42 U.S.C. 1395u(h)(2)) is amended by inserting ``(other than a 
        carrier described in subsection (f)(3))'' after ``Each 
        carrier''.
            (4) The first sentence of section 1866(a)(2)(A) of such Act 
        (42 U.S.C. 1395cc(a)(2)(A)) is amended--
                    (A) in clause (i), by inserting ``section 
                1834(d),'' after ``section 1833(b),'', and
                    (B) in clause (ii), by inserting ``, other than for 
                covered outpatient drugs,'' after ``provider)''.

SEC. 2003. MEDICARE REBATES FOR COVERED OUTPATIENT DRUGS.

    (a) In General.--Part B of title XVIII of the Social Security Act 
is amended by adding at the end the following new section:

                 ``rebates for covered outpatient drugs

    ``Sec. 1850. (a) Requirement for Rebate Agreement.--In order for 
payment to be available under this part for covered outpatient drugs of 
a manufacturer dispensed on or after January 1, 1996, the manufacturer 
must have entered into and have in effect a rebate agreement with the 
Secretary meeting the requirements of subsection (b), and an agreement 
to give equal access to discounts in accordance with subsection (e).
    ``(b) Terms, Implementation, and Enforcement of Rebate Agreement.--
            ``(1) Periodic rebates.--
                    ``(A) In general.--A rebate agreement under this 
                section shall require the manufacturer to pay to the 
                Secretary for each calendar quarter, not later than 30 
                days after the date of receipt of the information 
                described in paragraph (2) for such quarter, a rebate 
                in an amount determined under subsection (c) for all 
                covered outpatient drugs of the manufacturer described 
                in subparagraph (B).
                    ``(B) Drugs included in quarterly rebate 
                calculation.--Drugs subject to rebate with respect to a 
                calendar quarter are drugs which are dispensed by a 
                pharmacy during such quarter to individuals (other than 
                individuals enrolled with an eligible organization with 
                a contract under section 1876) eligible for benefits 
                under this part, as reported by such pharmacies to the 
                Secretary.
            ``(2) Information furnished to manufacturers.--
                    ``(A) In general.--The Secretary shall report to 
                each manufacturer, not later than 60 days after the end 
                of each calendar quarter, information on the total 
                number, for each covered outpatient drug, of units of 
                each dosage form, strength, and package size dispensed 
                under the plan during the quarter, on the basis of the 
                data reported to the Secretary described in paragraph 
                (1)(B).
                    ``(B) Audit.--The Comptroller General may audit the 
                records of the Secretary to the extent necessary to 
                determine the accuracy of reports by the Secretary 
                pursuant to subparagraph (A). Adjustments to rebates 
                shall be made to the extent determined necessary by the 
                audit to reflect actual units of drugs dispensed.
            ``(3) Provision of price information by manufacturer.--
                    ``(A) Quarterly pricing information.--Each 
                manufacturer with an agreement in effect under this 
                section shall report to the Secretary, not later than 
                30 days after the last day of each calendar quarter, on 
                the average manufacturer retail price and the average 
                manufacturer non-retail price for each dosage form and 
                strength of each covered outpatient drug for the 
                quarter.
                    ``(B) Base quarter prices.--Each manufacturer of a 
                covered outpatient drug with an agreement under this 
                section shall report to the Secretary, by not later 
                than 30 days after the effective date of such agreement 
                (or, if later, 30 days after the end of the base 
                quarter), the average manufacturer retail price, for 
                such base quarter, for each dosage form and strength of 
                each such covered drug.
                    ``(C) Verification of average manufacturer price.--
                The Secretary may inspect the records of manufacturers, 
                and survey wholesalers, pharmacies, and institutional 
                purchasers of drugs, as necessary to verify prices 
                reported under subparagraph (A).
                    ``(D) Penalties.--
                            ``(i) Civil money penalties.--The Secretary 
                        may impose a civil money penalty on a 
                        manufacturer with an agreement under this 
                        section--
                                    ``(I) for failure to provide 
                                information required under subparagraph 
                                (A) on a timely basis, in an amount up 
                                to $10,000 per day of delay;
                                    ``(II) for refusal to provide 
                                information about charges or prices 
                                requested by the Secretary for purposes 
                                of verification pursuant to 
                                subparagraph (C), in an amount up to 
                                $100,000; and
                                    ``(III) for provision, pursuant to 
                                subparagraph (A) or (B), of information 
                                that the manufacturer knows or should 
                                know is false, in an amount up to 
                                $100,000 per item of information.
                        Such civil money penalties are in addition to 
                        any other penalties prescribed by law. The 
                        provisions of section 1128A (other than 
                        subsections (a) (with respect to amounts of 
                        penalties or additional assessments) and (b)) 
                        shall apply to a civil money penalty under this 
                        subparagraph in the same manner as such 
                        provisions apply to a penalty or proceeding 
                        under section 1128A(a).
                            ``(ii) Termination of agreement.--If a 
                        manufacturer with an agreement under this 
                        section has not provided information required 
                        under subparagraph (A) or (B) within 90 days of 
                        the deadline imposed, the Secretary may suspend 
                        the agreement with respect to covered 
                        outpatient drugs dispensed after the end of 
                        such 90-day period and until the date such 
                        information is reported (but in no case shall a 
                        suspension be for less than 30 days).
            ``(4) Length of agreement.--
                    ``(A) In general.--A rebate agreement shall be 
                effective for an initial period of not less than one 
                year and shall be automatically renewed for a period of 
                not less than one year unless terminated under 
                subparagraph (B).
                    ``(B) Termination.--
                            ``(i) By the secretary.--The Secretary may 
                        provide for termination of a rebate agreement 
                        for violation of the requirements of the 
                        agreement or other good cause shown. Such 
                        termination shall not be effective earlier than 
                        60 days after the date of notice of such 
                        termination. The Secretary shall afford a 
                        manufacturer an opportunity for a hearing 
                        concerning such termination, but such hearing 
                        shall not delay the effective date of the 
                        termination.
                            ``(ii) By a manufacturer.--A manufacturer 
                        may terminate a rebate agreement under this 
                        section for any reason. Any such termination 
                        shall not be effective until the calendar 
                        quarter beginning at least 60 days after the 
                        date the manufacturer provides notice to the 
                        Secretary.
                            ``(iii) Effective date of termination.--Any 
                        termination under this subparagraph shall not 
                        affect rebates due under the agreement before 
                        the effective date of its termination.
                            ``(iv) Notice to pharmacies.--In the case 
                        of a termination under this subparagraph, the 
                        Secretary shall notify pharmacies and physician 
                        organizations not less than 30 days before the 
                        effective date of such termination.
    ``(c) Amount of Rebate.--
            ``(1) Basic rebate.--Each manufacturer shall remit a basic 
        rebate to the Secretary for each calendar quarter in an amount, 
        with respect to each dosage form and strength of a covered drug 
        (except as provided under paragraph (4)), equal to the product 
        of--
                    ``(A) the total number of units subject to rebate 
                for such quarter, as described in subsection (b)(1)(B); 
                and
                    ``(B) the greater of--
                            ``(i) the difference between the average 
                        manufacturer retail price and the average 
                        manufacturer non-retail price,
                            ``(ii) 17 percent of the average 
                        manufacturer retail price, or
                            ``(iii) the amount determined pursuant to 
                        paragraph (3).
            ``(2) Additional rebate.--Each manufacturer shall remit to 
        the Secretary, for each calendar quarter, an additional rebate 
        for each dosage form and strength of a covered drug (except as 
        provided under paragraph (4)), in an amount equal to--
                    ``(A) the total number of units subject to rebate 
                for such quarter, as described in subsection (b)(1)(B), 
                multiplied by
                    ``(B) the amount, if any, by which the average 
                manufacturer retail price for covered drugs of the 
                manufacturer exceeds the average manufacturer retail 
                price for the base quarter, increased by the percentage 
                increase in the Consumer Price Index for all urban 
                consumers (U.S. average) from the end of such base 
                quarter to the month before the beginning of such 
                calendar quarter.
            ``(3) Negotiated rebate amount for new drugs.--
                    ``(A) In general.--The Secretary may negotiate with 
                the manufacturer a per-unit rebate amount, in 
                accordance with this paragraph, for any covered 
                outpatient drug (except as provided under paragraph 
                (4)) first marketed after June 30, 1993--
                            ``(i) which is not marketed in any country 
                        specified in section 802(b)(4)(A) of the 
                        Federal Food, Drug, and Cosmetic Act and for 
                        which the Secretary believes the average 
                        manufacturer's retail price may be excessive, 
                        or
                            ``(ii) which is marketed in one or more of 
                        such countries, at prices significantly lower 
                        than the average manufacturer retail price.
                    ``(B) Maximum rebate amount for drugs marketed in 
                certain countries.--The rebate negotiated pursuant to 
                this paragraph for a drug described in subparagraph 
                (A)(ii) may be an amount up to the difference between 
                the average manufacturer retail price and any price at 
                which the drug is available to wholesalers in a country 
                specified in such section 802(b)(4)(A).
                    ``(C) Factors to be considered.--In making 
                determinations with respect to the prices of a covered 
                drug described in subparagraph (A) and in negotiating a 
                rebate amount pursuant to this paragraph, the Secretary 
                shall take into consideration, as applicable and 
                appropriate, the prices of other drugs in the same 
                therapeutic class, cost information requested by the 
                Secretary and supplied by the manufacturer or estimated 
                by the Secretary, prescription volumes, economies of 
                scale, product stability, special manufacturing 
                requirements, prices of the drug in countries specified 
                in subparagraph (A)(i) (in the case of a drug described 
                in such subparagraph), and other relevant factors.
                    ``(D) Option to exclude coverage.--If the Secretary 
                is unable to negotiate with the manufacturer an 
                acceptable rebate amount with respect to a covered 
                outpatient drug pursuant to this paragraph, the 
                Secretary may exclude such drug from coverage under 
                this part.
                    ``(E) Effective date of exclusion from coverage.--
                An exclusion of a drug from coverage pursuant to 
                subparagraph (D) shall be effective on and after--
                            ``(i) the date 6 months after the effective 
                        date of marketing approval of such drug by the 
                        Food and Drug Administration (but in no event 
                        earlier than July 1, 1996), or
                            ``(ii) the date the manufacturer terminates 
                        negotiations with the Secretary concerning the 
                        rebate amount,
                whichever is earlier.
            ``(4) No rebate required for generic drugs.--Paragraphs (1) 
        through (3) shall not apply with respect to a covered 
        outpatient drug that is not a single source drug or an 
        innovator multiple source drug (as such terms are defined in 
        section 1927(k)).
            ``(5) Deposit of rebates.--The Secretary shall deposit 
        rebates under this section in the Federal Supplementary Medical 
        Insurance Trust Fund established under section 1841.
    ``(d) Confidentiality of Information.--Notwithstanding any other 
provision of law, information disclosed by a manufacturer under this 
section is confidential and shall not be disclosed by the Secretary, 
except--
            ``(A) as the Secretary determines to be necessary to carry 
        out this section,
            ``(B) to permit the Comptroller General to review the 
        information provided, and
            ``(C) to permit the Director of the Congressional Budget 
        Office to review the information provided.
    ``(e) Agreement to Give Equal Access to Discounts.--An agreement 
under this subsection by a manufacturer of covered outpatient drugs 
shall guarantee that the manufacturer will offer, to each wholesaler or 
retailer (or other purchaser representing a group of such wholesalers 
or retailers) that purchases such drugs on substantially the same terms 
(including such terms as prompt payment, cash payment, volume purchase, 
single-site delivery, the use of formularies by purchasers, and any 
other terms effectively reducing the manufacturer's costs) as any other 
purchaser (including any institutional purchaser) the same price for 
such drugs as is offered to such other purchaser. In determining a 
manufacturer's compliance with the previous sentence, there shall not 
be taken into account terms offered to the Department of Veterans 
Affairs, the Department of Defense, or any public program.
    ``(f) Definitions.--For purposes of this section--
            ``(1) Average manufacturer retail price.--The term `average 
        manufacturer retail price' means, with respect to a covered 
        outpatient drug of a manufacturer for a calendar quarter, the 
        average price (inclusive of discounts for cash payment, prompt 
        payment, volume purchases, and rebates (other than rebates 
        under this section), but exclusive of nominal prices) paid to 
        the manufacturer for the drug in the United States for drugs 
        distributed to the retail pharmacy class of trade.
            ``(2) Average manufacturer non-retail price.--The term 
        `average manufacturer non-retail price' means, with respect to 
        a covered outpatient drug of a manufacturer for a calendar 
        quarter, the weighted average price (inclusive of discounts for 
        cash payment, prompt payment, volume purchases, and rebates 
        (other than rebates under this section), but exclusive of 
        nominal prices) paid to the manufacturer for the drug in the 
        United States by hospitals and other institutional purchasers 
        that purchase drugs for institutional use and not for resale.
            ``(3) Base quarter.--The term `base quarter' means, with 
        respect to a covered outpatient drug of a manufacturer, the 
        calendar quarter beginning April 1, 1993, or (if later) the 
        first full calendar quarter during which the drug was marketed 
        in the United States.
            ``(4) Covered drug.--The term `covered drug' includes each 
        innovator multiple source drug and single source drug, as those 
        terms are defined in section 1927(k)(7).
            ``(5) Manufacturer.--The term `manufacturer' means, with 
        respect to a covered outpatient drug--
                    ``(A) the entity whose National Drug Code number 
                (as issued pursuant to section 510(e) of the Federal 
                Food, Drug, and Cosmetic Act) appears on the labeling 
                of the drug; or
                    ``(B) if the number described in subparagraph (A) 
                does not appear on the labeling of the drug, the person 
                named as the applicant in a human drug application (in 
                the case of a new drug) or the product license 
                application (in the case of a biological product) for 
                such drug approved by the Food and Drug 
                Administration.''.
    (b) Exclusions From Coverage.--Section 1862(a) of such Act (42 
U.S.C. 1395y(a)), as amended by sections 4034(b)(4) and 4118(b), is 
amended--
            (1) by striking ``and'' at the end of paragraph (15),
            (2) by striking the period at the end of paragraph (16) and 
        inserting ``; or'', and
            (3) by inserting after paragraph (16) the following new 
        paragraph:
            ``(17) A covered outpatient drug (as described in section 
        1861(t))--
                    ``(A) furnished during a year for which the drug's 
                manufacturer does not have in effect a rebate agreement 
                with the Secretary that meets the requirements of 
                section 1850 for the year, or
                    ``(B) excluded from coverage during the year by the 
                Secretary pursuant to section 1850(c)(3)(D) (relating 
                to negotiated rebate amounts for certain new drugs).''.

SEC. 2004. EXTENSION OF 25 PERCENT RULE FOR PORTION OF PREMIUM 
              ATTRIBUTABLE TO COVERED OUTPATIENT DRUGS.

    Section 1839(e) of the Social Security Act (42 U.S.C. 1395r(e)) is 
amended by adding at the end the following:
    ``(3) Notwithstanding the provisions of subsection (a), the portion 
of the monthly premium for each individual enrolled under this part for 
each month after December 1998 that is attributable to covered 
outpatient drugs shall be an amount equal to 50 percent of the portion 
of the monthly actuarial rate for enrollees age 65 and over, as 
determined under subsection (a)(1) and applicable to such month, that 
is attributable to covered outpatient drugs.''.

SEC. 2005. COVERAGE OF HOME INFUSION DRUG THERAPY SERVICES.

    (a) In General.--Section 1832(a)(2)(A) of the Social Security Act 
(42 U.S.C. 1395k(a)(2)(A)) is amended by inserting ``and home infusion 
drug therapy services'' before the semicolon.
    (b) Home Infusion Drug Therapy Services Defined.--Section 1861 of 
such Act (42 U.S.C. 1395x) is amended--
            (1) by redesignating the subsection (jj) inserted by 
        section 4156(a)(2) of the Omnibus Budget Reconciliation Act of 
        1990 as subsection (kk); and
            (2) by inserting after such subsection the following new 
        subsection:

                 ``Home Infusion Drug Therapy Services

    ``(ll)(1) The term `home infusion drug therapy services' means the 
items and services described in paragraph (2) furnished to an 
individual who is under the care of a physician--
            ``(A) in a place of residence used as the individual's 
        home,
            ``(B) by a qualified home infusion drug therapy provider 
        (as defined in paragraph (3)) or by others under arrangements 
        with them made by that provider, and
            ``(C) under a plan established and periodically reviewed by 
        a physician.
    ``(2) The items and services described in this paragraph are such 
nursing, pharmacy, and related services (including medical supplies, 
intravenous fluids, delivery, and equipment) as are necessary to 
conduct safely and effectively a drug regimen through use of a covered 
home infusion drug (as defined in subsection (t)(5)), but do not 
include such covered home infusion drugs.
    ``(3) The term `qualified home infusion drug therapy provider' 
means any entity that the Secretary determines meets the following 
requirements:
            ``(A) The entity is capable of providing or arranging for 
        the items and services described in paragraph (2) and covered 
        home infusion drugs.
            ``(B) The entity maintains clinical records on all 
        patients.
            ``(C) The entity adheres to written protocols and policies 
        with respect to the provision of items and services.
            ``(D) The entity makes services available (as needed) seven 
        days a week on a 24-hour basis.
            ``(E) The entity coordinates all service with the patient's 
        physician.
            ``(F) The entity conducts a quality assessment and 
        assurance program, including drug regimen review and 
        coordination of patient care.
            ``(G) The entity assures that only trained personnel 
        provide covered home infusion drugs (and any other service for 
        which training is required to provide the service safely).
            ``(H) The entity assumes responsibility for the quality of 
        services provided by others under arrangements with the entity.
            ``(I) In the case of an entity in any State in which State 
        or applicable local law provides for the licensing of entities 
        of this nature, the entity (i) is licensed pursuant to such 
        law, or (ii) is approved, by the agency of such State or 
        locality responsible for licensing entities of this nature, as 
        meeting the standards established for such licensing.
            ``(J) The entity meets such other requirements as the 
        Secretary may determine are necessary to assure the safe and 
        effective provision of home infusion drug therapy services and 
        the efficient administration of the home infusion drug therapy 
        benefit.''.
    (c) Payment.--
            (1) In general.--Section 1833 of such Act (42 U.S.C. 1395l) 
        is amended--
                    (A) in subsection (a)(2)(B), by striking ``or (E)'' 
                and inserting ``(E), or (F)'',
                    (B) in subsection (a)(2)(D), by striking ``and'' at 
                the end,
                    (C) in subsection (a)(2)(E), by striking the 
                semicolon and inserting ``; and'',
                    (D) by inserting after subsection (a)(2)(E) the 
                following new subparagraph:
                    ``(F) with respect to home infusion drug therapy 
                services, the amounts described in section 1834(j);'', 
                and
                    (E) in the first sentence of subsection (b), by 
                striking ``services, (3)'' and inserting ``services and 
                home infusion drug therapy services, (3)''.
            (2) Amount described.--Section 1834 of such Act, as amended 
        by section 13544(b)(i) of OBRA-1993, is amended by adding at 
        the end the following new subsection:
    ``(j) Home Infusion Drug Therapy Services.--
            ``(1) In general.--With respect to home infusion drug 
        therapy services, payment under this part shall be made in an 
        amount equal to the lesser of the actual charges for such 
        services or the fee schedule established under paragraph (2).
            ``(2) Establishment of fee schedule.--The Secretary shall 
        establish by regulation before the beginning of 1996 and each 
        succeeding year a fee schedule for home infusion drug therapy 
        services for which payment is made under this part. A fee 
        schedule established under this subsection shall be on a per 
        diem basis.''.
            (3) Prohibition on certain referrals.--Section 1877(h)(6) 
        of such Act (42 U.S.C. 1395nn(h)(6)), as amended by section 
        13562(a) of OBRA-1993, is amended by adding at the end the 
        following:
                    ``(L) Home infusion drug therapy services.''.
    (d) Certification.--Section 1835(a)(2) of such Act (42 U.S.C. 
1395n(a)(2)) is amended--
            (1) by striking ``and'' at the end of subparagraph (E),
            (2) by striking the period at the end of subparagraph (F) 
        and inserting ``; and'', and
            (3) by inserting after subparagraph (F) the following:
                    ``(G) in the case of home infusion drug therapy 
                services, (i) such services are or were required 
                because the individual needed such services for the 
                administration of a covered home infusion drug, (ii) a 
                plan for furnishing such services has been established 
                and is reviewed periodically by a physician, and (iii) 
                such services are or were furnished while the 
                individual is or was under the care of a physician.''.
    (e) Certification of Home infusion Drug Therapy Providers; 
Intermediate Sanctions for Noncompliance.--
            (1) Treatment as provider of services.--Section 1861(u) of 
        such Act (42 U.S.C. 1395x(u)) is amended by inserting ``home 
        infusion drug therapy provider,'' after ``hospice program,''.
            (2) Consultation with state agencies and other 
        organizations.--Section 1863 of such Act (42 U.S.C. 1395z) is 
        amended by striking ``and (dd)(2)'' and inserting ``(dd)(2), 
        and (ll)(3)''.
            (3) Use of state agencies in determining compliance.--
        Section 1864(a) of such Act (42 U.S.C. 1395aa(a)) is amended--
                    (A) in the first sentence, by striking ``an agency 
                is a hospice program'' and inserting ``an agency or 
                entity is a hospice program or a home infusion drug 
                therapy provider,''; and
                    (B) in the second sentence--
                            (i) by striking ``institution or agency'' 
                        and inserting ``institution, agency, or 
                        entity'', and
                            (ii) by striking ``or hospice program'' and 
                        inserting ``hospice program, or home infusion 
                        drug therapy provider''.
            (4) Application of intermediate sanctions.--Section 1846 of 
        such Act (42 U.S.C. 1395w-2) is amended--
                    (A) in the heading, by adding ``and for qualified 
                home infusion drug therapy providers'' at the end,
                    (B) in subsection (a), by inserting ``or that a 
                qualified home infusion drug therapy provider that is 
                certified for participation under this title no longer 
                substantially meets the requirements of section 
                1861(ll)(3)'' after ``under this part'', and
                    (C) in subsection (b)(2)(A)(iv), by inserting ``or 
                home infusion drug therapy services'' after ``clinical 
                diagnostic laboratory tests''.
    (f) Use of Regional Intermediaries in Administration of Benefit.--
Section 1816 of such Act (42 U.S.C. 1395h) is amended by adding at the 
end the following new subsection:
    ``(k) With respect to carrying out functions relating to payment 
for home infusion drug therapy services and covered home infusion 
drugs, the Secretary may enter into contracts with agencies or 
organizations under this section to perform such functions on a 
regional basis.''.
    (g) Conforming Amendments Relating to Coverage of Enteral and 
Parenteral Nutrients, Supplies, and Equipment.--(1) Section 
1834(h)(4)(B) of such Act (42 U.S.C. 1395m(h)(4)(B)) is amended by 
striking ``, except that'' and all that follows through ``equipment''.
    (2) Section 1861(s)(8) of such Act (42 U.S.C. 1395x(s)(8)) is 
amended by inserting after ``dental'' the following: ``devices or 
enteral and parenteral nutrients, supplies, and equipment''.

SEC. 2006. CONFORMING AMENDMENTS TO MEDICAID PROGRAM.

    (a) In General.--
            (1) Requiring medicare rebate as condition of coverage.--
        The first sentence of section 1927(a)(1) of the Social Security 
        Act (42 U.S.C. 1396r-8(a)(1)) is amended--
                    (A) in the first sentence of paragraph (1), by 
                striking ``and paragraph (6)'' and inserting ``, 
                paragraph (6), and (for calendar quarters beginning on 
                or after January 1, 1996) paragraph (7)''; and
                    (B) by adding at the end the following new 
                paragraph:
            ``(7) Requirement relating to rebate agreements for covered 
        outpatient drugs under medicare program.--A manufacturer meets 
        the requirements of this paragraph for quarters in a year if 
        the manufacturer has in effect an agreement with the Secretary 
        under section 1850 for providing rebates for covered outpatient 
        drugs furnished to individuals under title XVIII during the 
        year.''.
            (2) Non-duplication of rebates.--Section 1927(b)(1) of such 
        Act (42 U.S.C. 1396r-8(b)(1)) is amended--
                    (A) by redesignating subparagraph (B) as 
                subparagraph (C), and
                    (B) by inserting after subparagraph (A) the 
                following new subparagraph:
                    ``(B) Non-duplication of medicare rebate.--Covered 
                drugs furnished to an individual eligible for benefits 
                under part B of title XVIII and enrolled in a State 
                plan under this title shall not be included in the 
                determination of units of covered outpatient drugs 
                subject to rebate under this section.''.
    (b) Effective Date.--The amendments made by subsection (a) shall 
apply to quarters beginning on or after January 1, 1996.

SEC. 2007. EFFECTIVE DATE.

    Except as otherwise provided, the amendments made by this subtitle 
shall apply to items and services furnished on or after January 1, 
1996.

                                                   Title II, Subtitle B

                       Subtitle B--Long-Term Care

   PART 1--STATE PROGRAMS FOR HOME AND COMMUNITY-BASED SERVICES FOR 
                     INDIVIDUALS WITH DISABILITIES

SEC. 2101. STATE PROGRAMS FOR HOME AND COMMUNITY-BASED SERVICES FOR 
              INDIVIDUALS WITH DISABILITIES.

    (a) In General.--Each State that has a plan for the home and 
community-based services to individuals with disabilities submitted to 
and approved by the Secretary under section 2102(b) is entitled to 
payment in accordance with section 2108.
    (b) No Individual Entitlement Established.--Nothing in this part 
shall be construed to create an entitlement for individuals or a 
requirement that a State with such an approved plan expend the entire 
amount of funds to which it is entitled in any year.

SEC. 2102. STATE PLANS.

    (a) Plan Requirements.--In order to be approved under subsection 
(b), a State plan for home and community-based services for individuals 
with disabilities must meet the following requirements:
            (1) Eligibility.--
                    (A) In general.--Within the amounts provided by the 
                State (and under section 2108) for such plan, the plan 
                shall provide that services under the plan will be 
                available to individuals with disabilities (as defined 
                in section 2103(a)) in the State.
                    (B) Initial screening.--The plan shall provide a 
                process for the initial screening of individuals who 
                appear to have some reasonable likelihood of being an 
                individual with disabilities.
                    (C) Restrictions.--The plan may not limit the 
                eligibility of individuals with disabilities based on--
                            (i) income,
                            (ii) age,
                            (iii) geography,
                            (iv) nature, severity, or category of 
                        disability,
                            (v) residential setting (other than an 
                        institutional setting), or
                            (vi) other grounds specified by the 
                        Secretary.
                    (D) Maintenance of effort.--The plan must provide 
                assurances that, in the case of an individual receiving 
                medical assistance for home and community-based 
                services under the State medicaid plan as of the date 
                of the enactment of this Act, the State will continue 
                to make available (either under this plan, under the 
                State medicaid plan, or otherwise) to such individual 
                an appropriate level of assistance for home and 
                community-based services, taking into account the level 
                of assistance provided as of such date and the 
                individual's need for home and community-based 
                services.
            (2) Services.--
                    (A) Specification.--Consistent with section 2104, 
                the plan shall specify--
                            (i) the services made available under the 
                        plan,
                            (ii) the extent and manner in which such 
                        services are allocated and made available to 
                        individuals with disabilities, and
                            (iii) the manner in which services under 
                        the plan are coordinated with each other and 
                        with health and long-term care services 
                        available outside the plan for individuals with 
                        disabilities.
                    (B) Allocation.--The State plan--
                            (i) shall specify how it will allocate 
                        services under the plan, during and after the 
                        7-fiscal-year phase-in period beginning with 
                        fiscal year 1996, among covered individuals 
                        with disabilities, and
                            (ii) may not allocate such services based 
                        on the income or other financial resources of 
                        such individuals.
                    (C) Limitation on licensure or certification.--The 
                State may not subject consumer-directed providers of 
                personal assistance services to licensure, 
                certification, or other requirements which the 
                Secretary finds not to be necessary for the health and 
                safety of individuals with disabilities.
                    (D) Consumer choice.--To the extent possible, the 
                choice of an individual with disabilities (and that 
                individual's family) regarding which covered services 
                to receive and the providers who will provide such 
                services shall be followed.
                    (E) Requirement to serve low-income individuals.--
                The plan shall assure that--
                            (i) the proportion of the population of 
                        low-income individuals with disabilities in the 
                        State that represents individuals with 
                        disabilities who are provided home and 
                        community-based services either under the plan, 
                        under the State medicaid plan, or under both, 
                        is not less than
                            (ii) the proportion of the population of 
                        the State that represents individuals who are 
                        low-income individuals.
            (3) Cost sharing.--The plan shall impose cost sharing with 
        respect to covered services only in accordance with section 
        2105.
            (4) Types of providers and requirements for 
        participation.--The plan shall specify--
                    (A) the types of service providers eligible to 
                participate in the program under the plan, which shall 
                include consumer-directed providers, and
                    (B) any requirements for participation applicable 
                to each type of service provider.
            (5) Budget.--The plan shall specify how the State will 
        manage Federal and State funds available under the plan for 
        each fiscal year during the period beginning with fiscal year 
        1996 and ending with fiscal year 2003 and for each 5-fiscal-
        year periods thereafter to serve all categories of individuals 
        with disabilities and meet the requirements of this subsection. 
        If the Secretary makes an adjustment under section 
        2109(a)(5)(C) for a year, each State shall update the 
        specifications under this paragraph to reflect the impact of 
        such an adjustment.
            (6) Provider reimbursement.--
                    (A) Payment methods.--The plan shall specify the 
                payment methods to be used to reimburse providers for 
                services furnished under the plan. Such methods may 
                include retrospective reimbursement on a fee-for-
                service basis, prepayment on a capitation basis, 
                payment by cash or vouchers to individuals with 
                disabilities, or any combination of these methods. In 
                the case of the use of cash or vouchers, the plan shall 
                specify how the plan will assure compliance with 
                applicable employment tax provisions.
                    (B) Payment rates.--The plan shall specify the 
                methods and criteria to be used to set payment rates 
                for services furnished under the plan (including rates 
                for cash payments or vouchers to individuals with 
                disabilities).
                    (C) Plan payment as payment in full.--The plan 
                shall restrict payment under the plan for covered 
                services to those providers that agree to accept the 
                payment under the plan (at the rates established 
                pursuant to subparagraph (B)) and any cost sharing 
                permitted or provided for under section 2105 as payment 
                in full for services furnished under the plan.
            (7) Quality assurance and safeguards.--The State plan shall 
        provide for quality assurance and safeguards for applicants and 
        beneficiaries in accordance with section 2106.
            (8) Advisory group.--The State plan shall--
                    (A) assure the establishment and maintenance of an 
                advisory group under section 2107(b), and
                    (B) include the documentation prepared by the group 
                under section 2107(b)(4).
            (9) Administration.--
                    (A) State agency.--The plan shall designate a State 
                agency or agencies to administer (or to supervise the 
                administration of) the plan.
                    (B) Administrative expenditures.--Effective 
                beginning with fiscal year 2003, the plan shall contain 
                assurances that not more than 10 percent of 
                expenditures under the plan for all quarters in any 
                fiscal year shall be for administrative costs.
                    (C) Coordination.--The plan shall specify how the 
                plan--
                            (i) will be integrated with the State 
                        medicaid plan, titles V and XX of the Social 
                        Security Act, programs under the Older 
                        Americans Act of 1965, programs under the 
                        Developmental Disabilities Assistance and Bill 
                        of Rights Act, the Individuals with 
                        Disabilities Education Act, and any other 
                        Federal or State programs that provide services 
                        or assistance targeted to individuals with 
                        disabilities, and
                            (ii) will be coordinated with health plans.
            (10) Reports and information to secretary; audits.--The 
        plan shall provide that the State will furnish to the 
        Secretary--
                    (A) such reports, and will cooperate with such 
                audits, as the Secretary determines are needed 
                concerning the State's administration of its plan under 
                this part, including the processing of claims under the 
                plan, and
                    (B) such data and information as the Secretary may 
                require in order to carry out the Secretary's 
                responsibilities.
            (11) Use of state funds for matching.--The plan shall 
        provide assurances that Federal funds will not be used to 
        provide for the State share of expenditures under this part.
            (12) Health care worker redeployment requirement.--The plan 
        provides for compliance with the requirement of section 
        3074(a).
    (b) Approval of Plans.--The Secretary shall approve a plan 
submitted by a State if the Secretary determines that the plan--
            (1) was developed by the State after consultation with 
        individuals with disabilities and representatives of groups of 
        such individuals, and
            (2) meets the requirements of subsection (a).
The approval of such a plan shall take effect as of the first day of 
the first fiscal year beginning after the date of such approval (except 
that any approval made before January 1, 1996, shall be effective as of 
January 1, 1996). In order to budget funds allotted under this part, 
the Secretary may establish a deadline for the submission of such a 
plan before the beginning of a fiscal year as a condition of its 
approval effective with that fiscal year.
    (c) Monitoring.--The Secretary shall monitor the compliance of 
State plans with the eligibility requirements of section 2103 and may 
monitor the compliance of such plans with other requirements of this 
part.
    (d) Regulations.--The Secretary shall issue such regulations as may 
be appropriate to carry out this part on a timely basis.

SEC. 2103. INDIVIDUALS WITH DISABILITIES DEFINED.

    (a) In General.--In this part, the term ``individual with 
disabilities'' means any individual within one or more of the following 
4 categories of individuals:
            (1) Individuals requiring help with activities of daily 
        living.--An individual of any age who--
                    (A) requires hands-on or standby assistance, 
                supervision, or cueing (as defined in regulations) to 
                perform three or more activities of daily living (as 
                defined in subsection (c)), and
                    (B) is expected to require such assistance, 
                supervision, or cueing over a period of at least 100 
                days.
            (2) Individuals with severe cognitive or mental 
        impairment.--An individual of any age--
                    (A) whose score, on a standard mental status 
                protocol (or protocols) appropriate for measuring the 
                individual's particular condition specified by the 
                Secretary, indicates either severe cognitive impairment 
                or severe mental impairment, or both;
                    (B) who--
                            (i) requires hands-on or standby 
                        assistance, supervision, or cueing with one or 
                        more activities of daily living,
                            (ii) requires hands-on or standby 
                        assistance, supervision, or cueing with at 
                        least such instrumental activity (or 
                        activities) of daily living related to 
                        cognitive or mental impairment as the Secretary 
                        specifies, or
                            (iii) displays symptoms of one or more 
                        serious behavioral problems (that is on a list 
                        of such problems specified by the Secretary) 
                        which create a need for supervision to prevent 
                        harm to self or others; and
                    (C) whose is expected to meet the requirements of 
                subparagraphs (A) and (B) over a period of at least 100 
                days.
            (3) Individuals with severe or profound mental 
        retardation.--An individual of any age who has severe or 
        profound mental retardation (as determined according to a 
        protocol specified by the Secretary).
            (4) Severely disabled children.--An individual under 6 
        years of age who--
                    (A) has a severe disability or chronic medical 
                condition,
                    (B) but for receiving personal assistance services 
                or any of the services described in section 2104(d)(1), 
                would require institutionalization in a hospital, 
                nursing facility, or intermediate care facility for the 
                mentally retarded, and
                    (C) is expected to have such disability or 
                condition and require such services over a period of at 
                least 100 days.
    (b) Determination.--
            (1) In general.--The determination of whether an individual 
        is an individual with disabilities shall be made, by persons or 
        entities specified under the State plan, using a uniform 
        protocol consisting of an initial screening and assessment 
        specified by the Secretary. A State may collect additional 
        information, at the time of obtaining information to make such 
        determination, in order to provide for the assessment and plan 
        described in section 2104(b) or for other purposes. The State 
        shall establish a fair hearing process for appeals of such 
        determinations.
            (2) Periodic reassessment.--The determination that an 
        individual is an individual with disabilities shall be 
        considered to be effective under the State plan for a period of 
        not more than 12 months (or for such longer period in such 
        cases as a significant change in an individual's condition that 
        may affect such determination is unlikely). A reassessment 
        shall be made if there is a significant change in an 
        individual's condition that may affect such determination.
    (c) Activity of Daily Living Defined.--In this part, the term 
``activity of daily living'' means any of the following: eating, 
toileting, dressing, bathing, and transferring.

SEC. 2104. HOME AND COMMUNITY-BASED SERVICES COVERED UNDER STATE PLAN.

    (a) Specification.--
            (1) In general.--Subject to the succeeding provisions of 
        this section, the State plan under this part shall specify--
                    (A) the home and community-based services available 
                under the plan to individuals with disabilities (or to 
                such categories of such individuals), and
                    (B) any limits with respect to such services.
            (2) Flexibility in meeting individual needs.--The services 
        shall be specified in a manner that permits sufficient 
        flexibility for providers to meet the needs of individuals with 
        disabilities in a cost effective manner. Subject to subsection 
        (e)(1)(B), such services may be delivered in an individual's 
        home, a range of community residential arrangements, or outside 
        the home.
    (b) Requirement for Needs Assessment and Plan of Care.--
            (1) In general.--The State plan shall provide for home and 
        community-based services to an individual with disabilities 
        only if--
                    (A) a comprehensive assessment of the individual's 
                need for home and community-based services (regardless 
                of whether all needed services are available under the 
                plan) has been made,
                    (B) an individualized plan of care based on such 
                assessment is developed, and
                    (C) such services are provided consistent with such 
                plan of care.
            (2) Involvement of individuals.--The individualized plan of 
        care under paragraph (1)(B) for an individual with disabilities 
        shall--
                    (A) be developed by qualified individuals 
                (specified under the State plan),
                    (B) be developed and implemented in close 
                consultation with the individual and the individual's 
                family,
                    (C) be approved by the individual (or the 
                individual's representative), and
                    (D) be reviewed and updated not less often than 
                every 6 months.
            (3) Plan of care.--The plan of care under paragraph (1)(B) 
        shall--
                    (A) specify which services specified under the 
                individual plan will be provided under the State plan 
                under this part,
                    (B) identify (to the extent possible) how the 
                individual will be provided any services specified 
                under the plan of care and not provided under the State 
                plan, and
                    (C) specify how the provision of services to the 
                individual under the plan will be coordinated with the 
                provision of other health care services to the 
                individual.
        The State shall make reasonable efforts to identify and arrange 
        for services described in subparagraph (B). Nothing in this 
        subsection shall be construed as requiring a State (under the 
        State plan or otherwise) to provide all the services specified 
        in such a plan.
    (c) Mandatory Coverage of Personal Assistance Services.--The State 
plan shall include, in the array of services made available to each 
category of individuals with disabilities, both agency-administered and 
consumer-directed personal assistance services (as defined in 
subsection (g)).
    (d) Additional Services.--
            (1) Types of services.--Subject to subsection (e), services 
        available under a State plan under this part shall include any 
        (or all) of the following:
                    (A) Case management.
                    (B) Homemaker and chore assistance.
                    (C) Home modifications.
                    (D) Respite services.
                    (E) Assistive devices.
                    (F) Adult day services.
                    (G) Habilitation and rehabilitation.
                    (H) Supported employment.
                    (I) Home health services.
                    (J) Any other care or assistive services (approved 
                by the Secretary) that the State determines will help 
                individuals with disabilities to remain in their homes 
                and communities.
            (2) Criteria for selection of services.--The State plan 
        shall specify--
                    (A) the methods and standards used to select the 
                types, and the amount, duration, and scope, of services 
                to be covered under the plan and to be available to 
                each category of individuals with disabilities, and
                    (B) how the types, and the amount, duration, and 
                scope, of services specified meet the needs of 
                individuals within each of the 4 categories of 
                individuals with disabilities.
    (e) Exclusions and Limitations.--
            (1) In general.--A State plan may not provide for coverage 
        of--
                    (A) room and board,
                    (B) services furnished in a hospital, nursing 
                facility, intermediate care facility for the mentally 
                retarded, or other institutional setting specified by 
                the Secretary, or
                    (C) items and services to the extent coverage is 
                provided for the individual under a health plan or the 
                medicare program.
            (2) Taking into account informal care.--A State plan may 
        take into account, in determining the amount and array of 
        services made available to covered individuals with disability, 
        the availability of informal care.
    (f) Payment for Services.--A State plan may provide for the use 
of--
            (1) vouchers,
            (2) cash payments directly to individuals with 
        disabilities,
            (3) capitation payments to health plans, and
            (4) payment to providers,
to pay for covered services.
    (g) Personal Assistance Services.--
            (1) In general.--In this section, the term ``personal 
        assistance services'' means those services specified under the 
        State plan as personal assistance services and shall include at 
        least hands-on and standby assistance, supervision, and cueing 
        with activities of daily living, whether agency-administered or 
        consumer-directed (as defined in paragraph (2)).
            (2) Consumer-directed; agency-administered.--In this part:
                    (A) The term ``consumer-directed'' means, with 
                reference to personal assistance services or the 
                provider of such services, services that are provided 
                by an individual who is selected and managed (and, at 
                the individual's option, trained) by the individual 
                receiving the services.
                    (B) The term ``agency-administered'' means, with 
                respect to such services, services that are not 
                consumer-directed.

SEC. 2105. COST SHARING.

    (a) No or Nominal Cost Sharing for Poorest.--The State plan may not 
impose any cost sharing (other than nominal cost sharing) for 
individuals with income (as determined under subsection (c)) less than 
150 percent of the official poverty line (referred to in section 
1902(25)(A)) applicable to a family of the size involved (determined 
without regard to section 1902(25)(B)).
    (b) Sliding Scale for Remainder.--The State plan shall impose cost 
sharing in the form of coinsurance (based on the amount paid under the 
State plan for a service)--
            (1) at a rate of 10 percent for individuals with 
        disabilities with income not less than 150 percent, and less 
        than 200 percent, of such official poverty line (as so 
        applied);
            (2) at a rate of 20 percent for such individuals with 
        income not less than 200 percent, and less than 250 percent, of 
        such official poverty line (as so applied); and
            (3) at a rate of 25 percent for such individuals with 
        income equal to at least 250 percent of such official poverty 
        line (as so applied).
    (c) Determination of Income for Purposes of Cost Sharing.--The 
State plan shall specify the process to be used to determine the income 
of an individual with disabilities for purposes of this section. Such 
process shall be consistent with standards specified by the Secretary.

SEC. 2106. QUALITY ASSURANCE AND SAFEGUARDS.

    (a) Quality Assurance.--The State plan shall specify how the State 
will ensure and monitor the quality of services, including--
            (1) safeguarding the health and safety of individuals with 
        disabilities,
            (2) the minimum standards for agency providers and how such 
        standards will be enforced,
            (3) the minimum competency requirements for agency provider 
        employees who provide direct services under this part and how 
        the competency of such employees will be enforced,
            (4) obtaining meaningful consumer input, including consumer 
        surveys that measure the extent to which participants receive 
        the services described in the plan of care and participant 
        satisfaction with such services,
            (5) participation in quality assurance activities, and
            (6) specifying the role of the long-term care ombudsman 
        (under the Older Americans Act of 1965) and the Protection and 
        Advocacy Agency (under the Developmental Disabilities 
        Assistance and Bill of Rights Act) in assuring quality of 
        services and protecting the rights of individuals with 
        disabilities.
    (b) Safeguards.--
            (1) Confidentiality.--The State plan shall provide 
        safeguards which restrict the use or disclosure of information 
        concerning applicants and beneficiaries to purposes directly 
        connected with the administration of the plan (including 
        performance reviews under section 2602).
            (2) Safeguards against abuse.--The State plans shall 
        provide safeguards against physical, emotional, or financial 
        abuse or exploitation (specifically including appropriate 
        safeguards in cases where payment for program benefits is made 
        by cash payments or vouchers given directly to individuals with 
        disabilities).

SEC. 2107. ADVISORY GROUPS.

    (a) Federal Advisory Group.--
            (1) Establishment.--The Secretary shall establish an 
        advisory group, to advise the Secretary and States on all 
        aspects of the program under this part.
            (2) Composition.--The group shall be composed of 
        individuals with disabilities and their representatives, 
        providers, Federal and State officials, and local community 
        implementing agencies. A majority of its members shall be 
        individuals with disabilities and their representatives.
    (b) State Advisory Groups.--
            (1) In general.--Each State plan shall provide for the 
        establishment and maintenance of an advisory group to advise 
        the State on all aspects of the State plan under this part.
            (2) Composition.--Members of each advisory group shall be 
        appointed by the Governor (or other chief executive officer of 
        the State) and shall include individuals with disabilities and 
        their representatives, providers, State officials, and local 
        community implementing agencies. A majority of its members 
        shall be individuals with disabilities and their 
        representatives.
            (3) Selection of members.--Each State shall establish a 
        process whereby all residents of the State, including 
        individuals with disabilities and their representatives, shall 
        be given the opportunity to nominate members to the advisory 
        group.
            (4) Particular concerns.--Each advisory group shall--
                    (A) before the State plan is developed, advise the 
                State on guiding principles and values, policy 
                directions, and specific components of the plan,
                    (B) meet regularly with State officials involved in 
                developing the plan, during the development phase, to 
                review and comment on all aspects of the plan,
                    (C) participate in the public hearings to help 
                assure that public comments are addressed to the extent 
                practicable,
                    (D) document any differences between the group's 
                recommendations and the plan,
                    (E) document specifically the degree to which the 
                plan is consumer-directed, and
                    (F) meet regularly with officials of the designated 
                State agency (or agencies) to provide advice on all 
                aspects of implementation and evaluation of the plan.

SEC. 2108. PAYMENTS TO STATES.

    (a) In General.--Subject to section 2102(a)(9)(B) (relating to 
limitation on payment for administrative costs), the Secretary, in 
accordance with the Cash Management Improvement Act, shall authorize 
payment to each State with a plan approved under this part, for each 
quarter (beginning on or after January 1, 1996), from its allotment 
under section 2109(b), an amount equal to--
            (1) the Federal matching percentage (as defined in 
        subsection (b)) of amount demonstrated by State claims to have 
        been expended during the quarter for home and community-based 
        services under the plan for individuals with disabilities; plus
            (2) an amount equal to 90 percent of amount expended during 
        the quarter under the plan for activities (including 
        preliminary screening) relating to determination of eligibility 
        and performance of needs assessment; plus
            (3) an amount equal to 90 percent (or, beginning with 
        quarters in fiscal year 2003, 75 percent) of the amount 
        expended during the quarter for the design, development, and 
        installation of mechanical claims processing systems and for 
        information retrieval; plus
            (4) an amount equal to 50 percent of the remainder of the 
        amounts expended during the quarter as found necessary by the 
        Secretary for the proper and efficient administration of the 
        State plan.
    (b) Federal Matching Percentage.--
            (1) In general.--In subsection (a), the term ``Federal 
        matching percentage'' means, with respect to a State, the 
        reference percentage specified in paragraph (2) increased by 28 
        percentage points, except that the Federal matching percentage 
        shall in no case be less than 78 percent or more than 95 
        percent.
            (2) Reference percentage.--
                    (A) In general.--The reference percentage specified 
                in this paragraph is 100 percent less the State 
                percentage specified in subparagraph (B), except that--
                            (i) the percentage under this paragraph 
                        shall in no case be less than 50 percent or 
                        more than 83 percent, and
                            (ii) the percentage for Puerto Rico, the 
                        Virgin Islands, Guam, the Northern Mariana 
                        Islands, and American Samoa shall be 50 
                        percent.
                    (B) State percentage.--The State percentage 
                specified in this subparagraph is that percentage which 
                bears the same ratio to 45 percent as the square of the 
                per capita income of such State bears to the square of 
                the per capita income of the continental United States 
                (including Alaska) and Hawaii.
    (c) Payments on Estimates with Retrospective Adjustments.--The 
method of computing and making payments under this section shall be as 
follows:
            (1) The Secretary shall, prior to the beginning of each 
        quarter, estimate the amount to be paid to the State under 
        subsection (a) for such quarter, based on a report filed by the 
        State containing its estimate of the total sum to be expended 
        in such quarter, and such other information as the Secretary 
        may find necessary.
            (2) From the allotment available therefore, the Secretary 
        shall provide for payment of the amount so estimated, reduced 
        or increased, as the case may be, by any sum (not previously 
        adjusted under this section) by which the Secretary finds that 
        the estimate of the amount to be paid the State for any prior 
        period under this section was greater or less than the amount 
        which should have been paid.
    (d) Application of Rules Regarding Limitations on Provider-Related 
Donations and Health Care Related Taxes.--The provisions of section 
1903(w) of the Social Security Act shall apply to payments to States 
under this section in the same manner as they apply to payments to 
States under section 1903(a) of such Act .

SEC. 2109. TOTAL FEDERAL BUDGET; ALLOTMENTS TO STATES.

    (a) Total Federal Budget.--
            (1) Fiscal years 1996 through 2003.--Subject to paragraph 
        (5)(C), for purposes of this part, the total Federal budget for 
        State plans under this part for each of fiscal years 1996 
        through 2003 is the following:
                    (A) For fiscal year 1996, $4.5 billion.
                    (B) For fiscal year 1997, $7.8 billion.
                    (C) For fiscal year 1998, $11.0 billion.
                    (D) For fiscal year 1999, $14.7 billion.
                    (E) For fiscal year 2000, $18.7 billion.
                    (F) For fiscal year 2001, $26.7 billion.
                    (G) For fiscal year 2002, $35.5 billion.
                    (H) For fiscal year 2003, $38.3 billion.
            (2) Subsequent fiscal years.--For purposes of this part, 
        the total Federal budget for State plans under this part for 
        each fiscal year after fiscal year 2003 is the total Federal 
        budget under this subsection for the preceding fiscal year 
        multiplied by--
                    (A) a factor (described in paragraph (3)) 
                reflecting the change in the CPI for the fiscal year, 
                and
                    (B) a factor (described in paragraph (4)) 
                reflecting the change in the number of individuals with 
                disabilities for the fiscal year.
            (3) CPI increase factor.--For purposes of paragraph (2)(A), 
        the factor described in this paragraph for a fiscal year is the 
        ratio of--
                    (A) the annual average index of the consumer price 
                index for the preceding fiscal year, to--
                    (B) such index, as so measured, for the second 
                preceding fiscal year.
            (4) Disabled population factor.--For purposes of paragraph 
        (2)(B), the factor described in this paragraph for a fiscal 
        year is 100 percent plus (or minus) the percentage increase (or 
        decrease) change in the disabled population of the United 
        States (as determined for purposes of the most recent update 
        under subsection (b)(3)(D)).
            (5) Additional funds due to medicaid offsets.--
                    (A) In general.--Each participating State must 
                provide the Secretary with information concerning 
                offsets and reductions in the medicaid program 
                resulting from home and community-based services 
                provided disabled individuals under this part, that 
                would have been paid for such individuals under the 
                State medicaid plan but for the provision of similar 
                services under the program under this part. At the time 
                a State first submits its plan under this title and 
                before each subsequent fiscal year (through fiscal year 
                2003), the State also must provide the Secretary with 
                such budgetary information (for each fiscal year 
                through fiscal year 2003), as the Secretary determines 
                to be necessary to carry out this paragraph.
                    (B) Reports.--Each State with a program under this 
                part shall submit such reports to the Secretary as the 
                Secretary may require in order to monitor compliance 
                with subparagraph (A).
                    (C) Adjustments to federal budget.--
                            (i) In general.--For each fiscal year 
                        (beginning with fiscal year 1996 and ending 
                        with fiscal year 2003) and based on a review of 
                        information submitted under subparagraph (A), 
                        the Secretary shall determine the amount by 
                        which the total Federal budget under subsection 
                        (a) will increase. The amount of such increase 
                        for a fiscal year shall be limited to the 
                        reduction in Federal expenditures of medical 
                        assistance (as determined by Secretary) that 
                        would have been made under title XIX of the 
                        Social Security Act for home and community 
                        based services for disabled individuals but for 
                        the provision of similar services under the 
                        program under this part.
                            (ii) Annual publication.--The Secretary 
                        shall publish before the beginning of such 
                        fiscal year, the revised total Federal budget 
                        under this subsection for such fiscal year (and 
                        succeeding fiscal years before fiscal year 
                        2003).
                    (D) No duplicate payment.--No payment may be made 
                to a State under this section for any services to the 
                extent that the State received payment for such 
                services under section 1903(a) of the Social Security 
                Act.
                    (E) Construction.--Nothing in this subsection shall 
                be construed as requiring States to determine 
                eligibility for medical assistance under the State 
                medicaid plan on behalf of individuals receiving 
                assistance under this part.
    (b) Allotments to States.--
            (1) In general.--The Secretary shall allot to each State 
        for each fiscal year an amount that bears the same ratio to the 
        total Federal budget for the fiscal year (specified under 
        paragraph (1) or (2) of subsection (a)) as the State allotment 
        factor (under paragraph (2) for the State for the fiscal year) 
        bears to the sum of such factors for all States for that fiscal 
        year.
            (2) State allotment factor.--
                    (A) In general.--For each State for each fiscal 
                year, the Secretary shall compute a State allotment 
                factor equal to the sum of--
                            (i) the base allotment factor (specified in 
                        subparagraph (B)), and
                            (ii) the low income allotment factor 
                        (specified in subparagraph (C)),
                for the State for the fiscal year.
                    (B) Base allotment factor.--The base allotment 
                factor, specified in this subparagraph, for a State for 
                a fiscal year is equal to the product of the following:
                            (i) Number of individuals with 
                        disabilities.--The number of individuals with 
                        disabilities in the State (determined under 
                        paragraph (3)) for the fiscal year.
                            (ii) 80 percent of the national per capita 
                        budget.--80 percent of the national average per 
                        capita budget amount (determined under 
                        paragraph (4)) for the fiscal year.
                            (iii) Wage adjustment factor.--The wage 
                        adjustment factor (determined under paragraph 
                        (5)) for the State for the fiscal year.
                            (iv) Federal matching rate.--The Federal 
                        matching rate (determined under section 
                        2108(b)) for the fiscal year.
                    (C) Low income allotment factor.--The low income 
                allotment factor, specified in this subparagraph, for a 
                State for a fiscal year is equal to the product of the 
                following:
                            (i) Number of individuals with 
                        disabilities.--The number of individuals with 
                        disabilities in the State (determined under 
                        paragraph (3)) for the fiscal year.
                            (ii) 10 percent of the national per capita 
                        budget.--10 percent of the national average per 
                        capita budget amount (determined under 
                        paragraph (4)) for the fiscal year.
                            (iii) Wage adjustment factor.--The wage 
                        adjustment factor (determined under paragraph 
                        (5)) for the State for the fiscal year.
                            (iv) Federal matching rate.--The Federal 
                        matching rate (determined under section 
                        2108(b)) for the fiscal year.
                            (v) Low income index.--The low income index 
                        (determined under paragraph (6)) for the State 
                        for the preceding fiscal year.
            (3) Number of individuals with disabilities.--The number of 
        individuals with disabilities in a State for a fiscal year 
        shall be determined as follows:
                    (A) Base.--The Secretary shall determine the number 
                of individuals in the State by age, sex, and income 
                category, based on the 1990 decennial census, adjusted 
                (as appropriate) by the March 1994 current population 
                survey.
                    (B) Disability prevalence level by population 
                category.--The Secretary shall determine, for each such 
                age, sex, and income category, the national average 
                proportion of the population of such category that 
                represents individuals with disabilities. The Secretary 
                may conduct periodic surveys in order to determine such 
                proportions.
                    (C) Base disabled population in a state.--The 
                number of individuals with disabilities in a State in 
                1994 is equal to the sum of the products, for such each 
                age, sex, and income category, of--
                            (i) the population of individuals in the 
                        State in the category (determined under 
                        subparagraph (A)), and
                            (ii) the national average proportion for 
                        such category (determined under subparagraph 
                        (B)).
                    (D) Update.--The Secretary shall determine the 
                number of individuals with disabilities in a State in a 
                fiscal year equal to the number determined under 
                subparagraph (C) for the State increased (or decreased) 
                by the percentage increase (or decrease) in the 
                disabled population of the State as determined under 
                the current population survey from 1994 to the year 
                before the fiscal year involved.
            (4) National per capita budget amount.--The national 
        average per capita budget amount, for a fiscal year, is--
                    (A) the total Federal budget specified under 
                subsection (a) for the fiscal year; divided by
                    (B) the sum, for the fiscal year, of the numbers of 
                individuals with disabilities (determined under 
                paragraph (3)) for all the States for the fiscal year.
            (5) Wage adjustment factor.--The wage adjustment factor, 
        for a State for a fiscal year, is equal to the ratio of--
                    (A) the average hourly wages for service workers 
                (other than household or protective services) in the 
                State, to
                    (B) the national average hourly wages for service 
                workers (other than household or protective services).
        The hourly wages shall be determined under this paragraph based 
        on data from the most recent decennial census for which such 
        data are available.
            (6) Low income index.--The low income index for each State 
        for a fiscal year is the ratio, determined for the preceding 
        fiscal year, of--
                    (A) the percentage of the State's population that 
                has income below 150 percent of the poverty level, to
                    (B) the percentage of the population of the United 
                States that has income below 150 percent of the poverty 
                level.
        Such percentages shall be based on data from the most recent 
        decennial census for which such data are available, adjusted by 
        data from the most recent current population survey as 
        determined appropriate by the Secretary.
    (c) State Entitlement.--This part constitutes budget authority in 
advance of appropriations Acts, and represents the obligation of the 
Federal Government to provide for the payment to States of amounts 
described in subsection (a).

               PART 2--MEDICAID NURSING HOME IMPROVEMENTS

SEC. 2201. REFERENCE TO AMENDMENTS.

    For amendments to the medicaid program under title XIX of the 
Social Security Act to improve nursing home benefits under such 
program, see part 2 of subtitle C of title IV.

                PART 3--PRIVATE LONG-TERM CARE INSURANCE

                     Subpart A--General Provisions

SEC. 2301. FEDERAL REGULATIONS; PRIOR APPLICATION OR CERTAIN 
              REQUIREMENTS.

    (a) In General.--The Secretary, with the advice and assistance of 
the Advisory Council, as appropriate, shall promulgate regulations as 
necessary to implement the provisions of this part, in accordance with 
the timetable specified in subsection (b).
    (b) Timetable for Publication of Regulations.--
            (1) Federal register notice.--Within 120 days after the 
        date a majority of the members are first appointed to the 
        Advisory Council pursuant to section 2302, the Secretary shall 
        publish in the Federal Register a notice setting forth the 
        projected timetable for promulgation of regulations required 
        under this part. Such timetable shall indicate which 
        regulations are proposed to be published by the end of the 
        first, second, and third years after appointment of the 
        Advisory Council.
            (2) Final deadline.--All regulations required under this 
        part shall be published by the end of the third year after 
        appointment of the Advisory Council.
    (c) Provisions Effective Without Regard to Promulgation of 
Regulations.--
            (1) In general.--Notwithstanding any other provision of 
        this part, insurers shall be required, not later than 6 months 
        after the enactment of this Act, regardless of whether final 
        implementing regulations have been promulgated by the 
        Secretary, to comply with the following provisions of this 
        part:
                    (A) Section 2321(c) (standard outline of coverage);
                    (B) Section 2321(d) (reporting to State insurance 
                commissioners);
                    (C) Section 2322(b) (preexisting condition 
                exclusions);
                    (D) Section 2322(c) (limiting conditions on 
                benefits);
                    (E) Section 2322(d) (inflation protection);
                    (F) Section 2324 (sales practices);
                    (G) Section 2325 (continuation, renewal, 
                replacement, conversion, and cancellation of policies); 
                and
                    (H) Section 2326 (payment of benefits).
            (2) Interim requirements.--Before the effective date of 
        applicable regulations promulgated by the Secretary 
        implementing requirements of this part as specified below, such 
        requirements will be considered to be met--
                    (A) in the case of section 2321(c) (requiring a 
                standard outline of coverage), if the long-term care 
                insurance policy meets the requirements of section 
                6.G.(2) of the NAIC Model Act and of section 24 of the 
                NAIC Model Regulation;
                    (B) in the case of section 2321(d) (requiring 
                reporting to the State insurance commissioner), if the 
                insurer meets the requirements of section 14 of the 
                NAIC Model Regulation;
                    (C) in the case of section 2322(c)(1) (general 
                requirements concerning limiting conditions on 
                benefits), if such policy meets the requirements of 
                section 6.D. of the NAIC Model Act;
                    (D) in the case of section 2322(c)(2) (limiting 
                conditions on home health care or community-based 
                services) if such policy meets the requirements of 
                section 11 of the NAIC Model Regulations;
                    (E) in the case of section 2322(d) (concerning 
                inflation protection), if the insurer meets the 
                requirements of section 12 of the NAIC Model 
                Regulation;
                    (F) in the case of section 2324(b) (concerning 
                applications for the purchase of insurance), if the 
                insurer meets the requirements of section 10 of the 
                NAIC Model Regulation;
                    (G) in the case of section 2324(d) (concerning 
                compensation for the sale of policies), if the insurer 
                meets the requirements of the optional regulation 
                entitled ``Permitted Compensation Arrangements'' 
                included in the NAIC Model Regulation;
                    (H) in the case of section 2324(g) (concerning 
                sales through employers or membership organizations), 
                if the insurer and the membership organization meet the 
                requirements of section 21.C. of the NAIC Model 
                Regulation;
                    (I) in the case of section 2324(h) (concerning 
                interstate sales of group policies), if the insurer and 
                the policy meet the requirements of section 5 of the 
                NAIC Model Act; and
                    (J) in the case of section 2325(f) (concerning 
                continuation, renewal, replacement, and conversion of 
                policies), if the insurer and the policy meet the 
                requirements of section 7 of the NAIC Model Regulation.

SEC. 2302. NATIONAL LONG-TERM CARE INSURANCE ADVISORY COUNCIL.

    (a) Appointment.--The Secretary shall appoint an advisory board to 
be known as the National Long-Term Care Insurance Advisory Council.
    (b) Composition.--
            (1) Number and qualifications of members.--The Advisory 
        Council shall consist of 5 members, each of whom has 
        substantial expertise in matters relating to the provision and 
        regulation of long-term care insurance. At least one member 
        shall have experience as a State insurance commissioner or 
        legislator with expertise in policy development with respect 
        to, and regulation of, long-term care insurance.
            (2) Terms of Office.--
                    (A) In general.--Except as otherwise provided in 
                this subsection, members shall be appointed for terms 
                of office of 5 years.
                    (B) Initial members.--Of the initial members of the 
                Council, one shall be appointed for a term of 5 years, 
                one for 4 years, one for 3 years, one for 2 years, and 
                one for 1 year.
                    (C) Two-term limit.--No member shall be eligible to 
                serve in excess of two consecutive terms, but may 
                continue to serve until such member's successor is 
                appointed.
            (3) Vacancies.--Any member appointed to fill a vacancy 
        occurring before the expiration of the term of such member's 
        predecessor shall be appointed for the remainder of such term.
            (4) Removal.--No member may be removed during the member's 
        term of office except for just and sufficient cause.
    (c) Chairperson.--The Secretary shall appoint a Chairperson from 
among the members.
    (d) Compensation.--
            (1) In general.--Except as provided in paragraph (3), 
        members of the Advisory Council, while serving on business of 
        the Advisory Council, shall be entitled to receive compensation 
        at a rate not to exceed the daily equivalent of the rate 
        specified for level V of the Executive Schedule under section 
        5316 of title 5, United States Code.
            (2) Travel.--Except as provided in paragraph (3), members 
        of the Advisory Council, while serving on business of the 
        Advisory Council away from their homes or regular places of 
        business, may be allowed travel expenses (including per diem in 
        lieu of subsistence) as authorized by section 5703(b) of title 
        5, United States Code, for persons in the Government service 
        employed intermittently.
            (3) Restriction.--A member of the Advisory Council may not 
        be compensated under this section if the member is receiving 
        compensation or travel expenses from another source while 
        serving on business of the Advisory Council.
    (e) Meetings.--The Advisory Council shall meet not less often than 
2 times a year at the direction of the Chairperson.
    (f) Staff and Support.--
            (1) In general.--The Advisory Council shall have a salaried 
        executive director appointed by the Chairperson, and staff 
        appointed by the executive director with the approval of the 
        Chairperson.
            (2) Federal entities.--The head of each Federal department 
        and agency shall make available to the Advisory Council such 
        information and other assistance as it may require to carry out 
        its responsibilities.
    (g) General Responsibilities.--The Advisory Council shall--
            (1) provide advice, recommendations, and assistance to the 
        Secretary on matters relating to long-term care insurance as 
        specified in this part and as otherwise required by the 
        Secretary;
            (2) collect, analyze, and disseminate information relating 
        to long-term care insurance in order to increase the 
        understanding of insurers, providers, consumers, and regulatory 
        bodies of the issues relating to, and to facilitate 
        improvements in, such insurance;
            (3) develop for the Secretary's consideration proposed 
        models, standards, requirements, and procedures relating to 
        long-term care insurance, as appropriate, with respect to the 
        content and format of insurance policies, agent and insurer 
        practices concerning the sale and servicing of such policies, 
        and regulatory activities; and
            (4) monitor the development of the long-term care insurance 
        market (including policies, marketing practices, pricing, 
        eligibility and benefit preconditions, and claims payment 
        procedures) and advise the Secretary concerning the need for 
        regulatory changes.
    (h) Specific Matters for Consideration.--The Advisory Council shall 
consider, and provide views and recommendations to the Secretary 
concerning, the following matters relating to long-term care insurance:
            (1) Uniform terms, definitions, and formats.--The Advisory 
        Council shall develop and propose to the Secretary uniform 
        terminology, definitions, and formats for use in long-term care 
        insurance policies.
            (2) Standard outline of coverage.--The Advisory Council 
        shall develop and propose to the Secretary a standard format 
        for use by all insurers offering long-term care policies for 
        the outline of coverage required pursuant to section 2321(c).
            (3) Premiums.--The Advisory Council shall consider, and 
        make recommendations to the Secretary concerning--
                    (A) whether Federal standards should be established 
                governing the amounts of and rates of increase in 
                premiums in long-term care policies, and
                    (B) if so, what factors should be taken into 
                account (and whether such factors should include the 
                age of the insured, actuarial information, cost of 
                care, lapse rates, financial reserve requirements, 
                insurer solvency, and tax treatment of premiums, and 
                benefits.
            (4) Upgrades of coverage.--The Advisory Council shall 
        consider, and make recommendations to the Secretary concerning, 
        whether Federal standards are needed governing the terms and 
        conditions insurers may place on insured individuals' 
        eligibility to obtain improved coverage (including any 
        restrictions considered advisable with respect to premium 
        increases, agent commissions, medical underwriting, and age 
        rating).
            (5) Threshold conditions for payment of benefits.--The 
        Advisory Council shall--
                    (A) consider, and make recommendations to the 
                Secretary concerning, the advisability of establishing 
                standardized sets of threshold conditions (based on 
                degrees of functional or cognitive impairment or on 
                other conditions) for payment of covered benefits;
                    (B) to the extent found appropriate, recommend to 
                the Secretary specific sets of threshold conditions to 
                be used for such purpose;
                    (C) develop and propose to the Secretary, with 
                respect to assessments of insured individuals' levels 
                of need for purposes of receipt of covered benefits--
                            (i) professional qualification standards 
                        applicable to individuals making such 
                        determinations; and
                            (ii) uniform procedures and formats for use 
                        in performing and documenting such assessments.
            (6) Dispute resolution.--The Advisory Council shall 
        consider, and make recommendations to the Secretary concerning, 
        procedures that insurers and States should be required to 
        implement to afford insured individuals a reasonable 
        opportunity to dispute denial of benefits under a long-term 
        care insurance policy.
            (7) Sales and servicing of policies.--The Advisory Council 
        shall consider, and make recommendations to the Secretary 
        concerning--
                    (A) training and certification to be required of 
                agents involved in selling or servicing long-term care 
                insurance policies;
                    (B) appropriate limits on commissions or other 
                compensation paid to agents for the sale or servicing 
                of such policies;
                    (C) sales practices that should be prohibited or 
                limited with respect to such policies (including any 
                financial limits that should be applied concerning the 
                individuals to whom such policies may be sold); and
                    (D) appropriate standards and requirements with 
                respect to sales of such policies by or through 
                employers and other entities, to employees, members, or 
                affiliates of such entities.
            (8) Continuing care retirement communities.--The Advisory 
        Council shall consider, and make recommendations to the 
        Secretary concerning, the extent to which the long-term care 
        insurance aspects of continuing care retirement community 
        arrangements should be subject to regulation under this part 
        (and the Secretary, in consultation with the Secretary of the 
        Treasury, shall consider such recommendations and promulgate 
        appropriate regulations).
    (i) Activities.--In order to carry out its responsibilities under 
this part, the Advisory Council is authorized to--
            (1) consult individuals and public and private entities 
        with experience and expertise in matters relating to long-term 
        care insurance (and shall consult the National Association of 
        Insurance Commissioners);
            (2) conduct meetings and hold hearings;
            (3) conduct research (either directly or under grant or 
        contract);
            (4) collect, analyze, publish, and disseminate data and 
        information (either directly or under grant or contract); and
            (5) develop model formats and procedures for insurance 
        policies and marketing materials; and develop proposed 
        standards, rules, and procedures for regulatory programs.
    (j) Authorization of Appropriations.--There are authorized to be 
appropriated, for activities of the Advisory Council, $1,500,000 for 
fiscal year 1995, and $2,000,000 for each succeeding fiscal year.

SEC. 2303. RELATION TO STATE LAW.

    Nothing in this part shall be construed as preventing a State from 
applying standards that provide greater protection to insured 
individuals under long-term care insurance policies than the standards 
promulgated under this part, except that such State standards may not 
be inconsistent with any of the requirements of this part or of 
regulations hereunder.

SEC. 2304. DEFINITIONS.

    For purposes of this part:
            (1) Activity of daily living.--The term ``activity of daily 
        living'' means any of the following: eating, toileting, 
        dressing, bathing, and transferring.
            (2) Adult day care.--The term ``adult day care'' means a 
        program providing social and health-related services during the 
        day to six or more adults with disabilities (or such smaller 
        number as the Secretary may specify in regulations) in a 
        community group setting outside the home.
            (3) Advisory council.--The term ``Advisory Council'' means 
        the National Long-Term Care Insurance Advisory Council 
        established pursuant to section 2302.
            (4) Certificate.--The term ``certificate'' means a document 
        issued to an individual as evidence of such individual's 
        coverage under a group insurance policy.
            (5) Continuing care retirement community.--The term 
        ``continuing care retirement community'' means a residential 
        community operated by a private entity that enters into 
        contractual agreements with residents under which such entity 
        guarantees, in consideration for residents' purchase of or 
        periodic payment for membership in the community, to provide 
        for such residents' future long-term care needs.
            (6) Designated representative.--The term ``designated 
        representative'' means the person designated by an insured 
        individual (or, if such individual is incapacitated, pursuant 
        to an appropriate administrative or judicial procedure) to 
        communicate with the insurer on behalf of such individual in 
        the event of such individual's incapacitation.
            (7) Home health care.--The term ``home health care'' means 
        medical and nonmedical services including such services as 
        homemaker services, assistance with activities of daily living, 
        and respite care provided to individuals in their residences.
            (8) Insured individual.--The term ``insured individual'' 
        means, with respect to a long-term care insurance policy, any 
        individual who has coverage of benefits under such policy.
            (9) Insurer.--The term ``insurer'' means any person that 
        offers or sells an individual or group long-term care insurance 
        policy under which such person is at risk for all or part of 
        the cost of benefits under the policy, and includes any agent 
        of such person.
            (10) Long-term care insurance policy.--The term ``long-term 
        care insurance policy'' has the meaning given that term in 
        section 4 of the NAIC Model Act, except that the last sentence 
        of such section shall not apply.
            (11) NAIC model act.--The term ``NAIC Model Act'' means the 
        Long-Term Care Insurance Model Act published by the NAIC, as 
        amended through January 1993.
            (12) NAIC model regulation.--The term ``NAIC Model 
        Regulation'' means the Long-Term Care Insurance Model 
        Regulation published by the NAIC, as amended through January 
        1993.
            (13) Nursing facility.--The term ``nursing facility'' means 
        a facility licensed by the State to provide to residents--
                    (A) skilled nursing care and related services for 
                residents who require medical or nursing care;
                    (B) rehabilitation services for the rehabilitation 
                of injured, disabled, or sick individuals, or
                    (C) on a regular basis, health-related care and 
                services to individuals who because of their mental or 
                physical condition require care and services (above the 
                level of room and board) which can be made available to 
                them only through institutional facilities.
            (14) Policyholder.--The term ``policyholder'' means the 
        entity which is the holder of record of a group long-term care 
        insurance policy.
            (15) Residential care facility.--The term ``residential 
        care facility'' means a facility (including a nursing facility) 
        that--
                    (A) provides to residents medical or personal care 
                services (including at a minimum assistance with 
                activities of daily living) in a setting other than an 
                individual or single-family home, and
                    (B) does not provide services of a higher level 
                than can be provided by a nursing facility.
            (16) Respite care.--The term ``respite care'' means the 
        temporary provision of care (including assistance with 
        activities of daily living) to an individual, in the 
        individual's home or another setting in the community, for the 
        purpose of affording such individual's unpaid caregiver a 
        respite from the responsibilities of such care.
            (17) State insurance commissioner.--The term ``State 
        insurance commissioner'' means the State official bearing such 
        title, or, in the case of a jurisdiction where such title is 
        not used, the State official with primary responsibility for 
        the regulation of insurance.

             Subpart B--Federal Standards and Requirements

SEC. 2321. REQUIREMENTS TO FACILITATE UNDERSTANDING AND COMPARISON OF 
              BENEFITS.

    (a) In General.--The Secretary, after considering (where 
appropriate) recommendations of the Advisory Council, shall promulgate 
regulations designed to standardize formats and terminology used in 
long-term care insurance policies, to require insurers to provide to 
customers and beneficiaries information on the range of public and 
private long-term care coverage available, and to establish such other 
requirements as may be appropriate to promote consumer understanding 
and facilitate comparison of benefits, which shall include at a minimum 
the requirements specified in this section.
    (b) Uniform Terms, Definitions, and Formats.--Insurers shall be 
required to use, in long-term care insurance policies, uniform 
terminology, definitions of terms, and formats, in accordance with 
regulations promulgated by the Secretary, after considering 
recommendations of the Advisory Council.
    (c) Standard Outline of Coverage.--
            (1) In general.--Insurers shall be required to develop for 
        each long-term care insurance policy offered or sold, to 
        include as a part of each such policy, and to make available to 
        each potential purchaser and furnish to each insured individual 
        and policyholder, an outline of coverage under such policy 
        that--
                    (A) includes the elements specified in paragraph 
                (2),
                    (B) is in a uniform format (as prescribed by 
                Secretary on the basis of recommendations by the 
                Advisory Council),
                    (C) accurately and clearly reflects the contents of 
                the policy, and
                    (D) is updated periodically on such timetable as 
                may be required by the Secretary (or more frequently as 
                necessary to reflect significant changes in outlined 
                information).
            (2) Contents of outline.--The outline of coverage for each 
        long-term care insurance policy shall include at least the 
        following:
                    (A) Benefits.--A description of--
                            (i) the principal benefits covered, 
                        including the extent of--
                                    (I) benefits for services furnished 
                                in residential care facilities, and
                                    (II) other benefits,
                            (ii) the principal exclusions from and 
                        limitations on coverage,
                            (iii) the terms and conditions, if any, 
                        upon which the insured individual may obtain 
                        upgraded benefits, and
                            (iv) the threshold conditions for 
                        entitlement to receive benefits.
                    (B) Continuation, renewal, and conversion.--A 
                statement of the terms under which a policy may be--
                            (i) returned (and premium refunded) during 
                        an initial examination period,
                            (ii) continued in force or renewed,
                            (iii) converted to an individual policy (in 
                        the case of coverage under a group policy),
                    (C) Cancellation.--A statement of the circumstances 
                in which a policy may be terminated, and the refund or 
                nonforfeitures benefits (if any) applicable in each 
                such circumstance, including--
                            (i) death of the insured individual,
                            (ii) nonpayment of premiums,
                            (iii) election by the insured individual 
                        not to renew,
                            (iv) any other circumstance.
                    (D) Premium.--A statement of--
                            (i) the total annual premium, and the 
                        portion of such premium attributable to each 
                        covered benefit,
                            (ii) any reservation by the insurer of a 
                        right to change premiums,
                            (iii) any limit on annual premium 
                        increases,
                            (iv) any expected premium increases 
                        associated with automatic or optional benefit 
                        increases (including inflation protection), and
                            (v) any circumstances under which payment 
                        of premium is waived.
                    (E) Declaration concerning summary.--A statement, 
                in bold face type on the face of the document in 
                language understandable to the average individual, that 
                the outline of coverage is a summary only, not a 
                contract of insurance, and that the policy contains the 
                contractual provisions that govern.
                    (F) Cost/value comparison.--
                            (i) Information on average costs (and 
                        variation in such costs) for nursing facility 
                        care (and such other care as the Secretary may 
                        specify) and information on the value of 
                        benefits relative to such costs.
                            (ii) A comparison of benefits, over a 
                        period of at least 20 years, for policies with 
                        and without inflation protection.
                            (iii) A declaration as to whether the 
                        amount of benefits will increase over time, 
                        and, if so, a statement of the type and amount 
                        of, any limitations on, and any premium 
                        increases for, such benefit increases.
                    (G) Tax treatment.--A statement of the Federal 
                income tax treatment of premiums and benefits under the 
                policy, as determined by the Secretary of the Treasury.
                    (H) Other.--Such other information as the Secretary 
                may require.
    (d) Reporting to State Insurance Commissioner.--Each insurer shall 
be required to report at least annually, to the State insurance 
commissioner of each State in which any long-term care insurance policy 
of the insurer is sold, such information, in such format, as the 
Secretary may specify with respect to each such policy, including--
            (1) the standard outline of coverage required pursuant to 
        subsection (c);
            (2) lapse rates and replacement rates for such policies;
            (3) the ratio of premiums collected to benefits paid;
            (4) reserves;
            (5) written materials used in sale or promotion of such 
        policy; and
            (6) any other information the Secretary may require.
    (e) Comparison of Long-Term Care Coverage Alternatives.--Each 
insurer shall be required to furnish to each individual before a long-
term care insurance policy of the insurer is sold to the individual 
information on the conditions of eligibility for, and benefits under, 
each of the following:
            (1) Policies offered by the insurer.--The standard outline 
        of coverage, and such other information as the Secretary may 
        specify, with respect to each long-term care insurance policy 
        offered by the insurer.
            (2) Comparison to other available private insurance.--
        Information, in such format as may be required under this part, 
        on--
                    (A) benefits offered under long-term care insurance 
                policies of the insurer (and the threshold conditions 
                for receipt by an insured individual of each such 
                benefit); and
                    (B) additional benefits available under policies 
                offered by other private insurers (to the extent such 
                information is made available by the State insurance 
                commissioner).
            (3) Public programs; regional alliances.--Information 
        furnished to the insurer, pursuant to section 2342(b)(2), by 
        the State in which such individual resides, on conditions of 
        eligibility for, and long-term care benefits (or the lack of 
        such benefits) under--
                    (A) each public long-term care program administered 
                by the State,
                    (B) the Medicare programs under title XVIII of the 
                Social Security Act; and
                    (C) each regional alliance operating in the State.

SEC. 2322. REQUIREMENTS RELATING TO COVERAGE.

    (a) In General.--The Secretary, after considering (where 
appropriate) recommendations of the Advisory Council, shall promulgate 
regulations establishing requirements with respect to the terms of and 
benefits under long-term care insurance policies, which shall include 
at a minimum the requirements specified in this section.
    (b) Limitations on Preexisting Condition Exclusions.--
            (1) Initial policies.--A long-term care insurance policy 
        may not exclude or limit coverage for any service or benefit, 
        the need for which is the result of a medical condition or 
        disability because an insured individual received medical 
        treatment for, or was diagnosed as having, such condition 
        before the issuance of the policy, unless--
                    (A) the insurer, prior to issuance of the policy, 
                determines and documents (with evidence including 
                written evidence that such condition has been treated 
                or diagnosed by a qualified health care professional) 
                that the insured individual had such condition during 
                the 6-month period (or such longer period as the 
                Secretary may specify) ending on the effective date of 
                the policy; and
                    (B) the need or such service or benefit begins 
                within 6 months (or such longer period as the Secretary 
                may specify) following the effective date of the 
                policy.
            (2) Replacement policies.--Solely for purposes of the 
        requirements of paragraph (1), with respect to an insured 
        individual, the effective date of a long-term care insurance 
        policy issued to replace a previous policy, with respect to 
        benefits which are the same as or substantially equivalent to 
        benefits under such previous policy, shall be considered to be 
        the effective date of such previous policy with respect to such 
        individual.
    (c) Limiting Conditions on Benefits.--
            (1) In general.--A long-term care insurance policy may 
        not--
                    (A) condition eligibility for benefits for a type 
                of service on the need for or receipt of any other type 
                of service (such as prior hospitalization or 
                institutionalization, or a higher level of care than 
                the care for which benefits are covered);
                    (B) condition eligibility for any benefit (where 
                the need for such benefit has been established by an 
                independent assessment of impairment) on any particular 
                medical diagnosis (including any acute condition) or on 
                one of a group of diagnoses;
                    (C) condition eligibility for benefits furnished by 
                licensed or certified providers on compliance by such 
                providers with conditions not required under Federal or 
                State law; or
                    (D) condition coverage of any service on provision 
                of such service by a provider, or in a setting, 
                providing a higher level of care than that required by 
                an insured individual.
            (2) Home care or community-based services.--A long-term 
        care insurance policy that provides benefits for any home care 
        or community-based services provided in a setting other than a 
        residential care facility--
                    (A) may not limit such benefits to services 
                provided by registered nurses or licensed practical 
                nurses;
                    (B) may not limit such benefits to services 
                furnished by persons or entities participating in 
                programs under titles XVIII and XIX of the Social 
                Security Act and in part 1 of this subtitle; and
                    (C) must provide, at a minimum, benefits for 
                personal assistance with activities of daily living, 
                home health care, adult day care, and respite care.
            (3) Nursing facility services.--A long-term care insurance 
        policy that provides benefits for any nursing facility 
        services--
                    (A) must provide benefits for such services 
                provided by all types of nursing facilities licensed by 
                the State, and
                    (B) may provide benefits for care in other 
                residential facilities.
            (4) Prohibition on discrimination by diagnosis.--A long-
        term care insurance policy may not provide for treatment of--
                    (A) Alzheimer's disease or any other progressive 
                degenerative dementia of an organic origin,
                    (B) any organic or inorganic mental illness,
                    (C) mental retardation or any other cognitive or 
                mental impairment, or
                    (D) HIV infection or AIDS,
        different from the treatment of any other medical condition for 
        purposes of determining whether threshold conditions for the 
        receipt of benefits have been met, or the amount of benefits 
        under the policy.
    (d) Inflation Protection.--
            (1) Requirement to offer.--An insurer offering for sale any 
        long-term care insurance policy shall be required to afford the 
        purchaser the option to obtain coverage under such policy (upon 
        payment of increased premiums) of annual increases in benefits 
        at rates in accordance with paragraph (2).
            (2) Rate increase in benefits.--For purposes of paragraph 
        (1), the benefits under a policy for each year shall be 
        increased by a percentage of the full value of benefits under 
        the policy for the previous year, which shall be not less than 
        5 percent of such value (or such other rate of increase as may 
        be determined by the Secretary to be adequate to offset 
        increases in the costs of long-term care services for which 
        coverage is provided under the policy).
            (3) Requirement of written rejection.--Inflation protection 
        in accordance with paragraph (1) may be excluded from the 
        coverage under a policy only if the insured individual (or, if 
        different, the person responsible for payment of premiums) has 
        rejected in writing the option to obtain such coverage.

SEC. 2323. REQUIREMENTS RELATING TO PREMIUMS.

    (a) In General.--The Secretary, after considering (where 
appropriate) recommendations of the Advisory Council, shall promulgate 
regulations establishing requirements applicable to premiums for long-
term care insurance policies, which shall include at a minimum the 
requirements specified in this section.
    (b) Limitations on Rates and Increases.--The Secretary, after 
considering recommendations of the Advisory Council, may establish by 
regulation such standards and requirements as may be determined 
appropriate with respect to--
            (1) mandatory or optional State procedures for review and 
        approval of premium rates and rate increases or decreases;
            (2) limitations on the amount of initial premiums, or on 
        the rate or amount of premium increases;
            (3) the factors to be taken into consideration by an 
        insurer in proposing, and by a State in approving or 
        disapproving, premium rates and increases; and
            (4) the extent to which consumers should be entitled to 
        participate or be represented in the rate-setting process and 
        to have access to actuarial and other information relied on in 
        setting rates.

SEC. 2324. REQUIREMENTS RELATING TO SALES PRACTICES.

    (a) In General.--The Secretary, after considering (where 
appropriate) recommendations of the Advisory Council, shall promulgate 
regulations establishing requirements applicable to the sale or 
offering for sale of long-term care insurance policies, which shall 
include at a minimum the requirements specified in this section.
    (b) Applications.--Any insurer that offers any long-term care 
insurance policy (including any group policy) shall be required to meet 
such requirements with respect to the content, format, and use of 
application forms for long-term care insurance as the Secretary may 
require by regulation.
    (c) Agent Training and Certification.--An insurer may not sell or 
offer for sale a long-term care insurance policy through an agent who 
does not comply with minimum standards with respect to training and 
certification established by the Secretary after consideration of 
recommendations by the Advisory Council.
    (d) Compensation for Sale of Policies.--Compensation by an insurer 
to an agent or agents for the sale of an original long-term care 
insurance policy, or for servicing or renewing such a policy, may not 
exceed amounts (or percentage shares of premiums or other reference 
amounts) specified by the Secretary in regulations, after considering 
recommendations of the Advisory Council.
    (e) Prohibited Sales Practices.--The following practices by 
insurers shall be prohibited with respect to the sale or offer for sale 
of long-term care insurance policies:
            (1) False and misleading representations.--Making any 
        statement or representation--
                    (A) which the insurer knows or should know is false 
                or misleading (including the inaccurate, incomplete, or 
                misleading comparison of long-term care insurance 
                policies or insurers), and
                    (B) which is intended, or would be likely, to 
                induce any person to purchase, retain, terminate, 
                forfeit, permit to lapse, pledge, assign, borrow 
                against, convert, or effect a change with respect to, 
                any long-term care insurance policy.
            (2) Inaccurate completion of medical history.--Making or 
        causing to be made (by any means including failure to inquire 
        about or to record information relating to preexisting 
        conditions) statements or omissions, in records detailing the 
        medical history of an applicant for insurance, which the 
        insurer knows or should know render such records false, 
        incomplete, or misleading in any way material to such 
        applicant's eligibility for or coverage under a long-term care 
        insurance policy.
            (3) Undue pressure.--Employing force, fright, threat, or 
        other undue pressure, whether explicit or implicit, which is 
        intended, or would be likely, to induce the purchase of a long-
        term care insurance policy.
            (4) Cold lead advertising.--Using, directly or indirectly, 
        any method of contacting consumers (including any method 
        designed to induce consumers to contact the insurer or agent) 
        for the purpose of inducing the purchase of long-term care 
        insurance (regardless of whether such purpose is the sole or 
        primary purpose of the contact) without conspicuously 
        disclosing such purpose.
    (f) Prohibition on Sale of Duplicate Benefits.--An insurer or agent 
may not sell or issue to an individual a long-term care insurance 
policy that the insurer or agent knows or should know provides for 
coverage that duplicates coverage already provided in another long-term 
care insurance policy held by such individual (unless the policy is 
intended to replace such other policy).
    (g) Sales Through Employers or Membership Organizations.--
            (1) Requirements concerning such arrangements.--In any case 
        where an employer, organization, association, or other entity 
        (referred to as a ``membership entity'') endorses a long-term 
        care insurance policy to, or such policy is marketed or sold 
        through such membership entity to, employees, members, or other 
        individuals affiliated with such membership entity--
                    (A) the insurer offering such policy shall not 
                permit its marketing or sale through such entity unless 
                the requirements of this subsection are met; and
                    (B) a membership entity that receives any 
                compensation for such sale, marketing, or endorsement 
                of such policy shall be considered the agent of the 
                insurer for purposes of this part.
            (2) Disclosure and information requirements.--A membership 
        entity that endorses a long-term care insurance policy, or 
        through which such policy is sold, to individuals affiliated 
        with such entity, shall--
                    (A) disclose prominently, in a form and manner 
                designed to ensure that each such individual who 
                receives information concerning any such policy through 
                such entity is aware of and understands such 
                disclosure--
                            (i) the manner in which the insurer and 
                        policy were selected;
                            (ii) the extent (if any) to which a person 
                        independent of the insurer with expertise in 
                        long-term care insurance analyzed the 
                        advantages and disadvantages of such policy 
                        from the standpoint of such individuals 
                        (including such matters as the merits of the 
                        policy compared to other available benefit 
                        packages, and the financial stability of the 
                        insurer), and the results of any such analysis;
                            (iii) any organizational or financial ties 
                        between the entity (or a related entity) and 
                        the insurer (or a related entity); and
                            (iv) the nature of compensation 
                        arrangements (if any) and the amount of 
                        compensation (including all fees, commissions, 
                        and other forms of financial support) for the 
                        endorsement or sale of such policy; and
                    (B) make available to such individuals, either 
                directly or through referrals, appropriate counseling 
                to assist such individuals to make educated and 
                informed decisions concerning the purchase of such 
                policies.

SEC. 2325. CONTINUATION, RENEWAL, REPLACEMENT, CONVERSION, AND 
              CANCELLATION OF POLICIES.

    (a) In General.--The Secretary, after considering (where 
appropriate) recommendations of the Advisory Council, shall promulgate 
regulations establishing requirements applicable to the renewal, 
replacement, conversion, and cancellation of long-term care insurance 
policies, which shall include at a minimum the requirements specified 
in this section.
    (b) Insured's Right to Cancel During Examination Period.--Each 
individual insured (or, if different, each individual liable for 
payment of premiums) under a long-term care insurance policy shall have 
the unconditional right to return the policy within 30 days after the 
date of its issuance and delivery, and to obtain a full refund of any 
premium paid.
    (c) Insurer's Right to Cancel (or Deny Benefits) Based on Fraud or 
Nondisclosure.--An insurer shall have the right to cancel a long-term 
care insurance policy, or to refuse to pay a claim for benefits, based 
on evidence that the insured falsely represented or failed to disclose 
information material to the determination of eligibility to purchase 
such insurance, but only if--
            (1) the insurer presents written documentation, developed 
        at the time the insured applied for such insurance, of the 
        insurer's request for the information thus withheld or 
        misrepresented, and the insured individual's response to such 
        request;
            (2) the insurer presents medical records or other evidence 
        showing that the insured individual knew or should have known 
        that such response was false, incomplete, or misleading;
            (3) notice of cancellation is furnished to the insured 
        individual before the date 3 years after the effective date of 
        the policy (or such earlier date as the Secretary may specify 
        in regulations); and
            (4) the insured individual is afforded the opportunity to 
        review and refute the evidence presented by the insurer 
        pursuant to paragraphs (1) and (2).
    (d) Insurer's Right to Cancel for Nonpayment of Premiums.--
            (1) In general.--Insurers shall have the right to cancel 
        long-term care insurance policies for nonpayment of premiums, 
        subject to the provisions of this subsection and subsection (e) 
        (relating to nonforfeiture).
            (2) Notice and acknowledgement.--
                    (A) In general.--The insurer may not cancel 
                coverage of an insured individual until--
                            (i) the insurer, not earlier than the date 
                        when such payment is 30 days past due, has 
                        given written notice to the insured individual 
                        (by registered letter or the equivalent) of 
                        such intent, and
                            (ii) 30 days have elapsed since the insurer 
                        obtained written acknowledgment of receipt of 
                        such notice from the insured individual (or the 
                        designated representative, at the insured 
                        individual's option or in the case of an 
                        insured individual determined to be 
                        incapacitated in accordance with paragraph 
                        (4)).
                    (B) Additional Requirement for Group Policies.--In 
                the case of a group long-term care insurance policy, 
                the notice and acknowledgement requirements of 
                subparagraph (A) apply with respect to the policyholder 
                and to each insured individual.
            (3) Reinstatement of coverage of incapacitated 
        individuals.--In any case where the coverage of an individual 
        under a long-term care insurance policy has been canceled 
        pursuant to paragraph (2), the insurer shall be required to 
        reinstate full coverage of such individual under such policy, 
        retroactive to the effective date of cancellation, if the 
        insurer receives from such individual (or the designated 
        representative of such individual), within 5 months after such 
        date--
                    (A) evidence of a determination of such 
                individual's incapacitation in accordance with 
                paragraph (4) (whether made before or after such date), 
                and
                    (B) payment of all premiums due and past due, and 
                all charges for late payment.
            (4) Determination of incapacitation.--For purposes of this 
        subsection, the term ``determination of incapacitation'' means 
        a determination by a qualified health professional (in 
        accordance with such requirements as the Secretary may 
        specify), that an insured individual has suffered a cognitive 
        impairment or loss of functional capacity which could 
        reasonably be expected to render the individual permanently or 
        temporarily unable to deal with business or financial matters. 
        The standard used to make such determination shall not be more 
        stringent than the threshold conditions for the receipt of 
        covered benefits.
            (5) Designation of representative.--The insurer shall be 
        required--
                    (A) to require the insured individual, at the time 
                of sale or issuance of a long-term care insurance 
                policy--
                            (i) to designate a representative for 
                        purposes of communication with the insurer 
                        concerning premium payments in the event the 
                        insured individual cannot be located or is 
                        incapacitated, or
                            (ii) to complete a signed and dated 
                        statement declining to designate a 
                        representative, and
                    (B) to obtain from the insured individual, at the 
                time of each premium payment (but in no event less 
                often than once in each 12-month period) reconfirmation 
                or revision of such designation or declination.
    (e) Nonforfeiture.--
            (1) In general.--The Secretary, after consideration of 
        recommendations by the Advisory Council, shall by regulation 
        require appropriate nonforfeiture benefits with respect to each 
        long-term care insurance policy that lapses for any reason 
        (including nonpayment of premiums, cancellation, or failure to 
        renew, but excluding lapses due to death) after remaining in 
        effect beyond a specified minimum period.
            (2) Nonforfeiture benefits.--The standards established 
        under this subsection shall require that the amount or 
        percentage of nonforfeiture benefits shall increase 
        proportionally with the amount of premiums paid by a 
        policyholder.
    (f) Continuation, Renewal, Replacement, and Conversion of 
Policies.--
            (1) In general.--Insurers shall not be permitted to cancel, 
        or refuse to renew (or replace with a substantial equivalent), 
        any long-term care insurance policy for any reason other than 
        for fraud or material misrepresentation (as provided in 
        subsection (c)) or for nonpayment of premium (as provided in 
        subsection (d)).
            (2) Duration and renewal of policies.--Each long-term care 
        insurance policy shall contain a provision that clearly 
        states--
                    (A) the duration of the policy,
                    (B) the right of the insured individual (or 
                policyholder) to renewal (or to replacement with a 
                substantial equivalent),
                    (C) the date by which, and the manner in which, the 
                option to renew must be exercised, and
                    (D) any applicable restrictions or limitations 
                (which may not be inconsistent with the requirements of 
                this part).
            (3) Replacement of policies.--
                    (A) In general.--Except as provided in subparagraph 
                (B), an insurer shall not be permitted to sell any 
                long-term care insurance policy as a replacement for 
                another such policy unless coverage under such 
                replacement policy is available to an individual 
                insured for benefits covered under the previous policy 
                to the same extent as under such previous policy 
                (including every individual insured under a group 
                policy) on the date of termination of such previous 
                policy, without exclusions or limitations that did not 
                apply under such previous policy.
                    (B) Insured's option to reduce coverage.--In any 
                case where an insured individual covered under a long-
                term care insurance policy knowingly and voluntarily 
                elects to substitute for such policy a policy that 
                provides less coverage, substitute policy shall be 
                considered a replacement policy for purposes of this 
                part.
            (3) Continuation and conversion rights with respect to 
        group policies.--
                    (A) In general.--Insurers shall be required to 
                include in each group long-term care insurance policy, 
                a provision affording to each insured individual, when 
                such policy would otherwise terminate, the opportunity 
                (at the insurer's option, subject to approval of the 
                State insurance commissioner) either to continue or to 
                convert coverage under such policy in accordance with 
                this paragraph.
                    (B) Rights of related individuals.--In the case of 
                any insured individual whose eligibility for coverage 
                under a group policy is based on relationship to 
                another individual, the insurer shall be required to 
                continue such coverage upon termination of the 
                relationship due to divorce or death.
                    (C) Continuation of coverage.--A group policy shall 
                be considered to meet the requirements of this 
                paragraph with respect to rights of an insured 
                individual to continuation of coverage if coverage of 
                the same (or substantially equivalent) benefits for 
                such individual under such policy is maintained, 
                subject only to timely payment of premiums.
                    (D) Conversion of coverage.--A group policy shall 
                be considered to meet the requirements of this 
                paragraph with respect to conversion if it entitles 
                each individual who has been continuously covered under 
                the policy for at least 6 months before the date of the 
                termination to issuance of a replacement policy 
                providing benefits identical to, substantially 
                equivalent to, or in excess of, the benefits under such 
                terminated group policy--
                            (i) without requiring evidence of 
                        insurability with respect to benefits covered 
                        under such previous policy, and
                            (ii) at premium rates no higher than would 
                        apply if the insured individual had initially 
                        obtained coverage under such replacement policy 
                        on the date such insured individual initially 
                        obtained coverage under such group policy.
            (4) Treatment of substantial equivalence.--
                    (A) Under secretary's guidelines.--The Secretary, 
                after considering recommendations by the Advisory 
                Council, shall develop guidelines for comparing long-
                term care insurance policies for the purpose of 
                determining whether benefits under such policies are 
                substantially equivalent.
                    (B) Before effective date of secretary's 
                guidelines.--During the period prior to the effective 
                date of guidelines published by the Secretary under 
                this paragraph, insurers shall comply with standards 
                for determinations of substantial equivalence 
                established by State insurance commissioners.
            (5) Additional requirements.--Insurers shall comply with 
        such other requirements relating to continuation, renewal, 
        replacement, and conversion of long-term care insurance 
        policies as the Secretary may establish.

SEC. 2326. REQUIREMENTS RELATING TO PAYMENT OF BENEFITS.

    (a) In General.--The Secretary, after considering (where 
appropriate) recommendations of the Advisory Council, shall promulgate 
regulations establishing requirements with respect to claims for and 
payment of benefits under long-term care insurance policies, which 
shall include at a minimum the requirements specified in this section.
    (b) Standards Relating to Threshold Conditions for Receipt of 
Covered Benefits.--Each long-term care insurance policy shall meet the 
following requirements with respect to identification of, and 
determination of whether an insured individual meets, the threshold 
conditions for receipt of benefits covered under such policy:
            (1) Declaration of threshold conditions.--
                    (A) In general.--The policy shall specify the level 
                (or levels) of functional or cognitive mental 
                impairment (or combination of impairments) required as 
                a threshold condition of entitlement to receive 
                benefits under the policy (which threshold condition or 
                conditions shall be consistent with any regulations 
                promulgated by the Secretary pursuant to subsection 
                (B)).
                    (B) Secretarial responsibility.--The Secretary 
                (after considering the views of the Advisory Council on 
                current practices of insurers concerning, and the 
                appropriateness of standardizing, threshold conditions) 
                may promulgate such regulations as the Secretary finds 
                appropriate establishing standardized thresholds to be 
                used under such policies as preconditions for varying 
                levels of benefits.
            (2) Independent professional assessment.--The policy shall 
        provide for a procedure for determining whether the threshold 
        conditions specified under paragraph (1) have been met with 
        respect to an insured individual which--
                    (A) applies such uniform assessment standards, 
                procedures, and formats as the Secretary may specify, 
                after consideration of recommendations by the Advisory 
                Council;
                    (B) permits an initial evaluation (or, if the 
                initial evaluation was performed by a qualified 
                independent assessor selected by the insurer, a 
                reevaluation) to be made by a qualified independent 
                assessor selected by the insured individual (or 
                designated representative) as to whether the threshold 
                conditions for receipt of benefits have been met;
                    (C) permits the insurer the option to obtain a 
                reevaluation by a qualified independent assessor 
                selected and reimbursed by the insurer;
                    (D) provides that the insurer will consider that 
                the threshold conditions have been met in any case 
                where--
                            (i) the assessment under subparagraph (B) 
                        concluded that such conditions had been met, 
                        and the insurer declined the option under 
                        subparagraph (C), or
                            (ii) assessments under both subparagraphs 
                        (B) and (C) concluded that such conditions had 
                        been met; and
                    (E) provides for final resolution of the question 
                by a State agency or other impartial third party in any 
                case where assessments under subparagraphs (B) and (C) 
                reach inconsistent conclusions.
            (3) Qualified independent assessor.--For purposes of 
        paragraph (2), the term ``qualified independent assessor'' 
        means a licensed or certified professional, as appropriate, 
        who--
                    (A) meets such standards with respect to 
                professional qualifications as may be established by 
                the Secretary, after consulting with the Secretary of 
                the Treasury, and
                    (B) has no significant or controlling financial 
                interest in, is not an employee of, and does not derive 
                more than 5 percent of gross income from, the insurer 
                (or any provider of services for which benefits are 
                available under the policy and in which the insurer has 
                a significant or controlling financial interest).
    (c) Requirements Relating to Claims for Benefits.--Insurers shall 
be required--
            (1) to promptly pay or deny claims for benefits submitted 
        by (or on behalf of) insured individuals who have been 
        determined pursuant to subsection (b) to meet the threshold 
        conditions for payment of benefits;
            (2) to provide an explanation in writing of the reasons for 
        payment, partial payment, or denial of each such claim; and
            (3) to provide an administrative procedure under which an 
        insured individual may appeal the denial of any claim.

                         Subpart C--Enforcement

SEC. 2342. STATE PROGRAMS FOR ENFORCEMENT OF STANDARDS.

    (a) Requirement for State Programs Implementing Federal 
Standards.--In order for a State to be eligible for grants under this 
subpart, the State must have in effect a program (including such laws 
and procedures as may be necessary) for the regulation of long-term 
care insurance which the Secretary has determined--
            (1) includes the elements required under this subpart, and
            (2) is designed to ensure the compliance of long-term care 
        insurance policies sold in the State, and insurers offering 
        such policies and their agents, with the requirements 
        established pursuant to subpart B.
    (b) Activities Under State Program.--A State program approved under 
this subpart shall provide for the following procedures and activities:
            (1) Monitoring of insurers and policies.--Procedures for 
        ongoing monitoring of the compliance of insurers doing business 
        in the State, and of long-term care insurance policies sold in 
        the State, with requirements under this part, including at 
        least the following:
                    (A) Policy review and certification.--A program for 
                review and certification (and annual recertification) 
                of each such policy sold in the State.
                    (B) Reporting by insurers.--Requirements of annual 
                reporting by insurers selling or servicing long-term 
                care insurance policies in the State, in such form and 
                containing such information as the State may require to 
                determine whether the insurer (and policies) are in 
                compliance with requirements under this part.
                    (C) Data collection.--Procedures for collection, 
                from insurers, service providers, insured individuals, 
                and others, of information required by the State for 
                purposes of carrying out its responsibilities under 
                this part (including authority to compel compliance of 
                insurers with requests for such information).
                    (D) Marketing oversight.--Procedures for monitoring 
                (through sampling or other appropriate procedures) the 
                sales practices of insurers and agents, including 
                review of marketing literature.
                    (E) Oversight of administration of benefits.--
                Procedures for monitoring (through sampling or other 
                appropriate procedures) insurers' administration of 
                benefits, including monitoring of--
                            (i) determinations of insured individuals' 
                        eligibility to receive benefits, and
                            (ii) disposition of claims for payment.
            (2) Information to insurers.--Procedures for furnishing, to 
        insurers selling or servicing any long-term care insurance 
        policies in the State, information on conditions of eligibility 
        for, and benefits under, each public long-term care program 
        administered by the State, in order to enable them to comply 
        with the requirement under section 2321(e)(3).
            (3) Consumer complaints and dispute resolution.--
        Administrative procedures for the investigation and resolution 
        of complaints by consumers, and disputes between consumers and 
        insurers, with respect to long-term care insurance, including--
                    (A) procedures for the filing, investigation, and 
                adjudication of consumer complaints with respect to the 
                compliance of insurers and policies with requirements 
                under this part, or other requirements under State law; 
                and
                    (B) procedures for resolution of disputes between 
                insured individuals and insurers concerning eligibility 
                for, or the amount of, benefits payable under such 
                policies, and other issues with respect to the rights 
                and responsibilities of insurers and insured 
                individuals under such policies.
            (4) Technical assistance to insurers.--Provision of 
        technical assistance to insurers to help them to understand and 
        comply with the requirements of this part, and other State 
        laws, concerning long-term care insurance policies and business 
        practices.
    (c) State Enforcement Authorities.--A State program meeting the 
requirements of this subpart shall ensure that the State insurance 
commissioner (or other appropriate official or agency) has the 
following authority with respect to long-term care insurers and 
policies:
            (1) Prohibition of sale.--Authority to prohibit the sale, 
        or offering for sale, of any long-term care insurance policy 
        that fails to comply with all applicable requirements under 
        this part.
            (2) Plans of correction.--Authority, in cases where the 
        business practices of an insurer are determined not to comply 
        with requirements under this part, to require the insurer to 
        develop, submit for State approval, and implement a plan of 
        correction which must be fulfilled within the shortest period 
        possible (not to exceed a year) as a condition of continuing to 
        do business in the State.
            (3) Corrective action orders.--Authority, in cases where an 
        insurer is determined to have failed to comply with 
        requirements of this part, or with the terms of a policy, with 
        respect to a consumer or insured individual, to direct the 
        insurer (subject to appropriate due process) to eliminate such 
        noncompliance within 30 days.
            (4) Civil money penalties.--Authority to assess civil money 
        penalties, in amounts for each violative act up to the greater 
        of $10,000 or three times the amount of any commission 
        involved--
                    (A) for violations of subsections (d) (concerning 
                compensation or sale of policies), (e) (concerning 
                prohibited sales practices), and (f) (prohibition on 
                sale of duplicate benefits) of section 2324,
                    (B) for such other violative acts as the Secretary 
                may specify in regulations, and
                    (C) in such other cases as the State finds 
                appropriate.
            (5) Other authorities.--Such other authorities as the State 
        finds necessary or appropriate to enforce requirements under 
        this part.
    (d) Records, Reports, and Audits.--As a condition of approval of 
its program under this part, a State must agree to maintain such 
records, make such reports (including expenditure reports), and 
cooperate with such audits, as the Secretary finds necessary to 
determine the compliance of such State program (and insurers and 
policies regulated under such program) with the requirements of this 
part.
    (e) Secretarial Responsibilities.--
            (1) Approval of state programs.--The Secretary shall 
        approve a State program meeting the requirements of this part.
            (2) Information on medicare benefits.--The Secretary shall 
        furnish, to the official in each State with chief 
        responsibility for the regulation of long-term care insurance, 
        a description of the Medicare programs under title XVIII of the 
        Social Security Act which makes clear the unavailability of 
        long-term benefits under such programs, for distribution by 
        such State official to insurers selling long-term care 
        insurance in the State, in accordance with subsection (b)(2).

SEC. 2342. AUTHORIZATION OF APPROPRIATIONS FOR STATE PROGRAMS.

    There are authorized to be appropriated $10,000,000 for fiscal year 
1996, $10,000,000 for fiscal year 1997, $7,500,000 for fiscal year 
1998, and $5,000,000 for fiscal year 1999 and each succeeding fiscal 
year, for grants to States with programs meeting the requirements of 
this part, to remain available until expended.

SEC. 2343. ALLOTMENTS TO STATES.

    The allotment for any fiscal year to a State with a program 
approved under this part shall be an amount determined by the 
Secretary, taking into account the numbers of long-term care insurance 
policies sold, and of elderly individuals residing, in the State, and 
such other factors as the Secretary finds appropriate.

SEC. 2344. PAYMENTS TO STATES.

    (a) In General.--Each State with a program approved under this part 
shall be entitled to payment under this title for each fiscal year in 
an amount equal to its allotment for such fiscal year, for expenditure 
by such State for up to 50 percent of the cost of activities under such 
program.
    (b) State Share of Program Expenditures.--No Federal funds from any 
source may be used as any part of the non-Federal share of expenditures 
under the State program under this subpart.
    (c) Transfer and Deposit Requirements.--The Secretary shall make 
payments under this section in accordance with section 6503 of title 
31, United States Code.

SEC. 2345. FEDERAL OVERSIGHT OF STATE ENFORCEMENT.

    (a) In General.--The Secretary shall periodically review State 
regulatory programs approved under section 2341 to determine whether 
they continue to comply with the requirements of this part.
    (b) Notice of Determination of Noncompliance.--The Secretary shall 
promptly notify the State of a determination that a State program fails 
to comply with this part, specifying the requirement or requirements 
not met and the elements of the State program requiring correction.
    (c) Opportunity for Correction.--
            (1) In general.--The Secretary shall afford a State 
        notified of noncompliance pursuant to subsection (b) a 
        reasonable opportunity to eliminate such noncompliance.
            (2) Correction plans.--In a case where substantial 
        corrections are needed to eliminate noncompliance of a State 
        program, the Secretary may--
                    (A) permit the State a reasonable time after the 
                date of the notice pursuant to subsection (b) to 
                develop and obtain the Secretary's approval of a 
                correction plan, and
                    (B) permit the State a reasonable time after the 
                date of approval of such plan to eliminate the 
                noncompliance.
    (d) Withdrawal of Program Approval.--In the case of a State that 
fails to eliminate noncompliance with requirements under this part by 
the date specified by the Secretary pursuant to subsection (c), the 
Secretary shall withdraw the approval of the State program pursuant to 
section 2341(e).

SEC. 2346. EFFECT OF FAILURE TO HAVE APPROVED STATE PROGRAM.

    (a) Restriction on Sale of Long-Term Care Insurance.--
            (1) In general.--No insurer may sell or offer for sale any 
        long-term care insurance policy, on or after the date specified 
        in subsection (c), in a State that does not have in effect a 
        regulatory program approved under section 2341(e).
            (2) Application of prohibition.--For purposes of paragraph 
        (1), an insurance policy shall not be considered to be sold or 
        offered for sale in a State solely because it is sold or 
        offered to a resident of such State.
    (b) Civil Money Penalty.--
            (1) In general.--An insurer shall be subject to a civil 
        money penalty, in an amount up to the greater of $10,000 or 
        three times any commission involved, for each incident in which 
        the insurer sells, or offers to sell, an insurance policy to an 
        individual in violation of subsection (a).
            (2) Enforcement procedure.--The Secretary shall enforce the 
        provisions of this subsection in accordance with the procedures 
        provided under section 5412 of this Act.
    (c) Effective Date.--
            (1) In general.--The date specified in this subsection, for 
        purposes of subsection (a), with respect to any requirement 
        under this part, is the date one year after the date the 
        Secretary first promulgates regulations with respect to such 
        requirement.
            (2) Exception.--To the extent that a State demonstrates to 
        the Secretary that State legislation is required to meet any 
        such requirement, the State shall not be regarded as failing to 
        have in effect a program in compliance with this part solely on 
        the basis of its failure to comply with such requirement before 
        the first day of the first calendar quarter beginning after the 
        close of the first regular session of the State legislature 
        that begins after the promulgation of the regulation imposing 
        such requirement. For purposes of the preceding sentence, in 
        the case of a State that has a 2-year legislative session, each 
        year of such session shall be deemed to be a separate regular 
        session of the State legislature.

                  Subpart D--Consumer Education Grants

SEC. 2361. GRANTS FOR CONSUMER EDUCATION.

    (a) Grant Program Authorized.--The Secretary is authorized to make 
grants--
            (1) to States,
            (2) to regional alliances (at the option of States within 
        which such Alliances are located), and
            (3) to national organizations representing insurance 
        consumers, long-term care providers, and insurers,
for the development and implementation of long-term care information, 
counseling, and other programs.
    (b) Applications.--
            (1) In general.--Each State or organization seeking a grant 
        under this section shall submit to the Secretary an 
        application, in such format and containing such information as 
        the Secretary may require.
            (2) Goals.--Programs under this section shall be directed 
        at the goals of increasing consumers' understanding and 
        awareness of options available to them with respect to long-
        term care insurance (and alternatives, such as public long-term 
        care programs), including--
                    (A) the risk of needing long-term care;
                    (B) the costs associated with long-term care 
                services;
                    (C) the lack of long-term care coverage under the 
                Medicare program, Medicare supplemental (Medigap) 
                policies, and standard private health insurance;
                    (D) the limitations on (and conditions of 
                eligibility for) long-term care coverage under State 
                programs;
                    (E) the availability, and variations in coverage 
                and cost, of private long-term care insurance;
                    (F) features common to many private long-term care 
                insurance policies; and
                    (G) pitfalls to avoid when purchasing a long-term 
                care insurance policy.
            (3) Activities.--An application for a grant under this 
        section shall indicate the activities the State or organization 
        would carry out under such grant, which activities may 
        include--
                    (A) coordination of the activities of State 
                agencies and private entities as necessary to carry out 
                the State's program under this section;
                    (B) collection, analysis, publication, and 
                dissemination of information,
                    (C) conducting or sponsoring of consumer education, 
                outreach, and information programs,
                    (D) providing (directly or through referral) 
                counseling and consultation services to consumers to 
                assist them in choosing long-term care insurance 
                coverage appropriate to their circumstances, and
                    (E) other appropriate activities.
            (4) Priority for innovation.--In awarding grants under this 
        section, the Secretary shall give priority to applications 
        proposing to use innovative approaches to providing 
        information, counseling, and other assistance to individuals 
        who might benefit from, or are considering the purchase of, 
        long-term care insurance.
    (c) Period of Grants.--Grants under this section shall be for not 
longer than 3 years.
    (d) Evaluations and Reports.--
            (1) By grantees to the secretary.--Each recipient of a 
        grant under this section shall annually evaluate the 
        effectiveness of its program under such grant, and report its 
        conclusions to the Secretary.
            (2) By the secretary to the congress.--The Secretary shall 
        annually evaluate, and report to the Congress on, the 
        effectiveness of programs under this section, on the basis of 
        reports received under paragraph (1) and such independent 
        evaluation as the Secretary finds necessary.
    (e) Authorization of Appropriations.--There are authorized to be 
appropriated, for grants under this section--
            (1) $10,000,000 for each of fiscal years 1995 through 1997 
        for grants to States, and
            (2) $1,000,000 for each of fiscal years 1995 through 1997,
for grants to eligible organizations.

     PART 4--TAX TREATMENT OF LONG-TERM CARE INSURANCE AND SERVICES

SEC. 2401. REFERENCE TO TAX PROVISIONS.

    For amendments to the Internal Revenue Code of 1986 relating to the 
treatment of long-term care insurance and services, see subtitle G of 
title VII.

   PART 5--TAX INCENTIVES FOR INDIVIDUALS WITH DISABILITIES WHO WORK

SEC. 2501. REFERENCE TO TAX PROVISION.

    For amendment to the Internal Revenue Code of 1986 providing for a 
tax credit for cost of personal assistance services required by 
employed individuals, see section 7901.

                  PART 6--DEMONSTRATION AND EVALUATION

SEC. 2601. DEMONSTRATION ON ACUTE AND LONG-TERM CARE INTEGRATION.

    (a) Program Authorized.--The Secretary of Health and Human Services 
shall conduct a demonstration program to test the effectiveness of 
various approaches to financing and providing integrated acute and 
long-term care services described in subsection (b) for the chronically 
ill and disabled who meet eligibility criteria under subsection (c).
    (b) Services and Benefits.--
            (1) In general.--Except as provided in paragraph (2), the 
        following services and benefits shall be provided under each 
        demonstration approved under this section:
                    (A) Comprehensive benefit package.--All benefits 
                included in the comprehensive benefit package under 
                title I of this Act.
                    (B) Transitional benefits.--Specialized benefits 
                relating to the transition from acute to long-term 
                care, including--
                            (i) assessment and consultation,
                            (ii) inpatient transitional care,
                            (iii) medical rehabilitation,
                            (iv) home health care and home care,
                            (v) caregiver support, and
                            (vi) self-help technology.
                    (C) Long-term care benefits.--Long-term care 
                benefits, including--
                            (i) adult day care,
                            (ii) personal assistance services,
                            (iii) homemaker services and chore 
                        services;
                            (iv) home-delivered meals;
                            (v) respite services;
                            (vi) nursing facility services in 
                        specialized care units;
                            (vii) services in other residential 
                        settings including community supported living 
                        arrangements and assisted living facilities; 
                        and
                            (viii) assistive devices and environmental 
                        modifications.
                    (D) Habilitation services.--Specialized 
                habilitation services for participants with 
                developmental disabilities.
            (2) Variations in minimum benefits.--
                    (A) In general.--Subject to the requirement of 
                subparagraph (B), demonstrations may omit specified 
                services listed under subparagraphs (C) and (D) of 
                paragraph (1), or provide additional services, as found 
                appropriate by the Secretary in the case of a 
                particular demonstration, taking into consideration 
                factors such as--
                            (i) the needs of a specialized group of 
                        eligible beneficiaries;
                            (ii) the availability of the omitted 
                        benefits under other programs in the service 
                        area; and
                            (iii) the geographic availability of 
                        service providers.
                    (B) Breadth requirement.--In approving variant 
                demonstrations pursuant to subparagraph (A), the 
                Secretary shall ensure that demonstrations under this 
                section, taken as a group, adequately test financing 
                and delivery models covering the entire array of 
                services and benefits described in paragraph (1).
    (c) Eligibility Criteria.--The Secretary shall establish 
eligibility criteria for individuals who may receive services under 
demonstrations under this section. Under such criteria, any of the 
following may be found to be eligible populations for such 
demonstrations:
            (1) Individuals with disabilities who are entitled to 
        services and benefits under a State program under part 1 of 
        this subtitle.
            (2) Individuals who are entitled to benefits under parts A 
        and B of title XVIII of the Social Security Act.
            (3) Individuals who are entitled to medical assistance 
        under a State plan under title XIX of the Social Security Act, 
        and are also--
                    (A) individuals described in paragraph (2), or
                    (B) individuals eligible for supplemental security 
                income under title XVI of that Act.
    (d) Application.--
            (1) In general.--Each entity seeking to participate in a 
        demonstration under this section shall submit an application, 
        in such format and containing such information as the Secretary 
        may require, including the information specified in this 
        subsection.
            (2) Service delivery.--The application shall state the 
        services to be provided under the demonstration (either 
        directly by the applicant or under other arrangements approved 
        by the Secretary), which shall include services specified 
        pursuant to subsection (b) and--
                    (A) enrollment services;
                    (B) client assessment and care planning;
                    (C) simplified access to needed services;
                    (D) integrated management of acute and chronic 
                care, including measures to ensure continuity of care 
                across settings and services;
                    (E) quality assurance, grievance, and appeals 
                mechanisms; and
                    (F) such other services as the Secretary may 
                require.
            (3) Consumer protection and participation.--The applicant 
        shall provide evidence of consumer participation--
                    (A) in the planning of the demonstration (including 
                a showing of support from community agencies or 
                consumer interest groups); and
                    (B) in the conduct of the demonstration, including 
                descriptions of methods and procedures to be used--
                            (i) to make available to individuals 
                        enrolled in the demonstration information on 
                        self-help, health promotion and disability 
                        prevention practices, and enrollees' 
                        contributions to the costs of care;
                            (ii) to ensure participation by such 
                        enrollees (or their designated representatives, 
                        where appropriate) in care planning and in 
                        decisions concerning treatment;
                            (iii) to handle and resolve client 
                        grievances and appeals;
                            (iv) to take enrollee views into account in 
                        quality assurance and provider contracting 
                        procedures; and
                            (v) to evaluate enrollee satisfaction with 
                        the program.
            (4) Applicant qualifications.--Applicants for grants under 
        this section shall meet eligibility criteria established by the 
        Secretary, including requirements relating to--
                    (A) adequate financial controls to monitor 
                administrative and service costs,
                    (B) demonstrated commitment of the Board of 
                Directors or comparable governing body to the goals of 
                demonstration,
                    (C) information systems adequate to pay service 
                providers, to collect required utilization and cost 
                data, and to provide data adequate to permit evaluation 
                of program performance, and
                    (D) compliance with applicable State laws.
    (e) Payments to Participants.--An entity conducting a demonstration 
under this section shall be entitled to receive, with respect to each 
enrollee, for the period during which it is providing to such enrollee 
services under a demonstration under this section, such amounts as the 
Secretary shall provide, which amounts--
            (1) may include risk-based payments and non-risk based 
        payments by governmental programs, by third parties, or by 
        project enrollees, or any combination of such payments, and
            (2) may vary by project and by enrollee.
    (f) Number and Duration of Demonstration Projects.--
            (1) Request for applications.--The Secretary shall publish 
        a request for applications under this section not later than 
        one year after enactment of this Act.
            (2) Number and duration.--The Secretary shall authorize not 
        more than 25 demonstrations under this section, each of which 
        shall run for 7 years from the date of the award.
    (g) Evaluation and Reports.--The Secretary shall evaluate the 
demonstration projects under this section, and shall submit to the 
Congress--
            (1) an interim report, by three years after enactment, 
        describing the status of the demonstration and characteristics 
        of the approved projects; and
            (2) a final report, by one year after completion of such 
        demonstration projects, evaluating their effectiveness 
        (including cost-effectiveness), and discussing the advisability 
        of including some or all of the integrated models tested in the 
        demonstration as a benefit under the comprehensive benefit 
        package under title I of this Act, or under the programs under 
        title XVIII of the Social Security Act.
    (h) Authorization of Appropriations.--
            (1) For secretarial responsibilities.--
                    (A) In general.--There are authorized to be 
                appropriated $7,000,000 for fiscal year 1996, and 
                $4,500,000 for each of the 6 succeeding fiscal years, 
                for payment of costs of the Secretary in carrying out 
                this section (including costs for technical assistance 
                to potential service providers, and research and 
                evaluation), which amounts shall remain available until 
                expended.
                    (B) Set-aside for feasibility studies.--Of the 
                total amount authorized to be appropriated under 
                subparagraph (A), not less than $1,000,000 shall be 
                available for studies of the feasibility of systems to 
                provide integrated care for nonaged populations 
                (including physically disabled children and adults, the 
                chronically mentally ill, and individuals with 
                disabilities, and combinations of these groups).
            (2) For covered benefits.--There are authorized to be 
        appropriated $50,000,000 for the first fiscal year for which 
        grants are awarded under this section, and for each of the four 
        succeeding fiscal years, for payment of costs of benefits for 
        which no public or private program or entity is legally 
        obligated to pay.

SEC. 2602. PERFORMANCE REVIEW OF THE LONG-TERM CARE PROGRAMS.

    (a) In General.--The Secretary of Health and Human Services shall 
prepare and submit to the Congress--
            (1) an interim report, not later than the end of the 
        seventh full calendar year beginning after the date of the 
        enactment of this Act, and
            (2) a final report, not later than two years after the date 
        of the interim report,
evaluating the effectiveness of the programs established and amendments 
made by this subtitle (and including at a minimum the elements 
specified in subsection (b)).
    (b) Elements of Assessment.--The evaluations to be made, and 
included in the reports required pursuant to subsection (a), include at 
least the following:
            (1) State service delivery programs.--An evaluation of 
        States' effectiveness in meeting the needs for home and 
        community-based services (including personal assistance 
        services) of individuals with disabilities (including 
        individuals who do, and who do not, meet the eligibility 
        criteria for the service program under part 1, individuals of 
        different ages, type and degree of disability, and income 
        levels, members of minority groups, and individuals residing in 
        rural areas).
            (2) Service access.--An evaluation of the degree of (and 
        obstacles to) access of individuals with disabilities to needed 
        home and community-based services and to inpatient services.
            (3) Quality.--An evaluation of the quality of long-term 
        care services available.
            (4) Private insurance.--An evaluation of the performance of 
        the private sector in offering affordable long-term care 
        insurance that provides adequate protection against the costs 
        of long-term care, and of the effectiveness of Federal 
        standards and State enforcement, pursuant to part 3, in 
        adequately protecting long-term care insurance consumers.
            (5) Cost issues.--An evaluation of the effectiveness of 
        amendments made by this subtitle in containing the costs of 
        long-term care, and in limiting the share of such costs borne 
        by individuals with lower incomes.
            (6) Service coordination and integration.--An evaluation of 
        the effectiveness of the programs established or amended under 
        this subtitle in achieving coordination and integration of 
        long-term care services, and of such services with acute care 
        services and social services, and in ensuring provision of 
        services in the least restrictive setting possible.

                                                              Title III

                  TITLE III--PUBLIC HEALTH INITIATIVES

                       table of contents of title

                                                                   Page
        Subtitle A--Workforce Priorities Under Federal Payments

 Part 1--Institutional Costs of Graduate Medical Education; Workforce 
       subpart a--national council regarding workforce priorities
Sec. 3001subpart b--authorized positions in specialty training      504
Sec. 3011. Cooperation regarding approved physician training        506
                            programs.
Sec. 3012. Annual authorization of number of specialty              509
                            positions; requirements 
                            regarding primary health care.
Sec. 3subpart c--institutional costs of graduate medical education  513
Sec. 3031. Federal formula payments to approved physician           515
                            training programs.
Sec. 3032. Application for payments.........................        516
Sec. 3033. Availability of funds for payments; annual amount        517
                            of payments.
Sec. 3034. Additionalsubpart d--general provisions..........        522
Sec. 3041. Definitisubpart e--transitional provisions.......        526
Sec. 3051. Transitional payments to institutions............        527
 Part 2--Institutional Costs of Graduate Nursing Education; Workforce 
                               Priorities

Sec. 3061. National council; authorized graduate nurse              533
                            training positions; 
                            institutional costs.
Sec. 3062. Applicability of part 1 provisions...............        535
Sec. 3063. Funding..........................................        536
                        Part 3--Related Programs

Sec. 3071. Programs of the Secretary of Health and Human            536
                            Services.
Sec. 3072. Programs of the Secretary of Labor...............        540
Sec. 3073. National Institute for Health Care Workforce             543
                            Development.
Sec. 3074. Requirement for certain programs regarding               546
                            redeployment of health care 
                            workers.
                  Subtitle B--Academic Health Centers

                        Part 1--Formula Payments

Sec. 3101. Federal formula payments to academic health              548
                            centers.
Sec. 3102. Request for payments.............................        551
Sec. 3103. Availability of funds for payments; annual amount        552
                            of payments.
Sec. 3104. Additional funding provisions....................        554
         Part 2--Access of Patients to Academic Health Centers

Sec. 3131. Contracts for ensuring access to centers.........        558
Sec. 3132. Discretionary grants regarding access to centers.        559
                Subtitle C--Health Research Initiatives

                 Part 1--Programs for Certain Agencies

Sec. 3201. Biomedical and behavioral research on health 
                                      promotion and disease 
prevention.                                                         560
Sec. 3202. Health services research.........................        561
                      Part 2--Funding for Programs

Sec. 3211. Authorizations of appropriations.................        563
    Subtitle D--Core Functions of Public Health Programs; National 
                Initiatives Regarding Preventive Health

                            Part 1--Funding

Sec. 3301. Authorizations of appropriations.................        564
            Part 2--Core Functions of Public Health Programs

Sec. 3311. Purposes.........................................        565
Sec. 3312. Grants to States for core health functions.......        565
Sec. 3313. Submission of information........................        570
Sec. 3314. Reports..........................................        571
Sec. 3315. Application for grant............................        571
Sec. 3316. General provisions...............................        572
Sec. 3317. Allocations for certain activities...............        572
Sec. 3318. Definitions......................................        573
  Part 3--National Initiatives Regarding Health Promotion and Disease 
                               Prevention

Sec. 3331. Grants for national prevention initiatives.......        573
Sec. 3332. Priorities.......................................        575
Sec. 3333. Submission of information........................        576
Sec. 3334. Application for grant............................        577
   Subtitle E--Health Services for Medically Underserved Populations

              Part 1--Community and Migrant Health Centers

Sec. 3401. Authorizations of appropriations.................        578
Sec. 3402. Use of funds.....................................        579
             Part 2--Isubpart a--purposes; fundinglth Care
Sec. 3411. Purposes.........................................        579
subpart b--development of qualified community health plans and practice 
                                networks
Sec. 3421. Grants and contracts for development of plans and        581
                            networks.
Sec. 3422. Preferences in making awards of assistance.......        586
Sec. 3423. Certain uses of awards...........................        587
Sec. 3424. Accessibility of services........................        589
Sec. 3425. Additional agreements............................        592
Sec. 3426. Submission of certain information................        594
Sec. 3427. Reports; audits..................................        595
Sec. 3428. Application for assistance.......................        595
Ssubpart c--capital cost of development of qualified community health 6
                      plans and practice networks
Sec. 3441. Loans and loan guarantees regarding plans and            596
                            networks.
Sec. 3442. Certain requirements.............................        598
Sec. 3443. Defaults; right of recovery......................        600
Sec. 3444. Provisions regarding construction or expansion of        603
                            facilities.
Sec. 3445. Application for assistance.......................        604
Sec. 3446. Administratsubpart d--enabling services..........        605
Sec. 3461. Grants and contracts for enabling services.......        605
Sec. 3462. Authorizations of appropriations.................        608
                 Part 3--National Health Service Corps

Sec. 3471. Authorizations of appropriations.................        608
Sec. 3472. Allocation for participation of nurses in                609
                            scholarship and loan repayment 
                            programs.
      Part 4--Payments to Hospitals Serving Vulnerable Populations

Sec. 3481. Payments to hospitals............................        610
Sec. 3482. Identification of eligible hospitals.............        612
Sec. 3483. Amount of payments...............................        613
Sec. 3484. Base year........................................        615
               Subtitle F--Mental Health; Substance Abuse

                      Part 1--Financial Assistance

Sec. 3501. Authorizations of appropriations.................        615
Sec. 3502. Supplemental formula grants for States regarding 
                            activities under part B of title 
                               XIX of Public Health Service 
Act.                                                                616
Sec. 3503. Capital costs of development of certain centers          621
                            and clinics.
           Part 2--Authoritsubpart a--reportticipating States
Sec. 3511. Report on intsubpart b--pilot programh systems...        622
Sec. 3521. Pilot program....................................        626
   Subtitle G--Comprehensive School Health Education; School-Related 
                            Health Services

                       Part 1--General Provisions

Sec. 3601. Purposes.........................................        627
Sec. 3602. Definitions......................................        629
          Part 2--School Health Education; General Provisions

Sec. 3611. Authorizations of appropriations.................        631
Sec. 3612. Waivers of statutory and regulatory requirements.        632
  Part 3subpart a--planning grants for state education agenciesencies
Sec. 3621. Application for grant............................        636
Sec. 3622. Approval of Secretary............................        638
Sec. 3623. Amount of grant..................................        638
Sec. subpart b--implementation grants for state education agencies  639
Sec. 3631. Application for grant............................        640
Sec. 3632. Selection of grantees............................        642
Sec. 3633. Amount of grant..................................        642
Sec. 3634. Authorized activities; limitation on                     643
                            administrative costs.
Sec. 3635. Subgrantsubpart c--state and local reports.......        644
Sec. 3641. State and local reports..........................        646
 Part 4--School Health Education; Grants to Certain Local Educational 
                         subpart a--eligibility
Sec. 365subpart b--planning grants for local education agencies     647
Sec. 3661. Application for grant............................        647
Sec. 3662. Selection of grantees............................        649
Sec. 3663. Amount of grant..................................        649
Sec.subpart c--implementation grants for local educational agencies 650
Sec. 3671. Application for grant............................        651
Sec. 3672. Selection of grantees............................        653
Sec. 3673. Amount of grant..................................        654
Sec. 3674. Authorized activities............................        655
Sec. 3675. Reports..........................................        655
            subpart a--development and operation of projects
Sec. 3681. Authorizations of appropriations.................        656
Sec. 3682. Eligibility for development and operation grants.        656
Sec. 3683. Preferences......................................        658
Sec. 3684. Grants for development of projects...............        659
Sec. 3685. Grants for operation of projects.................        662
Sec. 3686. Fsubpart b--capital costs of developing projects.        666
Sec. 3691. Loans and loan guarantees regarding projects.....        666
Sec. 3692. Funding..........................................        667
              Subtitle H--Public Health Service Initiative

Sec. 3701. Public health service initiative.................        667
       Subtitle I--Coordination With COBRA Continuation Coverage

Sec. 3801. Public Health Service Act; coordination with             668
                            COBRA continuation coverage.

                                                  Title III, Subtitle A

        Subtitle A--Workforce Priorities Under Federal Payments

 PART 1--INSTITUTIONAL COSTS OF GRADUATE MEDICAL EDUCATION; WORKFORCE 
                               PRIORITIES

       Subpart A--National Council Regarding Workforce Priorities

SEC. 3001. NATIONAL COUNCIL ON GRADUATE MEDICAL EDUCATION.

    (a) In General.--There is established within the Department of 
Health and Human Services a council to be known as the National Council 
on Graduate Medical Education.
    (b) Duties.--The Secretary shall carry out subpart B acting through 
the National Council.
    (c) Composition.--
            (1) In general.--The membership of the National Council 
        shall include individuals who are appointed to the Council from 
        among individuals who are not officers or employees of the 
        United States. Such individuals shall be appointed by the 
        Secretary, and shall include individuals from each of the 
        following categories:
                    (A) Consumers of health care services.
                    (B) Physicians who are faculty members of medical 
                schools.
                    (C) Physicians in private practice who are not 
                physicians described in subparagraph (B).
                    (D) Officers or employees of regional and corporate 
                health alliances.
                    (E) Officers or employees of health care plans that 
                participate in such alliances.
                    (F) Such other individuals as the Secretary 
                determines to be appropriate.
            (2) Ex officio members; other federal officers or 
        employees.--The membership of the National Council shall 
        include individuals designated by the Secretary to serve as 
        members of the Council from among Federal officers or employees 
        who are appointed by the President, or by the Secretary or 
        other Federal officers who are appointed by the President with 
        the advice and consent of the Senate.
    (d) Chair.--The Secretary shall, from among members of the National 
Council appointed under subsection (c)(1), designate an individual to 
serve as the Chair of the Council.
    (e) Definitions.--For purposes of this subtitle:
            (1) The term ``medical school'' means a school of medicine 
        (as defined in section 799 of the Public Health Service Act) or 
        a school of osteopathic medicine (as defined in such section).
            (2) The term ``National Council'' means the council 
        established in subsection (a).

         Subpart B--Authorized Positions in Specialty Training

SEC. 3011. COOPERATION REGARDING APPROVED PHYSICIAN TRAINING PROGRAMS.

    (a) In General.--With respect to an approved physician training 
program in a medical specialty, a funding agreement for payments under 
section 3031 for a calendar year is that the program will ensure that 
the number of individuals enrolled in the program in the subsequent 
academic year is in accordance with this subpart.
    (b) Definitions.--
            (1) Approved program.--For purposes of this subtitle:
                    (A) The term ``approved physician training 
                program'', with respect to the medical speciality 
                involved, means a residency or other postgraduate 
                program that trains physicians and meets the following 
                conditions:
                            (i) Participation in the program may be 
                        counted toward certification in the medical 
                        specialty.
                            (ii) The program is accredited by the 
                        Accreditation Council on Graduate Medical 
                        Education, or approved by the Council on 
                        Postgraduate Training of the American 
                        Osteopathic Association.
                    (B) The term ``approved physician training 
                program'' includes any postgraduate program described 
                in subparagraph (A) that provides health services in an 
                ambulatory setting, without regard to whether the 
                program provides inpatient hospital services.
                    (C) The term ``approved physician training 
                program'' includes any postgraduate program described 
                in subparagraph (A), whether operated by academic 
                health centers, teaching hospitals, multispecialty 
                group practices, ambulatory care providers, prepaid 
                health plans, or other entities.
            (2) Eligible program; subpart definition.--For purposes of 
        this subpart, the term ``eligible program'', with respect to an 
        academic year, means an approved physician training program 
        that receives payments under subpart C for the calendar year in 
        which the academic year begins.
            (3) Other definitions.--For purposes of this subtitle:
                    (A)(i) The term ``academic year'' means the 1-year 
                period beginning on July 1. The academic year beginning 
                July 1, 1993, is academic year 1993-94.
                    (ii) With respect to the funding agreement 
                described in subsection (a), the term ``subsequent 
                academic year'' means the academic year beginning July 
                1 of the calendar year for which payments are to be 
                made under the agreement.
                    (B) The term ``funding agreement'', with respect to 
                payments under section 3031 to an eligible program, 
                means that the Secretary may make the payments only if 
                the program makes the agreement involved.
                    (C) The term ``medical specialty'' includes all 
                medical, surgical, and other physician specialties and 
                subspecialties.

SEC. 3012. ANNUAL AUTHORIZATION OF NUMBER OF SPECIALTY POSITIONS; 
              REQUIREMENTS REGARDING PRIMARY HEALTH CARE.

    (a) Annual Authorization of Number of Positions.--In the case of 
each medical specialty, the National Council shall, pursuant to section 
3011, designate for each academic year the number of individuals 
nationwide who are authorized to be enrolled in eligible programs. The 
preceding sentence is subject to subsection (c)(2).
    (b) Primary Health Care.--
            (1) In general.--Subject to paragraph (2), in carrying out 
        subsection (a) for an academic year, the National Council shall 
        ensure that, of the class of training participants entering 
        eligible programs for academic year 1998-99 or any subsequent 
        academic year, the percentage of such class that completes 
        eligible programs in primary health care is not less than 55 
        percent (without regard to the academic year in which the 
        members of the class complete the programs).
            (2) Rule of construction.--The requirement of paragraph (1) 
        regarding a percentage applies in the aggregate to training 
        participants entering eligible programs for the academic year 
        involved, and not individually to any eligible program.
    (c) Designations Regarding 3-Year Periods.--
            (1) Designation periods.--For each medical specialty, the 
        National Council shall make the annual designations under 
        subsection (a) for periods of 3 academic years.
            (2) Initial period.--The first designation period 
        established by the National Council after the date of the 
        enactment of this Act shall be the academic years 1998-99 
        through 2000-01.
    (d) Certain Considerations in Designating Annual Numbers.--
            (1) In general.--Factors considered by the National Council 
        in designating the annual number of specialty positions for an 
        academic year for a medical specialty shall include the extent 
        to which there is a need for additional practitioners in the 
        speciality, as indicated by the following:
                    (A) The incidence and prevalence (in the general 
                population and in various other populations) of the 
                diseases, disorders, or other health conditions with 
                which the specialty is concerned.
                    (B) The number of physicians who will be practicing 
                in the specialty in the academic year.
                    (C) The number of physicians who will be practicing 
                in the specialty at the end of the 5-year period 
                beginning on the first day of the academic year.
            (2) Recommendations of private organizations.--In 
        designating the annual number of specialty positions for an 
        academic year for a medical specialty, the National Council 
        shall consider the recommendations of organizations 
        representing physicians in the specialty and the 
        recommendations of organizations representing consumers of the 
        services of such physicians.
            (3) Total of respective annual numbers.--
                    (A) Subject to subparagraph (B), for academic year 
                1998-99 and subsequent academic years, the National 
                Council shall ensure that the total of the respective 
                annual numbers designated under subsection (a) for an 
                academic year is a total that--
                            (i) bears a relationship to the number of 
                        individuals who graduated from medical schools 
                        in the United States in the preceding academic 
                        year; and
                            (ii) is consistent with the purposes of 
                        this subpart.
                    (B) For each of the academic years 1998-99 through 
                2002-03, the total determined under subparagraph (A) 
                shall be reduced by a percentage determined by the 
                National Council.
    (e) Definitions.--For purposes of this subtitle:
            (1) The term ``annual number of specialty positions'', with 
        respect to a medical specialty, means the number designated by 
        the National Council under subsection (a) for eligible programs 
        for the academic year involved.
            (2) The term ``designation period'' means a 3-year period 
        under subsection (c)(1) for which designations under subsection 
        (a) are made by the National Council.
            (3) The term ``primary health care'' means the following 
        medical specialties: Family medicine, general internal 
        medicine, general pediatrics, and obstetrics and gynecology.
            (4) The term ``specialty position'' means a position as a 
        training participant.
            (5) The term ``training participant'' means an individual 
        who is enrolled in an approved physician training program.

SEC. 3013. ALLOCATIONS AMONG SPECIALITIES AND PROGRAMS.

    (a) In General.--For each academic year, the National Council shall 
for each medical specialty make allocations among eligible programs of 
the annual number of specialty positions that the Council has 
designated for such year. The preceding sentence is subject to 
subsection (b)(3).
    (b) Allocations Regarding 3-Year Period.--
            (1) In general.--For each medical specialty, the National 
        Council shall make the annual allocations under subsection (a) 
        for periods of 3 academic years.
            (2) Advance notice to programs.--With respect to the first 
        academic year of an allocation period established by the 
        National Council, the National Council shall, not later than 
        July 1 of the preceding academic year, notify each eligible 
        program of the allocations made for the program for each of the 
        academic years of the period.
            (3) Initial period.--The first allocation period 
        established by the National Council after the date of the 
        enactment of this Act shall be the academic years 1998-99 
        through 2000-01.
    (c) Certain Considerations.--
            (1) Geographic areas; quality of programs.--In making 
        allocations under subsection (a) for eligible programs of the 
        various geographic areas, the National Council shall include 
        among the factors considered the historical distribution among 
        the areas of approved physician training programs, and the 
        quality of such programs.
            (2) Underrepresentation of minority groups.--In making an 
        allocation under subsection (a) for an eligible program, the 
        National Council shall include among the factors considered the 
        following:
                    (A) The extent to which the population of training 
                participants in the program includes training 
                participants who are members of racial or ethnic 
                minority groups.
                    (B) With respect to a racial or ethnic group 
                represented among the training participants, the extent 
                to which the group is underrepresented in the field of 
                medicine generally and in the various medical 
                specialities.
            (3) Recommendations of private organizations.--In making 
        allocations under subsection (a) for eligible programs, the 
        National Council shall consider the recommendations of 
        organizations representing physicians in the medical 
        specialties and the recommendations of organizations 
        representing consumers of the services of such physicians.
    (d) Definitions.--For purposes of this subtitle, the term 
``allocation period'' means a 3-year period under subsection (b)(1) for 
which allocations under subsection (a) are made by the National 
Council.

      Subpart C--Institutional Costs of Graduate Medical Education

SEC. 3031. FEDERAL FORMULA PAYMENTS TO APPROVED PHYSICIAN TRAINING 
              PROGRAMS.

    (a) In General.--In the case of an approved physician training 
program that in accordance with section 3032 submits to the Secretary 
an application for calendar year 1996 or any subsequent calendar year, 
the Secretary shall make payments for such year to the program for the 
purpose specified in subsection (b). The Secretary shall make the 
payments in an amount determined in accordance with section 3033, and 
may administer the payments as a contract, grant, or cooperative 
agreement.
    (b) Payments for Operation of Approved Physician Training 
Programs.--The purpose of payments under subsection (a) is to assist an 
eligible program with the costs of operation. A funding agreement for 
such payments is that the approved physician training program involved 
will expend the payments only for such purpose.
    (c) Eligible Program; Subpart Definition.--For purposes of this 
subpart, the term ``eligible program'', with respect to the calendar 
year involved, means an approved physician training program that 
submits to the Secretary an application for such year in accordance 
with section 3032.

SEC. 3032. APPLICATION FOR PAYMENTS.

    (a) In General.--For purposes of section 3031(a), an application 
for payments under such section for a calendar year is in accordance 
with this section if--
            (1) the approved physician training program involved 
        submits the application not later than the date specified by 
        the Secretary;
            (2) the application demonstrates that the condition 
        described in subsection (b) is met with respect to the program;
            (3) the application contains each funding agreement 
        described in this part and the application provides such 
        assurances of compliance with the agreements as the Secretary 
        may require; and
            (4) the application is in such form, is made in such 
        manner, and contains such agreements, assurances, and 
        information as the Secretary determines to be necessary to 
        carry out this part.
    (b) Certain Conditions.--An approved physician training program 
meets the condition described in this subsection for receiving payments 
under section 3031 for a calendar year if the institution within which 
the program operates agrees that such payments will be made by the 
Secretary directly to the program (and such agreement is included in 
the application under subsection (a)), and the Secretary shall ensure 
that such institution is permitted to participate as a provider in a 
regional or corporate alliance health plan during such year only if 
each of the approved physician training programs of the institution 
meets the requirements for receiving payments under such section for 
such year.

SEC. 3033. AVAILABILITY OF FUNDS FOR PAYMENTS; ANNUAL AMOUNT OF 
              PAYMENTS.

    (a) Annual Health Professions Workforce Account.--
            (1) In general.--Subject to paragraph (2) and section 3034, 
        the amount available for a calendar year for making payments 
        under sections 3031 and 3051 (constituting an account to be 
        known as the annual health professions workforce account) is 
        the following, as applicable to the calendar year:
                    (A) In the case of calendar year 1996, 
                $3,200,000,000.
                    (B) In the case of calendar year 1997, 
                $3,550,000,000.
                    (C) In the case of calendar year 1998, 
                $4,800,000,000.
                    (D) In the case of each of the calendar years 1999 
                and 2000, $5,800,000,000.
                    (E) In the case of each subsequent calendar year, 
                the amount specified in subparagraph (D) increased by 
                the product of such amount and the general health care 
                inflation factor for such year (as defined in 
                subsection (d)).
            (2) Transitional provision.--
                    (A) With respect to making payments under sections 
                3031 and 3051 for calendar year 1996 or 1997, the 
                Secretary shall first make payments under section 3031 
                to eligible programs described in subparagraph (B) in 
                the amount determined for the programs under subsection 
                (b) for such year, and then, from such amounts as 
                remain available in the annual health professions 
                workforce account for such year, shall make payments 
                under section 3031 to other eligible programs and shall 
                make payments under section 3051.
                    (B) An eligible program described in this 
                subparagraph is such a program that is operated in a 
                State that is a participating State under title I.
    (b) Amount of Payments for Individual Eligible Programs.--
            (1) In general.--Subject to the annual health professions 
        workforce account available for a calendar year, the amount of 
        payments required in section 3031 to be made to an eligible 
        program for the calendar year is an amount equal to the product 
        of--
                    (A) the number of full-time equivalent training 
                participants in the program; and
                    (B) the national average of the costs of such 
                programs in training such a participant, as determined 
                by consideration of the following factors (and as 
                adjusted under paragraph (2)):
                            (i) The national average salary of training 
                        participants.
                            (ii) The national average costs of such 
                        programs in providing for faculty supervision 
                        of training participants and for related 
                        activities.
            (2) Additional provisions regarding national average 
        cost.--
                    (A) The Secretary shall in accordance with 
                paragraph (1)(B) determine, for academic year 1992-93, 
                an amount equal to the national average described in 
                such paragraph with respect to training a participant 
                in an approved physician training program in the 
                medical specialty involved. The national average 
                applicable under such paragraph for a calendar year for 
                such programs is, subject to subparagraph (B), the 
                amount determined under the preceding sentence 
                increased by the amount necessary to offset the effects 
                of inflation occurring since academic year 1992-93, as 
                determined through use of the consumer price index.
                    (B) The national average determined under 
                subparagraph (A) and applicable to a calendar year 
                shall, in the case of the eligible program involved, be 
                adjusted by a factor to reflect regional differences in 
                the applicable wage and wage-related costs.
    (c) Limitation.--If, subject to subsection (a)(2), the annual 
health professions workforce account available for a calendar year is 
insufficient for providing each eligible program with the amount of 
payments determined under subsection (b) for the program for such year, 
the Secretary shall make such pro rata reductions in the amounts so 
determined as may be necessary to ensure that the total of payments 
made under section 3031 for such year equals the total of such account.
    (d) Definitions.--For purposes of this subtitle:
            (1) The term ``annual health professions workforce 
        account'' means the account established pursuant to subsection 
        (a)(1).
            (2) The term ``consumer price index'' has the meaning given 
        such term in section 1902.
            (3) The term ``general health care inflation factor'', with 
        respect to a year, has the meaning given such term in section 
        6001(a)(3) for such year.

SEC. 3034. ADDITIONAL FUNDING PROVISIONS.

    (a) Sources of Funds for Annual Health Professions Workforce 
Account.--The amount specified in section 3033(a)(1) for the annual 
health professions workforce account for a calendar year shall be 
derived from the sources specified in subsection (b).
    (b) Contributions From Medicare Trust Funds, Regional Alliances, 
and Corporate Alliances.--For purposes of subsection (a), the sources 
specified in this subsection for a calendar year are the following:
            (1) Transfers made by the Secretary under section 4051.
            (2) Payments made by regional alliances under section 1353 
        and--
                    (A) in the case of each of the calendar years 1996 
                and 1997, transferred in an amount equal to 50 percent 
                of such payments made for the calendar year involved; 
                and
                    (B) in the case of calendar year 1998 and each 
                subsequent calendar year, transferred in an amount 
                equal to the aggregate regional alliance portion 
                determined under subsection (c)(2)(A).
            (3) The transfer made under subsection (d)(1).
    (c) Contributions From Regional and Corporate Alliances.--
            (1) Determination of aggregate regional and corporate 
        alliance amount.--For purposes regarding the provision of funds 
        for the annual health professions workforce account for a 
        calendar year (other than calendar year 1996 or 1997), the 
        Secretary shall determine an aggregate regional and corporate 
        alliance amount, which amount is to be paid by such alliances 
        pursuant to paragraphs (2)(B) and (3) of subsection (b), 
        respectively, and which amount shall be equal to the difference 
        between--
                    (A) the amount specified in section 3033(a)(1) for 
                the annual health professions workforce account for 
                such year; and
                    (B) the amount transferred under section 4051 for 
                the year.
            (2) Allocation of amount among regional and corporate 
        alliances.--With respect to the aggregate regional and 
        corporate alliance amount determined under paragraph (1) for a 
        calendar year (other than calendar year 1996 or 1997)--
                    (A) the aggregate regional alliance portion of such 
                amount is the product of such amount and the percentage 
                constituted by the ratio of the total plan payments of 
                regional alliances to the combined total plan payments 
                of regional alliances and corporate alliances; and
                    (B) the aggregate corporate alliance portion of 
                such amount is the product of such amount and the 
                percentage constituted by the ratio of the total plan 
                payments of corporate alliances to such combined total 
                plan payments.
    (d) Compliance Regarding Corporate Alliances.--
            (1) In general.--Effective January 15 of calendar year 1996 
        and each subsequent calendar year, there is hereby transferred 
        to the Secretary, out of any money in the Treasury not 
        otherwise appropriated--
                    (A) in the case of each of the calendar years 1996 
                and 1997, an amount equal to the difference between--
                            (i) the amount specified in section 
                        3033(a)(1) for the annual health professions 
                        workforce account for the calendar year 
                        involved; and
                            (ii) the sum of the amount transferred 
                        under section 4051 for such year and the amount 
                        transferred under subsection (b)(2)(A) for such 
                        year; and
                    (B) in the case of calendar year 1998 and each 
                subsequent calendar year, an amount equal to the 
                aggregate corporate alliance portion determined under 
                subsection (c)(2)(B) for the calendar year involved.
            (2) Manner of compliance.--The payment by corporate 
        alliances of the tax imposed under section 3461 of the Internal 
        Revenue Code of 1986 (as added by section 7121 of this Act), 
        together with the transfer made in paragraph (1)(B) for the 
        calendar year involved, is deemed to be the payment required 
        pursuant to subsection (c)(1) for corporate alliances for such 
        year.
            (3) Graduate nurse education.--Effective January 15 of 
        calendar year 1996 and each subsequent calendar year, there is 
        hereby transferred to the Secretary, out of any money in the 
        Treasury not otherwise appropriated, 50 percent of the amount 
        specified in section 3063(b) with respect to the annual 
        graduate nurse training account.
    (e) Definitions.--For purposes of this subtitle, the term ``plan 
payments'' with respect to a regional or corporate alliance, means the 
amount paid to health plans by the alliance.

                     Subpart D--General Provisions

SEC. 3041. DEFINITIONS.

    For purposes of this subtitle:
            (1) The term ``academic year'' has the meaning given such 
        term in section 3011(b).
            (2) The term ``allocation period'' has the meaning given 
        such term in section 3013(d).
            (3) The term ``annual health professions workforce 
        account'' has the meaning given such term in section 3033(d).
            (4) The term ``annual number of specialty positions'' has 
        the meaning given such term in section 3012(e).
            (5) The term ``approved physician training program'' has 
        the meaning given such term in section 3011(b).
            (6) The term ``consumer price index'' has the meaning given 
        such term in section 3033(d).
            (7) The term ``designation period'' has the meaning given 
        such term in section 3012(e).
            (8) The term ``eligible program'' has the meaning given 
        such term in section 3011(b), in the case of subpart B; and has 
        the meaning given such term in section 3031(c), in the case of 
        subpart C.
            (9) The term ``funding agreement'' has the meaning given 
        such term in section 3011(b).
            (10) The term ``general health care inflation factor'' has 
        the meaning given such term in section 3033(d).
            (11) The term ``medical school'' has the meaning given such 
        term in section 3001(e).
            (12) The term ``medical specialty'' has the meaning given 
        such term in section 3011(b).
            (13) The term ``National Council'' has the meaning given 
        such term in section 3001(e).
            (14) The term ``plan payments'' has the meaning given such 
        term in section 3034(e).
            (15) The term ``primary health care'' has the meaning given 
        such term in section 3012(e).
            (16) The term ``specialty position'' has the meaning given 
        such term in section 3012(e).
            (17) The term ``training participant'' has the meaning 
        given such term in section 3012(e).

                   Subpart E--Transitional Provisions

SEC. 3051. TRANSITIONAL PAYMENTS TO INSTITUTIONS.

    (a) Payments Regarding Effects of Subpart B Allocations.--For each 
of the four calendar years specified in subsection (b)(2), in the case 
of an institution that submits to the Secretary an application for such 
year in accordance with subsection (d), the Secretary shall make 
payments for the year to the institution for the purpose specified in 
subsection (c). The Secretary shall make the payments in an amount 
determined in accordance with subsection (e), and may administer the 
payments as a contract, grant, or cooperative agreement.
    (b) Institutions Losing Specialty Positions; Relevant Years 
Regarding Payments.--
            (1) Institutions losing specialty positions.--The Secretary 
        may make payments under subsection (a) to an institution only 
        if, with respect to the calendar year involved, the institution 
        meets the following conditions:
                    (A) The institution operates one or more programs 
                that--
                            (i) are approved physician training 
                        programs; and
                            (ii) are receiving payments under section 
                        3031 for such year.
                    (B) The aggregate number of speciality positions in 
                such programs (in the medical specialities with respect 
                to which such payments are made) is below the aggregate 
                number of such positions at the institution for 
                academic year 1993-94 as a result of allocations under 
                subpart B.
            (2) Relevant years.--The Secretary may make payments under 
        subsection (a) to an institution only for the first four 
        calendar years after calendar 1997 for which the institution 
        meets the conditions described in paragraph (1).
            (3) Eligible institution.--For purposes of this section, 
        the term ``eligible institution'' means an institution that 
        submits to the Secretary an application in accordance with 
        subsection (d).
    (c) Purpose of Payments.--The purpose of payments under subsection 
(a) is to assist an eligible institution with the costs of operation. A 
funding agreement for such payments is that the institution involved 
will expend the payments only for such purpose.
    (d) Application for Payments.--For purposes of subsection (a), an 
application for payments under such subsection is in accordance with 
this subsection if the institution involved submits the application not 
later than the date specified by the Secretary; the application 
demonstrates that the institution meets the conditions described in 
subsection (b)(1) and that the institution has cooperated with the 
approved physician training programs of the institution in meeting the 
condition described in section 3032(b); the application contains each 
funding agreement described in this subpart and the application 
provides such assurances of compliance with the agreements as the 
Secretary may require; and the application is in such form, is made in 
such manner, and contains such agreements, assurances, and information 
as the Secretary determines to be necessary to carry out this subpart.
    (e) Amount of Payments.--
            (1) In general.--Subject to the annual health professions 
        workforce account available for the calendar year involved, the 
        amount of payments required in subsection (a) to be made to an 
        eligible institution for such year is the product of the amount 
        determined under paragraph (2) and the applicable percentage 
        specified in paragraph (3).
            (2) Number of specialty positions lost; national average 
        salary.--For purposes of paragraph (1), the amount determined 
        under this paragraph for an eligible institution for the 
        calendar year involved is the product of--
                    (A) an amount equal to the aggregate number of 
                full-time equivalent specialty positions lost; and
                    (B) the national average salary of training 
                participants.
            (3) Applicable percentage.--For purposes of paragraph (1), 
        the applicable percentage for a calendar year is the following, 
        as applicable to such year:
                    (A) For the first calendar year after calendar 1997 
                for which the eligible institution involved meets the 
                conditions described in subsection (b)(1), 100 percent.
                    (B) For the second such year, 75 percent.
                    (C) For the third such year, 50 percent.
                    (D) For the fourth such year, 25 percent.
            (4) Determination of specialty positions lost.--
                    (A) For purposes of this subsection, the aggregate 
                number of specialty positions lost, with respect to a 
                calendar year, is the difference between--
                            (i) the aggregate number of specialty 
                        positions described in subparagraph (B) that 
                        are estimated for the eligible institution 
                        involved for the academic year beginning in 
                        such calendar year; and
                            (ii) the aggregate number of such specialty 
                        positions at the institution for academic year 
                        1993-94.
                    (B) For purposes of subparagraph (A), the specialty 
                positions described in this subparagraph are specialty 
                positions in the medical specialities with respect to 
                which payments under section 3031 are made to the 
                approved physician training programs of the eligible 
                institution involved.
            (5) Additional provision regarding national average 
        salary.--
                    (A) The Secretary shall determine, for academic 
                year 1992-93, an amount equal to the national average 
                described in paragraph (2)(B). The national average 
                applicable under such paragraph for a calendar year is, 
                subject to subparagraph (B), the amount determined 
                under the preceding sentence increased by an amount 
                necessary to offset the effects of inflation occurring 
                since academic year 1992-93, as determined through use 
                of the consumer price index.
                    (B) The national average determined under 
                subparagraph (A) and applicable to a calendar year 
                shall, in the case of the eligible institution 
                involved, be adjusted by a factor to reflect regional 
                differences in the applicable wage and wage-related 
                costs.

 PART 2--INSTITUTIONAL COSTS OF GRADUATE NURSING EDUCATION; WORKFORCE 
                               PRIORITIES

SEC. 3061. NATIONAL COUNCIL; AUTHORIZED GRADUATE NURSE TRAINING 
              POSITIONS; INSTITUTIONAL COSTS.

    (a) Program Regarding Graduate Nurse Training Programs.--The 
Secretary shall, in accordance with this part, carry out a program with 
respect to graduate nurse training programs that is equivalent to the 
program carried out under part 1 with respect to approved physician 
training programs.
    (b) Definitions.--For purposes of this part:
            (1) The term ``graduate nurse training programs'' means 
        programs for advanced nurse education, programs for education 
        as nurse practitioners, programs for education as nurse 
        midwives, programs for education as nurse anesthetists, and 
        such other programs for training in clinical nurse specialties 
        as are determined by the Secretary to require advanced 
        education.
            (2) The term ``graduate nurse training position'' means a 
        position as an individual who is enrolled in a graduate nurse 
        training program.
            (3) The term ``programs for advanced nurse education'' 
        means programs meeting the conditions to be programs for which 
        awards of grants and contracts may be made under section 821 of 
        the Public Health Service Act.
            (4) The term ``programs for education as nurse 
        practitioners'' means programs meeting the conditions to be 
        programs for which awards of grants and contracts may be made 
        under section 822 of the Public Health Service Act for 
        education as a nurse practitioners.
            (5) The term ``programs for education as nurse midwives'' 
        means programs meeting the conditions to be programs for which 
        awards of grants and contracts may be made under section 822 of 
        the Public Health Service Act for education as nurse midwives.
            (6) The term ``programs for education as nurse 
        anesthetists'' means programs meeting the conditions to be 
        programs for which awards of grants may be made under section 
        831 of the Public Health Service Act for education as nurse 
        anesthetists.

SEC. 3062. APPLICABILITY OF PART 1 PROVISIONS.

    (a) In General.--The provisions of part 1 apply to the program 
carried out under section 3061 to the same extent and in the same 
manner as such provisions apply to the program carried out under part 
1, subject to the subsequent provisions of this section. Section 3051 
does not apply for purposes of the preceding sentence.
    (b) National Council.--With respect to section 3001 as applied to 
this part, the council shall be known as the National Council on 
Graduate Nurse Education (in this part referred to as the ``National 
Council''). The provisions of section 851 of the Public Health Service 
Act regarding the composition of the council under such section apply 
to the composition of the National Council to the same extent and in 
the same manner as such provisions apply to the council under such 
section 851.
    (c) Allocation of Graduate Nurse Training Positions; Formula 
Payments for Operating Costs.--With respect to subparts B and C of part 
1 as applied to this part--
            (1) the funding agreement described in section 3011 is to 
        be made by graduate nurse training programs;
            (2) designations under section 3012 and allocations under 
        section 3013 apply to graduate nurse training positions; and
            (3) payments under section 3031 are to be made to graduate 
        nurse training programs, subject to the requirements for such 
        payments.

SEC. 3063. FUNDING.

    (a) In General.--With respect to sections 3033 and 3034 as applied 
to this part, the provisions of this section apply.
    (b) Annual Graduate Nurse Training Account.--Subject to subsection 
(c), the amount available for each calendar year for making payments 
pursuant to section 3062(c)(3) to graduate nurse training programs 
(constituting an account to be known as the annual graduate nurse 
training account) is $200,000,000.
    (c) Sources of Funds for Account.--The amount specified in 
subsection (b) for the annual graduate nurse training account for a 
calendar year shall be derived from the following sources:
            (1) The transfer under section 3034(d)(3).
            (2) The transfer under section 3104(d)(3).

                        PART 3--RELATED PROGRAMS

SEC. 3071. PROGRAMS OF THE SECRETARY OF HEALTH AND HUMAN SERVICES.

    (a) In General.--
            (1) Funding.--For purposes of carrying out the programs 
        described in this section, there is authorized to be 
        appropriated $400,000,000 for fiscal year 1994 and each 
        subsequent fiscal year (in addition to amounts that may 
        otherwise be authorized to be appropriated for carrying out the 
        programs).
            (2) Administration.--The programs described in this section 
        and carried out with amounts made available under subsection 
        (a) shall be carried out by the Secretary of Health and Human 
        Services.
    (b) Primary Care Physician and Physician Assistant Training.--For 
purposes of subsection (a), the programs described in this section 
include programs to support projects to train additional numbers of 
primary care physicians and physician assistants, including projects to 
enhance community-based generalist training for medical students, 
residents, and practicing physicians; to retrain mid-career physicians 
previously certified in a nonprimary care medical specialty; to expand 
the supply of physicians with special training to serve in rural and 
inner-city medically underserved areas; to support expansion of 
service-linked educational networks that train a range of primary care 
providers in community settings; to provide for training in managed 
care, cost-effective practice management, and continuous quality 
improvement; and to develop additional information on primary care 
workforce issues as required to meet future needs in health care.
    (c) Training of Underrepresented Minorities and Disadvantaged 
Persons.--For purposes of subsection (a), the programs described in 
this section include a program to support projects to increase the 
number of underrepresented minority and disadvantaged persons in 
medicine, osteopathy, dentistry, nursing, public health, and other 
health professions, including projects to provide continuing financial 
assistance for such persons entering health professions training 
programs; to increase support for recruitment and retention of such 
persons in the health professions; to maintain efforts to foster 
interest in health careers among such persons at the preprofessional 
level; and to increase the number of minority health professions 
faculty.
    (d) Nurse Training.--For purposes of subsection (a), the programs 
described in this section include a program to support projects to 
support midlevel provider training and address priority nursing 
workforce needs, including projects to train additional nurse 
practitioners and nurse midwives; to support baccalaureate-level nurse 
training programs providing preparation for careers in teaching, 
community health service, and specialized clinical care; to train 
additional nurse clinicians and nurse anesthetists; to support 
interdisciplinary school-based community nursing programs; and to 
promote research on nursing workforce issues.
    (e) Inappropriate Practice Barriers; Full Utilization of Skills.--
For purposes of subsection (a), the programs described in this section 
include a program--
            (1) to develop and encourage the adoption of model 
        professional practice statutes for advanced practice nurses and 
        physician assistants, and to otherwise support efforts to 
        remove inappropriate barriers to practice by such nurses and 
        such physician assistants; and
            (2) to promote the full utilization of the professional 
        education and clinical skills of advanced practice nurses and 
        physician assistants.
    (f) Other Programs.--For purposes of subsection (a), the programs 
described in this section include a program to train health 
professionals and administrators in managed care, cost-effective 
practice management, continuous quality improvement practices, and 
provision of culturally sensitive care.
    (g) Relationship to Existing Programs.--This section may be carried 
out through programs established in title VII or VIII of the Public 
Health Service Act, as appropriate and as consistent with the purposes 
of such programs.

SEC. 3072. PROGRAMS OF THE SECRETARY OF LABOR.

    (a) In General.--
            (1) Funding.--For purposes of carrying out the programs 
        described in this section, and for carrying out section 3073, 
        there is authorized to be appropriated $200,000,000 for fiscal 
        year 1994 and each subsequent fiscal year (in addition to 
        amounts that may otherwise be authorized to be appropriated for 
        carrying out the programs).
            (2) Administration.--The programs described in this section 
        and carried out with amounts made available under subsection 
        (a) shall be carried out by the Secretary of Labor (in this 
        section referred to as the ``Secretary'').
    (b) Retraining Programs; Advanced Career Positions; Workforce 
Adjustment Programs.--
            (1) In general.--For purposes of subsection (a), the 
        programs described in this section are the following:
                    (A) A program for skills upgrading and occupational 
                retraining (including retraining health care workers 
                for more advanced positions as technicians, nurses, and 
                physician assistants), and for quality and workforce 
                improvement.
                    (B) A demonstration program to assist workers in 
                health care institutions in obtaining advanced career 
                positions.
                    (C) A program to develop and operate health-worker 
                job banks in local employment services agencies, 
                subject to the following:
                            (i) Such job banks shall be available to 
                        all health care providers in the community 
                        involved.
                            (ii) Such job banks shall begin operation 
                        not later than 90 days after the date of the 
                        enactment of this Act.
                    (D) A program to provide for joint labor-management 
                decision-making in the health care sector on workplace 
                matters related to the restructuring of the health care 
                delivery system provided for in this Act.
                    (E) A program to facilitate the comprehensive 
                workforce adjustment initiative.
            (2) Use of funds.--Amounts made available under subsection 
        (a) for carrying out this section may be expended for program 
        support, faculty development, trainee support, workforce 
        analysis, and dissemination of information, as necessary to 
        produce required performance outcomes.
    (c) Certain Requirements for Programs.--In carrying out the 
programs described in subsection (b), the Secretary shall, with respect 
to the organizations and employment positions involved, provide for the 
following:
            (1) Explicit, clearly defined skill requirements developed 
        for all the positions and projections of the number of openings 
        for each position.
            (2) Opportunities for internal career movement.
            (3) Opportunities to work while training or completing an 
        educational program.
            (4) Evaluation and dissemination.
            (5) Training opportunities in several forms, as 
        appropriate.
    (d) Administrative Requirements.--In carrying out the programs 
described in subsection (b), the Secretary shall, with respect to the 
organizations and employment positions involved, provide for the 
following:
            (1) Joint labor-management implementation and 
        administration.
            (2) Discussion with employees as to training needs for 
        career advancement.
            (3) Commitment to a policy of internal hirings and 
        promotion.
            (4) Provision of support services.
            (5) Consultations with employers and with organized labor.

SEC. 3073. NATIONAL INSTITUTE FOR HEALTH CARE WORKFORCE DEVELOPMENT.

    (a) Establishment of Institute.--The Secretary of Health and Human 
Services and the Secretary of Labor shall jointly establish an office 
to be known as the National Institute for Health Care Workforce 
Development.
    (b) Director.--The Institute shall be headed by a director, who 
shall be appointed jointly by the Secretaries.
    (c) Duties.--
            (1) In general.--The Director of the Institute shall make 
        recommendations to the Secretaries regarding--
                    (A) the supply of health care workers needed for 
                proper staffing of the health care delivery system 
                serving the regional and corporate alliance health 
                plans established under title I;
                    (B) the impact of this Act, and of related changes 
                regarding health care, on health care workers and the 
                needs of such workers with respect to such matters, 
                including needs regarding education, training, and 
                other matters relating to career development; and
                    (C) the development and implementation of high-
                performance, high-quality health care delivery systems, 
                including employee participation committee systems and 
                employee team systems, that will contribute to the 
                development of better, more effective health care by 
                increasing the role, the responsibilities and the area 
                of independent decision-making authority of health care 
                workers.
            (2) Administration of programs regarding retraining, 
        advanced career positions, job banks, and high-performance 
        workplaces.--The Secretary of Labor is authorized to--
                    (A) carry out section 3073 acting through the 
                Director of the Institute; and
                    (B) implement the recommendations of the Director 
                regarding employee participation committees and other 
                high-performance systems.
    (d) Advisory Board.--
            (1) In general.--The Secretaries shall establish an 
        advisory board to assist in the develop of recommendations 
        under subsection (c).
            (2) Composition.--The Advisory Board shall be composed of--
                    (A) the Secretary of Labor;
                    (B) the Secretary of Health and Human Services;
                    (C) representatives of health care workers in 
                organized labor;
                    (D) representatives of health care institutions;
                    (E) representatives of health care education 
                organizations;
                    (F) representatives of consumer organizations; and
                    (G) such other individuals as the Secretaries 
                determine to be appropriate.
    (e) Staff, Quarters, and Other Assistance.--The Secretaries shall 
provide the Institute and the Advisory Board with such staff, quarters, 
and other administrative assistance as may be necessary for the 
Institute and the Advisory Board to carry out this section.
    (f) Definitions.--For purposes of this section:
            (1) The term ``Advisory Board'' means the advisory board 
        established under subsection (d).
            (2) The term ``employee participation committees'' means 
        committees of workers independently drawn from a facility's 
        workforce, or selected by unions where collective bargaining 
        agreements are in effect, and which operate without employer 
        interference and consult with management on issues of costs and 
        efficiency, workplace reorganizations, productivity, and 
        quality of care.
            (3) The term ``Institute'' means the Institute established 
        under subsection (a).
            (4) The term ``Secretaries'' means the Secretary of Health 
        and Human Services and the Secretary of Labor.
    (g) Sunset.--Effective upon the end of calendar year 2000, this 
section is repealed.

SEC. 3074. REQUIREMENT FOR CERTAIN PROGRAMS REGARDING REDEPLOYMENT OF 
              HEALTH CARE WORKERS.

    (a) State Programs for Home and Community-Based Services for 
Individuals with Disabilities.--With respect to the plan required in 
section 2102(a) (for State programs for home and community-based 
services for individuals with disabilities under part 1 of subtitle B 
of title II), the plan shall, in addition to requirements under such 
part, provide for the following:
            (1) Before initiating the process of implementing the State 
        program under such plan, negotiations will be commenced with 
        labor unions representing the employees of the affected 
        hospitals or other facilities.
            (2) Negotiations under paragraph (1) will address the 
        following:
                    (A) The impact of the implementation of the program 
                upon the workforce.
                    (B) Methods to redeploy workers to positions in the 
                proposed system, in the case of workers affected by the 
                program.
            (3) The plan will provide evidence that there has been 
        compliance with paragraphs (1) and (2), including a description 
        of the results of the negotiations.
    (b) Plan for Integration of Mental Health Systems.--With respect to 
the plan required in section 3511(a) (relating to the integration of 
the mental health and substance abuse services of a State and its 
political subdivisions with the mental health and substance abuse 
services included in the comprehensive benefit package under title I), 
the plan shall, in addition to requirements under such section, provide 
for the following:
            (1) Before initiating the process of implementing the 
        integration of such services, negotiations will be commenced 
        with labor unions representing the employees of the affected 
        hospitals or other facilities.
            (2) Negotiations under paragraph (1) will address the 
        following:
                    (A) The impact of the proposed changes upon the 
                workforce.
                    (B) Methods to redeploy workers to positions in the 
                proposed system, in the case of workers affected by the 
                proposed changes.
            (3) The plan will provide evidence that there has been 
        compliance with paragraphs (1) and (2), including a description 
        of the results of the negotiations.

                                                  Title III, Subtitle B

                  Subtitle B--Academic Health Centers

                        PART 1--FORMULA PAYMENTS

SEC. 3101. FEDERAL FORMULA PAYMENTS TO ACADEMIC HEALTH CENTERS.

    (a) In General.--In the case of a qualified academic health center 
or qualified teaching hospital that in accordance with section 3102 
submits to the Secretary a written request for calendar year 1996 or 
any subsequent calendar year, the Secretary shall make payments for 
such year to the center or hospital for the purpose specified in 
subsection (b). The Secretary shall make the payments in an amount 
determined in accordance with section 3103, and may administer the 
payments as a contract, grant, or cooperative agreement.
    (b) Payments for Costs Attributable to Academic Nature of 
Institutions.--The purpose of payments under subsection (a) is to 
assist eligible institutions with costs that are not routinely incurred 
by other entities in providing health services, but are incurred by 
such institutions in providing health services by virtue of the 
academic nature of such institutions. Such costs include--
            (1) with respect to productivity in the provision of health 
        services, costs resulting from the reduced rate of productivity 
        of faculty due to teaching responsibilities;
            (2) the uncompensated costs of clinical research; and
            (3) exceptional costs associated with the treatment of 
        health conditions with respect to which an eligible institution 
        has specialized expertise (including treatment of rare 
        diseases, treatment of unusually severe conditions, and 
        providing other specialized health care).
    (c) Definitions.--
            (1) Academic health center.--For purposes of this subtitle, 
        the term ``academic health center'' means an entity that--
                    (A) operates a school of medicine or osteopathic 
                medicine, as defined in section 799 of the Public 
                Health Service Act;
                    (B) operates, or is affiliated with, one or more 
                other types of schools or programs described in such 
                section, or with one or more schools of nursing (as 
                defined in section 853 of such Act); and
                    (C) operates, or is affiliated with, one or more 
                teaching hospitals.
            (2) Teaching hospital.--For purposes of this subtitle, the 
        term ``teaching hospital'' means a hospital that operates an 
        approved physician training program (as defined in section 
        3011(b)).
            (3) Qualified center or hospital.--For purposes of this 
        subtitle:
                    (A) The term ``qualified academic health center'' 
                means an academic health center that operates a 
                teaching hospital.
                    (B) The term ``qualified teaching hospital'' means 
                any teaching hospital other than a teaching hospital 
                that is operated by an academic health center.
            (4) Eligible institution.--For purposes of this subtitle, 
        the term ``eligible institution'', with respect to a calendar 
        year, means a qualified academic health center, or a qualified 
        teaching hospital, that submits to the Secretary a written 
        request in accordance with section 3102.

SEC. 3102. REQUEST FOR PAYMENTS.

  (a) In General.--For purposes of section 3101, a written request for 
payments under such section is in accordance with this section if the 
qualified academic health center or qualified teaching hospital 
involved submits the request not later than the date specified by the 
Secretary; the request is accompanied by each funding agreement 
described in this part; and the request is in such form, is made in 
such manner, and contains such agreements, assurances, and information 
as the Secretary determines to be necessary to carry out this part.
    (b) Continued Status as Academic Health Center.--A funding 
agreement for payments under section 3101 is that the qualified 
academic health center or qualified teaching hospital involved will 
maintain status as such a center or hospital, respectively. For 
purposes of this subtitle, the term ``funding agreement'', with respect 
to payments under section 3101 to such a center or hospital, means that 
the Secretary may make the payments only if the center or hospital 
makes the agreement involved.

SEC. 3103. AVAILABILITY OF FUNDS FOR PAYMENTS; ANNUAL AMOUNT OF 
              PAYMENTS.

    (a) Annual Academic Health Center Account.--Subject to section 
3104, the amount available for a calendar year for making payments 
under section 3101 (constituting an account to be known as the annual 
academic health center account) is the following, as applicable to the 
calendar year:
            (1) In the case of calendar year 1996, $3,100,000,000.
            (2) In the case of each of the calendar years 1997 and 
        1998, $3,200,000,000.
            (3) In the case of calendar year 1999, $3,700,000,000.
            (4) In the case of calendar year 2000, $3,800,000,000.
            (5) In the case of each subsequent calendar year, the 
        amount specified in paragraph (4) increased by the product of 
        such amount and the general health care inflation factor (as 
        defined in subsection (d)).
    (b) Amount of Payments for Individual Eligible Institutions.--The 
amount of payments required in section 3101 to be made to an eligible 
institution for a calendar year is an amount equal to the product of--
            (1) the annual academic health center account available for 
        the calendar year; and
            (2) the percentage constituted by the ratio of--
                    (A) an amount equal to the product of--
                            (i) the portion of the gross receipts of 
                        the institution for the preceding calendar year 
                        that was derived from providing services to 
                        patients (both inpatients and outpatients); and
                            (ii) the indirect teaching adjustment 
                        factor determined under section 
                        1886(d)(5)(B)(ii) of the Social Security Act 
                        (as in effect before January 1, 1998) and--
                                    (I) applicable to patients 
                                discharged from the institution (or 
                                hospitals of the institution, as the 
                                case may be) in such preceding year; or
                                    (II) in the case of patients 
                                discharged on or after January 1, 1998, 
                                applicable to patients discharged in 
                                calendar year 1997; to
                    (B) the sum of the respective amounts determined 
                under subparagraph (A) for eligible institutions.
    (c) Report Regarding Modifications in Formula.--Not later than July 
1, 1996, the Secretary shall submit to the Congress a report containing 
any recommendations of the Secretary regarding policies for allocating 
amounts under subsection (a) among eligible institutions. In making 
such recommendations, the Secretary shall consider the costs described 
in section 3101(b) that are incurred by such institutions.
    (d) Definition.--For purposes of this subtitle:
            (1) The term ``annual academic health center account'' 
        means the account established pursuant to subsection (a).
            (2) The term ``general health care inflation factor'', with 
        respect to a year, has the meaning given such term in section 
        6001(a)(3) for such year.

SEC. 3104. ADDITIONAL FUNDING PROVISIONS.

    (a) Sources of Funds for Annual Academic Health Center Account.--
The amount specified in section 3103(a) for the annual academic health 
center account for a calendar year shall be derived from the sources 
specified in subsection (b).
    (b) Contributions From Medicare Trust Funds, Regional Alliances, 
and Corporate Alliances.--For purposes of subsection (a), the sources 
specified in this subsection for a calendar year are the following:
            (1) Transfers made by the Secretary under section 4052.
            (2) Payments made by regional alliances under section 1353 
        and--
                    (A) in the case of each of the calendar years 1996 
                and 1997, transferred in an amount equal to 50 percent 
                of such payments made for the calendar year involved; 
                and
                    (B) in the case of calendar year 1998 and each 
                subsequent calendar year, transferred in an amount 
                equal to the aggregate regional alliance portion 
                determined under subsection (c)(2)(A).
            (3) The transfer made under subsection (d)(1).
    (c) Contributions From Regional and Corporate Alliances.--
            (1) Determination of aggregate regional and corporate 
        alliance amount.--For purposes regarding the provision of funds 
        for the annual academic health center account for a calendar 
        year (other than calendar year 1996 or 1997), the Secretary 
        shall determine an aggregate regional and corporate alliance 
        amount, which amount is to be paid by such alliances pursuant 
        to paragraphs (2)(B) and (3) of subsection (b), respectively, 
        and which amount shall be equal to the difference between--
                    (A) the amount specified in section 3103(a) for the 
                annual academic health center account for such year; 
                and
                    (B) the amount transferred under section 4052 for 
                the year.
            (2) Allocation of amount among regional and corporate 
        alliances.--With respect to the aggregate regional and 
        corporate alliance amount determined under paragraph (1) for a 
        calendar year (other than calendar year 1996 or 1997)--
                    (A) the aggregate regional alliance portion of such 
                amount is the product of such amount and the percentage 
                constituted by the ratio of the total plan payments of 
                regional alliances to the combined total plan payments 
                of regional alliances and corporate alliances; and
                    (B) the aggregate corporate alliance portion of 
                such amount is the product of such amount and the 
                percentage constituted by the ratio of the total plan 
                payments of corporate alliances to such combined total 
                plan payments.
    (d) Compliance Regarding Corporate Alliances.--
            (1) In general.--Effective January 15 of calendar year 1996 
        and each subsequent calendar year, there is hereby transferred 
        to the Secretary, out of any money in the Treasury not 
        otherwise appropriated--
                    (A) in the case of each of the calendar years 1996 
                and 1997, an amount equal to the difference between--
                            (i) the amount specified in section 3103(a) 
                        for the annual academic health center account 
                        for the calendar year involved; and
                            (ii) the sum of the amount transferred 
                        under section 4052 for such year and the amount 
                        transferred under subsection (b)(2)(A) for such 
                        year; and
                    (B) in the case of calendar year 1998 and each 
                subsequent calendar year, an amount equal to the 
                aggregate corporate alliance portion determined under 
                subsection (c)(2)(B) for the calendar year involved.
            (2) Manner of compliance.--The payment by corporate 
        alliances of the tax imposed under section 3461 of the Internal 
        Revenue Code of 1986 (as added by section 7121 of this Act), 
        together with the transfer made in paragraph (1)(B) for the 
        calendar year involved, is deemed to be the payment required 
        pursuant to subsection (c)(1) for corporate alliances for such 
        year.
            (3) Graduate nurse education.--Effective January 15 of 
        calendar year 1996 and each subsequent calendar year, there is 
        hereby transferred to the Secretary, out of any money in the 
        Treasury not otherwise appropriated, 50 percent of the amount 
        specified in section 3063(b) with respect to the annual 
        graduate nurse training account.
    (e) Definitions.--For purposes of this subtitle, the term ``plan 
payments'' with respect to a regional or corporate alliance, means the 
amount paid to health plans by the alliance.

         PART 2--ACCESS OF PATIENTS TO ACADEMIC HEALTH CENTERS

SEC. 3131. CONTRACTS FOR ENSURING ACCESS TO CENTERS.

    (a) Contracts With Health Plans.--Regional and corporate health 
alliances under this Act shall ensure that, in accordance with 
subsection (b), the health plans of the alliances enter into sufficient 
contracts with eligible centers to ensure that enrollees in regional or 
corporate alliance health plans, as appropriate, receive the 
specialized treatment expertise of such centers, subject to such 
exceptions as the Secretary may provide.
    (b) Utilization of Specialized Treatment Expertise of Centers.--
Contracts under subsection (a) between eligible centers and health 
plans are in accordance with this subsection if the contracts provide 
that, with respect to health conditions within the specialized 
treatment expertise of the centers, health plans will refer medical 
cases involving such conditions to the centers.
    (c) Specialized Treatment Expertise.--For purposes of this 
subtitle, the term ``specialized treatment expertise'', with respect to 
treatment of a health condition by an academic health center, means 
expertise in treating rare diseases, treating unusually severe 
conditions, and providing other specialized health care.

SEC. 3132. DISCRETIONARY GRANTS REGARDING ACCESS TO CENTERS.

    (a) Rural Information and Referral Systems.--The Secretary may make 
grants to eligible centers for the establishment and operation of 
information and referral systems to provide the services of such 
centers to rural regional and corporate health alliance health plans.
    (b) Other Purposes Regarding Urban and Rural Areas.--The Secretary 
may make grants to eligible centers to carry out activities (other than 
activities carried out under subsection (a)) for the purpose of 
providing the services of eligible centers to residents of rural or 
urban communities who otherwise would not have adequate access to such 
services.

                                                  Title III, Subtitle C

                Subtitle C--Health Research Initiatives

                 PART 1--PROGRAMS FOR CERTAIN AGENCIES

SEC. 3201. BIOMEDICAL AND BEHAVIORAL RESEARCH ON HEALTH PROMOTION AND 
              DISEASE PREVENTION.

    Section 402(f) of the Public Health Service Act (42 U.S.C. 282(f)), 
as amended by section 201 of Public Law 103-43 (107 Stat. 144), is 
amended--
            (1) in paragraph (3), by redesignating subparagraphs (A) 
        and (B) as clauses (i) and (ii), respectively;
            (2) by redesignating paragraphs (1) through (3) as 
        subparagraphs (A) through (C);
            (3) by inserting ``(1)'' after ``(f)''; and
            (4) by adding at the end the following paragraph:
    ``(2)(A) The Director of NIH, in collaboration with the Associate 
Director for Prevention and with the heads of the agencies of the 
National Institutes of Health, shall ensure that such Institutes 
conduct and support biomedical and behavioral research on promoting 
health and preventing diseases, disorders, and other health conditions 
(including Alzheimer's disease, breast cancer, heart disease, and 
stroke).
    ``(B) In carrying out subparagraph (A), the Director of NIH shall 
give priority to conducting and supporting research on child and 
adolescent health (including birth defects), chronic and recurrent 
health conditions, reproductive health, mental health, elderly health, 
substance abuse, infectious diseases, health and wellness promotion, 
and environmental health, and to resource development related to such 
research.''.

SEC. 3202. HEALTH SERVICES RESEARCH.

    Section 902 of the Public Health Service Act (42 U.S.C. 299a), as 
amended by section 2(b) of Public Law 102-410 (106 Stat. 2094), is 
amended by adding at the end the following subsection:
    ``(f) Research on Health Care Reform.--
            ``(1) In general.--In carrying out section 901(b), the 
        Administrator shall conduct and support research on the reform 
        of the health care system of the United States, as directed by 
        the National Board.
            ``(2) Priorities.--In carrying out paragraph (1), the 
        Administrator shall give priority to the following:
                    ``(A) Conducting and supporting research on the 
                appropriateness and effectiveness of alternative 
                clinical strategies; the quality and outcomes of care; 
                and administrative simplification.
                    ``(B) Conducting and supporting research on 
                consumer choice and information resources; the effects 
                of health care reform on health delivery systems; 
                workplace injury and illness prevention; methods for 
                risk adjustment; factors influencing access to health 
                care for underserved populations; and primary care.
                    ``(C) The development of clinical practice 
                guidelines consistent with section 913, the 
                dissemination of such guidelines consistent with 
                section 903, and the assessment of the effectiveness of 
                such guidelines.''.

                      PART 2--FUNDING FOR PROGRAMS

SEC. 3211. AUTHORIZATIONS OF APPROPRIATIONS.

    (a) Biomedical and Behavioral Research on Health Promotion and 
Disease Prevention.--For the purpose of carrying out activities 
pursuant to the amendments made by section 3201, there are authorized 
to be appropriated $400,000,000 for fiscal year 1995, and $500,000,000 
for each of the fiscal years 1996 through 2000.
    (b) Health Services Research.--For the purpose of carrying out 
activities pursuant to the amendments made by section 3202, there are 
authorized to be appropriated $150,000,000 for fiscal year 1995, 
$400,000,000 for fiscal year 1996, $500,000,000 for fiscal year 1997, 
and $600,000,000 for each of the fiscal years 1998 through 2000.
    (c) Relation to Other Funds.--The authorizations of appropriations 
established in subsections (a) and (b) are in addition to any other 
authorizations of appropriations that are available for the purposes 
described in such subsections.

                                                  Title III, Subtitle C

    Subtitle D--Core Functions of Public Health Programs; National 
                Initiatives Regarding Preventive Health

                            PART 1--FUNDING

SEC. 3301. AUTHORIZATIONS OF APPROPRIATIONS.

    (a) Core Functions of Public Health Programs.--For the purpose of 
carrying out part 2, there are authorized to be appropriated 
$12,000,000 for fiscal year 1995, $325,000,000 for fiscal year 1996, 
$450,000,000 for fiscal year 1997, $550,000,000 for fiscal year 1998, 
$650,000,000 for fiscal year 1999, and $750,000,000 for fiscal year 
2000.
    (b) National Initiatives Regarding Health Promotion and Disease 
Prevention.--For the purpose of carrying out part 3, there are 
authorized to be appropriated $175,000,000 for fiscal year 1996, and 
$200,000,000 for each of the fiscal years 1997 through 2000.
    (c) Relation to Other Funds.--The authorizations of appropriations 
established in subsections (a) and (b) are in addition to any other 
authorizations of appropriations that are available for the purposes 
described in such subsections.

            PART 2--CORE FUNCTIONS OF PUBLIC HEALTH PROGRAMS

SEC. 3311. PURPOSES.

    Subject to the subsequent provisions of this subtitle, the purposes 
of this part are to strengthen the capacity of State and local public 
health agencies to carry out the following functions:
            (1) To monitor and protect the health of communities 
        against communicable diseases and exposure to toxic 
        environmental pollutants, occupational hazards, harmful 
        products, and poor quality health care.
            (2) To identify and control outbreaks of infectious disease 
        and patterns of chronic disease and injury.
            (3) To inform and educate health care consumers and 
        providers about their roles in preventing and controlling 
        disease and the appropriate use of medical services.
            (4) To develop and test new prevention and public health 
        control interventions.

SEC. 3312. GRANTS TO STATES FOR CORE HEALTH FUNCTIONS.

    (a) In General.--The Secretary may make grants to States for the 
purpose of carrying out one or more of the functions described in 
subsection (b).
    (b) Core Functions of Public Health Programs.--For purposes of 
subsection (a), the functions described in this subsection are, subject 
to subsection to subsection (c), as follows:
            (1) Data collection, activities related to population 
        health measurement and outcomes monitoring, including the 
        regular collection and analysis of public health data, vital 
        statistics, and personal health services data and analysis for 
        planning and needs assessment purposes of data collected from 
        health plans through the information system under title V of 
        this Act.
            (2) Activities to protect the environment and to assure the 
        safety of housing, workplaces, food and water, including the 
        following activities:
                    (A) Monitoring the overall public health quality 
                and safety of communities.
                    (B) Assessing exposure to high lead levels and 
                water contamination.
                    (C) Monitoring sewage and solid waste disposal, 
                radiation exposure, radon exposure, and noise levels.
                    (D) Abatement of lead-related hazards.
                    (E) Assuring recreation and worker safety.
                    (F) Enforcing public health safety and sanitary 
                codes.
                    (G) Other activities relating to promoting the 
                public health of communities.
            (3) Investigation and control of adverse health conditions, 
        including improvements in emergency treatment preparedness, 
        cooperative activities to reduce violence levels in 
        communities, activities to control the outbreak of disease, 
        exposure related conditions and other threats to the health 
        status of individuals.
            (4) Public information and education programs to reduce 
        risks to health such as use of tobacco, alcohol and other 
        drugs, sexual activities that increase the risk to HIV 
        transmission and sexually transmitted diseases, poor diet, 
        physical inactivity, and low childhood immunization levels.
            (5) Accountability and quality assurance activities, 
        including monitoring the quality of personal health services 
        furnished by health plans and providers of medical and health 
        services in a manner consistent with the overall quality of 
        care monitoring activities undertaken under title V, and 
        monitoring communities' overall access to health services.
            (6) Provision of public health laboratory services to 
        complement private clinical laboratory services and that screen 
        for diseases and conditions such as metabolic diseases in 
        newborns, provide toxicology assessments of blood lead levels 
        and other environmental toxins, diagnose sexually transmitted 
        diseases, tuberculosis and other diseases requiring partner 
        notification, test for infectious and food-borne diseases, and 
        monitor the safety of water and food supplies.
            (7) Training and education to assure provision of care by 
        all health professionals, with special emphasis placed on the 
        training of public health professions including 
        epidemiologists, biostatisticians, health educators, public 
        health administrators, sanitarians and laboratory technicians.
            (8) Leadership, policy development and administration 
        activities, including needs assessment, the setting of public 
        health standards, the development of community public health 
        policies, and the development of community public health 
        coalitions.
    (c) Restrictions on Use of Grant.--
             (1) In general.--A funding agreement for a grant under 
        subsection (a) for a State is that the grant will not be 
        expended--
                    (A) to provide inpatient services;
                    (B) to make cash payments to intended recipients of 
                health services;
                    (C) to purchase or improve land, purchase, 
                construct, or permanently improve (other than minor 
                remodeling) any building or other facility, or purchase 
                major medical equipment;
                    (D) to satisfy any requirement for the expenditure 
                of non-Federal funds as a condition for the receipt of 
                Federal funds; or
                    (E) to provide financial assistance to any entity 
                other than a public or nonprofit private entity.
            (2) Limitation on administrative expenses.--A funding 
        agreement for a grant under subsection (a) is that the State 
        involved will not expend more than 10 percent of the grant for 
        administrative expenses with respect to the grant.
    (d) Maintenance of Effort.--A funding agreement for a grant under 
subsection (a) is that the State involved will maintain expenditures of 
non-Federal amounts for core health functions at a level that is not 
less than the level of such expenditures maintained by the State for 
the fiscal year preceding the first fiscal year for which the State 
receives such a grant.

SEC. 3313. SUBMISSION OF INFORMATION.

    The Secretary may make a grant under section 3312 only if the State 
involved submits to the Secretary the following information:
            (1) A description of existing deficiencies in the State's 
        public health system (at the State level and the local level), 
        using standards of sufficiency developed by the Secretary.
            (2) A description of health status measures to be improved 
        within the State (at the State level and the local level) 
        through expanded public health functions.
            (3) Measurable outcomes and process objectives for 
        improving health status and core health functions for which the 
        grant is to be expended.
            (4) Information regarding each such function, which--
                    (A) identifies the amount of State and local 
                funding expended on each such function for the fiscal 
                year preceding the fiscal year for which the grant is 
                sought; and
                    (B) provides a detailed description of how 
                additional Federal funding will improve each such 
                function by both the State and local public health 
                agencies.
            (5) A description of the core health functions to be 
        carried out at the local level, and a specification for each 
        such function of--
                    (A) the communities in which the function will be 
                carried out; and
                    (B) the amount of the grant to be expended for the 
                function in each community so specified.

SEC. 3314. REPORTS.

    A funding agreement for a grant under section 3312 is that the 
States involved will, not later than the date specified by the 
Secretary, submit to the Secretary a report describing--
            (1) the purposes for which the grant was expended; and
            (2) describing the extent of progress made by the State in 
        achieving measurable outcomes and process objectives described 
        in section 3313(3).

SEC. 3315. APPLICATION FOR GRANT.

    The Secretary may make a grant under section 3312 only if an 
application for the grant is submitted to the Secretary, the 
application contains each agreement described in this part, the 
application contains the information required in section 3314, and the 
application is in such form, is made in such manner, and contains such 
agreements, assurances, and information as the Secretary determines to 
be necessary to carry out this part.

SEC. 3316. GENERAL PROVISIONS.

    (a) Uniform Data Sets.--The Secretary, in consultation with the 
States, shall develop uniform sets of data for the purpose of 
monitoring the core health functions carried out with grants under 
section 3312.
    (b) Duration of Grant.--The period during which payments are made 
to a State from a grant under section 3312 may not exceed 5 years. The 
provision of such payments shall be subject to annual approval by the 
Secretary of the payments. This subsection may not be construed as 
establishing a limitation on the number of grants under such section 
that may be made to the State.

SEC. 3317. ALLOCATIONS FOR CERTAIN ACTIVITIES.

    Of the amounts made available under section 3301 for a fiscal year 
for carrying out this part, the Secretary may reserve not more than 5 
percent for carrying out the following activities:
            (1) Technical assistance with respect to planning, 
        development, and operation of core health functions carried out 
        under section 3312, including provision of biostatistical and 
        epidemiological expertise and provision of laboratory 
        expertise.
            (2) Development and operation of a national information 
        network among State and local health agencies.
            (3) Program monitoring and evaluation of core health 
        functions carried out under section 3312.
            (4) Development of a unified electronic reporting mechanism 
        to improve the efficiency of administrative management 
        requirements regarding the provision of Federal grants to State 
        public health agencies.

SEC. 3318. DEFINITIONS.

    For purposes of this part:
            (1) The term ``funding agreement'', with respect to a grant 
        under section 3312 to a State, means that the Secretary may 
        make the grant only if the State makes the agreement involved.
            (2) The term ``core health functions'', with respect to a 
        State, means the functions described in section 3312(b).

  PART 3--NATIONAL INITIATIVES REGARDING HEALTH PROMOTION AND DISEASE 
                               PREVENTION

SEC. 3331. GRANTS FOR NATIONAL PREVENTION INITIATIVES.

    (a) In General.--The Secretary may make grants to entities 
described in subsection (b) for the purpose of carrying out projects to 
develop and implement innovative community-based strategies to provide 
for health promotion and disease prevention activities for which there 
is a significant need, as identified under section 1701 of the Public 
Health Service Act.
    (b) Eligible Entities.--The entities referred to in subsection (a) 
are agencies of State or local government, private nonprofit 
organizations (including research institutions), and coalitions that 
link two or more of these groups.
    (c) Certain Activities.--The Secretary shall ensure that projects 
carried out under subsection (a)--
            (1) reflect approaches that take into account the special 
        needs and concerns of the affected populations;
            (2) are targeted to the most needy and vulnerable 
        population groups and geographic areas of the Nation;
            (3) examine links between various high priority preventable 
        health problems and the potential community-based remedial 
        actions; and
            (4) establish or strengthen the links between the 
        activities of agencies engaged in public health activities with 
        those of health alliances, health care providers, and other 
        entities involved in the personal health care delivery system 
        described in title I.

SEC. 3332. PRIORITIES.

    (a) Establishment.--
            (1) Annual statement.--The Secretary shall for each fiscal 
        year develop a statement of proposed priorities for grants 
        under section 3331 for the fiscal year.
            (2) Allocations among priorities.--With respect to the 
        amounts available under section 3301(b) for the fiscal year for 
        carrying out this part, each statement under paragraph (1) for 
        a fiscal year shall include a specification of the percentage 
        of the amount to be devoted to projects addressing each of the 
        proposed priorities established in the statement.
            (3) Process for establishing priorities.--Not later than 
        January 1 of each fiscal year, the Secretary shall publish a 
        statement under paragraph (1) in the Federal Register. A period 
        of 60 days shall be allowed for the submission of public 
        comments and suggestions concerning the proposed priorities. 
        After analyzing and considering comments on the proposed 
        priorities, the Secretary shall publish in the Federal Register 
        final priorities (and associated reservations of funds) for 
        approval of projects for the following fiscal year.
    (b) Applicability to Making of Grants.--
            (1) In general.--The Secretary may make grants under 
        section 3331 for projects that the Secretary determines--
                    (A) are consistent with the applicable final 
                statement of priorities and otherwise meets the 
                objectives described in subsection (a); and
                    (B) will assist in meeting a health need or concern 
                of a population served by a health plan or health 
                alliance established under title I.
            (2) Special consideration for certain projects.--In making 
        grants under section 3331, the Secretary shall give special 
        consideration to applicants that will carry out projects that, 
        in addition to being consistent with the applicable published 
        priorities under subsection (a) and otherwise meeting the 
        requirements of this part, have the potential for replication 
        in other communities.

SEC. 3333. SUBMISSION OF INFORMATION.

    The Secretary may make a grant under section 3331 only if the 
applicant involved submits to the Secretary the following information:
            (1) A description of the activities to be conducted, and 
        the manner in which the activities are expected to contribute 
        to meeting one or more of the priority health needs specified 
        under section 3332 for the fiscal year for which the grant is 
        initially sought.
            (2) A description of the total amount of Federal funding 
        requested, the geographic area and populations to be served, 
        and the evaluation procedures to be followed.
            (3) Such other information as the Secretary determines to 
        be appropriate.

SEC. 3334. APPLICATION FOR GRANT.

    The Secretary may make a grant under section 3331 only if an 
application for the grant is submitted to the Secretary, the 
application contains each agreement described in this part, the 
application contains the information required in section 3333, and the 
application is in such form, is made in such manner, and contains such 
agreements, assurances, and information as the Secretary determines to 
be necessary to carry out this part.

   Subtitle E--Health Services for Medically Underserved Populations

              PART 1--COMMUNITY AND MIGRANT HEALTH CENTERS

                                                  Title III, Subtitle E

SEC. 3401. AUTHORIZATIONS OF APPROPRIATIONS.

    (a) Grants to Community and Migrant Health Centers.--The Secretary 
shall make grants in accordance with this part to migrant health 
centers and community health centers.
    (b) Authorization of Appropriations.--For the purpose of carrying 
out subsection (a), there are authorized to be appropriated 
$100,000,000 for each of the fiscal years 1995 through 2000.
    (c) Relation to Other Funds.--The authorizations of appropriations 
established in subsection (b) for the purpose described in such 
subsection are in addition to any other authorizations of 
appropriations that are available for such purpose.
    (d) Definitions.--For purposes of this subtitle, the terms 
``migrant health center'' and ``community health center'' have the 
meanings given such terms in sections 329(a)(1) and 330(a) of the 
Public Health Service Act, respectively.

SEC. 3402. USE OF FUNDS.

    (a) Development, Operation, and Other Purposes Regarding Centers.--
Subject to subsection (b), grants under section 3401 to migrant health 
centers and community health centers may be made only in accordance 
with the conditions upon which grants are made under sections 329 and 
330 of the Public Health Service Act, respectively.
    (b) Required Financial Reserves.--The Secretary may authorize 
migrant health centers and community health centers to expend a grant 
under section 3401 to establish and maintain the financial reserves 
required under title I for providers of health services.

             PART 2--INITIATIVES FOR ACCESS TO HEALTH CARE

                      Subpart A--Purposes; Funding

SEC. 3411. PURPOSES.

    Subject to the provisions of subparts B through D, the purposes of 
this part are as follows:
            (1) To improve access to health services for urban and 
        rural medically-underserved populations through a program of 
        flexible grants, contracts, and loans.
            (2) To facilitate transition to a system in which 
        medically-underserved populations have an adequate choice of 
        community-oriented providers and health plans.
            (3) To promote the development of community practice 
        networks and community health plans that integrate health 
        professionals and health care organizations supported through 
        public funding with other providers in medically underserved 
        areas.
            (4) To support linkages between providers of health care 
        for medically-underserved populations and regional and 
        corporate alliance health plans.
            (5) To expand the capacity of community practice networks 
        and community health plans in underserved areas by increasing 
        the number of practice sites and by renovating and converting 
        substandard inpatient and outpatient facilities.
            (6) To link providers in underserved areas with each other 
        and with regional health care institutions and academic health 
        centers through information systems and telecommunications.
            (7) To support activities that enable medically underserved 
        populations to gain access to the health care system and use it 
        effectively.

SEC. 3412. AUTHORIZATIONS OF APPROPRIATIONS.

    (a) Development of Qualified Community Health Plans and Practice 
Groups.--For the purpose of carrying out subparts B and C, there are 
authorized to be appropriated $200,000,000 for fiscal year 1995, 
$500,000,000 for fiscal year 1996, $600,000,000 for fiscal year 1997, 
$700,000,000 for fiscal year 1998, $500,000,000 for fiscal year 1999, 
and $200,000,000 for fiscal year 2000.
    (b) Relation to Other Funds.--The authorizations of appropriations 
established in subsection (a) are in addition to any other 
authorizations of appropriations that are available for the purpose 
described in such subsection.
    (c) Relationship to Program Regarding School-Related Health 
Services.--This section is subject to section 3692.

Subpart B--Development of Qualified Community Health Plans and Practice 
                                Networks

SEC. 3421. GRANTS AND CONTRACTS FOR DEVELOPMENT OF PLANS AND NETWORKS.

    (a) In General.--The Secretary may make grants to and enter into 
contracts with consortia of public or private health care providers for 
the development of qualified community health plans and qualified 
community practice networks. For purposes of this subtitle, the term 
``qualified community health group'' means such a health plan or such a 
practice network.
    (b) Qualified Community Health Plans.--For purposes of this 
subtitle, the term ``qualified community health plan'' means a health 
plan that meets the following conditions:
            (1) The health plan is a public or nonprofit private entity 
        whose principal purpose is, with respect to the items and 
        services included in the comprehensive benefit package under 
        title I, to provide each of such items and services in one or 
        more health professional shortage areas or to provide such 
        items and services to a significant number of individuals who 
        are members of a medically underserved population.
            (2) The health plan is a participant in one or more health 
        alliances.
            (3) Two or more of the categories specified in subsection 
        (d) are represented among the entities providing health 
        services through the health plan.
    (c) Qualified Community Practice Networks.--For purposes of this 
subtitle, the term ``qualified community practice network'' means a 
consortium of health care providers meeting the following conditions:
            (1) The consortium is a public or nonprofit private entity 
        whose principal purpose is the purpose described in subsection 
        (b)(1).
            (2) The consortium has an agreement with one or more health 
        plans that are participating in one or more health alliances.
            (3) The participation of health care providers in the 
        consortium is governed by a written agreement to which each of 
        the participating providers is a party.
            (4) Two or more of the categories described in subsection 
        (d) are represented among the entities participating in the 
        consortium.
    (d) Relevant Categories of Entities.--For purposes of subsections 
(b)(3) and (c)(4), the categories described in this subsection are the 
following categories of entities:
            (1) Physicians, other health professionals, or health care 
        institutions that provide health services in one or more health 
        professional shortage areas or provide such services to a 
        significant number of individuals who are members of a 
        medically underserved population, and that do not provide 
        health services under any of the programs specified in 
        paragraphs (2) through (7) or as employees of public entities.
            (2) Entities providing health services under grants under 
        sections 329 and 330 of the Public Health Service Act.
            (3) Entities providing health services under grants under 
        sections 340 and 340A of such Act.
            (4) Entities providing health services under grants under 
        section 1001 or title XXVI of such Act.
            (5) Entities providing health services under title V of the 
        Social Security Act.
            (6) Entities providing health services through rural health 
        clinics and other federally qualified health centers.
            (7) Entities providing health services in urban areas 
        through programs under title V of the Indian Health Care 
        Improvement Act, and entities providing outpatient health 
        services through programs under the Indian Self-Determination 
        Act.
            (8) Programs providing personal health services and 
        operating through State or local public health agencies.
    (e) Rule of Construction.--The consortia to which the Secretary may 
make an award of financial assistance under subsection (a) for the 
development of qualified community practice networks include any health 
plan that participates in one or more health alliances, without regard 
to whether the health plan is a qualified community health plan.
    (f) Service Area.--In making an award of financial assistance under 
subsection (a), the Secretary shall designate the geographic area with 
respect to which the qualified community health group involved is to 
provide health services. A funding agreement for such an award is that 
the qualified community health group involved will provide such 
services in the area so designated.
    (g) Definitions.--For purposes of this subtitle:
            (1) The term ``health professional shortage areas'' means 
        health professional shortage areas designated under section 332 
        of the Public Health Service Act.
            (2) The term ``medically underserved population'' means a 
        medically underserved population designated under section 330 
        of the Public Health Service Act.
            (3) The term ``rural health clinic'' has the meaning given 
        such term in section 1861(aa)(2) of the Social Security Act.
            (4) The term ``federally qualified health centers'' has the 
        meaning given such term in section 1861(aa)(4) of the Social 
        Security Act.
            (5) The term ``service area'', with respect to a qualified 
        community health group, means the geographic area designated 
        under subsection (f).
            (6) The term ``funding agreement'', with respect to an 
        award of financial assistance under this section, means that 
        the Secretary may make the award only if the applicant for the 
        award makes the agreement involved.
            (7) The term ``financial assistance'', with respect to 
        awards under subsection (a), means a grant or contract.

SEC. 3422. PREFERENCES IN MAKING AWARDS OF ASSISTANCE.

    In making awards of financial assistance under section 3421, the 
Secretary shall give preference to applicants in accordance with the 
following:
            (1) The Secretary shall give preference if 3 or more of the 
        categories described in subsection (d) of such section will be 
        represented in the qualified community health group involved 
        (pursuant to subsection (b)(3) or (c)(4) of such section, as 
        the case may be).
            (2) Of applicants receiving preference under paragraph (1), 
        the Secretary shall give a greater degree of preference 
        according to the extent to which a greater number of categories 
        are represented.
            (3) Of applicants receiving preference under paragraph (1), 
        the Secretary shall give a greater degree of preference if one 
        of the categories represented is the category described in 
        subsection (d)(1) of such section.

SEC. 3423. CERTAIN USES OF AWARDS.

    (a) In General.--Subject to subsection (b), the purposes for which 
an award of financial assistance under section 3421 may be expended in 
developing a qualified community health group include the following:
            (1) Planning such group, including entering into contracts 
        between the recipient of the award and health care providers 
        who are to participate in the group.
            (2) Recruitment, compensation, and training of health 
        professionals and administrative staff.
            (3) Acquisition, expansion, modernization, and conversion 
        of facilities, including for purposes of providing for sites at 
        which health services are to be provided through such group.
            (4) Acquisition and development of information systems 
        (exclusive of systems that the Secretary determines are 
        information highways).
            (5) Such other expenditures as the Secretary determines to 
        be appropriate.
    (b) Twenty-year Obligation Regarding Significant Capital 
Expenditures; Right of Recovery.--
            (1) In general.--With respect to a facility for which 
        substantial capital costs are to paid from an award of 
        financial assistance under section 3421, the Secretary may make 
        the award only if the applicant involved agrees that the 
        applicant will be liable to the United States for the amount of 
        the award expended for such costs, together with an amount 
        representing interest, if at any time during the 20-year period 
        beginning on the date of completion of the activities involved, 
        the facility--
                    (A) ceases to be a facility utilized by a qualified 
                community health group, or by another public or 
                nonprofit private entity that provides health services 
                in one or more health professional shortage areas or 
                that provides such services to a significant number of 
                individuals who are members of a medically underserved 
                population; or
                    (B) is sold or transferred to any entity other than 
                an entity that is--
                            (i) a qualified community health group or 
                        other entity described in subparagraph (A); and
                            (ii) approved by the Secretary as a 
                        purchaser or transferee regarding the facility.
            (2) Subordination; waivers.--The Secretary may subordinate 
        or waive the right of recovery under paragraph (1), and any 
        other Federal interest that may be derived by virtue of an 
        award of financial assistance under section 3421 from which 
        substantial capital costs are to paid, if the Secretary 
        determines that subordination or waiver will further the 
        objectives of this part.

SEC. 3424. ACCESSIBILITY OF SERVICES.

    (a) Services for Certain Individuals.--A funding agreement for an 
award of financial assistance under section 3421 is that the qualified 
community health group involved will ensure that the services of the 
group will be accessible directly or through formal contractual 
arrangements with its participating providers regardless of whether 
individuals who seek care from the applicant are eligible persons under 
title I.
    (b) Use of Third-Party Payors.--A funding agreement for an award of 
financial assistance under section 3421 is that the qualified community 
health group involved will ensure that the health care providers of the 
group are all approved by the Secretary as providers under title XVIII 
of the Social Security Act and by the appropriate State agency as 
providers under title XIX of the Social Security Act, and the applicant 
has made or will make every reasonable effort to collect appropriate 
reimbursement for its costs in providing health services to individuals 
who are entitled to health benefits under title I of this Act, 
insurance benefits under title XVIII of the Social Security Act, 
medical assistance under a State plan approved under title XIX of the 
Social Security Act, or to assistance for medical expenses under any 
other public assistance program or private health insurance program.
    (c) Schedule of Fees.--A funding agreement for an award of 
financial assistance under section 3421 is that the qualified community 
health group involved will--
            (1) prepare a schedule of fees or payments for the 
        provision of health services not covered by title I that is 
        consistent with locally prevailing rates or charges and 
        designed to cover its reasonable costs of operation and has 
        prepared a corresponding schedule of discounts to be applied to 
        the payment of such fees or payments (or payments of cost 
        sharing amounts owed in the case of covered benefits) which 
        discounts are applied on the basis of the patient's ability to 
        pay; and
            (2) make every reasonable effort to secure from patients 
        payment in accordance with such schedules, and to collect 
        reimbursement for services to persons entitled to public or 
        private insurance benefits or other medical assistance on the 
        basis of full fees without application of discounts, except 
        that the applicant will ensure that no person is denied service 
        based on the person's inability to pay therefor.
    (d) Barriers Within Service Area.--A funding agreement for an award 
of financial assistance under section 3421 is that the qualified 
community health group involved will ensure that the following 
conditions are met:
            (1) In the service area of the group, the group will ensure 
        that--
                    (A) the services of the group are accessible to all 
                residents; and
                    (B) to the maximum extent possible, barriers to 
                access to the services of the group are eliminated, 
                including barriers resulting from the area's physical 
                characteristics, its residential patterns, its 
                economic, social and cultural groupings, and available 
                transportation.
            (2) The group will periodically conduct reviews within the 
        service area of the group to determine whether the conditions 
        described in paragraph (1) are being met.
    (e) Limited Ability to Speak English Language.--A funding agreement 
for an award of financial assistance under section 3421 is that, if the 
service area of the qualified community health group involved includes 
a substantial number of individuals who have a limited ability to speak 
the English language, the applicant will--
            (1) maintain arrangements responsive to the needs of such 
        individuals for providing services to the extent practicable in 
        the language and cultural context most appropriate to such 
        individuals; and
            (2) maintain a sufficient number of staff members who are 
        fluent in both English and the languages spoken by such 
        individuals, and will ensure that the responsibilities of the 
        employees include providing guidance and assistance to such 
        individuals and to other staff members of the group.

SEC. 3425. ADDITIONAL AGREEMENTS.

    (a) Required Services.--A funding agreement for an award of 
financial assistance under section 3421 is that the qualified community 
health group involved will provide enabling services (as defined in 
section 3461(g)) and all of the items and services identified by the 
Secretary in rules regarding qualified community health plans and 
practice networks.
    (b) Quality Control System.--A funding agreement for an award of 
financial assistance under section 3421 is that the qualified community 
health group involved will maintain a community-oriented, patient 
responsive, quality control system under which the group, in accordance 
with regulations prescribed by the Secretary--
            (1) conducts an ongoing quality assurance program for the 
        health services delivered by participating provider entities;
            (2) maintains a continuous community health status 
        improvement process; and
            (3) maintains a system for development, compilation, 
        evaluation and reporting of information to the public regarding 
        the costs of operation, service utilization patterns, 
        availability, accessibility and acceptability of services, 
        developments in the health status of the populations served, 
        uniform health and clinical performance measures and financial 
        performance of the network or plan.
    (c) Use of Existing Resources.--A funding agreement for an award of 
financial assistance under section 3421 is that the applicant will, in 
developing the qualified community health group involved, utilize 
existing resources to the maximum extent practicable.

SEC. 3426. SUBMISSION OF CERTAIN INFORMATION.

    (a) Assessment of Need.--The Secretary may make an award of 
financial assistance under section 3421 only if the applicant involved 
submits to the Secretary an assessment of the need that the medically 
underserved population or populations proposed to be served by the 
applicant have for health services and for enabling services (as 
defined in section 3461(g)).
    (b) Description of Intended Expenditures; Related Information.--The 
Secretary may make an award of financial assistance under section 3421 
only if the applicant involved submits to the Secretary the following 
information:
            (1) A description of how the applicant will design the 
        proposed quality community health plan or practice network 
        (including the service sites involved) for such populations 
        based on the assessment of need.
            (2) A description of efforts to secure, within the proposed 
        service area of such health plan or practice network (including 
        the service sites involved), financial and professional 
        assistance and support for the project.
            (3) Evidence of significant community involvement in the 
        initiation, development and ongoing operation of the project.

SEC. 3427. REPORTS; AUDITS.

    A funding agreement for an award of financial assistance under 
section 3421 is that the applicant involved will--
            (1) provide such reports and information on activities 
        carried out under this section in a manner and form required by 
        the Secretary; and
            (2) provide an annual organization-wide audit that meets 
        applicable standards of the Secretary.

SEC. 3428. APPLICATION FOR ASSISTANCE.

    The Secretary may make an award of financial assistance under 
section 3421 only if an application for the award is submitted to the 
Secretary, the application contains each funding agreement described in 
this subpart, the application contains the information required in 
section 3426, and the application is in such form, is made in such 
manner, and contains such agreements, assurances, and information as 
the Secretary determines to be necessary to carry out this subpart.

SEC. 3429. GENERAL PROVISIONS.

    (a) Limitation on Number of Awards.--The Secretary may not make 
more than two awards of financial assistance under section 3421 for the 
same project.
    (b) Amount.--The amount of any award of financial assistance under 
section 3421 for any project shall be determined by the Secretary.

 Subpart C--Capital Cost of Development of Qualified Community Health 
                      Plans and Practice Networks

SEC. 3441. LOANS AND LOAN GUARANTEES REGARDING PLANS AND NETWORKS.

    (a) In General.--The Secretary may make loans to, and guarantee the 
payment of principal and interest to Federal and non-Federal lenders on 
behalf of, public and private entities for the capital costs of 
developing qualified community health groups (as defined in section 
3421(a)).
    (b) Preferences; Accessibility of Services; Certain Other 
Provisions.--The provisions of subpart B apply to loans and loan 
guarantees under subsection (a) to the same extent and in the same 
manner as such provisions apply to awards of grants and contracts under 
section 3421.
    (c) Use of Assistance.--
            (1) In general.--With respect to the development of 
        qualified community health groups, the capital costs for which 
        loans made pursuant to subsection (a) may be expended are, 
        subject to paragraphs (2) and (3), the following:
                    (A) The acquisition, modernization, expansion or 
                construction of facilities, or the conversion of 
                unneeded hospital facilities to facilities that will 
                assure or enhance the provision and accessibility of 
                health care and enabling services to medically 
                underserved populations.
                    (B) The purchase of major equipment, including 
                equipment necessary for the support of external and 
                internal information systems.
                    (C) The establishment of reserves required for 
                furnishing services on a prepaid basis.
                    (D) Such other capital costs as the Secretary may 
                determine are necessary to achieve the objectives of 
                this section.
            (2) Priorities regarding use of funds.--In providing loans 
        or loan guarantees under subsection (a) for an entity, the 
        Secretary shall give priority to authorizing the use of amounts 
        for projects for the renovation and modernization of medical 
        facilities necessary to prevent or eliminate safety hazards, 
        avoid noncompliance with licensure or accreditation standards, 
        or projects to replace obsolete facilities.
            (3) Limitation.--The Secretary may authorize the use of 
        amounts under subsection (a) for the construction of new 
        buildings only if the Secretary determines that appropriate 
        facilities are not available through acquiring, modernizing, 
        expanding or converting existing buildings, or that 
        construction new buildings will cost less.
    (d) Amount of assistance.--The principal amount of loans or loan 
guarantees under subsection (a) may, when added to any other assistance 
under this section, cover up to 100 percent of the costs involved.

SEC. 3442. CERTAIN REQUIREMENTS.

    (a) Loans.--
            (1) In general.--The Secretary may approve a loan under 
        section 3441 only if--
                    (A) the Secretary is reasonably satisfied that the 
                applicant for the project for which the loan would be 
                made will be able to make payments of principal and 
                interest thereon when due; and
                    (B) the applicant provides the Secretary with 
                reasonable assurances that there will be available to 
                it such additional funds as may be necessary to 
                complete the project or undertaking with respect to 
                which such loan is requested.
            (2) Terms and conditions.--Any loan made under section 3441 
        shall, subject to the Federal Credit Reform Act of 1990, meet 
        such terms and conditions (including provisions for recovery in 
        case of default) as the Secretary, in consultation with the 
        Secretary of the Treasury, determines to be necessary to carry 
        out the purposes of such section while adequately protecting 
        the financial interests of the United States. Terms and 
        conditions for such loans shall include provisions regarding 
        the following:
                    (A) Security.
                    (B) Maturity date.
                    (C) Amount and frequency of installments.
                    (D) Rate of interest, which shall be at a rate 
                comparable to the rate of interest prevailing on the 
                date the loan is made.
    (b) Loan Guarantees.--The Secretary may not approve a loan 
guarantee under section 3441 unless the Secretary determines that the 
terms, conditions, security (if any), schedule and amount of repayments 
with respect to the loan are sufficient to protect the financial 
interests of the United States and are otherwise reasonable. Such loan 
guarantees shall be subject to such further terms and conditions as the 
Secretary determines, in consultation with the Secretary of the 
Treasury, and subject to the Federal Credit Reform Act of 1990, to be 
necessary to ensure that the purposes of this section will be achieved.
    (c) Use of Existing Resources.--The Secretary may provide a loan or 
loan guarantee under section 3441 only if the applicant involved agrees 
that, in developing the qualified community health group involved, the 
applicant will utilize existing resources to the maximum extent 
practicable.

SEC. 3443. DEFAULTS; RIGHT OF RECOVERY.

    (a) Defaults.--
            (1) In general.--The Secretary may take such action as may 
        be necessary to prevent a default on loans or loan guarantees 
        under section 3441, including the waiver of regulatory 
        conditions, deferral of loan payments, renegotiation of loans, 
        and the expenditure of funds for technical and consultative 
        assistance, for the temporary payment of the interest and 
        principal on such a loan, and for other purposes.
            (2) Foreclosure.--The Secretary may take such action, 
        consistent with State law respecting foreclosure procedures, as 
        the Secretary deems appropriate to protect the interest of the 
        United States in the event of a default on a loan made pursuant 
        to section 3441, including selling real property pledged as 
        security for such a loan or loan guarantee and for a reasonable 
        period of time taking possession of, holding, and using real 
        property pledged as security for such a loan or loan guarantee.
            (3) Waivers.--The Secretary may, for good cause, but with 
        due regard to the financial interests of the United States, 
        waive any right of recovery which the Secretary has by reasons 
        of the failure of a borrower to make payments of principal of 
        and interest on a loan made pursuant to section 3441, except 
        that if such loan is sold and guaranteed, any such waiver shall 
        have no effect upon the Secretary's guarantee of timely payment 
        of principal and interest.
    (b) Twenty-year Obligation; Right of Recovery.--
            (1) In general.--With respect to a facility for which a 
        loan is to be made pursuant to section 3441, the Secretary may 
        provide the loan or loan guarantee only if the applicant 
        involved agrees that the applicant will be liable to the United 
        States for the amount of the loan or loan guarantee, together 
        with an amount representing interest, if at any time during the 
        20-period beginning on the date of completion of the activities 
        involved, the facility--
                    (A) ceases to be a facility utilized by a qualified 
                community health group, or by another public or 
                nonprofit private entity that provides health services 
                in one or more health professional shortage areas or 
                that provides such services to a significant number of 
                individuals who are members of a medically underserved 
                population; or
                    (B) is sold or transferred to any entity other than 
                an entity that is--
                            (i) a qualified community health group or 
                        other entity described in subparagraph (A); and
                            (ii) approved by the Secretary as a 
                        purchaser or transferee regarding the facility.
            (2) Subordination; waivers.--The Secretary may subordinate 
        or waive the right of recovery under paragraph (1), and any 
        other Federal interest that may be derived by virtue of a loan 
        or loan guarantee under subsection (a), if the Secretary 
        determines that subordination or waiver will further the 
        objectives of this part.

SEC. 3444. PROVISIONS REGARDING CONSTRUCTION OR EXPANSION OF 
              FACILITIES.

    (a) Submission of Information.--In the case of a project for 
construction, conversion, expansion or modernization of a facility, the 
Secretary may provide loans or loan guarantees under section 3441 only 
if the applicant submits to the Secretary the following:
            (1) A description of the site.
            (2) Plans and specifications which meet requirements 
        prescribed by the Secretary.
            (3) Information reasonably demonstrating that title to such 
        site is vested in one or more of the entities filing the 
        application (unless the agreement described in subsection 
        (b)(1) is made).
            (4) A specification of the type of assistance being 
        requested under section 3441.
    (b) Agreements.--In the case of a project for construction, 
conversion, expansion or modernization of a facility, the Secretary may 
provide loans or loan guarantees under section 3441 only if the 
applicant makes the following agreements:
            (1) Title to such site will be vested in one or more of the 
        entities filing the application (unless the assurance described 
        in subsection (a)(3) has been submitted under such subsection).
            (2) Adequate financial support will be available for 
        completion of the project and for its maintenance and operation 
        when completed.
            (3) All laborers and mechanics employed by contractors or 
        subcontractors in the performance of work on a project will be 
        paid wages at rates not less than those prevailing on similar 
        construction in the locality as determined by the Secretary of 
        Labor in accordance with the Act of March 3, 1931 (40 U.S.C. 
        276a et seq; commonly known as the Davis-Bacon Act), and the 
        Secretary of Labor shall have with respect to such labor 
        standards the authority and functions set forth in 
        Reorganization Plan Numbered 14 of 1950 (15 FR 3176; 5 U.S.C. 
        Appendix) and section 276c of title 40.
            (4) The facility will be made available to all persons 
        seeking service regardless of their ability to pay.

SEC. 3445. APPLICATION FOR ASSISTANCE.

    The Secretary may provide loans or loan guarantees under section 
3441 only if an application for such assistance is submitted to the 
Secretary, the application contains each agreement described in this 
subpart, the application contains the information required in section 
3444(a), and the application is in such form, is made in such manner, 
and contains such agreements, assurances, and information as the 
Secretary determines to be necessary to carry out this subpart.

SEC. 3446. ADMINISTRATION OF PROGRAMS.

    This subpart, and any other program of the Secretary that provides 
loans or loan guarantees, shall be carried out by a centralized loan 
unit established within the Department of Health and Human Services.

                      Subpart D--Enabling Services

SEC. 3461. GRANTS AND CONTRACTS FOR ENABLING SERVICES.

    (a) In General.--
            (1) Grants and contracts.--The Secretary may make grants to 
        and enter into contracts with entities described in paragraph 
        (2) to assist such entities in providing the services described 
        in subsection (b) for the purpose of increasing the capacity of 
        individuals to utilize the items and services included in the 
        comprehensive benefits package under title I.
            (2) Relevant entities.--For purposes of paragraph (1), the 
        entities described in this paragraph are qualified community 
        health groups (as defined in section 3421(a)), and other public 
        or nonprofit private entities, that--
                    (A) provide health services in one or more health 
                professional shortage areas or that provide such 
                services to a significant number of individuals who are 
                members of a medically underserved population; and
                    (B) are experienced in providing services to 
                increase the capacity of individuals to utilize health 
                services.
    (b) Enabling Services.--The services referred to in subsection 
(a)(1) are transportation, community and patient outreach, patient 
education, translation services, and such other services as the 
Secretary determines to be appropriate in carrying out the purpose 
described in such subsection.
    (c) Certain Requirements Regarding Project Area.--The Secretary may 
make an award of a grant or contract under subsection (a) only if the 
applicant involved--
            (1) submits to the Secretary--
                    (A) information demonstrating that the medically 
                underserved populations in the community to be served 
                under the award have a need for enabling services; and
                    (B) a proposed budget for providing such services; 
                and
            (2) the applicant for the award agrees that the residents 
        of the community will be significantly involved in the project 
        carried out with the award.
    (d) Imposition of Fees.--The Secretary may make an award of a grant 
or contract under subsection (a) only if the applicant involved agrees 
that, in the project carried out under such subsection, enabling 
services will be provided without charge to the recipients of the 
services.
    (e) Use of Existing Resources.--The Secretary may make an award of 
a grant or contract under subsection (a) only if the applicant involved 
agrees that, in carrying out the project under such subsection, the 
applicant will utilize existing resources to the maximum extent 
practicable.
    (f) Application for Awards of Assistance.--The Secretary may make 
an award of a grant or contract under subsection (a) only if an 
application for the award is submitted to the Secretary, the 
application contains each agreement described in this subpart, the 
application contains the information required in subsection (d)(1), and 
the application is in such form, is made in such manner, and contains 
such agreements, assurances, and information as the Secretary 
determines to be necessary to carry out this subpart.
    (g) Definition.--For purposes of this section, the term ``enabling 
services'' means services described in subsection (b) that are provided 
for the purpose described in subsection (a)(1).

SEC. 3462. AUTHORIZATIONS OF APPROPRIATIONS.

    (a) Enabling Services.--For the purpose of carrying out section 
3461, there are authorized to be appropriated $200,000,000 for fiscal 
year 1996, $300,000,000 for each of the fiscal years 1997 through 1999, 
and $100,000,000 for fiscal year 2000.
    (b) Relation to Other Funds.--The authorizations of appropriations 
established in subsection (a) are in addition to any other 
authorizations of appropriations that are available for the purpose 
described in such subsection.

                 PART 3--NATIONAL HEALTH SERVICE CORPS

SEC. 3471. AUTHORIZATIONS OF APPROPRIATIONS.

    (a) Additional Funding; General Corps Program; Allocations 
Regarding Nurses.--For the purpose of carrying out subpart II of part D 
of title III of the Public Health Service Act, and for the purpose of 
carrying out section 3472, there are authorized to be appropriated 
$50,000,000 for fiscal year 1995, $100,000,000 for fiscal year 1996, 
and $200,000,000 for each of the fiscal years 1997 through 2000.
    (b) Relation to Other Funds.--The authorizations of appropriations 
established in subsection (a) are in addition to any other 
authorizations of appropriations that are available for the purpose 
described in such subsection.
    (c) Availability of Funds.--An appropriation under this section for 
any fiscal year may be made at any time before that fiscal year and may 
be included in an Act making an appropriation under an authorization 
under subsection (a) for another fiscal year; but no funds may be made 
available from any appropriation under this section for obligation 
under sections 331 through 335, section 336A, and section 337 before 
the fiscal year involved.

SEC. 3472. ALLOCATION FOR PARTICIPATION OF NURSES IN SCHOLARSHIP AND 
              LOAN REPAYMENT PROGRAMS.

    Of the amounts appropriated under section 3471, the Secretary shall 
reserve such amounts as may be necessary to ensure that, of the 
aggregate number of individuals who are participants in the Scholarship 
Program under section 338A of the Public Health Service Act, or in the 
Loan Repayment Program under section 338B of such Act, the total number 
who are being educated as nurses or are serving as nurses, 
respectively, is increased to 20 percent.

      PART 4--PAYMENTS TO HOSPITALS SERVING VULNERABLE POPULATIONS

SEC. 3481. PAYMENTS TO HOSPITALS.

    (a) Entitlement Status.--The Secretary shall make payments in 
accordance with this part to eligible hospitals described in section 
3482. The preceding sentence--
            (1) is an entitlement in the Secretary on behalf of such 
        eligible hospitals (but is not an entitlement in the State in 
        which any such hospital is located or in any individual 
        receiving services from any such hospital); and
            (2) constitutes budget authority in advance of 
        appropriations Acts and represents the obligation of the 
        Federal Government to provide funding for such payments in the 
        amounts, and for the fiscal years, specified in subsection (b).
    (b) Amount of Entitlement.--
            (1) In general.--For purposes of subsection (a)(2), the 
        amounts and fiscal years specified in this subsection are (in 
        the aggregate for all eligible hospitals) $800,000,000 for the 
        fiscal year in which the general effective date occurs and for 
        each subsequent fiscal year.
            (2) Special rule for years before general effective date.--
                    (A) In general.--For any fiscal year that begins 
                prior to the general effective date, the amount 
                specified in this subsection for purposes of subsection 
                (a)(2) shall be equal to the aggregate DSH percentage 
                of the amount otherwise determined under paragraph (1).
                    (B) Aggregate dsh percentage defined.--In 
                subparagraph (A), the ``aggregate DSH percentage'' for 
                a year is the amount (expressed as a percentage) equal 
                to--
                            (i) the total amount of payment made by the 
                        Secretary under section 1903(a) of the Social 
                        Security Act during the base year with respect 
                        to payment adjustments made under section 
                        1923(c) of such Act for hospitals in the States 
                        in which eligible hospitals for the year are 
                        located; divided by
                            (ii) the total amount of payment made by 
                        the Secretary under section 1903(a) of such Act 
                        during the base year with respect to payment 
                        adjustments made under section 1923(c) of such 
                        Act for hospitals in all States.
    (c) Period of Payment.--An eligible hospital shall receive a 
payment under this section for a period of 5 years, without regard to 
the year for which the hospital first receives a payment.
    (d) Payments Made on Quarterly Basis.--Payments to an eligible 
hospital under this section for a year shall be made on a quarterly 
basis during the year.

SEC. 3482. IDENTIFICATION OF ELIGIBLE HOSPITALS.

    (a) Hospitals in Participating States.--In order to be an eligible 
hospital under this part, a hospital must be located in a State that is 
a participating State under this Act, except that an eligible hospital 
remains eligible to receive a payment under this part notwithstanding 
that, during the 5-year period for which the payment is to be made, the 
State in which it is located no longer meets the requirements for 
participating States under this Act.
    (b) State Identification.--In accordance with the criteria 
described in subsection (c) and such procedures as the Secretary may 
require, each State shall identify the hospitals in the State that meet 
such criteria and provide the Secretary with a list of such hospitals.
    (c) Criteria for Eligibility.--A hospital meets the criteria 
described in this subsection if the hospital's low-income utilization 
rate for the base year under section 1923(b)(3) of the Social Security 
Act (as such section is in effect on the day before the date of the 
enactment of this Act) is not less than 25 percent.

SEC. 3483. AMOUNT OF PAYMENTS.

    (a) Distribution of Allocation for Low-Income Assistance.--
            (1) Allocation from total amount.--Of the total amount 
        available for payments under this section in a year, 75 percent 
        shall be allocated to hospitals for low-income assistance in 
        accordance with this subsection.
            (2) Determination of hospital payment amount.--The amount 
        of payment to an eligible hospital from the allocation made 
        under paragraph (1) during a year shall be the equal to the 
        hospital's low-income percentage of the allocation for the 
        year.
    (b) Distribution of Allocation for Assistance for Uncovered 
Services.--
            (1) Allocation from total amount; determination of State-
        specific portion of allocation.--Of the total amount available 
        for payments under this section in a year, 25 percent shall be 
        allocated to hospitals for assistance in furnishing inpatient 
        hospital services that are not covered services under title I 
        (in accordance with regulations of the Secretary) in accordance 
        with this subsection. The amount available for payments to 
        eligible hospitals in a State shall be equal to an amount 
        determined in accordance with a methodology specified by the 
        Secretary.
            (2) Determination of hospital payment amount.--The amount 
        of payment to an eligible hospital in a State from the amount 
        available for payments to eligible hospitals in the State under 
        paragraph (1) during a year shall be the equal to the 
        hospital's low-income percentage of such amount for the year.
    (c) Low-Income Percentage Defined.--
            (1) In general.--In this subsection, an eligible hospital's 
        ``low-income percentage'' for a year is equal to the amount 
        (expressed as a percentage) of the total low-income days for 
        all eligible hospitals for the year that are attributable to 
        the hospital.
            (2) Low-income days described.--For purposes of paragraph 
        (1), an eligible hospital's low-income days for a year shall be 
        equal to the product of--
                    (A) the total number of inpatient days for the 
                hospital for the year (as reported to the Secretary by 
                the State in which the hospital is located, in 
                accordance with a reporting schedule and procedures 
                established by the Secretary); and
                    (B) the hospital's low-income utilization rate for 
                the base year under section 1923(b)(3) of the Social 
                Security Act (as such section is in effect on the day 
                before the date of the enactment of this Act).

SEC. 3484. BASE YEAR.

    In this part, the ``base year'' is, with respect to a State and 
hospitals in a State, the year immediately prior to the year in which 
the general effective date occurs.

               Subtitle F--Mental Health; Substance Abuse

                      PART 1--FINANCIAL ASSISTANCE

                                                  Title III, Subtitle F

SEC. 3501. AUTHORIZATIONS OF APPROPRIATIONS.

    (a) In General.--For the purpose of carrying out this part, there 
are authorized to be appropriated $100,000,000 for fiscal year 1995, 
$150,000,000 for fiscal year 1996, and $250,000,000 for each of the 
fiscal years 1997 through 2000.
    (b) Allocation Among Programs.--Of the amounts made available under 
subsection (a) for a fiscal year--
            (1) the Secretary may reserve for carrying out section 3503 
        such amounts as the Secretary determines to be appropriate; and
            (2) the Secretary shall, of the remaining amounts, reserve 
        50 percent for carrying out subsection (a) of section 3502 and 
        50 percent for carrying out subsection (b) of such section.
    (c) Relation to Other Funds.--The authorizations of appropriations 
established in subsection (a) are in addition to any other 
authorizations of appropriations that are available for the purpose 
described in such subsection.

SEC. 3502. SUPPLEMENTAL FORMULA GRANTS FOR STATES REGARDING ACTIVITIES 
              UNDER PART B OF TITLE XIX OF PUBLIC HEALTH SERVICE ACT.

    (a) Mental Health.--
            (1) In general.--In the case of any State that submits to 
        the Secretary an application in accordance with subsection (e) 
        for a fiscal year with respect to mental health, the Secretary 
        shall make a grant to the State for the purposes authorized in 
        subsection (c) with respect to mental health. The grant shall 
        consist of the allotment determined under paragraph (2) for the 
        State for such year.
            (2) Determination of allotment.--For purposes of paragraph 
        (1), the allotment under this paragraph for a State for a 
        fiscal year shall be determined as follows: With respect to the 
        amount reserved under section 3501(b)(2) for carrying out this 
        subsection, section 1918 of the Public Health Service Act shall 
        be applied to such amount to the same extent and in the same 
        manner as such section 1918 is applied to the amount determined 
        under section 1918(a)(2) of such Act.
    (b) Substance Abuse.--
            (1) In general.--In the case of any State that submits to 
        the Secretary an application in accordance with subsection (e) 
        for a fiscal year with respect to substance abuse, the 
        Secretary shall make a grant to the State for the purposes 
        authorized in subsection (c) with respect to substance abuse. 
        The grant shall consist of the allotment determined under 
        paragraph (2) for the State for such year.
            (2) Determination of allotment.--For purposes of paragraph 
        (1), the allotment under this paragraph for a State for a 
        fiscal year shall be determined as follows: With respect to the 
        amount reserved under section 3501(b)(2) for carrying out this 
        subsection, section 1933 of the Public Health Service Act shall 
        be applied to such amount to the same extent and in the same 
        manner as such section 1933 is applied to the amount determined 
        pursuant to sections 1933(a)(1)(B)(i) and 1918(a)(2)(A) of such 
        Act.
    (c) Use of Grants.--
            (1) In general.--With respect to the expenditure of a grant 
        to a State under subsection (a) or (b), the Secretary--
                    (A) shall designate as authorized expenditures such 
                of the activities described in paragraph (2) with 
                respect to mental health and substance abuse, 
                respectively, as the Secretary determines to be 
                appropriate; and
                    (B) may make the grant only if the State agrees to 
                expend the grant in accordance with the activities so 
                designated.
            (2) Description of activities.--The activities referred to 
        in paragraph (1) are (as applicable to the grant involved) the 
        following:
                    (A) For the purpose of increasing the access of 
                individuals to services relating to mental health and 
                substance abuse, the following services: 
                Transportation, community and patient outreach, patient 
                education, translation services, and such other 
                services as the Secretary determines to be appropriate 
                regarding such purpose.
                    (B) Improving the capacity of State and local 
                service systems to coordinate and monitor mental health 
                and substance abuse services, including improvement of 
                management information systems, and establishment of 
                linkages between providers of mental health and 
                substance abuse services and primary care providers and 
                health plans.
                    (C) Providing incentives to integrate public and 
                private systems for the treatment of mental health and 
                substance abuse disorders.
                    (D) Any activity for which a grant under section 
                1911 or section 1921 of the Public Health Service Act 
                is authorized to be expended.
    (d) Maintenance of Effort.--
            (1) In general.--With respect to the activities for which a 
        grant under subsection (a) or (b) is to be made, the Secretary 
        may make the grant only if the State involved agrees to 
        maintain expenditures of non-Federal amounts for such 
        activities at a level that is not less than the level of such 
        expenditures maintained by the State for the fiscal year 
        preceding the first fiscal year for which the State receives 
        such a grant.
            (2) Waiver.--The Secretary may waive all or part of the 
        requirement established for a State under paragraph (1) if--
                    (A) the State agrees that the amounts that 
                otherwise would have been subject to such requirement 
                will be expended for the purpose of developing 
                community-based systems of care to promote the eventual 
                integration of the public and private systems for 
                treatment of mental health, or substance abuse, as 
                applicable to the grant;
                    (B) the State submits to the Secretary a request 
                for the waiver and a description of the manner in which 
                the State will carry out such purpose; and
                    (C) the Secretary approves the waiver.
    (e) Application for Grant.--For purposes of subsection (a)(1) and 
(b)(1), an application for a grant under this section regarding mental 
health or substance abuse, respectively, is in accordance with this 
subsection if the State involved submits the application not later than 
the date specified by the Secretary, the application contains each 
applicable agreement described in this section, and the application 
otherwise is in such form, is made in such manner, and contains such 
agreements, assurances, and information as the Secretary determines to 
be necessary to carry out the purpose involved.

SEC. 3503. CAPITAL COSTS OF DEVELOPMENT OF CERTAIN CENTERS AND CLINICS.

    (a) In General.--The Secretary may make loans to, and guarantee the 
payment of principal and interest to Federal and non-Federal lenders on 
behalf of, public and private entities for the capital costs to be 
incurred by the entities in the development of non-acute, residential 
treatment centers and community-based ambulatory clinics.
    (b) Priorities Regarding Use of Funds.--In providing loans or loan 
guarantees under subsection (a), the Secretary shall give priority to 
authorizing the use of amounts for projects in health professional 
shortage areas or in geographic area in which there resides a 
significant number of individuals who are members of a medically 
underserved population.
    (c) Applicability of Certain Provisions.--The Secretary may provide 
loans or loan guarantees under subsection (a) only if the applicant 
involved agrees that, except to the extent inconsistent with the 
purpose described in subsection (a), subpart C of part 2 of subtitle E 
applies to such assistance to the same extent and in the same manner as 
such subpart applies to loans and loan guarantees under section 3441.

           PART 2--AUTHORITIES REGARDING PARTICIPATING STATES

                           Subpart A--Report

SEC. 3511. REPORT ON INTEGRATION OF MENTAL HEALTH SYSTEMS.

    (a) In General.--As a condition of being a participating State 
under title I, each State shall, not later than October 1, 1998, submit 
to the Secretary a report on (including a plan for) the measures to be 
implemented by the State to achieve the integration of the mental 
illness and substance abuse services of the State and its political 
subdivisions with the mental illness and substance abuse services that 
are included in the comprehensive benefit package under title I. The 
plan required in the preceding sentence shall meet the conditions 
described in section 3074(b).
    (b) Required Contents.--With respect to the provision of items and 
services relating to mental illness and substance abuse, the report of 
a State under subsection (a) shall, at a minimum, contain the following 
information:
            (1) Information on the number of individuals served by or 
        through mental illness and substance abuse programs 
        administered by State and local agencies and the proportion who 
        are eligible persons under title I.
            (2) The following information on services furnished to 
        eligible persons:
                    (A) Each type of benefit furnished.
                    (B) The mental illness diagnoses for which each 
                type of benefit is covered, the amount, duration and 
                scope of coverage for each covered benefit, and any 
                applicable limits on benefits.
                    (C) Cost sharing rules that apply.
            (3) Information on the extent to which each health provider 
        furnishing mental illness and substance abuse services under a 
        State program participates in one or more regional or corporate 
        alliance health plans, and, in the case of providers that do 
        not so participate, the reasons for the lack of participation.
            (4) The amount of revenues from health plans received by 
        mental illness and substance abuse providers that are 
        participating in such health plans and are funded under one or 
        more State programs.
            (5) With respect to the two years preceding the year in 
        which the State becomes a participating State under title I--
                    (A) the amount of funds expended by the State and 
                its political subdivisions for each of such years for 
                items and services that are included in the 
                comprehensive benefit package under such title;
                    (B) the amount of funds expended for medically 
                necessary and appropriate items and services not 
                included in such benefit package, including medical 
                care, other health care, and supportive services 
                related to the provision of health care.
            (6) An estimate of the amount that the State will expend to 
        furnish items and services not included in such package once 
        the expansion of coverage for mental illness and substance 
        abuse services is implemented in the year 2001.
            (7) A description of how the State will assure that all 
        individuals served by mental illness and substance abuse 
        programs funded by the State will be enrolled in a health plan 
        and how mental illness and substance abuse services not covered 
        under the benefit package will continue to be furnished to such 
        enrollees.
            (8) A description of the conditions under which the 
        integration of mental illness and substance abuse providers 
        into regional and corporate alliances can be achieved, and an 
        identification of changes in participation and certification 
        requirements that are needed to achieve the integration of such 
        programs and providers into health plans.
            (9) If the integration of mental illness and substance 
        abuse programs operated by the State into one or more health 
        plans is not medically appropriate or feasible for one or more 
        groups of individuals treated under State programs, a 
        description of the reasons that integration is not feasible or 
        appropriate and a plan for assuring the coordination for such 
        individuals of the care and services covered under the 
        comprehensive benefit package with the additional items and 
        services furnished by such programs.
    (c) General Provisions.--Reports under subsection (a) shall be 
provided at the time and in the manner prescribed by the Secretary.

                        Subpart B--Pilot Program

SEC. 3521. PILOT PROGRAM.

    (a) In General.--The Secretary shall establish a pilot program to 
demonstrate model methods of achieving the integration of the mental 
illness and substance abuse services of the States with the mental 
illness and substance abuse services that are included in the 
comprehensive benefit package under title I.
    (b) Certain Considerations.--With respect to the provision of items 
and services relating to mental illness and substance abuse, the 
Secretary, in carrying out subsection (a), shall consider the 
following:
            (1) The types of items and services needed in addition to 
        the items and services included in the comprehensive benefits 
        package under title I.
            (2) The optimal methods of treatment for individuals with 
        long-term conditions.
            (3) The capacity of alliance health plans to furnish such 
        treatment.
            (4) The modifications that should be made in the items and 
        services furnished by such health plans.
            (5) The role of publicly-funded health providers in the 
        integration of acute and long-term treatment.

   Subtitle G--Comprehensive School Health Education; School-Related 
                            Health Services

                       PART 1--GENERAL PROVISIONS

SEC. 3601. PURPOSES.

                                                  Title III, Subtitle G

    Subject to the subsequent provisions of this subtitle, the purposes 
of this subtitle are as follows:
            (1) To support the provision in kindergarten through grade 
        12 of sequential, age-appropriate, comprehensive health 
        education programs that address locally relevant priorities.
            (2) To establish a national framework within which States 
        can create comprehensive school health education programs 
        that--
                    (A) target the health risk behaviors accounting for 
                the majority of the morbidity and mortality among youth 
                and adults, including the following: Tobacco use; 
                alcohol and other drug abuse; sexual behaviors 
                resulting in infection with the human immunodeficiency 
                virus, in other sexually transmitted diseases or in 
                unintended pregnancy; behaviors resulting in 
                intentional and unintentional injuries; dietary 
                patterns resulting in disease; and sedentary 
                lifestyles; and
                    (B) are integrated with plans and programs in the 
                State, if any, under title III of the Goals 2000: 
                Educate America Act and those targeting health 
                promotion and disease prevention goals related to the 
                national health objectives set forth in Healthy People 
                2000.
            (3) To pay the initial costs of planning and establishing 
        Statewide comprehensive school health education programs that 
        will be implemented and maintained with local, State, and other 
        Federal resources.
            (4) To support Federal activities such as research and 
        demonstrations, evaluations, and training and technical 
        assistance regarding comprehensive school health education.
            (5) To motivate youth, especially low-achieving youth, to 
        stay in school, avoid teen pregnancy, and strive for success by 
        providing intensive, high-quality health education programs 
        that include peer-teaching, family, and community involvement.
            (6) To improve the knowledge and skills of children and 
        youth by integrating academic and experiential learning in 
        health education with other elements of a comprehensive school 
        health program.
            (7) To further the National Education Goals set forth in 
        title I of the Goals 2000: Educate America Act and the national 
        health objectives set forth in Healthy People 2000.

SEC. 3602. DEFINITIONS.

    (a) Comprehensive School Health Education Program.--For purposes of 
this subtitle, the term ``comprehensive school health education 
program'' means a program that addresses locally relevant priorities 
and meets the following conditions:
            (1) The program is sequential, and age and developmentally 
        appropriate.
            (2) The program is provided, in the area served by the 
        program, every year for all students from kindergarten through 
        grade 12.
            (3) The program provides comprehensive health education, 
        including the following components:
                    (A) Community health.
                    (B) Environmental health.
                    (C) Personal health.
                    (D) Family life.
                    (E) Growth and development.
                    (F) Nutritional health.
                    (G) Prevention and control of disease and 
                disorders.
                    (H) Safety and prevention of injuries.
                    (I) Substance abuse, including tobacco and alcohol 
                use.
                    (J) Consumer health, including education to ensure 
                that students understand the benefits and appropriate 
                use of medical services, including immunizations and 
                other clinical preventive services.
            (4) The program promotes personal responsibility for a 
        healthy lifestyle and provides the knowledge and skills 
        necessary to adopt a healthy lifestyle, including teaching the 
        legal, social, and health consequences of behaviors that pose 
        health risks.
            (5) The program is sensitive to cultural and ethnic issues 
        in the content of instructional materials and approaches.
            (6) The program includes activities that support 
        instruction.
            (7) The program includes activities to promote involvement 
        by parents, families, community organizations, and other 
        appropriate entities.
            (8) The program is coordinated with other Federal, State, 
        and local health education and prevention programs and with 
        other Federal, State and local education programs, including 
        those carried out under title I of the Elementary and Secondary 
        Education Act of 1965.
            (9) The program focuses on the particular health concerns 
        of the students in the State, school district, or school, as 
        the case may be.
    (b) Other Definitions.--For purposes of this subtitle:
            (1) The term ``local educational agency'' has the meaning 
        given such term in section 1471(12) of the Elementary and 
        Secondary Education Act of 1965.
            (2) The term ``State educational agency'' has the meaning 
        given such term in section 1471(23) of the Elementary and 
        Secondary Education Act of 1965.

          PART 2--SCHOOL HEALTH EDUCATION; GENERAL PROVISIONS

SEC. 3611. AUTHORIZATIONS OF APPROPRIATIONS.

    (a) Funding for School Health Education.--For the purpose of 
carrying out parts 3 and 4, there are authorized to be appropriated 
$50,000,000 for each of the fiscal year 1995 through 2000.
    (b) Allocations.--Of the amounts appropriated under subsection (a) 
for a fiscal year--
            (1) the Secretary may reserve not more than $13,000,000 for 
        carrying out part 4;
            (2) the Secretary may reserve not more than $5,000,000 to 
        support national leadership activities, such as research and 
        demonstration, evaluation, and training and technical 
        assistance in comprehensive school health education; and
            (3) the Secretary may reserve not more than 5 percent for 
        administrative expenses regarding parts 3 and 4.
    (c) Relation to Other Funds.--The authorizations of appropriations 
established in subsection (a) are in addition to any other 
authorizations of appropriations that are available for the purpose 
described in such subsection.

SEC. 3612. WAIVERS OF STATUTORY AND REGULATORY REQUIREMENTS.

    (a) In General.--
            (1) Waivers.--Except as provided in subsection (c), upon 
        the request of an entity receiving funds under part 3 or part 4 
        and under a program specified in paragraph (2), the Secretary 
        of Health and Human Services or the Secretary of Education (as 
        the case may be, according to which Secretary administers the 
        program so specified) may grant to the entity a waiver of any 
        requirement of such program regarding the use of funds, or of 
        the regulations issued for the program by the Secretary 
        involved, if the following conditions are met with respect to 
        such program:
                    (A) The Secretary involved determines that the 
                requirement of such program impedes the ability of the 
                State educational agency or other recipient to achieve 
                more effectively the purposes of part 3 or 4.
                    (B) The Secretary involved determines that, with 
                respect to the use of funds under such program, the 
                requested use of the funds by the entity would be 
                consistent with the purposes of part 3 or 4.
                    (C) In the case of a request for a waiver submitted 
                by a State educational agency, the State educational 
                agency--
                            (i) provides all interested local 
                        educational agencies in the State with notice 
                        and an opportunity to comment on the proposal; 
                        and
                            (ii) submits the comments to the Secretary 
                        involved.
                    (D) In the case of a request for a waiver submitted 
                by a local educational agency or other agency, 
                institution, or organization that receives funds under 
                part 3 from the State educational agency, such request 
                has been reviewed by the State educational agency and 
                is accompanied by the comments, if any, of such agency.
            (2) Relevant programs.--For purposes of paragraph (1), the 
        programs specified in this paragraph are as follows:
                    (A) In the case of programs administered by the 
                Secretary of Health and Human Services, the following:
                            (i) The program known as the Prevention, 
                        Treatment, and Rehabilitation Model Projects 
                        for High Risk Youth, carried out under section 
                        517 of the Public Health Service Act.
                            (ii) The program known as the State and 
                        Local Comprehensive School Health Programs to 
                        Prevent Important Health Problems and Improve 
                        Educational Outcomes, carried out under such 
                        Act.
                    (B) In the case of programs administered by the 
                Secretary of Education, any program carried out under 
                part B of the Drug-Free Schools and Communities Act of 
                1986.
    (b) Waiver Period.--
            (1) In general.--A waiver under this section shall be for a 
        period not to exceed three years.
            (2) Extensions.--The Secretary involved under subsection 
        (a) may extend such period if the Secretary determines that--
                    (A) the waiver has been effective in enabling the 
                State or affected recipients to carry out the 
                activities for which it was requested and has 
                contributed to improved performance; and
                    (B) such extension is in the public interest.
    (c) Waivers Not Authorized.--The Secretary involved under 
subsection (a) may not waive, under this section, any statutory or 
regulatory requirement relating to--
            (1) comparability of services;
            (2) maintenance of effort;
            (3) the equitable participation of students attending 
        private schools;
            (4) parental participation and involvement;
            (5) the distribution of funds to States or to local 
        educational agencies or other recipients of funds under the 
        programs specified in subsection (a)(2);
            (6) maintenance of records;
            (7) applicable civil rights requirements; or
            (8) the requirements of sections 438 and 439 of the General 
        Education Provisions Act.
    (d) Termination of Waiver.--The Secretary involved under subsection 
(a) shall terminate a waiver under this section if the Secretary 
determines that the performance of the State or other recipient 
affected by the waiver has been inadequate to justify a continuation of 
the waiver or if it is no longer necessary to achieve its original 
purposes.

  PART 3--SCHOOL HEALTH EDUCATION; GRANTS TO STATE EDUCATION AGENCIES

        Subpart A--Planning Grants for State Education Agencies

SEC. 3621. APPLICATION FOR GRANT.

    (a) In General.--Any State educational agency that wishes to 
receive a planning grant under this subpart shall submit an application 
to the Secretary of Health and Human Services, at such time and in such 
manner as the Secretary may require.
    (b) Application; Joint Development; Contents.--An application under 
subsection (a) shall be jointly developed by the State educational 
agency and the State health agencies of the State involved, and shall 
contain the following:
            (1) An assessment of the State's need for comprehensive 
        school health education, using goals established by the 
        Department of Health and Human Services and the Department of 
        Education and the State's school improvement plan, if any, 
        under title III of Goals 2000: Educate America Act.
            (2) A description of how the State educational agency will 
        collaborate with the State health agency in the planning and 
        development of a comprehensive school health education program 
        in the State, including coordination of existing health 
        education programs and resources.
            (3) A plan to build capacity at the State and local levels 
        to provide staff development and technical assistance to local 
        educational agency and local health agency personnel involved 
        with comprehensive school health education.
            (4) A preliminary plan for evaluating comprehensive school 
        health education activities.
            (5) Information demonstrating that the State has 
        established a State-level advisory council whose membership 
        includes representatives of the State agencies with principal 
        responsibilities for programs regarding health, education, and 
        mental health.
            (6) A timetable and proposed budget for the planning 
        process.
            (7) Such other information and assurances as the Secretary 
        may require.
    (c) Number of Grants.--States may receive one planning grant 
annually and no more than two planning grants may be awarded to any one 
State.

SEC. 3622. APPROVAL OF SECRETARY.

    The Secretary may approve the application of a State under section 
3621 if the Secretary determines that--
            (1) the application meets the requirements of this subpart; 
        and
            (2) there is a substantial likelihood that the State will 
        be able to develop and implement a comprehensive school health 
        education plan that complies with the requirements of subpart 
        B.

SEC. 3623. AMOUNT OF GRANT.

    For any fiscal year, the minimum grant to any State under this 
subpart is an amount determined by the Secretary to be necessary to 
enable the State to conduct the planning process, and the maximum such 
grant is $500,000.

SEC. 3624. AUTHORIZED ACTIVITIES.

    A State may use funds received under this subpart only for the 
following:
            (1) To establish and carry out the State planning process.
            (2) To conduct Statewide or sub-State regional coordination 
        and collaboration activities for local educational agencies, 
        local health agencies, and other agencies and organizations, as 
        appropriate.
            (3) To conduct activities to build capacity to provide 
        staff development and technical assistance services to local 
        educational agency and local health agency personnel involved 
        with comprehensive school health education.
            (4) To develop student learning objectives and assessment 
        instruments.
            (5) To work with State and local health agencies and State 
        and local educational agencies to reduce barriers to the 
        implementation of comprehensive school health education 
        programs in schools.
            (6) To prepare the plan required to receive an 
        implementation grant under subpart B.
            (7) To adopt, validate, and disseminate curriculum models 
        and program strategies, if the Secretary determines that such 
        activities are necessary to achieving the objectives of the 
        State's program.

     Subpart B--Implementation Grants for State Education Agencies

SEC. 3631. APPLICATION FOR GRANT.

    (a) In General.--Any State that wishes to receive an implementation 
grant under this subpart shall submit an application to the Secretary 
of Health and Human Services, at such time, in such manner, and 
containing such information and assurances as the Secretary may 
require.
    (b) Application and State Plan; Joint Development; Contents.--An 
application under subsection (a) shall be jointly developed by the 
State educational agency and the State health agencies of the State 
involved, and shall include a State plan for comprehensive school 
health education programs (as defined in section 3602) that describes 
the following:
            (1) The State's goals and objectives for those programs.
            (2) How the State will allocate funds to local educational 
        agencies in accordance with section 3634.
            (3) How the State will coordinate programs under this 
        subpart with other local, State and Federal health education 
        programs.
            (4) How comprehensive school health education programs will 
        be coordinated with other local, State and Federal education 
        programs, such as programs under title I of the Elementary and 
        Secondary Education Act of 1965, with the State's school 
        improvement plan, if any, under title III of the Goals 2000: 
        Educate America Act, and with any similar programs.
            (5) How the State has worked with State and local education 
        agencies and with State and local health agencies to reduce 
        barriers to implementing comprehensive school health education 
        programs.
            (6) How the State will monitor the implementation of such 
        programs by local educational agencies.
            (7) How the State will build capacity for professional 
        development of health educators.
            (8) How the State will provide staff development and 
        technical assistance to local educational agencies.
            (9) The respective roles of the State educational agency, 
        local educational agencies, the State health agency, and the 
        local health agencies in developing and implementing such 
        school health education programs.
            (10) How such school health education programs will be 
        tailored to the extent practicable to be culturally and 
        linguistically sensitive and responsive to the various needs of 
        the students served, including individuals with disabilities, 
        and individuals from disadvantaged backgrounds (including 
        racial and ethnic minorities).
            (11) How the State will evaluate and report on the State's 
        progress toward attaining the goals and objectives described in 
        paragraph (1).

SEC. 3632. SELECTION OF GRANTEES.

    (a) Selection of Grantees.--The Secretary shall establish criteria 
for the competitive selection of grantees under this subpart.
    (b) Opportunity for Planning Grant.--If the Secretary does not 
approve a State's application under this subpart and determines that 
the State could benefit from a planning grant under subpart A, the 
Secretary shall inform the State of any planning grant funds that may 
be available to it under subpart A, subject to section 3621(c).

SEC. 3633. AMOUNT OF GRANT.

    (a) In General.--For any fiscal year, the minimum grant to any 
State under this subpart is an amount determined by the Secretary to be 
necessary to enable the State to conduct the implementation process.
    (b) Criteria.--In determining the amount of any such grant, the 
Secretary may consider such factors as the number of children enrolled 
in schools in the State, the number of school-aged children living in 
poverty in the State, and the scope and quality of the State's plan.

SEC. 3634. AUTHORIZED ACTIVITIES; LIMITATION ON ADMINISTRATIVE COSTS.

    (a) Subgrants to Local Educational Agencies.--Each State that 
receives funds under this subpart for any fiscal year shall retain not 
more than 75 percent of those funds in the first year, 50 percent of 
those funds in the second and third years, and 25 percent of those 
funds in each succeeding year. Those funds not retained by the State 
shall be used to make grants to local educational agencies in 
accordance with section 3635.
    (b) State-level Activities.--Each State shall use retained funds 
for any fiscal year for the following purposes:
            (1) To conduct Statewide or sub-State regional coordination 
        and collaboration activities.
            (2) To adapt, validate, or disseminate program models or 
        strategies for comprehensive school health education.
            (3) To build capacity to deliver staff development and 
        technical assistance services to local educational agencies, 
        and State and local health agencies.
            (4) To promote program activities involving families and 
        coordinating program activities with community groups and 
        agencies.
            (5) To evaluate and report to the Secretary on the progress 
        made toward attaining the goals and objectives described in 
        section 3621(b)(1).
            (6) To conduct such other activities to achieve the 
        objectives of this subpart as the Secretary may by regulation 
        authorize.
    (c) State Administration.--Of the amounts received by a State for a 
fiscal year under this subpart and remaining after any grants to local 
educational agencies made from such amounts, the State may use up to 10 
percent for the costs of administering such amounts, including the 
activities of the State advisory council and monitoring the performance 
of local educational agencies.

SEC. 3635. SUBGRANTS TO LOCAL EDUCATIONAL AGENCIES.

    (a) Application for Grant.--Any local educational agency that 
wishes to receive a grant under this subpart shall submit an 
application to the State, containing such information and assurances as 
the State may require, including a description of the following:
            (1) The local educational agency's goals and objectives for 
        comprehensive school health education programs.
            (2) How the local educational agency will concentrate funds 
        in high-need schools and provide sufficient funds to targeted 
        schools to ensure the implementation of comprehensive programs.
            (3) How the local educational agency will monitor the 
        implementation of these programs.
            (4) How the local educational agency will ensure that 
        school health education programs are tailored to the extent 
        practicable to be culturally and linguistically sensitive and 
        responsive to the various needs of the students served, 
        including individuals with disabilities, and individuals from 
        disadvantaged backgrounds (including racial and ethnic 
        minorities).
            (5) How the local educational agency, in consultation with 
        the local health agency, will evaluate and report on its 
        progress toward attaining the goals and objectives described in 
        paragraph (1).
    (b) Selection of Subgrantees.--Each State shall give priority to 
applications from local educational agencies serving areas with high 
needs, as indicated by criteria developed by the State, which shall 
include, but need not be limited to, high rates of any of the 
following:
            (1) Poverty among school-aged youth.
            (2) Births to adolescents.
            (3) Sexually transmitted diseases among school-aged youth.
            (4) Drug and alcohol use among school-aged youth.
            (5) Violence among school-aged youth.
    (c) Authorized Activities.--Each local educational agency that 
receives a grant under this subpart shall use the grant funds to 
implement comprehensive school health education programs, as defined in 
section 3602.

                   Subpart C--State and Local Reports

SEC. 3641. STATE AND LOCAL REPORTS.

    (a) State Reports.--Each State that receives a grant under this 
part shall collect and submit to the Secretary such data and other 
information on State and local programs as the Secretary may require.
    (b) In General.-- Each local educational agency that receives a 
grant under subpart B shall collect and report to the State such data 
and other information as the Secretary may require.

 PART 4--SCHOOL HEALTH EDUCATION; GRANTS TO CERTAIN LOCAL EDUCATIONAL 
                                AGENCIES

                         Subpart A--Eligibility

SEC. 3651. SUBSTANTIAL NEED OF AREA SERVED BY AGENCY.

    Any local educational agency is eligible for a grant under this 
part for any fiscal year if--
            (1) the agency enrolls at least 25,000 students; and
            (2) the geographic area served by the agency has a 
        substantial need for such a grant, relative to other geographic 
        areas in the United States.

        Subpart B--Planning Grants for Local Education Agencies

SEC. 3661. APPLICATION FOR GRANT.

    (a) In General.--Any local educational agency that wishes to 
receive a planning grant under this subpart shall submit an application 
to the Secretary of Health and Human Services at such time and in such 
manner as the Secretary may require.
    (b) State Educational Agency Review.--Each such local educational 
agency, before submitting its application to the Secretary, shall 
submit the application to the State educational agency for comment by 
such agency and by the State health agencies of the State.
    (c) Contents of Applications.--Each such application shall contain 
the following:
            (1) An assessment of the local educational agency's need 
        for comprehensive school health education, using goals 
        established by the Department of Health and Human Services and 
        the Department of Education, as well as local health and 
        education strategies, such as State school improvement plans, 
        if any, under title III of the Goals 2000: Educate America Act.
            (2) Information demonstrating that the local educational 
        agency has established or selected a community-level advisory 
        council, which shall include representatives of relevant 
        community agencies such as those that administer education, 
        child nutrition, health, and mental health programs.
            (3) A description of how the local educational agency will 
        collaborate with the State educational agency, the State health 
        agency, and the local health agency in the planning and 
        development of a comprehensive school health education program 
        in the local educational agency, including coordination of 
        existing health education programs and resources.
            (4) A plan to build capacity at the local educational 
        agency to provide staff development and technical assistance to 
        local educational agency and local health agency personnel 
        involved with comprehensive school health education.
            (5) A preliminary plan for evaluating comprehensive school 
        health education activities.
            (6) A timetable and proposed budget for the planning 
        process.
            (7) Such other information and assurances as the Secretary 
        may require.
    (d) Number of Grants.--Local educational agencies may receive at a 
maximum two annual planning grants.

SEC. 3662. SELECTION OF GRANTEES.

    (a) Selection Criteria.--The Secretary shall establish criteria for 
the competitive selection of grantees under this part.
    (b) Limitation.--The Secretary shall not approve an application 
from a local educational agency in a State that has an approved plan 
under subpart A or B of part 3 of this subtitle unless the Secretary 
determines, after consultation with the State that the local 
application is consistent with the State plan, if one exists.

SEC. 3663. AMOUNT OF GRANT.

    For any fiscal year, the minimum grant to any local educational 
agency under this subpart is an amount determined by the Secretary to 
be necessary to enable the local educational agency to conduct the 
planning process, and the maximum such grant is $500,000.

SEC. 3664. AUTHORIZED ACTIVITIES.

    A local educational agency may use funds received under this 
subpart only for the following:
            (1) To establish and carry out the local educational agency 
        planning process.
            (2) To undertake joint training, staffing, administration, 
        and other coordination and collaboration activities for local 
        educational agencies, local health agencies, and other agencies 
        and organizations, as appropriate.
            (3) To conduct activities to build capacity to provide 
        staff development and technical assistance services to local 
        educational agency and local health agency personnel involved 
        with comprehensive school health education.
            (4) To develop student learning objectives and assessment 
        instruments.
            (5) To work with State and local health agencies and State 
        educational agencies to reduce barriers to the implementation 
        of comprehensive school health education programs in schools, 
        by, for example, ensuring that adequate time is a available 
        during the school day for such programs.
            (6) To prepare the plan required to receive an 
        implementation grant under subpart C.

    Subpart C--Implementation Grants for Local Educational Agencies

SEC. 3671. APPLICATION FOR GRANT.

    (a) In General.--Any local educational agency that wishes to 
receive an implementation grant under this subpart shall submit an 
application to the Secretary of Health and Human Services, at such 
time, in such manner, and containing such information and assurances as 
the Secretary may require.
    (b) State Educational Agency Review.--Each such local educational 
agency shall submit its application to the State educational agency for 
comment before submitting it to the Secretary.
    (c) Local Educational Agency Plan.--Each such application shall 
include a local educational agency plan for comprehensive school health 
education programs (as defined in section 3602) that describes the 
following:
            (1) The local educational agency's goals and objectives for 
        those programs.
            (2) How the local educational agency will coordinate 
        programs under this subpart with other local, State and Federal 
        health education programs.
            (3) How comprehensive school health education programs will 
        be coordinated with other local, State and Federal education 
        programs, such as programs under title I of the Elementary and 
        Secondary Education Act of 1965, and with State's school 
        improvement plan, if any, under title III of the Goals 2000: 
        Educate America Act.
            (4) How the local educational agency has worked with State 
        educational agencies and with State and local health agencies 
        to reduce barriers to implementing comprehensive school health 
        education programs.
            (5) How local educational agencies will monitor the 
        implementation of such programs.
            (6) How the local educational agency, in consultation with 
        the State educational agency and State and local health 
        agencies and in conjunction with other local professional 
        development activities, will build capacity for professional 
        development of health educators.
            (7) How the local educational agency, in consultation with 
        the State educational agency and State and local health 
        agencies, will provide staff development and technical 
        assistance.
            (8) The respective roles of the State educational agency, 
        local educational agencies, the State health agency, and the 
        local health agencies in developing and implementing such 
        school health education programs.
            (9) How such school health education programs will be 
        tailored to the extent practicable to be culturally and 
        linguistically sensitive and responsive to the various needs of 
        the students served, including individuals with disabilities, 
        and individuals from disadvantaged backgrounds (including 
        racial and ethnic minorities).
            (10) How the local educational agency, in consultation with 
        the local health agency, will evaluate and report on the local 
        educational agency's progress toward attaining the goals and 
        objectives described in paragraph (1).

SEC. 3672. SELECTION OF GRANTEES.

    (a) Selection of Grantees.--The Secretary shall establish criteria 
for the competitive selection of grantees under this subpart.
    (b) Limitation.--The Secretary shall not approve an application 
from a local educational agency in a State that has an approved plan 
under subpart A or B of part 3 unless the Secretary determines, after 
consultation with the State that the local application is consistent 
with such State plan.
    (c) Opportunity for Planning Grant.--If the Secretary does not 
approve a local educational agency's application under this subpart and 
determines that the local educational agency could benefit from a 
planning grant under subpart B, the Secretary shall inform the local 
educational agency of any planning grant funds that may be available to 
it under subpart B, subject to section 3661(d).

SEC. 3673. AMOUNT OF GRANT.

    (a) In General.--For any fiscal year, the minimum grant to any 
local educational agency under this subpart is an amount determined by 
the Secretary to be necessary to enable the local educational agency to 
conduct the implementation process.
    (b) Criteria.--In determining the amount of any such grant, the 
Secretary may consider such factors as the number of children enrolled 
in schools in the local educational agency, the number of school-aged 
children living in poverty in the local educational agency, and the 
scope and quality of the local educational agency's plan.

SEC. 3674. AUTHORIZED ACTIVITIES.

    Each local educational agency that receives a grant under this 
subpart shall use the grant funds as follows:
            (1) To implement comprehensive school health education 
        programs, as defined in section 3602.
            (2) To conduct local or regional coordination and 
        collaboration activities.
            (3) To provide staff development and technical assistance 
        to schools, local health agencies, and other community agencies 
        involved in providing comprehensive school health education 
        programs.
            (4) To administer the program and monitor program 
        implementation at the local level.
            (5) To evaluate and report to the Secretary on the local 
        educational agency's progress toward attaining the goals and 
        objectives described in section 3671(c)(1).
            (6) To conduct such other activities as the Secretary may 
        by regulation authorize.

SEC. 3675. REPORTS.

    Each local educational agency that receives a grant under this 
subpart shall collect and report to the Secretary and the State such 
data and other information as the Secretary may require.

                 PART 5--SCHOOL-RELATED HEALTH SERVICES

            Subpart A--Development and Operation of Projects

SEC. 3681. AUTHORIZATIONS OF APPROPRIATIONS.

    (a) Funding for School-Related Health Services.--For the purpose of 
carrying out this subpart, there are authorized to be appropriated 
$100,000,000 for fiscal year 1996, $275,000,000 for fiscal year 1997, 
$350,000,000 for fiscal year 1998, and $400,000,000 for each of the 
fiscal years 1999 and 2000.
    (b) Relation to Other Funds.--The authorizations of appropriations 
established in subsection (a) are in addition to any other 
authorizations of appropriations that are available for the purpose 
described in such subsection.

SEC. 3682. ELIGIBILITY FOR DEVELOPMENT AND OPERATION GRANTS.

    (a) In General.--Entities eligible to apply for and receive grants 
under section 3484 or 3485 are the following:
            (1) State health agencies that apply on behalf of local 
        community partnerships and other communities in need of 
        adolescent health services within the State.
            (2) Local community partnerships in States in which health 
        agencies have not applied.
    (b) Local Community Partnerships.--
            (1) In general.--A local community partnership under 
        subsection (a)(2) is an entity that, at a minimum, includes--
                    (A) a local health care provider with experience in 
                delivering services to adolescents;
                    (B) one or more local public schools; and
                    (C) at least one community based organization 
                located in the community to be served that has a 
                history of providing services to at-risk youth in the 
                community.
            (2) Participation.--A partnership described in paragraph 
        (1) shall, to the maximum extent feasible, involve broad based 
        community participation from parents and youth to be served, 
        health and social service providers (including regional 
        alliance health plans and corporate alliance health plans in 
        which families in the community are enrolled), teachers and 
        other public school and school board personnel, the regional 
        health alliance in which the schools participating in the 
        partnership are located, youth development and service 
        organizations, and interested business leaders. Such 
        participation may be evidenced through an expanded partnership, 
        or an advisory board to such partnership.

SEC. 3683. PREFERENCES.

    (a) In General.--In making grants under sections 3484 and 3485, the 
Secretary shall give preference to applicants whose communities to be 
served show the most substantial level of need for such services among 
individuals who are between the ages of 10 and 19 (inclusive), as 
measured by indicators of community health including the following:
            (1) High levels of poverty.
            (2) The presence of a medically underserved area or 
        population (as defined under section 330(a) of the Public 
        Health Service Act).
            (3) A health professional shortage area, as designated 
        under section 332 of the Public Health Service Act.
            (4) High rates of indicators of health risk among children 
        and youth, including a high proportion of children receiving 
        services through the Individuals with Disabilities Education 
        Act, adolescent pregnancy, sexually transmitted disease 
        (including infection with the human immunodeficiency virus), 
        preventable disease, communicable disease, intentional and 
        unintentional injuries among children and youth, community and 
        gang violence, youth unemployment, juvenile justice 
        involvement, and high rates of drug and alcohol exposure.
    (b) Linkage to Qualified Community Health Groups.--In making grants 
under sections 3484 and 3485, the Secretary shall give preference to 
applicants that demonstrate a linkage to qualified community health 
groups (as defined in section 3421(a)).

SEC. 3684. GRANTS FOR DEVELOPMENT OF PROJECTS.

    (a) In General.--The Secretary may make grants to State health 
agencies or to local community partnerships to develop school health 
service sites.
    (b) Use of Funds.--A project for which a grant may be made under 
subsection (a) may include but not be limited to the cost of the 
following:
            (1) Planning for the provision of school health services.
            (2) Recruitment, compensation, and training of health and 
        administrative staff.
            (3) The development of agreements with regional and 
        corporate alliance health plans and the acquisition and 
        development of equipment and information services necessary to 
        support information exchange between school health service 
        sites and health plans, health providers, and other entities 
        authorized to collect information under this Act.
            (4) In the case of communities described in subsection 
        (d)(2)(B), funds to aid in the establishment of local community 
        partnerships.
            (5) Other activities necessary to assume operational 
        status.
    (c) Application for Grant.--
            (1) In general.--Applicants shall submit applications in a 
        form and manner prescribed by the Secretary.
            (2) Applications by state health agencies.--
                    (A) In the case of applicants that are State health 
                agencies, the application shall contain assurances that 
                the State health agency is applying for funds--
                            (i) on behalf of at least one local 
                        community partnership; and
                            (ii) on behalf of at least one other 
                        community identified by the State as in need of 
                        the services funded under this part but without 
                        a local community partnership.
                    (B) In the case of communities identified in 
                applications submitted by State health agencies that do 
                not yet have local community partnerships, the State 
                shall describe the steps that will be taken to aid the 
                community in developing a local community partnership.
                    (C) A State applying on behalf of local community 
                partnerships and other communities may retain not more 
                than 10 percent of grants awarded under this subpart 
                for administrative costs.
    (d) Contents of Application.--In order to receive a grant under 
this section, an applicant must include in the application the 
following information:
            (1) An assessment of the need for school health services in 
        the communities to be served, using the latest available health 
        data and health goals and objectives established by the 
        Secretary.
            (2) A description of how the applicant will design the 
        proposed school health services to reach the maximum number of 
        school-aged children and youth at risk for poor health outcome.
            (3) An explanation of how the applicant will integrate its 
        services with those of other health and social service programs 
        within the community.
            (4) An explanation of how the applicant will link its 
        activities to the regional and corporate alliance health plans 
        serving the communities in which the applicant's program is to 
        be located.
            (5) A description of linkages with regional and corporate 
        health alliances in whose areas the applicant's program is to 
        be located.
            (6) A description of a quality assurance program which 
        complies with standards that the Secretary may prescribe.
    (e) Number of Grants.--Not more than one planning grant may be made 
to a single applicant. A planning grant may not exceed two years in 
duration.

SEC. 3685. GRANTS FOR OPERATION OF PROJECTS.

    (a) In General.--The Secretary may make grants to State health 
agencies or to local community partnerships for the cost of operating 
school health service sites.
    (b) Use of Grant.--The costs for which a grant may be made under 
this section include but are not limited to the following:
            (1) The cost of furnishing health services that are not 
        covered under title I of this Act or by any other public or 
        private insurer.
            (2) The cost of furnishing enabling services, as defined in 
        section 3461(g).
            (3) Training, recruitment and compensation of health 
        professionals and other staff.
            (4) Outreach services to at-risk youth and to parents.
            (5) Linkage of individuals to health plans, community 
        health services and social services.
            (6) Other activities deemed necessary by the Secretary.
    (c) Application for Grant.--Applicants shall submit applications in 
a form and manner prescribed by the Secretary. In order to receive a 
grant under this section, an applicant must include in the application 
the following information:
            (1) A description of the services to be furnished by the 
        applicant.
            (2) The amounts and sources of funding that the applicant 
        will expend, including estimates of the amount of payments the 
        applicant will received from alliance health plans and from 
        other sources.
            (3) Such other information as the Secretary determines to 
        be appropriate.
    (d) Additional Contents of Application.--In order to receive a 
grant under this section, an applicant must meet the following 
conditions:
            (1) The applicant furnishes the following services:
                    (A) Diagnosis and treatment of simple illnesses and 
                minor injuries.
                    (B) Preventive health services, including health 
                screenings.
                    (C) Enabling services, as defined in section 
                3461(g).
                    (D) Referrals and followups in situations involving 
                illness or injury.
                    (E) Health and social services, counseling 
                services, and necessary referrals, including referrals 
                regarding mental health and substance abuse.
                    (F) Such other services as the Secretary determines 
                to be appropriate.
            (2) The applicant maintains agreements with all regional 
        and corporate alliance health plans offering services in the 
        applicant's service area.
            (3) The applicant is a participating provider in the 
        State's program for medical assistance under title XIX of the 
        Social Security Act.
            (4) The applicant does not impose charges on students or 
        their families for services (including collection of any cost-
        sharing for services under the comprehensive benefit package 
        that otherwise would be required).
            (5) The applicant has reviewed and will periodically review 
        the needs of the population served by the applicant in order to 
        ensure that its services are accessible to the maximum number 
        of school age children and youth in the area, and that, to the 
        maximum extent possible, barriers to access to services of the 
        applicant are removed (including barriers resulting from the 
        area's physical characteristics, its economic, social and 
        cultural grouping, the health care utilization patterns of 
        children and youth, and available transportation).
            (6) In the case of an applicant which serves a population 
        that includes a substantial proportion of individuals of 
        limited English speaking ability, the applicant has developed a 
        plan to meet the needs of such population to the extent 
        practicable in the language and cultural context most 
        appropriate to such individuals.
            (7) The applicant will provide non-Federal contributions 
        toward the cost of the project in an amount determined by the 
        Secretary.
            (8) The applicant will operate a quality assurance program 
        consistent with section 3684(e)(6).
    (e) Duration of Grant.--A grant under this section shall be for a 
period determined by the Secretary.
    (f) Reports.--A recipient of funding under this section shall 
provide such reports and information as are required in regulations of 
the Secretary.

SEC. 3686. FEDERAL ADMINISTRATIVE COSTS.

    Of the amounts made available under section 3681, the Secretary may 
reserve not more than 5 percent for administrative expenses regarding 
this subpart.

            Subpart B--Capital Costs of Developing Projects

SEC. 3691. LOANS AND LOAN GUARANTEES REGARDING PROJECTS.

    (a) In General.--The Secretary may make loans to, and guarantee the 
payment of principal and interest to Federal and non-Federal lenders on 
behalf of, State health agencies and local community partnerships for 
the capital costs of developing projects in accordance with subpart A.
    (b) Applicability of Certain Provisions.--The provisions of subpart 
A apply to loans and loan guarantees under subsection (a) to the same 
extent and in the same manner as such provisions apply to grants under 
subpart A. Except for any provision inconsistent with the purpose 
described in subsection (a), the provisions of subpart C of part 2 of 
subtitle E apply to loans and loan guarantees under subsection (a) to 
the same extent and in the same manner as such provisions apply to 
loans and loan guarantees under section 3441.

SEC. 3692. FUNDING.

    Amounts available to the Secretary under section 3412 for the 
purpose of carrying out subparts B and C of part 2 of subtitle E are, 
in addition to such purpose, available to the Secretary for the purpose 
of carrying out this subpart.

                                                  Title III, Subtitle H

              Subtitle H--Public Health Service Initiative

SEC. 3701. PUBLIC HEALTH SERVICE INITIATIVE.

    (a) In General.--There is established pursuant to this title a 
Public Health Service Initiative consisting of the total amounts 
authorized and described in subsection (b). The Initiative includes the 
programs of subtitles C through G of this title and the programs of 
subtitle D of title VIII.
    (b) Total of the Amounts Authorized to be Appropriated.--The 
following is the total of the amounts authorized to be appropriated for 
the Initiative under the previous subtitles of this title:
            (1) For fiscal year 1995, $1,125,000,000.
            (2) For fiscal year 1996, $2,984,000,000.
            (3) For fiscal year 1997, $3,830,000,000.
            (4) For fiscal year 1998, $4,205,000,000.
            (5) For fiscal year 1999, $4,055,000,000.
            (6) For fiscal year 2000, $3,666,000,000.
    (c) Use of Amounts; Availability.--
            (1) Use; annual appropriations.--Amounts appropriated to 
        carry out the Initiative, including subtitles A through F of 
        this title, are available to carry out the specific programs 
        for which the amounts are appropriated.
            (2) Availability of appropriated amounts.--Amounts 
        appropriated for programs in the Initiative are available until 
        expended.

                                                  Title III, Subtitle I

       Subtitle I--Coordination With COBRA Continuation Coverage

SEC. 3801. PUBLIC HEALTH SERVICE ACT; COORDINATION WITH COBRA 
              CONTINUATION COVERAGE.

    (a) Period of Coverage.--Subparagraph (D) of section 2202(2) of the 
Public Health Service Act (42 U.S.C. 300bb-2(2)) is amended--
            (1) by striking ``or'' at the end of clause (i), by 
        striking the period at the end of clause (ii) and inserting ``, 
        or'', and by adding at the end the following new clause:
                            ``(iii) eligible for comprehensive health 
                        coverage described in section 1101 of the 
                        Health Security Act.'', and
            (2) by striking ``or medicare entitlement'' in the heading 
        and inserting ``, medicare entitlement, or health security act 
        eligibility''.
    (b) Qualified Beneficiary.--Section 2208(3) of such Act (42 U.S.C. 
300bb-8(3)) is amended by adding at the end the following new 
subparagraph:
                    ``(C) Special rule for individuals covered by 
                health security act.--The term `qualified beneficiary' 
                shall not include any individual who, upon termination 
                of coverage under a group health plan, is eligible for 
                comprehensive health coverage described in section 1101 
                of the Health Security Act.''.
    (c) Repeal Upon Implementation of Health Security Act.--
            (1) In general.--Title XXII of such Act (42 U.S.C. 300bb-1 
        et seq.) is hereby repealed.
            (2) Conforming amendment.--The table of contents of such 
        Act is amended by striking the item relating to title XXII.
            (3) Effective date.--The amendments made by this subsection 
        shall take effect on the earlier of--
                    (A) January 1, 1998, or
                    (B) the first day of the first calendar year 
                following the calendar year in which all States have in 
                effect plans under which individuals are eligible for 
                comprehensive health coverage described in section 1101 
                of this Act.

                                                               Title IV

                    TITLE IV--MEDICARE AND MEDICAID

                       table of contents of title

                                                                   Page
Sec. 4000. References in title..............................        673
              Subtitle A--Medicare and the Alliance System

Part 1--Enrollment of Medicare Beneficiaries in Regional Alliance Plans

Sec. 4001. Optional State integration of medicare                   674
                            beneficiaries into regional 
                            alliance plans.
Sec. 4002. Individual election to remain in certain health          681
                            plans.
Sec. 4003. Payments to regional alliances on behalf of              684
                            certain medicare-eligible 
                            individuals.
Sec. 4004. Prohibiting employers from taking into account           685
                            status as medicare beneficiary 
                            on any grounds.
 Part 2--Encouraging Managed Care Under Medicare Program; Coordination 
                           With Medigap Plans

Sec. 4011. Enrollment and termination of enrollment.........        689
Sec. 4012. Uniform informational materials..................        692
Sec. 4013. Outlier payments.................................        693
Sec. 4014. Point of service option..........................        695
                  Part 3--Medicare Coverage Expansions

Sec. 4021. Reference to coverage of outpatient prescription         702
                            drugs.
Sec. 4022. Expanded coverage for physician assistants, nurse        702
                            practitioners, and clinical 
                            nurse specialists.
  Part 4--Coordination With Administrative Simplification and Quality 
                         Management Initiatives

Sec. 4031. Repeal of separate medicare peer review program..        703
Sec. 4032. Mandatory assignment for all part B services.....        704
Sec. 4033. Elimination of complexities caused by dual               705
                            funding sources and rules for 
                            payment of claims.
Sec. 4034. Repeal of pro precertification requirement for           706
                            certain surgical procedures.
Sec. 4035. Requirements for changes in billing procedures...        708
         Part 5--Amendments to Anti-fraud and Abuse Provisions

Sec. 4041. Anti-kickback provisions.........................        710
Sec. 4042. Revisions to limitations on physician self-              718
                            referral.
Sec. 4043. Civil monetary penalties.........................        730
Sec. 4044. Exclusions from program participation............        738
Sec. 4045. Sanctions against practitioners and persons for          745
                            failure to comply with statutory 
                            obligations relating to quality 
                            of care.
Sec. 4046. Effective date...................................        746
   Part 6--Funding of Graduate Medical Education and Academic Health 
                                Centers

Sec. 4051. Transfers from medicare trust funds for graduate         746
                            medical education.
Sec. 4052. Transfers from Hospital Insurance Trust Fund for         748
                            academic health centers.
   Part 7--Coverage of Services Provided by Facilities and Plans of 
              Departments of Defense and Veterans Affairs

Sec. 4061. Treatment of uniformed services health plan as           749
                            eligible organization under 
                            medicare.
Sec. 4062. Coverage of services provided to medicare                750
                            beneficiaries by plans and 
                            facilities of Department of 
                            Veterans Affairs.
Sec. 4063. Conforming amendments............................        752
                Subtitle B--Savings in Medicare Program

                   Part 1--Savings Relating to Part A

Sec. 4101. Reduction in update for inpatient hospital               752
                            services.
Sec. 4102. Reduction in adjustment for indirect medical             753
                            education.
Sec. 4103. Reduction in payments for capital-related costs          754
                            for inpatient hospital services.
Sec. 4104. Revisions to payment adjustments for                     757
                            disproportionate share hospitals 
                            in participating States.
Sec. 4105. Moratorium on designation of additional long-term        761
                            care hospitals.
Sec. 4106. Extension of freeze on updates to routine service        761
                            costs of skilled nursing 
                            facilities.
                   Part 2--Savings Relating to Part B

Sec. 4111. Establishment of cumulative expenditure goals for        762
                            physician services.
Sec. 4112. Use of real GDP to adjust for volume and                 767
                            intensity; repeal of restriction 
                            on maximum reduction permitted 
                            in default update.
Sec. 4113. Reduction in conversion factor for physician fee         768
                            schedule for 1995.
Sec. 4114. Limitations on payment for physicians' services          769
                            furnished by high-cost hospital 
                            medical staffs.
Sec. 4115. Medicare incentives for physicians to provide            780
                            primary care.
Sec. 4116. Elimination of formula-driven overpayments for           785
                            certain outpatient hospital 
                            services.
Sec. 4117. Imposition of coinsurance on laboratory services.        786
Sec. 4118. Application of competitive acquisition process           787
                            for part B items and services.
Sec. 4119. Application of competitive acquisition procedures        791
                            for laboratory services.
               Part 3--Savings Relating to Parts A and B

Sec. 4131. Medicare secondary payer changes.................        792
Sec. 4132. Payment limits for HMOs and CMPs with risk-              793
                            sharing contracts.
Sec. 4133. Reduction in routine cost limits for home health         800
                            services.
Sec. 4134. Imposition of copayment for certain home health          801
                            visits.
Sec. 4135. Expansion of centers of excellence...............        804
                         Part 4--Part B Premium

Sec. 4141. General part B premium...........................
 Part 5--Report on Medicare Savings for Fiscal Years 2000 Through 2003

Sec. 4151. Report on savings................................        806
                          Subtitle C--Medicaid

                 Part 1--Comprehensive Benefit Package

Sec. 4201. Limiting coverage under medicaid of items and            807
                            services covered under 
                            comprehensive benefit package.
Part 2--Expanding Eligibility for Nursing Facility Services; Long-term 
                        Care Integration Option

Sec. 4211. Spenddown eligibility for nursing facility               809
                            residents.
Sec. 4212. Increased income and resource disregards for             811
                            nursing facility residents.
Sec. 4213. Informing nursing home residents about                   813
                            availability of assistance for 
                            home and community-based 
                            services.
                         Part 3--Other Benefits

Sec. 4221. Treatment of items and services not covered under        814
                            the comprehensive benefit 
                            package.
Sec. 4222. Establishment of program for poverty-level               818
                            children with special needs.
          Part 4--Discontinuation of Certain Payment Policies

Sec. 4231. Discontinuation of medicaid DSH payments.........        825
Sec. 4232. Discontinuation of reimbursement standards for           827
                            inpatient hospital services.
  Part 5--Coordination With Administrative Simplification and Quality 
                         Management Initiatives

Sec. 4241. Requirements for changes in billing procedures...        828
                      Part 6--Medicaid Commission

Sec. 4251. Medicaid Commission..............................        829
          Subtitle D--Increase in SSI Personal Needs Allowance

Sec. 4301. Increase in SSI personal needs allowance.........        832

                                                               Title IV

                    TITLE IV--MEDICARE AND MEDICAID

SEC. 4000. REFERENCES IN TITLE.

    (a) Amendments to Social Security Act.--Except as otherwise 
specifically provided, whenever in this title an amendment is expressed 
in terms of an amendment to or repeal of a section or other provision, 
the reference shall be considered to be made to that section or other 
provision of the Social Security Act.
    (b) References to OBRA.--In this title, the terms ``OBRA-1986'', 
``OBRA-1987'', ``OBRA-1989'', ``OBRA-1990'', and ``OBRA-1993'' refer to 
the Omnibus Budget Reconciliation Act of 1986 (Public Law 99-509), the 
Omnibus Budget Reconciliation Act of 1987 (Public Law 100-203), the 
Omnibus Budget Reconciliation Act of 1989 (Public Law 101-239), the 
Omnibus Budget Reconciliation Act of 1990 (Public Law 101-508), and the 
Omnibus Budget Reconciliation Act of 1993 (Public Law 103-66), 
respectively.

              Subtitle A--Medicare and the Alliance System

PART 1--ENROLLMENT OF MEDICARE BENEFICIARIES IN REGIONAL ALLIANCE PLANS

SEC. 4001. OPTIONAL STATE INTEGRATION OF MEDICARE BENEFICIARIES INTO 
              REGIONAL ALLIANCE PLANS.

                                                   Title IV, Subtitle A

    Title XVIII is amended by adding at the end the following:

     ``integration of medicare into state health security programs

    ``Sec. 1893. (a) Payment to States.--The Secretary shall pay a 
participating State that has submitted an application, as specified by 
subsection (b) which the Secretary has approved under subsection (c), 
the amount specified by subsection (d) for the period specified by 
subsection (e) for covered medicare beneficiaries. This section shall 
apply without regard to whether or not a State is a single-payer State.
    ``(b) Application by State.--An application submitted by a 
participating State shall contain the following assurances:
            ``(1) Coverage of all medicare-eligible individuals.--The 
        State's application shall assure that the provisions of the 
        succeeding paragraphs of this subsection shall apply to all 
        medicare-eligible individuals who are residents of the 
        State.''.
            ``(2) Enrollment in and selection of health plans.--
                    ``(A) Enrollment.--Each medicare-eligible 
                individual (within a class of medicare beneficiaries 
                covered under the application) who is a resident of the 
                State will be enrolled in a regional alliance health 
                plan serving the area in which the individual resides 
                (or, in the case of an individual who is a resident of 
                a single-payer State, in the Statewide single-payer 
                system operated under part 2 of subtitle C of title I 
                of the Health Security Act).
                    ``(B) Selection.--Each such individual will have 
                the same choice among applicable health plans as other 
                individuals in the State who are eligible individuals 
                under the Health Security Act.
                    ``(C) Offer of fee-for-service plan.--Each such 
                individual shall be offered enrollment in at least one 
                health plan that is a fee-for-service plan (or, in the 
                case of an individual who is a resident of a single-
                payer State, the Statewide single-payer system under 
                part 2 of subtitle C of title I of the Health Security 
                Act) that meets the following requirements:
                            ``(i) The plan's premium rate, and the 
                        actuarial value of the plan's deductibles, 
                        coinsurance, and copayments, charged to the 
                        individual do not exceed the actuarial value of 
                        the coinsurance and deductibles that would be 
                        applicable on the average if this section did 
                        not apply to those individuals.
                            ``(ii) The plan's payment rates for covered 
                        items and services are accepted as payment in 
                        full for such items and services.
            ``(3) Coverage of full medicare benefits.--For each health 
        plan providing coverage under this section--
                    ``(A) the plan shall cover at least the items and 
                services for which payment would otherwise be made 
                under this title (including payments under section 
                1862(b)(4)), and
                    ``(B) coverage determinations under the plan are 
                made under rules that are no more restrictive than 
                otherwise applicable under this title.
            ``(4) Premium.--During the period for which payments are 
        made to a State under this section, the requirements of the 
        Health Security Act relating to premiums that are otherwise 
        applicable with respect to individuals enrolled in health plans 
        in a State shall not apply with respect to medicare-eligible 
        individuals in the State who are covered under the State's 
        application under this section. Nothing in the previous 
        sentence shall operate to permit a State or health plans in a 
        State to charge different premiums among medicare-eligible 
        individuals within the same premium class under the Health 
        Security Act.
            ``(5) Quality assurance.--For each health plan providing 
        coverage under this section there are quality assurance 
        mechanisms for covered medicare individuals that equal, or 
        exceed, such mechanisms otherwise applicable under this title.
            ``(6) Review rights.--Covered medicare individuals have 
        review, reconsideration, and appeal rights (including appeals 
        to courts of the State) that equal or exceed such rights 
        otherwise applicable under this title.
            ``(7) Data reporting and access to documents.--The State 
        will--
                    ``(A) provide such utilization and statistical data 
                as the Secretary determines are needed for purposes of 
                the programs established under this title, and
                    ``(B) the State will ensure access by the Secretary 
                or the Comptroller General to relevant documents.
            ``(8) Use of payments.--Payments made to the State under 
        subsection (a) will be used only to carry out the purposes of 
        this section.
    ``(c) Approval by Secretary.--The Secretary shall approve an 
application under subsection (b) if the Secretary finds--
            ``(1) that the individuals covered under the State's 
        application shall receive at least the benefits provided under 
        this title (including cost sharing);
            ``(2) that the amount of expenditures that will be made 
        under this title will not exceed the amount of expenditures 
        that will be made if the State's application is not accepted; 
        and
            ``(3) that the State is able and willing to carry out the 
        assurances provided in its application.
    ``(d) Amount and Source of Payment.--
            ``(1) Amount of payment.--For purposes of subsection (a), 
        the amount of payments to a State--
                    ``(A) for the first year for which payments are 
                made to the State under this section shall be 
                determined by the applicable rate specified in section 
                1876(a)(1)(C) (but at 100 percent, rather than 95 
                percent, of the applicable amount) for each medicare-
                eligible individual who is a resident of the State (but 
                without regard to any reduction based on payments to be 
                made under section 1876(a)(1)(G)), and
                    ``(B) for each succeeding year, shall be determined 
                by the applicable rate determined under subparagraph 
                (A) or this subparagraph for the preceding year for 
                each such individual, adjusted by the regional alliance 
                inflation factor applicable to regional alliances in 
                the State (as determined in accordance with section 
                6001(a) of the Health Security Act) for the year.
            ``(2) Source of payment.--Payment shall be made from the 
        Federal Hospital Insurance Trust Fund and the Federal 
        Supplementary Medical Insurance Trust Fund as provided under 
        paragraph (5) of section 1876(a) (other than as provided under 
        subparagraph (B) of that paragraph).
    ``(e) Period for Which Payment Made.--The period for which payment 
may be made under subsection (a) to a State--
            ``(1) begins with January 1 of the first calendar year for 
        which the Secretary approves under subsection (c) the 
        application of the State; and
            ``(2) ends--
                    ``(A) on December 31 of the year in which the State 
                notifies the Secretary (before April of that year) that 
                the State no longer intends to receive payments under 
                this section, or
                    ``(B) if the Secretary finds that the State is no 
                longer in substantial compliance with the requirements 
                under paragraphs (2) or (3) of subsection (c), at the 
                time specified by the Secretary.
No termination is effective under paragraph (2) unless notice has been 
provided to medicare covered individuals, health providers, and health 
plans affected by the termination.
    ``(f) Payments Under this Section as Sole Medicare Benefits.--
Payments to a State under subsection (a) shall be instead of the 
amounts that would otherwise be payable, pursuant to sections 1814(b) 
and 1833(a), for services furnished to medicare-eligible residents of 
the State covered under the application.
    ``(g) Evaluation.--The Secretary shall evaluate on an ongoing basis 
the compliance of a State with the requirements of this section.
    ``(h) Definitions.--In this section the terms `applicable health 
plan', `fee-for-service plan', `health plan', `medicare-eligible 
individual', `participating State', `single-payer State', and 
`Statewide single-payer system' have the meanings of those terms in the 
Health Security Act.''.

SEC. 4002. INDIVIDUAL ELECTION TO REMAIN IN CERTAIN HEALTH PLANS.

    (a) In General.--Section 1876 (42 U.S.C. 1395mm) is amended by 
adding at the end the following new subsection:
    ``(k)(1) Notwithstanding any other provision of this section, each 
eligible organization with a risk-sharing contract (or which is 
eligible to enter into such a contract, as determined by the Secretary) 
that is the sponsor of a health plan under subtitle E of title I of the 
Health Security Act shall provide each individual who meets the 
requirements of paragraph (2) with the opportunity to elect (by 
submitting an application at such time and in such manner as specified 
by the Secretary) to continue enrollment in such plan (for the same 
benefits as alliance-eligible individuals) and to have payments made by 
the Secretary to the plan on the individual's behalf in accordance with 
paragraph (3). The premium imposed with respect to such an individual 
by the plan shall be in an amount (determined in accordance with rules 
of the Secretary and notwithstanding other provisions of such Act) 
which reflects the difference between the premium otherwise established 
(adjusted by a factor to reflect the actuarial difference between 
medicare beneficiaries and other plan enrollees) and the amount payable 
under paragraph (3).
    ``(2) An individual meets the requirements of this paragraph if the 
individual is--
            ``(A) enrolled in the health plan of an eligible 
        organization in a month in which the individual is either not 
        entitled to benefits under part A, or is an eligible employee 
        (as defined in the Health Security Act) or the spouse or 
        dependent of an eligible employee,
            ``(B) entitled to benefits under part A and enrolled under 
        part B in the succeeding month,
            ``(C) an eligible individual under the Health Security Act 
        in that succeeding month, and
            ``(D) not an eligible employee (as defined in the Health 
        Security Act) or the spouse or dependent of an eligible 
        employee in that succeeding month.
    ``(3) The Secretary shall make a payment to an eligible 
organization on behalf of each individual enrolled with the 
organization for whom an election is in effect under this subsection in 
an amount determined by the rate specified by subsection (a)(1)(C) 
(notwithstanding the second sentence of paragraph (1)). Such payment 
shall be made from the Federal Hospital Insurance Trust Fund and the 
Federal Supplementary Medical Insurance Trust Fund as provided under 
subsection (a)(5) (other than as provided under subparagraph (B) of 
that paragraph).
    ``(4) The period for which payment may be made under paragraph 
(3)--
            ``(A) begins with the first month for which the individual 
        meets the requirements of paragraph (2) (or a later month, in 
        the case of a late application, as may be specified by the 
        Secretary); and
            ``(B) ends with the earliest of--
                    ``(i) the month following the month--
                            ``(I) in which the individual notifies the 
                        Secretary that the individual no longer wishes 
                        to be enrolled in the health plan of the 
                        eligible organization and to have payment made 
                        on the individual's behalf under this 
                        subsection; and
                            ``(II) which is a month specified by the 
                        Secretary as a uniform open enrollment period 
                        under subsection (c)(3)(A)(i), or
                    ``(ii) the month in which the individual ceases to 
                meet the requirements of paragraph (2).
    ``(5) Notwithstanding any other provision of this title, payments 
to an eligible organization under this subsection on behalf of an 
individual shall be the sole payments made with respect to items and 
services furnished to the individual during the period for which the 
individual's election under this subsection is in effect.''.
    (b) Conforming Amendment.--Section 1838(b) (42 U.S.C. 1395q(b)) is 
amended by inserting after ``section 1843(e)'' the following: ``, 
1876(c)(3)(B), 1876(k)(4)(B), or 1890(j)(1)(B)(iv)''.

SEC. 4003. PAYMENTS TO REGIONAL ALLIANCES ON BEHALF OF CERTAIN 
              MEDICARE-ELIGIBLE INDIVIDUALS.

    Title XVIII, as amended by section 4001, is further amended by 
adding at the end the following new section:

``payments to regional alliances on behalf of certain medicare-eligible 
                 individuals under health security act

    ``Sec. 1894. The Secretary shall provide for a transfer from the 
Federal Hospital Insurance Trust Fund and the Federal Supplementary 
Medical Insurance Trust Fund, in appropriate proportions, to each 
regional alliance in each year of the amount of the reductions in 
liability owed to the alliance in the year resulting from the 
application of section 6115 of the Health Security Act. In the case of 
an individual to whom such section applies, unless all the members of 
the family would be medicare-eligible individuals (but for section 
1012(a) of such Act), the reductions in liability under section 6115 of 
such Act shall be based upon the alliance credit amount for an 
individual class of enrollment (as defined in section 1011(c)(1)(A) of 
such Act).''.

SEC. 4004. PROHIBITING EMPLOYERS FROM TAKING INTO ACCOUNT STATUS AS 
              MEDICARE BENEFICIARY ON ANY GROUNDS.

    (a) Extension of Protections for Working Aged to Group Health Plans 
of All Employers.--Section 1862(b)(1)(A) (42 U.S.C. 1395y(b)(1)(A)) is 
amended by striking clauses (ii) and (iii).
    (b) Extension of Protections for Disabled Individuals to All Group 
Health Plans.--
            (1) In general.--Section 1862(b)(1)(B) (42 U.S.C. 
        1395y(b)(1)(B)), as amended by section 13561(e) of OBRA-1993, 
        is amended--
                    (A) in clause (i), by striking ``large group health 
                plans (as defined in clause (iv))'' and inserting 
                ``group health plan (as defined in subparagraph (A)(v), 
                taking into account the exceptions described in clauses 
                (ii) and (iii) of subparagraph (A))''; and
                    (B) by striking clause (iv).
            (2) Conforming amendment.--Section 1862(b)(1)(A)(v) (42 
        U.S.C. 1395y(b)(1)(A)(v)) is amended by striking ``this 
        subparagraph, and subparagraph (C)'' and inserting ``this 
        paragraph''.
    (c) Repeal of Limitation on Period of Protection for Individuals 
With End Stage Renal Disease.--
            (1) In general.--Section 1862(b)(1)(C) (42 U.S.C. 
        1395y(b)(1)(C)), as amended by section 13561(c) of OBRA-1993, 
        is amended--
                    (A) in clause (i), by striking ``an individual is 
                entitled'' and all that follows through ``such 
                benefits'' and inserting ``an individual (or a member 
                of the individual's family) who is covered under the 
                plan by virtue of the individual's current employment 
                status with an employer is entitled to benefits under 
                this title under section 226A'';
                    (B) in clause (ii), by striking the semicolon at 
                the end and inserting a period; and
                    (C) by striking the matter following clause (ii).
            (2) Conforming amendment.--Section 1862(b)(1) is amended--
                    (A) in subparagraph (A), by striking clause (iv); 
                and
                    (B) in subparagraph (B), by striking clause (ii).
    (d) No Primary Payment for Services Under a Health Plan.--Section 
1862(b)(2)(A) (42 U.S.C. 1395y(b)(2)(A)(i)) is amended--
            (1) by striking ``or'' at the end of clause (i);
            (2) by striking the period at the end of clause (ii) and 
        inserting ``, or'';
            (3) by inserting after clause (ii) the following new 
        clause:
                            ``(iii) payment has been made, or can 
                        reasonably be expected to be made, with respect 
                        to the item or service under any health plan 
                        under the Health Security Act.''; and
            (4) in the second sentence--
                    (A) by striking ``and'' after ``applies'', and
                    (B) by inserting before the period at the end the 
                following: ``, and a health plan under the Health 
                Security Act to the extent that clause (iii) applies''.
    (e) Simplification of Coordination of Benefits.--Section 1862(b)(4) 
(42 U.S.C. 1395y(b)(4)) is amended by adding after and below 
subparagraph (B) the following:
        ``Notwithstanding the previous sentence, where payment is made 
        for an item or service by a primary plan that is a health plan 
        (within the meaning of section 1400 of the Health Security Act) 
        and for which payment would be made under this title but for 
        this subsection, payment may be made under this title (without 
        regard to deductibles and coinsurance) in the amount of the 
        cost sharing imposed under such primary plan (consistent with 
        such Act).''.
    (f) Effective Date.--The amendments made by this section shall 
apply with respect to medicare-eligible individuals residing in a 
participating State as of January 1 of the first year for which the 
State is a participating State.

 PART 2--ENCOURAGING MANAGED CARE UNDER MEDICARE PROGRAM; COORDINATION 
                           WITH MEDIGAP PLANS

SEC. 4011. ENROLLMENT AND TERMINATION OF ENROLLMENT.

    (a) Uniform Open Enrollment Periods.--
            (1) For capitated plans.--The first sentence of section 
        1876(c)(3)(A)(i) (42 U.S.C. 1395mm(c)(3)(A)(i)) is amended by 
        inserting ``(which may be specified by the Secretary)'' after 
        ``open enrollment period''.
            (2) For medigap plans.--Section 1882(s) (42 U.S.C. 
        1395ss(s)) is amended--
                    (A) in paragraph (3), by striking ``paragraphs (1) 
                and (2)'' and inserting ``paragraph (1), (2), or (3)'',
                    (B) by redesignating paragraph (3) as paragraph 
                (4), and
                    (C) by inserting after paragraph (2) the following 
                new paragraph:
    ``(3) Each issuer of a medicare supplemental policy shall have an 
open enrollment period (which shall be the period specified by the 
Secretary under section 1876(c)(3)(A)(i)), of at least 30 days duration 
every year, during which the issuer may not deny or condition the 
issuance or effectiveness of a medicare supplemental policy, or 
discriminate in the pricing of the policy, because of age, health 
status, claims experience, receipt of health care, or medical 
condition. The policy may not provide any time period applicable to 
pre-existing conditions, waiting periods, elimination periods, and 
probationary periods (except as provided by paragraph (2)(B)). The 
Secretary may require enrollment through a third party designated under 
section 1876(c)(3)(B).''.
    (b) Enrollments for New Medicare Beneficiaries and Those Who 
Move.--Section 1876(c)(3)(A) (42 U.S.C. 1395mm(c)(3)(A)) is amended--
            (1) in clause (i), by striking ``clause (ii)'' and 
        inserting ``clauses (ii) through (iv)'', and
            (2) by adding at the end the following:
    ``(iii) Each eligible organization shall have an open enrollment 
period for each individual eligible to enroll under subsection (d) 
during any enrollment period specified by section 1837 that applies to 
that individual. Enrollment under this clause shall be effective as 
specified by section 1838.
    ``(iv) Each eligible organization shall have an open enrollment 
period for each individual eligible to enroll under subsection (d) who 
has previously resided outside the geographic area which the 
organization serves. The enrollment period shall begin with the 
beginning of the month that precedes the month in which the individual 
becomes a resident of that geographic area and shall end at the end of 
the following month. Enrollment under this clause shall be effective as 
of the first of the month following the month in which the individual 
enrolls.''.
    (c) Enrollment Through Third Party; Uniform Termination of 
Enrollment.--The first sentence of section 1876(c)(3)(B) (42 U.S.C. 
1395mm(c)(3)(B)) is amended--
            (1) by inserting ``(including enrollment through a third 
        party)'' after ``regulations'', and
            (2) by striking everything after ``with the eligible 
        organization'' and inserting ``during an annual period as 
        prescribed by the Secretary, and as specified by the Secretary 
        in the case of financial insolvency of the organization, if the 
        individual moves from the geographic area served by the 
        organization, or in other special circumstances that the 
        Secretary may prescribe.''.
    (d) Effective Date.--The amendments made by the previous 
subsections apply to enrollments and terminations of enrollments 
occurring after 1995 (but only after the Secretary of Health and Human 
Services has prescribed the relevant annual period), except that the 
amendments made by subsection (a)(2) apply to enrollments for a 
medicare supplemental policy made after 1995.

SEC. 4012. UNIFORM INFORMATIONAL MATERIALS.

    (a) For Capitated Plans.--Section 1876(c)(3)(C) (42 U.S.C. 
1395mm(c)(3)(C)) is amended by adding at the end the following: ``In 
addition, the Secretary shall develop and distribute comparative 
materials about all eligible organizations. Each eligible organization 
shall reimburse the Secretary for its pro rata share (as determined by 
the Secretary) of the costs incurred by the Secretary in carrying out 
the requirements of the preceding sentence and other enrollment 
activities.''.
    (b) For Medigap Plans.--Paragraph (1) of section 1882(f) (42 U.S.C. 
1395ss(f)) is amended to read as follows:
    ``(f)(1) The Secretary shall develop and distribute comparative 
materials about all medicare supplemental policies issued in a State. 
Each issuer of such a policy shall reimburse the Secretary for its pro 
rata share (as determined by the Secretary for purposes of section 
1876(c)(3)(C)) of the costs incurred by the Secretary in carrying out 
the requirements of the preceding sentence and other enrollment 
activities, or the issuer shall no longer be considered as meeting the 
requirements of this section.''.
    (c) Effective Date.--The amendments made by this section shall 
apply with respect to materials for enrollment in years after 1995.

SEC. 4013. OUTLIER PAYMENTS.

    (a) General Rule.--Section 1876(a)(1) (42 U.S.C. 1395mm(a)(1)) is 
amended by adding at the end the following:
    ``(G)(i) In the case of an eligible organization with a risk-
sharing contract, the Secretary may make additional payments to the 
organization equal to not more than 50 percent of the imputed 
reasonable cost (or, if so requested by the organization, the 
reasonable cost) above the threshold amount of services covered under 
parts A and B and provided (or paid for) in a year by the organization 
to any individual enrolled with the organization under this section.
    ``(ii) For purposes of clause (i), the `imputed reasonable cost' is 
an amount determined by the Secretary on a national, regional, or other 
basis that is related to the reasonable cost of services.
    ``(iii) For purposes of clause (i), the `threshold amount' is an 
amount determined by the Secretary from time to time, adjusted by the 
geographic factor utilized in determining payments to the organization 
under subparagraph (C) and rounded to the nearest multiple of $100, 
such that the total amount to be paid under this subparagraph for a 
year is estimated to be 5 percent or less of the total amount to be 
paid under risk-sharing contracts for services furnished for that year.
    ``(iv) An eligible organization shall submit a claim for additional 
payments under subsection (i) within such time as the Secretary may 
specify.
    ``(v) To the extent that total payments under clause (i) in a 
year--
            ``(I) exceed the payment set aside as a result of the 
        reduction under subparagraph (C) for the year, the Secretary 
        shall increase the percentage reduction under such subparagraph 
        for the following year by such percentage as will result in an 
        increase in the reduction equal to such excess in previous 
        payments, or
            ``(II) are less than the payment set aside as a result of 
        the reduction under subparagraph (C) for the year, the amount 
        of such difference shall remain available in the succeeding 
        years for additional payments under this subparagraph and the 
        Secretary may take such difference into account in establishing 
        the percentage reduction under subparagraph (C) for the 
        following year.''.
    (b) Conforming Amendment.--Section 1876(a)(1)(C)(i) (42 U.S.C. 
1395mm(a)(1)(C)(i)), as amended by section 4132(a), is further amended 
by inserting ``, and reduced by a uniform percentage (determined by the 
Secretary for a year, subject to adjustment under subparagraph (G)(v)) 
so that the total reduction is estimated to equal the amount to be paid 
under subparagraph (G)'' before the period.
    (c) Effective Date.--The amendments made by the preceding 
subsections apply to services furnished after 1994.

SEC. 4014. POINT OF SERVICE OPTION.

    (a) Point of Service Contracts.--Part C of title XVIII is amended 
by inserting after section 1889 the following:

                       ``point of service option

    ``Sec. 1890. (a) Establishment of Program.--Not later than July 1, 
1995, the Secretary shall promulgate regulations establishing a point-
of-service program under which individuals entitled to benefits under 
this title (other than individuals enrolled with an eligible 
organization with a risk-sharing contract under section 1876(g)) may 
obtain such benefits through providers and suppliers who are members of 
a point-of-service network established by the Secretary in accordance 
with the criteria described in subsection (b).
    ``(b) Criteria for Networks.--In establishing criteria for point-
of-service networks under the program under this section, the Secretary 
shall--
            ``(1) designate an appropriate geographic service area for 
        each such network to ensure that each network has a sufficient 
        number of participating members to provide items and services 
        under this title to beneficiaries, except that no such service 
        area may be served by more than one such network;
            ``(2) establish requirements for participating members;
            ``(3) establish a schedule of payments for services 
        furnished by networks, including a schedule of bundled payment 
        arrangements for selected medical and surgical procedures;
            ``(4) delineate permissible incentives to encourage 
        physicians and other suppliers to join the network, and to 
        encourage individuals to receive services under this title 
        through the network;
            ``(5) specify the rules under which carriers under section 
        1842 may administer the program;
            ``(6) establish procedures to used for the provision of 
        case management services and criteria for determining whether 
        (and under which circumstances) services which would otherwise 
        not be covered under this title would be covered by the network 
        under such case management;
            ``(7) establish standards for the processing and payment of 
        claims for payment for services furnished by the network, 
        including standards for the apportionment of payments among the 
        Trust Funds established under this title;
            ``(8) establish standards for the selection of physicians 
        for the network based on practice patterns and a demonstration 
        of effective quality assurance;
            ``(9) develop standards to ensure that the point-of-service 
        option does not result in a net financial loss to the medicare 
        program under this title after the implementation of the option 
        in an area, taking into account administrative costs, the costs 
        of services (which would otherwise not be covered under this 
        title) provided to beneficiaries under case management, and the 
        costs of incentives for physicians, other providers, and 
        beneficiaries; and
            ``(10) apply such other criteria as the Secretary considers 
        appropriate.
    ``(c) Bonus Payments Permitted.--
            ``(1) In general.--Notwithstanding any other provision of 
        this title, the Secretary may increase the amount of payment 
        otherwise provided under this title for items and services 
        furnished by individuals who are members of a point-of-service 
        network under this section by a bonus payment (in such amount 
        as the Secretary may determine).
            ``(2) Criteria for receiving payment.--The Secretary may 
        make a bonus payment under this subsection to members of a 
        point-of-service network if the Secretary determines that the 
        members of the network have reduced the costs to the medicare 
        program of the items and services furnished by the network 
        without adversely affecting the quality of care provided to 
        beneficiaries.''.
    (b) Conforming Amendments.--
            (1) Section 1812(a) (42 U.S.C. 1395d(a)) is amended--
                    (A) by striking ``and'' at the end of paragraph 
                (3),
                    (B) by substituting ``; and'' for the period at the 
                end of paragraph (4), and
                    (C) by adding at the end the following:
            ``(5) such additional items and services furnished by a 
        provider of services to an individual subject to case 
        management as may be specified under a point-of-service network 
        arrangement under section 1890.''.
            (2)(A) Section 1814(b) (42 U.S.C. 1395f(b)) is amended--
                    (i) in paragraph (1), by inserting ``or (4)'' after 
                ``paragraph (3)'',
                    (ii) by striking ``or'' at the end of paragraph 
                (2),
                    (iii) by substituting ``; and'' for the period at 
                the end of paragraph (3), and
                    (iv) by inserting after paragraph (3) the 
                following:
            ``(4) in the case of items and services furnished through a 
        point of service network (as described in section 1890), the 
        payment basis specified under the arrangement established for 
        such network, plus any bonus payments as determined under 
        subsection (c) of that section.''.
            (B) The matter in section 1886(d)(1)(A) (42 U.S.C. 
        1395ww(d)(1)(A)) preceding clause (i) is amended by inserting 
        ``(other than paragraph (4))'' after ``1814(b)''.
            (3) Section 1832(a)(2) (42 U.S.C. 1395k(a)(2)) is amended--
                    (A) by striking ``and'' at the end of subparagraph 
                (I),
                    (B) by substituting ``; and'' for the period at the 
                end of subparagraph (J), and
                    (C) by adding at the end the following:
                    ``(K) such additional items and services (other 
                than inpatient services furnished by providers of 
                services) as may be specified under a point-of-service 
                network arrangement under section 1890.''.
            (4) Section 1833 (42 U.S.C. 1395l), as amended by section 
        4032, is amended by adding at the end the following new 
        subsection:
    ``(u) In the case of items and services furnished through a point 
of service network (as described in section 1890), there shall be paid 
(subject to subsection (b)) amounts equal to 80 percent of the payment 
basis specified in an agreement entered into pursuant to that section, 
plus any bonus payments as determined under subsection (c) of that 
section.''.
            (5) Section 1862(a) (42 U.S.C. 1395y(a)), as amended by 
        sections 4034(b)(4), 4118(b), and 2003(b), is further amended--
                    (A) in paragraph (7), by striking ``or under 
                paragraph (1)(F)'' and inserting ``, under paragraph 
                (1)(F), or under a contract under section 1890'',
                    (B) by striking ``or'' at the end of paragraph 
                (16),
                    (C) by striking the period at the end of paragraph 
                (17) and inserting ``; or'', and
                    (D) by inserting after paragraph (17) the following 
                new paragraph:
            ``(18) which are furnished to an individual and related to 
        a health condition with respect to which the individual is 
        subject to case management through a point-of-service network 
        under section 1890 but which are not included in the plan of 
        care developed for such individual and agreed to by the 
        individual and the case manager.''.
    (c) Effective Date.--The amendments made by this subsection shall 
take effect January 1, 1996.

                  PART 3--MEDICARE COVERAGE EXPANSIONS

SEC. 4021. REFERENCE TO COVERAGE OF OUTPATIENT PRESCRIPTION DRUGS.

    For provisions adding a new outpatient prescription drug benefit to 
the medicare program, see subtitle A of title II.

SEC. 4022. EXPANDED COVERAGE FOR PHYSICIAN ASSISTANTS, NURSE 
              PRACTITIONERS, AND CLINICAL NURSE SPECIALISTS.

    (a) Physician Assistants.--Section 1861(s)(2)(K)(i) (42 U.S.C. 
1395x(s)(2)(K)(i)) is amended by striking ``(I) in a hospital'' and all 
that follows through ``shortage area''.
    (b) Nurse Practitioners and Clinical Nurse Specialists.--Section 
1861(s)(2)(K)(iii) (42 U.S.C. 1395x(s)(2)(K)(iii)) is amended--
            (1) by inserting ``(I)'' before ``in a rural area'', and
            (2) by inserting ``, (II) in any other area, in the case of 
        services furnished by nurse practitioners other than services 
        furnished to an inpatient of a hospital, or (III) in any other 
        area, in the case of services furnished by clinical nurse 
        specialists other than services furnished to an inpatient of a 
        hospital, skilled nursing facility or nursing facility (as 
        defined in section 1919(a)), and'' after ``section 
        1886(d)(2)(D))''.
    (c) Conforming Amendments.--(1) Section 1832(a)(2)(B)(iv) (42 
U.S.C. 1395k(a)(2)(B)(iv)) is amended by striking ``provided in a rural 
area (as defined in section 1886(d)(2)(D))'' and inserting ``described 
in section 1861(s)(2)(K)(iii)''.
    (2) Section 1833(a)(1)(O) (42 U.S.C. 1395l(a)(1)(O)) is amended by 
striking ``provided in a rural area''.
    (3) Section 1833(r)(1) (42 U.S.C. 1395l(r)(1)) is amended by 
striking ``provided in a rural area''.
    (d) Effective Date.--The amendments made by this section shall 
apply to services furnished on or after January 1, 1996.

  PART 4--COORDINATION WITH ADMINISTRATIVE SIMPLIFICATION AND QUALITY 
                         MANAGEMENT INITIATIVES

SEC. 4031. REPEAL OF SEPARATE MEDICARE PEER REVIEW PROGRAM.

    Part B of title XI of the Social Security Act (42 U.S.C. 1301 et 
seq.) is amended by adding at the end the following new section:

                             ``termination

    ``Sec. 1165. The provisions of this part shall terminate effective 
upon the adoption of the National Quality Management Program under 
subtitle A of title V of the Health Security Act. Any reference to this 
part or any section in this part shall not be effective after such 
date.''.

SEC. 4032. MANDATORY ASSIGNMENT FOR ALL PART B SERVICES.

    Section 1833 (42 U.S.C. 1395l) is amended--
            (1) by redesignating the subsection (r) added by section 
        4206(b)(2) of OBRA-1990 as subsection (s); and
            (2) by adding at the end the following new subsection:
    ``(t)(1) Notwithstanding any other provision of this part, payment 
under this part for any item or service furnished on or after January 
1, 1996, may only be made on an assignment-related basis.
    ``(2) Except for deductible, coinsurance, or copayment amounts 
applicable under this part, no physician, supplier, or other person may 
bill or collect any amount from an individual enrolled under this part 
or other person for an item or service for which payment may be made 
under this part. No such individual or person is liable for payment of 
any amounts billed in violation of the previous sentence.
    ``(3) If a physician, supplier, or other person knowingly and 
willfully bills or collects an amount in violation of paragraph (2), 
the Secretary may apply sanctions against such physician, supplier, or 
other person in accordance with section 1842(j)(2). Paragraph (4) of 
section 1842(j) shall apply in this paragraph in the same manner as 
such paragraph applies to such section.''.

SEC. 4033. ELIMINATION OF COMPLEXITIES CAUSED BY DUAL FUNDING SOURCES 
              AND RULES FOR PAYMENT OF CLAIMS.

    (a) In General.--The Secretary of Health and Human Services shall 
take such steps as may be necessary to consolidate the administration 
(including processing systems) of parts A and B of the medicare program 
(under title XVIII of the Social Security Act).
    (b) Combination of Intermediary and Carrier Functions.--In taking 
such steps, the Secretary shall contract with a single entity that 
combines the fiscal intermediary and carrier functions in each area 
except where the Secretary finds that special regional or national 
contracts are appropriate.
    (c) Superseding Conflicting Requirements.--The provisions of 
sections 1816 and 1842 of the Social Security Act (including provider 
nominating provisions in such section 1816) are superseded to the 
extent required to carry out this section.

SEC. 4034. REPEAL OF PRO PRECERTIFICATION REQUIREMENT FOR CERTAIN 
              SURGICAL PROCEDURES.

    (a) In General.--Section 1164 (42 U.S.C. 1320c-13) is repealed.
    (b) Conforming Amendments.--
            (1) Section 1154 (42 U.S.C. 1320c-3) is amended--
                    (A) in subsection (a), by striking paragraph (12), 
                and
                    (B) in subsection (d), by striking ``(and except as 
                provided in section 1164)''.
            (2) Section 1833 (42 U.S.C. 1395l) is amended--
                    (A) in subsection (a)(1)(D)(i), by striking ``, or 
                for tests furnished in connection with obtaining a 
                second opinion required under section 1164(c)(2) (or a 
                third opinion, if the second opinion was in 
                disagreement with the first opinion)'';
                    (B) in subsection (a)(1), by striking clause (G);
                    (C) in subsection (a)(2)(A), by striking ``, to 
                items and services (other than clinical diagnostic 
                laboratory tests) furnished in connection with 
                obtaining a second opinion required under section 
                1164(c)(2) (or a third opinion, if the second opinion 
                was in disagreement with the first opinion),'';
                    (D) in subsection (a)(2)(D)(i)--
                            (i) by striking ``basis,'' and inserting 
                        ``basis or'', and
                            (ii) by striking ``, or for tests furnished 
                        in connection with obtaining a second opinion 
                        required under section 1164(c)(2) (or a third 
                        opinion, if the second opinion was in 
                        disagreement with the first opinion)'';
                    (E) in subsection (a)(3), by striking ``and for 
                items and services furnished in connection with 
                obtaining a second opinion required under section 
                1164(c)(2), or a third opinion, if the second opinion 
                was in disagreement with the first opinion)''; and
                    (F) in the first sentence of subsection (b), by 
                striking ``(4)'' and all that follows through ``and 
                (5)'' and inserting and ``(4)''.
            (3) Section 1834(g)(1)(B) (42 U.S.C. 1395m(g)(1)(B)) is 
        amended by striking ``and for items and services furnished in 
        connection with obtaining a second opinion required under 
        section 1164(c)(2), or a third opinion, if the second opinion 
        was in disagreement with the first opinion)''.
            (4) Section 1862(a) (42 U.S.C. 1395y(a)) is amended--
                    (A) by adding ``or'' at the end of paragraph (14),
                    (B) by striking ``; or'' at the end of paragraph 
                (15) and inserting a period, and
                    (C) by striking paragraph (16).
            (5) The third sentence of section 1866(a)(2)(A) (42 U.S.C. 
        1395w(a)(2)(A)) is amended by striking ``, with respect to 
        items and services furnished in connection with obtaining a 
        second opinion required under section 1164(c)(2) (or a third 
        opinion, if the second opinion was in disagreement with the 
        first opinion),''.
    (c) Effective Date.--The amendments made by this section shall 
apply to services provided on or after the date of the enactment of 
this Act.

SEC. 4035. REQUIREMENTS FOR CHANGES IN BILLING PROCEDURES.

    (a) Limitation on Frequency of System Changes.--The Secretary of 
Health and Human Services may not implement any change in the system 
used for the billing and processing of claims for payment for items and 
services furnished under title XVIII of the Social Security Act within 
6 months of implementing any previous change in such system.
    (b) Advance Notification to Providers as Requirement for Carriers 
and Fiscal Intermediaries.--
            (1) Fiscal intermediaries.--Section 1816(c) (42 U.S.C. 
        1395h(c)) is amended by adding at the end the following new 
        paragraph:
    ``(4) Each agreement with an agency or organization under this 
section shall provide that the agency or organization shall notify 
providers of services of any major change in the procedures for billing 
for services furnished under this part at least 120 days before such 
change is to take effect.''.
            (2) Carriers.--Section 1842(b)(3) (42 U.S.C. 1395u(b)(3)) 
        is amended--
                    (A) by striking ``and'' at the end of subparagraph 
                (G) and the end of subparagraph (H); and
                    (B) by inserting after subparagraph (H) the 
                following new subparagraph:
            ``(I) will notify individuals and entities furnishing items 
        and services for which payment may be made under this part of 
        any major change in the procedures for billing for such items 
        and services at least 120 days before such change is to take 
        effect; and''.
            (3) Effective date.--The amendments made by paragraphs (1) 
        and (2) shall apply to agreements with fiscal intermediaries 
        under section 1816 of the Social Security Act and to contracts 
        with carriers under section 1842 of such Act for years 
        beginning after the expiration of the 9-month period beginning 
        on the date of the enactment of this Act.

         PART 5--AMENDMENTS TO ANTI-FRAUD AND ABUSE PROVISIONS

SEC. 4041. ANTI-KICKBACK PROVISIONS.

    (a) Revision to Penalties.--
            (1) Permitting secretary to impose civil monetary 
        penalty.--Section 1128A(a) (42 U.S.C. 1320a-7a(a)) is amended--
                    (A) by striking ``or'' at the end of paragraphs (1) 
                and (2);
                    (B) by striking the semicolon at the end of 
                paragraph (3) and inserting ``; or''; and
                    (C) by inserting after paragraph (3) the following 
                new paragraph:
            ``(4) carries out any activity in violation of paragraph 
        (1) or (2) of section 1128B(b);''.
            (2) Description of civil monetary penalty applicable.--
        Section 1128A(a) (42 U.S.C. 1320a-7a(a)) is amended--
                    (A) by striking ``given).'' at the end of the first 
                sentence and inserting the following: ``given or, in 
                cases under paragraph (4), $50,000 for each such 
                violation).''; and
                    (B) by striking ``claim.'' at the end of the second 
                sentence and inserting the following: ``claim (or, in 
                cases under paragraph (4), damages of not more than 
                three times the total amount of remuneration offered, 
                paid, solicited, or received, without regard to whether 
                a portion of such remuneration was offered, paid, 
                solicited, or received for a lawful purpose).''.
            (3) Increase in criminal penalty.--Paragraphs (1) and (2) 
        of section 1128B(b) (42 U.S.C. 1320a-7b(b)) are each amended--
                    (A) by striking ``$25,000'' and inserting 
                ``$50,000''; and
                    (B) by striking the period at the end and inserting 
                the following: ``, and shall be subject to damages of 
                not more than three times the total remuneration 
                offered, paid, solicited, or received, without regard 
                to whether a portion of such remuneration was offered, 
                paid, solicited, or received for a lawful purpose.''.
    (b) Revisions to Exceptions.--
            (1) Exception for discounts.--Section 1128B(b)(3)(A) (42 
        U.S.C. 1320a-7b(b)(3)(A)) is amended by striking ``program;'' 
        and inserting ``program and is not--
                    ``(i) for the furnishing of one item or service 
                without charge or at a reduced charge in exchange for 
                any agreement to buy a different item or service;
                    ``(ii) applicable to one payor but not to providers 
                of services or other entities under title XVIII or a 
                State health care program; or
                    ``(iii) in the form of a cash payment;''.
            (2) Exception for payments to employees.--Section 
        1128B(b)(3)(B) (42 U.S.C. 1320a-7b(b)(3)(B)) is amended by 
        inserting at the end ``if the amount of remuneration under the 
        arrangement is consistent with the fair market value of the 
        services and is not determined in a manner that takes into 
        account (directly or indirectly) the volume or value of any 
        referrals, except that such employee can be paid remuneration 
        in the form of a productivity bonus based on services 
        personally performed by the employee.''.
            (3) Exception for waiver of coinsurance by certain 
        providers.--Section 1128B(b)(3)(D) (42 U.S.C. 1320a-
        7b(b)(3)(D)) is amended to read as follows:
            ``(D) a waiver or reduction of any coinsurance or other 
        copayment if the waiver or reduction is made pursuant to a 
        public schedule of discounts which the person is obligated as a 
        matter of law to apply to certain individuals.''.
            (4) New exception for certain providers.--Section 
        1128B(b)(3) (42 U.S.C. 1320a-7b(b)(3)) is amended--
                    (A) by striking ``and'' at the end of subparagraph 
                (D);
                    (B) by striking the period at the end of 
                subparagraph (E) and inserting ``; and''; and
                    (C) by adding at the end the following new 
                subparagraph:
            ``(F) any remuneration obtained by or given to an 
        individual or entity who receives assistance under a grant or 
        cooperative agreement for the provision of health care services 
        under title V, title XX, or the Public Health Service Act, or 
        is obligated as a matter of law to provide services according 
        to a schedule which provides for discounts based on the ability 
        of the individual services to pay, if--
                    ``(i) in the case of an individual or entity who 
                receives assistance under a grant or cooperative 
                agreement for the provision of health care services 
                under title V, title XX, or the Public Health Service 
                Act, the remuneration is directly and primarily related 
                to the activity supported by the grant or cooperative 
                agreement; and
                    ``(ii) the remuneration is pursuant to a written 
                arrangement for the use or procurement of space, 
                equipment, goods, or services for the referral of 
                patients that--
                            ``(I) does not result in private inurement 
                        to any current employee, officer, member of the 
                        Board of Directors, or agent of the recipient 
                        or any other person involved in recommending or 
                        negotiating the arrangement; and
                            ``(II) does not preclude the referral of 
                        patients to other providers of service of the 
                        patient's own choosing and does not interfere 
                        with the ability of health professionals to 
                        refer patients to providers of services they 
                        believe are the most appropriate, except to the 
                        extent such choices or referrals are limited by 
                        the terms of a health plan in which the patient 
                        has enrolled or the terms of a grant or 
                        cooperative agreement described in clause 
                        (i).''.
            (5) New exception for capitated payments.--Section 
        1128B(b)(3) (42 U.S.C. 1320a-7b(b)(3)), as amended by paragraph 
        (4), is further amended--
                    (A) by striking ``and'' at the end of subparagraph 
                (E);
                    (B) by striking the period at the end of 
                subparagraph (F) and inserting ``; and''; and
                    (C) by adding at the end the following new 
                subparagraph--
            ``(G) any reduction in cost sharing or increased benefits 
        given to an individual, any amounts paid to a provider of 
        services for items or services furnished to an individual, or 
        any discount or reduction in price given by the provider for 
        such items or services, if the individual is enrolled with and 
        such items and services are covered under any of the following:
                    ``(i) A health plan which is furnishing items or 
                services under title XVIII or a State health care 
                program to individuals on an at-risk, prepaid, 
                capitated basis pursuant to a written agreement with 
                the Secretary or a State health care program.
                    ``(ii) An organization receiving payments on a 
                prepaid basis, under a demonstration project under 
                section 402(a) of the Social Security Amendments of 
                1967 or under section 222(a) of the Social Security 
                Amendments of 1972.
                    ``(iii) Any other plan or insurer under which each 
                participating provider is paid wholly on an at-risk, 
                prepaid, capitated basis for such items or services 
                pursuant to a written arrangement between the plan and 
                the provider.''.
    (c) Clarification of Coverage of Employers and Employees.--Section 
1128B(b) (42 U.S.C. 1320a-7b(b)), as amended by subsection (a)(4), is 
further amended by adding at the end the following new paragraph:
    ``(5) In this subsection, the term `referral' includes the referral 
by an employee to his or her employer of any item or service for which 
payment may be made in whole or in part under title XVIII or a State 
health care program.''
    (d) Authorization for the Secretary To Issue Regulations.--Section 
1128B(b) (42 U.S.C. 1320a-7b(b)), as amended by subsections (a)(4) and 
(c), is further amended by adding at the end the following new 
paragraph:
    ``(6) The Secretary is authorized to impose by regulation such 
other requirements as needed to protect against program or patient 
abuse with respect to any of the exceptions described in paragraph 
(3).''.
    (e) Clarification of Other Elements of Offense.--Section 1128B(b) 
(42 U.S.C. 1320a-7b(b)) is amended--
            (1) in paragraph (1) in the matter preceding subparagraph 
        (A), by striking ``kind--'' and inserting ``kind with intent to 
        be influenced--'';
            (2) in paragraph (1)(A), by striking ``in return for 
        referring'' and inserting ``to refer'';
            (3) in paragraph (1)(B), by striking ``in return for 
        purchasing, leasing, ordering, or arranging for or 
        recommending'' and inserting ``to purchase, lease, order, or 
        arrange for or recommend'';
            (4) in paragraph (2) in the matter preceding subparagraph 
        (A), by striking ``to induce such person'' and inserting ``with 
        intent to influence such person''; and
            (5) by adding at the end of paragraphs (1) and (2) the 
        following sentence: ``A violation exists under this paragraph 
        if one or more purposes of the remuneration is unlawful under 
        this paragraph.''.

SEC. 4042. REVISIONS TO LIMITATIONS ON PHYSICIAN SELF-REFERRAL.

    (a) Clarification of Payment Ban.--Section 1877(a)(1)(B) (42 U.S.C. 
1395nn(a)(1)(B)) is amended to read as follows:
            ``(B) no physician or entity may present or cause to be 
        presented a claim under this title or bill to any third party 
        payor or other entity for designated health services furnished 
        pursuant to a referral prohibited under subparagraph (A).''.
    (b) Clarification of Coverage of Holding Company Type Arrangements 
and Loans.--The last sentence of section 1877(a)(2) (42 U.S.C. 
1395nn(a)(2)) is amended by striking ``an interest in an entity that 
holds an ownership or investment interest in any entity providing the 
designated health service'' and inserting the following: ``a loan from 
the entity, and an interest held indirectly through means such as (but 
not limited to) having a family member hold such investment interest or 
holding a legal or beneficial interest in another entity (such as a 
trust or holding company) that holds such investment interest''.
    (c) Revisions to General Exceptions to Both Ownership and 
Compensation Arrangement Prohibitions.--
            (1) Repeal of exception for physicians' services.--Section 
        1877(b) (42 U.S.C. 1395nn(b)) is amended--
                    (A) by striking paragraph (1); and
                    (B) by redesignating paragraphs (2) and (3) as 
                paragraphs (1) and (2).
            (2) Revision to in-office ancillary services exception.--
        Section 1877(b)(1) (42 U.S.C. 1395nn(b)(1)), as redesignated by 
        paragraph (1), is amended--
                    (A) in the matter preceding subparagraph (A), by 
                striking ``services (other than durable medical 
                equipment (excluding infusion pumps) and parenteral and 
                enteral nutrients, equipment, and supplies)'' and 
                inserting ``clinical laboratory services, x-ray and 
                ultrasound services that are provided at low-cost (as 
                determined in accordance with regulations of the 
                Secretary)''; and
                    (B) in subparagraph (A)--
                            (i) in clause (ii)(I), by striking ``(or 
                        another physician who is a member of the same 
                        group practice)'',
                            (ii) in clause (ii)(II) by inserting ``the 
                        same or'' before ``another building'', and
                            (iii) in clause (ii)(II)(bb), by inserting 
                        ``all of'' after ``centralized provision of''.
            (3) Revision to prepaid plan exception.--Section 
        1877(b)(2), (42 U.S.C. 1395nn(b)(2)), as redesignated by 
        paragraph (1), is amended to read as follows:
            ``(2) Prepaid plans.--In the case of designated health 
        services furnished by an organization--
                    ``(A) with a risk sharing contract under section 
                1876(g) to an individual enrolled with the 
                organization,
                    ``(B) receiving payments on a prepaid basis, under 
                a demonstration project under section 402(a) of the 
                Social Security Amendments of 1967 or under section 
                222(a) of the Social Security Amendments of 1972, to an 
                individual enrolled with the organization, or
                    ``(C) that is a qualified health maintenance 
                organization (within the meaning of section 1310(d) of 
                the Public Health Service Act) to an individual 
                enrolled with the organization.''.
            (4) New exception for capitated payments.--Section 1877(b) 
        (42 U.S.C. 1395nn(b)), as amended by paragraph (1), is amended 
        by inserting after paragraph (2) the following new paragraph:
            ``(3) Other capitated payments.--In the case of a 
        designated health service, if the designated health service is 
        included in the services for which a physician or physician 
        group is paid wholly on an at-risk, prepaid, capitated basis by 
        a health plan or insurer pursuant to a written arrangement 
        between the plan or insurer and the physician or physician 
        group.''.
    (d) Revision to Publicly Traded Securities Exception.--Section 
1877(c)(1) (42 U.S.C. 1395nn(c)(1)) is amended by inserting ``at the 
time acquired by the physician'' after ``which may be purchased on 
terms generally available to the public''.
    (e) Revision to Rural Provider Exception.--Section 1877(d)(2) (42 
U.S.C. 1395nn(d)(2)) is amended by striking ``substantially all'' and 
inserting ``not less than 85 percent (as determined in accordance with 
regulations of the Secretary)''.
    (f) Revisions to Exceptions Relating to Other Compensation 
Arrangements.--
            (1) Exception for personal services arrangements.--(A) 
        Section 1877(e)(3)(B)(i)(II) (42 U.S.C. 1395nn(e)(3)(B)(i)(II)) 
        is amended to read as follows:
                                    ``(II) If the plan places a 
                                physician or physician group at 
                                substantial financial risk (as 
                                determined by the Secretary pursuant to 
                                section 1876(i)(8)(A)(ii)), for 
                                services not provided by the physician, 
                                the entity complies with the provisions 
                                of subclauses (I) and (II) of section 
                                1876(i)(8)(A)(ii).'';
            (B) Section 1877(e)(3)(B)(ii), 42 U.S.C. 
        1395nn(e)(3)(B)(ii) is amended by striking ``may directly or 
        indirectly have the effect of'' and inserting ``has the purpose 
        of''.
            (2) Repeal of exception for remuneration unrelated to the 
        provision of designated health services.--Section 1877(e) (42 
        U.S.C. 1395nn(e)) is amended--
                    (A) by striking paragraph (4); and
                    (B) by redesignating paragraphs (5), (6), (7), and 
                (8) as paragraphs (4), (5), (6), and (7).
            (3) Exception for certain physician recruitment.--Section 
        1877(e)(4) (42 U.S.C. 1395nn(e)(4)), as redesignated by 
        paragraph (2), is amended to read as follows:
            ``(4) Physician recruitment.--In the case of remuneration 
        which is provided by an entity located in a rural area (as 
        defined in section 1886(d)(2)(D)) or a health professional 
        shortage areas (designated under section 332 of the Public 
        Health Service Act), or an entity for which 85 percent of the 
        patients are members of a medically underserved population 
        designated under section 330 of the Public Health Service Act 
        (as determined in accordance with regulations of the 
        Secretary), in order to induce a physician who has been 
        practicing within the physician's current specialty for less 
        than one year to establish staff privileges at the entity, or 
        to induce any other physician to relocate his or her primary 
        place of practice to the geographic area served by the entity, 
        if the following standards are met:
                    ``(A) The arrangement is set forth in a written 
                agreement that specifies the benefits provided by the 
                entity to the physician, the terms under which the 
                benefits are to be provided, and the obligations of 
                each party.
                    ``(B) If a physician is leaving an established 
                practice, the physical location of the new primary 
                place of practice must be not less than 100 miles from 
                the location of the established primary place of 
                practice and at least 85 percent of the revenues of the 
                physician's new practice must be generated from new 
                patients for whom the physician did not previously 
                provide services at the former practice.
                    ``(C) The benefits are provided by the entity for a 
                period not in excess of 3 years, and the terms of the 
                agreement are not renegotiated during this 3-year 
                period in any substantial aspect, unless the 
                physician's new primary place of practice is designated 
                as a health professional shortage area (pursuant to 
                section 332 of the Public Health Service Act) for the 
                physician's specialty category during the entire 
                duration of the relationship between the physician and 
                the entity.
                    ``(D) There is no requirement that the physician 
                make referrals to, be in a position to make or 
                influence referrals to, or otherwise generate business 
                for the entity as a condition for receiving the 
                benefits.
                    ``(E) The physician is not restricted from 
                establishing staff privileges at, referring any service 
                to, or otherwise generating any business for any other 
                entity of the physician's choosing.
                    ``(F) The amount or value of the benefits provided 
                by the entity may not vary (or be adjusted or 
                renegotiated) in any manner based on the volume or 
                value of any expected referrals to or business 
                otherwise generated for the entity by the physician for 
                which payment may be made in whole or in part under 
                this title or a State health care program (as defined 
                in section 1128(h)).
                    ``(G) The physician agrees to treat patients 
                entitled to benefits under this title or enrolled in a 
                State plan for medical assistance under title XIX.''.
            (4) Exception for isolated transactions.--Section 
        1877(e)(5) (42 U.S.C. 1395nn(e)(6)), as redesignated by 
        paragraph (2), is amended--
                    (A) by redesignating subparagraph (B) as 
                subparagraph (C);
                    (B) by striking ``and'' at the end of subparagraph 
                (A); and
                    (C) by inserting after subparagraph (A) the 
                following new subparagraph:
                    ``(B) there is no financing of the sale between the 
                parties, and''.
            (5) Exception for payments by a physician.--Section 
        1877(e)(7) (42 U.S.C. 1395nn(e)(7)), as redesignated by 
        paragraph (2), is amended to read as follows:
            ``(7) Payments by a physician for items and services.--
        Payments made by a physician to an individual or entity as 
        compensation for items or services if the items or services are 
        furnished at a price that is consistent with fair market 
        value.''.
            (6) Additional exception for discounts or other reductions 
        in price.--Section 1877(e) (42 U.S.C. 1395nn(e)), as amended by 
        paragraph (2), is amended by adding at the end the following 
        new paragraph:
            ``(8) Discounts or other reductions in price.--Discounts or 
        other reductions in price between a physician and an entity for 
        items or services for which payment may be made under this 
        title so long as the discount or other reduction in price is 
        properly disclosed and appropriately reflected in the costs 
        claimed or charges made by the physician or entity under this 
        title and is not--
                    ``(A) for the furnishing of one item or service 
                without charge or at a reduced charge in exchange for 
                any agreement to buy a different item or service,
                    ``(B) applicable to one or more payers but not to 
                all individuals and entities providing services for 
                which payment may be made under this title, or
                    ``(C) in the form of a cash payment.''.
    (g) Clarification of Sanction Authority.--Section 1877(g)(4) (42 
U.S.C. 1395nn(g)(4)) is amended by striking ``Any physician'' and all 
that follows through ``to such entity,'' and inserting the following: 
``Any physician or other entity that enters into an arrangement or 
scheme (such as a cross-referral arrangement or an arrangement with 
multiple leases overlapping in time for the same or similar rental 
space or equipment) which the physician or entity knows or should know 
has a principal purpose of inducing referrals to another entity, which 
referrals, if made directly by the physician or entity to such other 
entity,''.
    (h) Clarification of Definition of Remuneration.--Section 
1877(h)(1)(B) (42 U.S.C. 1395nn(h)(1)(B)) is amended to read as 
follows:
            ``(B) The term `remuneration' includes any payment, 
        discount or other reduction in price, forgiveness of debt or 
        other benefit made directly or indirectly, overtly or covertly, 
        in cash or in kind.''.
    (i) Revision to Definition of Group Practice.--Section 1877(h)(4) 
(42 U.S.C. 1395nn(h)(4)) is amended--
            (1) in subparagraph (A)(vi), by striking the period at the 
        end and inserting the following: ``, including a requirement 
        for the physical grouping of physician practices as may be 
        reasonably required to prevent the abuse of any exceptions 
        provided to group practices under this section.''; and
            (2) in subparagraph (B)(i), by striking ``or services 
        incident to such personally performed services''.
    (j) Expansion to Cover Additional Items and Services.--Section 
1877(h)(6) (42 U.S.C. 1395nn(h)(6)), as amended by section 2005(c)(3), 
is amended--
            (1) in subparagraph (D), by striking ``or other''; and
            (2) by adding at the end the following new subparagraphs:
                    ``(M) Diagnostic services.
                    ``(N) Any other item or service not rendered by the 
                physician personally or by a person under the 
                physician's direct supervision.''.
    (k) Authorization for the Secretary to Issue Regulations.--Section 
1877 (42 U.S.C. 1395nn) is amended by adding the following new 
subsection:
    ``(i) Additional Requirements.--The Secretary is authorized to 
impose by regulation such other requirements as needed to protect 
against program or patient abuse with respect to any of the exceptions 
under this section.''.
    (l) Incorporation of Amendments Made Under OBRA-1993.--In this 
section, any reference to section 1877 of the Social Security Act shall 
be considered a reference to such section as amended by section 
13562(a) of OBRA-1993.

SEC. 4043. CIVIL MONETARY PENALTIES.

    (a) Prohibition Against Offering Inducements to Individuals 
Enrolled Under Plans.--
            (1) Offer of remuneration.--Section 1128A(a) (42 U.S.C. 
        1320a-7a(a)) (as amended by section 4041(a)(1)) is amended--
                    (A) by striking ``; or'' at the end of paragraph 
                (3) and inserting a semicolon;
                    (B) by striking the semicolon at the end of 
                paragraph (4) and inserting ``; or''; and
                    (C) by inserting after paragraph (4) the following 
                new paragraph:
            ``(5) offers, pays, or transfers remuneration to any 
        individual eligible for benefits under title XVIII of this Act, 
        or under a State health care program (as defined in section 
        1128(h)) that such person knows or should know is likely to 
        influence such individual to order or receive from a particular 
        provider, practitioner, or supplier any item or service for 
        which payment may be made, in whole or in part, under title 
        XVIII, or a State health care program;''.
            (2) Remuneration defined.--Section 1128A(i) (42 U.S.C. 
        1320a-7a(i)) is amended by adding at the end the following new 
        paragraph:
            ``(6) The term `remuneration' includes the waiver of 
        coinsurance and deductible amounts (or any part thereof), and 
        transfers of items or services for free or for other than fair 
        market value, except that such term does not include the waiver 
        of coinsurance or deductible amounts by a person or entity, 
        if--
                    ``(A) the waiver is not offered as part of any 
                advertisement or solicitation;
                    ``(B) the person does not routinely waive 
                coinsurance or deductible amounts; and
                    ``(C) the person--
                            ``(i) waives the coinsurance and deductible 
                        amounts after determining in good faith that 
                        the individual is indigent;
                            ``(ii) fails to collect coinsurance or 
                        deductible amounts after making reasonable 
                        collection efforts; or
                            ``(iii) provides for any permissible waiver 
                        as specified in section 1128B(b)(3) or in 
                        regulations issued by the Secretary.''.
    (b) Claim for Item or Service Based on Incorrect Coding or 
Medically Unnecessary Services.--Section 1128A(a)(1) (42 U.S.C. 1320a-
7a(a)(1)) is amended--
            (1) in subparagraph (A), by striking ``claimed,'' and 
        inserting the following: ``claimed, including any person who 
        presents or causes to be presented a claim for an item or 
        service which includes a procedure or diagnosis code that the 
        person knows or should know will result in a greater payment to 
        the person than the code applicable to the item or service 
        actually provided or actual patient medical condition,'';
            (2) in subparagraph (C), by striking ``or'' at the end;
            (3) in subparagraph (D), by striking ``; or'' and inserting 
        ``, or''; and
            (4) by inserting after subparagraph (D) the following new 
        subparagraph:
                    ``(E) is for a medical or other item or service 
                that a person knows or should know is not medically 
                necessary; or''.
    (c) Excluded Individual Retaining Ownership or Control Interest in 
Participating Entity.--Section 1128A(a) of such Act, as amended by 
section 4041(a)(1) and subsection (a)(1), is further amended--
            (1) by striking ``or'' at the end of paragraph (4);
            (2) by striking the semicolon at the end of paragraph (5) 
        and inserting ``; or''; and
            (3) by inserting after paragraph (5) the following new 
        paragraph:
            ``(6) in the case of a person who is not an organization, 
        agency, or other entity, who is excluded from participating in 
        a program under title XVIII or a State health care program in 
        accordance with this section, section 1128, or section 1156 and 
        who, during the period of exclusion, retains either a direct or 
        indirect ownership or control interest of 5 percent or more in, 
        or an ownership or control interest (as defined in section 
        1124(a)(3)) in, or who is an officer, director, agent, or 
        managing employee (as defined in section 1126(b)) of, an entity 
        that is participating in a program under title XVIII or a State 
        health care program;''.
    (d) Additional Offenses Relating to Alliance System.--Section 
1128A(a) of such Act, as amended by section 4041(a)(1) and subsections 
(a)(1) and (c), is further amended--
            (1) by striking ``or'' at the end of paragraph (5);
            (2) by striking the semicolon at the end of paragraph (6) 
        and inserting ``; or''; and
            (3) by inserting after paragraph (6) the following new 
        paragraphs:
            ``(7) engages in a practice that circumvents a payment 
        methodology intended to reimburse for two or more discreet 
        medical items or services at a single or fixed amount, 
        including but not limited to, multiple admissions or 
        readmission to hospitals and other institutions reimbursed on a 
        diagnosis reimbursement grouping basis;
            ``(8) engages in a practice which has the effect of 
        limiting or discouraging (as compared to other plan enrollees) 
        the utilization of health care services covered by law or under 
        the service contract by title XIX or other publicly subsidized 
        patients, including but not limited to differential standards 
        for the location and hours of service offered by providers 
        participating in the plan;
            ``(9) substantially fails to cooperate with a quality 
        assurance program or a utilization review activity;
            ``(10) fails substantially to provide or authorize 
        medically necessary items and services that are required to be 
        provided to an individual covered under a health plan under the 
        Health Security Act or public program for the delivery of or 
        payment for health care items or services, if the failure has 
        adversely affected (or had a substantial likelihood of 
        adversely affecting) the individual;
            ``(11) employs or contracts with any individual or entity 
        who is excluded from participating in a program under title 
        XVIII or a State health care program in accordance with this 
        section, section 1128, or section 1156, for the provision of 
        any services (including but not limited to health care, 
        utilization review, medical social work, or administrative), or 
        employs or contracts with any entity for the direct or indirect 
        provision of such services, through such an excluded individual 
        or entity; or
            ``(12) submits false or fraudulent statements, data or 
        information or claims to the National Health Board established 
        under part 1 of subtitle F of title I of the Health Security 
        Act, any other Federal agency, a State health care agency, a 
        health alliance (under subtitle D of title I of such Act), or 
        any other Federal, State or local agency charged with 
        implementation or oversight of a health plan under such Act or 
        a public program that the person knows or should know is 
        fraudulent;''.
    (e) Modifications of Amounts of Penalties and Assessments.--Section 
1128A(a) (42 U.S.C. 1320a-7a(a)), as amended by section 4041(a), 
subsection (a)(1), subsection (c), and subsection (d), is amended in 
the matter following paragraph (12)--
            (1) by striking ``$2,000'' and inserting ``$10,000'';
            (2) by inserting after ``under paragraph (4), $50,000 for 
        each such violation'' the following: ``; in cases under 
        paragraph (5), $10,000 for each such offer, payment, or 
        transfer; in cases under paragraph (6), $10,000 for each day 
        the prohibited relationship occurs; in cases under paragraphs 
        (7) through (12), an amount not to exceed $50,000 for each such 
        determination by the Secretary''; and
            (3) by striking ``twice the amount'' and inserting ``three 
        times the amount''.
    (f) Interest on Penalties.--Section 1128A(f) (42 U.S.C. 1320a-
7a(f)) is amended by adding after the first sentence the following: 
``Interest shall accrue on the penalties and assessments imposed by a 
final determination of the Secretary in accordance with an annual rate 
established by the Secretary under the Federal Claims Collection Act. 
The rate of interest charged shall be the rate in effect on the date 
the determination becomes final and shall remain fixed at that rate 
until the entire amount due is paid. In addition, the Secretary is 
authorized to recover the costs of collection in any case where the 
penalties and assessments are not paid within 30 days after the 
determination becomes final, or in the case of a compromised amount, 
where payments are more than 90 days past due. In lieu of actual costs, 
the Secretary is authorized to impose a charge of up to 10 percent of 
the amount of penalties and assessments owed to cover the costs of 
collection.''.
    (g) Authorization To Act.--
            (1) In general.--The first sentence of section 1128A(c)(1) 
        (42 U.S.C. 1320a-7a(c)(1)) is amended by striking all that 
        follows ``(b)'' and inserting the following: ``unless, within 
        one year after the date the Secretary presents a case to the 
        Attorney General for consideration, the Attorney General brings 
        an action in a district court of the United States.''.
            (2) Effective date.--The amendment made by this paragraph 
        (1) shall apply to cases presented by the Secretary of Health 
        and Human Services for consideration on or after the date of 
        the enactment of this Act.
    (h) Deposit of Penalties Collected into All-Payer Account.--Section 
1128A(f)(3) (42 U.S.C. 1320a-7a(f)(3)) is amended by striking ``as 
miscellaneous receipts of the Treasury of the United States'' and 
inserting ``in the All-Payer Health Care Fraud and Abuse Control 
Account established under section 5402 of the Health Security Act''.
    (i) Clarification of Penalty Imposed on Excluded Provider 
Furnishing Services.--Section 1128A(a)(1)(D) (42 U.S.C. 1320a-
7a(a)(1)(D)) is amended by inserting ``who furnished the service'' 
after ``in which the person''.

SEC. 4044. EXCLUSIONS FROM PROGRAM PARTICIPATION.

    (a) Mandatory Exclusion for Individual Convicted of Criminal 
Offense Related to Health Care Fraud.--Section 1128 (42 U.S.C. 1320a-7) 
is amended--
            (1) by amending paragraph (1) of subsection (a) to read as 
        follows:
            ``(1) Convictions of program-related crimes and health care 
        fraud.--
                    ``(A) Any individual or entity that has been 
                convicted of a criminal offense related to the delivery 
                of an item or service under title XVIII or under any 
                State health care program; or
                    ``(B) Any individual or entity that has been 
                convicted, under Federal or State law, in connection 
                with the delivery of a health care item or service of a 
                criminal offense relating to fraud, theft, 
                embezzlement, breach of fiduciary responsibility, or 
                other financial misconduct.''; and
            (2) in subsection (b)(1), by striking ``in connection with 
        the delivery of a health care item or service or''.
    (b) Establishment of Minimum Period of Exclusion for Certain 
Individuals and Entities Subject to Permissive Exclusion From Medicare 
and State Health Care Programs.--Section 1128(c)(3) (42 U.S.C. 1320a-
7(c)(3)) is amended by adding at the end the following new 
subparagraphs:
    ``(D) In the case of an exclusion of an individual or entity under 
paragraphs (1), (2), or (3) of subsection (b), the period of exclusion 
shall be a minimum of 3 years, unless the Secretary determines that a 
longer period is appropriate because of aggravating circumstances.
    ``(E) In the case of an exclusion of an individual or entity under 
paragraph (4) or (5) of subsection (b), the period of the exclusion 
shall not be less than the period during which the individual's or 
entity's license to provide health care is revoked, suspended, or 
surrendered, or the individual or the entity is excluded or suspended 
from a Federal or State health care program.
    ``(F) In the case of an exclusion of an individual or entity under 
subsection (b)(6)(B), the period of the exclusion shall be not less 
than 1 year.''.
    (c) Revision to Exclusion for Default on Health Education Loan or 
Scholarship Obligations.--Section 1128(b)(14) (42 U.S.C. 1320a-
7(b)(14)) is amended by striking ``all reasonable steps'' and inserting 
``reasonable steps''.
    (d) Permissive Exclusion of Individuals With Ownership or Control 
Interest in Sanctioned Entities.--Section 1128(b) (42 U.S.C. 1320a-
7(b)) is amended by adding at the end the following new paragraph:
            ``(15) Individuals controlling a sanctioned entity.--Any 
        individual who has a direct or indirect ownership or control 
        interest of 5 percent or more, or an ownership or control 
        interest (as defined in section 1124(a)(3)) in, or who is an 
        officer, director, agent, or managing employee (as defined in 
        section 1126(b)) of, an entity--
                    ``(A) that has been convicted of any offense 
                described in subsection (a) or in paragraph (1), (2), 
                or (3) of this subsection;
                    ``(B) against which a civil monetary penalty has 
                been assessed under section 1128A; or
                    ``(C) that has been excluded from participation 
                under a program under title XVIII or under a State 
                health care program.''.
    (e) Exclusions Based on Actions Under Alliance System.--Section 
1128 (42 U.S.C. 1320a-7), as amended by subsections (a) and (d), is 
amended--
            (1) in subsection (a)(1)(A), by striking ``XVIII or under a 
        State health care program'' and inserting ``XVIII, a State 
        health care program, or under an applicable health plan (as 
        defined in section 1902(6) of the Health Security Act)'';
            (2) in subsection (b)(5)--
                    (A) by striking ``or'' at the end of subparagraph 
                (A),
                    (B) by adding ``or'' at the end of subparagraph 
                (B), and
                    (C) by inserting after subparagraph (B) the 
                following new subparagraph:
                    ``(C) an applicable health plan (as defined in 
                section 1902(6) of the Health Security Act) under 
                section 5411 or 5412(b)(3) of such Act,'';
            (3) in subsection (b)(6)(B), by striking ``XVIII or under a 
        State health care program'' and inserting ``XVIII, a State 
        health care program, or an applicable health plan (as defined 
        in section 1902(6) of the Health Security Act)'';
            (4) in subsection (b)(7), by striking the period at the end 
        and inserting ``, or in section 5412 of the Health Security 
        Act.'';
            (5) in subsection (b)(8)(B)--
                    (A) in clause (ii), by striking ``1128A'' and 
                inserting ``1128A or under section 5412 of the Health 
                Security Act'', and
                    (B) in clause (iii), by striking ``XVIII or under a 
                State health care program'' and inserting ``XVIII, a 
                State health care program, or under an applicable 
                health plan (as defined in section 1902(6) of the 
                Health Security Act)'';
            (6) in subsection (b)(9), by striking the period at the end 
        and inserting ``, or provide any information requested by the 
        Inspector General of the Department of Health and Human 
        Services to carry out the All-Payer Health Care Fraud and Abuse 
        Control Program established under section 5401 of the Health 
        Security Act.'';
            (7) in subsection (b)(11)--
                    (A) by striking ``title XVIII or a State health 
                care program'' and inserting ``title XVIII, a State 
                health care program, or an applicable health plan (as 
                defined in section 1902(6) of the Health Security 
                Act)'',
                    (B) by striking ``Secretary or the appropriate 
                State agency'' and inserting ``Secretary, the 
                appropriate State agency, or plan sponsor'', and
                    (C) by striking ``Secretary or that agency'' and 
                inserting ``Secretary, that agency, or that sponsor'';
            (8) in subsection (b)(12), by adding at the end the 
        following new subparagraph:
                    ``(E) Any entity authorized by law to (i) conduct 
                on-site health, safety or patient care reviews and 
                surveys or (ii) to investigate whether any violations 
                of law have occurred, including violations under this 
                section, section 1128A, section 1128B, or part 2 of 
                subtitle E of title V of the Health Security Act.'';
            (9) in subsection (b)(14), by striking ``XVIII or XIX'' and 
        inserting ``XVIII, a State health care program, or an 
        applicable health plan (as defined in section 1902(6) of the 
        Health Security Act)''; and
            (10) in subsection (b)(15)--
                    (A) in subparagraph (B), by striking ``1128A'' and 
                inserting ``1128A or section 5412 of the Health 
                Security Act'', and
                    (B) in subparagraph (C), by striking ``title XVIII 
                or under a State health care program'' and inserting 
                ``title XVIII, a State health care program, or an 
                applicable health plan (as defined in section 1902(6) 
                of the Health Security Act''.
    (f) Appeal of Exclusions to Court of Appeals.--Section 1128(f)(1) 
(42 U.S.C. 1320a-7(f)(1)) is amended by striking the period at the end 
and inserting the following: ``, except that any action brought to 
appeal such decision shall be brought in the United States Court of 
Appeals for the judicial circuit in which the individual or entity 
resides or has a principal place of business (or, if the individual or 
entity does not reside or have a principal place of business within any 
such judicial circuit, in the United States Court of Appeals for the 
District of Columbia Circuit).''.

SEC. 4045. SANCTIONS AGAINST PRACTITIONERS AND PERSONS FOR FAILURE TO 
              COMPLY WITH STATUTORY OBLIGATIONS RELATING TO QUALITY OF 
              CARE.

    (a) Minimum Period of Exclusion for Practitioners and Persons 
Failing To Meet Statutory Obligations.--
            (1) In general.--The second sentence of section 1156(b)(1) 
        (42 U.S.C. 1320c-5(b)(1)) is amended by striking ``may 
        prescribe)'' and inserting ``may prescribe, except that such 
        period may not be less than one year)''.
            (2) Conforming amendment.--Section 1156(b)(2) (42 U.S.C. 
        1320c-5(b)(2)) is amended by striking ``shall remain'' and 
        inserting ``shall (subject to the minimum period specified in 
        the second sentence of paragraph (1)) remain''.
    (b) Repeal of ``Unwilling or Unable'' Condition for Imposition of 
Sanction.--Section 1156(b)(1) (42 U.S.C. 1320c-5(b)(1)) is amended--
            (1) in the second sentence, by striking ``and determines'' 
        and all that follows through ``such obligations,'' and
            (2) by striking the third sentence.
    (c) Amount of Civil Money Penalty.--Section 1156(b)(3) (42 U.S.C. 
1320c-5(b)(3)) is amended by striking ``the actual or estimated cost'' 
and inserting the following: ``$50,000 for each instance''.

SEC. 4046. EFFECTIVE DATE.

    The amendments made by this part shall take effect January 1, 1995.

   PART 6--FUNDING OF GRADUATE MEDICAL EDUCATION AND ACADEMIC HEALTH 
                                CENTERS

SEC. 4051. TRANSFERS FROM MEDICARE TRUST FUNDS FOR GRADUATE MEDICAL 
              EDUCATION.

    (a) In General.--For purposes of complying with section 3034(a), 
there shall be transferred to the Secretary from the Federal Hospital 
Insurance Trust Fund (established under section 1817 of the Social 
Security Act) and the Federal Supplementary Medical Insurance Trust 
Fund (established under section 1841 of such Act) the following amount 
(in the aggregate), as applicable to a fiscal year:
            (1) In the case of fiscal year 1996, $1,500,000,000.
            (2) In the case of each of the fiscal years 1997 and 1998, 
        $1,600,000,000.
            (3) In the case of each subsequent fiscal year, the amount 
        specified in paragraph (2) increased by the Secretary's 
        estimate of the percentage increase in the consumer price index 
        for all urban consumers (U.S. city average) for the 12-month 
        period ending with the midpoint of the previous fiscal year.
    (b) Allocation of Amount Among Funds.--With respect to the amount 
required under subsection (a) to be transferred for a year from the 
Federal Hospital Insurance Trust Fund and the Federal Supplementary 
Medical Insurance Trust Fund, the Secretary shall determine an 
equitable allocation of such amount among the funds.
    (c) Termination of Graduate Medical Education Payments Under 
Medicare.--
            (1) In General.-- Section 1886(h) (42 U.S.C. 1395ww(h)) is 
        amended by adding at the end the following new paragraph:
            ``(6) Termination of payments attributable to costs of 
        training physicians.--Notwithstanding any other provision of 
        this section or section 1861(v), no payment may be made under 
        this title for direct graduate medical education costs 
        attributable to an approved medical residency training program 
        for any cost reporting period (or portion thereof) beginning on 
        or after October 1, 1995.''.
            (2) Prohibition against recognition of costs.--Section 
        1861(v)(1) (42 U.S.C. 1395x(v)(1)) is amended by adding at the 
        end the following new subparagraph:
    ``(T) Such regulations shall not include any provision for specific 
recognition of the costs of graduate medical education for hospitals 
for any cost reporting period (or portion thereof) beginning on or 
after October 1, 1995. Nothing in the previous sentence shall be 
construed to affect in any way payments to hospitals for the costs of 
any approved educational activities that are not described in such 
sentence.''.

SEC. 4052. TRANSFERS FROM HOSPITAL INSURANCE TRUST FUND FOR ACADEMIC 
              HEALTH CENTERS.

    (a) In General.--For purposes of complying with section 3104(a), 
there shall be transferred to the Secretary from the Federal Hospital 
Insurance Trust Fund (established under section 1817 of the Social 
Security Act) the following amount (in the aggregate), as applicable to 
a fiscal year:
            (1) In the case of fiscal year 1996, $2,100,000,000.
            (2) In the case of each of the fiscal years 1997 and 1998, 
        $2,000,000,000.
            (3) In the case of each subsequent fiscal year, the amount 
        specified in paragraph (2) increased by the Secretary's 
        estimate of the percentage increase in the consumer price index 
        for all urban consumers (U.S. city average) for the 12-month 
        period ending with the midpoint of the previous fiscal year.
    (b) Termination of Payments Under Medicare.--
            (1) In general.--Section 1886(d)(5)(B) (42 U.S.C. 
        1395ww(d)(5)(B)) is amended in the matter preceding clause (i) 
        by striking ``The Secretary'' and inserting ``For discharges 
        occurring before October 1, 1995, the Secretary''.
            (2) Adjustment to standardized amounts.--Section 
        1886(d)(2)(C)(i) (42 U.S.C. 1395ww(d)(2)(C)(i)) is amended by 
        striking ``excluding'' and inserting ``for discharges occurring 
        before October 1, 1995, excluding''.

   PART 7--COVERAGE OF SERVICES PROVIDED BY FACILITIES AND PLANS OF 
              DEPARTMENTS OF DEFENSE AND VETERANS AFFAIRS

SEC. 4061. TREATMENT OF UNIFORMED SERVICES HEALTH PLAN AS ELIGIBLE 
              ORGANIZATION UNDER MEDICARE.

    (a) In General.--Section 1876 (42 U.S.C. 1395mm), as amended by 
section 4002(a), is further amended by adding at the end the following 
new subsection:
    ``(l) Notwithstanding any other provision of this section, a 
Uniformed Services Health Plan of the Department of Defense under 
chapter 55 of title 10, United States Code, shall be considered an 
eligible organization under this section, and the Secretary shall make 
payments to such Plan during a year on behalf of any individuals 
entitled to benefits under this title who are enrolled with such a Plan 
during the year in the same amounts and under the same terms and 
conditions under which the Secretary makes payments to eligible 
organizations with risk-sharing contracts under section 1876.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to items and services furnished under title XVIII of the Social 
Security Act on or after October 1, 1995.

SEC. 4062. COVERAGE OF SERVICES PROVIDED TO MEDICARE BENEFICIARIES BY 
              PLANS AND FACILITIES OF DEPARTMENT OF VETERANS AFFAIRS.

    (a) In General.--Title XVIII, as amended by sections 4001 and 4003, 
is further amended by adding at the end the following new section:

 ``treatment of plans and facilities of department of veterans affairs 
                              as providers

    ``Sec. 1895. (a) In General.--Notwithstanding any other provision 
of this title--
            ``(1) a VA health plan (as defined in section 1801(2) of 
        title 38, United States Code) shall be considered an eligible 
        organization for purposes of section 1876; and
            ``(2) a health care facility of the Department of Veterans 
        Affairs shall be considered a provider of services under 
        section 1861(u).
    ``(b) Eligibility for Payments.--
            ``(1) VA health plans.--The Secretary shall make payments 
        to a VA health plan during a year on behalf of any veteran, 
        other than a veteran described in section 1831(b) during the 
        year (other than any individuals described in section 1831(b) 
        of title 38, United States Code) in the same amounts and under 
        the same terms and conditions under which the Secretary makes 
        payments to eligible organizations with a risk-sharing contract 
        under section 1876.
            ``(2) Health care facilities.--The Secretary shall make 
        payments to a health care facility of the Department of 
        Veterans Affairs for services provided to an individual 
        entitled to benefits under this title in the same amounts and 
        under the same terms and conditions under which the Secretary 
        makes payments to provider of services under this title.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to items and services furnished under title XVIII of the Social 
Security Act on or after January 1, 1998.

SEC. 4063. CONFORMING AMENDMENTS.

    (a) Part A.--Section 1814 (42 U.S.C. 1395f) is amended by striking 
subsection (c).
    (b) Part B.--Section 1835 (42 U.S.C. 1395n) is amended by striking 
subsection (d).
    (c) Additional Conforming Amendment.--Section 1880(a) (42 U.S.C. 
1395qq(a)) is amended by striking ``, notwithstanding sections 1814(c) 
and 1835(d),''.
    (d) Effective Date.--The amendments made by this section shall take 
effect January 1, 1998.

                                                   Title IV, Subtitle B

                Subtitle B--Savings in Medicare Program

                   PART 1--SAVINGS RELATING TO PART A

SEC. 4101. REDUCTION IN UPDATE FOR INPATIENT HOSPITAL SERVICES.

    Section 1886(b)(3)(B)(i) (42 U.S.C. 1395ww(b)(3)(B)(i)), as amended 
by section 13501(a)(1) of OBRA-1993, is amended--
            (1) in subclause (XII)--
                    (A) by striking ``fiscal year 1997'' and inserting 
                ``for each of the fiscal years 1997 through 2000'', and
                    (B) by striking ``0.5 percentage point'' and 
                inserting ``2.0 percentage points''; and
            (2) in subclause (XIII), by striking ``fiscal year 1998'' 
        and inserting ``fiscal year 2003''.

SEC. 4102. REDUCTION IN ADJUSTMENT FOR INDIRECT MEDICAL EDUCATION.

    (a) In General.--Section 1886(d)(5)(B)(ii) (42 U.S.C. 
1395ww(d)(5)(B)(ii)) is amended to read as follows:
            ``(ii) For purposes of clause (i)(II), the indirect 
        teaching adjustment factor is equal to c * (((1+r) to the nth 
        power) - 1), where `r' is the ratio of the hospital's full-time 
        equivalent interns and residents to beds and `n' equals .405. 
        For discharges occurring on or after--
                    ``(I) May 1, 1986, and before October 1, 1995, `c' 
                is equal to 1.89, and
                    ``(II) October 1, 1995, `c' is equal to 0.74.''.
    (b) No Restandardization of Payment Amounts Required.--Section 
1886(d)(2)(C)(i) (42 U.S.C. 1395ww(d)(2)(C)(i)) is amended by striking 
``of 1985'' and inserting ``of 1985, but not taking into account the 
amendments made by section 4102(a) of the Health Security Act''.

SEC. 4103. REDUCTION IN PAYMENTS FOR CAPITAL-RELATED COSTS FOR 
              INPATIENT HOSPITAL SERVICES.

    (a) PPS Hospitals.--
            (1) Reduction in base payment rates.--Section 1886(g)(1)(A) 
        (42 U.S.C. 1395ww(g)(1)(A)), as amended by section 13501(a)(3) 
        of OBRA-1993, is amended by adding at the end the following new 
        sentence: ``In addition to the reduction described in the 
        preceding sentence, for discharges occurring after September 
        30, 1995, the Secretary shall reduce by 7.31 percent the 
        unadjusted standard Federal capital payment rate (as described 
        in 42 CFR 412.308(c), as in effect on the date of the enactment 
        of the Health Security Act) and shall reduce by 10.41 percent 
        the unadjusted hospital-specific rate (as described in 42 CFR 
        412.328(e)(1), as in effect on the date of the enactment of the 
        Health Security Act).''.
            (2) Reduction in update.--Section 1886(g)(1) (42 U.S.C. 
        1395ww(g)(1)) is amended--
                    (A) in subparagraph (B)(i)--
                            (i) by striking ``and (II)'' and inserting 
                        ``(II)'', and
                            (ii) by striking the semicolon at the end 
                        and inserting the following: ``, and (III) an 
                        annual update factor established for the 
                        prospective payment rates applicable to 
                        discharges in a fiscal year which (subject to 
                        reduction under subparagraph (C)) will be based 
                        upon such factor as the Secretary determines 
                        appropriate to take into account amounts 
                        necessary for the efficient and effective 
                        delivery of medically appropriate and necessary 
                        care of high quality;'';
                    (B) by redesignating subparagraph (C) as 
                subparagraph (D); and
                    (C) by inserting after subparagraph (B) the 
                following new subparagraph:
            ``(C)(i) With respect to payments attributable to portions 
        of cost reporting periods or discharges occurring during each 
        of the fiscal years 1996 through 2003, the Secretary shall 
        include a reduction in the annual update factor established 
        under subparagraph (B)(i)(III) for discharges in the year equal 
        to the applicable update reduction described in clause (ii) to 
        adjust for excessive increases in capital costs per discharge 
        for fiscal years prior to fiscal year 1992 (but in no event may 
        such reduction result in an annual update factor less than 
        zero).
            ``(ii) In clause (i), the term `applicable update 
        reduction' means, with respect to the update factor for a 
        fiscal year--
                    ``(I) 4.9 percentage points; or
                    ``(II) if the annual update factor for the previous 
                fiscal year was less than the applicable update 
                reduction for the previous year, the sum of 4.9 
                percentage points and the difference between the annual 
                update factor for the previous year and the applicable 
                update reduction for the previous year.''.
    (b) PPS-Exempt Hospitals.--Section 1861(v)(1) (42 U.S.C. 
1395x(v)(1)), as amended by section 4051(c)(2), is further amended by 
adding at the end the following new subparagraph:
    ``(U) Such regulations shall provide that, in determining the 
amount of the payments that may be made under this title with respect 
to the capital-related costs of inpatient hospital services furnished 
by a hospital that is not a subsection (d) hospital (as defined in 
section 1886(d)(1)(B)) or a subsection (d) Puerto Rico hospital (as 
defined in section 1886(d)(9)(A)), the Secretary shall reduce the 
amounts of such payments otherwise established under this title by 15 
percent for payments attributable to portions of cost reporting periods 
occurring during each of the fiscal years 1996 through 2003.''.

SEC. 4104. REVISIONS TO PAYMENT ADJUSTMENTS FOR DISPROPORTIONATE SHARE 
              HOSPITALS IN PARTICIPATING STATES.

    (a) Application of Alternative Adjustments.--Section 1886(d)(5) (42 
U.S.C. 1395ww(d)(5)) is amended--
            (1) by redesignating subparagraphs (H) and (I) as 
        subparagraphs (I) and (J); and
            (2) by inserting after subparagraph (G) the following new 
        subparagraph:
    ``(H)(i) In accordance with this subparagraph, the Secretary shall 
provide for an additional payment for each subsection (d) hospital that 
is located in a participating State under the Health Security Act 
during a cost reporting period and that meets the eligibility 
requirements described in clause (iii).
    ``(ii) The amount of the additional payment made under clause (i) 
for each discharge shall be determined by multiplying--
            ``(I) the sum of the amount determined under paragraph 
        (1)(A)(ii)(II) (or, if applicable, the amount determined under 
        paragraph (1)(A)(iii)) and the amount paid to the hospital 
        under subparagraph (A) for the discharge, by
            ``(II) the SSI adjustment percentage for the cost reporting 
        period in which the discharge occurs (as defined in clause 
        (iv)).
    ``(iii) A hospital meets the eligibility requirements described in 
this clause with respect to a cost reporting period if--
            ``(I) in the case of a hospital that is located in an urban 
        area and that has more than 100 beds, the hospital's SSI 
        patient percentage (as defined in clause (v)) for the cost 
        reporting period is not less than 5.5 percent;
            ``(II) in the case of a hospital that is located in an 
        urban area and that has less than 100 beds, the hospital's SSI 
        patient percentage is not less than 17 percent;
            ``(III) in the case of a hospital that is classified as a 
        rural referral center under subparagraph (C) or a sole 
        community hospital under subparagraph (D), the hospital's SSI 
        patient percentage for the cost reporting period is not less 
        than 23 percent; and
            ``(IV) in the case of any other hospital, the hospital's 
        SSI patient percentage is not less than 23 percent.
    ``(iv) For purposes of clause (ii), the `SSI adjustment percentage' 
applicable to a hospital for a cost reporting period is equal to--
            ``(I) in the case of a hospital described in clause 
        (iii)(I), the percentage determined in accordance with the 
        following formula: e to the nth power - 1, where `e' is the 
        natural antilog of 1 and where `n' is equal to (.5642 * (the 
        hospital's SSI patient percentage for the cost reporting period 
        - .055));
            ``(II) in the case of a hospital described in clause 
        (iii)(II) or clause (iii)(IV), 2 percent; and
            ``(III) in the case of a hospital described in clause 
        (iii)(III), the sum of 2 percent and .30 percent of the 
        difference between the hospital's SSI patient percentage for 
        the cost reporting period and 23 percent.
    ``(v) In this subparagraph, a hospital's `SSI patient percentage' 
with respect to a cost reporting period is equal to the fraction 
(expressed as a percentage)--
            ``(I) the numerator of which is the number of the 
        hospital's patient days for such period which were made up of 
        patients who (for such days) were entitled to benefits under 
        part A and were entitled to supplementary security income 
        benefits (excluding State supplementation) under title XVI; and
            ``(II) the denominator of which is the number of the 
        hospital's patient days for such period which were made up of 
        patients who (for such days) were entitled to benefits under 
        part A.''.
    (b) No Standardization Resulting From Reduction.--Section 
1886(d)(2)(C)(iv) (42 U.S.C. 1395ww(d)(2)(C)(iv)) is amended--
            (1) by striking ``exclude additional payments'' and 
        inserting ``adjust such estimate for changes in payments'';
            (2) by striking ``1989 or'' and inserting ``1989,''; and
            (3) by striking the period at the end and inserting the 
        following: ``, or the enactment of section 4104 of the Health 
        Security Act.''.
    (c) Conforming Amendment.--Section 1886(d)(5)(F)(i) (42 U.S.C. 
1395ww(d)(5)(F)(i)) is amended in the matter preceding subclause (I) by 
inserting after ``hospital'' the following: ``that is not located in a 
State that is a participating State under the Health Security Act''.

SEC. 4105. MORATORIUM ON DESIGNATION OF ADDITIONAL LONG-TERM CARE 
              HOSPITALS.

    Notwithstanding clause (iv) of section 1886(d)(1)(B) of the Social 
Security Act, a hospital which has an average inpatient length of stay 
(as determined by the Secretary of Health and Human Services) of 
greater than 25 days shall not be treated as a hospital described in 
such clause for purposes of title XVIII of such Act unless the hospital 
was treated as a hospital described in such clause for purposes of such 
title as of the date of the enactment of this Act.

SEC. 4106. EXTENSION OF FREEZE ON UPDATES TO ROUTINE SERVICE COSTS OF 
              SKILLED NURSING FACILITIES.

    (a) Payments Based on Cost Limits.--Section 1888(a) (42 U.S.C. 
1395yy(a)) is amended by striking ``112 percent'' each place it appears 
and inserting ``100 percent (adjusted by such amount as the Secretary 
determines to be necessary to preserve the savings resulting from the 
enactment of section 13503(a)(1) of the Omnibus Budget Reconciliation 
Act of 1993)''.
    (b) Payments Determined on Prospective Basis.--Section 
1888(d)(2)(B) (42 U.S.C. 1395yy(d)(2)(B)) is amended by striking ``105 
percent'' and inserting ``100 percent (adjusted by such amount as the 
Secretary determines to be necessary to preserve the savings resulting 
from the enactment of section 13503(b) of the Omnibus Budget 
Reconciliation Act of 1993)''.
    (c) Effective Date.--The amendments made by subsections (a) and (b) 
shall apply to cost reporting periods beginning on or after October 1, 
1995.

                   PART 2--SAVINGS RELATING TO PART B

SEC. 4111. ESTABLISHMENT OF CUMULATIVE EXPENDITURE GOALS FOR PHYSICIAN 
              SERVICES.

    (a) Use of Cumulative Performance Standard.--Section 1848(f)(2) (42 
U.S.C. 1395w-4(f)(2)) is amended--
            (1) in subparagraph (A)--
                    (A) in the heading, by striking ``In general'' and 
                inserting ``Fiscal years 1991 through 1994.--'',
                    (B) in the matter preceding clause (i), by striking 
                ``a fiscal year (beginning with fiscal year 1991)'' and 
                inserting ``fiscal years 1991, 1992, 1993, and 1994'', 
                and
                    (C) in the matter following clause (iv), by 
                striking ``subparagraph (B)'' and inserting 
                ``subparagraph (C)'';
            (2) in subparagraph (B), by striking ``subparagraph (A)'' 
        and inserting ``subparagraphs (A) and (B)'';
            (3) by redesignating subparagraphs (B) and (C) as 
        subparagraphs (C) and (D); and
            (4) by inserting after subparagraph (A) the following new 
        subparagraph:
                    ``(B) Fiscal years beginning with fiscal year 
                1995.--Unless Congress otherwise provides, the 
                performance standard rate of increase, for all 
                physicians' services and for each category of 
                physicians' services, for a fiscal year beginning with 
                fiscal year 1995 shall be equal to the performance 
                standard rate of increase determined under this 
                paragraph for the previous fiscal year, increased by 
                the product of--
                            ``(i) 1 plus the Secretary's estimate of 
                        the weighted average percentage increase 
                        (divided by 100) in the fees for all 
                        physicians' services or for the category of 
                        physicians' services, respectively, under this 
                        part for portions of calendar years included in 
                        the fiscal year involved,
                            ``(ii) 1 plus the Secretary's estimate of 
                        the percentage increase or decrease (divided by 
                        100) in the average number of individuals 
                        enrolled under this part (other than HMO 
                        enrollees) from the previous fiscal year to the 
                        fiscal year involved,
                            ``(iii) 1 plus the Secretary's estimate of 
                        the average annual percentage growth (divided 
                        by 100) in volume and intensity of all 
                        physicians' services or of the category of 
                        physicians' services, respectively, under this 
                        part for the 5-fiscal-year period ending with 
                        the preceding fiscal year (based upon 
                        information contained in the most recent annual 
                        report made pursuant to section 1841(b)(2)), 
                        and
                            ``(iv) 1 plus the Secretary's estimate of 
                        the percentage increase or decrease (divided by 
                        100) in expenditures for all physicians' 
                        services or of the category of physicians' 
                        services, respectively, in the fiscal year 
                        (compared with the previous fiscal year) which 
                        are estimated to result from changes in law or 
                        regulations affecting the percentage increase 
                        described in clause (i) and which is not taken 
                        into account in the percentage increase 
                        described in clause (i),
                minus 1, multiplied by 100, and reduced by the 
                performance standard factor (specified in subparagraph 
                (C)).''.
    (b) Treatment of Default Update.--
            (1) In general.--Section 1848(d)(3)(B) (42 U.S.C. 1395w-
        4(d)(3)(B)) is amended--
                    (A) in clause (i)--
                            (i) in the heading, by striking ``In 
                        general'' and inserting ``1992 through 1996'', 
                        and
                            (ii) by striking ``for a year'' and 
                        inserting ``for 1992, 1993, 1994, 1995, and 
                        1996''; and
                    (B) by adding after clause (ii) the following new 
                clause:
                            ``(iii) Years beginning with 1997.--
                                    ``(I) In general.--The update for a 
                                category of physicians' services for a 
                                year beginning with 1997 provided under 
                                subparagraph (A) shall be increased or 
                                decreased by the same percentage by 
                                which the cumulative percentage 
                                increase in actual expenditures for 
                                such category of physicians' services 
                                for such year was less or greater, 
                                respectively, than the performance 
                                standard rate of increase (established 
                                under subsection (f)) for such category 
                                of services for such year.
                                    ``(II) Cumulative percentage 
                                increase defined.--In subclause (I), 
                                the `cumulative percentage increase in 
                                actual expenditures' for a year shall 
                                be equal to the product of the adjusted 
                                increases for each year beginning with 
                                1995 up to and including the year 
                                involved, minus 1 and multiplied by 
                                100. In the previous sentence, the 
                                `adjusted increase' for a year is equal 
                                to 1 plus the percentage increase in 
                                actual expenditures for the year.''.
            (2) Conforming amendment.--Section 1848(d)(3)(A)(i) (42 
        U.S.C. 1395w-4(d)(3)(A)(i)) is amended by striking 
        ``subparagraph (B)'' and inserting ``subparagraphs (B) and 
        (C)''.

SEC. 4112. USE OF REAL GDP TO ADJUST FOR VOLUME AND INTENSITY; REPEAL 
              OF RESTRICTION ON MAXIMUM REDUCTION PERMITTED IN DEFAULT 
              UPDATE.

    (a) Use of Real GDP to Adjust for Volume and Intensity.--Section 
1848(f)(2)(B)(iii) (42 U.S.C. 1395w-4(f)(2)(B)(iii)), as added by 
section 4111(a), is amended to read as follows:
                            ``(iii) 1 plus the average per capita 
                        growth in the real gross domestic product 
                        (divided by 100) for the 5-fiscal-year period 
                        ending with the previous fiscal year (increased 
                        by 1.5 percentage points for the category of 
                        services consisting of primary care services), 
                        and''.
    (b) Repeal of Restriction on Maximum Reduction.--Section 
1848(d)(3)(B)(ii) (42 U.S.C. 1395w-4(d)(3)(B)(ii)), as amended by 
section 13512(b) of OBRA-1993, is amended--
            (1) in the heading, by inserting ``in certain years'' after 
        ``adjustment'';
            (2) in the matter preceding subclause (I), by striking 
        ``for a year'';
            (3) in subclause (I), by adding ``and'' at the end;
            (4) in subclause (II), by striking ``, and'' and inserting 
        a period; and
            (5) by striking subclause (III).
    (c) Repeal of Performance Standard Factor.--
            (1) In general.--Section 1842(f)(2), as amended by section 
        4111(a)(3), is amended by striking subparagraph (C) and 
        redesignating subparagraph (D) as subparagraph (C).
            (2) Conforming amendment.--Section 1842(f)(2)(B), as added 
        by section 4111(a), is amended in the matter following clause 
        (iv) by striking ``1, multiplied by 100'' and all that follows 
        through ``subparagraph (C))'' and inserting ``1 and multiplied 
        by 100''.

SEC. 4113. REDUCTION IN CONVERSION FACTOR FOR PHYSICIAN FEE SCHEDULE 
              FOR 1995.

    Section 1848(d)(1) (42 U.S.C. 1395w-4(d)(1)) is amended--
            (1) in subparagraph (A), by inserting after ``subparagraph 
        (B)'' the following: ``, and, in the case of 1995, specified in 
        subparagraph (C)'';
            (2) by redesignating subparagraph (C) as subparagraph (D); 
        and
            (3) by inserting after subparagraph (B) the following new 
        subparagraph:
                    ``(C) Special provision for 1995.--For purposes of 
                subparagraph (A), the conversion factor specified in 
                this subparagraph for 1995 is--
                            ``(i) in the case of physicians' services 
                        included in the category of primary care 
                        services (as defined in subsection (j)(1)), the 
                        conversion factor established under this 
                        subsection for 1994 adjusted by the update 
                        established under paragraph (3) for 1995; and
                            ``(ii) in the case of any other physicians' 
                        services, the conversion factor established 
                        under this subsection for 1994 reduced by 3 
                        percent and adjusted by the update established 
                        under paragraph (3) for 1995.''.

SEC. 4114. LIMITATIONS ON PAYMENT FOR PHYSICIANS' SERVICES FURNISHED BY 
              HIGH-COST HOSPITAL MEDICAL STAFFS.

    (a) In General.--
            (1) Limitations described.--Part B of title XVIII, as 
        amended by section 2003(a), is amended by inserting after 
        section 1848 the following new section:

  ``limitations on payment for physicians' services furnished by high-
                      cost hospital medical staffs

    ``Sec. 1849. (a) Services Subject to Reduction.--
            ``(1) Determination of hospital-specific per admission 
        relative value.--Not later than October 1 of each year 
        (beginning with 1997), the Secretary shall determine for each 
        hospital--
                    ``(A) the hospital-specific per admission relative 
                value under subsection (b)(2) for the following year; 
                and
                    ``(B) whether such hospital-specific relative value 
                is projected to exceed the allowable average per 
                admission relative value applicable to the hospital for 
                the following year under subsection (b)(1).
            ``(2) Reduction for services at hospitals exceeding 
        allowable average per admission relative value.--If the 
        Secretary determines (under paragraph (1)) that a medical 
        staff's hospital-specific per admission relative value for a 
        year (beginning with 1998) is projected to exceed the allowable 
        average per admission relative value applicable to the medical 
        staff for the year, the Secretary shall reduce (in accordance 
        with subsection (c)) the amount of payment otherwise determined 
        under this part for each physician's service furnished during 
        the year to an inpatient of the hospital by an individual who 
        is a member of the hospital's medical staff.
            ``(3) Timing of determination; notice to hospitals and 
        carriers.--Not later than October 1 of each year (beginning 
        with 1997), the Secretary shall notify the medical executive 
        committee of each hospital (as set forth in the Standards of 
        the Joint Commission on the Accreditation of Health 
        Organizations) of the determinations made with respect to the 
        medical staff under paragraph (1).
    ``(b) Determination of Allowable Average Per Admission Relative 
Value and Hospital-Specific Per Admission Relative Values.--
            ``(1) Allowable average per admission relative value.--
                    ``(A) Urban hospitals.--In the case of a hospital 
                located in an urban area, the allowable average per 
                admission relative value established under this 
                subsection for a year is equal to 125 percent (or 120 
                percent for years after 1999) of the median of 1996 
                hospital-specific per admission relative values 
                determined under paragraph (2) for all hospital medical 
                staffs.
                    ``(B) Rural hospitals.--In the case of a hospital 
                located in a rural area, the allowable average per 
                admission relative value established under this 
                subsection for 1998 and each succeeding year, is equal 
                to 140 percent of the median of the 1996 hospital-
                specific per admission relative values determined under 
                paragraph (2) for all hospital medical staffs.
            ``(2) Hospital-specific per admission relative value.--
                    ``(A) In general.--The hospital-specific per 
                admission relative value projected for a hospital 
                (other than a teaching hospital) for a calendar year, 
                shall be equal to the average per admission relative 
                value (as determined under section 1848(c)(2)) for 
                physicians' services furnished to inpatients of the 
                hospital by the hospital's medical staff (excluding 
                interns and residents) during the second year preceding 
                such calendar year, adjusted for variations in case-mix 
                and disproportionate share status among hospitals (as 
                determined by the Secretary under subparagraph (C)).
                    ``(B) Special rule for teaching hospitals.--The 
                hospital-specific relative value projected for a 
                teaching hospital in a calendar year shall be equal to 
                the sum of--
                            ``(i) the average per admission relative 
                        value (as determined under section 1848(c)(2)) 
                        for physicians' services furnished to 
                        inpatients of the hospital by the hospital's 
                        medical staff (excluding interns and residents) 
                        during the second year preceding such calendar 
                        year; and
                            ``(ii) the equivalent per admission 
                        relative value (as determined under section 
                        1848(c)(2)) for physicians' services furnished 
                        to inpatients of the hospital by interns and 
                        residents of the hospital during the second 
                        year preceding such calendar year, adjusted for 
                        variations in case-mix, disproportionate share 
                        status, and teaching status among hospitals (as 
                        determined by the Secretary under subparagraph 
                        (C)). The Secretary shall determine such 
                        equivalent relative value unit per admission 
                        for interns and residents based on the best 
                        available data for teaching hospitals and may 
                        make such adjustment in the aggregate.
                    ``(C) Adjustment for teaching and disproportionate 
                share hospitals.--The Secretary shall adjust the 
                allowable per admission relative values otherwise 
                determined under this paragraph to take into account 
                the needs of teaching hospitals and hospitals receiving 
                additional payments under subparagraphs (F) and (G) of 
                section 1886(d)(5). The adjustment for teaching status 
                or disproportionate share shall not be less than zero.
    ``(c) Amount of Reduction.--The amount of payment otherwise made 
under this part for a physician's service that is subject to a 
reduction under subsection (a) during a year shall be reduced 15 
percent, in the case of a service furnished by a member of the medical 
staff of the hospital for which the Secretary determines under 
subsection (a)(1) that the hospital medical staff's projected relative 
value per admission exceeds the allowable average per admission 
relative value.
    ``(d) Reconciliation of Reductions Based on Hospital-Specific 
Relative Value Per Admission With Actual Relative Values.--
            ``(1) Determination of actual average per admission 
        relative value.--Not later than October 1 of each year 
        (beginning with 1999), the Secretary shall determine the actual 
        average per admission relative value (as determined pursuant to 
        section 1848(c)(2)) for the physicians' services furnished by 
        members of a hospital's medical staff to inpatients of the 
        hospital during the previous year, on the basis of claims for 
        payment for such services that are submitted to the Secretary 
        not later than 90 days after the last day of such previous 
        year. The actual average per admission shall be adjusted by the 
        appropriate case-mix, disproportionate share factor, and 
        teaching factor for the hospital medical staff (as determined 
        by the Secretary under subsection (b)(2)(C)). Notwithstanding 
        any other provision of this title, no payment may be made under 
        this part for any physician's service furnished by a member of 
        a hospital's medical staff to an inpatient of the hospital 
        during a year unless the hospital submits a claim to the 
        Secretary for payment for such service not later than 90 days 
        after the last day of the year.
            ``(2) Reconciliation with reductions taken.--In the case of 
        a hospital for which the payment amounts for physicians' 
        services furnished by members of the hospital's medical staff 
        to inpatients of the hospital were reduced under this section 
        for a year--
                    ``(A) if the actual average per admission relative 
                value for such hospital's medical staff during the year 
                (as determined by the Secretary under paragraph (1)) 
                did not exceed the allowable average per admission 
                relative value applicable to the hospital's medical 
                staff under subsection (b)(1) for the year, the 
                Secretary shall reimburse the fiduciary agent for the 
                medical staff by the amount by which payments for such 
                services were reduced for the year under subsection 
                (c), including interest at an appropriate rate 
                determined by the Secretary;
                    ``(B) if the actual average per admission relative 
                value for such hospital's medical staff during the year 
                is less than 15 percentage points above the allowable 
                average per admission relative value applicable to the 
                hospital's medical staff under subsection (b)(1) for 
                the year, the Secretary shall reimburse the fiduciary 
                agent for the medical staff, as a percent of the total 
                allowed charges for physicians' services performed in 
                such hospital (prior to the withhold), the difference 
                between 15 percentage points and the actual number of 
                percentage points that the staff exceeds the limit 
                allowable average per admission relative value, 
                including interest at an appropriate rate determined by 
                the Secretary; and
                    ``(C) if the actual average per admission relative 
                value for such hospital's medical staff during the year 
                exceeded the allowable average per admission relative 
                value applicable to the hospital's medical staff by 15 
                percentage points or more, none of the withhold is paid 
                to the fiduciary agent for the medical staff.
            ``(3) Medical executive committee of a hospital.--Each 
        medical executive committee of a hospital whose medical staff 
        is projected to exceed the allowable relative value per 
        admission for a year, shall have one year from the date of 
        notification that such medical staff is projected to exceed the 
        allowable relative value per admission to designate a fiduciary 
        agent for the medical staff to receive and disburse any 
        appropriate withhold amount made by the carrier.
            ``(4) Alternative reimbursement to members of staff.--At 
        the request of a fiduciary agent for the medical staff, if the 
        fiduciary agent for the medical staff is owed the reimbursement 
        described in paragraph (2)(B) for excess reductions in payments 
        during a year, the Secretary shall make such reimbursement to 
        the members of the hospital's medical staff, on a pro-rata 
        basis according to the proportion of physicians' services 
        furnished to inpatients of the hospital during the year that 
        were furnished by each member of the medical staff.
    ``(e) Definitions.--In this section, the following definitions 
apply:
            ``(1) Medical staff.--An individual furnishing a 
        physician's service is considered to be on the medical staff of 
        a hospital--
                    ``(A) if (in accordance with requirements for 
                hospitals established by the Joint Commission on 
                Accreditation of Health Organizations)--
                            ``(i) the individual is subject to bylaws, 
                        rules, and regulations established by the 
                        hospital to provide a framework for the self-
                        governance of medical staff activities;
                            ``(ii) subject to such bylaws, rules, and 
                        regulations, the individual has clinical 
                        privileges granted by the hospital's governing 
                        body; and
                            ``(iii) under such clinical privileges, the 
                        individual may provide physicians' services 
                        independently within the scope of the 
                        individual's clinical privileges, or
                    ``(B) if such physician provides at least one 
                service to a medicare beneficiary in such hospital.
            ``(2) Rural area; urban area.--The terms `rural area' and 
        `urban area' have the meaning given such terms under section 
        1886(d)(2)(D).
            ``(3) Teaching hospital.--The term `teaching hospital' 
        means a hospital which has a teaching program approved as 
        specified in section 1861(b)(6).''.
            (2) Conforming amendments.--(A) Section 1833(a)(1)(N) (42 
        U.S.C. 1395l(a)(1)(N)) is amended by inserting ``(subject to 
        reduction under section 1849)'' after ``1848(a)(1)''.
            (B) Section 1848(a)(1)(B) (42 U.S.C. 1395w-4(a)(1)(B)) is 
        amended by striking ``this subsection,'' and inserting ``this 
        subsection and section 1849,''.
    (b) Requiring Physicians To Identify Hospital at Which Service 
Furnished.--Section 1848(g)(4)(A)(i) (42 U.S.C. 1395w-4(g)(4)(A)(i)) is 
amended by striking ``beneficiary,'' and inserting ``beneficiary (and, 
in the case of a service furnished to an inpatient of a hospital, 
report the hospital identification number on such claim form),''.
    (c) Effective Date.--The amendments made by this section shall 
apply to services furnished on or after January 1, 1998.

SEC. 4115. MEDICARE INCENTIVES FOR PHYSICIANS TO PROVIDE PRIMARY CARE.

    (a) Resource-Based Practice Expense Relative Value Units.--
            (1) Increase in practice expense relative value units for 
        certain services.--Section 1848(c)(2) (42 U.S.C. 1395w-
        4(c)(2)), as amended by sections 13513 and 13514 of OBRA-93, is 
        amended by adding at the end the following new subparagraph:
                    ``(G) Increase in practice expense relative value 
                units for certain services.--The Secretary shall 
                increase the practice expense relative value units 
                applied in primary care services, as defined in section 
                1842(i)(4), by 10 percent, beginning with 1996.''.
            (2) Assuring budget neutrality.--Section 1842(c)(2)(F) (42 
        U.S.C. 1395u(c)(2)(F)), as added by section 13513 and amended 
        by section 13514 of OBRA-93, is amended by adding at the end 
        the following new clause:
                            ``(iii) shall reduce the relative values 
                        for all services (other than anesthesia 
                        services and primary care services, as defined 
                        in section 1842(i)(4)) established under this 
                        paragraph (and, in the case of anesthesia 
                        services, the conversion factor established by 
                        the Secretary for such services) by such 
                        percentage as the Secretary determines to be 
                        necessary so that, beginning in 1996, the 
                        amendment made by section 4115(a)(1) of the 
                        Health Security Act would not result in 
                        expenditures under this section that exceed the 
                        amount of such expenditures that would have 
                        been made if such amendment had not been 
                        made.''.
            (3) Study.--The Secretary of Health and Human Services 
        shall--
                    (A) develop a methodology for implementing in 1997 
                a resource-based system for determining practice 
                expense relative values unit for each physician's 
                service, and
                    (B) transmit a report by June 30, 1996, on the 
                methodology developed under paragraph (1) to the 
                Committees on Ways and Means and Energy and Commerce of 
                the House of Representatives and the Committee on 
                Finance of the Senate. The reported shall include a 
                presentation of the data utilized in developing the 
                methodology and an explanation of the methodology.
    (b) Office Visit Pre- and Post-Time.--
            (1) Increase in work relative value units for office 
        visits.--Section 1848(c)(2) (42 U.S.C. 1395w-4(c)(2)), as 
        amended by subsection (a)(1), is amended by adding at the end 
        the following new subparagraph:
                    ``(H) Increase in work relative value units for 
                certain services.--The Secretary shall increase the 
                work relative value units applied to office visits by 
                10 percent, beginning with 1996.''.
            (2) Assuring budget neutrality.--Section 1842(c)(2)(F)(iii) 
        (42 U.S.C. 1395u(c)(2)(F)(iii)), as added by subsection (a)(2), 
        is amended by striking ``section 4115(a)(1)'' and substituting 
        ``sections 4115(a)(1) and (b)(1)''.
    (c) Office Consultations.--Section 1848(c)(2) (42 U.S.C. 1395w-
4(c)(2)), as amended by subsections (a)(1) and (b)(1), is amended by 
adding at the end the following new subparagraph:
                    ``(I) Amendment in relative values for office 
                consultations.--The Secretary shall reduce the work, 
                practice expense and malpractice relative value 
                components of office consultations to be equal to the 
                work, practice expense and malpractice relative value 
                components for comparable office visits beginning with 
                1996. In making such adjustment, the Secretary shall 
                apply the savings from such reduction to increase each 
                of the relative value components for office visits in a 
                manner that would not result in expenditures under this 
                section that exceed the amount of such expenditures 
                that would have been made if such amendment had not 
                been made.''.
    (d) Outlier Intensity Relative Value Adjustments.--
            (1) Adjustment of outlier intensity of relative values.--
        Section 1848(c)(2) (42 U.S.C. 1395w-4(c)(2)), as amended by 
        subsections (a)(1), (b)(1), and (c), is amended by adding at 
        the end the following new subparagraph:
                    ``(J) Adjustment of outlier intensity of relative 
                values.--Beginning with 1996, the Secretary shall 
                reduce the work relative value components of 
                procedures, or classes of procedures, where the 
                intensity exceeds thresholds established by the 
                Secretary. In the previous sentence, intensity shall 
                mean the work relative value units for the procedure 
                divided by the time for the procedure. The Secretary 
                shall apply the savings from such reductions to 
                increase the work relative value components of primary 
                care services, as defined in section 1842(i)(4), such 
                that the changes made by this subsection would not 
                result in expenditures under this section that exceed 
                the amount of such expenditures that would have been 
                made if such amendment had not been made.''.
    (e) Changes In Underserved Area Bonus Payments.--
            (1) In general.--Section 1833(m) (42 U.S.C. 1395l(m)) is 
        amended--
                    (A) by striking ``10 percent'' and inserting ``a 
                percent'',
                    (B) by striking ``service'' the last place it 
                appears and inserting ``services'', and
                    (C) by adding the following new sentence: ``The 
                percent referred to in the previous sentence is 20 
                percent in the case of primary care services, as 
                defined in section 1842(i)(4), and 10 percent for 
                services other than primary care services furnished in 
                health professional shortage areas located in rural 
                areas as defined in section 1886(d)(2)(D).''.
            (2) The amendments made by paragraph (1) are effective for 
        services furnished on or after January 1, 1996.

SEC. 4116. ELIMINATION OF FORMULA-DRIVEN OVERPAYMENTS FOR CERTAIN 
              OUTPATIENT HOSPITAL SERVICES.

    (a) Ambulatory Surgical Center Procedures.--Section 
1833(i)(3)(B)(i)(II) (42 U.S.C. 1395l(i)(3)(B)(i)(II)) is amended--
            (1) by striking ``of 80 percent''; and
            (2) by striking the period at the end and inserting the 
        following: ``, less the amount a provider may charge as 
        described in clause (ii) of section 1866(a)(2)(A).''.
    (b) Radiology Services and Diagnostic Procedures.--Section 
1833(n)(1)(B)(i)(II) (42 U.S.C. 1395l(n)(1)(B)(i)(II)) is amended--
            (1) by striking ``of 80 percent''; and
            (2) by striking the period at the end and inserting the 
        following: ``, less the amount a provider may charge as 
        described in clause (ii) of section 1866(a)(2)(A).''.
    (c) Effective Date.--The amendments made by this section shall 
apply to services furnished during portions of cost reporting periods 
occurring on or after July 1, 1994.

SEC. 4117. IMPOSITION OF COINSURANCE ON LABORATORY SERVICES.

    (a) In General.--Paragraphs (1)(D) and (2)(D) of section 1833(a) 
(42 U.S.C. 1395l(a)) are each amended--
            (1) by striking ``(or 100 percent'' and all that follows 
        through ``the first opinion))''; and
            (2) by striking ``100 percent of such negotiated rate'' and 
        inserting ``80 percent of such negotiated rate''.
    (b) Effective Date.--The amendments made by subsection (a) shall 
apply to tests furnished on or after January 1, 1995.

SEC. 4118. APPLICATION OF COMPETITIVE ACQUISITION PROCESS FOR PART B 
              ITEMS AND SERVICES.

    (a) General Rule.--Part B of title XVIII of the Social Security Act 
is amended by inserting after section 1846 the following:

            ``competition acquisition for items and services

    ``Sec. 1847. (a) Establishment of Bidding Areas.--
            ``(1) In general.--The Secretary shall establish 
        competitive acquisition areas for the purpose of awarding a 
        contract or contracts for the furnishing under this part of the 
        items and services described in subsection (c) on or after 
        January 1, 1995. The Secretary may establish different 
        competitive acquisition areas under this subsection for 
        different classes of items and services under this part.
            ``(2) Criteria for establishment.--The competitive 
        acquisition areas established under paragraph (1) shall--
                    ``(A) initially be, or be within, metropolitan 
                statistical areas; and
                    ``(B) be chosen based on the availability and 
                accessibility of suppliers and the probable savings to 
                be realized by the use of competitive bidding in the 
                furnishing of items and services in the area.
    ``(b) Awarding of Contracts in Areas.--
            ``(1) In general.--The Secretary shall conduct a 
        competition among individuals and entities supplying items and 
        services under this part for each competitive acquisition area 
        established under subsection (a) for each class of items and 
        services.
            ``(2) Conditions for awarding contract.--The Secretary may 
        not award a contract to any individual or entity under the 
        competition conducted pursuant to paragraph (1) to furnish an 
        item or service under this part unless the Secretary finds that 
        the individual or entity--
                    ``(A) meets quality standards specified by the 
                Secretary for the furnishing of such item or service; 
                and
                    ``(B) offers to furnish a total quantity of such 
                item or service that is sufficient to meet the expected 
                need within the competitive acquisition area.
            ``(3) Contents of contract.--A contract entered into with 
        an individual or entity under the competition conducted 
        pursuant to paragraph (1) shall specify (for all of the items 
        and services within a class)--
                    ``(A) the quantity of items and services the entity 
                shall provide; and
                    ``(B) such other terms and conditions as the 
                Secretary may require.
    ``(c) Services Described.--The items and services to which the 
provisions of this section shall apply are as follows:
            ``(1) Magnetic resonance imaging tests and computerized 
        axial tomography scans, including a physician's interpretation 
        of the results of such tests and scans.
            ``(2) Oxygen and oxygen equipment.
            ``(3) Such other items and services for which the Secretary 
        determines that the use of competitive acquisition under this 
        section will be appropriate and cost-effective.''.
    (b) Items and Services To Be Furnished Only Through Competitive 
Acquisition.--Section 1862(a) (42 U.S.C. 1395y(a)), as amended by 
section 4034(b)(4), is amended--
            (1) by striking ``or'' at the end of paragraph (14);
            (2) by striking the period at the end of paragraph (15) and 
        inserting ``; or''; and
            (3) by inserting after paragraph (15) the following new 
        paragraph:
            ``(16) where such expenses are for an item or service 
        furnished in a competitive acquisition area (as established by 
        the Secretary under section 1847(a)) by an individual or entity 
        other than the supplier with whom the Secretary has entered 
        into a contract under section 1847(b) for the furnishing of 
        such item or service in that area, unless the Secretary finds 
        that such expenses were incurred in a case of urgent need.''.
    (c) Reduction in Payment Amounts if Competitive Acquisition Fails 
to Achieve Minimum Reduction in Payments.--Notwithstanding any other 
provision of title XVIII of the Social Security Act, if the 
establishment of competitive acquisition areas under section 1847 of 
such Act (as added by subsection (a)) and the limitation of coverage 
for items and services under part B of such title to items and services 
furnished by providers with competitive acquisition contracts under 
such section does not result in a reduction of at least 10 percent in 
the projected payment amount that would have applied to the item or 
service under part B if the item or service had not been furnished 
through competitive acquisition under such section, the Secretary shall 
reduce the payment amount by such percentage as the Secretary 
determines necessary to result in such a reduction.
    (d) Effective Date.--The amendments made by this section shall 
apply to items and services furnished under part B of title XVIII of 
the Social Security Act on or after January 1, 1995.

SEC. 4119. APPLICATION OF COMPETITIVE ACQUISITION PROCEDURES FOR 
              LABORATORY SERVICES.

    (a) In General.--Section 1847(c), as added by section 4118, is 
amended--
            (1) by redesignating paragraph (4) as paragraph (5); and
            (2) by inserting after paragraph (3) the following new 
        paragraph:
            ``(4) Clinical diagnostic laboratory tests.''.
    (b) Reduction in Fee Schedule Amounts if Competitive Acquisition 
Fails to Achieve Savings.--Section 1833(h) (42 U.S.C. 1395l(h)) is 
amended by adding at the end the following new paragraph:
    ``(7) Notwithstanding any other provision of this subsection, if 
the Secretary applies the authority provided under section 1847 to 
establish competitive acquisition areas for the furnishing of clinical 
diagnostic laboratory tests in a year and the application of such 
authority does not result in a reduction of at least 10 percent in the 
projected payment amount that would have applied to such tests under 
this section if the tests had not been furnished through competitive 
acquisition under section 1847, the Secretary shall reduce each payment 
amount otherwise determined under the fee schedules and negotiated 
rates established under this subsection by such percentage as the 
Secretary determines necessary to result in such a reduction.''.

               PART 3--SAVINGS RELATING TO PARTS A AND B

SEC. 4131. MEDICARE SECONDARY PAYER CHANGES.

    (a) Extension of Data Match.--
            (1) Section 1862(b)(5)(C) (42 U.S.C. 1395y(b)(5)(C)) is 
        amended by striking clause (iii).
            (2) Section 6103(l)(12) of the Internal Revenue Code of 
        1986 is amended by striking subparagraph (F).
    (b) Repeal of Sunset on Application to Disabled Employees of 
Employers with More than 100 Employees.--Section 1862(b)(1)(B)(iii) (42 
U.S.C. 1395y(b)(1)(B)(iii)), as amended by section 13561(b) of OBRA-
1993, is amended--
            (1) in the heading, by striking ``Sunset'' and inserting 
        ``Effective date''; and
            (2) by striking ``, and before October 1, 1998''.
    (c) Extension of Period for End Stage Renal Disease 
Beneficiaries.--Section 1862(b)(1)(C) (42 U.S.C. 1395y(b)(1)(C)), as 
amended by section 13561(c) of OBRA-1993, is amended in the second 
sentence by striking ``and on or before October 1, 1998,''.

SEC. 4132. PAYMENT LIMITS FOR HMOS AND CMPS WITH RISK-SHARING 
              CONTRACTS.

    (a) In General.--Section 1876(a)(1)(C) (42 U.S.C. 1395mm(a)(1)(C)) 
is amended--
            (1) by inserting ``, subject to adjustment to take into 
        account the provisions of the succeeding clauses'' before the 
        period,
            (2) by striking ``(C)'' and inserting ``(C)(i)'', and
            (3) by adding at the end the following new clauses:
    ``(ii) The portion of the annual per capita rate of payment for 
each such class attributable to payments made from the Federal 
Supplementary Medical Insurance Trust Fund may not exceed 95 percent of 
the following amount (unless the portion of the annual per capita rate 
of payment for each such class attributable to payments made from the 
Federal Hospital Insurance Trust Fund is less than 95 percent of the 
weighted national average of all adjusted average per capita costs 
determined under paragraph (4) for that class that are attributable to 
payments made from the Federal Hospital Insurance Trust Fund):
            ``(I) For 1995, 150 percent of the weighted national 
        average of all adjusted average per capita costs determined 
        under paragraph (4) for that class that are attributable to 
        payments made from such Trust Fund, plus 80 percent of the 
        amount by which (if any) the adjusted average per capita cost 
        for that class exceeds 150 percent of that weighted national 
        average.
            ``(II) For 1996, 150 percent of the weighted national 
        average of all adjusted average per capita costs determined 
        under paragraph (4) for that class that are attributable to 
        payments made from such Trust Fund, plus 60 percent of the 
        amount by which (if any) the adjusted average per capita cost 
        for that class exceeds 150 percent of that weighted national 
        average.
            ``(III) For 1997, 150 percent of the weighted national 
        average of all adjusted average per capita costs determined 
        under paragraph (4) for that class that are attributable to 
        payments made from such Trust Fund, plus 40 percent of the 
        amount by which (if any) the adjusted average per capita cost 
        for that class exceeds 150 percent of that weighted national 
        average.
            ``(IV) For 1998, 150 percent of the weighted national 
        average of all adjusted average per capita costs determined 
        under paragraph (4) for that class that are attributable to 
        payments made from such Trust Fund, plus 20 percent of the 
        amount by which (if any) the adjusted average per capita cost 
        for that class exceeds 150 percent of that weighted national 
        average.
            ``(V) For 1999 and each succeeding year (subject to the 
        establishment by the Secretary of alternative limits under 
        clause (vi)), 150 percent of the weighted national average of 
        all adjusted average per capita costs determined under 
        paragraph (4) for that class that are attributable to payments 
        made from such Trust Fund.
    ``(iii) The portion of the annual per capita rate of payment for 
each such class attributable to payments made from the Federal Hospital 
Insurance Trust Fund may not exceed 95 percent of the following amount 
(unless the portion of the annual per capita rate of payment for each 
such class attributable to payments made from the Federal Supplementary 
Medical Insurance Trust Fund is less than 95 percent of the weighted 
national average of all adjusted average per capita costs determined 
under paragraph (4) for that class that are attributable to payments 
made from the Federal Supplementary Medical Insurance Trust Fund):
            ``(I) For 1995, 170 percent of the weighted national 
        average of all adjusted average per capita costs determined 
        under paragraph (4) for that class that are attributable to 
        payments made from such Trust Fund, plus 80 percent of the 
        amount by which (if any) the adjusted average per capita cost 
        for that class exceeds 170 percent of that weighted national 
        average.
            ``(II) For 1996, 170 percent of the weighted national 
        average of all adjusted average per capita costs determined 
        under paragraph (4) for that class that are attributable to 
        payments made from such Trust Fund, plus 60 percent of the 
        amount by which (if any) the adjusted average per capita cost 
        for that class exceeds 170 percent of that weighted national 
        average.
            ``(III) For 1997, 170 percent of the weighted national 
        average of all adjusted average per capita costs determined 
        under paragraph (4) for that class that are attributable to 
        payments made from such Trust Fund, plus 40 percent of the 
        amount by which (if any) the adjusted average per capita cost 
        for that class exceeds 170 percent of that weighted national 
        average.
            ``(IV) For 1998, 170 percent of the weighted national 
        average of all adjusted average per capita costs determined 
        under paragraph (4) for that class that are attributable to 
        payments made from such Trust Fund, plus 20 percent of the 
        amount by which (if any) the adjusted average per capita cost 
        for that class exceeds 170 percent of that weighted national 
        average.
            ``(V) For 1999 and each succeeding year (subject to the 
        establishment by the Secretary of alternative limits under 
        clause (vi)), 170 percent of the weighted national average of 
        all adjusted average per capita costs determined under 
        paragraph (4) for that class that are attributable to payments 
        made from such Trust Fund.
    ``(iv) For 1995 and succeeding years, the portion of the annual per 
capita rate of payment for each such class attributable to payments 
made from the Federal Supplementary Medical Insurance Trust Fund may 
not be less than 80 percent of 95 percent of the weighted national 
average of all adjusted average per capita costs determined under 
paragraph (4) for that class that are attributable to payments made 
from such Trust Fund, unless the portion of the annual per capita rate 
of payment for each such class attributable to payments made from the 
Federal Hospital Insurance Trust Fund is greater than 95 percent of the 
weighted national average of all adjusted average per capita costs 
determined under paragraph (4) for that class that are attributable to 
payments made from the Federal Hospital Insurance Trust Fund.
    ``(v) For 1995 and succeeding years, the portion of the annual per 
capita rate of payment for each such class attributable to payments 
made from the Federal Hospital Insurance Trust Fund may not be less 
than 80 percent of 95 percent of the weighted national average of all 
adjusted average per capita costs determined under paragraph (4) for 
that class that are attributable to payments made from such Trust Fund, 
unless the portion of the annual per capita rate of payment for each 
such class attributable to payments made from the Federal Supplementary 
Medical Insurance Trust Fund is greater than 95 percent of the weighted 
national average of all adjusted average per capita costs determined 
under paragraph (4) for that class that are attributable to payments 
made from the Federal Supplementary Medical Insurance Trust Fund.
    ``(vi) For 2000 and succeeding years, the Secretary may revise any 
of the percentages otherwise applicable during a year under the 
preceding clauses (other than clause (i)), but only if the aggregate 
payments made under this title to eligible organizations under risk-
sharing contracts during the year is not greater than the aggregate 
payments that would have been made under this title to such 
organizations during the year if the Secretary had not revised the 
percentages.
    ``(vii) For purposes of clauses (ii) through (v), in determining 
the weighed average of all adjusted average per capita costs determined 
under paragraph (4) for a class, the Secretary shall not take into 
account any costs associated with individuals entitled to benefits 
under this title under section 226A.''.
    (b) Conforming Amendment.--Section 1876(a)(5)(A) (42 U.S.C. 
1395mm(a)(5)(A)) is amended by inserting ``, adjusted to take into 
account the limitations imposed by clauses (ii) through (vi) of 
paragraph (1)(C)'' before the period.

SEC. 4133. REDUCTION IN ROUTINE COST LIMITS FOR HOME HEALTH SERVICES.

    (a) Reduction in Update to Maintain Freeze in 1996.--Section 
1861(v)(1)(L)(i) (42 U.S.C. 1395x(v)(1)(L)(i)) is amended--
            (1) in subclause (II), by striking ``or'' at the end;
            (2) in subclause (III), by striking ``112 percent,'' and 
        inserting ``and before July 1, 1996, 112 percent, or''; and
            (3) by inserting after subclause (III) the following new 
        subclause:
            ``(IV) July 1, 1996, 100 percent (adjusted by such amount 
        as the Secretary determines to be necessary to preserve the 
        savings resulting from the enactment of section 13564(a)(1) of 
        the Omnibus Budget Reconciliation Act of 1993),''.
    (b) Basing Limits in Subsequent Years on Median of Costs.--
            (1) In general.--Section 1861(v)(1)(L)(i) (U.S.C. 
        1395x(v)(1)(L)(i)), as amended by subsection (a), is amended in 
        the matter following subclause (IV) by striking ``the mean'' 
        and inserting ``the median''.
            (2) Effective date.--The amendment made by paragraph (1) 
        shall apply to cost reporting periods beginning on or after 
        July 1, 1997.

SEC. 4134. IMPOSITION OF COPAYMENT FOR CERTAIN HOME HEALTH VISITS.

    (a) In General.--
            (1) Part a.--Section 1813(a) (42 U.S.C. 1395e(a)) is 
        amended by adding at the end the following new paragraph:
    ``(5) The amount payable for home health services furnished to an 
individual under this part shall be reduced by a copayment amount equal 
to 10 percent of the average of all per visit costs for home health 
services furnished under this title determined under section 
1861(v)(1)(L) (as determined by the Secretary on a prospective basis 
for services furnished during a calendar year), unless such services 
were furnished to the individual during the 30-day period that begins 
on the date the individual is discharged as an inpatient from a 
hospital.''.
            (2) Part b.--Section 1833(a)(2) (42 U.S.C. 1395l(a)(2)) is 
        amended--
                    (A) in subparagraph (A), by striking ``to home 
                health services,'' and by striking the comma after 
                ``opinion)'';
                    (B) in subparagraph (D), by striking ``and'' at the 
                end;
                    (C) in subparagraph (E), by striking the semicolon 
                at the end and inserting ``; and''; and
                    (D) by adding at the end the following new 
                subparagraph:
                    ``(F) with respect to home health services--
                            ``(i) the lesser of --
                                    ``(I) the reasonable cost of such 
                                services, as determined under section 
                                1861(v), or
                                    ``(II) the customary charges with 
                                respect to such services,
                        less the amount a provider may charge as 
                        described in clause (ii) of section 
                        1866(a)(2)(A),
                            ``(ii) if such services are furnished by a 
                        public provider of services, or by another 
                        provider which demonstrates to the satisfaction 
                        of the Secretary that a significant portion of 
                        its patients are low-income (and requests that 
                        payment be made under this clause), free of 
                        charge or at nominal charges to the public, the 
                        amount determined in accordance with section 
                        1814(b)(2), or
                            ``(iii) if (and for so long as) the 
                        conditions described in section 1814(b)(3) are 
                        met, the amounts determined under the 
                        reimbursement system described in such section,
                less a copayment amount equal to 10 percent of the 
                average of all per visit costs for home health services 
                furnished under this title determined under section 
                1861(v)(1)(L) (as determined by the Secretary on a 
                prospective basis for services furnished during a 
                calendar year), unless such services were furnished to 
                the individual during the 30-day period that begins on 
                the date the individual is discharged as an inpatient 
                from a hospital;''.
            (3) Provider charges.--Section 1866(a)(2)(A)(i) (42 U.S.C. 
        1395cc(a)(2)(A)(i)) is amended--
                    (A) by striking ``deduction or coinsurance'' and 
                inserting ``deduction, coinsurance, or copayment''; and
                    (B) by striking ``or (a)(4)'' and inserting 
                ``(a)(4), or (a)(5)''.
    (b) Effective Date.--The amendments made by subsection (a) shall 
apply to home health services furnished on or after July 1, 1995.

SEC. 4135. EXPANSION OF CENTERS OF EXCELLENCE.

    (a) In General.--The Secretary of Health and Human Services shall 
use a competitive process to contract with centers of excellence for 
cataract surgery, coronary artery by-pass surgery, and such other 
services as the Secretary determines to be appropriate. Payment under 
title XVIII of the Social Security Act will be made for services 
subject to such contracts on the basis of negotiated or all-inclusive 
rates as follows:
            (1) The center shall cover services provided in an urban 
        area (as defined in section 1886(d)(2)(D) of the Social 
        Security Act) for years beginning with fiscal year 1995.
            (2) The amount of payment made by the Secretary to the 
        center under title XVIII of the Social Security Act for 
        services covered under the project shall be less than the 
        aggregate amount of the payments that the Secretary would have 
        made to the center for such services had the project not been 
        in effect.
            (3) The Secretary shall make payments to the center on such 
        a basis for the following services furnished to individuals 
        entitled to benefits under such title:
                    (A) Facility, professional, and related services 
                relating to cataract surgery.
                    (B) Coronary artery bypass surgery and related 
                services.
                    (C) Such other services as the Secretary and the 
                center may agree to cover under the agreement.
    (b) Rebate of Portion of Savings.--In the case of any services 
provided under a demonstration project conducted under subsection (a), 
the Secretary shall make a payment to each individual to whom such 
services are furnished (at such time and in such manner as the 
Secretary may provide) in an amount equal to 10 percent of the amount 
by which--
            (1) the amount of payment that would have been made by the 
        Secretary under title XVIII of the Social Security Act to the 
        center for such services if the services had not been provided 
        under the project, exceeds
            (2) the amount of payment made by the Secretary under such 
        title to the center for such services.

                         PART 4--PART B PREMIUM

SEC. 4141. GENERAL PART B PREMIUM.

    Section 1839(e) (42 U.S.C. 1395r(e)), as amended by section 13571 
of OBRA-1993, is amended--
            (1) in paragraph (1)(A), by striking ``and prior to January 
        1999''; and
            (2) in paragraph (2), by striking ``prior to January 
        1998''.

 PART 5--REPORT ON MEDICARE SAVINGS FOR FISCAL YEARS 2000 THROUGH 2003

SEC. 4151. REPORT ON SAVINGS.

    (a) In General.--The Secretary shall submit to Congress, by January 
30, 1999, a report that contains--
            (1) a determination of whether the average, annual rate of 
        growth in spending under the medicare program (taking into 
        account savings under this subtitle) in the 4-fiscal-year 
        period beginning with fiscal year 2000 will exceed the rate of 
        growth described in subsection (b); and
            (2) if so, recommendations as to how to achieve the rate of 
        growth specified in subsection (b).
    (b) Rate of Growth Described.--The rate of growth described in this 
subsection is the sum of the following:
            (1) CPI.--The average annual percentage change in the CPI.
            (2) Medicare population.--The average, annual percentage 
        change in the number of medicare-eligible individuals.
            (3) Real gdp per capita.--The average, annual percentage 
        change in the real, per capita gross domestic product of the 
        United States, and
            (4) 1 percent.--1 percentage point.

                                                   Title IV, Subtitle C

                          Subtitle C--Medicaid

                 PART 1--COMPREHENSIVE BENEFIT PACKAGE

SEC. 4201. LIMITING COVERAGE UNDER MEDICAID OF ITEMS AND SERVICES 
              COVERED UNDER COMPREHENSIVE BENEFIT PACKAGE.

    (a) Removal of Comprehensive Benefits Package from State Plan.--
Title XIX is amended by redesignating section 1931 as section 1932 and 
by inserting after section 1930 the following new section:

 ``treatment of comprehensive benefit package under health security act

    ``Sec. 1931. (a) Items and Services Covered Under Comprehensive 
Benefit Package.--If a State plan for medical assistance under this 
title provides for payment in accordance with section 1902(a)(63) for a 
year, notwithstanding any other provision of this title, the State plan 
under this title is not required to provide medical assistance 
consisting of payment for items and services in the comprehensive 
benefit package under subtitle B of title I of the Health Security Act 
for alliance eligible individuals (as defined in section 1902(5) of 
such Act).
    ``(b) Construction.--(1) Payment under section 1902(a)(63) shall 
not constitute medical assistance for purposes of section 1903(a).
    ``(2) This section shall not be construed as affecting the 
provision of medical assistance under this title for items and services 
included in the comprehensive benefit package for--
            ``(A) medicare-eligible individuals, or
            ``(B) certain emergency services to certain aliens under 
        section 1903(v)(2).''.
    (b) Substitute Requirement of State Payment.--Section 1902(a) (42 
U.S.C. 1396a(a)), as amended by section 13631(a)(3) of OBRA-1993, is 
amended--
            (1) by striking ``and'' at the end of paragraph (61),
            (2) by striking the period at the end of paragraph (62) and 
        inserting ``; and'', and
            (3) by inserting after paragraph (62) the following new 
        paragraph:
            ``(63) provide for payment to regional alliances of the 
        amounts required under subtitle A of title IX of the Health 
        Security Act.''.
    (c) No Federal Financial Participation.--Section 1903(i) (42 U.S.C. 
1396b(i)), as amended by section 13631(h)(1)(C) of OBRA-1993, is 
amended--
            (1) by striking ``or'' at the end of paragraph (14),
            (2) by striking the period at the end of paragraph (15) and 
        inserting ``; or'', and
            (3) by inserting after paragraph (15) the following new 
        paragraph:
            ``(16) with respect to items and services covered under the 
        comprehensive benefit package under subtitle B of title I of 
        the Health Security Act for alliance eligible individuals (as 
        defined in section 1902(5) of such Act).''.
    (d) Effective Date.--The amendments made by this section shall 
apply with respect to items or services furnished in a State on or 
after January 1 of the first year (as defined in section 1902(17)) for 
the State.

PART 2--EXPANDING ELIGIBILITY FOR NURSING FACILITY SERVICES; LONG-TERM 
                        CARE INTEGRATION OPTION

SEC. 4211. SPENDDOWN ELIGIBILITY FOR NURSING FACILITY RESIDENTS.

    (a) In General.--Section 1902(a)(10)(A)(i) (42 U.S.C. 
1396a(a)(10)(A)(i)) is amended--
            (1) by striking ``or'' at the end of subclause (VI);
            (2) by striking the semicolon at the end of subclause (VII) 
        and inserting ``, or''; and
            (3) by inserting after subclause (VII) the following new 
        subclause:
                                    ``(VIII) who are individuals who 
                                would meet the income and resource 
                                requirements of the appropriate State 
                                plan described in subclause (I) or the 
                                supplemental security income program 
                                (as the case may be), if incurred 
                                expenses for medical care as recognized 
                                under State law were deducted from 
                                income;''.
    (b) Limitation to Benefits for Nursing Facility Services.--Section 
1902(a)(10) of such Act (42 U.S.C. 1396a(a)(10)), as amended by section 
13603(c)(1) of OBRA-1993, is amended in the matter following 
subparagraph (F)--
            (1) by striking ``and (XIII)'' and inserting ``(XIII)''; 
        and
            (2) by inserting before the semicolon at the end the 
        following: ``, and (XIV) the medical assistance made available 
        to an individual described in subparagraph (A)(i)(VIII) shall 
        be limited to medical assistance for nursing facility services, 
        except to the extent that assistance is provided in accordance 
        with the election described in section 1932 in the case of a 
        State making such election''.
    (c) Effective Date.--The amendments made by subsections (a) and (b) 
shall apply with respect to a State as of January 1, 1996.

SEC. 4212. INCREASED INCOME AND RESOURCE DISREGARDS FOR NURSING 
              FACILITY RESIDENTS.

    (a) Increased Disregards for Personal Needs Allowance; Resources.--
Section 1902(a)(10) (42 U.S.C. 1396a(a)(1)) is amended--
            (1) by striking ``and'' at the end of paragraph (F); and
            (2) by adding at the end the following new paragraph:
                    ``(G) that, in determining the eligibility of any 
                individual who is an inpatient in a nursing facility or 
                intermediate care facility for the mentally retarded--
                            ``(i) the first $50 of income for each 
                        month shall be disregarded; and
                            ``(ii) in the case of an unmarried 
                        individual, the first $12,000 of resources may, 
                        at the option of the State, be disregarded;''.
    (b) Conforming SSI Personal Needs Allowance.--For provision 
increasing SSI personal needs allowance, see section 4301.
    (c) Federal Reimbursement for Reductions in State Funds 
Attributable to Increased Disregard.--Section 1903(a) (42 U.S.C. 
1396b(a)) is amended--
            (1) by striking ``plus'' at the end of paragraph (6);
            (2) by striking the period at the end of paragraph (7) and 
        inserting ``; plus''; and
            (3) by adding at the end the following new paragraph:
            ``(8) an amount equal to 100 percent of the difference 
        between the amount of expenditures made by the State for 
        nursing facility services and services in an intermediate care 
        facility for the mentally retarded during the quarter and the 
        amount of expenditures that would have been made by the State 
        for such services during the quarter based on the personal 
        needs allowance in effect in the State as of September 30, 
        1993.''.
    (d) Effective Date.--The amendments made by subsection (a) shall 
apply with respect to months beginning with January 1996.

SEC. 4213. INFORMING NURSING HOME RESIDENTS ABOUT AVAILABILITY OF 
              ASSISTANCE FOR HOME AND COMMUNITY-BASED SERVICES.

    (a) In General.--Section 1902(a) (42 U.S.C. 1396a(a)), as amended 
by section 4201(b), is amended--
            (1) by striking ``and'' at the end of paragraph (62),
            (2) by striking the period at the end of paragraph (63) and 
        inserting ``; and'', and
            (3) by inserting after paragraph (63) the following new 
        paragraph:
            ``(64) provide, in the case of an individual who is a 
        resident (or who is applying to become a resident) of a nursing 
        facility or intermediate care facility for the mentally 
        retarded, at the time of application for medical assistance and 
        periodically thereafter, the individual (or a designated 
        representative) with information on the range of home and 
        community-based services for which assistance is available in 
        the State either under the plan under this title, under the 
        program under part 1 of subtitle B of title II of the Health 
        Security Act, or any other public program.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to quarters beginning on or after January 1, 1996.

                         PART 3--OTHER BENEFITS

SEC. 4221. TREATMENT OF ITEMS AND SERVICES NOT COVERED UNDER THE 
              COMPREHENSIVE BENEFIT PACKAGE.

    (a) Continuation of Eligibility for Assistance for AFDC and SSI 
Recipients.--With respect to an individual who is described in section 
1933(b) of the Social Security Act (as added by subsection (b)(1)), 
nothing in this Act shall be construed as--
            (1) changing the eligibility of the individual for medical 
        assistance under title XIX of the Social Security Act for items 
        and services not covered under the comprehensive benefit 
        package, or
            (2) subject to the amendments made by this subtitle, 
        changing the amount, duration, or scope of medical assistance 
        required (or permitted) to be provided to the individual under 
        such title.
    (b) Limitation on Scope of Assistance for Other Medicaid 
Beneficiaries.--
            (1) In general.--Title XIX, as amended by sections 4201(a) 
        and 4213, is amended by redesignating section 1933 as section 
        1934 and by inserting after section 1932 the following new 
        section:

  ``limitation on scope of assistance for most non-cash beneficiaries

    ``Sec 1933. (a) Limitation.--Notwithstanding any other provision of 
this title, the medical assistance made available under section 1902(a) 
to an individual not described in subsection (b) shall be limited to 
medical assistance for--
            ``(1) long-term care services (as defined in subsection 
        (c)); and
            ``(2) medicare cost-sharing (as defined in section 
        1905(p)(3)), in accordance with the requirements of section 
        1902(a)(10)(E).
    ``(b) Individuals Exempt from Limitation.--The individuals 
described in this subsection are the following:
            ``(1) AFDC recipients (as defined in section 1902(3) of the 
        Health Security Act).
            ``(2) SSI recipients (as defined in section 1902(33) of the 
        Health Security Act).
            ``(3) Individuals entitled to benefits under title XVIII.
            ``(4) Children under 18 years of age (or, at the option of 
        the State, under age 19, 20, or 21).
    ``(c) Long-Term Care Services Defined.--In subsection (a), the term 
`long-term care services' means the following items and services, but 
only to the extent they are not included as an item or service under 
the comprehensive benefit package under the Health Security Act:
            ``(1) Nursing facility services and intermediate care 
        facility services for the mentally retarded (including items 
        and services that may be included in such services pursuant to 
        regulations in effect as of October 26, 1993).
            ``(2) Personal care services.
            ``(3) Home or community-based services provided under a 
        waiver granted under subsection (c), (d), or (e) of section 
        1915.
            ``(4) Home and community care provided to functionally 
        disabled elderly individuals under section 1929.
            ``(5) Community supported living arrangements services 
        provided under section 1930.
            ``(6) Case-management services (as described in section 
        1915(g)(2)).
            ``(7) Home health care services, clinic services, and 
        rehabilitation services that are furnished to an individual who 
        has a condition or disability that qualifies the individual to 
        receive any of the services described in paragraphs (1) through 
        (6).''.
            (2) Conforming amendment.--Section 1902(a)(10) of such Act 
        (42 U.S.C. 1396a(a)(10)), as amended by section 13603(c)(1) of 
        OBRA-1993 and section 4211(b), is amended in the matter 
        following subparagraph (G) (as inserted by section 4212(a))--
                    (A) by striking ``and (XIV)'' and inserting 
                ``(XIV)''; and
                    (B) by inserting before the semicolon at the end 
                the following: ``, and (XV) the medical assistance made 
                available to an individual who is not described in 
                section 1933(b) shall be limited in accordance with 
                section 1933''.
    (c) Conforming Amendments Relating to Secondary Payer.--(1) Section 
1902(a)(25)(A) (42 U.S.C. 1396a(a)(25)(A)), as amended by section 
13622(a) of OBRA-1993, is amended by inserting ``health plans (as 
defined in section 1400 of the Health Security Act),'' after ``of 
1974),''.
    (2) Section 1903(o) (42 U.S.C. 1396b(o)), as so amended, is amended 
by inserting ``and a health plan (as defined in section 1400 of the 
Health Security Act)'' after ``of 1974)''.
    (d) Effective Date.--The amendments made by this section shall 
apply to items and services furnished in a State on or after January 1 
of the first year for which the State is a participating State under 
the Health Security Act.

SEC. 4222. ESTABLISHMENT OF PROGRAM FOR POVERTY-LEVEL CHILDREN WITH 
              SPECIAL NEEDS.

    (a) Establishment of Program.--Title XIX, as amended by sections 
4201, 4213, and 4221(b), is amended by redesignating section 1934 as 
section 1935 and by inserting after section 1933 the following new 
section:

        ``services for poverty-level children with special needs

    ``Sec 1934. (a) Establishment of Program.--There is hereby 
established a program under which the Secretary shall provide for 
payment on behalf of each qualified child (as defined in subsection 
(b)) during a year for all medically necessary or appropriate items and 
services described in section 1905(a) (including items and services 
described in section 1905(r) but excluding long-term care services 
described in section 1933(c)) that are not included in the 
comprehensive benefit package under subtitle B of title I of the Health 
Security Act.
    ``(b) Qualified Child Defined.--
            ``(1) In general.--In this section, a `qualified child' is 
        an eligible individual (as defined in section 1001(c) of the 
        Health Security Act) who--
                    ``(A) for years prior to 1998, is a resident of a 
                participating State under the Health Security Act;
                    ``(B) is under the age of 19; and
                    ``(C) meets the requirements relating to financial 
                eligibility described in paragraph (2).
            ``(2) Requirements relating to financial eligibility.--An 
        individual meets the requirements of this paragraph if--
                    ``(A) the individual is an AFDC recipient or an SSI 
                recipient (as such terms are defined in section 1902 of 
                the Health Security Act);
                    ``(B) the individual is eligible to receive medical 
                assistance under the State plan under section 
                1902(a)(10)(C); or
                    ``(C) the individual is--
                            ``(i) under one year of age and has 
                        adjusted family income at or below 133 percent 
                        of the income official poverty line (as defined 
                        by the Office of Management and Budget, and 
                        revised annually in accordance with section 
                        673(2) of the Omnibus Budget Reconciliation Act 
                        of 1981, applicable to a family of the size 
                        involved) (or, in the case of a State that 
                        established an income level greater than 133 
                        percent for individuals under 1 year of age for 
                        purposes of section 1902(l)(2)(A) as of October 
                        1, 1993, an income level which is a percentage 
                        of such level not greater than 185 percent),
                            ``(ii) the individual has attained 1 year 
                        of age but is under 6 years of age and has 
                        adjusted family income at or below 133 percent 
                        of such income official poverty line, or
                            ``(iii) the individual was born after 
                        September 30, 1983, has attained 6 years of 
                        age, and has adjusted family income at or below 
                        100 percent of such income official poverty 
                        line.
            ``(3) Enrollment procedures.--
                    ``(A) In general.--Not later than July 1, 1995, the 
                Secretary shall establish procedures for the enrollment 
                of qualified children in the program under this section 
                under which--
                            ``(i) essential community providers 
                        certified by the Secretary under subpart B of 
                        part 2 of subtitle F of title I of the Health 
                        Security Act serve as enrollment sites for the 
                        program; and
                            ``(ii) any forms used for enrollment 
                        purposes are designed to make the enrollment as 
                        simple as practicable.
                    ``(B) Individuals under alliance plans 
                automatically enrolled.--The Secretary shall establish 
                a process under which an individual who is a qualified 
                child under paragraph (1) and is enrolled in a health 
                plan (as defined in section 1400(a) of the Health 
                Security Act) shall automatically be deemed to have met 
                any enrollment requirements established under paragraph 
                (1).
    ``(c) Additional Responsibilities of Secretary.--Not later than 
July 1, 1995, the Secretary shall promulgate such regulations as are 
necessary to establish and operate the program under this section, 
including regulations with respect to the following:
            ``(1) The benefits to be provided and the circumstances 
        under which such benefits shall be considered medically 
        necessary.
            ``(2) Procedures for the periodic redetermination of an 
        individual's eligibility for benefits.
            ``(3) Qualification criteria for providers participating in 
        the program.
            ``(4) Payment amounts for services provided under the 
        program, the methodology used to determine such payment 
        amounts, and the procedures for making payments to providers.
            ``(5) Standards to ensure the quality of services and the 
        coordination of services under the program with services under 
        the comprehensive benefit package, as well as services under 
        parts B and H of the Individuals With Disabilities Education 
        Act, title V, and any other program providing health care, 
        remedial, educational, and social services to qualified 
        children as the Secretary may identify.
            ``(6) Hearing and appeals for individuals adversely 
        affected by any determination by the Secretary under the 
        program.
            ``(7) Such other requirements as the Secretary determines 
        to be necessary for the proper and efficient administration of 
        the program.
    ``(d) Federal Payment for Program.--
            ``(1) In general.--Subject to paragraph (2), the Secretary 
        shall pay 100 percent of the costs of providing benefits under 
        this program in a year, including all administrative expenses.
            ``(2) Annual limit on expenditures.--The total amount of 
        Federal expenditures that may be made under this section in a 
        year may not exceed--
                    ``(A) for a year prior to 1998, an amount equal to 
                total expenditures for medical assistance under State 
                plans under this title during fiscal year 1993 for 
                services described in subsection (a) furnished to 
                qualified children that are attributable to States in 
                which the program is in operation during the year 
                (adjusted to take into account the operation of the 
                program under this section on a calendar year basis)--
                            ``(i) adjusted to take into account any 
                        increases or decreases in the number of 
                        qualified children under the most recent 
                        decennial census, as adjusted by the most 
                        recent current population survey for the year 
                        in question, and
                            ``(ii) adjusted by the applicable 
                        percentage applied to the State non-cash, non-
                        DSH baseline amount for the year under section 
                        9003(a) of the Health Security Act;
                    ``(B) for 1998, the total expenditures for medical 
                assistance under State plans under this title during 
                1993 for services described in subsection (a) furnished 
                to qualified children (adjusted to take into account 
                the operation of the program under this section on a 
                calendar year basis)--
                            ``(i) adjusted to take into account any 
                        increases or decreases in the number of 
                        qualified children under the most recent 
                        decennial census, as adjusted by the most 
                        recent current population survey for the year 
                        in question, and
                            ``(ii) adjusted by the update applied to 
                        the State non-cash, non-DSH baseline amount for 
                        the year under section 9003(b) of the Health 
                        Security Act; and
                    ``(C) for each succeeding year, the limit 
                established under this paragraph for the previous year 
                (adjusted to take into account the operation of the 
                program under this section on a calendar year basis), 
                adjusted by the update applied to the State non-cash 
                baseline amount for the year under section 9003(b) of 
                the Health Security Act.''.
    (b) Repeal of Alternative Eligibility Standards for Children in 
Participating States.--Section 1902(r)(2) (42 U.S.C. 1396a(r)(2)) is 
amended by adding at the end the following new subparagraph:
    ``(C) Subparagraph (A) shall not apply with respect to the 
determination of income and resources for children under age 18 under 
the State plan of a State (other than under the State plan of a State 
that utilized an alternative methodology pursuant to such subparagraph 
as of October 1, 1993)--
            ``(i) in the case of a State that is a participating State 
        under the Health Security Act for a year prior to 1998, for 
        quarters beginning on or after January 1 of the first year for 
        which the State is such a participating State; and
            ``(ii) in the case of any State not described in clause 
        (i), for quarters beginning on or after January 1, 1998.''.

          PART 4--DISCONTINUATION OF CERTAIN PAYMENT POLICIES

SEC. 4231. DISCONTINUATION OF MEDICAID DSH PAYMENTS.

    (a) Elimination of Specific Obligation.--Section 1923(a) (42 U.S.C. 
1396r-4(a)) is amended by adding at the end the following new 
paragraph:
            ``(5) Notwithstanding any other provision of this title, 
        the requirement of this subsection shall not apply--
                    ``(A) with respect to a State for any portion of a 
                fiscal year during which the State is a participating 
                State under the Health Security Act; or
                    ``(B) with respect to any State for any months 
                beginning on or after January 1, 1998.''.
    (b) Elimination of State Plan Requirement.--Section 1902(a)(13)(A) 
(42 U.S.C. 1396a(a)(13)(A)) is amended by inserting after ``special 
needs'' the following: ``(but only with respect to any quarters during 
which the State is not a participating State under the Health Security 
Act or with respect to any quarters ending on or before December 31, 
1997)''.
    (c) Elimination of State DSH Allotments and Federal Financial 
Participation.--Section 1923(f) (42 U.S.C. 1396r-4(f)) is amended--
            (1) in paragraph (2), by inserting ``and paragraph (5)'' 
        after ``subparagraph (B)'', and
            (2) by adding at the end the following new paragraph:
            ``(5) Elimination of allotments for participating States 
        and sunset for all States.--
                    ``(A) In general.--Notwithstanding any other 
                provision of this section, the State DSH allotment 
                shall be zero with respect to--
                            ``(i) any participating State under the 
                        Health Security Act; and
                            ``(ii) any State for any portion of a 
                        fiscal year that occurs on or after January 1, 
                        1998.
                    ``(B) No redistribution of reductions.--In the 
                computation of State supplemental amounts under 
                paragraph (3), the State DSH allotments shall be 
                determined under subparagraph (A)(ii) of such paragraph 
                as if this paragraph did not apply.''.

SEC. 4232. DISCONTINUATION OF REIMBURSEMENT STANDARDS FOR INPATIENT 
              HOSPITAL SERVICES.

    Section 1902(a)(13)(A) (42 U.S.C. 1396a(a)(13)(A)), as amended by 
section 4231(b), is amended by inserting ``(in the case of services 
other than hospital services in a State that is a participating State 
under the Health Security Act)'' before ``are reasonable and 
adequate''.

  PART 5--COORDINATION WITH ADMINISTRATIVE SIMPLIFICATION AND QUALITY 
                         MANAGEMENT INITIATIVES

SEC. 4241. REQUIREMENTS FOR CHANGES IN BILLING PROCEDURES.

    (a) Limitation on Frequency of System Changes; Advance Notification 
to Providers.--Section 1902(a) (42 U.S.C. 1396a(a)), as amended by 
sections 4201(b) and 4214(a), is amended--
            (1) by striking ``and'' at the end of paragraph (63),
            (2) by striking the period at the end of paragraph (64) and 
        inserting ``; and'', and
            (3) by inserting after paragraph (64) the following new 
        paragraph:
            ``(65) provide that the State--
                    ``(A) will not implement any change in the system 
                used for the billing and processing of claims for 
                payment for items and services furnished under the 
                State plan within 6 months of implementing any previous 
                change in such system; and
                    ``(B) shall notify individuals and entities 
                providing medical assistance under the State plan of 
                any major change in the procedures for billing for 
                services furnished under the plan at least 120 days 
                before such change is to take effect.''.
    (b) Effective Date.--The amendments made by subsection (a) shall 
apply to a State as of January 1 of the first year for which the State 
is a participating State.

                      PART 6--MEDICAID COMMISSION

SEC. 4251. MEDICAID COMMISSION.

    (a) Establishment.--There is established a commission to be known 
as the ``Medicaid Commission'' (in this section referred to as the 
``Commission'').
    (b) Membership.--(1) The Commission shall be composed of 15 members 
appointed by the Secretary for the life of the Commission.
    (2) Members shall include representatives of the Federal Government 
and State Governments.
    (3) The Administrator of the Health Care Financing Administration 
shall be an ex officio member of the Commission.
    (4) Individuals, while serving as members of the Commission, shall 
not be entitled to compensation, other than travel expenses, including 
per diem in lieu of subsistence, in accordance with sections 5702 and 
5703 of title 5, United States Code.
    (c) Study.--The Commission shall study options with respect to each 
of the following in relation to the medicaid program under title XIX of 
the Social Security Act:
            (1) Use of block grant.--Whether, and (if so) how, to 
        convert payments for services not covered in the comprehensive 
        benefit package (for all recipients, including AFDC and SSI 
        recipients defined in section 1902) into new financing 
        mechanisms that give the States greater flexibility in 
        targeting and delivering needed services.
            (2) Integration of acute and long-term care services for 
        health plans.--Whether, and (if so) how, to integrate long-term 
        care services and the home and community-based services program 
        under part 1 of subtitle B of title II with the services 
        covered under the comprehensive benefit package offered by 
        health plans.
            (3) Consolidating institutional and home and community-
        based long-term care.--Whether, and (if so) how, to offer 
        States an option to combine together expenditures under the 
        home and community-based services program (under part 1 of 
        subtitle B of title II) with continuing home and community-
        based services and institutional care under the medicaid 
        program into a global budget for long-term care services, and 
        how such a combined program could be implemented.
    (d) Report and Recommendations.--The Commission shall submit to the 
Secretary and the National Health Board, not later than 1 year after 
the date of the enactment of this Act, a report on its study under 
subsection (c). The Commission shall include in such report such 
recommendations for changes in the medicaid program, and the programs 
under this Act, as it deems appropriate.
    (e) Operations.--(1) The Commission shall appoint a chair from 
among its members.
    (2) Upon request of the Chair of the Commission, the head of any 
Federal department or agency may detail, on a reimbursable basis, any 
of the personnel of that department or agency to the Commission to 
assist it in carrying out its duties under this section.
    (3) The Commission may secure directly from any department or 
agency of the United States information necessary to enable it to carry 
out this section. Upon request of the Chair of the Commission, the head 
of that department or agency shall furnish that information to the 
Commission.
    (4) Upon the request of the Commission, the Administrator of 
General Services shall provide to the Commission, on a reimbursable 
basis, the administrative support services necessary for the Commission 
to carry out its responsibilities under this section.
    (f) Termination.--The Commission shall terminate 90 days after the 
date of submission of its report under subsection (d).
    (g) Authorization of Appropriations.--There are authorized to be 
appropriated such sums as may be necessary to carry out this section.

                                                   Title IV, Subtitle D

          Subtitle D--Increase in SSI Personal Needs Allowance

SEC. 4301. INCREASE IN SSI PERSONAL NEEDS ALLOWANCE.

    (a) In General.--Section 1611(e)(1)(B) (42 U.S.C. 1382(e)(1)(B)) is 
amended--
            (1) in clauses (i) and (ii)(I), by striking ``$360'' and 
        inserting ``$600''; and
            (2) in clause (iii), by striking ``$720'' and inserting 
        ``$1,200''.
    (b) Effective Date.--The amendments made by subsection (a) shall 
apply with respect to months beginning with January 1996.

                                                                Title V

                TITLE V--QUALITY AND CONSUMER PROTECTION

                       table of contents of title

                                                                   Page
             Subtitle A--Quality Management and Improvement

Sec. 5001. National Quality Management Program..............        835
Sec. 5002. National Quality Management Council..............        836
Sec. 5003. National measures of quality performance.........        838
Sec. 5004. Consumer surveys.................................        842
Sec. 5005. Evaluation and reporting of quality performance..        843
Sec. 5006. Development and dissemination of practice                846
                            guidelines.
Sec. 5007. Research on health care quality..................        849
Sec. 5008. Regional professional foundations................        851
Sec. 5009. National Quality Consortium......................        853
Sec. 5010. Eliminating CLIA requirement for certificate of          855
                            waiver for simple laboratory 
                            examinations and procedures.
Sec. 5011. Uniform standards for health care institutions...        856
Sec. 5012. Role of alliances in quality assurance...........        857
Sec. 5013. Role of health plans in quality management.......        858
     Subtitle B--Information Systems, Privacy, and Administrative 
                             Simplification

                   Part 1--Health Information Systems

Sec. 5101. Establishment of health information system.......        859
Sec. 5102. Additional requirements for health information           863
                            system.
Sec. 5103. Electronic data network..........................        865
Sec. 5104. Unique identifier numbers........................        867
Sec. 5105. Health security cards............................        868
Sec. 5106. Technical assistance in the establishment of             870
                            health information systems.
                     Part 2--Privacy of Information

Sec. 5120. Health information system privacy standards......        871
Sec. 5121. Other duties with respect to privacy.............        875
Sec. 5122. Comprehensive Health Information Privacy                 876
                            Protection Act.
Sec. 5123. Definitions......................................        876
     Part 3--Interim Requirements for Administrative Simplification

Sec. 5130. Standard benefit forms...........................        878
                       Part 4--General Provisions

Sec. 5140. National Privacy and Health Data Advisory Council        883
Sec. 5141. Civil money penalties............................        885
Sec. 5142. Relationship to other laws.......................        886
                  Subtitle C--Remedies and Enforcement

   Part 1--Review of Bensubpart a--general rulesEnrolled Individuals
Sec. 5201. Health plan claims procedure.....................        887
Sec. 5202. Review in regional alliance complaint review             894
                            offices of grievances based on 
                            acts or practices by health 
                            plans.
Sec. 5203. Initial proceedings in complaint review offices..        897
Sec. 5204. Hearings before hearing officers in complaint            899
                            review offices.
Sec. 5205. Review by Federal Health Plan Review Board.......        905
Sec. 5206. Rules governing benefit claims determinations....        909
Sec. 5207. Civil msubpart b--early resolution programs......        909
Sec. 5211. Establishment of early resolution programs in            911
                            complaint review offices.
Sec. 5212. Initiation of participation in mediation                 913
                            proceedings.
Sec. 5213. Mediation proceedings............................        915
Sec. 5214. Legal effect of participation in mediation               918
                            proceedings.
Sec. 5215. Enforcement of settlement agreements.............        919
         Part 2--Additional Remedies and Enforcement Provisions

Sec. 5231. Judicial review of Federal action on State               920
                            systems.
Sec. 5232. Administrative and judicial review relating to           921
                            cost containment.
Sec. 5233. Civil enforcement................................        922
Sec. 5234. Priority of certain bankruptcy claims............        922
Sec. 5235. Private right to enforce State responsibilities..        923
Sec. 5236. Private right to enforce Federal responsibilities 
                                 in operating a system in a 
State.                                                              923
Sec. 5237. Private right to enforce responsibilities of             925
                            alliances.
Sec. 5238. Discrimination claims............................        926
Sec. 5239. Nondiscrimination in federally assisted programs.        929
Sec. 5240. Civil action by essential community provider.....        929
Sec. 5241. Facial constitutional challenges.................        930
Sec. 5242. Treatment of plans as parties in civil actions...        932
Sec. 5243. General nonpreemption of existing rights and             932
                            remedies.
                    Subtitle D--Medical Malpractice

                        Part 1--Liability Reform

Sec. 5301. Federal tort reform..............................        933
Sec. 5302. Plan-based alternative dispute resolution                937
                            mechanisms.
Sec. 5303. Requirement for certificate of merit.............        939
Sec. 5304. Limitation on amount of attorney's contingency           942
                            fees.
Sec. 5305. Reduction of awards for recovery from collateral         943
                            sources.
Sec. 5306. Periodic payment of awards.......................        944
   Part 2--Other Provisions Relating to Medical Malpractice Liability

Sec. 5311. Enterprise liability demonstration project.......        944
Sec. 5312. Pilot program applying practice guidelines to            946
                            medical malpractice liability 
                            actions.
                      Subtitle E--Fraud and Abuse

Part 1--Establishment of All-payer Health Care Fraud and Abuse Control 
                                Program

Sec. 5401. All-Payer Health Care Fraud and Abuse Control            948
                            Program.
Sec. 5402. Establishment of All-Payer Health Care Fraud and         951
                            Abuse Control Account.
Sec. 5403. Use of funds by Inspector General................        954
  Part 2--Application of Fraud and Abuse Authorities Under the Social 
                       Security Act to All Payers

Sec. 5411. Exclusion from participation.....................        956
Sec. 5412. Civil monetary penalties.........................        963
Sec. 5413. Limitations on physician self-referral...........        968
Sec. 5414. Construction of Social Security Act references...        969
Part 3--Amendments to Anti-fraud and Abuse Provisions Under the Social 
                              Security Act

Sec. 5421. Reference to amendments..........................        969
                   Part 4--Amendments to Criminal Law

Sec. 5431. Health care fraud................................        970
Sec. 5432. Forfeitures for violations of fraud statutes.....        971
Sec. 5433. False Statements.................................        972
Sec. 5434. Bribery and graft................................        973
Sec. 5435. Injunctive relief relating to health care                975
                            offenses.
Sec. 5436. Grand jury disclosure............................        975
Sec. 5437. Theft or embezzlement............................        976
Sec. 5438. Misuse of health security card or unique                 977
                            identifier.
              Part 5--Amendments to Civil False Claims Act

Sec. 5441. Amendments to Civil False Claims Act.............        978
                  Subtitle F--McCarran-Ferguson Reform

Sec. 5501. Repeal of exemption for health insurance.........        979

                                                    Title V, Subtitle A

             Subtitle A--Quality Management and Improvement

SEC. 5001. NATIONAL QUALITY MANAGEMENT PROGRAM.

    Not later than 1 year after the date of the enactment of this Act, 
the National Health Board shall establish and oversee a performance-
based program of quality management and improvement designed to enhance 
the quality, appropriateness, and effectiveness of health care services 
and access to such services. The program shall be known as the National 
Quality Management Program and shall be administered by the National 
Quality Management Council established under section 5002.

SEC. 5002. NATIONAL QUALITY MANAGEMENT COUNCIL.

    (a) Establishment.--There is established a council to be known as 
the National Quality Management Council.
    (b) Duties.--The Council shall--
            (1) administer the National Quality Management Program;
            (2) perform any other duty specified as a duty of the 
        Council in this subtitle; and
            (3) advise the National Health Board with respect its 
        duties under this subtitle.
    (c) Number and Appointment.--The Council shall be composed of 15 
members appointed by the President. The Council shall consist of 
members who are broadly representative of the population of the United 
States and shall include--
            (1) individuals representing the interests of governmental 
        and corporate purchasers of health care;
            (2) individuals representing the interests of health plans;
            (3) individuals representing the interests of States;
            (4) individuals representing the interests of health care 
        providers and academic health centers (as defined in section 
        3101(c)); and
            (5) individuals distinguished in the fields of public 
        health, health care quality, and related fields of health 
        services research.
    (d) Terms.--
            (1) In general.--Except as provided in paragraph (2), 
        members of the Council shall serve for a term of 3 years.
            (2) Staggered rotation.--Of the members first appointed to 
        the Council under subsection (c), the President shall appoint 5 
        members to serve for a term of 3 years, 5 members to serve for 
        a term of 2 years, and 5 members to serve for a term of 1 year.
            (3) Service beyond term.--A member of the Council may 
        continue to serve after the expiration of the term of the 
        member until a successor is appointed.
    (e) Vacancies.--If a member of the Council does not serve the full 
term applicable under subsection (d), the individual appointed to fill 
the resulting vacancy shall be appointed for the remainder of the term 
of the predecessor of the individual.
    (f) Chair.--The President shall designate an individual to serve as 
the chair of the Council.
    (g) Meetings.--The Council shall meet not less than once during 
each 4-month period and shall otherwise meet at the call of the 
President or the chair.
    (h) Compensation and Reimbursement of Expenses.--Members of the 
Council shall receive compensation for each day (including travel time) 
engaged in carrying out the duties of the Council. Such compensation 
may not be in an amount in excess of the maximum rate of basic pay 
payable for level IV of the Executive Schedule under section 5315 of 
title 5, United States Code.
    (i) Staff.--The National Health Board shall provide to the Council 
such staff, information, and other assistance as may be necessary to 
carry out the duties of the Council.
    (j) Health Care Provider.--For purposes of this subtitle, the term 
``health care provider'' means an individual who, or entity that, 
provides an item or service to an individual that is covered under the 
health plan (as defined in section 1400) in which the individual is 
enrolled.

SEC. 5003. NATIONAL MEASURES OF QUALITY PERFORMANCE.

    (a) In General.--The National Quality Management Council shall 
develop a set of national measures of quality performance, which shall 
be used to assess the provision of health care services and access to 
such services.
    (b) Subject of Measures.--National measures of quality performance 
shall be selected in a manner that provides information on the 
following subjects:
            (1) Access to health care services by consumers.
            (2) Appropriateness of health care services provided to 
        consumers.
            (3) Outcomes of health care services and procedures.
            (4) Health promotion.
            (5) Prevention of diseases, disorders, and other health 
        conditions.
            (6) Consumer satisfaction with care.
    (c) Selection of Measures.--
            (1) Consultation.--In developing and selecting the national 
        measures of quality performance, the National Quality 
        Management Council shall consult with appropriate interested 
        parties, including--
                    (A) States;
                    (B) health plans;
                    (C) employers and individuals purchasing health 
                care through regional and corporate alliances;
                    (D) health care providers;
                    (E) the National Quality Consortium established 
                under section 5009;
                    (F) individuals distinguished in the fields of law, 
                medicine, economics, public health, and health services 
                research;
                    (G) the Administrator for Health Care Policy and 
                Research;
                    (H) the Director of the National Institutes of 
                Health; and
                    (I) the Administrator of the Health Care Financing 
                Administration.
            (2) Criteria.--The following criteria shall be used in 
        developing and selecting national measures of quality 
        performance:
                    (A) Significance.--When a measure relates to a 
                specific disease, disorder, or other health condition, 
                the disease, disorder, or condition shall be of 
                significance in terms of prevalence, morbidity, 
                mortality, or the costs associated with the prevention, 
                diagnosis, treatment, or clinical management of the 
                disease, disorder, or condition.
                    (B) Range of services.--The set of measures, taken 
                as a whole, shall be representative of the range of 
                services provided to consumers of health care.
                    (C) Reliability and validity.--The measures shall 
                be reliable and valid.
                    (D) Undue burden.--The data needed to calculate the 
                measures shall be obtained without undue burden on the 
                entity or individual providing the data.
                    (E) Variation.--Performance with respect to a 
                measure shall be expected to vary widely among the 
                individuals and entities whose performance is assessed 
                using the measure.
                    (F) Linkage to health outcome.--When a measure is a 
                rate of a process of care, the process shall be linked 
                to a health outcome based upon the best available 
                scientific evidence.
                    (G) Provider control and risk adjustment.--When a 
                measure is an outcome of the provision of care, the 
                outcome shall be within the control of the provider and 
                one with respect to which an adequate risk adjustment 
                can be made.
                    (H) Public health.--The measures may incorporate 
                standards identified by the Secretary of Health and 
                Human Services for meeting public health objectives.
    (d) Updating.--The National Quality Management Council shall review 
and update the set of national measures of quality performance annually 
to reflect changing goals for quality improvement. The Council shall 
establish and maintain a priority list of performance measures that 
within a 5-year period it intends to consider for inclusion within the 
set through the updating process.

SEC. 5004. CONSUMER SURVEYS.

    (a) In General.--The National Quality Management Council shall 
conduct periodic surveys of health care consumers to gather information 
concerning access to care, use of health services, health outcomes, and 
patient satisfaction. The surveys shall monitor consumer reaction to 
the implementation of this Act and be designed to assess the impact of 
this Act on the general population of the United States and potentially 
vulnerable populations.
    (b) Survey Administration.--The National Quality Management Council 
shall develop and approve a standard design for the surveys, which 
shall be administered by the Administrator for Health Care Policy and 
Research on a plan-by-plan and State-by-State basis. A State may add 
survey questions on quality measures of local interest to surveys 
conducted in the State.
    (c) Sampling Strategies.--The National Quality Management Council 
shall develop sampling strategies that ensure that survey samples 
adequately measure populations that are considered to be at risk of 
receiving inadequate health care and may be difficult to reach through 
consumer-sampling methods, including individuals who--
            (1) fail to enroll in a health plan;
            (2) resign from a plan; or
            (3) are members of a vulnerable population.

SEC. 5005. EVALUATION AND REPORTING OF QUALITY PERFORMANCE.

    (a) National Goals.--In subject matter areas with respect to which 
the National Quality Management Council determines that sufficient 
information and consensus exist, the Council shall recommend to the 
Board that the Board establish goals for performance by health plans 
and health care providers on a subset of the set of national measures 
of quality performance.
    (b) Impact of Reform.--The National Quality Management Council 
shall evaluate the impact of the implementation of this Act on the 
quality of health care services in the United States and the access of 
consumers to such services.
    (c) Performance Reports.--
            (1) Alliance and health plan reports.--Each health alliance 
        annually shall publish and make available to the public a 
        performance report outlining in a standard format the 
        performance of each health plan offered in the alliance on the 
        set of national measures of quality performance. The report 
        shall include the results of a smaller number of such measures 
        for health care providers who are members of provider networks 
        of such plans (as defined in section 1402(f)), if the available 
        information is statistically meaningful. The report also shall 
        include the results of consumer surveys described in section 
        5004 that were conducted in the alliance area during the year 
        that is the subject of the report.
            (2) National quality reports.--The National Quality 
        Management Council annually shall provide to the Congress and 
        to each health alliance a report that--
                    (A) outlines in a standard format the performance 
                of each regional alliance, corporate alliance, and 
                health plan;
                    (B) discusses State-level and national trends 
                relating to health care quality; and
                    (C) presents data for each health alliance from 
                consumer surveys described in section 5004 that were 
                conducted during the year that is the subject of the 
                report.
    (d) Public Availability of Information in National Practitioner 
Data Bank on Defendants, Awards, and Settlements.--
            (1) In general.--Section 427(a) of the Health Care Quality 
        Improvement Act (42 U.S.C. 11137(a)) is amended by adding at 
        the end the following new sentence: ``Not later than January 1, 
        1996, the Secretary shall promulgate regulations under which 
        individuals seeking to enroll in health plans under the Health 
        Security Act may obtain information reported under this part 
        with respect to physicians and other licensed health 
        practitioners participating in such plans for whom information 
        has been reported under this part on repeated occasions.''.
            (2) Access to data bank for point-of-service contractors 
        under medicare.--Section 427(a) of such Act (42 U.S.C. 
        11137(a)) is amended--
                    (A) by inserting ``to sponsors of point-of-service 
                networks under section 1890 of the Social Security 
                Act,'' after ``State licensing boards,'', and
                    (B) in the heading, by inserting ``Related'' after 
                ``Care''.

SEC. 5006. DEVELOPMENT AND DISSEMINATION OF PRACTICE GUIDELINES.

    (a) Development of Guidelines.--
            (1) In general.--The National Quality Management Council 
        shall direct the Administrator for Health Care Policy and 
        Research to develop and periodically review and update 
        clinically relevant guidelines that may be used by health care 
        providers to assist in determining how diseases, disorders, and 
        other health conditions can most effectively and appropriately 
        be prevented, diagnosed, treated, and managed clinically.
            (2) Certain Requirements.--Guidelines under paragraph (1) 
        shall--
                    (A) be based on the best available research and 
                professional judgment regarding the effectiveness and 
                appropriateness of health care services and procedures;
                    (B) be presented in formats appropriate for use by 
                health care providers, medical educators, medical 
                review organizations, and consumers of health care;
                    (C) include treatment-specific or condition-
                specific practice guidelines for clinical treatments 
                and conditions in forms appropriate for use in clinical 
                practice, for use in educational programs, and for use 
                in reviewing quality and appropriateness of medical 
                care;
                    (D) include information on risks and benefits of 
                alternative strategies for prevention, diagnosis, 
                treatment, and management of a given disease, disorder, 
                or other health condition;
                    (E) include information on the costs of alternative 
                strategies for the prevention, diagnosis, treatment, 
                and management of a given disease, disorder, or other 
                health condition, where cost information is available 
                and reliable; and
                    (F) be developed in accordance with priorities that 
                shall be established by the National Quality Management 
                Council based on the research priorities that are 
                established under section 5007(b) and the 5-year 
                priority list of performance measures described in 
                section 5003(d).
            (3) Health service utilization protocols.--The National 
        Quality Management Council shall establish standards and 
        procedures for evaluating the clinical appropriateness of 
        protocols used to manage health service utilization.
            (4) Use in medical malpractice liability pilot program.--
        Guidelines developed under this subsection may be used by the 
        Secretary of Health and Human Services in the pilot program 
        applying practice guidelines to medical malpractice liability 
        under section 5312.
    (b) Evaluation and Certification of Other Guidelines.--
            (1) Methodology.--The National Quality Management Council 
        shall direct the Administrator for Health Care Policy and 
        Research to develop and publish standards relating to 
        methodologies for developing the types of guidelines described 
        in subsection (a)(1).
            (2) Evaluation and certification.--The National Quality 
        Management Council shall direct the Administrator for Health 
        Care Policy and Research to establish a procedure by which 
        individuals and entities may submit guidelines of the type 
        described in subsection (a)(1) to the Council for evaluation 
        and certification by the Council using the standards developed 
        under paragraph (1).
            (3) Use in medical malpractice liability pilot program.--
        Guidelines certified under paragraph (2) may be used by the 
        Secretary of Health and Human Services in the pilot program 
        applying practice guidelines to medical malpractice liability 
        under section 5312.
    (c) Guideline Clearinghouse.--The National Quality Management 
Council shall direct the Administrator for Health Care Policy and 
Research to establish and oversee a clearinghouse and dissemination 
program for practice guidelines that are developed or certified under 
this section.
    (d) Dissemination of Information on Ineffective Treatments.--The 
National Quality Management Council shall collect and disseminate 
information documenting clinically ineffective treatments and 
procedures.

SEC. 5007. RESEARCH ON HEALTH CARE QUALITY.

    (a) Research Support.--The National Quality Management Council 
shall direct the Administrator for Health Care Policy and Research to 
support research directly related to the 5-year priority list of 
performance measures described in section 5003(d), including research 
with respect to--
            (1) outcomes of health care services and procedures;
            (2) effective and efficient dissemination of information, 
        standards, and guidelines;
            (3) methods of measuring quality and shared decisionmaking; 
        and
            (4) design and organization of quality of care components 
        of automated health information systems.
    (b) Research Priorities.--The National Quality Management Council 
shall establish priorities for research with respect to the quality, 
appropriateness, and effectiveness of health care and make 
recommendations concerning research projects. In establishing the 
priorities, the National Quality Management Council shall emphasize 
research involving diseases, disorders, and health conditions as to 
which--
            (1) there is the highest level of uncertainty concerning 
        treatment;
            (2) there is the widest variation in practice patterns;
            (3) the costs associated with prevention, diagnosis, 
        treatment, or clinical management are significant; and
            (4) the rate of incidence or prevalence is high for the 
        population as a whole or for particular subpopulations.

SEC. 5008. REGIONAL PROFESSIONAL FOUNDATIONS.

    (a) Establishment.--The National Health Board shall establish and 
oversee regional professional foundations to perform the duties 
specified in subsection (c).
    (b) Structure and Membership.--
            (1) In general.--The National Quality Consortium 
        established under section 5009 shall oversee the establishment 
        of regional professional foundations, the membership 
        requirements for each foundation, and any other requirement for 
        the internal operation of each foundation.
            (2) Entities eligible for membership.--Each regional 
        professional foundation shall include at least one academic 
        health center (as defined in section 3101(c)). The following 
        entities also shall be eligible to serve as members of the 
        regional professional foundation for the region in which the 
        entity is located:
                    (A) Schools of public health (as defined in section 
                799 of the Public Health Service Act).
                    (B) Other schools and programs defined in such 
                section.
                    (C) Health plans.
                    (D) Regional alliances.
                    (E) Corporate alliances.
                    (F) Health care providers.
    (c) Duties.--A regional professional foundation shall carry out the 
following duties for the region in which the foundation is located 
(such region to be demarcated by the National Health Board with the 
advice of the National Quality Consortium established under section 
5009):
            (1) Developing programs in lifetime learning for health 
        professionals (as defined in section 1112(c)(1)) to ensure the 
        delivery of quality health care.
            (2) Fostering collaboration among health plans and health 
        care providers to improve the quality of primary and 
        specialized health care.
            (3) Disseminating information about successful quality 
        improvement programs, practice guidelines, and research 
        findings.
            (4) Disseminating information on innovative uses of health 
        professionals.
            (5) Developing innovative patient education systems that 
        enhance patient involvement in decisions relating their health 
        care.
            (6) Applying for and conducting research described in 
        section 5007.
    (d) Programs in Lifetime Learning.--The programs described in 
subsection (c)(1) shall ensure that health professionals remain abreast 
of new knowledge, acquire new skills, and adopt new roles as technology 
and societal demands change.

SEC. 5009. NATIONAL QUALITY CONSORTIUM.

    (a) Establishment.--The National Health Board shall establish a 
consortium to be known as the National Quality Consortium.
    (b) Duties.--The Consortium shall--
            (1) establish programs for continuing education for health 
        professionals;
            (2) advise the National Quality Management Council and the 
        Administrator for Health Care Policy and Research on research 
        priorities;
            (3) oversee the development of the regional professional 
        foundations established under section 5008;
            (4) advise the National Quality Management Council with 
        respect to the funding of proposals to establish such 
        foundations;
            (5) consult with the National Quality Management Council 
        regarding the selection of national measures of quality 
        performance under section 5003(c); and
            (6) advise the National Health Board and the National 
        Quality Management Council with respect to any other duty of 
        the Board or the Council under this subtitle.
    (c) Membership.--The Consortium shall be composed of 11 members 
appointed by the National Health Board. The members of the Consortium 
shall include--
            (1) 5 individuals representing the interests of academic 
        health centers; and
            (2) 6 other individuals representing the interests of one 
        of the following persons:
                    (A) Schools of public health.
                    (B) Other schools and programs defined in section 
                799 of the Public Health Service Act (including medical 
                schools, nursing schools, and allied health 
                professional schools).
    (d) Terms.--
            (1) In general.--Except as provided in paragraph (2), 
        members of the Consortium shall serve for a term of 3 years.
            (2) Staggered rotation.--Of the members first appointed to 
        the Consortium under subsection (c), the National Health Board 
        shall appoint 4 members to serve for a term of 3 years, 3 
        members to serve for a term of 2 years, and 4 members to serve 
        for a term of 1 year.
    (e) Chair.--The National Health Board shall designate an individual 
to serve as the chair of the Consortium.

SEC. 5010. ELIMINATING CLIA REQUIREMENT FOR CERTIFICATE OF WAIVER FOR 
              SIMPLE LABORATORY EXAMINATIONS AND PROCEDURES.

    (a) In General.--Section 353 of the Public Health Service Act (42 
U.S.C. 263a) is amended--
            (1) in subsection (b), by inserting before the period at 
        the end the following: ``or unless the laboratory is exempt 
        from the certificate requirement under subsection (d)(2)'';
            (2) by amending paragraph (2) of subsection (d) to read as 
        follows:
            ``(2) Exemption from certificate requirement for 
        laboratories performing only simple examinations and 
        procedures.--A laboratory which performs only laboratory 
        examinations and procedures described in paragraph (3) is not 
        required to have in effect a certificate under this section.'';
            (3) by striking paragraph (4) of subsection (d); and
            (4) in subsection (m)(1), by striking ``, except that the 
        Secretary'' and all that follows and inserting a period.
    (b) Effective Date.--The amendments made by this section shall take 
effect on the first day of the first month beginning after the date of 
the enactment of this Act.

SEC. 5011. UNIFORM STANDARDS FOR HEALTH CARE INSTITUTIONS.

    (a) Development of Standards.--Not later than 3 years after the 
date of the enactment of this Act, the National Health Board shall 
develop demonstration standards for the licensing of health care 
institutions that address essential performance requirements related to 
patient care. The standards shall be developed in a manner that permits 
them to be applied uniformly to all such institutions, except in the 
areas of fire safety, sanitation, and patient rights, and so as not to 
undermine ongoing nursing home reforms.
    (b) Demonstration Projects.--By January 1, 1996, the National 
Quality Management Council shall complete demonstration projects for 
the standards developed under subsection (a) and shall revise the 
standards according to the findings of such projects. The demonstration 
projects shall evaluate the impact of these standards in ensuring 
quality of care, reducing cost, and reducing burdens on health care 
providers.
    (c) Preemptive Effect of Fully Implemented Standard.--After a 
standard developed under this section is tested, evaluated, revised, 
and fully implemented, it shall replace existing standards, except in 
cases in which statutory changes are necessary to implement such 
standards. In such cases, the National Quality Management Council shall 
recommend to the President and the Congress revisions in Federal 
statutes to conform the statutes to the standards.
    (d) Consolidated Audit and Inspection.--The National Quality 
Management Council shall undertake research efforts designed to develop 
a system for carrying out through grant or contract a single, 
consolidated annual audit and inspection of each health care 
institution and health care provider for the combined purposes of 
Federal, State, local, and private licensure, accreditation, and 
certification.

SEC. 5012. ROLE OF ALLIANCES IN QUALITY ASSURANCE.

    Each regional alliance and each corporate alliance shall--
            (1) disseminate to consumers information related to quality 
        and access to aid in their selection of plans in accordance 
        with section 1325;
            (2) disseminate information on the quality of health plans 
        and health care providers contained in reports of the National 
        Quality Management Council section 5005(c)(2);
            (3) ensure through negotiations with health plans that 
        performance and quality standards are continually improved; and
            (4) conduct educational programs in cooperation with 
        regional professional foundations to assist consumers in using 
        quality and other information in choosing health plans.

SEC. 5013. ROLE OF HEALTH PLANS IN QUALITY MANAGEMENT.

    Each health plan shall--
            (1) measure and disclose performance on quality measures 
        used by--
                    (A) participating States in which the plan does 
                business;
                    (B) regional alliances and corporate alliances that 
                offer the plan; and
                    (C) the National Quality Management Council;
            (2) furnish information required under subtitle B of this 
        title and provide such other reports and information on the 
        quality of care delivered by health care providers who are 
        members of a provider network of the plan (as defined in 
        section 1402(f)) as may be required under this Act; and
            (3) maintain quality management systems that--
                    (A) use the national measures of quality 
                performance developed by the National Quality 
                Management Council under section 5003; and
                    (B) measure the quality of health care furnished to 
                enrollees under the plan by all health care providers 
                who are members of a provider network of the plan.

                                                    Title V, Subtitle B

     Subtitle B--Information Systems, Privacy, and Administrative 
                             Simplification

                   PART 1--HEALTH INFORMATION SYSTEMS

SEC. 5101. ESTABLISHMENT OF HEALTH INFORMATION SYSTEM.

    (a) In General.--Not later than 2 years after the date of the 
enactment of this Act, the National Health Board shall develop and 
implement a health information system by which the Board shall collect, 
report, and regulate the collection and dissemination of the health 
care information described in subsection (e) pursuant to standards 
promulgated by the Board and (if applicable) consistent with policies 
established as part of the National Information Infrastructure Act of 
1993.
    (b) Privacy.--The health information system shall be developed and 
implemented in a manner that is consistent with the privacy and 
security standards established under section 5120.
    (c) Reduction in Administrative Costs.--The health information 
system shall be developed and implemented in a manner that is 
consistent with the objectives of reducing wherever practicable and 
appropriate--
            (1) the costs of providing and paying for health care;
            (2) the time, effort, and financial resources expended by 
        persons to provide information to States, the Federal 
        Government, health alliances, and health plans.
    (d) Uses of Information.--The health care information described in 
subsection (e) shall be collected and reported in a manner that 
facilitates its use for the following purposes:
            (1) Health care planning, policy development, policy 
        evaluation, and research by Federal, State, and local 
        governments and regional and corporate alliances.
            (2) Establishing and monitoring payments for health 
        services by the Federal Government, States, regional alliances, 
        and corporate alliances.
            (3) Assessing and improving the quality of health care.
            (4) Measuring and optimizing access to health care.
            (5) Evaluating the cost of specific clinical or 
        administrative functions.
            (6) Supporting public health functions and objectives.
            (7) Improving the ability of health plans, health care 
        providers, and consumers to coordinate, improve, and make 
        choices about health care.
            (8) Managing and containing costs at the alliance and plan 
        levels.
    (e) Health Care Information.--The health care information referred 
to in subsection (a) shall include data on--
            (1) enrollment and disenrollment in health plans;
            (2) clinical encounters and other items and services 
        provided by health care providers;
            (3) administrative and financial transactions and 
        activities of participating States, regional alliances, 
        corporate alliances, health plans, health care providers, 
        employers, and individuals that are necessary to determine 
        compliance with this Act or an Act amended by this Act;
            (4) the characteristics of regional alliances, including 
        the number, and demographic characteristics of eligible 
        individuals residing in each alliance area;
            (5) the characteristics of corporate alliances, including 
        the number, and demographic characteristics of individuals who 
        are eligible to be enrolled in each corporate alliance health 
        plan and individuals with respect to whom a large employer has 
        exercised an option under section 1311 to make ineligible for 
        such enrollment;
            (6) terms of agreement between health plans and the health 
        care providers who are members of provider networks of the 
        plans (as defined in section 1402(f));
            (7) payment of benefits in cases in which benefits may be 
        payable under a health plan and any other insurance policy or 
        health program;
            (8) utilization management by health plans and health care 
        providers;
            (9) the information collected and reported by the Board or 
        disseminated by other individuals or entities as part of the 
        National Quality Management Program under subtitle A;
            (10) grievances filed against regional alliances, corporate 
        alliances, and health plans and the resolutions of such 
        grievances; and
            (11) any other fact that may be necessary to determine 
        whether a health plan or a health care provider has complied 
        with a Federal statute pertaining to fraud or misrepresentation 
        in the provision or purchasing of health care or in the 
        submission of a claim for benefits or payment under a health 
        plan.

SEC. 5102. ADDITIONAL REQUIREMENTS FOR HEALTH INFORMATION SYSTEM.

    (a) Consultation.--The health information system shall be developed 
in consultation with--
            (1) Federal agencies that--
                    (A) collect health care information;
                    (B) oversee the collection of information or 
                records management by other Federal agencies;
                    (C) directly provide health care services;
                    (D) provide for payments for health care services; 
                or
                    (E) enforce a provision of this Act or any Act 
                amended by this Act;
            (2) the National Quality Management Council established 
        under section 5002;
            (3) participating States;
            (4) regional alliances and corporate alliances;
            (5) health plans;
            (6) representatives of health care providers;
            (7) representatives of employers;
            (8) representatives of consumers of health care;
            (9) experts in public health and health care information 
        and technology; and
            (10) representatives of organizations furnishing health 
        care supplies, services, and equipment.
    (b) Collection and Transmission Requirements.--In establishing 
standards under section 5101, the National Health Board shall specify 
the form and manner in which individuals and entities are required to 
collect or transmit health care information for or to the Board. The 
Board also shall specify the frequency with which individuals and 
entities are required to transmit such information to the Board. Such 
specifications shall include, to the extent practicable--
            (1) requirements for use of uniform paper forms containing 
        standard data elements, definitions, and instructions for 
        completion in cases where the collection or transmission of 
        data in electronic form is not specified by the Board;
            (2) requirements for use of uniform health data sets with 
        common definitions to standardize the collection and 
        transmission of data in electronic form;
            (3) uniform presentation requirements for data in 
        electronic form; and
            (4) electronic data interchange requirements for the 
        exchange of data among automated health information systems.
    (c) Preemption of State ``Pen & Quill'' Laws.--A standard 
established by the National Health Board relating to the form in which 
medical or health plan records are required to be maintained shall 
supercede any contrary provision of State law, except where the Board 
determines that the provision is necessary to prevent fraud and abuse, 
with respect to controlled substances, or for other purposes.

SEC. 5103. ELECTRONIC DATA NETWORK.

    (a) In General.--As part of the health information system, the 
National Health Board shall oversee the establishment of an electronic 
data network consisting of regional centers that collect, compile, and 
transmit information.
    (b) Consultation.--The electronic data network shall be developed 
in consultation with--
            (1) Federal agencies that--
                    (A) collect health care information;
                    (B) oversee the collection of information or 
                records management by other Federal agencies;
                    (C) directly provide health care services;
                    (D) provide for payments for health care services; 
                or
                    (E) enforce a provision of this Act or any Act 
                amended by this Act;
            (2) the National Quality Management Council established 
        under section 5002;
            (3) participating States;
            (4) regional alliances and corporate alliances;
            (5) health plans;
            (6) representatives of health care providers;
            (7) representatives of employers;
            (8) representatives of consumers of health care;
            (9) experts in public health and health care information 
        and technology; and
            (10) representatives of organizations furnishing health 
        care supplies, services, and equipment.
    (c) Demonstration Projects.--The electronic data network shall be 
tested prior to full implementation through the establishment of 
demonstration projects.
    (d) Disclosure of Individually Identifiable Information.--The 
electronic data network may be used to disclose individually 
identifiable health information (as defined in section 5123(3)) to any 
individual or entity only in accordance with the health information 
system privacy standards promulgated by the National Health Board under 
section 5120.

SEC. 5104. UNIQUE IDENTIFIER NUMBERS.

    (a) In General.--As part of the health information system, the 
Board shall establish a system to provide for a unique identifier 
number for each--
            (1) eligible individual;
            (2) employer;
            (3) health plan; and
            (4) health care provider.
    (b) Impermissible Data Links.--In establishing the system under 
subsection (a), the National Health Board shall ensure that a unique 
identifier number may not be used to connect individually identifiable 
health information (as defined in section 5123(3)) that is collected as 
part of the health information system or that otherwise may be accessed 
through the number with individually identifiable information from any 
other source, except in cases where the National Health Board 
determines that such connection is necessary to carry out a duty 
imposed on any individual or entity under this Act.
    (c) Permissible Uses of Identifier.--The National Health Board 
shall by regulation establish the purposes for which a unique 
identifier number provided pursuant to this section may be used.

SEC. 5105. HEALTH SECURITY CARDS.

    (a) Permissible Uses of Card.--A health security card that is 
issued to an eligible individual under section 1001(b) may be used by 
an individual or entity, in accordance with regulations promulgated by 
the Board, only for the purpose of providing or assisting the eligible 
individual in obtaining an item or service that is covered under--
            (1) the applicable health plan in which the individual is 
        enrolled (as defined in section 1902);
            (2) a policy consisting of a supplemental health benefit 
        policy (described in part 2 of subtitle E of title I), a cost 
        sharing policy (described in such part), or both;
            (3) a FEHBP supplemental plan (described in subtitle C of 
        title VIII);
            (4) a FEHBP medicare supplemental plan (described in such 
        subtitle); or
            (5) such other programs as the Board may specify.
    (b) Form of Card and Encoded Information.--The National Health 
Board shall establish standards respecting the form of health security 
cards and the information to be encoded in electronic form on the 
cards. Such information shall include--
            (1) the identity of the individual to whom the card is 
        issued;
            (2) the applicable health plan in which the individual is 
        enrolled;
            (3) any policy described in paragraph (2), (3), or (4) of 
        subsection (a) in which the individual is enrolled; and
            (4) any other information that the National Health Board 
        determines to be necessary in order for the card to serve the 
        purpose described in subsection (a).
    (c) Unique Identifier Numbers.--The unique identifier number system 
developed by the National Health Board under section 5104 shall be used 
in encoding the information described in subsection (b).
    (d) Registration of Card.--The Board shall take appropriate steps 
to register the card, the name of the card, and other indicia relating 
to the card as a trademark or service mark (as appropriate) under the 
Trademark Act of 1946. For purposes of this subsection, the ``Trademark 
Act of 1946'' refers to the Act entitled ``An Act to provide for the 
registration and protection of trademarks used in commerce, to carry 
out the provisions of international conventions, and for other 
purposes'', approved July 5, 1946 (15 U.S.C. et seq.).
    (e) Reference to Crime.--For a provision relating to criminal 
penalties for misuse of a health security card or a unique identifier 
number, see section 5438.

SEC. 5106. TECHNICAL ASSISTANCE IN THE ESTABLISHMENT OF HEALTH 
              INFORMATION SYSTEMS.

    The National Health Board shall provide information and technical 
assistance to participating States, regional alliances, corporate 
alliances, health plans, and health care providers with respect to the 
establishment and operation of automated health information systems. 
Such assistance shall focus on--
            (1) the promotion of community-based health information 
        systems; and
            (2) the promotion of patient care information systems that 
        collect data at the point of care or as a by-product of the 
        delivery of care.

                     PART 2--PRIVACY OF INFORMATION

SEC. 5120. HEALTH INFORMATION SYSTEM PRIVACY STANDARDS.

    (a) Health Information System Standards.--Not later than 2 years 
after the date of the enactment of this Act, the National Health Board 
shall promulgate standards respecting the privacy of individually 
identifiable health information that is in the health information 
system described in part 1 of this subtitle. Such standards shall 
include standards concerning safeguards for the security of such 
information. The Board shall develop and periodically revise the 
standards in consultation with--
            (1) Federal agencies that--
                    (A) collect health care information;
                    (B) oversee the collection of information or 
                records management by other Federal agencies;
                    (C) directly provide health care services;
                    (D) provide for payments for health care services; 
                or
                    (E) enforce a provision of this Act or any Act 
                amended by this Act;
            (2) the National Quality Management Council established 
        under section 5002;
            (3) participating States;
            (4) regional alliances and corporate alliances;
            (5) health plans; and
            (6) representatives of consumers of health care.
    (b) Information Covered.--The standards established under 
subsection (a) shall apply to individually identifiable health 
information collected for or by, reported to or by, or the 
dissemination of which is regulated by, the National Health Board under 
section 5101.
    (c) Principles.--The standards established under subsection (a) 
shall incorporate the following principles:
            (1) Unauthorized disclosure.--All disclosures of 
        individually identifiable health information by an individual 
        or entity shall be unauthorized unless--
                    (A) the disclosure is by the enrollee identified in 
                the information or whose identity can be associated 
                with the information;
                    (B) the disclosure is authorized by such enrollee 
                in writing in a manner prescribed by the Board;
                    (C) the disclosure is to Federal, State, or local 
                law enforcement agencies for the purpose of enforcing 
                this Act or an Act amended by this Act; or
                    (D) the disclosure otherwise is consistent with 
                this Act and specific criteria governing disclosure 
                established by the Board.
            (2) Minimal disclosure.--All disclosures of individually 
        identifiable health information shall be restricted to the 
        minimum amount of information necessary to accomplish the 
        purpose for which the information is being disclosed.
            (3) Risk adjustment.--No individually identifiable health 
        information may be provided by a health plan to a regional 
        alliance or a corporate alliance for the purpose of setting 
        premiums based on risk adjustment factors.
            (4) Required safeguards.--Any individual or entity who 
        maintains, uses, or disseminates individually identifiable 
        health information shall implement administrative, technical, 
        and physical safeguards for the security of such information.
            (5) Right to know.--An enrollee (or an enrollee 
        representative of the enrollee) has the right to know--
                    (A) whether any individual or entity uses or 
                maintains individually identifiable health information 
                concerning the enrollee; and
                    (B) for what purposes the information may be used 
                or maintained.
            (6) Right to access.--Subject to appropriate procedures, an 
        enrollee (or an enrollee representative of the enrollee) has 
        the right, with respect to individually identifiable health 
        information concerning the enrollee that is recorded in any 
        form or medium--
                    (A) to see such information;
                    (B) to copy such information; and
                    (C) to have a notation made with or in such 
                information of any amendment or correction of such 
                information requested by the enrollee or enrollee 
                representative.
            (7) Right to notice.--An enrollee and an enrollee 
        representative have the right to receive a written statement 
        concerning--
                    (A) the purposes for which individually 
                identifiable health information provided to a health 
                care provider, a health plan, a regional alliance, a 
                corporate alliance, or the National Health Board may be 
                used or disclosed by, or disclosed to, any individual 
                or entity; and
                    (B) the right of access described in paragraph (6).
            (8) Use of unique identifier.--When individually 
        identifiable health information concerning an enrollee is 
        required to accomplish the purpose for which information is 
        being transmitted between or among the National Health Board, 
        regional and corporate alliances, health plans, and health care 
        providers, the transmissions shall use the unique identifier 
        number provided to the enrollee pursuant to section 5104 in 
        lieu of the name of the enrollee.
            (9) Use for employment decisions.--Individually 
        identifiable health care information may not be used in making 
        employment decisions.

SEC. 5121. OTHER DUTIES WITH RESPECT TO PRIVACY.

    (a) Research and Technical Support.--The National Health Board may 
sponsor--
            (1) research relating to the privacy and security of 
        individually identifiable health information;
            (2) the development of consent forms governing disclosure 
        of such information; and
            (3) the development of technology to implement standards 
        regarding such information.
    (c) Education.--The National Health Board shall establish education 
and awareness programs--
            (1) to foster adequate security practices by States, 
        regional alliances, corporate alliances, health plans, and 
        health care providers;
            (2) to train personnel of public and private entities who 
        have access to individually identifiable health information 
        respecting the duties of such personnel with respect to such 
        information; and
            (3) to inform individuals and employers who purchase health 
        care respecting their rights with respect to such information.

SEC. 5122. COMPREHENSIVE HEALTH INFORMATION PRIVACY PROTECTION ACT.

    (a) In General.--Not later than 3 years after the date of the 
enactment of this Act, the National Health Board shall submit to the 
President and the Congress a detailed proposal for legislation to 
provide a comprehensive scheme of Federal privacy protection for 
individually identifiable health information.
    (b) Code of Fair Information Practices.--The proposal shall include 
a Code of Fair Information Practices to be used to advise enrollees to 
whom individually identifiable health information pertains of their 
rights with respect to such information in an easily understood and 
useful form.
    (c) Enforcement.--The proposal shall include provisions to enforce 
effectively the rights and duties that would be created by the 
legislation.

SEC. 5123. DEFINITIONS.

    For purposes of this part:
            (1) Enrollee.--The term ``enrollee'' means an individual 
        who enrolls or has enrolled under a health plan. The term 
        includes a deceased individual who was enrolled under a health 
        plan.
            (2) Enrollee representative.--The term ``enrollee 
        representative'' means any individual legally empowered to make 
        decisions concerning the provision of health care to an 
        enrollee or the administrator or executor of the estate of a 
        deceased enrollee.
            (3) Individually identifiable health information.--The term 
        ``individually identifiable health information'' means any 
        information, whether oral or recorded in any form or medium, 
        that--
                    (A) identifies or can readily be associated with 
                the identity of an enrollee; and
                    (B) relates to--
                            (i) the past, present, or future physical 
                        or mental health of the enrollee;
                            (ii) the provision of health care to the 
                        enrollee; or
                            (iii) payment for the provision of health 
                        care to the enrollee.

     PART 3--INTERIM REQUIREMENTS FOR ADMINISTRATIVE SIMPLIFICATION

SEC. 5130. STANDARD BENEFIT FORMS.

    (a) Development.--Not later than 1 year after the date of the 
enactment of this Act, the National Health Board shall develop, 
promulgate, and publish in the Federal Register the following standard 
health care benefit forms:
            (1) An enrollment and disenrollment form to be used to 
        record enrollment and disenrollment in a health benefit plan.
            (2) A clinical encounter record to be used by health 
        benefit plans and health service providers.
            (3) A claim form to be used in the submission of claims for 
        benefits or payment under a health benefit plan.
    (b) Instructions, Definitions, and Codes.--Each standard form 
developed under subsection (a) shall include instructions for 
completing the form that--
            (1) specifically define, to the extent practicable, the 
        data elements contained in the form; and
            (2) standardize any codes or data sets to be used in 
        completing the form.
    (c) Requirements for Adoption of Forms.--
            (1) Health service providers.--On or after the date that is 
        270 days after the publication of the standard forms developed 
        under subsection (a), a health service provider that furnishes 
        items or services in the United States for which payment may be 
        made under a health benefit plan may not--
                    (A) maintain records of clinical encounters 
                involving such items or services that are required to 
                be maintained by the National Health Board in a paper 
                form that is not the clinical encounter record 
                promulgated by the Board; or
                    (B) submit any claim for benefits or payment for 
                such services to such plan in a paper form that is not 
                the claim form promulgated by the National Health 
                Board.
            (2) Health benefit plans.--On or after the date that is 270 
        days after the publication of the standard forms developed 
        under subsection (a), a health benefit plan may not--
                    (A) record enrollment and disenrollment in a paper 
                form that is not the enrollment and disenrollment form 
                promulgated by the National Health Board;
                    (B) maintain records of clinical encounters that 
                are required to be maintained by the National Health 
                Board in a paper form that is not the clinical 
                encounter record promulgated by the Board; or
                    (C) reject a claim for benefits or payment under 
                the plan on the basis of the form or medium in which 
                the claim is submitted if--
                            (i) the claim is submitted on the claim 
                        form promulgated by the National Health Board; 
                        and
                            (ii) the plan accepts claims submitted in 
                        paper form.
    (d) Definitions.--For purposes of this subtitle:
            (1) Health benefit plan.--
                    (A) In general.--The term ``health benefit plan'' 
                means, except as provided in subparagraphs (B) through 
                (D), any public or private entity or program that 
                provides for payments for health care services, 
                including--
                            (i) a group health plan (as defined in 
                        section 5000(b)(1) of the Internal Revenue Code 
                        of 1986); and
                            (ii) any other health insurance 
                        arrangement, including any arrangement 
                        consisting of a hospital or medical expense 
                        incurred policy or certificate, hospital or 
                        medical service plan contract, or health 
                        maintenance organization subscriber contract.
                    (B) Plans excluded.--Such term does not include--
                            (i) accident-only, credit, or disability 
                        income insurance;
                            (ii) coverage issued as a supplement to 
                        liability insurance;
                            (iii) an individual making payment on the 
                        individual's own behalf (or on behalf of a 
                        relative or other individual) for deductibles, 
                        coinsurance, or services not covered under a 
                        health benefit plan; and
                            (iv) such other plans as the National 
                        Health Board may determine, because of the 
                        limitation of benefits to a single type or kind 
                        of health care, such as dental services or 
                        hospital indemnity plans, or other reasons 
                        should not be subject to the requirements of 
                        this section.
                    (C) Plans included.--Such term includes--
                            (i) workers compensation or similar 
                        insurance insofar as it relates to workers 
                        compensation medical benefits (as defined in 
                        section 10000(3)) provided by or through health 
                        plans; and
                            (ii) automobile medical insurance insofar 
                        as it relates to automobile insurance medical 
                        benefits (as defined in section 10100(2)) 
                        provided by or through health plans.
                    (D) Treatment of direct provision of services.--
                Such term does not include a Federal or State program 
                that provides directly for the provision of health 
                services to beneficiaries.
            (2) Health service provider.--The term ``health service 
        provider'' includes a provider of services (as defined in 
        section 1861(u) of the Social Security Act), physician, 
        supplier, and other person furnishing health care services. 
        Such term includes a Federal or State program that provides 
        directly for the provision of health services to beneficiaries.
    (e) Interim Nature of Requirements.--The National Health Board may 
modify, update, or supercede any standard form or requirement 
developed, promulgated, or imposed under this section through the 
establishment of a standard under section 5101.

                       PART 4--GENERAL PROVISIONS

SEC. 5140. NATIONAL PRIVACY AND HEALTH DATA ADVISORY COUNCIL.

    (a) Establishment.--There is established an advisory council to be 
known as the National Privacy and Health Data Advisory Council.
    (b) Duties.--The Council shall advise the National Health Board 
with respect to its duties under this subtitle.
    (c) Number and Appointment.--The Council shall be composed of 15 
members appointed by the National Health Board. The members of the 
Council shall include--
            (1) individuals representing the interests of consumers, 
        employers, and other purchasers of health care;
            (2) individuals representing the interests of health plans, 
        health care providers, corporate alliances, regional alliances, 
        public health agencies, and participating States; and
            (3) individuals distinguished in the fields of data 
        collection, data protection and privacy, law, ethics, medical 
        and health services research, public health, and civil 
        liberties and patient advocacy.
    (d) Terms.--
            (1) In general.--Except as provided in paragraph (2), 
        members of the Council shall serve for a term of 3 years.
            (2) Staggered rotation.--Of the members first appointed to 
        the Council under subsection (c), the National Health Board 
        shall appoint 5 members to serve for a term of 3 years, 5 
        members to serve for a term of 2 years, and 5 members to serve 
        for a term of 1 year.
            (3) Service beyond term.--A member of the Council may 
        continue to serve after the expiration of the term of the 
        member until a successor is appointed.
    (e) Vacancies.--If a member of the Council does not serve the full 
term applicable under subsection (d), the individual appointed to fill 
the resulting vacancy shall be appointed for the remainder of the term 
of the predecessor of the individual.
    (f) Chair.--The National Health Board shall designate an individual 
to serve as the chair of the Council.
    (g) Meetings.--The Council shall meet not less than once during 
each 4-month period and shall otherwise meet at the call of the 
National Health Board or the chair.
    (h) Compensation and Reimbursement of Expenses.--Members of the 
Council shall receive compensation for each day (including travel time) 
engaged in carrying out the duties of the Council. Such compensation 
may not be in an amount in excess of the maximum rate of basic pay 
payable for level IV of the Executive Schedule under section 5315 of 
title 5, United States Code.
    (i) Staff.--The National Health Board shall provide to the Council 
such staff, information, and other assistance as may be necessary to 
carry out the duties of the Council.
    (j) Duration.--Notwithstanding section 14(a) of the Federal 
Advisory Committee Act, the Council shall continue in existence until 
otherwise provided by law.

SEC. 5141. CIVIL MONEY PENALTIES.

    (a) Violation of Health Information System Standards.--Any person 
who the Secretary of Health and Human Services determines--
            (1) is required, but has substantially failed, to comply 
        with a standard established by the National Health Board under 
        section 5101 or 5120;
            (2) has required the display of, has required the use of, 
        or has used a health security card for any purpose other than a 
        purpose described in section 5105(a); or
            (3) has required the disclosure of, has required the use 
        of, or has used a unique identifier number provided pursuant to 
        section 5104 for any purpose that is not authorized by the 
        National Health Board pursuant to such section
shall be subject, in addition to any other penalties that may be 
prescribed by law, to a civil money penalty of not more than $10,000 
for each such violation.
    (b) Standard Benefit Forms.--Any health service provider or health 
benefit plan that the Secretary of Health and Human Services determines 
is required, but has substantially failed, to comply with section 
5130(c) shall be subject, in addition to any other penalties that may 
be prescribed by law, to a civil money penalty of not more than $10,000 
for each such violation.
    (c) Process.--The process for the imposition of a civil money 
penalty under the All-Payer Health Care Fraud and Abuse Control Program 
under part 1 of subtitle E of this title shall apply to a civil money 
penalty under this section in the same manner as such process applies 
to a penalty or proceeding under such program.

SEC. 5142. RELATIONSHIP TO OTHER LAWS.

    (a) Court Orders.--Nothing in this title shall be construed to 
invalidate or limit the power or authority of any court of competent 
jurisdiction with respect to health care information.
    (b) Public Health Reporting.--Nothing in this title shall be 
construed to invalidate or limit the authorities, powers, or procedures 
established under any law that provides for the reporting of disease, 
child abuse, birth, or death.

                                                    Title V, Subtitle C

                  Subtitle C--Remedies and Enforcement

   PART 1--REVIEW OF BENEFIT DETERMINATIONS FOR ENROLLED INDIVIDUALS

                        Subpart A--General Rules

SEC. 5201. HEALTH PLAN CLAIMS PROCEDURE.

    (a) Definitions.--For purposes of this section--
            (1) Claim.--The term ``claim'' means a claim for payment or 
        provision of benefits under a health plan or a request for 
        preauthorization of items or services which is submitted to a 
        health plan prior to receipt of the items or services.
            (2) Individual claimant.--The term ``individual claimant'' 
        with respect to a claim means any individual who submits the 
        claim to a health plan in connection with the individual's 
        enrollment under the plan, or on whose behalf the claim is 
        submitted to the plan by a provider.
            (3) Provider claimant.--The term ``provider claimant'' with 
        respect to a claim means any provider who submits the claim to 
        a health plan with respect to items or services provided to an 
        individual enrolled under the plan.
    (b) General Rules Governing Treatment of Claims.--
            (1) Adequate notice of disposition of claim.--In any case 
        in which a claim is submitted in complete form to a health 
        plan, the plan shall provide to the individual claimant and any 
        provider claimant with respect to the claim a written notice of 
        the plan's approval or denial of the claim within 30 days after 
        the date of the submission of the claim. The notice to the 
        individual claimant shall be written in language calculated to 
        be understood by the typical individual enrolled under the plan 
        and in a form which takes into account accessibility to the 
        information by individuals whose primary language is not 
        English. In the case of a denial of the claim, the notice shall 
        be provided within 5 days after the date of the determination 
        to deny the claim, and shall set forth the specific reasons for 
        the denial. The notice of a denial shall include notice of the 
        right to appeal the denial under paragraph (2). Failure by any 
        plan to comply with the requirements of this paragraph with 
        respect to any claim submitted to the plan shall be treated as 
        approval by the plan of the claim.
            (2) Plan's duty to review denials upon timely request.--The 
        plan shall review its denial of the claim if an individual 
        claimant or provider claimant with respect to the claim submits 
        to the plan a written request for reconsideration of the claim 
        after receipt of written notice from the plan of the denial. 
        The plan shall allow any such claimant not less than 60 days, 
        after receipt of written notice from the plan of the denial, to 
        submit the claimant's request for reconsideration of the claim.
            (3) Time limit for review.--The plan shall complete any 
        review required under paragraph (2), and shall provide the 
        individual claimant and any provider claimant with respect to 
        the claim written notice of the plan's decision on the claim 
        after reconsideration pursuant to the review, within 30 days 
        after the date of the receipt of the request for 
        reconsideration.
            (4) De novo reviews.--Any review required under paragraph 
        (2)--
                    (A) shall be de novo,
                    (B) shall be conducted by an individual who did not 
                make the initial decision denying the claim and who is 
                authorized to approve the claim, and
                    (C) shall include review by a qualified physician 
                if the resolution of any issues involved requires 
                medical expertise.
    (c) Treatment of Urgent Requests to Plans for Preauthorization.--
            (1) In general.--This subsection applies in the case of any 
        claim submitted by an individual claimant or a provider 
        claimant consisting of a request for preauthorization of items 
        or services (other than emergency services which under section 
        1406(b) may not be subject to preauthorization) which is 
        accompanied by an attestation that--
                    (A) failure to immediately provide the items or 
                services could reasonably be expected to result in--
                            (i) placing the health of the individual 
                        claimant (or, with respect to an individual 
                        claimant who is a pregnant woman, the health of 
                        the woman or her unborn child) in serious 
                        jeopardy,
                            (ii) serious impairment to bodily 
                        functions, or
                            (iii) serious dysfunction of any bodily 
                        organ or part,
                or
                    (B) immediate provision of the items or services is 
                necessary because the individual claimant has made or 
                is at serious risk of making an attempt to harm such 
                individual claimant or another individual.
            (2) Shortened time limit for consideration of requests for 
        preauthorization.--Notwithstanding subsection (b)(1), a health 
        plan shall approve or deny any claim described in paragraph (1) 
        within 24 hours after submission of the claim to the plan. 
        Failure by the plan to comply with the requirements of this 
        paragraph with respect to the claim shall be treated as 
        approval by the plan of the claim.
            (3) Expedited exhaustion of plan remedies.--Any claim 
        described in paragraph (1) which is denied by the plan shall be 
        treated as a claim with respect to which all remedies under the 
        plan provided pursuant to this section are exhausted, 
        irrespective of any review provided under subsection (b)(2).
            (4) Denial of previously authorized claims not permitted.--
        In any case in which a health plan approves a claim described 
        in paragraph (1)--
                    (A) the plan may not subsequently deny payment or 
                provision of benefits pursuant to the claim, unless the 
                plan makes a showing of an intentional 
                misrepresentation of a material fact by the individual 
                claimant, and
                    (B) in the case of a violation of subparagraph (A) 
                in connection with the claim, all remedies under the 
                plan provided pursuant to this section with respect to 
                the claim shall be treated as exhausted.
    (d) Time Limit for Determination of Incompleteness of Claim.--For 
purposes of this section--
            (1) any claim submitted by an individual claimant and 
        accepted by a provider serving under contract with a health 
        plan and any claim described in subsection (b)(1) shall be 
        treated with respect to the individual claimant as submitted in 
        complete form, and
            (2) any other claim for benefits under the plan shall be 
        treated as filed in complete form as of 10 days after the date 
        of the submission of the claim, unless the plan provides to the 
        individual claimant and any provider claimant, within such 
        period, a written notice of any required matter remaining to be 
        filed in order to complete the claim.
Any filing by the individual claimant or the provider claimant of 
additional matter requested by the plan pursuant to paragraph (2) shall 
be treated for purposes of this section as an initial filing of the 
claim.
    (e) Additional Notice and Disclosure Requirements for Health 
Plans.--In the case of a denial of a claim for benefits under a health 
plan, the plan shall include, together with the specific reasons 
provided to the individual claimant and any provider claimant under 
subsection (b)(1)--
            (1) if the denial is based in whole or in part on a 
        determination that the claim is for an item or service which is 
        not covered by the comprehensive benefit package or exceeds 
        payment rates under the applicable alliance or State fee 
        schedule, the factual basis for the determination,
            (2) if the denial is based in whole or in part on exclusion 
        of coverage with respect to services because the services are 
        determined to comprise an experimental treatment or 
        investigatory procedure, the medical basis for the 
        determination and a description of the process used in making 
        the determination, and
            (3) if the denial is based in whole or in part on a 
        determination that the treatment is not medically necessary or 
        appropriate or is inconsistent with the plan's practice 
        guidelines, the medical basis for the determination, the 
        guidelines used in making the determination, and a description 
        of the process used in making the determination.
    (f) Waiver of Rights Prohibited.--A health plan may not require any 
party to waive any right under the plan or this Act as a condition for 
approval of any claim under the plan, except to the extent otherwise 
specified in a formal settlement agreement.

SEC. 5202. REVIEW IN REGIONAL ALLIANCE COMPLAINT REVIEW OFFICES OF 
              GRIEVANCES BASED ON ACTS OR PRACTICES BY HEALTH PLANS.

    (a) Complaint Review Offices.--
            (1) In general.--In accordance with rules which shall be 
        prescribed by the Secretary of Labor, each State shall 
        establish and maintain a complaint review office for each 
        regional alliance established by such State. According to 
        designations which shall be made by each State under 
        regulations of the Secretary of Labor, the complaint review 
        office for a regional alliance established by such State shall 
        also serve as the complaint review office for corporate 
        alliances operating in the State with respect to individuals 
        who are enrolled under plans described in subsection (b) 
        maintained by such corporate alliances and who reside within 
        the area of the regional alliance.
            (2) Regional alliances not established by States.--In the 
        case of any regional alliance established in any State by the 
        Secretary of Health and Human Services, the Secretary of Health 
        and Human Services shall assume all duties and obligations of 
        such State under this part in accordance with the applicable 
        regulations of the Secretary of Labor under this part.
    (b) Filings of Complaints by Aggrieved Persons.--In the case of any 
person who is aggrieved by--
            (1) any act or practice engaged in by any health plan which 
        consists of or results in denial of payment or provision of 
        benefits under the plan or delay in the payment or provision of 
        benefits, or
            (2) any act or practice engaged in by any other plan 
        maintained by a regional alliance or a corporate alliance which 
        consists of or results in denial of payment or provision of 
        benefits under a supplemental benefit policy described in 
        section 1421(b)(1) or a cost sharing policy described in 
        section 1421(b)(2) or delay in the payment or provision of the 
        benefits,
if the denial or delay consists of a failure to comply with the terms 
of the plan (including the provision of benefits in full when due in 
accordance with the terms of the plan), or with the applicable 
requirements of this Act, such person may file a complaint with the 
appropriate complaint review office.
    (c) Exhaustion of Plan Remedies.--Any complaint including a claim 
to which section 5201 applies may not be filed until the complainant 
has exhausted all remedies provided under the plan with respect to the 
claim in accordance with such section.
    (d) Exclusive Means of Review for Plans Maintained by Corporate 
Alliances.--Notwithstanding part 2, proceedings under sections 5203 and 
5204 pursuant to complaints filed under subsection (b), and review 
under section 5205 of determinations made under section 5204, shall be 
the exclusive means of review of acts or practices described in 
subsection (b) which are engaged in by a corporate alliance health plan 
or by any plan maintained by a corporate alliance with respect to 
benefits under a supplemental benefit policy described in section 
1421(b)(1) or a cost sharing policy described in section 1421(b)(2).
    (e) Form of Complaint.--The complaint shall be in writing under 
oath or affirmation, shall set forth the complaint in a manner 
calculated to give notice of the nature of the complaint, and shall 
contain such information as may be prescribed in regulations of the 
Secretary of Labor.
    (f) Notice of Filing.--The complaint review office shall serve by 
certified mail a notice of the complaint (including the date, place, 
and circumstances of the alleged violation) on the person or persons 
alleged in the complaint to have committed the violation within 10 days 
after the filing of the complaint.
    (g) Time Limitation.--Complaints may not be brought under this 
section with respect to any violation later than one year after the 
date on which the violation occurs. This subsection shall not prevent 
the subsequent amending of a complaint.

SEC. 5203. INITIAL PROCEEDINGS IN COMPLAINT REVIEW OFFICES.

    (a) Elections.--Whenever a complaint is brought to the complaint 
review office under section 5202(b), the complaint review office shall 
provide the complainant with an opportunity, in such form and manner as 
shall be prescribed in regulations of the Secretary of Labor, to elect 
one of the following:
            (1) to forego further proceedings in the complaint review 
        office and rely on remedies available in a court of competent 
        jurisdiction, with respect to any matter in the complaint with 
        respect to which proceedings under this section and section 
        5204, and review under section 5205, are not under section 
        5202(d) the exclusive means of review,
            (2) to submit the complaint as a dispute under the Early 
        Resolution Program established under subpart B and thereby 
        suspend further review proceedings under this section pending 
        termination of proceedings under the Program, or
            (3) in any case in which an election under paragraph (2) is 
        not made, or such an election was made but resolution of all 
        matters in the complaint was not obtained upon termination of 
        proceedings pursuant to the election by settlement agreement or 
        otherwise, to proceed with the complaint to a hearing in the 
        complaint review office under section 5204 regarding the 
        unresolved matters.
    (b) Effect of Participation in Early Resolution Program.--Any 
matter in a complaint brought to the complaint review office which is 
included in a dispute which is timely submitted to the Early Resolution 
Program established under subpart B shall not be assigned to a hearing 
under section 5204 unless the proceedings under the Program with 
respect to the dispute are terminated without settlement or resolution 
of the dispute with respect to such matter. Upon termination of any 
proceedings regarding a dispute submitted to the Program, the 
applicability of this section to any matter in a complaint which was 
included in the dispute shall not be affected by participation in the 
proceedings, except to the extent otherwise required under the terms of 
any settlement agreement or other formal resolution obtained in the 
proceedings.

SEC. 5204. HEARINGS BEFORE HEARING OFFICERS IN COMPLAINT REVIEW 
              OFFICES.

    (a) Hearing Process.--
            (1) Assignment of complaints to hearing officers and notice 
        to parties.--
                    (A) In general.--In the case of an election under 
                section 5203(a)(3)--
                            (i) the complaint review office shall 
                        assign the complaint, and each motion in 
                        connection with the complaint, to a hearing 
                        officer employed by the State in the office; 
                        and
                            (ii) the hearing officer shall have the 
                        power to issue and cause to be served upon the 
                        plan named in the complaint a copy of the 
                        complaint and a notice of hearing before the 
                        hearing officer at a place fixed in the notice, 
                        not less than 5 days after the serving of the 
                        complaint.
                    (B) Qualifications for hearing officers.--No 
                individual may serve in a complaint review office as a 
                hearing officer unless the individual meets standards 
                which shall be prescribed by the Secretary of Labor. 
                Such standards shall include experience, training, 
                affiliations, diligence, actual or potential conflicts 
                of interest, and other qualifications deemed relevant 
                by the Secretary of Labor. At no time shall a hearing 
                officer have any official, financial, or personal 
                conflict of interest with respect to issues in 
                controversy before the hearing officer.
            (2) Amendment of complaints.--Any such complaint may be 
        amended by the hearing officer conducting the hearing, upon the 
        motion of the complainant, in the hearing officer's discretion 
        at any time prior to the issuance of an order based thereon.
            (3) Answers.--The party against whom the complaint is filed 
        shall have the right to file an answer to the original or 
        amended complaint and to appear in person or otherwise and give 
        testimony at the place and time fixed in the complaint.
    (b) Additional Parties.--In the discretion of the hearing officer 
conducting the hearing, any other person may be allowed to intervene in 
the proceeding and to present testimony.
    (c) Hearings.--
            (1) De novo hearing.--Each hearing officer shall hear 
        complaints and motions de novo.
            (2) Testimony.--The testimony taken by the hearing officer 
        shall be reduced to writing. Thereafter, the hearing officer, 
        in his or her discretion, upon notice may provide for the 
        taking of further testimony or hear argument.
            (3) Authority of hearing officers.--The hearing officer may 
        compel by subpoena the attendance of witnesses and the 
        production of evidence at any designated place or hearing. In 
        case of contumacy or refusal to obey a subpoena lawfully issued 
        under this paragraph and upon application of the hearing 
        officer, an appropriate district court of the United States may 
        issue an order requiring compliance with the subpoena and any 
        failure to obey the order may be punished by the court as a 
        contempt thereof. The hearing officer may also seek enforcement 
        of the subpoena in a State court of competent jurisdiction.
            (4) Expedited hearings.--Notwithstanding section 5203 and 
        the preceding provisions of this section, upon receipt of a 
        complaint containing a claim described in section 5201(c)(1), 
        the complaint review office shall promptly provide the 
        complainant with the opportunity to make an election under 
        section 5203(a)(3) and assignment to a hearing on the complaint 
        before a hearing officer. The complaint review office shall 
        ensure that such a hearing commences not later than 24 hours 
        after receipt of the complaint by the complaint hearing office.
    (d) Decision of Hearing Officer.--
            (1) In general.--The hearing officer shall decide upon the 
        preponderance of the evidence whether to decide in favor of the 
        complainant with respect to each alleged act or practice. Each 
        such decision--
                    (A) shall include the hearing officer's findings of 
                fact, and
                    (B) shall constitute the hearing officer's final 
                disposition of the proceedings.
            (2) Decisions finding in favor of complainant.--If the 
        hearing officer's decision includes a determination that any 
        party named in the complaint has engaged in or is engaged in an 
        act or practice described in section 5202(b), the hearing 
        officer shall issue and cause to be served on such party an 
        order which requires such party--
                    (A) to cease and desist from such act or practice,
                    (B) to provide the benefits due under the terms of 
                the plan and to otherwise comply with the terms of the 
                plan and the applicable requirements of this Act,
                    (C) to pay to the complainant prejudgment interest 
                on the actual costs incurred in obtaining the items and 
                services at issue in the complaint, and
                    (D) to pay to the prevailing complainant a 
                reasonable attorney's fee, reasonable expert witness 
                fees, and other reasonable costs relating to the 
                hearing on the charges on which the complainant 
                prevails.
            (3) Decisions not in favor of complainant.--If the hearing 
        officer's decision includes a determination that the party 
        named in the complaint has not engaged in or is not engaged in 
        an act or practice referred to in section 5202(b), the hearing 
        officer--
                    (A) shall include in the decision a dismissal of 
                the charge in the complaint relating to the act or 
                practice, and
                    (B) upon a finding that such charge is frivolous, 
                shall issue and cause to be served on the complainant 
                an order which requires the complainant to pay to such 
                party a reasonable attorney's fee, reasonable expert 
                witness fees, and other reasonable costs relating to 
                the proceedings on such charge.
            (4) Submission and service of decisions.--The hearing 
        officer shall submit each decision to the complaint review 
        office at the conclusion of the proceedings and the office 
        shall cause a copy of the decision to be served on the parties 
        to the proceedings.
    (e) Review.--
            (1) In general.--The decision of the hearing officer shall 
        be final and binding upon all parties. Except as provided in 
        paragraph (2), any party to the complaint may, within 30 days 
        after service of the decision by the complaint review office, 
        file an appeal of the decision with the Federal Health Plan 
        Review Board under section 5205 in such form and manner as may 
        be prescribed by such Board.
            (2) Exception.--The decision in the case of an expedited 
        hearing under subsection (c)(4) shall not be subject to review.
    (f) Court Enforcement of Orders.--
            (1) In general.--If a decision of the hearing officer in 
        favor of the complainant is not appealed under section 5205, 
        the complainant may petition any court of competent 
        jurisdiction for enforcement of the order. In any such 
        proceeding, the order of the hearing officer shall not be 
        subject to review.
            (2) Awarding of costs.--In any action for court enforcement 
        under this subsection, a prevailing complainant shall be 
        entitled to a reasonable attorney's fee, reasonable expert 
        witness fees, and other reasonable costs relating to such 
        action.

SEC. 5205. REVIEW BY FEDERAL HEALTH PLAN REVIEW BOARD.

    (a) Establishment and Membership.--The Secretary of Labor shall 
establish by regulation a Federal Health Plan Review Board (hereinafter 
in this subtitle referred to as the ``Review Board''). The Review Board 
shall be composed of 5 members appointed by the Secretary of Labor from 
among persons who by reason of training, education, or experience are 
qualified to carry out the functions of the Review Board under this 
subtitle. The Secretary of Labor shall prescribe such rules as are 
necessary for the orderly transaction of proceedings by the Review 
Board. Every official act of the Review Board shall be entered of 
record, and its hearings and records shall be open to the public.
    (b) Review Process.--The Review Board shall ensure, in accordance 
with rules prescribed by the Secretary of Labor, that reasonable notice 
is provided for each appeal before the Review Board of a hearing 
officer's decision under section 5304, and shall provide for the 
orderly consideration of arguments by any party to the hearing upon 
which the hearing officer's decision is based. In the discretion of the 
Review Board, any other person may be allowed to intervene in the 
proceeding and to present written argument. The National Health Board 
may intervene in the proceeding as a matter of right.
    (c) Scope of Review.--The Review Board shall review the decision of 
the hearing officer from which the appeal is made, except that the 
review shall be only for the purposes of determining--
            (1) whether the determination is supported by substantial 
        evidence on the record considered as a whole,
            (2) in the case of any interpretation by the hearing 
        officer of contractual terms (irrespective of the extent to 
        which extrinsic evidence was considered), whether the 
        determination is supported by a preponderance of the evidence,
            (3) whether the determination is in excess of statutory 
        jurisdiction, authority, or limitations, or in violation of a 
        statutory right, or
            (4) whether the determination is without observance of 
        procedure required by law.
    (d) Decision of Review Board.--The decision of the hearing officer 
as affirmed or modified by the Review Board (or any reversal by the 
Review Board of the hearing officer's final disposition of the 
proceedings) shall become the final order of the Review Board and 
binding on all parties, subject to review under subsection (e). The 
Review Board shall cause a copy of its decision to be served on the 
parties to the proceedings not later than 5 days after the date of the 
decision.
    (e) Review of Final Orders.--
            (1) In general.--Not later than 60 days after the entry of 
        the final order, any person aggrieved by any such final order 
        under which the amount or value in controversy exceeds $10,000 
        may seek a review of the order in the United States court of 
        appeals for the circuit in which the violation is alleged to 
        have occurred or in which the complainant resides.
            (2) Further review.--Upon the filing of the record with the 
        court, the jurisdiction of the court shall be exclusive and its 
        judgment shall be final, except that the judgment shall be 
        subject to review by the Supreme Court of the United States 
        upon writ of certiorari or certification as provided in section 
        1254 of title 28 of the United States Code.
            (3) Enforcement decree in original review.--If, upon appeal 
        of an order under paragraph (1), the United States court of 
        appeals does not reverse the order, the court shall have the 
        jurisdiction to make and enter a decree enforcing the order of 
        the Review Board.
    (f) Awarding of Attorneys' Fees and Other Costs and Expenses.--In 
any proceeding before the Review Board under this section or any 
judicial proceeding under subsection (e), the Review Board or the court 
(as the case may be) shall award to a prevailing complainant reasonable 
costs and expenses (including a reasonable attorney's fee) on the 
causes on which the complainant prevails.

SEC. 5206. RULES GOVERNING BENEFIT CLAIMS DETERMINATIONS.

    (a) In General.--Determinations made under this part or by any 
State court in connection with a complaint based on an act or practice 
described in section 5202(b) shall be in accordance with the provisions 
of this Act, the comprehensive benefit package as provided by this Act, 
the rules and regulations of the National Health Board prescribed under 
this Act, and decisions of the National Health Board under this Act.
    (b) Rights and Remedies Under State Law.--Subject to subsection 
(a), the rights and remedies available in State court against a health 
plan providing services through a regional alliance in connection with 
a complaint based on an act or practice described in section 5202(b) 
shall be governed by State law.

SEC. 5207. CIVIL MONEY PENALTIES.

    (a) Denial or Delay in Payment or Provision of Benefits.--
            (1) In general.--The Secretary of Labor may assess a civil 
        penalty against any health plan, or against any other plan in 
        connection with benefits provided thereunder under a 
        supplemental benefit policy described in section 1421(b)(1) or 
        a cost sharing policy described in section 1421(b)(2), for 
        unreasonable denial or delay in the payment or provision of 
        benefits thereunder, in an amount not to exceed--
                    (A) $25,000 per violation, or $75,000 per violation 
                in the case of a finding of bad faith on the part of 
                the plan, and
                    (B) in the case of a finding of a pattern or 
                practice of such violations engaged in by the plan, 
                $1,000,000 in addition to the total amount of penalties 
                assessed under subparagraph (A) with respect to such 
                violations.
        For purposes of subparagraph (A), each violation with respect 
        to any single individual shall be treated as a separate 
        violation.
            (2) Civil action to enforce civil penalty.--The Secretary 
        of Labor may commence a civil action in any court of competent 
        jurisdiction to enforce a civil penalty assessed under 
        paragraph (1).
    (b) Civil Penalties for Certain Other Actions.--The Secretary of 
Labor may assess a civil penalty described in section 5412(b)(1) 
against any corporate alliance health plan, or against any other plan 
sponsored by a corporate alliance in connection with benefits provided 
thereunder under a cost sharing policy described in section 1421(b)(2), 
for any action described in section 5412(a). The Secretary of Labor may 
initiate proceedings to impose such penalty in the same manner as the 
Secretary of Health and Human Services may initiate proceedings under 
section 5412 with respect to actions described in section 5412(a).

                  Subpart B--Early Resolution Programs

SEC. 5211. ESTABLISHMENT OF EARLY RESOLUTION PROGRAMS IN COMPLAINT 
              REVIEW OFFICES.

    (a) Establishment of Programs.--Each State shall establish and 
maintain an Early Resolution Program in each complaint review office in 
such State. The Program shall include--
            (1) the establishment and maintenance of forums for 
        mediation of disputes in accordance with this subpart, and
            (2) the establishment and maintenance of such forums for 
        other forms of alternative dispute resolution (including 
        binding arbitration) as may be prescribed in regulations of the 
        Secretary of Labor.
Each State shall ensure that the standards applied in Early Resolution 
Programs administered in such State which apply to any form of 
alternative dispute resolution described in paragraph (2) and which 
relate to time requirements, qualifications of facilitators, 
arbitrators, or other mediators, and confidentiality are at least 
equivalent to the standards which apply to mediation proceedings under 
this subpart.
    (b) Duties of Complaint Review Offices.--Each complaint review 
office in a State--
            (1) shall administer its Early Resolution Program in 
        accordance with regulations of the Secretary of Labor,
            (2) shall, pursuant to subsection (a)(1)--
                    (A) recruit and train individuals to serve as 
                facilitators for mediation proceedings under the Early 
                Resolution Program from attorneys who have the 
                requisite expertise for such service, which shall be 
                specified in regulations of the Secretary of Labor,
                    (B) provide meeting sites, maintain records, and 
                provide facilitators with administrative support staff, 
                and
                    (C) establish and maintain attorney referral 
                panels,
            (3) shall ensure that, upon the filing of a complaint with 
        the office, the complainant is adequately apprised of the 
        complainant's options for review under this part, and
            (4) shall monitor and evaluate the Program on an ongoing 
        basis.

SEC. 5212. INITIATION OF PARTICIPATION IN MEDIATION PROCEEDINGS.

    (a) Eligibility of Cases for Submission to Early Resolution 
Program.--A dispute may be submitted to the Early Resolution Program 
only if the following requirements are met with respect to the dispute:
            (1) Nature of dispute.--The dispute consists of an 
        assertion by an individual enrolled under a health plan of one 
        or more claims against the health plan for payment or provision 
        of benefits, or against any other plan maintained by the 
        regional alliance or corporate alliance sponsoring the health 
        plan with respect to benefits provided under a supplemental 
        benefit policy described in section 1421(b)(1) or a cost 
        sharing policy described in section 1421(b)(2), based on 
        alleged coverage under the plan, and a denial of the claims, or 
        a denial of appropriate reimbursement based on the claims, by 
        the plan.
            (2) Nature of disputed claim.--Each claim consists of--
                    (A) a claim for payment or provision of benefits 
                under the plan; or
                    (B) a request for information or documents the 
                disclosure of which is required under this Act 
                (including claims of entitlement to disclosure based on 
                colorable claims to rights to benefits under the plan).
    (b) Filing of Election.--A complainant with a dispute which is 
eligible for submission to the Early Resolution Program may make the 
election under section 5203(a)(2) to submit the dispute to mediation 
proceedings under the Program not later than 15 days after the date the 
complaint is filed with the complaint review office under section 
5202(b).
    (c) Agreement to Participate.--
            (1) Election by claimant.--A complainant may elect 
        participation in the mediation proceedings only by entering 
        into a written participation agreement (including an agreement 
        to comply with the rules of the Program and consent for the 
        complaint review office to contact the health plan regarding 
        the agreement), and by releasing plan records to the Program 
        for the exclusive use of the facilitator assigned to the 
        dispute.
            (2) Participation by plans or health benefits 
        contractors.--Each party whose participation in the mediation 
        proceedings has been elected by a claimant pursuant to 
        paragraph (1) shall participate in, and cooperate fully with, 
        the proceedings. The claims review office shall provide such 
        party with a copy of the participation agreement described in 
        paragraph (1), together with a written description of the 
        Program. Such party shall submit the copy of the agreement, 
        together with its authorized signature signifying receipt of 
        notice of the agreement, to the claims review office, and shall 
        include in the submission to the claims review office a copy of 
        the written record of the plan claims procedure completed 
        pursuant to section 5201 with respect to the dispute and all 
        relevant plan documents. The relevant documents shall include 
        all documents under which the plan is or was administered or 
        operated, including copies of any insurance contracts under 
        which benefits are or were provided and any fee or 
        reimbursement schedules for health care providers.

SEC. 5213. MEDIATION PROCEEDINGS.

    (a) Role of Facilitator.--In the course of mediation proceedings 
under the Early Resolution Program, the facilitator assigned to the 
dispute shall prepare the parties for a conference regarding the 
dispute and serve as a neutral mediator at such conference, with the 
goal of achieving settlement of the dispute.
    (b) Preparations for Conference.--In advance of convening the 
conference, after identifying the necessary parties and confirming that 
the case is eligible for the Program, the facilitator shall analyze the 
record of the claims procedure conducted pursuant to section 5201 and 
any position papers submitted by the parties to determine if further 
case development is needed to clarify the legal and factual issues in 
dispute, and whether there is any need for additional information and 
documents.
    (c) Conference.--Upon convening the conference, the facilitator 
shall assist the parties in identifying undisputed issues and exploring 
settlement. If settlement is reached, the facilitator shall assist in 
the preparation of a written settlement agreement. If no settlement is 
reached, the facilitator shall present the facilitator's evaluation, 
including an assessment of the parties' positions, the likely outcome 
of further administrative action or litigation, and suggestions for 
narrowing the issues in dispute.
    (d) Time Limit.--The facilitator shall ensure that mediation 
proceedings with respect to any dispute under the Early Resolution 
Program shall be completed within 120 days after the election to 
participate. The parties may agree to one extension of the proceedings 
by not more than 30 days if the proceedings are suspended to obtain an 
agency ruling or to reconvene the conference in a subsequent session.
    (e) Inapplicability of Formal Rules.--Formal rules of evidence 
shall not apply to mediation proceedings under the Early Resolution 
Program. All statements made and evidence presented in the proceedings 
shall be admissible in the proceedings. The facilitator shall be the 
sole judge of the proper weight to be afforded to each submission. The 
parties to mediation proceedings under the Program shall not be 
required to make statements or present evidence under oath.
    (f) Representation.--Parties may participate pro se or be 
represented by attorneys throughout the proceedings of the Early 
Resolution Program.
    (g) Confidentiality.--
            (1) In general.--Under regulations of the Secretary of 
        Labor, rules similar to the rules under section 574 of title 5, 
        United States Code (relating to confidentiality in dispute 
        resolution proceedings) shall apply to the mediation 
        proceedings under the Early Resolution Program.
            (2) Civil remedies.--The Secretary of Labor may assess a 
        civil penalty against any person who discloses information in 
        violation of the regulations prescribed pursuant to paragraph 
        (1) in the amount of three times the amount of the claim 
        involved. The Secretary of Labor may bring a civil action to 
        enforce such civil penalty in any court of competent 
        jurisdiction.

SEC. 5214. LEGAL EFFECT OF PARTICIPATION IN MEDIATION PROCEEDINGS.

    (a) Process Nonbinding.--Findings and conclusions made in the 
mediation proceedings of the Early Resolution Program shall be treated 
as advisory in nature and nonbinding. Except as provided in subsection 
(b), the rights of the parties under subpart A shall not be affected by 
participation in the Program.
    (b) Resolution Through Settlement Agreement.--If a case is settled 
through participation in mediation proceedings under the Program, the 
facilitator shall assist the parties in drawing up an agreement which 
shall constitute, upon signature of the parties, a binding contract 
between the parties, which shall be enforceable under section 5215.
    (c) Preservation of Rights of Non-Parties.--The settlement 
agreement shall not have the effect of waiving or otherwise affecting 
any rights to review under subpart A, or any other right under this Act 
or the plan, with respect to any person who is not a party to the 
settlement agreement.

SEC. 5215. ENFORCEMENT OF SETTLEMENT AGREEMENTS.

    (a) Enforcement.--Any party to a settlement agreement entered 
pursuant to mediation proceedings under this subpart may petition any 
court of competent jurisdiction for the enforcement of the agreement, 
by filing in the court a written petition praying that the agreement be 
enforced. In such a proceeding, the order of the hearing officer shall 
not be subject to review.
    (b) Court Review.--It shall be the duty of the court to advance on 
the docket and to expedite to the greatest possible extent the 
disposition of any petition filed under this section, with due 
deference to the role of settlement agreements under this part in 
achieving prompt resolution of disputes involving health plans.
    (c) Awarding of Attorney's Fees and Other Costs and Expenses.--In 
any action by an individual enrolled under a health plan for court 
enforcement under this section, a prevailing plaintiff shall be 
entitled to reasonable costs and expenses (including a reasonable 
attorney's fee and reasonable expert witness fees) on the charges on 
which the plaintiff prevails.

         PART 2--ADDITIONAL REMEDIES AND ENFORCEMENT PROVISIONS

SEC. 5231. JUDICIAL REVIEW OF FEDERAL ACTION ON STATE SYSTEMS.

    (a) In General.--Any State or alliance that is aggrieved by a 
determination by the National Health Board under subpart B of part 1 of 
subtitle F of title I shall be entitled to judicial review of such 
determination in accordance with this section.
    (b) Judicial Review.--
            (1) Jurisdiction.--The courts of appeals of the United 
        States (other than the United States Court of Appeals for the 
        Federal Circuit) shall have jurisdiction to review a 
        determination described in subsection (a), to affirm the 
        determination, or to set it aside, in whole or in part. A 
        judgment of a court of appeals in such an action shall be 
        subject to review by the Supreme Court of the United States 
        upon certiorari or certification as provided in section 1254 of 
        title 28, United States Code.
            (2) Petition for review.--A State or an alliance that 
        desires judicial review of a determination described in 
        subsection (a) shall, within 30 days after it has been notified 
        of such determination, file with the United States court of 
        appeals for the circuit in which the State or alliance is 
        located a petition for review of such determination. A copy of 
        the petition shall be transmitted by the clerk of the court to 
        the National Health Board, and the Board shall file in the 
        court the record of the proceedings on which the determination 
        or action was based, as provided in section 2112 of title 28, 
        United States Code.
            (3) Scope of review.--The findings of fact of the National 
        Health Board, if supported by substantial evidence, shall be 
        conclusive; but the court, for good cause shown, may remand the 
        case to the Board to take further evidence, and the Board may 
        make new or modified findings of fact and may modify its 
        previous action, and shall certify to the court the record of 
        the further proceedings. Such new or modified findings of fact 
        shall likewise be conclusive if supported by substantial 
        evidence.

SEC. 5232. ADMINISTRATIVE AND JUDICIAL REVIEW RELATING TO COST 
              CONTAINMENT.

    There shall be no administrative or judicial review of any 
determination by the National Health Board respecting any matter under 
subtitle A of title VI.

SEC. 5233. CIVIL ENFORCEMENT.

    Unless otherwise provided in this Act, the district courts of the 
United States shall have jurisdiction of civil actions brought by--
            (1) the Secretary of Labor to enforce any final order of 
        such Secretary or to collect any civil monetary penalty 
        assessed by such Secretary under this Act; and
            (2) the Secretary of Health and Human Services to enforce 
        any final order of such Secretary or to collect any civil 
        monetary penalty assessed by such Secretary under this Act.

SEC. 5234. PRIORITY OF CERTAIN BANKRUPTCY CLAIMS.

    Section 507(a)(8) of title 11, United States Code, is amended to 
read as follows:
            ``(8) Eighth, allowed unsecured claims--
                    ``(A) based upon any commitment by the debtor to 
                the Federal Deposit Insurance Corporation, the 
                Resolution Trust Corporation, the Director of the 
                Office of Thrift Supervision, the Comptroller of the 
                Currency, or the Board of Governors of the Federal 
                Reserve System, or their predecessors or successors, to 
                maintain the capital of an insured depository 
                institution;
                    ``(B) for payments under subtitle B of title IV of 
                the Health Security Act owed to a regional alliance (as 
                defined in section 1301 of such Act);
                    ``(C) for payments owed to a corporate alliance 
                health plan under trusteeship of the Secretary of Labor 
                under section 1395 of the Health Security Act; or
                    ``(D) for assessments and related amounts owed to 
                the Secretary of Labor under section 1397 of the Health 
                Security Act.''.

SEC. 5235. PRIVATE RIGHT TO ENFORCE STATE RESPONSIBILITIES.

    The failure of a participating State to carry out a responsibility 
applicable to participating States under this Act constitutes a 
deprivation of rights secured by this Act for the purposes of section 
1977 of the Revised Statutes of the United States (42 U.S.C. 1983). In 
an action brought under such section, the court shall exercise 
jurisdiction without regard to whether the aggrieved person has 
exhausted any administrative or other remedies that may be provided by 
law.

SEC. 5236. PRIVATE RIGHT TO ENFORCE FEDERAL RESPONSIBILITIES IN 
              OPERATING A SYSTEM IN A STATE.

    (a) In General.--The failure of the Secretary of Health and Human 
Services to carry out a responsibility under section 1522 (relating to 
operation of an alliance system in a State) confers an enforceable 
right of action on any person who is aggrieved by such failure. Such a 
person may commence a civil action against the Secretary in an 
appropriate State court or district court of the United States.
    (b) Exhaustion of Remedies.--In an action under subsection (a), the 
court shall exercise jurisdiction without regard to whether the 
aggrieved person has exhausted any administrative or other remedies 
that may be provided by law.
    (c) Relief.--In an action under subsection (a), if the court finds 
that a failure described in such subsection has occurred, the aggrieved 
person may recover compensatory and punitive damages and the court may 
order any other appropriate relief.
    (d) Attorney's Fees.--In an action under subsection (a), the court, 
in its discretion, may allow the prevailing party, other than the 
United States, a reasonable attorney's fee (including expert fees) as 
part of the costs, and the United States shall be liable for costs the 
same as a private person.

SEC. 5237. PRIVATE RIGHT TO ENFORCE RESPONSIBILITIES OF ALLIANCES.

    (a) In General.--The failure of a regional alliance or a corporate 
alliance to carry out a responsibility applicable to the alliance under 
this Act confers an enforceable right of action on any person who is 
aggrieved by such failure. Such a person may commence a civil action 
against the alliance in an appropriate State court or district court of 
the United States.
    (b) Exhaustion of Remedies.--
            (1) In general.--Except as provided in paragraph (2), in an 
        action under subsection (a) the court may not exercise 
        jurisdiction until the aggrieved person has exhausted any 
        administrative remedies that may be provided by law.
            (2) No exhaustion required.--In an action under subsection 
        (a), the court shall exercise jurisdiction without regard to 
        whether the aggrieved person has exhausted any administrative 
        or other remedies that may be provided by law if the action 
        relates to--
                    (A) whether the person is an eligible individual 
                within the meaning of section 1001(c);
                    (B) whether the person is eligible for a premium 
                discount under subpart A of part 1 of subtitle B of 
                title VI;
                    (C) whether the person is eligible for a reduction 
                in cost sharing under subpart D of part 3 of subtitle D 
                of title I; or
                    (D) enrollment or disenrollment in a health plan.
    (c) Relief.--In an action under subsection (a), if the court finds 
that a failure described in such subsection has occurred, the aggrieved 
person may recover compensatory and punitive damages and the court may 
order any other appropriate relief.
    (d) Attorney's Fees.--In any action under subsection (a), the 
court, in its discretion, may allow the prevailing party, other than 
the United States, a reasonable attorney's fee (including expert fees) 
as part of the costs, and the United States shall be liable for costs 
the same as a private person.

SEC. 5238. DISCRIMINATION CLAIMS.

    (a) Civil Action by Aggrieved Person.--
            (1) In general.--Any person who is aggrieved by the failure 
        of a health plan to comply with section 1402(c) may commence a 
        civil action against the plan in an appropriate State court or 
        district court of the United States.
            (2) Standards.--The standards used to determine whether a 
        violation has occurred in a complaint alleging discrimination 
        on the basis of age or disability under section 1402(c) shall 
        be the standards applied under the Age Discrimination Act of 
        1975 (42 U.S.C. 6101 et seq.) and the Americans with 
        Disabilities Act of 1990 (42 U.S.C. 12101 et seq.).
            (3) Relief.--In an action under paragraph (1), if the court 
        finds that the health plan has failed to comply with section 
        1402(c), the aggrieved person may recover compensatory and 
        punitive damages and the court may order any other appropriate 
        relief.
            (4) Attorney's fees.--In any action under paragraph (1), 
        the court, in its discretion, may allow the prevailing party, 
        other than the United States, a reasonable attorney's fee 
        (including expert fees) as part of the costs, and the United 
        States shall be liable for costs the same as a private person.
    (b) Action by Secretary.--Whenever the Secretary of Health and 
Human Services finds that a health plan has failed to comply with 
section 1402(c), or with an applicable regulation issued under such 
section, the Secretary shall notify the plan. If within a reasonable 
period of time the health plan fails or refuses to comply, the 
Secretary may--
            (1) refer the matter to the Attorney General with a 
        recommendation that an appropriate civil action be instituted;
            (2) terminate the participation of the health plan in an 
        alliance; or
            (3) take such other action as may be provided by law.
    (c) Action by Attorney General.--When a matter is referred to the 
Attorney General under subsection (b)(1), the Attorney General may 
bring a civil action in a district court of the United States for such 
relief as may be appropriate, including injunctive relief. In a civil 
action under this section, the court--
            (1) may grant any equitable relief that the court considers 
        to be appropriate;
            (2) may award such other relief as the court considers to 
        be appropriate, including compensatory and punitive damages; 
        and
            (3) may, to vindicate the public interest when requested by 
        the Attorney General, assess a civil money penalty against the 
        health plan in an amount--
                    (A) not exceeding $50,000 for a first violation; 
                and
                    (B) not exceeding $100,000 for any subsequent 
                violation.

SEC. 5239. NONDISCRIMINATION IN FEDERALLY ASSISTED PROGRAMS.

    Federal payments to regional alliances under part 2 of subtitle C 
of title VI shall be treated as Federal financial assistance for 
purposes of section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 
794), section 303 of the Age Discrimination Act of 1975 (42 U.S.C. 
6102), and section 601 of the Civil Rights Act of 1964 (42 U.S.C. 
2000d).

SEC. 5240. CIVIL ACTION BY ESSENTIAL COMMUNITY PROVIDER.

    (a) In General.--An electing essential community provider (as 
defined in section 1431(d)) who is aggrieved by the failure of a health 
plan to fulfill a duty imposed on the plan by section 1431 may commence 
a civil action against the plan in an appropriate State court or 
district court of the United States.
    (b) Relief.--In an action under subsection (a), if the court finds 
that the health plan has failed to fulfill a duty imposed on the plan 
by section 1431, the electing essential community provider may recover 
compensatory damages and the court may order any other appropriate 
relief.
    (c) Attorney's Fees.--In any action under subsection (a), the 
court, in its discretion, may allow the prevailing party, other than 
the United States, a reasonable attorney's fee (including expert fees) 
as part of the costs, and the United States shall be liable for costs 
the same as a private person.

SEC. 5241. FACIAL CONSTITUTIONAL CHALLENGES.

    (a) Jurisdiction.--The United States District Court for the 
District of Columbia shall have original and exclusive jurisdiction of 
any civil action brought to invalidate this Act or a provision of this 
Act on the ground of its being repugnant to the Constitution of the 
United States on its face and for every purpose. In any action 
described in this subsection, the district court may not grant any 
temporary order or preliminary injunction restraining the enforcement, 
operation, or execution of this Act or any provision of this Act.
    (b) Statute of Limitations.--An action described in subsection (a) 
shall be commenced not later than 1 year after the date of the 
enactment of this Act.
    (c) Convening of Three-Judge Court.--An action described in 
subsection (a) shall be heard and determined by a district court of 
three judges in accordance with section 2284 of title 28, United States 
Code.
    (d) Consolidation.--When actions described in subsection (a) 
involving a common question of law or fact are pending before a 
district court, the court shall order all the actions consolidated.
    (e) Direct Appeal to Supreme Court.--In any action described in 
subsection (a), an appeal may be taken directly to the Supreme Court of 
the United States from any final judgment, decree, or order in which 
the district court--
            (1) holds this Act or any provision of this Act invalid; 
        and
            (2) makes a determination that its holding will materially 
        undermine the application of the Act as whole.
    (f) Construction.--This section does not limit--
            (1) the right of any person--
                    (A) to a litigation concerning the Act or any 
                portion of the Act; or
                    (B) to petition the Supreme Court for review of any 
                holding of a district court by writ of certiorari at 
                any time before the rendition of judgment in a court of 
                appeals; or
            (2) the authority of the Supreme Court to grant a writ of 
        certiorari for the review described in paragraph (1)(B).

SEC. 5242. TREATMENT OF PLANS AS PARTIES IN CIVIL ACTIONS.

    (a) In General.--A health plan may sue or be sued under this Act as 
an entity. Service of summons, subpoena, or other legal process of a 
court or hearing officer upon a trustee or an administrator of any such 
plan in his capacity as such shall constitute service upon the plan. In 
a case where a plan has not designated in applicable plan documents an 
individual as agent for the service of legal process, service upon the 
Secretary of Health and Human Services (in the case of a regional 
alliance health plan) or the Secretary of Labor (in the case of a 
corporate alliance health plan) shall constitute such service. The 
Secretary, not later than 15 days after receipt of service under the 
preceding sentence, shall notify the administrator or any trustee of 
the plan of receipt of such service.
    (b) Other Parties.--Any money judgment under this Act against a 
plan referred to in subsection (a) shall be enforceable only against 
the plan as an entity and shall not be enforceable against any other 
person unless liability against such person is established in his 
individual capacity under this Act.

SEC. 5243. GENERAL NONPREEMPTION OF EXISTING RIGHTS AND REMEDIES.

    Nothing in this title shall be construed to deny, impair, or 
otherwise adversely affect a right or remedy available under law to any 
person on the date of the enactment of this Act or thereafter, except 
to the extent the right or remedy is inconsistent with this title.

                                                    Title V, Subtitle D

                    Subtitle D--Medical Malpractice

                        PART 1--LIABILITY REFORM

SEC. 5301. FEDERAL TORT REFORM.

    (a) Applicability.--
            (1) In general.--Except as provided in section 5302, this 
        part shall apply with respect to any medical malpractice 
        liability action brought in any State or Federal court, except 
        that this part shall not apply to a claim or action for damages 
        arising from a vaccine-related injury or death to the extent 
        that title XXI of the Public Health Service Act applies to the 
        claim or action.
            (2) Preemption.--The provisions of this part shall preempt 
        any State law to the extent such law is inconsistent with the 
        limitations contained in such provisions. The provisions of 
        this part shall not preempt any State law that provides for 
        defenses or places limitations on a person's liability in 
        addition to those contained in this subtitle, places greater 
        limitations on the amount of attorneys' fees that can be 
        collected, or otherwise imposes greater restrictions than those 
        provided in this part.
            (3) Effect on sovereign immunity and choice of law or 
        venue.--Nothing in this part shall be construed to--
                    (A) waive or affect any defense of sovereign 
                immunity asserted by any State under any provision of 
                law;
                    (B) waive or affect any defense of sovereign 
                immunity asserted by the United States;
                    (C) affect the applicability of any provision of 
                the Foreign Sovereign Immunities Act of 1976;
                    (D) preempt State choice-of-law rules with respect 
                to claims brought by a foreign nation or a citizen of a 
                foreign nation; or
                    (E) affect the right of any court to transfer venue 
                or to apply the law of a foreign nation or to dismiss a 
                claim of a foreign nation or of a citizen of a foreign 
                nation on the ground of inconvenient forum.
            (4) Federal court jurisdiction not established on federal 
        question grounds.--Nothing in this part shall be construed to 
        establish any jurisdiction in the district courts of the United 
        States over medical malpractice liability actions on the basis 
        of section 1331 or 1337 of title 28, United States Code.
    (b) Definitions.--In this subtitle, the following definitions 
apply:
            (1) Alternative dispute resolution system; ADR.--The term 
        ``alternative dispute resolution system'' or ``ADR'' means a 
        system that provides for the resolution of medical malpractice 
        claims in a manner other than through medical malpractice 
        liability actions.
            (2) Claimant.--The term ``claimant'' means any person who 
        alleges a medical malpractice claim, and any person on whose 
        behalf such a claim is alleged, including the decedent in the 
        case of an action brought through or on behalf of an estate.
            (3) Health care professional.--The term ``health care 
        professional'' means any individual who provides health care 
        services in a State and who is required by the laws or 
        regulations of the State to be licensed or certified by the 
        State to provide such services in the State.
            (4) Health care provider.--The term ``health care 
        provider'' means any organization or institution that is 
        engaged in the delivery of health care services in a State and 
        that is required by the laws or regulations of the State to be 
        licensed or certified by the State to engage in the delivery of 
        such services in the State.
            (5) Injury.--The term ``injury'' means any illness, 
        disease, or other harm that is the subject of a medical 
        malpractice liability action or a medical malpractice claim.
            (6) Medical malpractice liability action.--The term 
        ``medical malpractice liability action'' means a civil action 
        brought in a State or Federal court against a health care 
        provider or health care professional (regardless of the theory 
        of liability on which the claim is based) in which the 
        plaintiff alleges a medical malpractice claim.
            (7) Medical malpractice claim.--The term ``medical 
        malpractice claim'' means a claim brought against a health care 
        provider or health care professional in which a claimant 
        alleges that injury was caused by the provision of (or the 
        failure to provide) health care services, except that such term 
        does not include--
                    (A) any claim based on an allegation of an 
                intentional tort; or
                    (B) any claim based on an allegation that a product 
                is defective that is brought against any individual or 
                entity that is not a health care professional or health 
                care provider.

SEC. 5302. PLAN-BASED ALTERNATIVE DISPUTE RESOLUTION MECHANISMS.

    (a) Application to Malpractice Claims Under Plans.--In the case of 
any medical malpractice claim arising from the provision of (or failure 
to provide) health care services to an individual enrolled in a 
regional alliance health plan or a corporate alliance health plan, no 
medical malpractice liability action may be brought with respect to 
such claim until the final resolution of the claim under the 
alternative dispute resolution system adopted by the plan under 
subsection (b).
    (b) Adoption of Mechanism by Plans.--Each regional alliance health 
plan and corporate alliance health plan shall--
            (1) adopt at least one of the alternative dispute 
        resolution methods specified under subsection (c) for the 
        resolution of medical malpractice claims arising from the 
        provision of (or failure to provide) health care services to 
        individuals enrolled in the plan; and
            (2) disclose to enrollees (and potential enrollees), in a 
        manner specified by the regional alliance or the corporate 
        alliance, the availability and procedures for consumer 
        grievances under the plan, including the alternative dispute 
        resolution method or methods adopted under this subsection.
    (c) Specification of Permissible Alternative Dispute Resolution 
Methods.--
            (1) In general.--The Board shall, by regulation, develop 
        alternative dispute resolution methods for the use by regional 
        alliance and corporate alliance health plans in resolving 
        medical malpractice claims under subsection (a). Such methods 
        shall include at least the following:
                    (A) Arbitration.--The use of arbitration.
                    (B) Mediation.--The use of required mediation.
                    (C) Early offers of settlement.--The use of a 
                process under which parties are required to make early 
                offers of settlement.
            (2) Standards for establishing methods.--In developing 
        alternative dispute resolution methods under paragraph (1), the 
        Board shall assure that the methods promote the resolution of 
        medical malpractice claims in a manner that--
                    (A) is affordable for the parties involved;
                    (B) provides for timely resolution of claims;
                    (C) provides for the consistent and fair resolution 
                of claims; and
                    (D) provides for reasonably convenient access to 
                dispute resolution for individuals enrolled in plans.
    (d) Further Redress.--A plan enrollee dissatisfied with the 
determination reached as a result of an alternative dispute resolution 
method applied under this section may, after the final resolution of 
the enrollee's claim under the method, bring a cause of action to seek 
damages or other redress with respect to the claim to the extent 
otherwise permitted under State law.

SEC. 5303. REQUIREMENT FOR CERTIFICATE OF MERIT.

    (a) Requiring Submission With Complaint.--No medical malpractice 
liability action may be brought by any individual unless, at the time 
the individual brings the action (except as provided in subsection 
(b)(1)), the individual submits an affidavit--
            (1) declaring that the individual (or the individual's 
        attorney) has consulted and reviewed the facts of the action 
        with a qualified specialist (as defined in subsection (c));
            (2) including a written report by a qualified specialist 
        that clearly identifies the individual and that includes the 
        specialist's determination that, after a review of the medical 
        record and other relevant material, there is a reasonable and 
        meritorious cause for the filing of the action against the 
        defendant; and
            (3) on the basis of the qualified specialist's review and 
        consultation, that the individual (or the individual's 
        attorney) has concluded that there is a reasonable and 
        meritorious cause for the filing of the action.
    (b) Extension in Certain Instances.--
            (1) In general.--Subject to paragraph (2), subsection (a) 
        shall not apply with respect to an individual who brings a 
        medical malpractice liability action without submitting an 
        affidavit described in such subsection if--
                    (A) the individual is unable to obtain the 
                affidavit before the expiration of the applicable 
                statute of limitations; or
                    (B) at the time the individual brings the action, 
                the individual has been unable to obtain medical 
                records or other information necessary to prepare the 
                affidavit requested pursuant to any applicable law.
            (2) Deadline for submission where extension applies.--In 
        the case of an individual who brings an action for which 
        paragraph (1) applies, the action shall be dismissed unless the 
        individual submits the affidavit described in subsection (a) 
        not later than--
                    (A) in the case of an action for which subparagraph 
                (A) of paragraph (1) applies, 90 days after bringing 
                the action; or
                    (B) in the case of an action for which subparagraph 
                (B) of paragraph (1) applies, 90 days after obtaining 
                the information described in such subparagraph.
    (c) Qualified Specialist Defined.--In subsection (a), a ``qualified 
specialist'' means, with respect to a medical malpractice liability 
action, a health care professional who--
            (1) is knowledgeable of, and has expertise in, the same 
        specialty area of practice that is the subject of the action; 
        and
            (2) is reasonably believed by the individual bringing the 
        action (or the individual's attorney)--
                    (A) to be knowledgeable in the relevant issues 
                involved in the particular action,
                    (B) to practice (or to have practiced within the 
                preceding 6 years) or to teach (or to have taught 
                within the preceding 6 years) in the same area of 
                health care or medicine that is at issue in the action, 
                and
                    (C) to be qualified by experience or demonstrated 
                competence in the subject matter of the case.
    (d) Sanctions for Submitting False Allegations.--Upon the motion of 
any party or its own initiative, the court in a medical malpractice 
liability action may impose a sanction on a party or the party's 
attorney (or both), including a requirement that the party reimburse 
the other party to the action for costs and reasonable attorney's fees, 
if any information contained in an affidavit described in subsection 
(a) is submitted without reasonable cause and is found to be untrue.

SEC. 5304. LIMITATION ON AMOUNT OF ATTORNEY'S CONTINGENCY FEES.

    (a) In General.--An attorney who represents, on a contingency fee 
basis, a plaintiff in a medical malpractice liability action may not 
charge, demand, receive, or collect for services rendered in connection 
with such action (including the resolution of the claim that is the 
subject of the action under any alternative dispute resolution system) 
in excess of 33\1/3\ percent of the total amount recovered by judgment 
or settlement in such action.
    (b) Calculation of periodic payments.--In the event that a judgment 
or settlement includes periodic or future payments of damages, the 
amount recovered for purposes of computing the limitation on the 
contingency fee under subsection (a) shall be based on the cost of the 
annuity or trust established to make the payments. In any case in which 
an annuity or trust is not established to make such payments, such 
amount shall be based on the present value of the payments.
    (c) Contingency Fee Defined.--As used in this section, the term 
``contingency fee'' means any fee for professional legal services which 
is, in whole or in part, contingent upon the recovery of any amount of 
damages, whether through judgment or settlement.

SEC. 5305. REDUCTION OF AWARDS FOR RECOVERY FROM COLLATERAL SOURCES.

    The total amount of damages recovered by a plaintiff in a medical 
malpractice liability action shall be reduced by the amount of any past 
or future payment which the plaintiff has received or for which the 
plaintiff is eligible on account of the same injury for which the 
damages are awarded, including payment under--
            (1) Federal or State disability or sickness programs;
            (2) Federal, State, or private health insurance programs;
            (3) private disability insurance programs;
            (4) employer wage continuation programs; and
            (5) any other program, if the payment is intended to 
        compensate the plaintiff for the same injury for which damages 
        are awarded.

SEC. 5306. PERIODIC PAYMENT OF AWARDS.

    At the request of any party to a medical malpractice liability 
action, the defendant shall not be required to pay damages in a single, 
lump-sum payment, but shall be permitted to make such payments 
periodically based on such schedule as the court considers appropriate, 
taking into account the periods for which the injured party will need 
medical and other services.

   PART 2--OTHER PROVISIONS RELATING TO MEDICAL MALPRACTICE LIABILITY

SEC. 5311. ENTERPRISE LIABILITY DEMONSTRATION PROJECT.

    (a) Establishment.--Not later than January 1, 1996, the Secretary 
shall establish a demonstration project under which the Secretary shall 
provide funds (in such amount as the Secretary considers appropriate) 
to one or more eligible States to demonstrate whether substituting 
liability for medical malpractice on the part of the health plan in 
which a physician participates for the personal liability of the 
physician will result in improvements in the quality of care provided 
under the plan, reductions in defensive medical practices, and better 
risk management.
    (b) Eligibility of State.--A State is eligible to participate in 
the demonstration project established under subsection (a) if the State 
submits an application to the Secretary (at such time and in such form 
as the Secretary may require) containing such information and 
assurances as the Secretary may require, including assurances that the 
State--
            (1) has entered into an agreement with a health plan (other 
        than a fee-for-service plan) operating in the State under which 
        the plan assumes legal liability with respect to any medical 
        malpractice claim arising from the provision of (or failure to 
        provide) services under the plan by any physician participating 
        in the plan;
            (2) has provided that, under the law of the State, a 
        physician participating in a plan that has entered into an 
        agreement with the State under paragraph (1) may not be liable 
        in damages or otherwise for such a claim and the plan may not 
        require such physician to indemnify the plan for any such 
        liability; and
            (3) will provide the Secretary with such reports on the 
        operation of the project as the Secretary may require.
    (c) Authorization of Appropriations.--There are authorized to be 
appropriated such sums as may be necessary to carry out demonstration 
projects under this section.

SEC. 5312. PILOT PROGRAM APPLYING PRACTICE GUIDELINES TO MEDICAL 
              MALPRACTICE LIABILITY ACTIONS.

    (a) Establishment.--Not later than 1 year after the Secretary 
determines that appropriate practice guidelines are available, the 
Secretary shall establish a pilot program under which the Secretary 
shall provide funds (in such amount as the Secretary considers 
appropriate) to one or more eligible States to determine the effect of 
applying practice guidelines in the resolution of medical malpractice 
liability actions.
    (b) Eligibility of State.--A State is eligible to participate in 
the pilot program established under subsection (a) if the State submits 
an application to the Secretary (at such time and in such form as the 
Secretary may require) containing--
            (1) assurances that, under the law of the State, in the 
        resolution of any medical malpractice liability action, it 
        shall be a complete defense to any allegation that a party 
        against whom the action is filed was negligent that, in the 
        provision of (or the failure to provide) the services that are 
        the subject of the action, the party followed the appropriate 
        practice guideline established by the National Quality 
        Management Program under subtitle A; and
            (2) such other information and assurances as the Secretary 
        may require.
    (c) Reports to Congress.--Not later than 3 months after the last 
day of each year for which the pilot program established under 
subsection (a) is in effect, the Secretary shall submit a report to 
Congress describing the operation of the program during the previous 
year and containing such recommendations as the Secretary considers 
appropriate, including recommendations relating to revisions to the 
laws governing medical malpractice liability.

                      Subtitle E--Fraud and Abuse

                                                    Title V, Subtitle E

PART 1--ESTABLISHMENT OF ALL-PAYER HEALTH CARE FRAUD AND ABUSE CONTROL 
                                PROGRAM

SEC. 5401. ALL-PAYER HEALTH CARE FRAUD AND ABUSE CONTROL PROGRAM.

    (a) In General.--Not later than January 1, 1996, the Secretary 
(acting through the Inspector General of the Department of Health and 
Human Services) and the Attorney General shall establish a program--
            (1) to coordinate the functions of the Attorney General, 
        the Secretary, and other organizations with respect to the 
        prevention, detection, and control of health care fraud and 
        abuse,
            (2) to conduct investigations, audits, evaluations, and 
        inspections relating to the delivery of and payment for health 
        care in the United States, and
            (3) to facilitate the enforcement of this subtitle and 
        other statutes applicable to health care fraud and abuse.
    (b) Coordination With Law Enforcement Agencies.--In carrying out 
the program under subsection (a), the Secretary and Attorney General 
shall consult with, and arrange for the sharing of data and resources 
with Federal, State and local law enforcement agencies, State Medicaid 
Fraud Control Units, and State agencies responsible for the licensing 
and certification of health care providers.
    (c) Coordination With Health Alliances and Health Plans.--In 
carrying out the program under subsection (a), the Secretary and 
Attorney General shall consult with, and arrange for the sharing of 
data with representatives of health alliances and health plans.
    (d) Authorities of Attorney General and Inspector General.--In 
carrying out duties under subsection (a), the Attorney General and the 
Inspector General are authorized--
            (1) to conduct, supervise, and coordinate audits, civil and 
        criminal investigations, inspections, and evaluations relating 
        to the program established under such subsection; and
            (2) to have access (including on-line access as requested 
        and available) to all records available to health alliances and 
        health plans relating to the activities described in paragraph 
        (1) (subject to restrictions based on the confidentiality of 
        certain information under part 2 of subtitle B).
    (e) Qualified Immunity for Providing Information.--The provisions 
of section 1157(a) of the Social Security Act (relating to limitation 
on liability) shall apply to a person providing information or 
communications to the Secretary or Attorney General in conjunction with 
their performance of duties under this section, in the same manner as 
such section applies to information provided to organizations with a 
contract under part B of title XI of such Act.
    (f) Authorizations of Appropriations for Investigators and Other 
Personnel.--In addition to any other amounts authorized to be 
appropriated to the Secretary and the Attorney General for health care 
anti-fraud and abuse activities for a fiscal year, there are authorized 
to be appropriated such additional amounts as may be necessary to 
enable the Secretary and the Attorney General to conduct 
investigations, audits, evaluations, and inspections of allegations of 
health care fraud and abuse and otherwise carry out the program 
established under subsection (a) in a fiscal year.
    (g) Use of Powers Under Inspector General Act of 1978.--In carrying 
out duties and responsibilities under the program established under 
subsection (a), the Inspector General is authorized to exercise all 
powers granted under the Inspector General Act of 1978 to the same 
manner and extent as provided in that Act.
    (h) Definition.--In this part and part 2, the term ``Inspector 
General'' means the Inspector General of the Department of Health and 
Human Services.

SEC. 5402. ESTABLISHMENT OF ALL-PAYER HEALTH CARE FRAUD AND ABUSE 
              CONTROL ACCOUNT.

    (a) Establishment.--
            (1) In general.--There is hereby created on the books of 
        the Treasury of the United States an account to be known as the 
        ``All-Payer Health Care Fraud and Abuse Control Account'' (in 
        this section referred to as the ``Anti-Fraud Account''). The 
        Anti-Fraud Account shall consist of such gifts and bequests as 
        may be made as provided in paragraph (2) and such amounts as 
        may be deposited in such Anti-Fraud Account as provided in 
        section 5412(d)(2) and title XI of the Social Security Act. It 
        shall also include the following:
                    (A) All criminal fines imposed in cases involving a 
                Federal health care offense (as defined in subsection 
                (d)).
                    (B) Penalties and damages imposed under the False 
                Claims Act (31 U.S.C. 3729 et seq.), in cases involving 
                claims related to the provision of health care items 
                and services (other than funds awarded to a relator or 
                for restitution).
                    (C) Administrative penalties and assessments 
                imposed under titles XI, XVIII, and XIX of the Social 
                Security Act and section 5412 (except as otherwise 
                provided by law).
                    (D) Amounts resulting from the forfeiture of 
                property by reason of a Federal health care offense.
        Any such funds received on or after the date of the enactment 
        of this Act shall be deposited in the Anti-Fraud Account.
            (2) Authorization to accept gifts.--The Anti-Fraud Account 
        is authorized to accept on behalf of the United States money 
        gifts and bequests made unconditionally to the Anti-Fraud 
        Account, for the benefit of the Anti-Fraud Account or any 
        activity financed through the Anti-Fraud Account.
    (b) Use of Funds.--
            (1) In general.--Amounts in the Anti-Fraud Account shall be 
        available without appropriation and until expended as 
        determined jointly by the Secretary and Attorney General in 
        carrying out the All-Payer Health Care Fraud and Abuse Control 
        Program established under section 5401 (including the 
        administration of the Program), and may be used to cover costs 
        incurred in operating the Program, including--
                    (A) costs of prosecuting health care matters 
                (through criminal, civil and administrative 
                proceedings);
                    (B) costs of investigations (including equipment, 
                salaries, administratively uncontrollable work, travel, 
                and training of law enforcement personnel);
                    (C) costs of financial and performance audits of 
                health care programs and operations; and
                    (D) costs of inspections and other evaluations.
            (2) Funds used to supplement agency appropriations.--It is 
        intended that disbursements made from the Anti-Fraud Account to 
        any Federal agency be used to increase and not supplant the 
        recipient agency's appropriated operating budget.
    (c) Annual Report.--The Secretary and the Attorney General shall 
submit an annual report to Congress on the amount of revenue which is 
generated and disbursed by the Anti-Fraud Account in each fiscal year.
    (d) Federal Health Care Offense Defined.--The term ``Federal health 
care offense'' means a violation of, or a criminal conspiracy to 
violate--
            (1) sections 226, 668, 1033, or 1347 of title 18, United 
        States Code;
            (2) section 1128B of the Social Security Act;
            (3) sections 287, 371, 664, 666, 1001, 1027, 1341, 1343, or 
        1954 of title 18, United States Code, if the violation or 
        conspiracy relates to health care fraud;
            (4) sections 501 or 511 of the Employee Retirement Income 
        Security Act of 1974, if the violation or conspiracy relates to 
        health care fraud; or
            (5) sections 301, 303(a)(2), or 303 (b) or (e) of the 
        Federal Food Drug and Cosmetic Act, if the violation or 
        conspiracy relates to health care fraud.

SEC. 5403. USE OF FUNDS BY INSPECTOR GENERAL.

    (a) Reimbursements for Investigations.--
            (1) In general.--The Inspector General is authorized to 
        receive and retain for current use reimbursement for the costs 
        of conducting investigations, when such restitution is ordered 
        by a court, voluntarily agreed to by the payor, or otherwise.
            (2) Crediting.--Funds received by the Inspector General as 
        reimbursement for costs of conducting investigations shall be 
        deposited to the credit of the appropriation from which 
        initially paid, or to appropriations for similar purposes 
        currently available at the time of deposit, and shall remain 
        available for obligation for 1 year from the date of their 
        deposit.
            (3) Exception for forfeitures.--This subsection does not 
        apply to investigative costs paid to the Inspector General from 
        the Department of Justice Asset Forfeiture Fund, which monies 
        shall be deposited and expended in accordance with subsection 
        (b).
    (b) HHS Office of Inspector General Asset Forfeiture Proceeds 
Fund.--
            (1) In general.--There is established in the Treasury of 
        the United States the ``HHS Office of Inspector General Asset 
        Forfeiture Proceeds Fund,'' to be administered by the Inspector 
        General, which shall be available to the Inspector General 
        without fiscal year limitation for expenses relating to the 
        investigation of matters within the jurisdiction of the 
        Inspector General.
            (2) Deposits.--There shall be deposited in the Fund all 
        proceeds from forfeitures that have been transferred to the 
        Inspector General from the Department of Justice Asset 
        Forfeiture Fund under section 524 of title 28, United States 
        Code.

  PART 2--APPLICATION OF FRAUD AND ABUSE AUTHORITIES UNDER THE SOCIAL 
                       SECURITY ACT TO ALL PAYERS

SEC. 5411. EXCLUSION FROM PARTICIPATION.

    (a) Mandatory Exclusion.--The Secretary shall exclude an individual 
or entity from participation in any applicable health plan if the 
individual or entity is excluded from participation in a public program 
under, or is otherwise described in, section 1128(a) of the Social 
Security Act (relating to individuals and entities convicted of health 
care-related crimes or patient abuse).
    (b) Permissive Exclusion.--The Secretary may exclude an individual 
or entity from participation in any applicable health plan if the 
individual or entity is excluded from participation in a public program 
under, or is otherwise described in, section 1128(b) of the Social 
Security Act (other than paragraphs (6)(A), (6)(C), (6)(D), (10), or 
(13) of such section).
    (c) Notice, Effective Date, and Period of Exclusion.--(1) An 
exclusion under this section or section 5412(b)(3) shall be effective 
at such time and upon such reasonable notice to the public and to the 
individual or entity excluded as may be specified in regulations 
consistent with paragraph (2).
    (2) Such an exclusion shall be effective with respect to services 
furnished to an individual on or after the effective date of the 
exclusion.
    (3)(A) The Secretary shall specify, in the notice of exclusion 
under paragraph (1) and the notice under section 5412(e), the minimum 
period (or, in the case of an exclusion of an individual excluded from 
participation in a public program under, or is otherwise described in, 
section 1128(b)(12) of the Social Security Act, the period) of the 
exclusion.
    (B) In the case of a mandatory exclusion under subsection (a), the 
minimum period of exclusion shall be not less than 5 years.
    (C) In the case of an exclusion of an individual excluded from 
participation in a public program under, or is otherwise described in, 
paragraph (1), (2), or (3) of section 1128(b) of the Social Security 
Act, the period of exclusion shall be a minimum of 3 years, unless the 
Secretary determines that a longer period is necessary because of 
aggravating circumstances.
    (D) In the case of an exclusion of an individual or entity excluded 
from participation in a public program under, or is otherwise described 
in, paragraph (4), (5)(A), or (5)(B) of section 1128(b) of the Social 
Security Act, the period of the exclusion shall not be less than the 
period during which the individual's or entity's license to provide 
health care is revoked, suspended or surrendered, or the individual or 
the entity is excluded or suspended from a Federal or State health care 
program.
    (E) In the case of an exclusion of an individual or entity 
described in paragraph (6)(B) of section 1128(b) of the Social Security 
Act, the period of the exclusion shall be not less than 1 year.
    (F) In the case of an exclusion of an individual described in 
paragraph (12) of section 1128(b) of the Social Security Act, the 
period of the exclusion shall be equal to the sum of--
            (i) the length of the period in which the individual failed 
        to grant the immediate access described in that paragraph, and
            (ii) an additional period, not to exceed 90 days, set by 
        the Secretary.
    (d) Notice to Entities Administering Public Programs for the 
Delivery of or Payment for Health Care Items or Services.--(1) The 
Secretary shall exercise the authority under this section in a manner 
that results in an individual's or entity's exclusion from all 
applicable health plans for the delivery of or payment for health care 
items or services.
    (2) The Secretary shall promptly notify each sponsor of an 
applicable health plan and each entity that administers a State health 
care program described in section 1128(h) of the Social Security Act of 
the fact and circumstances of each exclusion (together with the period 
thereof) effected against an individual or entity under this section or 
under section 5412(b)(3).
    (e) Notice to State Licensing Agencies.--The provisions of section 
1128(e) of the Social Security Act shall apply to this section in the 
same manner as such provisions apply to sections 1128 and 1128A of such 
Act.
    (f) Notice, Hearing, and Judicial Review.--(1) Subject to paragraph 
(2), any individual or entity that is excluded (or directed to be 
excluded) from participation under this section is entitled to 
reasonable notice and opportunity for a hearing thereon by the 
Secretary to the same extent as is provided in section 205(b) of the 
Social Security Act, and to judicial review of the Secretary's final 
decision after such hearing as is provided in section 205(g) of such 
Act, except that such action shall be brought in the Court of Appeals 
of the United States for the judicial circuit in which the individual 
or entity resides, or has a principal place of business, or, if the 
individual or entity does not reside or have a principal place of 
business within any such judicial circuit, in the United States Court 
of Appeals for the District of Columbia Circuit.
    (2) Unless the Secretary determines that the health or safety of 
individuals receiving services warrants the exclusion taking effect 
earlier, any individual or entity that is the subject of an adverse 
determination based on paragraphs (6)(B), (7), (8), (9), (11), (12), 
(14), or (15) of section 1128(b) of the Social Security Act, shall be 
entitled to a hearing by an administrative law judge (as provided under 
section 205(b) of the Social Security Act) on the determination before 
any exclusion based upon the determination takes effect. If a hearing 
is requested, the exclusion shall be effective upon the issuance of an 
order by the administrative law judge upholding the determination of 
the Secretary to exclude.
    (3) The provisions of section 205(h) of the Social Security Act 
shall apply with respect to this section or section 5412(b)(3) to the 
same extent as such provisions apply with respect to title II of such 
Act.
    (g) Application for Termination of Exclusion.--(1) An individual or 
entity excluded (or directed to be excluded) from participation under 
this section or section 5412(b)(3) may apply to the Secretary, in a 
manner specified by the Secretary in regulations and at the end of the 
minimum period of exclusion (or, in the case of an individual or entity 
described in section 1128(b)(12), the period of exclusion) provided 
under this section or section 5412(b)(3) and at such other times as the 
Secretary may provide, for termination of the exclusion.
    (2) The Secretary may terminate the exclusion if the Secretary 
determines, on the basis of the conduct of the applicant which occurred 
after the date of the notice of exclusion or which was unknown to the 
Secretary at the time of the exclusion, that--
            (A) there is no basis under this section or section 
        5412(b)(3) for a continuation of the exclusion, and
            (B) there are reasonable assurances that the types of 
        actions which formed the basis for the original exclusion have 
        not recurred and will not recur.
    (3) The Secretary shall promptly notify each sponsor of an 
applicable health plan and each entity that administers a State health 
care program described in section 1128(h) of the Social Security Act of 
each termination of exclusion made under this subsection.
    (h) Convicted Defined.--In this section, the term ``convicted'' has 
the meaning given such term in section 1128(i) of the Social Security 
Act.
    (i) Request for Exclusion.--The sponsor of any applicable health 
plan (including a State in the case of a regional alliance health plan 
and the Secretary of Labor in the case of a corporate alliance health 
plan) may request that the Secretary of Health and Human Services 
exclude an individual or entity with respect to actions under such a 
plan in accordance with this section.
    (j) Effect of Exclusion.--Notwithstanding any other provision of 
this Act, no payment may be made under a health plan for the delivery 
of or payment for any item or service (other than an emergency item or 
service, not including items or services furnished in an emergency room 
of a hospital) furnished--
            (1) by an individual or entity during the period when such 
        individual or entity is excluded pursuant to this section or 
        section 5412(b)(3) from participation in a health plan; or
            (2) at the medical direction or on the prescription of a 
        physician during the period when the physician is excluded 
        pursuant to this section or section 5412(b)(3) from 
        participation in a health plan and the person furnishing the 
        item or service knew or had reason to know of the exclusion 
        (after a reasonable time period after reasonable notice has 
        been furnished to the person).
    (k) Delegation.--The Secretary may delegate authority granted under 
this section to the Inspector General.

SEC. 5412. CIVIL MONETARY PENALTIES.

    (a) Actions Subject to Penalty.--Any person who is determined by 
the Secretary to have committed any of the following actions with 
respect to an applicable health plan shall be subject to a penalty in 
accordance with subsection (b):
            (1) Actions subject to penalty under medicare, medicaid, 
        and other social security health programs.--Any action that 
        would subject the person to a penalty under paragraphs (1) 
        through (12) of section 1128A(a) of the Social Security Act if 
        the action was taken with respect to title V, XVIII, XIX, or XX 
        of such Act.
            (2) Termination of enrollment.--The termination of an 
        individual's enrollment (including the refusal to re-enroll an 
        individual) in violation of subtitle E of title I or State law.
            (3) Discriminating on basis of medical condition.--The 
        engagement in any practice that would reasonably be expected to 
        have the effect of denying or discouraging the initial or 
        continued enrollment in a health plan by individuals whose 
        medical condition or history indicates a need for substantial 
        future medical services.
            (4) Inducing enrollment on false pretenses.--The engagement 
        in any practice to induce enrollment in an applicable health 
        plan through representations to individuals which the person 
        knows or should know are false or fraudulent.
            (5) Providing incentives to enroll.--The offer or payment 
        of remuneration to any individual that such person knows or 
        should know is likely to influence such individual to enroll in 
        a particular plan, or to cause such individual to induce others 
        to enroll in a particular plan.
    (b) Penalties Described.--
            (1) General rule.--Any person who the Secretary determines 
        has committed an action described in paragraphs (2) through (5) 
        of subsection (a) shall be subject to a civil monetary penalty 
        in an amount not to exceed $50,000 for each such determination.
            (2) Actions subject to penalties under social security 
        act.--In the case of a person who the Secretary determines has 
        committed an action described in paragraph (1) of subsection 
        (a), the person shall be subject to the civil monetary penalty 
        (together with any additional assessment) to which the person 
        would be subject under section 1128A of the Social Security Act 
        if the action on which the determination is based had been 
        committed with respect to title V, XVIII, XIX, or XX of such 
        Act.
            (3) Determinations to exclude permitted.--In addition to 
        any civil monetary penalty or assessment imposed under this 
        subsection, the Secretary may make a determination in the same 
        proceeding to exclude the person from participation in all 
        applicable health plans for the delivery of or payment for 
        health care items or services (in accordance with section 
        5411(c)).
    (c) Procedures for Imposition of Penalties.--
            (1) Applicability of procedures under social security 
        act.--Except as otherwise provided in paragraph (2), the 
        provisions of section 1128A of the Social Security Act (other 
        than subsections (a) and (b) and the second sentence of 
        subsection (f)) shall apply to the imposition of a civil 
        monetary penalty, assessment, or exclusion under this section 
        in the same manner as such provisions apply with respect to the 
        imposition of a penalty, assessment, or exclusion under section 
        1128A of such Act.
            (2) Authority of secretary of labor and states to impose 
        penalties, assessments, and exclusions.--
                    (A) In general.--The Secretary of Labor or a State 
                may initiate an action to impose a civil monetary 
                penalty, assessment, or exclusion under this section 
                with respect to actions relating to a corporate 
                alliance health plan or a regional alliance health 
                plan, respectively, if authorized by the Attorney 
                General and the Secretary pursuant to regulations 
                promulgated by the Secretary in consultation with the 
                Attorney General.
                    (B) Requirements described.--Under the regulations 
                promulgated under subparagraph (A), the Attorney 
                General and the Secretary shall review an action 
                proposed by the Secretary of Labor or a State, and not 
                later than 120 days after receiving notice of the 
                proposed action from the Secretary of Labor or the 
                State, shall--
                            (i) approve the proposed action to be taken 
                        by the Secretary of Labor or the State;
                            (ii) disapprove the proposed action; or
                            (iii) assume responsibility for initiating 
                        a criminal, civil, or administrative action 
                        based on the information provided in the 
                        notice.
                    (C) Action deemed approved if deadline missed.--If 
                the Attorney General and the Secretary fail to respond 
                to a proposed action by the Secretary of Labor or a 
                State within the period described in subparagraph (B), 
                the Attorney General and the Secretary shall be deemed 
                to have approved the proposed action to be taken by the 
                Secretary of Labor or the State.
    (d) Treatment of Amounts Recovered.--Any amounts recovered under 
this section shall be paid to the Secretary and disposed of as follows:
            (1) Such portions of the amounts recovered as is determined 
        to have been improperly paid from an applicable health plan for 
        the delivery of or payment for health care items or services 
        shall be repaid to such plan.
            (2) The remainder of the amounts recovered shall be 
        deposited in the All-Payer Health Care Fraud and Abuse Control 
        Account established under section 5402.
    (e) Notification of Licensing Authorities.--Whenever the 
Secretary's determination to impose a penalty, assessment, or exclusion 
under this section becomes final, the Secretary shall notify the 
appropriate State or local licensing agency or organization (including 
the agency specified in section 1864(a) and 1902(a)(33) of the Social 
Security Act) that such a penalty, assessment, or exclusion has become 
final and the reasons therefor.

SEC. 5413. LIMITATIONS ON PHYSICIAN SELF-REFERRAL.

    The provisions of section 1877 of the Social Security Act shall 
apply--
            (1) to items and services (and payments and claims for 
        payment for such items and services) furnished under any 
        applicable health plan in the same manner as such provisions 
        apply to designated health services (and payments and claims 
        for payment for such services) under title XVIII of the Social 
        Security Act; and
            (2) to a State (with respect to an item or service 
        furnished or payment made under a regional alliance health 
        plan) and to the Secretary of Labor (with respect to an item or 
        service furnished or payment made under a corporate alliance 
        health plan) in the same manner as such provisions apply to the 
        Secretary.

SEC. 5414. CONSTRUCTION OF SOCIAL SECURITY ACT REFERENCES.

    (a) Incorporation of Other Amendments.--Any reference in this part 
to a provision of the Social Security Act shall be considered a 
reference to the provision as amended under title IV.
    (b) Effect of Subsequent Amendments.--Except as provided in 
subsection (a), any reference to a provision of the Social Security Act 
in this part shall be deemed to be a reference to such provision as in 
effect on the date of the enactment of this Act, and (except as 
Congress may otherwise provide) any amendments made to such provisions 
after such date shall not be taken into account in determining the 
applicability of such provisions to individuals and entities under this 
Act.

PART 3--AMENDMENTS TO ANTI-FRAUD AND ABUSE PROVISIONS UNDER THE SOCIAL 
                              SECURITY ACT

SEC. 5421. REFERENCE TO AMENDMENTS.

    For provisions amending the anti-fraud and abuse provisions 
existing under the Social Security Act, see part 5 of subtitle A of 
title IV.

                   PART 4--AMENDMENTS TO CRIMINAL LAW

SEC. 5431. HEALTH CARE FRAUD.

    (a) In General.--Chapter 63 of title 18, United States Code, is 
amended by adding at the end the following:
``Sec. 1347. Health care fraud
    ``(a) Whoever knowingly executes, or attempts to execute, a scheme 
or artifice--
            ``(1) to defraud any health alliance, health plan, or other 
        person, in connection with the delivery of or payment for 
        health care benefits, items, or services;
            ``(2) to obtain, by means of false or fraudulent pretenses, 
        representations, or promises, any of the money or property 
        owned by, or under the custody or control of, any health 
        alliance, health plan, or person in connection with the 
        delivery of or payment for health care benefits, items, or 
        services;
shall be fined under this title or imprisoned not more than 10 years, 
or both. If the violation results in serious bodily injury (as defined 
in section 1365 of this title) such person shall be imprisoned for life 
or any term of years.
    ``(b) As used in this section, the terms `health alliance' and 
`health plan' have the meanings given those terms in title I of the 
Health Security Act.''.
    (b) Clerical Amendment.--The table of sections at the beginning of 
chapter 63 of title 18, United States Code, is amended by adding at the 
end the following:

``1347. Health care fraud.''.

SEC. 5432. FORFEITURES FOR VIOLATIONS OF FRAUD STATUTES.

    (a) In General.--Section 982(a) of title 18, United States Code, is 
amended by inserting after paragraph (5) the following:
    ``(6) If the court determines that a Federal health care offense 
(as defined in section 5402(d) of the Health Security Act) is of a type 
that poses a serious threat to the health of any person or has a 
significant detrimental impact on the health care system, the court, in 
imposing sentence on a person convicted of that offense, shall order 
that person to forfeit property, real or personal, that--
            ``(A)(i) is used in the commission of the offense; or
            ``(ii) constitutes or is derived from proceeds traceable to 
        the commission of the offense; and
            ``(B) is of a value proportionate to the seriousness of the 
        offense.''.
    (b) Proceeds of Health Care Fraud Forfeitures.--Section 
524(c)(4)(A) of title 28, United States Code, is amended by inserting 
``all proceeds of forfeitures relating to Federal health care offenses 
(as defined in section 5402(d) of the Health Security Act), and'' after 
``except''.

SEC. 5433. FALSE STATEMENTS.

    (a) In General.--Chapter 47 of title 18, United States Code, is 
amended by adding at the end the following:
``Sec. 1033. False statements relating to health care matters
    ``(a) Whoever, in any matter involving a health alliance or health 
plan, knowingly and willfully falsifies, conceals, or covers up by any 
trick, scheme, or device a material fact, or makes any false, 
fictitious, or fraudulent statements or representations, or makes or 
uses any false writing or document knowing the same to contain any 
false, fictitious, or fraudulent statement or entry, shall be fined 
under this title or imprisoned not more than 5 years, or both.
    ``(b) As used in this section the terms `health alliance' and 
`health plan' have the meanings given those terms in title I of the 
Health Security Act.''.
    (b) Clerical Amendment.--The table of sections at the beginning of 
chapter 47 of title 18, United States Code, is amended by adding at the 
end the following:

``1033. False statements relating to health care matters.''.

SEC. 5434. BRIBERY AND GRAFT.

    (a) In General.--Chapter 11 of title 18, United States Code, is 
amended by adding at the end the following:
``Sec. 226. Bribery and graft in connection with health care
    ``(a) Whoever--
            ``(1) directly or indirectly, corruptly gives, offers, or 
        promises anything of value to a health care official, or offers 
        or promises a health care official to give anything of value to 
        any other person, with intent--
                    ``(A) to influence any of the health care 
                official's actions, decisions, or duties relating to a 
                health alliance or health plan;
                    ``(B) to influence such an official to commit or 
                aid in the committing, or collude in or allow, any 
                fraud, or make opportunity for the commission of any 
                fraud, on a health alliance or health plan; or
                    ``(C) to induce such an official to engage in any 
                conduct in violation of the lawful duty of such 
                official; or
            ``(2) being a health care official, directly or indirectly, 
        corruptly demands, seeks, receives, accepts, or agrees to 
        accept anything of value personally or for any other person or 
        entity, the giving of which violates paragraph (1) of this 
        subsection;
shall be fined under this title or imprisoned not more than 15 years, 
or both.
    ``(b) Whoever, otherwise than as provided by law for the proper 
discharge of any duty, directly or indirectly gives, offers, or 
promises anything of value to a health care official, for or because of 
any of the health care official's actions, decisions, or duties 
relating to a health care alliance or health plan, shall be fined under 
this title or imprisoned not more than two years, or both.
    ``(c) As used in this section--
            ``(1) the term `health care official' means--
                    ``(A) an administrator, officer, trustee, 
                fiduciary, custodian, counsel, agent, or employee of 
                any health care alliance or health plan;
                    ``(B) an officer, counsel, agent, or employee, of 
                an organization that provides services under contract 
                to any health alliance or health plan;
                    ``(C) an official or employee of a State agency 
                having regulatory authority over any health alliance or 
                health plan;
                    ``(D) an officer, counsel, agent, or employee of a 
                health care sponsor; and
            ``(2) the term `health care sponsor' means any individual 
        or entity serving as the sponsor of a health alliance or health 
        plan for purposes of the Health Security Act, and includes the 
        joint board of trustees or other similar body used by two or 
        more employers to administer a health alliance or health plan 
        for purposes of such Act.''.
    (b) Clerical Amendment.--The table of chapters at the beginning of 
chapter 11 of title 18, United States Code, is amended by adding at the 
end the following:

``226. Bribery and graft in connection with health care.''.

SEC. 5435. INJUNCTIVE RELIEF RELATING TO HEALTH CARE OFFENSES.

    Section 1345(a)(1) of title 18, United States Code, is amended--
            (1) by striking ``or'' at the end of subparagraph (A);
            (2) by inserting ``or'' at the end of subparagraph (B); and
            (3) by adding at the end the following:
            ``(C) committing or about to commit a Federal health care 
        offense (as defined in section 5402(d) of the Health Security 
        Act);''.

SEC. 5436. GRAND JURY DISCLOSURE.

    Section 3322 of title 18, United States Code, is amended--
            (1) by redesignating subsections (c) and (d) as subsections 
        (d) and (e), respectively; and
            (2) by inserting after subsection (b) the following:
    ``(c) A person who is privy to grand jury information concerning a 
health law violation--
            ``(1) received in the course of duty as an attorney for the 
        Government; or
            ``(2) disclosed under rule 6(e)(3)(A)(ii) of the Federal 
        Rules of Criminal Procedure;
may disclose that information to an attorney for the Government to use 
in any civil proceeding related to a Federal health care offense (as 
defined in section 5402(d) of the Health Security Act).''.

SEC. 5437. THEFT OR EMBEZZLEMENT.

    (a) In General.--Chapter 31 of title 18, United States Code, is 
amended by adding at the end the following:
``Sec. 668. Theft or embezzlement in connection with health care
    ``(a) Whoever embezzles, steals, willfully and unlawfully converts 
to the use of any person other than the rightful owner, or 
intentionally misapplies any of the moneys, securities, premiums, 
credits, property, or other assets of a health alliance, health plan, 
or of any fund connected with such an alliance or plan, shall be fined 
under this title or imprisoned not more than 10 years, or both.
    ``(b) As used in this section, the terms `health alliance' and 
`health plan' have the meanings given those terms under title I of the 
Health Security Act.''.
    (b) Clerical Amendment.--The table of sections at the beginning of 
chapter 31 of title 18, United States Code, is amended by adding at the 
end the following:

``668. Theft or embezzlement in connection with health care.''.

SEC. 5438. MISUSE OF HEALTH SECURITY CARD OR UNIQUE IDENTIFIER.

    (a) In General.--Chapter 33 of title 18, United States Code, is 
amended by adding at the end the following:
``Sec. 716. Misuse of health security card or unique identifier
    ``Whoever--
            ``(1) requires the display of, requires the use of, or uses 
        a health security card that is issued under section 1001(b) of 
        the Health Security Act for any purpose other than a purpose 
        described in section 5105(a) of such Act; or
            ``(2) requires the disclosure of, requires the use of, or 
        uses a unique identifier number provided pursuant to section 
        5104 of such Act for any purpose that is not authorized by the 
        National Health Board pursuant to such section;
shall be fined under this title or imprisoned not more than 2 years, or 
both.''.
    (b) Amendment to Chapter Heading.--The heading for chapter 33 of 
title 18, United States Code, is amended to read as follows:

       ``CHAPTER 33--EMBLEMS, INSIGNIA, IDENTIFIERS, AND NAMES''.

    (c) Clerical Amendment to Table of Sections.--The table of sections 
at the beginning of chapter 33, United States Code, is amended by 
adding at the end the following new item:

``716. Misuse of health security card or unique identifier.''.
    (d) Clerical Amendment to Table of Chapters.--The item relating to 
chapter 33 in the table of chapters at the beginning of part 1 of title 
18, United States Code, is amended to read as follows:

``33. Emblems, insignia, identifiers, and names.............     701''.

              PART 5--AMENDMENTS TO CIVIL FALSE CLAIMS ACT

SEC. 5441. AMENDMENTS TO CIVIL FALSE CLAIMS ACT.

    Section 3729 of title 31, United States Code, is amended--
            (1) in subsection (a)(7), by inserting ``or to a health 
        plan'' after ``property to the Government'';
            (2) in the matter following subsection (a)(7), by inserting 
        ``or health plan'' before ``sustains because of the act of that 
        person,'';
            (3) at the end of the first sentence of subsection (a), by 
        inserting ``or health plan'' before ``sustains because of the 
        act of the person.'';
            (4) in subsection (c)--
                    (A) by inserting ``the term'' after ``section,''; 
                and
                    (B) by adding at the end the following: ``The term 
                also includes any request or demand, whether under 
                contract of otherwise, for money or property which is 
                made or presented to a health plan.''; and
            (5) by adding at the end the following:
    ``(f) Health Plan Defined.--For purposes of this section, the term 
`health plan' has the meaning given such term under section 1400 of the 
Health Security Act.''.

                                                    Title V, Subtitle F

                  Subtitle F--McCarran-Ferguson Reform

SEC. 5501. REPEAL OF EXEMPTION FOR HEALTH INSURANCE.

    (a) In General.--Section 3 of the Act of March 9, 1945 (15 U.S.C. 
1013), known as the McCarran-Ferguson Act, is amended by adding at the 
end the following:
    ``(c) Notwithstanding that the business of insurance is regulated 
by State law, nothing in this Act shall limit the applicability of the 
following Acts to the business of insurance to the extent that such 
business relates to the provision of health benefits:
            ``(1) The Sherman Act (15 U.S.C. 1 et seq.).
            ``(2) The Clayton Act (15 U.S.C. 12 et seq.).
            ``(3) Federal Trade Commission Act (15 U.S.C. 41 et seq.).
            ``(4) The Act of June 19, 1936 (49 Stat. 1526; 15 U.S.C. 
        21a et seq.), known as the Robinson-Patman Antidiscrimination 
        Act.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
take effect on the first day of the sixth month beginning after the 
date of the enactment of this Act.

                                                               Title VI

   TITLE VI--PREMIUM CAPS; PREMIUM-BASED FINANCING; AND PLAN PAYMENTS

                       table of contents of title

                                                                   Page
Sec. 6000. General definitions..............................        982
                        Subtitle A--Premium Caps

          subpart a--computation of targets and accepted bids
Sec. 6001. Computation of regional alliance inflation               984
                            factors.
Sec. 6002. Board determination of national per capita               990
                            baseline premium target.
Sec. 6003. Determination of alliance per capita premium             995
                            targets.
Sec. 6004. Alliance initial bidding and negotiation process.       1000
Sec. 6005. State financial incentives.......................       1004
Sec. 6006. Recommendations to eliminate regional variations        1005
                            in alliance targets due to 
                            variation in practice patterns; 
                            congressional consideration.
Sec. 6subpart b--plan and provider payment reductions to maintain  1012
                      expenditures within targetsrtain 
                            determinations.
Sec. 6011. Plan payment reduction...........................       1012
Sec. 6012. Provider payment reduction.......................       1017
            Part 2--Corporate Alliances Health Expenditures

Sec. 6021. Calculation of premium equivalents...............       1020
Sec. 6022. Termination of corporate alliance for excess            1021
                            increase in expenditures.
                Part 3--Treatment of Single-payer States

Sec. 6031. Special rules for single-payer States............       1024
                     Part 4--Transition Provisions

Sec. 6041. Monitoring prices and expenditures...............       1024
                 Subtitle B--Premium-Related Financings

                    Partsubpart a--family shareents
Sec. 6101. Family share of premium..........................       1025
Sec. 6102. Amount of premium................................       1028
Sec. 6103. Alliance credit..................................       1030
Sec. 6104. Premium discount based on income.................       1030
Sec. 6105. Excess premium credit............................       1042
Sec. 6106. Corporate alliance opt-in credit.................       1044
Sec. 6subpart b--repayment of alliance credit by certain families  1045
Sec. 6111. Repayment of alliance credit by certain families.       1047
Sec. 6112. No liability for families employed full-time;           1048
                            reduction in liability for part-
                            time employment.
Sec. 6113. Limitation of liability based on income..........       1051
Sec. 6114. Special treatment of certain retirees and               1055
                            qualified spouses and children.
Sec. 6115. Special treatment of certain medicare                   1058
                            beneficiaries.
                 subpart a--regional alliance employers
Sec. 6121. Employer premium payment required................       1058
Sec. 6122. Computation of base employment monthly premium...       1063
Sec. 6123. Premium discount for certain employers...........       1070
Sec. 6124. Payment adjustment for large employers electing         1075
                            coverage in a regional alliance.
Sec. 6125. Employer collection shortfall add-on.............       1081
Sec. 6126. Applisubpart b--corporate alliance employers.....       1081
Sec. 6131. Employer premium payment required................       1084
         Subtitle C--Payments to Regional Alliance Health Plans

Sec. 6201. Computation of blended plan per capita payment          1086
                            amount.
Sec. 6202. Computation of plan bid, AFDC, and SSI                  1088
                            proportions.

SEC. 6000. GENERAL DEFINITIONS.

    (a) Definitions Relating to Bids.--In this title:
            (1) Accepted bid.--The term ``accepted bid'' means the bid 
        which is agreed to between a regional alliance health plan and 
        a regional alliance for coverage of the comprehensive benefit 
        package in the alliance area under subpart A of part 1.
            (2) Final accepted bid.--The term ``final accepted bid'' 
        means the accepted bid, taking into account any voluntary 
        reduction in such bid made under section 6004(e).
            (3) Weighted average accepted bid.--The term ``weighted 
        average accepted bid'' means, for a regional alliance for a 
        year, the average of the accepted bids for all regional 
        alliance health plans offered by such alliance, weighted to 
        reflect the relative enrollment of regional alliance eligible 
        individuals among such plans.
            (4) Reduced weighted average accepted bid.--The term 
        ``reduced weighted average accepted bid'', for a health plan 
        offered by a regional alliance for a year, is the lesser of--
                    (A) the weighted average accepted bid for the 
                regional alliance for the year (determined using the 
                final accepted bids as the accepted bids), or
                    (B) the regional alliance per capita target for the 
                year.
    (b) Weighted Average Premium.--In this title, the term ``weighted 
average premium'' means, for a class of family enrollment and with 
respect to a regional alliance for a year, the product of--
            (1) reduced weighted average accepted bid (as defined in 
        subsection (a)(4));
            (2) the uniform per capita conversion factor (established 
        under section 1341(b)) for the alliance; and
            (3) the premium class factor established by the Board for 
        that class under section 1531.
    (c) Incorporation of Other Definitions.--Except as otherwise 
provided in this title, the definitions of terms in subtitle J of title 
I of this Act shall apply to this title.

                        Subtitle A--Premium Caps

             PART 1--REGIONAL ALLIANCE HEALTH EXPENDITURES

          Subpart A--Computation of Targets and Accepted Bids

                                                   Title VI, Subtitle A

SEC. 6001. COMPUTATION OF REGIONAL ALLIANCE INFLATION FACTORS.

    (a) Computation.--
            (1) In general.--This section provides for the computation 
        of factors that limit the growth of premiums for the 
        comprehensive benefit package in regional alliance health 
        plans. The Board shall compute and publish, not later than 
        March 1 of each year (beginning with 1995) the regional 
        alliance inflation factor (as defined in paragraph (2)) for 
        each regional alliance for the following year.
            (2) Regional alliance inflation factor.--In this part, the 
        term ``regional alliance inflation factor'' means, for a year 
        for a regional alliance--
                    (A) the general health care inflation factor for 
                the year (as defined in paragraph (3));
                    (B) adjusted under subsection (c) (to take into 
                account material changes in the demographic and socio-
                economic characteristics of the population of alliance 
                eligible individuals);
                    (C) decreased by the percentage adjustment (if any) 
                provided with respect to the regional alliance under 
                subsection (d) (relating to adjustment for previous 
                excess expenditures); and
                    (D) in the case of the year 2001, increased by a 
                factor that the Board determines to reflect the ratio 
                of (i) the actuarial value of the increase in benefits 
                provided in that year under the comprehensive benefit 
                package to (ii) the actuarial value of the benefits 
                that would have been in such package in the year 
                without regard to the increase.
        For purposes of subparagraph (D)(i), the actuarial value of the 
        increase with respect to mental illness and substance abuse 
        services (included within the comprehensive benefit package) 
        shall not exceed an actuarial value based on the amount of the 
        total expenditures that would have been made in 2001 by States 
        and subdivisions of States for mental illness and substance 
        abuse services (included in such package as of 2001) if this 
        Act had not been enacted.
            (3) General health care inflation factor.--
                    (A) 1996 through 2000.--In this part, the term 
                ``general health care inflation factor'', for a year, 
                means the percentage increase in the CPI (as specified 
                under subsection (b)) for the year plus the following:
                            (i) For 1996, 1.5 percentage points.
                            (ii) For 1997, 1.0 percentage points.
                            (iii) For 1998, 0.5 percentage points.
                            (iv) For 1999 and for 2000, 0 percentage 
                        points.
                    (B) Years after 2000.--
                            (i) Recommendation to congress.--In 1999, 
                        the Board shall submit to Congress 
                        recommendations on what the general health care 
                        inflation factor should be for years beginning 
                        with 2001.
                            (ii) Failure of congress to act.--If the 
                        Congress fails to enact a law specifying the 
                        general health care inflation factor for a year 
                        after 2000, the Board, in January of the year 
                        before the year involved, shall compute such 
                        factor for the year involved. Such factor shall 
                        be the product of the factors described in 
                        subparagraph (C) for that fiscal year, minus 1.
                    (C) Factors.--The factors described in this 
                subparagraph for a year are the following:
                            (i) CPI.--1 plus the percentage change in 
                        the CPI for the year, determined based upon the 
                        percentage change in the average of the CPI for 
                        the 12-month period ending with August 31 of 
                        the previous fiscal year over such average for 
                        the preceding 12-month period.
                            (ii) Real gdp per capita.--1 plus the 
                        average annual percentage change in the real, 
                        per capita gross domestic product of the United 
                        States during the 3-year period ending in the 
                        preceding calendar year, determined by the 
                        Board based on data supplied by the Department 
                        of Commerce.
    (b) Projection of Increase in CPI.--
            (1) In general.--For purposes of this section, the Board 
        shall specify, as of the time of publication, the annual 
        percentage increase in the CPI (as defined in section 1902(9)) 
        for the following year.
            (2) Data to be used.--Such increase shall be the projection 
        of the CPI contained in the budget of the United States 
        transmitted by the President to the Congress in the year.
    (c) Special Adjustment for Material Changes in Demographic 
Characteristics of Population.--
            (1) Adjustment for corporate alliance opt-in.--
                    (A) In general.--The Board shall develop a method 
                for adjusting the regional alliance inflation factor 
                for each regional alliance in order to reflect material 
                changes in the demographic characteristics of regional 
                alliance eligible individuals residing in the alliance 
                area (in comparison with such characteristics for the 
                previous year) as a result of one or more corporate 
                alliances terminating an election under section 1313.
                    (B) Basis for adjustments.--Adjustments under this 
                paragraph (whether an increase or decrease) shall be 
                based on the characteristics and factors used for 
                making adjustments in payments under section 6124.
            (2) Adjustment for regional trend compared to national 
        trend.--
                    (A) In general.--The Board shall develop a method 
                for adjusting the regional alliance inflator factor for 
                each regional alliance in order to reflect material 
                changes in the demographic characteristics (including 
                at least age, gender, and socio-economic status) and 
                health status of regional alliance eligible individuals 
                residing in the alliance area in comparison with the 
                average change in such characteristics for such 
                individuals residing in the United States. The 
                adjustment under this paragraph shall be for changes 
                not taken into account in the adjustment under 
                paragraph (1).
                    (B) Neutral adjustment.--Such method (and any 
                annual adjustment under this paragraph) shall be 
                designed to result in the adjustment effected under 
                this paragraph for a year not changing the weighted 
                average of the regional alliance inflation factors.
            (3) Application.--The Board shall provide, on an annual 
        basis, for an adjustment of regional alliance inflation factors 
        under this subsection using such methods.
    (d) Consultation Process.--The Board shall have a process for 
consulting with representatives of States and regional alliances before 
establishing the regional alliance inflation factors for each year 
under this section.

SEC. 6002. BOARD DETERMINATION OF NATIONAL PER CAPITA BASELINE PREMIUM 
              TARGET.

    (a) In General.--Not later than January 1, 1995, the Board shall 
determine a national per capita baseline premium target. Such target is 
equal to--
            (1) the national average per capita current coverage health 
        expenditures (determined under subsection (b)),
            (2) updated under subsection (c).
    (b) Determination of National Average Per Capita Current Coverage 
Health Expenditures.--
            (1) In general.--The Board shall determine the national 
        average per capita current coverage health expenditures equal 
        to--
                    (A) total covered current health care expenditures 
                (described in paragraph (2)), divided by
                    (B) the estimated population in the United States 
                of regional alliance eligible individuals (as 
                determined by the Board as of 1993 under paragraph (4)) 
                for whom such expenditures were determined.
        The population under subparagraph (B) shall not include SSI 
        recipients or AFDC recipients.
            (2) Current health care expenditures.--For purposes of 
        paragraph (1)(A), the Board shall determine current health care 
        expenditures as follows:
                    (A) Determination of total expenditures.--The Board 
                shall first determine the amount of total payments made 
                for items and services included in the comprehensive 
                benefit package (determined without regard to cost 
                sharing) in the United States in 1993.
                    (B) Removal of certain expenditures not to be 
                covered through regional alliances.--The amount so 
                determined shall be decreased by the proportion of such 
                amount that is attributable to any of the following:
                            (i) Medicare beneficiaries (other than such 
                        beneficiaries who are regional alliance 
                        eligible individuals).
                            (ii) AFDC recipients or SSI recipients.
                            (iii) Expenditures which are paid for 
                        through workers' compensation or automobile or 
                        other liability insurance.
                            (iv) Expenditures by parties (including the 
                        Federal Government) that the Board determines 
                        will not be payable by regional alliance health 
                        plans for coverage of the comprehensive benefit 
                        package under this Act.
                    (C) Addition of projected expenditures for 
                uninsured and underinsured individuals.--The amount so 
                determined and adjusted shall be increased to take into 
                account increased utilization of, and expenditures for, 
                items and services covered under the comprehensive 
                benefit package likely to occur, as a result of 
                coverage under a regional alliance health plan of 
                individuals who, as of 1993 were uninsured or 
                underinsured with respect to the comprehensive benefit 
                package. In making such determination, such 
                expenditures shall be based on the estimated average 
                cost for such services in 1993 (and not on private 
                payment rates established for such services). In making 
                such determination, the estimated amount of 
                uncompensated care in 1993 shall be removed and will 
                not include adjustments to offset payments below costs 
                by public programs.
                    (D) Addition of health plan and alliance costs of 
                administration.--The amount so determined and adjusted 
                shall be increased by an estimated percentage 
                (determined by the Board, but no more than 15 percent) 
                that reflects the proportion of premiums that are 
                required for health plan and regional alliance 
                administration (including regional alliance costs for 
                administration of income-related premium discounts and 
                cost sharing reductions) and for State premium taxes 
                (which taxes shall be limited to such amounts in 1993 
                as are attributable to the health benefits to be 
                included in the comprehensive benefit package).
                    (E) Decrease for cost sharing.--The amount so 
                determined and adjusted shall be decreased by a 
                percentage that reflects (i) the estimated average 
                percentage of total amounts payable for items and 
                services covered under the comprehensive benefit 
                package that will be payments in the form of cost 
                sharing under a higher cost sharing plan, and (ii) the 
                percentage reduction in utilization estimated to result 
                from the application of high cost sharing.
            (3) Special rules.--
                    (A) Benefits used.--The determinations under this 
                section shall be based on the comprehensive benefit 
                package as in effect in 1996.
                    (B) Assuming no change in expenditure pattern.--The 
                determination under paragraph (2) shall be made without 
                regard to any change in the pattern of expenditures 
                that may result from the enrollment of AFDC recipients 
                and SSI recipients in regional alliance health plans.
            (4) Eligible individuals.--In this subsection, the 
        determination of who are regional alliance eligible individuals 
        under this subsection shall be made as though this Act was 
        fully in effect in each State as of 1993.
    (c) Updating.--
            (1) In general.--Subject to paragraph (3), the Board shall 
        update the amount determined under subsection (b)(1) for each 
        of 1994 and 1995 by the appropriate update factor described in 
        paragraph (2) for the year.
            (2) Appropriate update factor.--In paragraph (1), the 
        appropriate update factor for a year is 1 plus the annual 
        percentage increase for the year (as determined by the 
        Secretary, based on actual or projected information) in private 
        sector health care spending for items and services included in 
        the comprehensive benefit package (as of 1996).
            (3) Limit.--The total, cumulative update under this 
        subsection shall not exceed 15 percent.

SEC. 6003. DETERMINATION OF ALLIANCE PER CAPITA PREMIUM TARGETS.

    (a) Initial Determination.--Not later than January 1, 1995, the 
Board shall determine, for each regional alliance for 1996, a regional 
alliance per capita premium target. Such target shall equal--
            (1) the national per capita baseline premium target 
        (determined by the Board under section 6002),
            (2) updated by the regional alliance inflation factor (as 
        determined under section 6001(a)(2)) for 1996, and
            (3) adjusted by the adjustment factor for the regional 
        alliance (determined under subsection (c)).
    (b) Subsequent Determinations.--
            (1) Determination.--Not later than March 1 of each year 
        (beginning with 1996) the Board shall determine, for each 
        regional alliance for the succeeding year a regional alliance 
        per capita premium target.
            (2) General rule.--Subject to subsection (e), such target 
        shall equal--
                    (A) the regional alliance per capita target 
                determined under this section (without regard to 
                subsection (e)) for the regional alliance for the 
                previous year,
                    (B) updated by the regional alliance inflation 
                factor (as determined in section 6001(a)) for the year.
            (3) Adjustment for previous excess rate of increase in 
        expenditures.--Such target for a year is subject to a decrease 
        under section 6001(d).
    (c) Adjustment Factors for Regional Alliances for Initial 
Determination.--
            (1) In general.--The Board shall establish an adjustment 
        factor for each regional alliance in a manner consistent with 
        this subsection.
            (2) Considerations.--In establishing the factor for each 
        regional alliance, the Board shall consider, using information 
        of the type described in paragraph (3), the difference between 
        the national average of the factors taken into account in 
        determining the national per capita baseline premium target and 
        such factors for the regional alliance, including variations in 
        health care expenditures and in rates of uninsurance and 
        underinsurance in the different alliance areas and including 
        variations in the proportion of expenditures for services 
        provided by academic health centers in the different alliance 
        areas.
            (3) Type of information.--The type of information described 
        in this paragraph is--
                    (A) information on variations in premiums across 
                States and across alliance areas within a State (based 
                on surveys and other data);
                    (B) information on variations in per capita health 
                spending by State, as measured by the Secretary;
                    (C) information on variations across States in per 
                capita spending under the medicare program and in such 
                spending among alliance areas within a State under such 
                program; and
                    (D) area rating factors commonly used by actuaries.
            (4) Application of factors in neutral manner.--The 
        application of the adjustment factors under this subsection for 
        1996 shall be done in a manner so that the weighted average of 
        the regional alliance per capita premium targets for 1996 is 
        equal to the national per capita baseline premium target 
        determined under section 6002. Such weighted average shall be 
        based on the Board's estimate of the expected distribution of 
        alliance eligible individuals (taken into account under section 
        6002) among the regional alliances.
            (5) Consultation process.--The Board shall have a process 
        for consulting with representatives of States and regional 
        alliances before establishing the adjustment for regional 
        alliances under this subsection.
    (d) Treatment of Certain States.--
            (1) Non-alliance states.--In the case of a State that is 
        not a participating State or otherwise has not established 
        regional alliances, the entire State shall be treated under the 
        provisions of this part as composing a single regional 
        alliance.
            (2) Changes in alliance boundaries.--In the case of a State 
        that changes the boundaries of its regional alliances 
        (including the establishment of such alliances after 1996), the 
        Board shall provide a method for computing a regional alliance 
        per capita premium target for each regional alliance affected 
        by such change in a manner that--
                    (A) reflects the factors taken into account in 
                establishing the adjustment factors for regional 
                alliances under subsection (c), and
                    (B) results in the weighted average of the newly 
                computed regional targets for the regional alliances 
                affected by the change equal to the weighted average of 
                the regional targets for the regional alliances as 
                previously established.
    (e) Adjustment for Previous Excess Rate of Increase in 
Expenditures.--
            (1) In general.--If the actual weighted average accepted 
        bid for a regional alliance for a year (as determined by the 
        Board based on actual enrollment in the first month of the 
        year) exceeds the regional alliance per capita premium target 
        (determined under this section) for the year, then the regional 
        alliance per capita premium target shall be reduced, by \1/2\ 
        of the excess percentage (described in paragraph (2)) for the 
        year, for each of the 2 succeeding years.
            (2) Excess percentage.--The excess percentage described in 
        this paragraph for a year is the percentage by which--
                    (A) the actual weighted average accepted bid 
                (referred to in paragraph (1)) for a regional alliance 
                for the year, exceeds
                    (B) the regional alliance per capita premium target 
                (determined under this section) for the year.

SEC. 6004. ALLIANCE INITIAL BIDDING AND NEGOTIATION PROCESS.

    (a) Bidding Process.--
            (1) Obtaining bids.--
                    (A) In general.--Not later than July 1 before the 
                first year, and not later than August 1 of each 
                succeeding year, the regional alliance shall have 
                obtained premium bids from each plan seeking to 
                participate as a regional alliance health plan with 
                respect to the alliance in the following year.
                    (B) Disclosure.--In obtaining such bids, a regional 
                alliance may determine to disclose (or not to disclose) 
                the regional alliance per capita premium target for the 
                regional alliance (determined under section 6003) for 
                the year involved.
                    (C) Condition.--Each bid submitted by a plan under 
                this subsection shall be conditioned upon the plan's 
                agreement to accept any payment reduction that may be 
                imposed under section 6011.
            (2) Negotiation process.--Following the bidding process 
        under paragraph (1), a State may provide for negotiations with 
        health plans relating to the premiums to be charged by such 
        plans. Such negotiations may result in the resubmission of 
        bids, but in no case shall a health plan resubmit a bid that 
        exceeds its prior bid.
            (3) Legally binding bids.--All bids submitted under this 
        subsection must be legally binding with respect to the plans 
        involved.
            (4) Acceptance.--The final bid submitted by a plan under 
        this subsection shall be considered to be the final accepted 
        bid, except as provided in subsection (e).
            (5) Assistance.--The Board shall provide regional alliances 
        with such information and technical assistance as may assist 
        such alliances in the bidding process under this subsection.
    (b) Submission of Information to Board.--By not later than 
September 1 of each year for which bids are obtained under subsection 
(a), each regional alliance shall submit to the Board a report that 
discloses--
            (1) information regarding the final bids obtained under 
        subsection (a) by the different plans;
            (2)(A) for the first year, any information the Board may 
        request concerning an estimation of the enrollment likely in 
        each such plan of alliance eligible individuals who will be 
        offered enrollment in a health plan by alliance in the first 
        year, or
            (B) for a succeeding year, the actual distribution of 
        enrollment of alliance eligible individuals in regional 
        alliance health plans in the year in which the report is 
        transmitted; and
            (3) limitations on capacity of regional alliance health 
        plans.
    (c) Computation of Weighted Average Accepted Bid.--
            (1) In general.--For each regional alliance the Board shall 
        determine a weighted average accepted bid for each year for 
        which bids are obtained under subsection (a). Such 
        determination shall be based on information on accepted bids 
        for the year, submitted under subsection (b)(1), and shall take 
        into account, subject to paragraph (2), the information on 
        enrollment distribution submitted under subsection (b)(2).
            (2) Enrollment distribution rules.--In making the 
        determination under paragraph (1) for a regional alliance, the 
        Board shall establish rules respecting the treatment of 
        enrollment in plans that are discontinued or are newly offered.
    (d) Notice to Certain Alliances.--
            (1) In general.--By not later than October 1 of each year 
        for which bids are obtained, the Board shall notify a regional 
        alliance--
                    (A) if the weighted average accepted bid 
                (determined under subsection (c)) for the alliance is 
                greater than the regional alliance per capita premium 
                target for the alliance (determined under section 6003) 
                for the year, and
                    (B) of the reduced weighted average accepted bid 
                for the alliance.
            (2) Notice of premium reductions.--If notice is provided to 
        a regional alliance under paragraph (1), the Board shall notify 
        the regional alliance and each noncomplying plan of any plan 
        payment reduction computed under section 6011 for such a plan 
        and the opportunity to voluntarily reduce the accepted bid 
        under subsection (e) in order to avoid such a reduction.
    (e) Voluntary Reduction of Accepted Bid (Final Accepted Bid).--
After the Board has determined under subsection (c) the weighted 
average accepted bid for a regional alliance and the Board has 
determined plan payment reductions, before such date as the Board may 
specify (in order to provide for an open enrollment period), a 
noncomplying plan has the opportunity to voluntarily reduce its 
accepted bid by the amount of the plan payment reduction that would 
otherwise apply to the plan. Such reduction shall not affect the amount 
of the plan payment reduction for any other plan for that year.

SEC. 6005. STATE FINANCIAL INCENTIVES.

    (a) Election.--Any participating State may elect to assume 
responsibility for containment of health care expenditures in the State 
consistent with this part. Such responsibility shall include submitting 
annual reports to the Board on any activities undertaken by the State 
to contain such expenditures. A participating State may regulate the 
rates charged by providers furnishing health care items and services to 
all private payers. Such regulation of rates may not cause a corporate 
alliance health plan to be charged, directly or indirectly, rates 
different from those charged other health plans for the same items and 
services or otherwise discriminate against corporate alliance health 
plans.
    (b) Financial Incentive.--In the case of a State that has made an 
election under subsection (a), if the Board determines for a particular 
year (beginning with the first year) that the statewide weighted 
average of the reduced weighted average accepted bids (based on actual 
average enrollment for the year), for regional alliances in the State, 
is less than the statewide weighted average of the regional alliance 
per capita premium targets (based upon such enrollment) for such 
alliances for the year, then the amount of the State maintenance-of-
effort payment under section 9001(b), for the following year, shall be 
reduced by \1/2\ of the product of--
            (1)(A) the amount by which the amount of such statewide 
        average target exceeds the amount of such statewide average 
        accepted bid, divided by (B) the amount of such target; and
            (2) the total of the amount of the Federal payments made in 
        that particular year to regional alliances in the State under 
        subtitle B of title IX.

SEC. 6006. RECOMMENDATIONS TO ELIMINATE REGIONAL VARIATIONS IN ALLIANCE 
              TARGETS DUE TO VARIATION IN PRACTICE PATTERNS; 
              CONGRESSIONAL CONSIDERATION.

    (a) Establishment of Advisory Commission on Regional Variations in 
Health Expenditures.--The chair of the Board shall establish, by not 
later than 60 days after the date of appointment of the first chair, an 
advisory commission on regional variations in health expenditures.
    (b) Composition.--The advisory commission shall be composed of 
consumers, employers, providers, representatives of health plans, 
States, regional alliances, individuals with expertise in the financing 
of health care, individuals with expertise in the economics of health 
care, and representatives of diverse geographic areas.
    (c) Elimination of Regional Variation in Premiums Due to Practice 
Pattern.--
            (1) Commission study.--The advisory commission shall 
        examine methods of eliminating variation in regional alliance 
        per capita premium targets due to variation in practice 
        patterns, not due to other factors (such as health care input 
        prices and demographic factors), by 2002.
            (2) Commission report.--The advisory commission shall 
        submit to the Board a report that specifies one or more methods 
        for eliminating the variation described in paragraph (1).
            (3) Board recommendations.--The Board shall submit to 
        Congress, by not later July 1, 1995, detailed recommendations 
        respecting the specific method to be used to eliminate the 
        variation described in paragraph (1) by 2002. Such 
        recommendations may take into account regional variations in 
        demographic or health status and in health care input prices, 
        based on the availability of accurate proxies for measuring 
        price variation. In taking into account health care input 
        prices, the Board shall explain what percentage of variation 
        found should be adjusted and what percentage of the premium 
        should be adjusted.
    (d) Congressional Consideration.--
            (1) In general.--Detailed recommendations submitted under 
        subsection (c)(3) shall apply under this subtitle unless a 
        joint resolution (described in paragraph (2)) disapproving such 
        recommendations is enacted, in accordance with the provisions 
        of paragraph (3), before the end of the 60-day period beginning 
        on the date on which such recommendations were submitted. For 
        purposes of applying the preceding sentence and paragraphs (2) 
        and (3), the days on which either House of Congress is not in 
        session because of an adjournment of more than three days to a 
        day certain shall be excluded in the computation of a period.
            (2) Joint resolution of disapproval.--A joint resolution 
        described in this paragraph means only a joint resolution which 
        is introduced within the 10-day period beginning on the date on 
        which the Board submits recommendations under subsection (e)(3) 
        and--
                    (A) which does not have a preamble;
                    (B) the matter after the resolving clause of which 
                is as follows: ``That Congress disapproves the 
                recommendations of the National Health Board concerning 
                elimination of regional variation in regional alliance 
                premiums, as submitted by the Board on 
                ______________.'', the blank space being filled in with 
                the appropriate date; and
                    (C) the title of which is as follows: ``Joint 
                resolution disapproving recommendations of the National 
                Health Board concerning elimination of regional 
                variation in regional alliance premiums, as submitted 
                by the Board on ______________.'', the blank space 
                being filled in with the appropriate date.
            (3) Procedures for consideration of resolution of 
        disapproval.--Subject to paragraph (4), the provisions of 
        section 2908 (other than subsection (a)) of the Defense Base 
        Closure and Realignment Act of 1990 shall apply to the 
        consideration of a joint resolution described in paragraph (2) 
        in the same manner as such provisions apply to a joint 
        resolution described in section 2908(a) of such Act.
            (4) Special rules.--For purposes of applying paragraph (3) 
        with respect to such provisions--
                    (A) any reference to the Committee on Armed 
                Services of the House of Representatives shall be 
                deemed a reference to an appropriate Committee of the 
                House of Representatives (specified by the Speaker of 
                the House of Representatives at the time of submission 
                of recommendations under subsection (c)(3)) and any 
                reference to the Committee on Armed Services of the 
                Senate shall be deemed a reference to an appropriate 
                Committee of the Senate (specified by the Majority 
                Leader of the Senate at the time of submission of 
                recommendations under subsection (c)(3)); and
                    (B) any reference to the date on which the 
                President transmits a report shall be deemed a 
                reference to the date on which the Board submits a 
                recommendation under subsection (c)(3).
    (e) Elimination of Regional Variation State Payment Amounts.--
            (1) Commission study.--The advisory commission shall 
        examine methods of reducing variation among States in the level 
        of payments required under subtitle A of title IX by 2002. The 
        commission shall examine methods of reducing variation due to 
        practice patterns, historical differences in the rates of 
        reimbursement to providers, and in the amount, duration, and 
        scope of benefits covered under State medicaid plans.
            (2) Commission report.--The advisory commission shall 
        submit to the Board a report that specifies one or more methods 
        for reducing the variation described in paragraph (1).
            (3) Board recommendations.--The Board shall submit to 
        Congress, by not later than July 1, 1995, detailed 
        recommendations respecting the specific method to be used to 
        reduce the variation described in paragraph (1) by 2002 in a 
        budget neutral manner with respect to total government payments 
        and payments by the Federal Government. In submitting 
        recommendations under this paragraph, the Board shall consider 
        the fiscal capacity of the States.
            (4) Congressional consideration.--
                    (A) In general.--Subject to the succeeding 
                provisions of this paragraph, the provisions of 
                subsection (d) shall apply to recommendations under 
                paragraph (3) in the same manner as they apply to 
                recommendations under subsection (c)(3).
                    (B) Special rules.--In applying subparagraph (A)--
                            (i) the following shall be substituted for 
                        the matter after the resolving clause described 
                        in subsection (d)(2)(B): ``That Congress 
                        disapproves the recommendations of the National 
                        Health Board concerning reduction of regional 
                        variation in State payments, as submitted by 
                        the Board on ______________.''; and
                            (ii) the following shall be substituted for 
                        the title described in subsection (d)(2)(C): 
                        ``Joint resolution disapproving recommendations 
                        of the National Health Board concerning 
                        reducing regional variation in State payments, 
                        as submitted by the Board on ______________.''.
    (f) Information.--The advisory commission shall provide the Board, 
States, and regional alliances with information about regional 
differences in health care costs and practice patterns.

SEC. 6007. REFERENCE TO LIMITATION ON ADMINISTRATIVE AND JUDICIAL 
              REVIEW OF CERTAIN DETERMINATIONS.

    For limitation on administrative and judicial review of certain 
determinations under this part, see section 5232.

      Subpart B--Plan and Provider Payment Reductions to Maintain 
                      Expenditures within Targets

SEC. 6011. PLAN PAYMENT REDUCTION.

    (a) Plan Payment Reduction.--In order to assure that payments to 
regional alliance health plans by a regional alliance are consistent 
with the applicable regional alliance per capita target for the 
alliance (computed under this subtitle), each noncomplying plan (as 
defined in subsection (b)(2)) for a year is subject to a reduction in 
plan payment (under section 1351) by the amount equal to plan payment 
reduction specified in subsection (c) for the year.
    (b) Noncomplying Alliance and Noncomplying Plan Defined.--In this 
part:
            (1) Noncomplying alliance.--The term ``noncomplying 
        alliance'' means, for a year, a regional alliance for which the 
        weighted average accepted bid (computed under section 6004(c)) 
        exceeds the regional alliance per capita premium target for the 
        year.
            (2) Noncomplying plan.--The term ``noncomplying plan'' 
        means, for a year, a regional alliance health plan offered 
        through a noncomplying alliance if the final accepted bid for 
        the year exceeds the maximum complying bid (as defined in 
        subsection (d)) for the year. No plan shall be a noncomplying 
        plan for a year before the first year in which the plan is 
        offered by a regional alliance.
    (c) Amount of Plan Payment Reduction.--
            (1) In general.--The amount of the plan payment reduction, 
        for a noncomplying plan offered by an alliance, is the 
        alliance-wide reduction percentage (as defined in paragraph 
        (2)) of the excess bid amount (as defined in paragraph (3)) for 
        the plan.
            (2) Alliance-wide reduction percentage.--
                    (A) In general.--In paragraph (1), the term 
                ``alliance-wide reduction percentage'' means, for a 
                noncomplying plan offered by an alliance for a year--
                            (i) the amount by which (I) the weighted 
                        average accepted bid (computed under section 
                        6004(c)(1)) for the alliance for the year, 
                        exceeds (II) the regional alliance per capita 
                        target for the alliance for the year; divided 
                        by
                            (ii) the sum, for noncomplying plans 
                        offered by the alliance, of the plan 
                        proportions of alliance excess bid amounts 
                        (described in subparagraph (B)(i)) for the 
                        year.
                    (B) Plan proportion of alliance excess bid amount 
                described.--
                            (i) In general.--The ``plan proportion of 
                        alliance excess bid amount'' described in this 
                        clause, for a noncomplying plan, is the product 
                        of--
                                    (I) the excess bid amount (as 
                                defined in paragraph (3)) for the plan, 
                                and
                                    (II) the plan enrollment proportion 
                                (as defined in clause (ii)) for the 
                                plan.
                            (ii) Plan enrollment proportion.--In clause 
                        (i)(II), the term ``plan enrollment 
                        proportion'' means, with respect to a health 
                        plan offered by a regional alliance, the total 
                        enrollment of alliance eligible individuals 
                        enrolled in such plan expressed as a percentage 
                        of the total enrollment of alliance eligible 
                        individuals in all regional alliance plans 
                        offered by the alliance. Such proportion shall 
                        be computed based on the information used in 
                        computing the weighted average accepted bid for 
                        the alliance under section 6004(c)(1).
            (3) Excess bid amount.--In this subsection, the ``excess 
        bid amount'', with respect to a noncomplying plan for a year, 
        is the amount by which--
                    (A) the accepted bid for the year (not taking into 
                account any voluntary reduction under section 6004(e)), 
                exceeds
                    (B) the maximum complying bid (as defined in 
                subsection (d)) for the plan for the year.
    (d) Maximum Complying Bid.--
            (1) First year.--In this part for the first year, the 
        ``maximum complying bid'' for each plan offered by a regional 
        alliance, is the regional alliance per capita premium target 
        for the alliance (determined under section 6003) for the year.
            (2) Subsequent years.--In this part, subject to paragraph 
        (3), for a subsequent year, the ``maximum complying bid'', for 
        a plan offered by an alliance for a year, is the sum of the 
        following:
                    (A) Net previous year accepted bid for plan.--The 
                accepted bid for the previous year (not taking into 
                account any voluntary reduction under section 6004(e)), 
                minus the amount of any plan payment reduction for the 
                plan for that year.
                    (B) Alliance-wide inflation allowance.--The amount 
                by which--
                            (i) the regional alliance per capita 
                        premium target for the year, exceeds
                            (ii) such target for the previous year, or, 
                        if less, the weighted average accepted bid 
                        (computed under section 6004(c)(1)) for such 
                        year.
            (3) Special rules for new plans.--
                    (A) In general.--Subject to subparagraph (B), in 
                the case of a plan that is first offered by a regional 
                alliance in a year after the first year the maximum 
                complying bid shall be the regional alliance per capita 
                premium target for the year.
                    (B) Authority.--The Board or a State may establish 
                rules to modify the application of subparagraph (A) for 
                regional alliance health plans in the State in order--
                            (i) to prevent abusive premium practices by 
                        entities previously offering plans, or
                            (ii) to encourage the availability of all 
                        types of plans in the State and to permit 
                        establishment of new plans.

SEC. 6012. PROVIDER PAYMENT REDUCTION.

    (a) Participating Providers.--
            (1) In general.--Each regional alliance health plan, as 
        part of its contract under section 1406(e) with any 
        participating provider (as defined in section 1407(c), or group 
        of participating providers) shall--
                    (A) include a provision that provides that if the 
                plan is a noncomplying plan for a year, payments to the 
                provider (or group) shall be reduced by the applicable 
                network reduction percentage (described in paragraph 
                (2)) for the year, and
                    (B) not include any provision which the State 
                determines otherwise varies the payments to such 
                providers (or group) because of, or in relation to, a 
                plan payment reduction under section 6011 or otherwise 
                is intended to nullify the effect of subparagraph (A).
        The Board may issue regulations relating to the requirements of 
        this paragraph.
            (2) Applicable network reduction percentage.--
                    (A) In general.--Subject to subparagraph (B), the 
                ``applicable network reduction percentage'', with 
                respect to participating providers of a noncomplying 
                plan for a year is--
                            (i) the plan payment reduction amount for 
                        the plan for the year (as determined under 
                        section 6011(c)), divided by
                            (ii) the final accepted bid for the plan 
                        for the year,
                adjusted under subparagraph (B).
                    (B) Induced volume offset.--The Board shall provide 
                for an appropriate increase of the percentage reduction 
                computed under subparagraph (A) to take into account 
                any estimated increase in volume of services provided 
                that may reasonably be anticipated as a consequence of 
                applying a reduction in payment under this subsection. 
                The Board may compute and apply such increase 
                differently for different classes of providers or 
                services or different types of health plans (as the 
                Board may define).
    (b) Other Providers.--
            (1) In general.--Each regional alliance health plan that is 
        a noncomplying plan in a year shall provide for a reduction in 
        the amount of payments to providers (or groups of providers) 
        that are not participating providers under the applicable 
        alliance fee schedule under section 1406(c)(3) by the 
        applicable nonnetwork reduction percentage (described in 
        paragraph (2)) for the year.
            (2) Applicable nonnetwork reduction percentage.--
                    (A) In general.--Subject to subparagraph (B), the 
                ``applicable nonnetwork reduction percentage'', with 
                respect to nonparticipating providers of a noncomplying 
                plan for a year is--
                            (i) the plan payment reduction amount for 
                        the plan for the year (as determined under 
                        section 6011(c)), divided by
                            (ii) the final accepted bid for the plan 
                        for the year,
                adjusted under subparagraph (B).
                    (B) Induced volume offset.--The Board shall provide 
                for an appropriate increase of the percentage reduction 
                computed under subparagraph (A) to take into account 
                any estimated increase in volume of services provided 
                that may reasonably be anticipated as a consequence of 
                applying a reduction in payment under this subsection. 
                The Board may compute and apply such increase 
                differently for different classes of providers or 
                services or different types of health plans (as the 
                Board may define).
    (c) Application to Cost Sharing and to Balance Billing 
Restrictions.--For purposes of applying section 1406(d) (relating to 
balance billing limitations) and part 3 of subtitle B of title I 
(relating to computation of cost sharing), the payment basis otherwise 
used for computing any limitation on billing or cost sharing shall be 
such payment basis as adjusted by any reductions effected under this 
section.

            PART 2--CORPORATE ALLIANCES HEALTH EXPENDITURES

SEC. 6021. CALCULATION OF PREMIUM EQUIVALENTS.

    (a) In General.--By January 1, 1998, the Board shall develop a 
methodology for calculating an annual per capita expenditure equivalent 
for amounts paid for coverage for the comprehensive benefit package 
within a corporate alliance.
    (b) Adjustment Permitted.--Such methodology shall permit a 
corporate alliance to petition the Secretary of Labor for an adjustment 
of the inflation adjustment that would otherwise apply to compensate 
for material changes in the demographic characteristics of the eligible 
individuals receiving coverage through the alliance.
    (c) Reporting.--In 2001 and each subsequent year, each corporate 
alliance shall report to the Secretary of Labor, in a form and manner 
specified by the Secretary, the average of the annual per capita 
expenditure equivalent for the previous 3-year period.

SEC. 6022. TERMINATION OF CORPORATE ALLIANCE FOR EXCESS INCREASE IN 
              EXPENDITURES.

    (a) Termination.--
            (1) In general.--If a corporate alliance has two excess 
        years (as defined in subsection (b)) in a 3-year-period, then, 
        effective beginning with the second year following the second 
        excess year in such period--
                    (A) the Secretary of Labor shall terminate the 
                corporate alliance, and
                    (B) employers that were corporate alliance 
                employers with respect to such corporate alliance shall 
                become regional alliance employers (unless, in the case 
                of a corporate alliance with a plan sponsor described 
                in subparagraph (B) or (C) of section 1311(b)(1), the 
                employers become corporate alliance employers of 
                another such corporate alliance).
            (2) Initial 3-year-period.--Paragraph (1) shall first apply 
        to the 3-year-period beginning with 1998.
            (3) Special subsequent treatment for large employers.--In 
        the case of corporate alliance employers described in paragraph 
        (1)(B) that are large employers, the employer premium payments 
        under section 6121 are subject to adjustment under section 
        6124.
            (4) No further election.--If a corporate alliance of a 
        large employer is terminated under this subsection, no employer 
        that is a corporate alliance employer for that alliance is 
        eligible to be a sponsor of a corporate alliance.
    (b) Excess Year.--
            (1) In general.--In subsection (a), the term ``excess 
        year'' means, for a corporate alliance, a year (after 2000) for 
        which--
                    (A) the rate of increase for the corporate alliance 
                (specified in paragraph (2)) for the year, exceeds
                    (B) the national corporate inflation factor 
                (specified in paragraph (3)) for the year.
            (2) Rate of increase for corporate alliance.--The rate of 
        increase for a corporate alliance for a year, specified in this 
        paragraph, is the percentage by which--
                    (A) the average of the annual per capita 
                expenditure equivalent for the corporate alliance 
                (reported under section 6021(c)) for the 3-year period 
                ending with such year, exceeds
                    (B) the average of the annual per capita 
                expenditure equivalent for the corporate alliance 
                (reported under such subsection) for the 3-year period 
                ending with the previous year.
            (3) National corporate inflation factor.--The national 
        corporate inflation factor for a year, specified in this 
        paragraph, is the average of the general health care inflation 
        factors (as defined in section 6001(a)(3)) for each of the 3 
        years ending with such year.

                PART 3--TREATMENT OF SINGLE-PAYER STATES

SEC. 6031. SPECIAL RULES FOR SINGLE-PAYER STATES.

    In the case of a Statewide single-payer State, for purposes of 
section 1222(6), the Board shall compute a Statewide per capita premium 
target for each year in the same manner as a regional alliance per 
capita premium target is determined under section 6003.

                     PART 4--TRANSITION PROVISIONS

SEC. 6041. MONITORING PRICES AND EXPENDITURES.

    (a) In General.--The Secretary shall establish a program to monitor 
prices and expenditures in the health care system in the United States.
    (b) Reports.--The Secretary shall periodically report to the 
President on--
            (1) the rate of increase in expenditures in each sector of 
        the health care system, and
            (2) how such rates compare with rate of overall increase in 
        health care spending and rate of increase in the consumer price 
        index.
    (c) Access to Information.--
            (1) In general.--The Secretary may obtain, through surveys 
        or otherwise, information on prices and expenditures for health 
        care services. The Secretary may compel health care providers 
        and third party payers to disclose such information as is 
        necessary to carry out the program under this section.
            (2) Confidentiality.--Non-public information obtained under 
        this subsection with respect to individual patients is 
        confidential.
    (d) Periodic Reports.--The Secretary shall periodically issue 
public reports on the matters described in subsection (b).

                                                   Title VI, Subtitle B

                 Subtitle B--Premium-Related Financings

                    PART 1--FAMILY PREMIUM PAYMENTS

                        Subpart A--Family Share

SEC. 6101. FAMILY SHARE OF PREMIUM.

    (a) Requirement.--Each family enrolled in a regional alliance 
health plan or in a corporate alliance health plan in a class of family 
enrollment is responsible for payment of the family share of premium 
payable respecting such enrollment. Such premium may be paid by an 
employer or other person on behalf of such a family.
    (b) Family Share of Premium Defined.--
            (1) In general.--In this subtitle, the term ``family share 
        of premium'' means, with respect to enrollment of a family--
                    (A) in a regional alliance health plan, the amount 
                specified in paragraph (2) for the class, or
                    (B) in a corporate alliance health plan, the amount 
                specified in paragraph (3) for the class.
            (2) Regional alliance.--
                    (A) In general.--The amount specified in this 
                paragraph for a health plan based on a class of family 
                enrollment is the sum of the base amounts described in 
                subparagraph (B) reduced (but not below zero) by the 
                sum of the amounts described in subparagraph (C).
                    (B) Base.--The base amounts described in this 
                subparagraph (for a plan for a class of enrollment) are 
                as follows:
                            (i) Regional alliance premium.--The premium 
                        specified in section 6102(a) with respect to 
                        such class of enrollment.
                            (ii) Family collection shortfall.--20 
                        percent of the family collection shortfall add-
                        on (computed under section 6107 for such 
                        class).
                    (C) Credits and discounts.--The amounts described 
                in this subparagraph (for a plan for a class of 
                enrollment) are as follows:
                            (i) Alliance credit.--The amount of the 
                        alliance credit under section 6103(a).
                            (ii) Income related discount.--The amount 
                        of any income-related discount provided under 
                        section 6104(a)(1).
                            (iii) Excess premium credit.--The amount of 
                        any excess premium credit provided under 
                        section 6105.
                            (iv) Corporate alliance opt-in credit.--The 
                        amount of any corporate alliance opt-in credit 
                        provided under section 6106.
                            (v) Additional credit for ssi and afdc 
                        recipients.--In the case of an SSI or AFDC 
                        family or for whom the amount described in 
                        clause (ii) is equal to the amount described in 
                        section 6104(b)(1)(A), the amount described in 
                        subparagraph (B)(ii).
                    (D) Limit on miscellaneous credits.--In no case 
                shall the family share, due to credits under 
                subparagraph (C), be less than zero.
            (3) Corporate alliance.--
                    (A) In general.--The amount specified in this 
                paragraph for a health plan based on a class of family 
                enrollment is the premium described in subparagraph (B) 
                reduced (but not below zero) by the sum of the amounts 
                described in subparagraph (C).
                    (B) Premium.--The premium described in this 
                subparagraph (for a plan for a class of enrollment) is 
                premium specified under section 1384 with respect to 
                the plan and class of enrollment involved.
                    (C) Credits and discounts.--The amounts described 
                in this subparagraph (for a plan for a class of 
                enrollment) are as follows:
                            (i) Alliance credit.--The amount of the 
                        alliance credit under section 6103(b).
                            (ii) Income related discount.--The amount 
                        of any income-related discount provided under 
                        section 6104(a)(2).

SEC. 6102. AMOUNT OF PREMIUM.

    (a) Regional Alliance.--The amount of the premium charged by a 
regional alliance for all families in a class of family enrollment 
under a regional alliance health plan offered by the alliance is equal 
to the product of--
            (1) the final accepted bid for the plan (as defined in 
        section 6000(a)(2)),
            (2) the uniform per capita conversion factor (specified 
        under section 1341(b)) for the alliance, and
            (3) the premium class factor established by the Board for 
        that class under section 1531.
    (b) Reference to Corporate Alliance Premium Provisions.--The amount 
of the premium charged by a corporate alliance for all families in a 
class of family enrollment under a corporate alliance health plan 
offered by the alliance is specified under section 1384.
    (c) Special Rules for Divided Families.--In the case of an 
individual who is a qualifying employee of an employer, if the 
individual has a spouse or child who is not treated as part of the 
individual's family because of section 1012--
            (1) the combined premium for both families under this 
        section shall be computed as though such section had not 
        applied if such combined premium is less than the total of the 
        premiums otherwise applicable (without regard to this 
        subsection),
            (2) the regional alliance shall divide such combined 
        premium between the families proportionally (consistent with 
        rules established by the Board), and
            (3) in such case, credits and other amounts shall be pro-
        rated in a manner consistent with rules established by the 
        Board.

SEC. 6103. ALLIANCE CREDIT.

    (a) Regional Alliances.--The credit provided under this section for 
a family enrolled in a regional alliance health plan through a regional 
alliance for a class of family enrollment is equal to 80 percent of the 
weighted average premium (as defined in section 6000(b)) for health 
plans offered by the alliance for the class.
    (b) Corporate Alliances.--The credit provided under this section 
for a family enrolled in a corporate alliance health plan for a class 
of family enrollment is equal to the minimum employer premium payment 
required under section 6131 with respect to the family.

SEC. 6104. PREMIUM DISCOUNT BASED ON INCOME.

    (a) In General.--
            (1) Enrollees in regional alliance health plans.--Each 
        family enrolled with a regional alliance health plan is 
        entitled to a premium discount under this section, in the 
        amount specified in subsection (b), if the family--
                    (A) is an AFDC or SSI family,
                    (B) is determined, under subpart D of part 3 of 
                subtitle D of title I, to have family adjusted income 
                below 150 percent of the applicable poverty level, or
                    (C) is a family described in subsection (c)(3) for 
                which the family obligation amount under subsection (c) 
                for the year would otherwise exceed a specified percent 
                of family adjusted income described in such subsection.
            (2) Enrollees in corporate alliance health plans.--
                    (A) In general.--Subject to subparagraph (B), each 
                family enrolled with a corporate alliance health plan 
                in a class of family enrollment by virtue of the full-
                time employment of a low-wage employee (as defined in 
                subparagraph (B)) is entitled to a premium discount 
                under this section in the amount (if any) by which--
                            (i) 95 percent of the premium (specified in 
                        section 1384) for the least expensive corporate 
                        alliance health plan that is offered to the 
                        employee and that is a lower or combination 
                        cost sharing plan (as defined in paragraphs (7) 
                        and (20) of section 1902 for that class and 
                        premium area), exceeds
                            (ii) the alliance credit under section 
                        6103(b) for that class.
                    (B) Low-wage employee defined.--
                            (i) In general.--In this paragraph, the 
                        term ``low-wage employee'' means, with respect 
                        to an employer, an employee who is employed on 
                        a full-time basis and who is receiving wages 
                        (as defined in section 1901(a)(1)(A)) for 
                        employment for the employer, at an annual rate 
                        of less than $15,000 (as adjusted under clause 
                        (ii)).
                            (ii) Indexing.--For a year after 1994, the 
                        dollar amount specified in clause (i) shall be 
                        increased or decreased by the same percentage 
                        as the percentage increase or decrease by which 
                        the average CPI (described in section 1902(9)) 
                        for the 12-month-period ending with August 31 
                        of the preceding year exceeds such average for 
                        the 12-month period ending with August 31, 
                        1993.
                    (C) Timing of determination.--
                            (i) In general.--The determination of 
                        whether or not an employee is a low-wage 
                        employee shall be made, in accordance with 
                        rules of the Secretary of Labor, at the time of 
                        initial enrollment and shall also be made at 
                        the time of each subsequent open enrollment 
                        period, on the basis of the wages payable by 
                        the employer at that time.
                            (ii) Effective date.--Such determination 
                        shall apply as of the effective date of the 
                        initial enrollment, or, in the case of an open 
                        enrollment period, as of the effective date of 
                        changes in enrollment during such period.
            (3) No liability for indians and certain veterans and 
        military personnel.--
                    (A) In general.--In the case of an individual 
                described in subparagraph (B), because the applicable 
                health plan does not impose any premium for such an 
                individual, the individual is not eligible for any 
                premium discount under this section.
                    (B) Individuals described.--An individual described 
                in this subparagraph is--
                            (i) an electing veteran (as defined in 
                        section 1012(d)(1)) who is enrolled under a 
                        health plan of the Department of Veterans 
                        Affairs and who, under the laws and rules as in 
                        effect as of December 31, 1994, has a service-
                        connected disability or who is unable to defray 
                        the expenses of necessary care as determined 
                        under section 1722(a) of title 38, United 
                        States Code,
                            (ii) active duty military personnel (as 
                        defined in section 1012(d)(2)), and
                            (iii) an electing Indian (as defined in 
                        section 1012(d)(3)).
            (4) Monthly application to afdc and ssi families.--
        Paragraph (1)(A) (and the family obligation amount under 
        subsection (c) insofar as it relates to an AFDC or SSI family) 
        shall be applied to the premium or family obligation amount 
        only for months in which the family is such an AFDC or SSI 
        family.
    (b) Amount of Premium Discount for Regional Alliance Health 
Plans.--
            (1) In general.--Subject to the succeeding paragraphs of 
        this subsection, the amount of the premium discount under this 
        subsection for a family enrolled in a regional alliance health 
        plan under a class of family enrollment is equal to--
                    (A) 20 percent of the weighted average premium for 
                regional alliance health plans offered by the regional 
                alliance for that class of enrollment, increased by any 
                amount provided under paragraph (2); reduced (but not 
                below zero) by
                    (B) the sum of--
                            (i) the family obligation amount described 
                        in subsection (c), and
                            (ii) the amount of any employer payment 
                        (not required under part 2) towards the family 
                        share of premiums for covered members of the 
                        family.
            (2) Increase to assure enrollment in at-or-below-average-
        cost plan.--If a regional alliance determines that a family 
        eligible for a discount under this section is unable to enroll 
        in a at-or-below-average-cost plan (as defined in paragraph 
        (3)) that serves the area in which the family resides, the 
        amount of the premium discount under this subsection is 
        increased but only to such amount as will permit the family to 
        enroll in a regional alliance health plan without the need to 
        pay a family share of premium under this part in excess of the 
        sum described in paragraph (1)(B).
            (3) At-or-below-average-cost plan defined.--In this 
        section, the term ``at-or-below-average-cost plan'' means a 
        regional alliance health plan the premium for which does not 
        exceed, for the class of family enrollment involved, the 
        weighted average premium for the regional alliance.
    (c) Family Obligation Amount.--
            (1) Determination.--Subject to paragraphs (2) and (3), the 
        family obligation amount under this subsection is determined as 
        follows:
                    (A) No obligation if income below income threshold 
                amount or if afdc or ssi family.--If the family 
                adjusted income (as defined in section 1372(d)) of the 
                family is less than the income threshold amount 
                (specified in paragraph (4)) or if the family is an 
                AFDC or SSI family, the family obligation amount is 
                zero.
                    (B) Income above income threshold amount.--If such 
                income is at least such income threshold amount and the 
                family is not an AFDC or SSI family, the family 
                obligation amount is the sum of the following:
                            (i) For income (above income threshold 
                        amount) up to the poverty level.--The product 
                        of the initial marginal rate (specified in 
                        paragraph (2)) and the amount by which--
                                    (I) the family adjusted income (not 
                                including any portion that exceeds the 
                                applicable poverty level for the class 
                                of family involved), exceeds
                                    (II) such income threshold amount.
                            (ii) Graduated phase out of discount up to 
                        150 percent of poverty level.--The product of 
                        the final marginal rate (specified in paragraph 
                        (2)) and the amount by which the family 
                        adjusted income exceeds 100 percent (but is 
                        less than 150 percent) of the applicable 
                        poverty level.
            (2) Marginal rates.--In paragraph (1)--
                    (A) Individual marginal rates.--For a year for an 
                individual class of enrollment--
                            (i) Initial marginal rate.--The initial 
                        marginal rate is the ratio of--
                                    (I) 3 percent of the applicable 
                                poverty level for the individual class 
                                of enrollment for the year, to
                                    (II) the amount by which such 
                                poverty level exceeds such income 
                                threshold amount.
                            (ii) Final marginal rate.--The final 
                        marginal rate is the ratio of--
                                    (I) the amount by which the general 
                                family share (as defined in 
                                subparagraph (C)) for an individual 
                                class of enrollment exceeds 3 percent 
                                of the applicable poverty level (for an 
                                individual class of enrollment for the 
                                year); to
                                    (II) 50 percent of such poverty 
                                level.
                    (B) Family marginal rates.--For a year for a family 
                class of enrollment (as defined in section 
                1011(c)(2)(A))--
                            (i) Initial marginal rate.--The initial 
                        marginal rate is the ratio of--
                                    (I) 3 percent of the applicable 
                                poverty level for a dual parent class 
                                of enrollment for the year, to
                                    (II) the amount by which such 
                                poverty level exceeds such income 
                                threshold amount.
                            (ii) Final marginal rate.--The final 
                        marginal rate is the ratio of--
                                    (I) the amount by which the general 
                                family share (as defined in 
                                subparagraph (C)) for a dual parent 
                                class of enrollment exceeds 3 percent 
                                of the applicable poverty level (for 
                                such a class for the year); to
                                    (II) 50 percent of such poverty 
                                level.
                    (C) General family share.--In subparagraphs (A) and 
                (B), the term ``general family share'' means, for a 
                class, the weighted average premium for the class minus 
                the alliance credit (determined without regard to this 
                section).
            (3) Limitation to 3.9 percent for all families.--
                    (A) In general.--
                            (i) Families with income below 150 percent 
                        of poverty.--In the case of a family with 
                        family adjusted income of less than 150 percent 
                        of the applicable poverty level, in no case 
                        shall the family obligation amount under this 
                        subsection for the year exceed 3.9 percent 
                        (adjusted under subparagraph (C)) of the amount 
                        of such adjusted income.
                            (ii) Other families with income below 
                        $40,000.--In the case of a family with family 
                        adjusted income of at least 150 percent of the 
                        applicable poverty level but less than $40,000 
                        (adjusted under subparagraph (B)) for a year, 
                        the family obligation amount under this 
                        subsection for the year is equal to 3.9 percent 
                        (adjusted under subparagraph (C)) of the amount 
                        of such adjusted income.
                    (B) Indexing of dollar amounts.--
                            (i) In general.--For a year after 1994, the 
                        dollar amounts specified in subparagraph (A)(i) 
                        and in section 6113(d)(1)(B) shall be increased 
                        or decreased by the same percentage as the 
                        percentage increase or decrease by which the 
                        average CPI (described in section 1902(9)) for 
                        the 12-month-period ending with August 31 of 
                        the preceding year exceeds such average for the 
                        12-month period ending with August 31, 1993.
                            (ii) Rounding.--The dollar amounts adjusted 
                        under this subparagraph shall be rounded each 
                        year to the nearest multiple of $100.
                    (C) Indexing of percentage.--
                            (i) In general.--The percentage specified 
                        in subparagraph (A) shall be adjusted for any 
                        year after 1994 so that the percentage for the 
                        year bears the same ratio to the percentage so 
                        specified as the ratio of--
                                    (I) 1 plus the general health care 
                                inflation factor (as defined in section 
                                6001(a)(3)) for the year, bears to
                                    (II) 1 plus the percentage 
                                specified in section 1136(b) (relating 
                                to indexing of dollar amounts related 
                                to cost sharing) for the year.
                            (ii) Rounding.--Any adjustment under clause 
                        (i) for a year shall be rounded to the nearest 
                        multiple of \1/10\ of 1 percentage point.
            (4) Income threshold amount.--
                    (A) In general.--For purposes of this subtitle, the 
                income threshold amount specified in this paragraph is 
                $1,000 (adjusted under subparagraph (B)) .
                    (B) Indexing.--For a year after 1994, the income 
                threshold amount specified in subparagraph (A) shall be 
                increased or decreased by the same percentage as the 
                percentage increase or decrease by which the average 
                CPI (described in section 1902(9)) for the 12-month-
                period ending with August 31 of the preceding year 
                exceeds such average for the 12-month period ending 
                with August 31, 1993.
                    (C) Rounding.--Any increase or decrease under 
                subparagraph (B) for a year shall be rounded to the 
                nearest multiple of $10.

SEC. 6105. EXCESS PREMIUM CREDIT.

    (a) In General.--If plan payment reductions are made for one or 
more regional alliance health plans offered by a regional alliance for 
plan payments in a year under section 6021, the alliance shall provide 
for a credit under this section, in the amount described in subsection 
(b), in the case of each family enrolled in a regional alliance health 
plan offered by the alliance for premiums in the year.
    (b) Amount of Credit.--
            (1) In general.--Subject to paragraph (2), the amount of 
        the credit under this subsection, for a family enrolled in a 
        class of family enrollment for a regional alliance for a year, 
        is the amount that would be the weighted average premium for 
        such alliance, class, and year, if the per capita excess 
        premium amount (determined under subsection (c)) for the 
        alliance for the year were substituted for the reduced weighted 
        average accepted bid for the regional alliance for the year.
            (2) Adjustment to account for use of estimates.--Subject to 
        section 1361(b)(3), if the total payments made by a regional 
        alliance to all regional alliance health plans in a year under 
        section 1351(b) exceeds (or is less than) the total of such 
        payments estimated by the alliance (based on the reduced 
        weighted average accepted bid under subsection (c)(1)), because 
        of a difference between--
                    (A) the alliance's estimate of the distribution of 
                enrolled families between excess premium plans and 
                other plans, and
                    (B) the actual distribution of such enrolled 
                families among such plans,
        the amount of the credit under this section in the second 
        succeeding year shall be reduced (or increased, respectively) 
        by the amount of such excess (or deficit) in the total of such 
        payments made by the alliance to all such plans.
    (c) Per Capita Excess Premium Amount.--The per capita excess 
premium amount, for a regional alliance for a year, is the amount by 
which--
            (1) the reduced weighted average accepted bid (as defined 
        in section 6000(a)(1)) for the alliance for the year, exceeds
            (2) the regional alliance per capita premium target for the 
        alliance for the year.

SEC. 6106. CORPORATE ALLIANCE OPT-IN CREDIT.

    (a) In General.--If a regional alliance is owed a payment 
adjustment under section 6124 for a year, then the alliance shall 
provide for a credit under this section equal to 20 percent of the 
amount described in subsection (b), in the case of each family enrolled 
in a regional alliance plan offered by the alliance.
    (b) Amount of Credit.--The amount described in this subsection, for 
a family enrolled in a class of family enrollment for a regional 
alliance for a year, is the amount that would be the weighted average 
premium for such alliance, class, and year, if the per capita corporate 
alliance opt-in amount (determined under subsection (c)) for the 
alliance for the year were substituted for the reduced weighted average 
accepted bid for the regional alliance for the year.
    (c) Per Capita Corporate Alliance Opt-in Amount.--The per capita 
corporate alliance opt-in amount, for a regional alliance for a year, 
is--
            (1) the total amount of the payment adjustments owed for 
        the year under section 6124, divided by
            (2) the estimated average number of regional alliance 
        eligible individuals in the regional alliance during the year 
        (reduced by the average number of such individuals whose family 
        share of premiums, determined without regard to this section 
        and section 6107, is zero).

SEC. 6107. FAMILY COLLECTION SHORTFALL ADD-ON.

    (a) In General.--The family collection shortfall add-on, for a 
regional alliance for a class of enrollment for a year, is the amount 
that would be the weighted average premium for such alliance, class, 
and year, if the per capita collection shortfall amount (determined 
under subsection (b)) for the alliance for the year were substituted 
for the reduced weighted average accepted bid for the regional alliance 
for the year.
    (b) Computation of Per Capita Adjustment for Collection 
Shortfalls.--
            (1) Per capita collection shortfall amount.--The per capita 
        collection shortfall amount, for a regional alliance for a 
        year, under this subsection is equal to--
                    (A) the amount estimated under paragraph (2)(A) for 
                the year, divided by
                    (B) the estimated average number of regional 
                alliance eligible individuals in the regional alliance 
                during the year (reduced by the average number of such 
                individuals whose family share of premiums, determined 
                without regard to this section and section 6106, is 
                zero).
            (2) Aggregate collection shortfall.--
                    (A) In general.--Each regional alliance shall 
                estimate, for each year (beginning with the first year) 
                the total amount of payments which the alliance can 
                reasonably identify as owed to the alliance under this 
                Act (taking into account any premium reduction or 
                discount under this subtitle and including amounts owed 
                under subpart B and not taking into account any 
                penalties) for the year and not likely to be collected 
                (after making collection efforts described in section 
                1345) during a period specified by the Secretary 
                beginning on the first day of the year.
                    (B) Exclusion of government debts.--The amount 
                under subparagraph (A) shall not include any payments 
                owed to a regional alliance by the Federal, State, or 
                local governments.
                    (C) Adjustment for previous shortfall estimation 
                discrepancy.--Subject to section 1361(b)(3), the amount 
                estimated under this paragraph for a year shall be 
                adjusted to reflect over (or under) estimations in the 
                amounts so computed under this paragraph for previous 
                years (based on actual collections), taking into 
                account interest payable based upon borrowings (or 
                savings) attributable to such over or under 
                estimations.

      Subpart B--Repayment of Alliance Credit by Certain Families

SEC. 6111. REPAYMENT OF ALLIANCE CREDIT BY CERTAIN FAMILIES.

    (a) In General.--Subject to the succeeding provisions of this 
subpart, each family which is provided an alliance credit under section 
6103(a) for a class of enrollment is liable to the regional alliance 
for repayment of an amount equal to the base employment monthly premium 
(applicable to such class) for the month under section 6122.
    (b) Reduction for Self-Employment Payments.--The liability of a 
family under this section for a year shall be reduced (but not below 
zero) by the amount of any employer payments made in the year under 
section 6126 based on the net earnings from self-employment of a family 
member.

SEC. 6112. NO LIABILITY FOR FAMILIES EMPLOYED FULL-TIME; REDUCTION IN 
              LIABILITY FOR PART-TIME EMPLOYMENT.

    (a) In General.--The amount of any liability under section 6111 
shall be reduced, in accordance with rules established by the National 
Health Board consistent with this section, based on employer premiums 
payable under section 6121 with respect to the employment of a family 
member who is a qualifying employee or with respect to a family member. 
In no case shall the reduction under this section result in any payment 
owing to a family.
    (b) Credit for Full-Time and Part-Time Employment.--
            (1) In general.--Under rules of the Board, in the case of a 
        family enrolled under a class of family enrollment, if a family 
        member is a qualifying employee for a month and (except in the 
        case described in section 6114(a)) the employer is liable for 
        payment under section 6121 based on such employment--
                    (A) Full-time employment credit.--If the employment 
                is on a full-time basis (as defined in section 
                1901(b)(2)(A)) the liability under section 6111 shall 
                be reduced by the credit amount described in 
                subparagraph (C).
                    (B) Part-time employment credit.--If the employment 
                is on a part-time basis (as defined in section 
                1901(b)(2)(A)) the liability under section 6111 shall 
                be reduced by the employment ratio (as defined in 
                section 1901(b)(2)(B)) of the credit amount described 
                in subparagraph (C).
                    (C) Full-time monthly credit.--The amount of the 
                credit under this subparagraph, with respect to 
                employment by an employer in a month, is \1/12\ (or, if 
                applicable, the fraction described in paragraph (2)) of 
                the amount owed under section 6111, based on the class 
                of enrollment, for the year.
            (2) Coverage during only part of a year.--In the case of a 
        family that is not enrolled in a regional alliance health plan 
        for all the months in a year, the fraction described in this 
        paragraph is 1 divided by the number of months in the year in 
        which the family was enrolled in such a plan.
            (3) Aggregation of credits.--For purposes of paragraph 
        (1)--
                    (A) Individuals.--In the case of an individual who 
                is a qualifying employee of more than one employer in a 
                month, the credit for the month shall equal the sum of 
                the credits earned with respect to employment by each 
                employer. Such sum may exceed the credit amount 
                described in paragraph (1)(C).
                    (B) Couples.--In the case of a couple each spouse 
                of which is a qualifying employee in a month, the 
                credit for the month shall equal the sum of the credits 
                earned with respect to employment by each spouse. Such 
                sum may exceed the credit amount described in paragraph 
                (1)(C).
    (c) Treatment of Change of Enrollment Status.--In the case of a 
family for which the class of family enrollment changes during a year, 
the Board shall establish rules for appropriate conversion and 
allocation of the credit amounts under the previous provisions of this 
section in a manner that reflects the relative values of the base 
employment monthly premiums (as determined under section 6122) among 
the different classes of family enrollment.

SEC. 6113. LIMITATION OF LIABILITY BASED ON INCOME.

    (a) In General.--In the case of an eligible family described in 
subsection (b), the repayment amount required under this subpart (after 
taking into account any work credit earned under section 6112) with 
respect to a year shall not exceed the amount of liability described in 
subsection (c) for the year.
    (b) Eligible Family Described.--An eligible family described in 
this subsection is a family which is determined, under subpart B of 
part 3 of subtitle D of title I by the regional alliance for the 
alliance area in which the family resides, to have wage-adjusted income 
(as defined in subsection (d)) below 250 percent of the applicable 
poverty level.
    (c) Amount of Liability.--
            (1) Determination.--Subject to subsection (f), in the case 
        of a family enrolled in a class of enrollment with wage-
        adjusted income (as defined in subsection (d)), the amount of 
        liability under this subsection is determined as follows:
                    (A) No obligation if income below income threshold 
                amount or if afdc or ssi family.--If such income is 
                less than the income threshold amount (specified in 
                section 6104(c)(4)) or if the family is an AFDC or SSI 
                family, the amount of liability is zero.
                    (B) Income above income threshold amount.--If such 
                income is at least such income threshold amount and the 
                family is not an AFDC or SSI family, the amount of 
                liability is the sum of the following:
                            (i) 5.5 percent of income (above income 
                        threshold amount) up to the poverty level.--The 
                        initial marginal rate (specified in paragraph 
                        (2)(A)) of the amount by which--
                                    (I) the wage-adjusted income (not 
                                including any portion that exceeds the 
                                applicable poverty level for the class 
                                of family involved), exceeds
                                    (II) such income threshold amount.
                            (ii) Graduated phase out of discount up to 
                        250 percent of poverty level.--The final 
                        marginal rate (specified in paragraph (2)(B)) 
                        of the amount by which the wage-adjusted income 
                        exceeds 100 percent of the applicable poverty 
                        level.
            (2) Marginal rates.--In paragraph (1)--
                    (A) Initial marginal rate.--The initial marginal 
                rate, for a year for a class of enrollment, is the 
                ratio of--
                            (i) 5.5 percent of the applicable poverty 
                        level for the class of enrollment for the year, 
                        to
                            (ii) the amount by which such poverty level 
                        exceeds such income threshold amount.
                    (B) Final marginal rate.--The final marginal rate, 
                for a year for a class of enrollment, is the ratio of--
                            (i) the amount by which (I) the amount of 
                        the repayment amount described in section 
                        6111(a) exceeds (II) 5.5 percent of the 
                        applicable poverty level (for the class and 
                        year); to
                            (ii) 150 percent of such poverty level.
            (3) Monthly application to afdc and ssi families.--
        Paragraph (1) insofar as it relates to an AFDC or SSI family 
        shall be applied so as to reduce to zero the liability amount 
        only for months in which the family is such an AFDC or SSI 
        family.
    (d) Wage-Adjusted Income Defined.--In this subtitle, the term 
``wage-adjusted income'' means, for a family, family adjusted income of 
the family (as defined in section 1372(d)(1)), reduced by the sum of 
the following:
            (1)(A) Subject to subparagraph (B), the amount of any wages 
        included in such family's income that is received for 
        employment which is taken into account in the computation of 
        the amount of employer premiums under section 6121 (without 
        consideration of section 6126).
            (B) The reduction under subparagraph (A) shall not exceed 
        for a year $5,000 (adjusted under section 6104(c)(3)(B)) 
        multiplied by the number of months (including portions of 
        months) of employment with respect to which employer premiums 
        were payable under section 6121 (determined in a manner 
        consistent with section 1901(b)(3)).
            (2) The amount of net earnings from self employment of the 
        family taken into account under section 6126.
            (3) The amount of unemployment compensation included in 
        income under section 85 of the Internal Revenue Code of 1986.
    (e) Determinations.--A family's wage-adjusted income and the amount 
of liability under subsection (c) shall be determined by the applicable 
regional alliance upon application by a family under under subpart B of 
part 3 of subtitle D of title I.
    (f) No Liability for Indians and Certain Veterans and Military 
Personnel.--The provisions of paragraph (3) of section 6104(a) shall 
apply to the reduction in liability under this section in the same 
manner as such paragraph applies to the premium discount under section 
6104.

SEC. 6114. SPECIAL TREATMENT OF CERTAIN RETIREES AND QUALIFIED SPOUSES 
              AND CHILDREN.

    (a) Treatment as Full-Time Employee.--Subject to subsection (d), an 
individual who is an eligible retiree (as defined in subsection (b)) or 
a qualified spouse or child (as defined in subsection (c)) for a month 
in a year (beginning with 1998) is considered, for purposes of section 
6112, to be a full-time employee described in such section in such 
month.
    (b) Eligible Retiree Defined.--In this section, the term ``eligible 
retiree'' means, for a month, an individual who establishes to the 
satisfaction of the regional alliance (for the alliance area in which 
the individual resides), pursuant to rules of the Secretary, that the 
individual, as of the first day of the month--
            (1) is at least 55, but less than 65, years of age,
            (2) is not employed on a full-time basis (as defined in 
        section 1901(b)(2)(A)),
            (3) would be eligible (under section 226(a) of the Social 
        Security Act) for hospital insurance benefits under part A of 
        title XVIII of such Act if the individual were 65 years of age 
        based only on the employment of the individual, and
            (4) is not a medicare-eligible individual.
    (c) Qualified Spouse or Child Defined.--In subsection (a), the term 
``qualified spouse or child'' means, in relation to an eligible retiree 
for a month, an individual who establishes to the satisfaction of the 
regional alliance (for the alliance area in which the individual 
resides) under rules of the Secretary that the requirements in one of 
the following paragraphs is met with respect to the individual:
            (1) The individual (A) is under 65 years of age and is (and 
        has been for a period of at least one year) married to an 
        eligible retiree or (B) is a child of the eligible retiree.
            (2) In the case of a person who was an eligible retiree at 
        the time of the person's death--
                    (A) the individual was (and had for a period of at 
                least one year been) married to the retiree at the time 
                of the person's death,
                    (B) the individual is under 65 years of age,
                    (C) the individual is not employed on a full-time 
                basis (as defined in section 1901(b)(2)(A)),
                    (D) the individual is not remarried, and
                    (E) the deceased spouse would still be an eligible 
                retiree in the month if such spouse had not died.
            (3) The individual is a child of an individual described in 
        paragraph (2).
    (d) Application.--An individual may not be determined to be an 
eligible retiree or qualified spouse or child unless an application has 
been filed with the regional alliance. Such application shall contain 
such information as the Secretary may require to establish such status 
and verify information in the application. Any material 
misrepresentation in the application is subject to a penalty in the 
same manner as a misrepresentation described in section 1374(i)(2).

SEC. 6115. SPECIAL TREATMENT OF CERTAIN MEDICARE BENEFICIARIES.

    In the case of an individual who would be a medicare-eligible 
individual in a month but for the application of section 1012(a) on the 
basis of employment (in the month or a previous month) of the 
individual or the individual's spouse or parent, the individual (or 
spouse or parent, as the case may be) so employed is considered, for 
purposes of section 6112, to be a full-time employee described in such 
section in such month.

                   PART 2--EMPLOYER PREMIUM PAYMENTS

                 Subpart A--Regional Alliance Employers

SEC. 6121. EMPLOYER PREMIUM PAYMENT REQUIRED.

    (a) Requirement.--
            (1) In general.--Each regional alliance employer described 
        in paragraph (2) for a month shall pay to the regional alliance 
        that provides health coverage to a qualifying employee of the 
        employer an employer premium in a amount at least equal to the 
        amount specified in subsection (b). Such payments shall be made 
        in accordance with section 1345(c).
            (2) Employer described.--An employer described in this 
        paragraph for a month is an employer that in the month employs 
        one or more qualifying employees (as defined in section 
        1901(b)(1)).
            (3) Treatment of certain employment by corporate alliance 
        employers.--A corporate alliance employer shall be deemed, for 
        purposes of this subpart, to be a regional alliance employer 
        with respect to qualifying employees who are not corporate 
        alliance eligible individuals.
    (b) Premium Payment Amount.--
            (1) In general.--Except as provided in section 6123 
        (relating to a discount for certain employers), section 6124 
        (relating to large employers electing coverage in a regional 
        alliance), and section 6125 (relating to the employer 
        collection shortfall add-on), the amount of the employer 
        premium payment, for a month for qualifying employees of the 
        employer who reside in an alliance area, is the sum of the 
        payment amounts computed under paragraph (2) for each class of 
        family enrollment with respect to such employees in such area.
            (2) Payment amount for all employees in a class of family 
        enrollment.--Subject to paragraph (3), the payment amount under 
        this paragraph, for an employer for a class of family 
        enrollment for a month for qualifying employees residing in an 
        alliance area, is the product of--
                    (A) the base employment monthly premium determined 
                under section 6122 for the class of family enrollment 
                for the previous month for the regional alliance, and
                    (B) the number of full-time equivalent employees 
                (determined under section 1901(b)(2)) enrolled in that 
                class of family enrollment for the previous month and 
                residing in the alliance area.
            (3) Treatment of certain employees.--In applying this 
        subpart in the case of a qualifying employee (other than a 
        medicare-eligible individual) who is not enrolled in any 
        alliance health plan--
                    (A) the employee is deemed enrolled in a regional 
                alliance health plan (for the alliance area in which 
                the individual resides) in the dual parent class of 
                enrollment, and
                    (B) if the employee's residence is not known, the 
                employee is deemed to reside in the alliance area in 
                which the employee principally is employed for the 
                employer.
            (4) Transitional rules for first month in first year for a 
        state.--In the case of an employer for a State in the first 
        month of the State's first year--
                    (A) the premium amount for such month shall be 
                computed by substituting ``month'' for ``previous 
                month'' in paragraph (2);
                    (B) payment for such month shall be made on the 
                first of the month based on an estimate of the payment 
                for such month;
                    (C) an adjustment shall be made to the payment in 
                the following month to reflect the difference between 
                the payment in the first month and the payment in the 
                following month (calculated without regard to the 
                adjustment under this subparagraph); and
                    (D) the reconciliation of premiums for such first 
                month under section 1602(c) shall be included in the 
                reconciliation of premiums for the following 12 months.
            (5) Special rules for divided families.--In the case of an 
        individual who is a qualifying employee of an employer, if the 
        individual has a spouse or child who is not treated as part of 
        the individual's family because of section 1012--
                    (A) the employer premium payment under this section 
                shall be computed as though such section had not 
                applied, and
                    (B) the regional alliance shall make proportional 
                payments (consistent with rules established by the 
                Secretary) to the health plans (if different) of the 
                qualifying employee and of the employee's spouse and 
                children.
    (c) Application During Transition Period.--
            (1) In general.--For purposes of applying this subpart in 
        the case of an employer described in paragraph (3), there shall 
        only be taken into account qualifying employees (and wages of 
        such employees) who reside in a participating State.
            (2) Exception.--Paragraph (1) shall not apply in 
        determining the average number of full-time equivalent 
        employees or whether an employer is a small employer.
            (3) Employer described.--An employer described in this 
        paragraph is an employer that employs one or more qualifying 
        employees in a participating State and one or more qualifying 
        employees in a State that is not a participating State.

SEC. 6122. COMPUTATION OF BASE EMPLOYMENT MONTHLY PREMIUM.

    (a) In General.--Each regional alliance shall provide for the 
computation for each year (beginning with the first year) of a base 
employment monthly premium for each class of family enrollment as 
follows:
            (1) Individual enrollment.--The base employment monthly 
        premium for the individual class of enrollment is equal to \1/
        12\ of 80 percent of the credit-adjusted weighted average 
        premium (as defined in paragraph (4)) for such regional 
        alliance for the individual class of enrollment.
            (2) Couple-only enrollment.--
                    (A) In general.--The base employment monthly 
                premium for the couple-only class of enrollment is 
                equal to \1/12\ of 80 percent of the product described 
                in subparagraph (B), divided by the sum described in 
                subparagraph (C).
                    (B) Total premiums for couple-only enrollments.--
                The product described in this subparagraph is--
                            (i) the credit-adjusted weighted average 
                        premium for such regional alliance for the 
                        couple-only class of enrollment, multiplied by
                            (ii) the sum, for all the months in the 
                        year, of the number of covered families 
                        receiving coverage through regional alliance 
                        health plans of the regional alliance within 
                        such class of enrollment in each such month.
                    (C) Number of workers and extra workers.--The sum 
                described in this subparagraph is--
                            (i) the sum specified in subparagraph 
                        (B)(ii), plus
                            (ii) the number of additional workers 
                        (determined under subsection (b)(1)), for 
                        families receiving coverage within such class 
                        from regional alliance health plans offered by 
                        the regional alliance.
            (3) Single and dual parent enrollments.--
                    (A) In general.--The base employment monthly 
                premium for the single parent and dual parent classes 
                of enrollment is equal to \1/12\ of 80 percent of the 
                sum described in subparagraph (B), divided by the sum 
                described in subparagraph (C).
                    (B) Total premiums for single and dual parent 
                enrollments.--The sum described in this subparagraph is 
                the sum of the products described in the following 
                clauses:
                            (i) Total premiums for single parent 
                        enrollment.--The product of--
                                    (I) the credit-adjusted weighted 
                                average premium for such regional 
                                alliance for the single parent class of 
                                enrollment, multiplied by
                                    (II) the sum, for all the months in 
                                the year, of the number of covered 
                                families receiving coverage through 
                                regional alliance health plans of the 
                                regional alliance within such class of 
                                enrollment in each such month.
                            (ii) Total premiums for dual parent 
                        enrollment.--The product of--
                                    (I) the credit-adjusted weighted 
                                average premium for such regional 
                                alliance for the dual parent class of 
                                enrollment, multiplied by
                                    (II) the sum, for all the months in 
                                the year, of the number of covered 
                                families receiving coverage through 
                                regional alliance health plans of the 
                                regional alliance within such class of 
                                enrollment in each such month.
                    (C) Number of workers and extra workers.--The sum 
                described in this subparagraph is--
                            (i) the sum specified in subparagraph 
                        (B)(i)(II); plus
                            (ii) the sum specified in subparagraph 
                        (B)(ii)(II); plus
                            (iii) the number of additional workers 
                        (determined under subsection (b)(1)), for 
                        families receiving coverage within the dual 
                        parent class of enrollment from regional 
                        alliance health plans offered by the regional 
                        alliance.
            (4) Credit-adjusted weighted average premium defined.--In 
        this subsection, the term ``credit-adjusted weighted average 
        premium'' means, for a class of enrollment and a regional 
        alliance, the weighted average premium for the class and 
        alliance, reduced by the amount described in section 6106(b) 
        for such class and alliance.
    (b) Determination of Additional Workers for Couple-Only and Dual 
Parent Class.--
            (1) In general.--Subject to paragraph (4), the regional 
        alliance shall determine, for each couple class of family 
        enrollment and in a manner specified by the Board, an estimated 
        total number of additional workers equal to--
                    (A) 12 times the alliance-wide monthly average 
                number of premium payments (as determined under 
                paragraph (2)) for covered families (as defined in 
                paragraph (3)) within such class of enrollment, minus
                    (B) the sum described in subsection (a)(2)(B)(ii) 
                or (a)(3)(B)(ii)(II) for the couple-only and dual 
                parent classes, respectively.
            (2) Computation of alliance-wide monthly average number.--
                    (A) In general.--In determining the alliance-wide 
                monthly average number of premium payments under 
                paragraph (1)(A), a covered family shall count for a 
                month as 1, or, if greater, the number computed under 
                subparagraph (B) (but in no case greater than 2).
                    (B) Counting of families in which both spouses are 
                qualifying employees.--The number computed under this 
                subparagraph over all families within a couple-only or 
                dual parent class of enrollment in which both spouses 
                are qualifying employees is determined on an alliance-
                wide basis based on the following:
                            (i) For such a spouse, determine, using the 
                        rules under section 1902(b)(1)(A), how many 
                        full-time equivalent employees the spouse is 
                        counted as, but not to exceed 1 for either 
                        spouse.
                            (ii) Add the 2 numbers determined under 
                        clause (i) for spouses in such families.
            (3) Covered family defined.--In this subsection, the term 
        ``covered family'' means a family other than--
                    (A) an SSI family or AFDC family,
                    (B) a family in which a spouse is a medicare-
                eligible individual, or
                    (C) a family that is enrolled in a health plan 
                other than a regional alliance health plan.
            (4) Adjustment to account for use of estimates.--Subject to 
        section 1361(b)(3), if the total receipts of a regional 
        alliance to all regional alliance health plans in a year under 
        this subpart exceeds, or is less than, the total of such 
        receipts estimated by the alliance (based on the base 
        employment monthly premium under subsection (a)), because of a 
        difference between--
                    (A) the alliance's estimate of the estimated total 
                number of additional workers for the alliance and the 
                estimate of the number of covered families, and
                    (B) the actual total number of additional workers 
                and the actual number of covered families,
        the estimated total number of additional workers to be applied 
        under this section in the second succeeding year shall be 
        reduced, or increased, respectively, in a manner that results 
        in total receipts of the alliance under this subpart in such 
        succeeding year being increased or decreased by the amount of 
        such excess (or deficit).
    (c) Basis for Determinations.--
            (1) Premiums.--The determinations of premiums and families 
        under plans under this section shall be made in a manner 
        determined by the Board and based on the premiums and families 
        used by the Board in carrying out subtitle A and shall be based 
        on estimates on an annualized basis.
            (2) Employment.--The determinations of employment under 
        this section for the first year for a State shall be based on 
        estimates of employment established by the regional alliance in 
        accordance with standards promulgated by the Secretary of Labor 
        in consultation with the National Health Board.
            (3) Reports.--In accordance with rules established by the 
        Secretary of Labor in consultation with the National Health 
        Board, a regional alliance may require regional alliance 
        employers to submit such periodic information on employment as 
        may be necessary to monitor the determinations made under this 
        section, including months and extent of employment.
    (d) Timing of Determination.--Determinations under this section for 
a year shall be made by not later than December 1, or such other date 
as the Board may specify, before the beginning of the year.

SEC. 6123. PREMIUM DISCOUNT FOR CERTAIN EMPLOYERS.

    (a) Employer Discount.--
            (1) In general.--Subject to section 6124(c) (relating to 
        phase in for certain large corporate alliance employers) and 
        section 6125 (relating to the employer collection shortfall 
        add-on), the amount of the employer premium payment required 
        under this subpart for a regional alliance employer for any 
        year shall not exceed the limiting percentage (as defined in 
        subsection (b)) of the employer's wages for that year.
            (2) Exclusion of governmental employers and certain 
        corporate alliance employers.--Paragraph (1) shall not apply 
        to--
                    (A) the Federal Government, a State government, or 
                a unit of local government, or a unit or 
                instrumentality of such government, before 2002; and
                    (B) a corporate alliance employer which is treated 
                as a regional alliance employer under section 
                6131(a)(2).
    (b) Limiting Percentage Defined.--In subsection (a)--
            (1) Any employer.--For an employer that is not a small 
        employer (as defined in subsection (c)), the limiting 
        percentage is 7.9 percent.
            (2) Small employers.--For an employer that is a small 
        employer and that has an average number of full-time equivalent 
        employees and average annual wages per full-time equivalent 
        employee (as determined under subsection (d)), the limiting 
        percentage is the applicable percentage determined based on 
        following table:
 

                                               Limiting Percentage                                              
----------------------------------------------------------------------------------------------------------------
                                      Employer's average annual wages per full-time equivalent employee are:    
   Average number of full-time   -------------------------------------------------------------------------------
      equivalent employees        $0-$12,000  $12,001-$15,000  $15,001-$18,000  $18,001-$21,000  $21,001-$24,000
----------------------------------------------------------------------------------------------------------------
Fewer than 25...................       3.5%           4.4%             5.3%             6.2%             7.1%   
25 but fewer than 50............       4.4%           5.3%             6.2%             7.1%             7.9%   
50 but not over 75..............       5.3%           6.2%             7.1%             7.9%             7.9%   
----------------------------------------------------------------------------------------------------------------

    (c) Small Employer Defined.--
            (1) In general.--In this section--
                    (A) the term ``small employer'' means an employer 
                that does not employ, on average, more than 75 full-
                time equivalent employees; and
                    (B) the average number of full-time equivalent 
                employees shall be determined by averaging the number 
                of full-time equivalent employees employed by the 
                employer in each countable month during the year.
            (2) Countable month.--In paragraph (1), the term 
        ``countable month'' means, for an employer, a month in which 
        the employer employs any qualifying employee.
            (3) Determinations.--The number of full-time equivalent 
        employees shall be determined using the rules under section 
        1901(b)(2).
    (d) Average Annual Wages Per Full-Time Equivalent Employee 
Defined.--
            (1) In general.--In this section, the term ``average annual 
        wages per full-time equivalent employee'' means, for an 
        employer for a year--
                    (A) the total wages paid in the year to individuals 
                who, at the time of payment of the wages, are 
                qualifying employees of the employer; divided by
                    (B) the number of full-time equivalent employees of 
                the employer in the year.
            (2) Determination.--The Board may establish rules relating 
        to the computation of the average annual wages for employers.
    (e) Determinations.--For purposes of this section, the number of 
employees and average wages shall be determined on an annual basis.
    (f) Treatment of Certain Self-employed Individuals.--In the case of 
an individual who is a partner in a partnership, is a 2-percent 
shareholder in an S corporation (within the meaning of section 1372 of 
the Internal Revenue Code of 1986), or is any other individual who 
carries on a trade or business as a sole proprietorship, for purposes 
of this section--
            (1) the individual is deemed to be an employee of the 
        partnership, S corporation, or proprietorship, and
            (2) the individual's net earnings from self employment 
        attributable to the partnership, S corporation, or sole 
        proprietorship are deemed to be wages from the partnership, S 
        corporation, or proprietorship.
    (g) Application to Employers.--An employer that claims that this 
section applies--
            (1) shall provide notice to the regional alliance involved 
        of the claim at the time of making payments under this subpart; 
        and
            (2) shall make available such information (and provide 
        access to such information) as the regional alliance may 
        require (in accordance with regulations of the Secretary of 
        Labor) to audit the determination of--
                    (A) whether the employer is a small employer, and, 
                if so, the average number of full-time equivalent 
                employees and average annual wages of the employer; and
                    (B) the total wages paid by the employer for 
                qualifying employees.
    (h) Treatment of Multi-Alliance Employers.--In the case in which 
this section is applied to an employer that makes employer premium 
payments to more than one regional alliance, the reduction under this 
section shall be applied in a pro-rated manner to the premium payments 
made to all such alliances.

SEC. 6124. PAYMENT ADJUSTMENT FOR LARGE EMPLOYERS ELECTING COVERAGE IN 
              A REGIONAL ALLIANCE.

    (a) Application of Section.--
            (1) In general.--Except as otherwise provided in this 
        subsection, this section shall apply to the employer premium 
        payments for full-time employees in a State of an employer if--
                    (A)(i) the employer is an eligible sponsor 
                described in section 1311(b)(1)(A), (ii) the employer 
                elected to be a corporate alliance under section 
                1312(a)(1), and (iii) the election is terminated under 
                section 1313;
                    (B)(i) the employer is such an eligible sponsor as 
                of the first day of the first year of the State, and 
                (ii) the employer did not provide the notice required 
                under section 1312(a)(1) (with respect to an election 
                to become a corporate alliance); or
                    (C)(i) the employer is such an eligible sponsor, 
                (ii) the employer subsequently became a large employer 
                and elected to be a corporate alliance under section 
                1312(a)(2), and (iii) the election was terminated under 
                section 1313.
            (2) Effective date.--In the case of an employer described 
        in--
                    (A) paragraph (1)(A) or (1)(C), this section shall 
                first apply on the effective date of the termination of 
                the election under section 1313, or
                    (B) paragraph (1)(B), this section shall first 
                apply as of January 1, 1996 (or, if later with respect 
                to a State, the first day of the first year for the 
                State).
            (3) Treatment of employees in small establishments.--This 
        section shall not apply to the payment of premiums for full-
        time employees of an employer described in paragraph (1)(A) or 
        (1)(C), if the employees are employed at an establishment with 
        respect to which the option described in section 1311(c)(1)(B) 
        was exercised.
            (4) Sunset.--This section shall cease applying to an 
        employer with respect to employment in a State after the 7th 
        year in which this section applies to the employer in the 
        State.
            (5) Large employer defined.--In this section, the term 
        ``large employer'' has the meaning given such term in section 
        1311(e)(3).
    (b) Additional Amount.--
            (1) In general.--If an employer subject to this section for 
        a year has an excess risk proportion (specified in paragraph 
        (3)) of greater than zero with respect to an alliance area, 
        then the employer shall provide, on a monthly basis, for 
        payment to the regional alliance for such area of an amount 
        equal to \1/12\ of the excess risk amount described in 
        paragraph (2) for the year.
            (2) Excess risk amount.--The excess risk amount described 
        in this paragraph, for an employer for a year with respect to 
        an alliance area, is equal to the product of the following:
                    (A) The reduced weighted average accepted bid for 
                the regional alliance for the area for the year.
                    (B) The total average number of alliance eligible 
                individuals who--
                            (i) were full-time employees (or family 
                        members of such employees) of the employer, and
                            (ii) residing in the regional alliance 
                        area,
                in the year before the first year in which this section 
                applies to the employer.
                    (C) The excess risk proportion (specified in 
                paragraph (3)) for the employer for such area.
                    (D) The phase-down percentage (specified in 
                paragraph (4)) for the year.
            (3) Excess risk proportion.--
                    (A) In general.--The ``excess risk proportion'', 
                specified in this paragraph, with respect to an 
                employer and an alliance area, is a percentage that 
                reflects, for the year before the first year in which 
                this section applies to the employer, the amount by 
                which--
                            (i) the average demographic risk for 
                        employees (and family members) described in 
                        paragraph (2)(B) residing in the alliance area, 
                        exceeds
                            (ii) the average demographic risk for all 
                        regional alliance eligible individuals residing 
                        in the area.
                    (B) Measurement of demographic risk.--
                            (i) In general.--Demographic risk under 
                        subparagraph (A) shall be measured, in a manner 
                        specified by the Board, based on the 
                        demographic characteristics described in 
                        section 6001(c)(1)(A), that relate to the 
                        actuarial value of the comprehensive benefit 
                        package.
                            (ii) Provision of information.--Each 
                        employer to which this section applies shall 
                        submit, to each regional alliance for which an 
                        additional payment may be required under this 
                        section, such information (and at such time) as 
                        the Board may require in order to determine the 
                        demographic risk referred to in subparagraph 
                        (A)(i).
            (4) Phase-down percentage.--The phase down percentage, 
        specified in this paragraph for an employer for--
                    (A) each of the first 4 years to which this section 
                applies to the employer, is 100 percent,
                    (B) the fifth such year, is 75 percent,
                    (C) the sixth such year, is 50 percent, and
                    (D) the seventh such year, is 25 percent.
    (c) Phase in of Employer Premium Discount.--For--
            (1) each of the first 4 years in which this section applies 
        to such employer, section 6123 shall not apply to the employer;
            (2) the fifth such year, section 6123 shall apply to the 
        employer but the reduction in premium payment effected by such 
        section shall be 25 percent of the reduction that would 
        otherwise apply (but for this subsection);
            (3) the sixth such year, section 6123 shall apply to the 
        employer but the reduction in premium payment effected by such 
        section shall be 50 percent of the reduction that would 
        otherwise apply (but for this subsection);
            (4) the seventh such year, section 6123 shall apply to the 
        employer but the reduction in premium payment effected by such 
        section shall be 75 percent of the reduction that would 
        otherwise apply (but for this subsection); or
            (5) a subsequent year, section 6123 shall apply to the 
        employer without any reduction under this subsection.

SEC. 6125. EMPLOYER COLLECTION SHORTFALL ADD-ON.

    (a) In General.--The amount payable by an employer under this 
subpart shall be increased by the amount computed under subsection (b).
    (b) Amount.--The amount under this subsection for an employer is 
equal to the premium payment amount that would be computed under 
section 6121(b)(2) if the per capita collection shortfall amount 
(computed under section 6107(b)(1)) for the year were substituted for 
the reduced weighted average accepted bid for the year. The reduced 
weighted average accepted bid is used under section 6000(b)(1) in 
computing the weighted average premium, which in turn is used under 
section 6122(a)(1) in computing the base employment monthly premium, 
which in turn is used under section 6121(b)(2)(A) in computing the 
employer premium amount.
    (c) Discount Not Applicable.--Section 6123 shall not apply to the 
increase in the amount payable by virtue of this section.

SEC. 6126. APPLICATION TO SELF-EMPLOYED INDIVIDUALS.

    (a) In General.--A self-employed individual (as defined in section 
1901(c)(2)) shall be considered, for purposes of this subpart to be an 
employer of himself or herself and to pay wages to himself or herself 
equal to the amount of net earnings from self-employment (as defined in 
section 1901(c)(1)).
    (b) Credit for Employer Premiums.--
            (1) In general.--In the case of a self-employed individual, 
        the amount of any employer premium payable by virtue of 
        subsection (a) in a year shall be reduced (but not below zero) 
        by the sum of the following:
                    (A) Subject to paragraph (2), the amount of any 
                employer premiums payable under this subpart 
                (determined not taking into account any adjustment in 
                the premium amounts under section 6123 or 6124) with 
                respect to the employment of that individual in the 
                year.
                    (B) The product of (i) the number of months in the 
                year the individual was employed on a full-time basis 
                by a corporate alliance employer, and (ii) the employer 
                premium that would have been payable for such months 
                under this subpart (determined not taking into account 
                any adjustment in the premium amounts under section 
                6123 or 6124) for the class of enrollment if such 
                employer had been a regional alliance employer.
            (2) Special rule for certain closely-held businesses.--
                    (A) In general.--In the case of an individual who--
                            (i) has wage-adjusted income (as defined in 
                        section 6113(d), determined without regard to 
                        paragraphs (1)(B) and (2) thereof) that exceeds 
                        250 percent (or such higher percentage as the 
                        Board may establish) of the applicable poverty 
                        level, and
                            (ii) is both a substantial owner and an 
                        employee of a closely held business,
                the amount of any reduction under paragraph (1)(A) that 
                is attributable to the individual's employment by that 
                business shall be appropriately reduced in accordance 
                with rules prescribed by the Board, in order to prevent 
                individuals from avoiding payment of the full amount 
                owed through fraudulent or secondary employment 
                arrangements.
                    (B) Closely held business.--For purposes of 
                subparagraph (A), a business is ``closely held'' if it 
                is an employer that meets the requirements of section 
                542(a)(2) of the Internal Revenue Code of 1986 or 
                similar requirements as appropriate in the case of a 
                partnership or other entity.

                Subpart B--Corporate Alliance Employers

SEC. 6131. EMPLOYER PREMIUM PAYMENT REQUIRED.

    (a) Per Employee Premium Payment.--Subject to section 6124, each 
corporate alliance employer of a corporate alliance that in a month in 
a year employs a qualifying employee who is--
            (1) enrolled in a corporate alliance health plan offered by 
        the alliance, shall provide for a payment toward the premium 
        for the plan in an amount at least equal to the corporate 
        employer premium specified in subsection (b); or
            (2) is not so enrolled, shall make employer premium 
        payments with respect to such employment under subpart A in the 
        same manner as if the employer were a regional alliance 
        employer (except as otherwise provided in such subpart).
    (b) Corporate Employer Premium.--
            (1) Amount.--
                    (A) In general.--Except as provided in paragraph 
                (2), the amount of the corporate employer premium for a 
                month in a year for a class of family enrollment for a 
                family residing in a premium area (established under 
                section 1384(b)) is 80 percent of the weighted average 
                monthly premium of the corporate alliance health plans 
                offered by the corporate alliance for that class of 
                enrollment for families residing in that area.
                    (B) Application to self-insured plans.--In applying 
                this paragraph in the case of one or more corporate 
                alliance health plans that are self-insured plans--
                            (i) the ``premium'' for the plan is the 
                        actuarial equivalent of such premium, based 
                        upon the methodology (or such other consistent 
                        methodology) used under section 6021(a) 
                        (relating to application of premium caps to 
                        corporate alliance health plans), and
                            (ii) the premium amount, for different 
                        classes and, if applicable, for different 
                        premium areas, shall be computed in a manner 
                        based on such factors as may bear a reasonable 
                        relationship to costs for the provision of the 
                        comprehensive benefit package to the different 
                        classes in such areas.
                The Secretary of Labor shall establish rules to carry 
                out this subparagraph.
            (2) Low-wage employees.--In the case of a low-wage employee 
        entitled to a premium discount under section 6104(a)(2), the 
        amount of the employer premium payment for a month in a year 
        for a class of family enrollment shall be increased by the 
        amount of such premium discount.
    (c) Determinations.--
            (1) Basis.--Determinations under this section shall be made 
        based on such information as the Secretary of Labor shall 
        specify.
            (2) Timing.--Determinations of the monthly premiums under 
        this section for months in a year shall be made not later than 
        December 1 of the previous year.

                                                   Title VI, Subtitle C

         Subtitle C--Payments to Regional Alliance Health Plans

SEC. 6201. COMPUTATION OF BLENDED PLAN PER CAPITA PAYMENT AMOUNT.

    (a) In General.--For purposes of section 1351, the blended plan per 
capita payment amount for a regional alliance health plan for 
enrollments in an alliance for a year is equal to the sum of the 3 
components described in subsection (b), multiplied by any adjustment 
factor applied for the year under section 6202(d).
    (b) Sum of Products.--The 3 components described in this subsection 
are:
            (1) Plan bid component for that plan.--The product of--
                            (A) the final accepted bid for plan (as 
                        defined in section 6000(a)(2)) for the year, 
                        and
                            (B) the plan bid proportion determined 
                        under section 6202(a)(1) for the year.
            (2) AFDC component for alliance.--The product of--
                            (A) the AFDC per capita premium amount for 
                        the regional alliance for the year (determined 
                        under section 9012), and
                            (B) the AFDC proportion determined under 
                        section 6202(a)(2) for the year.
            (3) SSI component for alliance.--The product of--
                            (A) the SSI per capita premium amount for 
                        the regional alliance for the year (determined 
                        under section 9013) for the year, and
                            (B) the SSI proportion determined under 
                        section 6202(a)(3) for the year.

SEC. 6202. COMPUTATION OF PLAN BID, AFDC, AND SSI PROPORTIONS.

    (a) In General.--For purposes of this subtitle:
            (1) Plan bid proportion.--The ``plan bid proportion'' is, 
        for a class of enrollment, 1 minus the sum of (A) the AFDC 
        proportion, and (B) the SSI proportion.
            (2) AFDC proportion.--The ``AFDC proportion'' is, for a 
        class of family enrollment for a year, the ratio of--
                    (A) the average of the number of AFDC recipients 
                (as determined under subsection (c)) enrolled in 
                regional alliance health plans in that class of 
                enrollment for the year, to
                    (B) the average of the total number of individuals 
                enrolled in regional alliance health plans in that 
                class of enrollment for the year.
            (3) SSI proportion.--The ``SSI proportion'' is, for a class 
        of family enrollment for a year, the ratio of--
                    (A) the average of the number of SSI recipients (as 
                determined under subsection (c)) enrolled in regional 
                alliance health plans in that class of enrollment for 
                the year, to
                    (B) the average described in paragraph (2)(B).
    (b) Computation.--
            (1) Projections.--The proportions described in subsection 
        (a) shall be determined and applied by the State, based upon 
        the best available data, at least 1 month before the date bids 
        are submitted under section 6004 before the beginning of the 
        calendar year involved.
            (2) Actual.--For purposes of making adjustments under 
        subsection (d), the regional alliance shall determine, after 
        the end of each year, the actual proportions described in 
        subsection (a).
    (c) Counting of AFDC and SSI Recipients.--For purposes of 
subsections (a)(2)(A) and (a)(3)(A), the terms ``SSI recipient'' and 
``AFDC recipient'' do not include a medicare-eligible individual.
    (d) Adjustments For Discrepancies In Estimations.--
            (1) In general.--If the actual AFDC proportion or SSI 
        proportion (as determined under subsection (a)) for a year (in 
        this subsection referred to as the ``reference year''), 
        determined after the end of the year based upon actual number 
        of AFDC recipients and SSI recipients in the year, is different 
        from the projected AFDC and SSI proportions (as determined 
        under subsection (b)(1)) used in computing the blended plan 
        payment amount for the year, then, subject to section 
        1361(b)(3), the regional alliance shall adjust the blended plan 
        payment amount in the second succeeding year (in this 
        subsection referred to as the ``applicable year'') in the 
        manner described in paragraph (2). By regulation the Secretary 
        may apply the adjustment, based on estimated amounts, in the 
        year before the applicable year, with final adjustment in the 
        applicable year.
            (2) Adjustment described.--
                    (A) Positive cash flow.--If the cash flow 
                difference (as defined in paragraph (3)(A)) for the 
                reference year is positive, then in the applicable year 
                the blended plan payment amount shall be increased by 
                the adjustment percentage described in paragraph (4).
                    (B) Negative cash flow.--If the cash flow 
                difference (as defined in paragraph (3)(A)) for the 
                reference year is negative, then in the applicable year 
                the blended plan payment amount shall be reduced by the 
                adjustment percentage described in paragraph (4).
            (3) Cash flow difference defined.--In this subsection:
                    (A) In general.--The term ``cash flow difference'' 
                means, for a regional alliance for a reference year--
                            (i) the actual cash flow (as defined in 
                        subparagraph (B)) for the alliance for the 
                        year, minus
                            (ii) the reconciled cash flow (as defined 
                        in subparagraph (C)) for the alliance for the 
                        year.
                    (B) Actual cash flow.--The term ``actual cash 
                flow'' means, for a regional alliance for a reference 
                year, the total amount paid by the regional alliance to 
                the regional alliance health plans in the year based on 
                the blended plan payment amount (computed on the basis 
                of projected AFDC and SSI proportions determined under 
                subsection (b)(1)).
                    (C) Reconciled cash flow.--The term ``reconciled 
                cash flow'' means, for a regional alliance for a 
                reference year, the total amount that would have been 
                paid to regional alliance health plans in the year if 
                such payments had been made based on the blended plan 
                payment amount computed on the basis of the actual AFDC 
                and SSI proportions for the year (determined under 
                subsection (b)(2), rather than based on such payment 
                amount computed on the basis of the projected AFDC and 
                SSI proportions for the year (determined under 
                subsection (b)(1)).
            (4) Percentage adjustment.--The percentage adjustment 
        described in this paragraph for a regional alliance for an 
        applicable year is the ratio (expressed as a percentage) of--
                    (A) the cash flow difference for the reference 
                year, to
                    (B) the total payments estimated by the regional 
                alliance to be paid to regional alliance health plans 
                under this subtitle in the applicable year (determined 
                without regard to any adjustment under this 
                subsection).

                                                              Title VII

                     TITLE VII--REVENUE PROVISIONS

                       table of contents of title

                                                                   Page
Sec. 7001. Amendment of 1986 Code...........................       1094
                    Subtitle A--Financing Provisions

              Part 1--Increase in Tax on Tobacco Products

Sec. 7111. Increase in excise taxes on tobacco products.....       1094
Sec. 7112. Modifications of certain tobacco tax provisions..       1100
Sec. 7113. Imposition of excise tax on manufacture or              1105
                            importation of roll-your-own 
                            tobacco.
                   Part 2--Health Related Assessments

Sec. 7121. Health related assessments.......................       1107
           Part 3--Recapture of Certain Health Care Subsidies

Sec. 7131. Recapture of certain health care subsidies              1116
                            received by high-income 
                            individuals.
                        Part 4--Other Provisions

Sec. 7141. Modification to self-employment tax treatment of        1125
                            certain S corporation 
                            shareholders and partners.
Sec. 7142. Extending medicare coverage of, and application         1128
                            of hospital insurance tax to, 
                            all State and local government 
                            employees.
       Subtitle B--Tax Treatment of Employer-Provided Health Care

Sec. 7201. Limitation on exclusion for employer-provided           1133
                            health benefits.
Sec. 7202. Health benefits may not be provided under               1138
                            cafeteria plans.
Sec. 7203. Increase in deduction for health insurance costs        1139
                            of self-employed individuals.
Sec. 7204. Limitation on prepayment of medical insurance           1142
                            premiums.
                Subtitle C--Employment Status Provisions

Sec. 7301. Anti-abuse regulations relating to employment           1143
                            status.
Sec. 7302. Increase in services reporting penalties.........       1144
Sec. 7303. Revision of section 530 safe harbor rules........       1146
    Subtitle D--Tax Treatment of Funding of Retiree Health Benefits

Sec. 7401. Post-retirement medical and life insurance              1153
                            reserves.
Sec. 7402. Health benefits accounts maintained by pension          1154
                            plans.
     Subtitle E--Coordination With COBRA Continuing Care Provisions

Sec. 7501. Coordination with COBRA continuing care                 1157
                            provisions.
   Subtitle F--Tax Treatment of Organizations Providing Health Care 
                   Services and Related Organizations

Sec. 7601. Treatment of nonprofit health care organizations.       1159
Sec. 7602. Tax treatment of taxable organizations providing        1163
                            health insurance and other 
                            prepaid health care services.
Sec. 7603. Exemption from income tax for regional alliances.       1170
   Subtitle G--Tax Treatment of Long-term Care Insurance and Services

Sec. 7701. Qualified long-term care services treated as            1171
                            medical care.
Sec. 7702. Treatment of long-term care insurance............       1175
Sec. 7703. Tax treatment of accelerated death benefits under       1187
                            life insurance contracts.
Sec. 7704. Tax treatment of companies issuing qualified 
                                  accelerated death benefit 
riders.                                                            1190
        Subtitle H--Tax Incentives for Health Services Providers

Sec. 7801. Nonrefundable credit for certain primary health         1192
                            services providers.
Sec. 7802. Expensing of medical equipment...................       1197
                  Subtitle I--Miscellaneous Provisions

Sec. 7901. Credit for cost of personal assistance services 
                                       required by employed 
individuals.                                                       1199
Sec. 7902. Denial of tax-exempt status for borrowings of           1204
                            health care-related entities.
Sec. 7903. Disclosure of return information for                    1205
                            administration of certain 
                            programs under the Health 
                            Security Act.

SEC. 7001. AMENDMENT OF 1986 CODE.

    Except as otherwise expressly provided, whenever in this title an 
amendment or repeal is expressed in terms of an amendment to, or repeal 
of, a section or other provision, the reference shall be considered to 
be made to a section or other provision of the Internal Revenue Code of 
1986.

                                                  Title VII, Subtitle A

                    Subtitle A--Financing Provisions

              PART 1--INCREASE IN TAX ON TOBACCO PRODUCTS

SEC. 7111. INCREASE IN EXCISE TAXES ON TOBACCO PRODUCTS.

    (a) Cigarettes.--Subsection (b) of section 5701 is amended--
            (1) by striking ``$12 per thousand ($10 per thousand on 
        cigarettes removed during 1991 or 1992)'' in paragraph (1) and 
        inserting ``$49.50 per thousand'', and
            (2) by striking ``$25.20 per thousand ($21 per thousand on 
        cigarettes removed during 1991 or 1992)'' in paragraph (2) and 
        inserting ``$103.95 per thousand''.
    (b) Cigars.--Subsection (a) of section 5701 is amended--
            (1) by striking ``$1.125 cents per thousand (93.75 cents 
        per thousand on cigars removed during 1991 or 1992)'' in 
        paragraph (1) and inserting ``$38.62\1/2\ per thousand'', and
            (2) by striking ``equal to'' and all that follows in 
        paragraph (2) and inserting ``equal to 52.594 percent of the 
        price for which sold but not more than $123.75 per thousand.''
    (c) Cigarette Papers.--Subsection (c) of section 5701 is amended by 
striking ``0.75 cent (0.625 cent on cigarette papers removed during 
1991 or 1992)'' and inserting ``3.09 cents''.
    (d) Cigarette Tubes.--Subsection (d) of section 5701 is amended by 
striking ``1.5 cents (1.25 cents on cigarette tubes removed during 1991 
or 1992)'' and inserting ``6.19 cents''.
    (e) Smokeless Tobacco.--Subsection (e) of section 5701 is amended--
            (1) by striking ``36 cents (30 cents on snuff removed 
        during 1991 or 1992)'' in paragraph (1) and inserting 
        ``$12.86'', and
            (2) by striking ``12 cents (10 cents on chewing tobacco 
        removed during 1991 or 1992)'' in paragraph (2) and inserting 
        ``$12.62''.
    (f) Pipe Tobacco.--Subsection (f) of section 5701 is amended by 
striking ``67.5 cents (56.25 cents on pipe tobacco removed during 1991 
or 1992)'' and inserting ``$13.17\1/2\''.
    (g) Effective Date.--The amendments made by this section shall 
apply to articles removed (as defined in section 5702(k) of the 
Internal Revenue Code of 1986, as amended by this Act) after September 
30, 1994.
    (h) Floor Stocks Taxes.--
            (1) Imposition of tax.--On tobacco products and cigarette 
        papers and tubes manufactured in or imported into the United 
        States which are removed before October 1, 1994, and held on 
        such date for sale by any person, there is hereby imposed a tax 
        in an amount equal to the excess of--
                    (A) the tax which would be imposed under section 
                5701 of the Internal Revenue Code of 1986 on the 
                article if the article had been removed on such date, 
                over
                    (B) the prior tax (if any) imposed under section 
                5701 or 7652 of such Code on such article.
            (2) Authority to exempt cigarettes held in vending 
        machines.--To the extent provided in regulations prescribed by 
        the Secretary, no tax shall be imposed by paragraph (1) on 
        cigarettes held for retail sale on October 1, 1994, by any 
        person in any vending machine. If the Secretary provides such a 
        benefit with respect to any person, the Secretary may reduce 
        the $500 amount in paragraph (3) with respect to such person.
            (3) Credit against tax.--Each person shall be allowed as a 
        credit against the taxes imposed by paragraph (1) an amount 
        equal to $500. Such credit shall not exceed the amount of taxes 
        imposed by paragraph (1) for which such person is liable.
            (4) Liability for tax and method of payment.--
                    (A) Liability for tax.--A person holding cigarettes 
                on October 1, 1994, to which any tax imposed by 
                paragraph (1) applies shall be liable for such tax.
                    (B) Method of payment.--The tax imposed by 
                paragraph (1) shall be paid in such manner as the 
                Secretary shall prescribe by regulations.
                    (C) Time for payment.--The tax imposed by paragraph 
                (1) shall be paid on or before December 31, 1994.
            (5) Articles in foreign trade zones.--Notwithstanding the 
        Act of June 18, 1934 (48 Stat. 998, 19 U.S.C. 81a) and any 
        other provision of law, any article which is located in a 
        foreign trade zone on October 1, 1994, shall be subject to the 
        tax imposed by paragraph (1) if--
                    (A) internal revenue taxes have been determined, or 
                customs duties liquidated, with respect to such article 
                before such date pursuant to a request made under the 
                1st proviso of section 3(a) of such Act, or
                    (B) such article is held on such date under the 
                supervision of a customs officer pursuant to the 2d 
                proviso of such section 3(a).
            (6) Definitions.--For purposes of this subsection--
                    (A) In general.--Terms used in this subsection 
                which are also used in section 5702 of the Internal 
                Revenue Code of 1986 shall have the respective meanings 
                such terms have in such section, and such term shall 
                include articles first subject to the tax imposed by 
                section 5701 of such Code by reason of the amendments 
                made by this Act.
                    (B) Secretary.--The term ``Secretary'' means the 
                Secretary of the Treasury or his delegate.
            (7) Controlled groups.--Rules similar to the rules of 
        section 5061(e)(3) of such Code shall apply for purposes of 
        this subsection.
            (8) Other laws applicable.--All provisions of law, 
        including penalties, applicable with respect to the taxes 
        imposed by section 5701 of such Code shall, insofar as 
        applicable and not inconsistent with the provisions of this 
        subsection, apply to the floor stocks taxes imposed by 
        paragraph (1), to the same extent as if such taxes were imposed 
        by such section 5701. The Secretary may treat any person who 
        bore the ultimate burden of the tax imposed by paragraph (1) as 
        the person to whom a credit or refund under such provisions may 
        be allowed or made.

SEC. 7112. MODIFICATIONS OF CERTAIN TOBACCO TAX PROVISIONS.

    (a) Exemption for Exported Tobacco Products and Cigarette Papers 
and Tubes To Apply Only to Articles Marked for Export.--
            (1) Subsection (b) of section 5704 is amended by adding at 
        the end thereof the following new sentence: ``Tobacco products 
        and cigarette papers and tubes may not be transferred or 
        removed under this subsection unless such products or papers 
        and tubes bear such marks, labels, or notices as the Secretary 
        shall by regulations prescribe.''
            (2) Section 5761 is amended by redesignating subsections 
        (c) and (d) as subsections (d) and (e), respectively, and by 
        inserting after subsection (b) the following new subsection:
    ``(c) Sale of Tobacco Products and Cigarette Papers and Tubes for 
Export.--Except as provided in subsections (b) and (d) of section 
5704--
            ``(1) every person who sells, relands, or receives within 
        the jurisdiction of the United States any tobacco products or 
        cigarette papers or tubes which have been labeled or shipped 
        for exportation under this chapter,
            ``(2) every person who sells or receives such relanded 
        tobacco products or cigarette papers or tubes, and
            ``(3) every person who aids or abets in such selling, 
        relanding, or receiving,
shall, in addition to the tax and any other penalty provided in this 
title, be liable for a penalty equal to the greater of $1,000 or 5 
times the amount of the tax imposed by this chapter. All tobacco 
products and cigarette papers and tubes relanded within the 
jurisdiction of the United States, and all vessels, vehicles, and 
aircraft used in such relanding or in removing such products, papers, 
and tubes from the place where relanded, shall be forfeited to the 
United States.''
            (3) Subsection (a) of section 5761 is amended by striking 
        ``subsection (b)'' and inserting ``subsection (b) or (c)''.
            (4) Subsection (d) of section 5761, as redesignated by 
        paragraph (2), is amended by striking ``The penalty imposed by 
        subsection (b)'' and inserting ``The penalties imposed by 
        subsections (b) and (c)''.
            (5)(A) Subpart F of chapter 52 is amended by adding at the 
        end thereof the following new section:

``SEC. 5754. RESTRICTION ON IMPORTATION OF PREVIOUSLY EXPORTED TOBACCO 
              PRODUCTS.

    ``(a) In General.--Tobacco products and cigarette papers and tubes 
previously exported from the United States may be imported or brought 
into the United States only as provided in section 5704(d).
    ``(b) Cross Reference.--

                                ``For penalty for the sale of 
cigarettes in the United States which are labeled for export, see 
section 5761(d).''
            (B) The table of sections for subpart F of chapter 52 is 
        amended by adding at the end thereof the following new item:

                              ``Sec. 5754. Restriction on importation 
                                        of previously exported tobacco 
                                        products.''
    (b) Importers Required To Be Qualified.--
            (1) Sections 5712, 5713(a), 5721, 5722, 5762(a)(1), and 
        5763(b) and (c) are each amended by inserting ``or importer'' 
        after ``manufacturer''.
            (2) The heading of subsection (b) of section 5763 is 
        amended by inserting ``Qualified Importers,'' after 
        ``Manufacturers,''.
            (3) The heading for subchapter B of chapter 52 is amended 
        by inserting ``and Importers'' after ``Manufacturers''.
            (4) The item relating to subchapter B in the table of 
        subchapters for chapter 52 is amended by inserting ``and 
        importers'' after ``manufacturers''.
    (c) Repeal of Tax-Exempt Sales to Employees of Cigarette 
Manufacturers.--
            (1) Subsection (a) of section 5704 is amended--
                    (A) by striking ``Employee Use or'' in the heading, 
                and
                    (B) by striking ``for use or consumption by 
                employees or'' in the text.
            (2) Subsection (e) of section 5723 is amended by striking 
        ``for use or consumption by their employees, or for 
        experimental purposes'' and inserting ``for experimental 
        purposes''.
    (d) Repeal of Tax-Exempt Sales to United States.--Subsection (b) of 
section 5704 is amended by striking ``and manufacturers may similarly 
remove such articles for use of the United States;''.
    (e) Books of 25 or Fewer Cigarette Papers Subject to Tax.--
Subsection (c) of section 5701 is amended by striking ``On each book or 
set of cigarette papers containing more than 25 papers,'' and inserting 
``On cigarette papers,''.
    (f) Storage of Tobacco Products.--Subsection (k) of section 5702 is 
amended by inserting ``under section 5704'' after ``internal revenue 
bond''.
    (g) Authority To Prescribe Minimum Manufacturing Activity 
Requirements.--Section 5712 is amended by striking ``or'' at the end of 
paragraph (1), by redesignating paragraph (2) as paragraph (3), and by 
inserting after paragraph (1) the following new paragraph:
            ``(2) the activity proposed to be carried out at such 
        premises does not meet such minimum capacity or activity 
        requirements as the Secretary may prescribe, or''.
    (h) Limitation on Cover Over of Tax on Tobacco Products.--Section 
7652 is amended by adding at the end thereof the following new 
subsection:
    ``(h) Limitation on Cover Over of Tax on Tobacco Products.--For 
purposes of this section, with respect to taxes imposed under section 
5701 or this section on any tobacco product or cigarette paper or tube, 
the amount covered into the treasuries of Puerto Rico and the Virgin 
Islands shall not exceed the rate of tax under section 5701 in effect 
on the article on the day before the date of the enactment of the 
Health Security Act.''
    (i) Effective Date.--The amendments made by this section shall 
apply to articles removed (as defined in section 5702(k) of the 
Internal Revenue Code of 1986, as amended by this Act) after September 
30, 1994.

SEC. 7113. IMPOSITION OF EXCISE TAX ON MANUFACTURE OR IMPORTATION OF 
              ROLL-YOUR-OWN TOBACCO.

    (a) In General.--Section 5701 (relating to rate of tax) is amended 
by redesignating subsection (g) as subsection (h) and by inserting 
after subsection (f) the following new subsection:
    ``(g) Roll-Your-Own Tobacco.--On roll-your-own tobacco, 
manufactured in or imported into the United States, there shall be 
imposed a tax of $12.50 per pound (and a proportionate tax at the like 
rate on all fractional parts of a pound).''
    (b) Roll-Your-Own Tobacco.--Section 5702 (relating to definitions) 
is amended by adding at the end thereof the following new subsection :
    ``(p) Roll-Your-Own Tobacco.--The term `roll-your-own tobacco' 
means any tobacco which, because of its appearance, type, packaging, or 
labeling, is suitable for use and likely to be offered to, or purchased 
by, consumers as tobacco for making cigarettes.''
    (c) Technical Amendments.--
            (1) Subsection (c) of section 5702 is amended by striking 
        ``and pipe tobacco'' and inserting ``pipe tobacco, and roll-
        your-own tobacco''.
            (2) Subsection (d) of section 5702 is amended--
                    (A) in the material preceding paragraph (1), by 
                striking ``or pipe tobacco'' and inserting ``pipe 
                tobacco, or roll-your-own tobacco'', and
                    (B) by striking paragraph (1) and inserting the 
                following new paragraph:
            ``(1) a person who produces cigars, cigarettes, smokeless 
        tobacco, pipe tobacco, or roll-your-own tobacco solely for his 
        own personal consumption or use, and''.
            (3) The chapter heading for chapter 52 is amended to read 
        as follows:

    ``CHAPTER 52--TOBACCO PRODUCTS AND CIGARETTE PAPERS AND TUBES''.

            (4) The table of chapters for subtitle E is amended by 
        striking the item relating to chapter 52 and inserting the 
        following new item:

                              ``Chapter 52. Tobacco products and 
                                        cigarette papers and tubes.''
    (d) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to roll-your-own tobacco removed (as defined in section 
        5702(k) of the Internal Revenue Code of 1986, as amended by 
        this Act) after September 30, 1994.
            (2) Transitional rule.--Any person who--
                    (A) on the date of the enactment of this Act is 
                engaged in business as a manufacturer of roll-your-own 
                tobacco or as an importer of tobacco products or 
                cigarette papers and tubes, and
                    (B) before October 1, 1994, submits an application 
                under subchapter B of chapter 52 of such Code to engage 
                in such business,
        may, notwithstanding such subchapter B, continue to engage in 
        such business pending final action on such application. Pending 
        such final action, all provisions of such chapter 52 shall 
        apply to such applicant in the same manner and to the same 
        extent as if such applicant were a holder of a permit under 
        such chapter 52 to engage in such business.

                   PART 2--HEALTH RELATED ASSESSMENTS

SEC. 7121. HEALTH RELATED ASSESSMENTS.

    (a) In General.--Subtitle C (relating to employment taxes) is 
amended by inserting after chapter 24 the following new chapter:

               ``CHAPTER 24A--HEALTH RELATED ASSESSMENTS

                              ``Subchapter A. Assessment on corporate 
                                        alliance employers.
                              ``Subchapter B. Temporary assessment on 
                                        employers with retiree health 
                                        benefit costs.
                              ``Subchapter C. Definitions and 
                                        administrative provisions.

       ``Subchapter A--Assessment on Corporate Alliance Employers

                              ``Sec. 3461. Assessment on corporate 
                                        alliance employers.

``SEC. 3461. ASSESSMENT ON CORPORATE ALLIANCE EMPLOYERS.

    ``(a) Imposition of Assessment.--Every corporate alliance employer 
shall pay (in addition to any other amount imposed by this subtitle) 
for each calendar year an assessment equal to 1 percent of the payroll 
of such employer.
    ``(b) Definitions.--For purposes of this section--
            ``(1) Corporate alliance employer.--The term `corporate 
        alliance employer' means any employer if any individual, by 
        reason of being an employee of such employer, is provided with 
        health coverage through any corporate alliance described in 
        section 1311 of the Health Security Act.
            ``(2) Payroll.--The term `payroll' means the sum of--
                    ``(A) the wages (as defined in section 3121(a) 
                without regard to paragraph (1) thereof) paid by the 
                employer during the calendar year, plus
                    ``(B)(i) in the case of a sole proprietorship, the 
                net earnings from self-employment of the proprietor 
                from such trade or business for the taxable year ending 
                with or within the calendar year,
                    ``(ii) in the case of a partnership, the aggregate 
                of the net earnings from self-employment of each 
                partner which is attributable to such partnership for 
                the taxable year of such partnership ending with or 
                within the calendar year, and
                    ``(iii) in the case of an S corporation, the 
                aggregate of the net earnings from self-employment of 
                each shareholder which is attributable to such 
                corporation for the taxable year of such corporation 
                ending with or within the calendar year.
            ``(3) Net earnings from self-employment.--The term `net 
        earnings from self-employment' has the meaning given such term 
        by section 1402; except that the amount thereof--
                    ``(A) may never be less than zero, and
                    ``(B) shall be determined without regard to any 
                deduction for an assessment under this section to the 
                extent attributable to payroll described in paragraph 
                (2)(B).
    ``(c) Special Rules.--For purposes of this section--
            ``(1) Treatment of certain employers in multiemployer 
        corporate alliances.--An employer who is a corporate alliance 
        employer solely by reason of employees who are provided with 
        health coverage through a corporate alliance the eligible 
        sponsor of which is a multiemployer plan described in section 
        1311(b)(1)(B) of the Health Security Act is not subject to the 
        assessment under this section. In the case of an employer who 
        is a corporate alliance employer in part (but not solely) by 
        reason of such employees, the payroll of such employer shall be 
        determined without taking into account such employees.
            ``(2) Controlled group rules.--All persons treated as a 
        single employer under section 1901 of the Health Security Act 
        (relating to employer premiums for comprehensive health care) 
        shall be treated as a single employer.
            ``(3) Application of assessment beginning in 1996.--
                    ``(A) In general.--Every employer eligible to elect 
                to be an eligible sponsor under section 1311 of the 
                Health Security Act shall be treated as a corporate 
                alliance employer as of January 1, 1996, unless the 
                employer waives such employer's rights ever to be 
                treated as such a sponsor. The waiver under this 
                subparagraph shall be irrevocable.
                    ``(B) Exception.--Subparagraph (A) shall not apply 
                to any employer referred to in the first sentence of 
                paragraph (1).

``SEC. 3462. TEMPORARY ASSESSMENT ON EMPLOYERS WITH RETIREE HEALTH 
              BENEFIT COSTS.

    ``(a) Imposition of Assessment.--Every employer with base period 
retiree health costs shall pay (in addition to any other amount imposed 
by this subtitle) for each calendar year to which this section applies 
an assessment equal to the amount determined under subsection (b).
    ``(b) Amount of Assessment.--For purposes of subsection (a), the 
amount determined under this subsection with respect to any employer 
for any calendar year is 50 percent of the greater of--
            ``(1) the adjusted base period retiree health costs of such 
        employer for such calendar year, or
            ``(2) the amount (determined in the manner prescribed by 
        the Secretary) by which such employer's applicable retiree 
        health costs for such calendar year were reduced by reason of 
        the enactment of the Health Security Act.
    ``(c) Definitions.--For purposes of this section--
            ``(1) Base period retiree health costs.--The term `base 
        period retiree health costs' means the average of the 
        applicable retiree health costs of the employer for calendar 
        years 1991, 1992, and 1993.
            ``(2) Adjusted base period retiree health costs.--
                    ``(A) In general.--The term `adjusted base period 
                retiree health costs' means, with respect to any 
                employer for any calendar year, the base period retiree 
                health costs of the employer adjusted in the manner 
                prescribed by the Secretary to reflect increases in the 
                medical care component of the Consumer Price Index 
                during the period after 1992 and before such calendar 
                year.
                    ``(B) Adjustments for acquisitions and 
                dispositions.--Rules similar to the rules of 
                subparagraphs (A) and (B) of section 41(f)(3) shall 
                apply to acquisitions and dispositions after December 
                31, 1993.
            ``(3) Applicable retiree health costs.--
                    ``(A) In general.--The term `applicable retiree 
                health costs' means, with respect to any employer for 
                any calendar year, the aggregate cost (including 
                administrative costs) of the health benefits or 
                coverage provided during such calendar year (whether 
                directly by the employer or through a plan described in 
                section 401(h) or a welfare benefit fund as defined in 
                section 419(e)) to individuals who are entitled to 
                receive such benefits or coverage by reason of being 
                retired employees of such employer (or by reason of 
                being a spouse or other beneficiary of such an 
                employee).
                    ``(B) Only benefits and coverage after age 55 and 
                before age 65 taken into account.--In applying 
                subparagraph (A), there shall be taken into account 
                only health benefits and coverage provided after the 
                date the retired employee attained age 55 and before 
                the date such employee attained (or, but for the death 
                of such employee, would have attained) age 65.
    ``(d) Years to Which Assessment Applies.--This section shall apply 
to calendar years 1998, 1999, and 2000.

       ``Subchapter C--Definitions and Administrative Provisions

``SEC. 3463. DEFINITIONS AND ADMINISTRATIVE PROVISIONS

    ``(a) Employer.--For purposes of this chapter--
            ``(1) In general.--The term `employer' means any person or 
        governmental entity for whom an individual performs services, 
        of whatever nature, as an employee (as defined in section 
        3401(c)).
            ``(2) Special rules.--
                    ``(A) An individual who owns the entire interest in 
                an unincorporated trade or business shall be treated as 
                his own employer.
                    ``(B) A partnership shall be treated as the 
                employer of each partner who is an employee within the 
                meaning of section 401(c)(1).
                    ``(C) An S corporation shall be treated as the 
                employer of each shareholder who is an employee within 
                the meaning of section 401(c)(1).
    ``(b) Assessments to Apply to Governmental and Other Tax-Exempt 
Entities.--Notwithstanding any other provision of law or rule of law, 
none of the following shall be exempt from the assessments imposed by 
this chapter:
            ``(1) The United States, any State or political subdivision 
        thereof, the District of Columbia, and any agency or 
        instrumentality of any of the foregoing.
            ``(2) Any other entity otherwise exempt from tax under 
        chapter 1.
    ``(c) Administrative Provisions.--
            ``(1) Payment.--
                    ``(A) Section 3461.--Any assessment under section 
                3461 shall be paid at the same time and in the same 
                manner as the tax imposed by chapter 21.
                    ``(B) Section 3462.--Any assessment under section 
                3462 for any calendar year shall be paid on or before 
                March 15 of the following calendar year; except that 
                the Secretary may require quarterly estimated payments 
                of such assessment in a manner similar to the 
                requirements of section 6655.
            ``(2) Collection, etc.--For purposes of subtitle F, any 
        assessment under this subchapter shall be treated as if it were 
        a tax imposed by this subtitle.''
    (b) Clerical Amendment.--The table of chapters for subtitle C is 
amended by inserting after the item relating to chapter 24 the 
following new item:

                              ``Chapter 24A. Health-related 
                                        assessments.''
    (c) Effective Date.--The amendments made by this section shall take 
effect on January 1, 1996.

           PART 3--RECAPTURE OF CERTAIN HEALTH CARE SUBSIDIES

SEC. 7131. RECAPTURE OF CERTAIN HEALTH CARE SUBSIDIES RECEIVED BY HIGH-
              INCOME INDIVIDUALS.

    (a) In General.--Subchapter A of chapter 1 is amended by adding at 
the end thereof the following new part:

  ``PART VIII--CERTAIN HEALTH CARE SUBSIDIES RECEIVED BY HIGH-INCOME 
                              INDIVIDUALS

                              ``Sec. 59B. Recapture of certain health 
                                        care subsidies.

``SEC. 59B. RECAPTURE OF CERTAIN HEALTH CARE SUBSIDIES.

    ``(a) Imposition of Recapture Amount.--In the case of an 
individual, if the modified adjusted gross income of the taxpayer for 
the taxable year exceeds the threshold amount, such taxpayer shall pay 
(in addition to any other amount imposed by this subtitle) a recapture 
amount for such taxable year equal to the sum of--
            ``(1) the aggregate of the Medicare part B recapture 
        amounts (if any) for months during such year that a premium is 
        paid under part B of title XVIII of the Social Security Act for 
        the coverage of the individual under such part, and
            ``(2) the aggregate reductions (if any) in the individual's 
        liability for periods after December 31, 1997, under section 
        6111 of the Health Security Act (relating to repayment of 
        alliance credit by certain families) pursuant to section 6114 
        of such Act (relating to special treatment of certain retirees 
        and qualified spouses and children) for months during such 
        year.
    ``(b) Medicare Part B Premium Recapture Amount for Month.--For 
purposes of this section, the Medicare part B premium recapture amount 
for any month is the amount equal to the excess of--
            ``(1) 150 percent of the monthly actuarial rate for 
        enrollees age 65 and over determined for that calendar year 
        under section 1839(b) of the Social Security Act, over
            ``(2) the total monthly premium under section 1839 of the 
        Social Security Act (determined without regard to subsections 
        (b) and (f) of section 1839 of such Act).
    ``(c) Phasein of Recapture Amount.--
            ``(1) In general.--If the modified adjusted gross income of 
        the taxpayer for any taxable year exceeds the threshold amount 
        by less than $15,000, the recapture amount imposed by this 
        section for such taxable year shall be an amount which bears 
        the same ratio to the recapture amount which would (but for 
        this subsection) be imposed by this section for such taxable 
        year as such excess bears to $15,000.
            ``(2) Joint returns.--If a recapture amount is determined 
        separately for each spouse filing a joint return, paragraph (1) 
        shall be applied by substituting `$30,000' for `$15,000' each 
        place it appears.
    ``(d) Other Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Threshold amount.--The term `threshold amount' 
        means--
                    ``(A) except as otherwise provided in this 
                paragraph, $90,000,
                    ``(B) $115,000 in the case of a joint return, and
                    ``(C) zero in the case of a taxpayer who--
                            ``(i) is married (as determined under 
                        section 7703) but does not file a joint return 
                        for such year, and
                            ``(ii) does not live apart from his spouse 
                        at all times during the taxable year.
            ``(2) Modified adjusted gross income.--The term `modified 
        adjusted gross income' means adjusted gross income--
                    ``(A) determined without regard to sections 135, 
                911, 931, and 933, and
                    ``(B) increased by the amount of interest received 
                or accrued by the taxpayer during the taxable year 
                which is exempt from tax.
            ``(3) Joint returns.--In the case of a joint return--
                    ``(A) the recapture amount under subsection (a) 
                shall be the sum of the recapture amounts determined 
                separately for each spouse, and
                    ``(B) subsections (a) and (c) shall be applied by 
                taking into account the combined modified adjusted 
                gross income of the spouses.
            ``(4) Coordination with other provisions.--
                    ``(A) Treated as tax for subtitle f.--For purposes 
                of subtitle F, the recapture amount imposed by this 
                section shall be treated as if it were a tax imposed by 
                section 1.
                    ``(B) Not treated as tax for certain purposes.--The 
                recapture amount imposed by this section shall not be 
                treated as a tax imposed by this chapter for purposes 
                of determining--
                            ``(i) the amount of any credit allowable 
                        under this chapter, or
                            ``(ii) the amount of the minimum tax under 
                        section 55.
                    ``(C) Treated as payment for medical insurance.--
                The recapture amount imposed by this section shall be 
                treated as an amount paid for insurance covering 
                medical care, within the meaning of section 213(d).''
    (b) Transfers to Supplemental Medical Insurance Trust Fund.--
            (1) In general.--There are hereby appropriated to the 
        Supplemental Medical Insurance Trust Fund amounts equivalent to 
        the aggregate increase in liabilities under chapter 1 of the 
        Internal Revenue Code of 1986 which is attributable to the 
        application of section 59B(a)(1) of such Code, as added by this 
        section.
            (2) Transfers.--The amounts appropriated by paragraph (1) 
        to the Supplemental Medical Insurance Trust Fund shall be 
        transferred from time to time (but not less frequently than 
        quarterly) from the general fund of the Treasury on the basis 
        of estimates made by the Secretary of the Treasury of the 
        amounts referred to in paragraph (1). Any quarterly payment 
        shall be made on the first day of such quarter and shall take 
        into account the recapture amounts referred to in such section 
        59B(a)(1) for such quarter. Proper adjustments shall be made in 
        the amounts subsequently transferred to the extent prior 
        estimates were in excess of or less than the amounts required 
        to be transferred.
    (c) Reporting Requirements.--
            (1)(A) Paragraph (1) of section 6050F(a) (relating to 
        returns relating to social security benefits) is amended by 
        striking ``and'' at the end of subparagraph (B) and by 
        inserting after subparagraph (C) the following new 
        subparagraph:
                    ``(D) the number of months during the calendar year 
                for which a premium was paid under part B of title 
                XVIII of the Social Security Act for the coverage of 
                such individual under such part, and''.
            (B) Paragraph (2) of section 6050F(b) is amended to read as 
        follows:
            ``(2) the information required to be shown on such return 
        with respect to such individual.''
            (C) Subparagraph (A) of section 6050F(c)(1) is amended by 
        inserting before the comma ``and in the case of the information 
        specified in subsection (a)(1)(D)''.
            (D) The heading for section 6050F is amended by inserting 
        ``and medicare part b coverage'' before the period.
            (E) The item relating to section 6050F in the table of 
        sections for subpart B of part III of subchapter A of chapter 
        61 is amended by inserting ``and Medicare part B coverage'' 
        before the period.
            (2)(A) Subpart B of part III of subchapter A of chapter 61 
        (relating to information concerning transactions with other 
        persons) is amended by adding at the end thereof the following 
        new section:

``SEC. 6050Q. RETURNS RELATING TO CERTAIN RETIREE HEALTH CARE 
              SUBSIDIES.

    ``(a) In General.--Every alliance (as defined in section 1301 of 
the Health Security Act) that reduces an individual's liability under 
section 6111 of such Act (relating to repayment of alliance credit by 
certain families) pursuant to section 6114 of such Act (relating to 
special treatment of certain retirees and qualified spouses and 
children) shall make a return (according to the forms and regulations 
prescribed by the Secretary) setting forth--
            ``(1) the aggregate amount of such reductions by such 
        alliance with respect to any individual during such calendar 
        year, and
            ``(2) the name and address of such individual.
    ``(b) Statements To Be Furnished to Individuals With Respect to 
Whom Information Is Required To Be Reported.--Every alliance required 
to make a return under subsection (a) shall furnish to each individual 
whose name is required to be set forth in such return a written 
statement showing--
            ``(1) the name and address of such alliance, and
            ``(2) the information required to be shown on the return 
        with respect to such individual.
    ``(c) Due Date for Returns and Statements.--The written return 
required under subsection (a) shall be made, and the statement required 
under subsection (b) shall be furnished to the individual, on or before 
January 31 of the second year following the calendar year for which the 
return under subsection (a) is required to be made.''
            (B) Subparagraph (B) of section 6724(d)(1) is amended by 
        inserting after clause (viii) the following new clause (and by 
        redesignating the following clauses accordingly):
                            ``(ix) section 6050Q(a) (relating to 
                        returns relating to certain retiree health care 
                        subsidies),''.
            (C) Paragraph (2) of section 6724(d) is amended by 
        redesignating subparagraphs (Q) through (T) as subparagraphs 
        (R) through (U), respectively, and by inserting after 
        subparagraph (P) the following new subparagraph:
                    ``(Q) section 6050Q(b) (relating to statements 
                relating to certain retiree health care subsidies),''.
            (D) The table of sections for subpart B of part III of 
        subchapter A of chapter 61 is amended by adding at the end 
        thereof the following new item:

                              ``Sec. 6050Q. Returns relating to certain 
                                        retiree health care 
                                        subsidies.''
    (d) Waiver of Certain Estimated Tax Penalties.--No addition to tax 
shall be imposed under section 6654 of the Internal Revenue Code of 
1986 (relating to failure to pay estimated income tax) for any period 
before--
            (1) April 16, 1997, with respect to any underpayment to the 
        extent that such underpayment resulted from section 59B(a)(1) 
        of the Internal Revenue Code of 1986, as added by this section, 
        and
            (2) April 16, 1999, with respect to any underpayment to the 
        extent that such underpayment resulted from section 59B(a)(2) 
        of such Code, as added by this section.
    (e) Clerical Amendment.--The table of parts for subchapter A of 
chapter 1 is amended by adding at the end thereof the following new 
item:

                              ``Part VIII. Certain health care 
                                        subsidies received by high-
                                        income individuals.''
    (f) Effective Date.--The amendments made by this section shall 
apply to periods after December 31, 1995, in taxable years ending after 
such date.

                        PART 4--OTHER PROVISIONS

SEC. 7141. MODIFICATION TO SELF-EMPLOYMENT TAX TREATMENT OF CERTAIN S 
              CORPORATION SHAREHOLDERS AND PARTNERS.

    (a) Treatment of Certain S Corporation Shareholders.--
            (1) Amendment to internal revenue code.--Section 1402 
        (relating to definitions) is amended by adding at the end 
        thereof the following new subsection:
    ``(k) Treatment of Certain S Corporation Shareholders.--
            ``(1) In general.--In the case of any individual--
                    ``(A) who is a 2-percent shareholder (as defined in 
                section 1372(b)) of an S corporation for any taxable 
                year of such corporation, and
                    ``(B) who materially participates in the activities 
                of such S corporation during such taxable year,
        such shareholder's net earnings from self-employment for such 
        shareholder's taxable year in which the taxable year of the S 
        corporation ends shall include such shareholder's pro rata 
        share (as determined under section 1366(a)) of the taxable 
        income or loss of such corporation from service-related 
        businesses carried on by such corporation.
            ``(2) Certain exceptions to apply.--In determining the 
        amount to be taken into account under paragraph (1), the 
        exceptions provided in subsection (a) shall apply, except that, 
        in the case of the exceptions provided in subsection (a)(5), 
        the rules of subparagraph (B) thereof shall apply to 
        shareholders in S corporations.
            ``(3) Service-related business.--For purposes of this 
        subsection, the term `service-related business' means any trade 
        or business described in subparagraph (A) of section 
        1202(e)(3).''
            (2) Amendment to social security act.--Section 211 of the 
        Social Security Act is amended by adding at the end the 
        following new subsection:

           ``Treatment of Certain S Corporation Shareholders

    ``(k)(1) In the case of any individual--
            ``(A) who is a 2-percent shareholder (as defined in section 
        1372(b) of the Internal Revenue Code of 1986) of an S 
        corporation for any taxable year of such corporation, and
            ``(B) who materially participates in the activities of such 
        S corporation during such taxable year,
such shareholder's net earnings from self-employment for such 
shareholder's taxable year in which the taxable year of the S 
corporation ends shall include such shareholder's pro rata share (as 
determined under section 1366(a) of such Code) of the taxable income or 
loss of such corporation from service-related businesses (as defined in 
section 1402(k)(3) of such Code) carried on by such corporation.
    ``(2) In determining the amount to be taken into account under 
paragraph (1), the exceptions provided in subsection (a) shall apply, 
except that, in the case of the exceptions provided in subsection 
(a)(5), the rules of subparagraph (B) thereof shall apply to 
shareholders in S corporations.''.
    (b) Treatment of Certain Limited Partners.--
            (1) Amendment of internal revenue code.--Paragraph (13) of 
        section 1402(a) is amended by striking ``limited partner, as 
        such'' and inserting ``limited partner who does not materially 
        participate in the activities of the partnership''.
            (2) Amendment of social security act.--Paragraph (12) of 
        section 211(a) of the Social Security Act is amended by 
        striking ``limited partner, as such'' and inserting ``limited 
        partner who does not materially participate in the activities 
        of the partnership''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years of individuals beginning after December 31, 
1995, and to taxable years of S corporations and partnerships ending 
with or within such taxable years of individuals.

SEC. 7142. EXTENDING MEDICARE COVERAGE OF, AND APPLICATION OF HOSPITAL 
              INSURANCE TAX TO, ALL STATE AND LOCAL GOVERNMENT 
              EMPLOYEES.

    (a) In General.--
            (1) Application of hospital insurance tax.--Section 
        3121(u)(2) is amended by striking subparagraphs (C) and (D).
            (2) Coverage under medicare.--Section 210(p) of the Social 
        Security Act (42 U.S.C. 410(p)) is amended by striking 
        paragraphs (3) and (4).
            (3) Effective date.--The amendments made by this subsection 
        shall apply to services performed after September 30, 1995.
    (b) Transition in Benefits for State and Local Government Employees 
and Former Employees.--
            (1) In general.--
                    (A) Employees newly subject to tax.--For purposes 
                of sections 226, 226A, and 1811 of the Social Security 
                Act, in the case of any individual who performs 
                services during the calendar quarter beginning October 
                1, 1995, the wages for which are subject to the tax 
                imposed by section 3101(b) of the Internal Revenue Code 
                of 1986 only because of the amendment made by 
                subsection (a), the individual's medicare qualified 
                State or local government employment (as defined in 
                subparagraph (B)) performed before October 1, 1995, 
                shall be considered to be ``employment'' (as defined 
                for purposes of title II of such Act), but only for 
                purposes of providing the individual (or another 
                person) with entitlement to hospital insurance benefits 
                under part A of title XVIII of such Act for months 
                beginning with October 1995.
                    (B) Medicare qualified state or local government 
                employment defined.--In this paragraph, the term 
                ``medicare qualified State or local government 
                employment'' means medicare qualified government 
                employment described in section 210(p)(1)(B) of the 
                Social Security Act (determined without regard to 
                section 210(p)(3) of such Act, as in effect before its 
                repeal under subsection (a)(2)).
            (2) Authorization of appropriations.--There are authorized 
        to be appropriated to the Federal Hospital Insurance Trust Fund 
        from time to time such sums as the Secretary of Health and 
        Human Services deems necessary for any fiscal year on account 
        of--
                    (A) payments made or to be made during such fiscal 
                year from such Trust Fund with respect to individuals 
                who are entitled to benefits under title XVIII of the 
                Social Security Act solely by reason of paragraph (1),
                    (B) the additional administrative expenses 
                resulting or expected to result therefrom, and
                    (C) any loss in interest to such Trust Fund 
                resulting from the payment of those amounts, in order 
                to place such Trust Fund in the same position at the 
                end of such fiscal year as it would have been in if 
                this subsection had not been enacted.
            (3) Information to individuals who are prospective medicare 
        beneficiaries based on state and local government employment.--
        Section 226(g) of the Social Security Act (42 U.S.C. 426(g)) is 
        amended--
                    (A) by redesignating paragraphs (1) through (3) as 
                subparagraphs (A) through (C), respectively,
                    (B) by inserting ``(1)'' after ``(g)'', and
                    (C) by adding at the end the following new 
                paragraph:
            ``(2) The Secretary, in consultation with State and local 
        governments, shall provide procedures designed to assure that 
        individuals who perform medicare qualified government 
        employment by virtue of service described in section 210(a)(7) 
        are fully informed with respect to (A) their eligibility or 
        potential eligibility for hospital insurance benefits (based on 
        such employment) under part A of title XVIII, (B) the 
        requirements for, and conditions of, such eligibility, and (C) 
        the necessity of timely application as a condition of becoming 
        entitled under subsection (b)(2)(C), giving particular 
        attention to individuals who apply for an annuity or retirement 
        benefit and whose eligibility for such annuity or retirement 
        benefit is based on a disability.''
    (c) Technical Amendments.--
            (1) Subparagraph (A) of section 3121(u)(2) is amended by 
        striking ``subparagraphs (B) and (C),'' and inserting 
        ``subparagraph (B),''.
            (2) Subparagraph (B) of section 210(p)(1) of the Social 
        Security Act (42 U.S.C. 410(p)(1)) is amended by striking 
        ``paragraphs (2) and (3).'' and inserting ``paragraph (2).''
            (3) Section 218 of the Social Security Act (42 U.S.C. 418) 
        is amended by striking subsection (n).
            (4) The amendments made by this subsection shall apply 
        after September 30, 1995.

       Subtitle B--Tax Treatment of Employer-Provided Health Care

SEC. 7201. LIMITATION ON EXCLUSION FOR EMPLOYER-PROVIDED HEALTH 
              BENEFITS.

                                                  Title VII, Subtitle B

    (a) General Rule.--Section 106 (relating to contributions by 
employer to accident and health plans) is amended to read as follows:

``SEC. 106. CONTRIBUTIONS BY EMPLOYER TO ACCIDENT AND HEALTH PLANS.

    ``(a) General Rule.--Except as otherwise provided in this section, 
gross income of an employee does not include employer-provided coverage 
under an accident or health plan.
    ``(b) Inclusion of Certain Benefits Not Part of Comprehensive 
Benefit Package.--
            ``(1) In general.--Effective on and after January 1, 2004, 
        gross income of an employee shall include employer-provided 
        coverage under any accident or health plan except to the extent 
        that--
                    ``(A) such coverage consists of comprehensive 
                health coverage described in section 1101 of the Health 
                Security Act,
                    ``(B) such coverage consists of coverage of cost 
                sharing amounts under the comprehensive benefit package 
                described in such section (including such coverage 
                under a cost sharing policy under section 1421(b)(2) of 
                such Act), or
                    ``(C) such coverage consists of permitted coverage.
            ``(2) Permitted coverage.--For purposes of this subsection, 
        the term `permitted coverage' means--
                    ``(A) any coverage providing wages or payments in 
                lieu of wages for any period during which the employee 
                is absent from work on account of sickness or injury,
                    ``(B) any coverage providing for payments referred 
                to in section 105(c),
                    ``(C) any coverage provided to an employee or 
                former employee after such employee has attained age 
                65, unless such coverage is provided by reason of the 
                current employment of the individual (within the 
                meaning of section 1862(b)(1)(A)(i)(I) of the Social 
                Security Act) with the employer providing the coverage,
                    ``(D) any coverage under a qualified long-term care 
                insurance policy (as defined in section 7702B),
                    ``(E) any coverage provided under Federal law to 
                any individual (or spouse or dependent thereof) by 
                reason of such individual being--
                            ``(i) a member of the Armed Forces of the 
                        United States, or
                            ``(ii) a veteran, and
                    ``(F) any other coverage to the extent that the 
                Secretary determines that the continuation of an 
                exclusion for such coverage is not inconsistent with 
                the purposes of this subsection.
            ``(3) Special rules for flexible spending arrangements.--
                    ``(A) In general.--To the extent that any employer-
                provided coverage is provided through a flexible 
                spending or similar arrangement, paragraph (1) shall be 
                applied by substituting `January 1, 1997,' for `January 
                1, 2004'.
                    ``(B) Flexible spending arrangement.--For purposes 
                of this paragraph, a flexible spending arrangement is a 
                benefit program which provides employees with coverage 
                under which--
                            ``(i) specified incurred expenses may be 
                        reimbursed (subject to reimbursement maximums 
                        and other reasonable conditions), and
                            ``(ii) the maximum amount of reimbursement 
                        which is reasonably available to a participant 
                        for such coverage is less than 200 percent of 
                        the value of such coverage.
                In the case of an insured plan, the maximum amount 
                reasonably available shall be determined on the basis 
                of the underlying coverage.
    ``(c) Special Rules for Determining Amount of Inclusion.--
            ``(1) In general.--For purposes of this section, the value 
        of any coverage shall be determined on the basis of the average 
        cost of providing such coverage to the beneficiaries receiving 
        such coverage.
            ``(2) Special rule.--To the extent provided by the 
        Secretary, cost determinations under paragraph (1) may be made 
        on the basis of reasonable estimates.
    ``(d) Potential Cash Payment Not To Affect Exclusion.--No amount 
shall be included in the gross income of an employee solely because the 
employee may select coverage under an accident or health plan which 
results in a cash payment referred to in section 1607 of the Health 
Security Act.''
    (b) Employment Tax Treatment.--
            (1) Social security tax.--
                    (A) Subsection (a) of section 3121 is amended by 
                inserting after paragraph (21) the following new 
                sentence:
``Nothing in paragraph (2) shall exclude from the term `wages' any 
amount which is required to be included in gross income under section 
106(b).''
                    (B) Subsection (a) of section 209 of the Social 
                Security Act is amended by inserting after paragraph 
                (21) the following new sentence:
``Nothing in paragraph (2) shall exclude from the term `wages' any 
amount which is required to be included in gross income under section 
106(b) of the Internal Revenue Code of 1986.''
            (2) Railroad retirement tax.--Paragraph (1) of section 
        3231(e) is amended by adding at the end thereof the following 
        new sentence: ``Nothing in clause (i) of the second sentence of 
        this paragraph shall exclude from the term `compensation' any 
        amount which is required to be included in gross income under 
        section 106(b).''
            (3) Unemployment tax.--Subsection (b) of section 3306 is 
        amended by inserting after paragraph (16) the following new 
        sentence:
``Nothing in paragraph (2) shall exclude from the term `wages' any 
amount which is required to be included in gross income under section 
106(b).''
            (4) Wage withholding.--Subsection (a) of section 3401 is 
        amended by adding at the end thereof the following new 
        sentence:
``Nothing in the preceding provisions of this subsection shall exclude 
from the term `wages' any amount which is required to be included in 
gross income under section 106(b).''
    (c) Effective Date.--The amendments made by this section shall take 
effect on January 1, 1997.

SEC. 7202. HEALTH BENEFITS MAY NOT BE PROVIDED UNDER CAFETERIA PLANS.

    (a) General Rule.--Subsection (f) of section 125 (defining 
qualified benefits) is amended by adding at the end thereof the 
following new sentence: ``Such term shall not include any benefits or 
coverage (other than coverage described in section 106(b)(2)(A)) under 
an accident or health plan.''
    (b) Conforming Amendment.--Subsection (g) of section 125 is amended 
by striking paragraph (2) and redesignating paragraphs (3) and (4) as 
paragraphs (2) and (3), respectively.
    (c) Effective Date.--The amendments made by this section shall take 
effect on January 1, 1997.

SEC. 7203. INCREASE IN DEDUCTION FOR HEALTH INSURANCE COSTS OF SELF-
              EMPLOYED INDIVIDUALS.

    (a) Provision Made Permanent.--
            (1) In general.--Subsection (l) of section 162 (relating to 
        special rules for health insurance costs of self-employed 
        individuals) is amended by striking paragraph (6).
            (2) Effective date.--The amendment made by paragraph (1) 
        shall apply to taxable years beginning after December 31, 1993.
    (b) Deduction Limited to Basic Coverage Purchased From Health 
Alliance.--
            (1) In general.--Paragraphs (1) and (2) of section 162(l) 
        are amended to read as follows:
            ``(1) In general.--In the case of an individual who is an 
        employee within the meaning of section 401(c), there shall be 
        allowed as a deduction under this section an amount equal to 
        100 percent of the amount paid during the taxable year for 
        insurance which constitutes medical care for the taxpayer, his 
        spouse, and dependents; but only to the extent such insurance 
        is comprehensive health coverage described in section 1101 of 
        the Health Security Act purchased from a qualified alliance 
        described in section 1311 of such Act.
            ``(2) Limitations.--
                    ``(A) Lower percentage in certain cases.--If--
                            ``(i) the taxpayer has 1 or more employees 
                        in a trade or business with respect to which 
                        such taxpayer is treated as an employee within 
                        the meaning of section 401(c), and
                            ``(ii) the taxpayer does not pay at least 
                        100 percent of the weighted average premium 
                        applicable under the Health Security Act for 
                        each of such employees,
                paragraph (1) shall be applied by substituting for `100 
                percent' the lowest percentage of such weighted average 
                premium paid by the taxpayer for any of such employees.
                    ``(B) Deduction limited to earned income.--No 
                deduction shall be allowed under paragraph (1) to the 
                extent that the amount of such deduction exceeds the 
                taxpayer's earned income (within the meaning of section 
                401(c)).
                    ``(C) Other coverage.--Paragraph (1) shall not 
                apply to amounts paid for coverage for any individual 
                for any calendar month if such individual is employed 
                on a full-time basis (within the meaning of section 
                1901 of the Health Security Act) by an employer during 
                such month.''
            (2) Conforming amendment.--Subparagraph (A) of section 
        162(l)(5) is amended by striking ``shall be treated as such 
        individual's earned income'' and inserting ``shall be included 
        in such individual's earned income''.
            (3) Effective date.--The amendments made by this subsection 
        shall take effect on the earlier of--
                    (A) January 1, 1997, or
                    (B) the first day on which the taxpayer could 
                purchase comprehensive health coverage from a qualified 
                alliance.

SEC. 7204. LIMITATION ON PREPAYMENT OF MEDICAL INSURANCE PREMIUMS.

    (a) General Rule.--Subsection (d) of section 213 is amended by 
adding at the end thereof the following new paragraph:
            ``(10) Limitation on prepayments.--If the taxpayer pays a 
        premium or other amount which constitutes medical care under 
        paragraph (1), to the extent such premium or other amount is 
        properly allocable to insurance coverage or care to be provided 
        during periods more than 12 months after the month in which 
        such payment is made, such premium shall be treated as paid 
        ratably over the period during which such insurance coverage or 
        care is to be provided. The preceding sentence shall not apply 
        to any premium to which paragraph (7) applies nor to any 
        premium paid under a qualified long-term care insurance 
        policy.''
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to amounts paid after December 31, 1996.

                Subtitle C--Employment Status Provisions

                                                  Title VII, Subtitle C

SEC. 7301. ANTI-ABUSE REGULATIONS RELATING TO EMPLOYMENT STATUS.

    (a) General Rule.--In order to prevent misclassification of workers 
so as to minimize payments under this Act, chapter 25 (relating to 
general provisions applicable to employment taxes) is amended by adding 
at the end thereof the following new section:

``SEC. 3510. DEFINITION OF EMPLOYEE.

    ``(a) Regulations.--The Secretary shall prescribe regulations 
setting forth rules for determining whether an individual is an 
employee for purposes of--
            ``(1) the employment taxes imposed under this subtitle, and
            ``(2) to the extent provided in such regulations, subtitle 
        A.
    ``(b) Scope of Regulations.--Such regulations may modify the rules 
otherwise applicable for the determinations referred to in paragraphs 
(1) and (2) of subsection (a); except that--
            ``(1) such regulations shall give significant weight to the 
        common law applicable in determining the employer-employee 
        relationship, and
            ``(2) nothing in such regulations shall modify the 
        provisions of paragraph (1), (3), or (4) of section 3121(d), 
        section 3506, section 3508, or section 3511.''
    (b) Clerical Amendment.--The table of sections for chapter 25 is 
amended by adding at the end thereof the following new item:

                              ``Sec. 3510. Definition of employee.''
    (c) Effective Date.--The regulations described in section 3510 of 
the Internal Revenue Code of 1986 (as added by this section) shall be 
effective for periods beginning no earlier than the date which is 6 
months after the date such regulations are promulgated as final 
regulations.
    (d) Report to Congress.--Upon issuance of the regulations described 
in section 3510 of the Internal Revenue Code of 1986 (as added by this 
section) as final regulations, the Secretary of the Treasury shall 
submit a report to Congress relating to such regulations, including an 
explanation of their purposes and the issues they are designed to 
address.

SEC. 7302. INCREASE IN SERVICES REPORTING PENALTIES.

    (a) Increase in Penalty.--Section 6721(a) (relating to imposition 
of penalty) is amended by adding at the end the following new 
paragraph:
            ``(3) Increased penalty for returns involving payments for 
        services.--
                    ``(A) In general.--Subject to the overall 
                limitation of paragraph (1), the amount of the penalty 
                under paragraph (1) for any failure with respect to any 
                applicable return shall be equal to the greater of $50 
                or 5 percent of the amount required to be reported 
                correctly but not so reported.
                    ``(B) Exception where substantial compliance.--
                Subparagraph (A) shall not apply to failures with 
                respect to applicable returns required to be filed by a 
                person during any calendar year if the aggregate amount 
                which is timely and correctly reported on applicable 
                returns filed by the person for the calendar year is at 
                least 97 percent of the aggregate amount which is 
                required to be reported on applicable returns by the 
                person for the calendar year.
                    ``(C) Applicable return.--For purposes of this 
                paragraph, the term `applicable return' means any 
                information return required to be filed under--
                            ``(i) section 6041(a) which relates to 
                        payments to any person for services performed 
                        by such person (other than as an employee), or
                            ``(ii) section 6041A(a).''
    (b) Conforming Amendment.--Section 6721(a)(1) is amended by 
striking ``In'' and inserting ``Except as provided in paragraph (3), 
in''.
    (c) Effective Date.--The amendments made by this section shall 
apply to returns the due date for which (without regard to extensions) 
is more than 30 days after the date of the enactment of this Act.

SEC. 7303. REVISION OF SECTION 530 SAFE HARBOR RULES.

    (a) General Rule.--Chapter 25 (relating to general provisions 
applicable to employment taxes) is amended by adding at the end thereof 
the following new section:

``SEC. 3511. PROTECTION AGAINST RETROACTIVE EMPLOYMENT TAX 
              RECLASSIFICATIONS.

    ``(a) General Rule.--If--
            ``(1) for purposes of employment taxes, the taxpayer treats 
        an individual as not being an employee for any period,
            ``(2) for such period, the taxpayer meets--
                    ``(A) the consistency requirements of subsection 
                (b),
                    ``(B) the return filing requirements of subsection 
                (c), and
                    ``(C) the safe harbor requirement of subsection 
                (d), and
            ``(3) the Secretary has not notified the taxpayer in 
        writing before the beginning of such period that the Secretary 
        has determined that the taxpayer should treat such individual 
        (or any individual holding a substantially similar position) as 
        an employee,
then, for purposes of applying this subtitle for such period, the 
individual shall be deemed not to be an employee of the taxpayer.
    ``(b) Consistency Requirements.--A taxpayer meets the consistency 
requirements of this subsection with respect to any individual for any 
period if the taxpayer treats such individual (and all other 
individuals holding substantially similar positions) as not being an 
employee for purposes of the employment taxes for such period and all 
prior periods.
    ``(c) Return Filing Requirements.--
            ``(1) In general.--The taxpayer meets the return filing 
        requirements of this subsection with respect to any individual 
        for any period if all Federal tax returns (including 
        information returns) required to be filed by the taxpayer for 
        such period with respect to such individual (and all other 
        individuals holding substantially similar positions) are timely 
        filed on a basis consistent with the taxpayer's treatment of 
        such individuals as not being employees.
            ``(2) Special rules.--For purposes of paragraph (1)--
                    ``(A) any return filed for which the penalty under 
                section 6721(a) is reduced or waived pursuant to 
                subsection (b) or (c) of section 6721 shall be 
                considered timely filed, and
                    ``(B) a taxpayer shall not be considered as failing 
                to meet the requirements of paragraph (1) solely 
                because the taxpayer failed to timely file accurate 
                information returns in respect of payments to 
                individuals holding substantially similar positions if 
                the taxpayer satisfies the requirements of section 
                6721(a)(3)(B) for such period.
    ``(d) Safe Harbors.--
            ``(1) In general.--The taxpayer meets the safe harbor 
        requirement of this subsection with respect to any individual 
        for any period if the taxpayer's treatment of such individual 
        as not being an employee for such period was--
                    ``(A) in reasonable reliance on a written 
                determination (as defined in section 6110(b)(1)) issued 
                to or in respect of the taxpayer that addressed the 
                employment status of the individual or an individual 
                holding a substantially similar position;
                    ``(B) in reasonable reliance on a concluded 
                Internal Revenue Service audit of the taxpayer--
                            ``(i) which was for a period in which the 
                        rules for determining employment status were 
                        the same as for the period in question, and
                            ``(ii) in which the employment status of 
                        the individual or any individual holding a 
                        substantially similar position was examined 
                        without change to any such individual's status;
                    ``(C) in reasonable reliance on a longstanding 
                recognized practice of a significant segment of the 
                industry in which the individual is engaged; or
                    ``(D) supported by substantial authority.
        For purposes of subparagraph (D), the term `substantial 
        authority' has the same meaning as when used in section 
        6662(d)(2)(B)(i); except that such term shall not include any 
        private letter ruling issued to a person other than the 
        taxpayer.
            ``(2) Special rules.--
                    ``(A) Subsequent authority.--The taxpayer shall not 
                be considered to meet the safe harbor requirement of 
                paragraph (1)(B) with respect to any individual for any 
                period if the treatment of such individual as not being 
                an employee is inconsistent with any regulation, 
                Revenue Ruling, Revenue Procedure, or other authority 
                published by the Secretary before the beginning of such 
                period and after the conclusion of the audit referred 
                to in paragraph (1)(B).
                    ``(B) Termination of industry practice safe 
                harbor.--The taxpayer shall not be considered to meet 
                the safe harbor requirement of paragraph (1)(C) with 
                respect to any individual for--
                            ``(i) any period beginning after the date 
                        on which the Secretary prescribes regulations 
                        pursuant to section 3510, or
                            ``(ii) any period if the treatment of such 
                        individual as not being an employee is 
                        inconsistent with any regulation, Revenue 
                        Ruling, Revenue Procedure, or other authority 
                        published by the Secretary before the beginning 
                        of such period.
    ``(e) Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Employment tax.--The term `employment tax' means any 
        tax imposed by this subtitle.
            ``(2) Taxpayer.--The term `taxpayer' includes any person or 
        entity (including a governmental entity) which is (or would be 
        but for this section) liable for any employment tax. Such term 
        includes any predecessor or successor to the taxpayer.
    ``(f) Regulations.--The Secretary shall prescribe such regulations 
as may be appropriate to carry out the purposes of this section.''
    (b) Rules To Apply for Income Tax Purposes.--Part I of subchapter B 
of chapter 1 is amended by adding at the end thereof the following new 
section:

``SEC. 69. DETERMINATION OF EMPLOYMENT STATUS.

    ``For purposes of this subtitle, an individual shall be treated as 
a self-employed individual with respect to any services performed by 
such individual for another person if, under the rules of section 3511, 
such individual is treated as not being an employee of such other 
person with respect to such services.''
    (c) Conforming Amendment.--Section 530 of the Revenue Act of 1978 
is hereby repealed.
    (d) Clerical Amendments.--
            (1) The table of sections for chapter 25 is amended by 
        adding at the end thereof the following new item:

                              ``Sec. 3511. Protection against 
                                        retroactive employment tax 
                                        reclassifications.''
            (2) The table of sections for part I of subchapter B of 
        chapter 1 is amended by adding at the end thereof the following 
        new item:

                              ``Sec. 69. Determination of employment 
                                        status.''
    (e) Effective Date.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to all periods 
        beginning after December 31, 1995.
            (2) Repeal of limitations on regulations and rulings.--The 
        repeal made by subsection (c), insofar as it relates to section 
        530(b) of the Revenue Act of 1978, shall take effect on the 
        date of the enactment of this Act.

    Subtitle D--Tax Treatment of Funding of Retiree Health Benefits

SEC. 7401. POST-RETIREMENT MEDICAL AND LIFE INSURANCE RESERVES.

                                                  Title VII, Subtitle D

    (a) Minimum Period for Working Lives.--Section 419A(c)(2) (relating 
to additional reserves for post-retirement medical and life insurance 
benefits) is amended by inserting ``(but not less than 10 years)'' 
after ``working lives of the covered employees''.
    (b) Separate Accounting.--
            (1) Requirement.--Section 419A(c)(2) is amended by adding 
        at the end the following new flush sentence:
``Such reserve shall be maintained as a separate account.''
            (2) Use of reserve for other purposes.--Paragraph (1) of 
        section 4976(b) (defining disqualified benefit) is amended by 
        striking ``and'' at the end of subparagraph (B), by striking 
        the period at the end of subparagraph (C) and inserting ``, 
        and'', and by adding after subparagraph (C) the following new 
        subparagraph:
                    ``(D) any payment to which subparagraph (C) does 
                not apply which is out of an account described in 
                section 419A(c)(2) and which is not used to provide a 
                post-retirement medical benefit or life insurance 
                benefit.''
    (c) Special Limitations.--Section 419A(e) (relating to special 
limitations on reserves) is amended by adding at the end the following 
new paragraph:
            ``(3) Benefits must be excludable.--Post-retirement medical 
        benefits and life insurance benefits shall not be taken into 
        account under subsection (c)(2) to the extent it may be 
        reasonably anticipated that such benefits will be required to 
        be included in gross income when provided.''
    (d) Effective Dates.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to contributions 
        paid or accrued after December 31, 1994, in taxable years 
        ending after such date.
            (2) Separate accounting.--The amendments made by subsection 
        (b) shall apply to contributions paid or accrued after the date 
        of the enactment of this Act, in taxable years ending after 
        such date.

SEC. 7402. HEALTH BENEFITS ACCOUNTS MAINTAINED BY PENSION PLANS.

    (a) Termination of Accounts.--
            (1) In general.--Section 401(h) (relating to medical, etc., 
        benefits for retired employees and their spouses and 
        dependents) is amended by adding at the end the following new 
        paragraph:
            ``(2) Termination.--
                    ``(A) In general.--In the case of a pension or 
                annuity plan to which paragraph (1) applies--
                            ``(i) no contributions may be made to the 
                        separate account described in paragraph (1)(C) 
                        other than allowable contributions, and
                            ``(ii) such plan may pay benefits described 
                        in paragraph (1) only from funds attributable 
                        to allowable contributions and earnings 
                        allocable to such contributions.
                    ``(B) Allowable contribution.--For purposes of 
                subparagraph (A), the term `allowable contribution' 
                means--
                            ``(i) any contribution made before January 
                        1, 1995,
                            ``(ii) in the case of a plan maintained 
                        pursuant to 1 or more collective bargaining 
                        agreements between employee representatives and 
                        1 or more employees ratified on or before 
                        October 29, 1993, any contribution under such 
                        plan made before the earlier of--
                                    ``(I) the date on which the last of 
                                such agreements terminates (determined 
                                without regard to any extension after 
                                October 29, 1993), or, if later, 
                                January 1, 1995, or
                                    ``(II) January 1, 1998, or
                            ``(iii) any qualified transfer under 
                        section 420.''
            (2) Conforming amendments.--Section 401(h) is amended--
                    (A) by striking ``Under'' and inserting:
            ``(1) In general.--Under'',
                    (B) by redesignating paragraphs (1) through (6) as 
                subparagraphs (A) through (F), respectively,
                    (C) by striking ``paragraph (6)'' and inserting 
                ``subparagraph (F)'', and
                    (D) by striking ``paragraph (1)'' and inserting 
                ``subparagraph (A)''.
    (b) Minimum Cost Requirements of Employer.--Paragraph (3) of 
section 420(c) (relating to minimum cost requirements) is amended by 
adding at the end the following new subparagraph:
                    ``(E) Adjustment for cost savings under health 
                security act.--To the extent provided by the Secretary, 
                a plan shall not be treated as failing to meet the 
                requirements of this section to the extent such failure 
                is attributable to a reduction in qualified current 
                retiree health liabilities by reason of the enactment 
                of the Health Security Act.''

                                                  Title VII, Subtitle E

     Subtitle E--Coordination With COBRA Continuing Care Provisions

SEC. 7501. COORDINATION WITH COBRA CONTINUING CARE PROVISIONS.

    (a) Period of Coverage.--Clause (iv) of section 4980B(f)(2)(B) 
(defining period of coverage) is amended--
            (1) by striking ``or'' at the end of subclause (I), by 
        striking the period at the end of subclause (II) and inserting 
        ``, or'', and by adding at the end the following new subclause:
            ``(III) eligible for comprehensive health coverage 
        described in section 1101 of the Health Security Act.'', and
            (2) by striking ``or medicare entitlement'' in the heading 
        and inserting ``, medicare entitlement, or health security act 
        eligibility''.
    (b) Qualified Beneficiary.--Section 4980B(g)(1) (defining qualified 
beneficiary) is amended by adding at the end the following new 
subparagraph:
                    ``(E) Special rule for individuals covered by 
                health security act.--The term `qualified beneficiary' 
                shall not include any individual who, upon termination 
                of coverage under a group health plan, is eligible for 
                comprehensive health coverage described in section 1101 
                of the Health Security Act.''
    (c) Repeal Upon Implementation of Health Security Act.--
            (1) In general.--Section 4980B (relating to failure to 
        satisfy continuation coverage requirements of group health care 
        plans) is hereby repealed.
            (2) Conforming amendments.--
                    (A) Section 414(n)(3)(C) is amended by striking 
                ``505, and 4980B'' and inserting ``and 505''.
                    (B) Section 414(t)(2) is amended by striking ``505, 
                or 4980B'' and inserting ``or 505''.
                    (C) The table of sections for chapter 43 is amended 
                by striking the item relating to section 4980B.
            (3) Effective date.--The amendments made by this subsection 
        shall take effect on the earlier of--
                    (A) January 1, 1998, or
                    (B) the first day of the first calendar year 
                following the calendar year in which all States have in 
                effect plans under which individuals are eligible for 
                comprehensive health coverage described in section 1101 
                of this Act.
        Such amendments shall not apply in determining the amount of 
        any tax under section 4980B of the Internal Revenue Code of 
        1986 with respect to any failure occurring before the date 
        determined under the preceding sentence.

                                                  Title VII, Subtitle F

   Subtitle F--Tax Treatment of Organizations Providing Health Care 
                   Services and Related Organizations

SEC. 7601. TREATMENT OF NONPROFIT HEALTH CARE ORGANIZATIONS.

    (a) Treatment of Hospitals and Other Entities Providing Health Care 
Services.--Section 501 (relating to exemption from tax on corporations, 
certain trusts, etc.) is amended by redesignating subsection (n) as 
subsection (o) and by inserting after subsection (m) the following new 
subsection:
    ``(n) Qualification of Organizations Providing Health Care Services 
as Charitable Organizations.--For purposes of subsection (c)(3), the 
provision of health care services shall not be treated as an activity 
that accomplishes a charitable purpose unless the organization 
providing such services, on a periodic basis (no less frequently than 
annually), and with the participation of community representatives--
            ``(1) assesses the health care needs of its community, and
            ``(2) develops a plan to meet those needs.
In the case of a health maintenance organization, the provision of 
health care services shall not be treated as an activity that 
accomplishes a charitable purpose for purposes of subsection (c)(3) 
unless, in addition to meeting the requirement of the preceding 
sentence, such services are provided as described in subsection 
(m)(6)(B)(i).''
    (b) Treatment of Health Maintenance Organizations.--Section 501(m) 
is amended by adding at the end thereof the following new paragraph:
            ``(6) Insurance provided by health maintenance 
        organizations.--
                    ``(A) Certain insurance treated as commercial-type 
                insurance.--Health insurance provided by a health 
                maintenance organization shall be treated as 
                commercial-type insurance if such insurance relates to 
                care provided other than pursuant to a pre-existing 
                arrangement with such organization. In applying the 
                preceding sentence, care described in subparagraph 
                (B)(iv) shall not be taken into account.
                    ``(B) Certain insurance not treated as commercial-
                type insurance.--Health insurance provided by a health 
                maintenance organization shall not be treated as 
                commercial-type insurance if it relates to--
                            ``(i) care provided by such organization to 
                        its members at its own facilities through 
                        health care professionals who do not provide 
                        substantial health care services other than on 
                        behalf of such organization,
                            ``(ii) primary care provided by a health 
                        care professional to a member of such 
                        organization on a basis under which the amount 
                        paid to such professional does not vary with 
                        the amount of care provided to such member,
                            ``(iii) services other than primary care 
                        provided pursuant to a pre-existing arrangement 
                        with such organization, or
                            ``(iv) emergency care provided to a member 
                        of such organization at a location outside such 
                        member's area of residence.''
    (c) Treatment of Parent Organizations of Health Care Providers.--
Section 509(a) (defining private foundation) is amended by striking 
``and'' at the end of paragraph (3), by redesignating paragraph (4) as 
paragraph (5), and by inserting after paragraph (3) the following new 
paragraph:
            ``(4) an organization which is organized and operated for 
        the benefit of, and which directly or indirectly controls, an 
        organization described in section 170(b)(1)(A)(iii), and''.
    (d) Effective Dates.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall take effect on January 1, 
        1995.
            (2) Subsections (b) and (c).--The amendments made by 
        subsections (b) and (c) shall take effect on the date of the 
        enactment of this Act.

SEC. 7602. TAX TREATMENT OF TAXABLE ORGANIZATIONS PROVIDING HEALTH 
              INSURANCE AND OTHER PREPAID HEALTH CARE SERVICES.

    (a) General Rule.--Section 833 is amended to read as follows:

``SEC. 833. TREATMENT OF ORGANIZATIONS PROVIDING HEALTH INSURANCE AND 
              OTHER PREPAID HEALTH CARE SERVICES.

    ``(a) General Rule.--Any organization to which this section applies 
shall be taxable under this part in the same manner as if it were an 
insurance company other than a life insurance company.
    ``(b) Organizations To Which Section Applies.--This section shall 
apply to any organization--
            ``(1) which is not exempt from taxation under this 
        subtitle,
            ``(2) which is not taxable as a life insurance company 
        under part I of this subchapter, and
            ``(3) the primary and predominant business activity of 
        which during the taxable year consists of 1 or more of the 
        following:
                    ``(A) Issuing accident and health insurance 
                contracts or the reinsuring of risks undertaken by 
                other insurance companies under such contracts.
                    ``(B) Operating as a health maintenance 
                organization.
                    ``(C) Entering into arrangements under which--
                            ``(i) fixed payments or premiums are 
                        received as consideration for the 
                        organization's agreement to provide or arrange 
                        for the provision of health care services, 
                        regardless of how the health care services are 
                        provided or arranged to be provided, and
                            ``(ii) such fixed payments or premiums do 
                        not vary depending on the amount of health care 
                        services provided.
In the case of an organization which has as a material business 
activity the issuing of accident and health insurance contracts or the 
reinsuring of risks undertaken by other insurance companies under such 
contracts, the administering of accident and health insurance contracts 
by such organization shall be treated as part of such business activity 
for purposes of paragraph (3)(A).''
    (b) Conforming Amendments.--
            (1) Subsection (c) of section 56 is amended by striking 
        paragraph (3).
            (2) The table of sections for part II of subchapter L of 
        chapter 1 is amended by striking the item relating to section 
        833 and inserting the following:

                              ``Sec. 833. Treatment of organizations 
                                        providing health insurance and 
                                        other prepaid health care 
                                        services.''
    (c) Effective Dates.--
            (1) In general.--Except as otherwise provided in this 
        subsection, the amendments made by this section shall apply to 
        taxable years beginning after December 31, 1996.
            (2) Transition rules for blue cross and blue shield 
        organizations.--
                    (A) Prior fresh start preserved.--The adjusted 
                basis of any asset determined under section 
                1012(c)(3)(A)(ii) of the Tax Reform Act of 1986 shall 
                not be affected by the amendments made by this section 
                nor by reason of any failure to qualify in taxable 
                years beginning after December 31, 1996, as an existing 
                Blue Cross or Blue Shield organization (as defined in 
                section 833(c)(2) of the Internal Revenue Code of 1986, 
                as in effect on the day before the date of the 
                enactment of this Act).
                    (B) Recoupment of prior reserve benefit.--In the 
                case of any organization entitled to the benefits of 
                section 833(a)(3) of the Internal Revenue Code of 1986 
                (as in effect on the day before the date of the 
                enactment of this Act) for such organization's last 
                taxable year beginning before January 1, 1997, the 
                amount determined under paragraph (4) of section 832(b) 
                of such Code for each of such organization's first 6 
                taxable years beginning after December 31, 1996, shall 
                be increased by an amount equal to 3\1/3\ percent of 
                its unearned premiums on outstanding business as of the 
                close of such organization's last taxable year 
                beginning before January 1, 1997.
                    (C) Phase-out of special deduction for certain 
                organizations.--
                            (i) In general.--In the case of an 
                        organization which meets the requirements of 
                        clause (ii)--
                                    (I) such organization shall 
                                continue to be entitled to the 
                                deduction provided under section 833(b) 
                                of the Internal Revenue Code of 1986 
                                (as in effect on the day before the 
                                date of the enactment of this Act) for 
                                its first 2 taxable years beginning 
                                after December 31, 1996, except that
                                    (II) the amount of such deduction 
                                for such organization's taxable year 
                                beginning in 1997 shall be 67 percent 
                                of the amount which would have been 
                                determined under such section 833(b) as 
                                so in effect, and the amount of such 
                                deduction for organization's taxable 
                                year beginning in 1998 shall be 33 
                                percent of the amount which would have 
                                been so determined.
                        Notwithstanding the amendment made by 
                        subsection (b)(1), any deduction under the 
                        preceding sentence shall not be allowable in 
                        computing alternative minimum taxable income.
                            (ii) Requirements.--An organization meets 
                        the requirements of this clause if, for each of 
                        its taxable years beginning in 1995 and 1996, 
                        such organization--
                                    (I) was an organization to which 
                                section 833 of such Code (as so in 
                                effect) applied, and
                                    (II) met the requirements of 
                                subparagraph (A) of section 833(c)(3) 
                                of such Code (as so in effect).
            (3) Transitional rules for other companies.--
                    (A) Organizations to which paragraph applies.--This 
                paragraph shall apply to any organization to which 
                section 833 of the Internal Revenue Code of 1986 (as 
                amended by subsection (a)) applies for such 
                organization's first taxable year beginning after 
                December 31, 1996; except that this paragraph shall not 
                apply if such organization treated itself as an 
                insurance company taxable under part II of subchapter L 
                of chapter 1 of such Code on its original Federal 
                income tax return for its taxable year beginning in 
                1992 and for all of its taxable years thereafter 
                beginning before January 1, 1997.
                    (B) Treatment of currently taxable companies.--
                Except as provided in subparagraph (C), in the case of 
                any organization to which this paragraph applies--
                            (i) the amendments made by this section 
                        shall be treated as a change in the method of 
                        accounting, and
                            (ii) all adjustments required to be taken 
                        into account under section 481 of the Internal 
                        Revenue Code of 1986, shall be taken into 
                        account for such company's first taxable year 
                        beginning after December 31, 1996.
                    (C) Treatment of currently tax exempt companies.--
                In the case of any organization to which this paragraph 
                applies and which was exempt from tax under chapter 1 
                of the Internal Revenue Code of 1986 for such 
                organization's last taxable year beginning before 
                January 1, 1997--
                            (i) no adjustment shall be made under 
                        section 481 (or any other provision) of such 
                        Code on account of a change in its method of 
                        accounting required by this section for its 
                        first taxable year beginning after December 31, 
                        1996, and
                            (ii) for purposes of determining gain or 
                        loss, the adjusted basis of any asset held by 
                        such organization on the first day of such 
                        taxable year shall be treated as equal to its 
                        fair market value as of such day.

SEC. 7603. EXEMPTION FROM INCOME TAX FOR REGIONAL ALLIANCES.

    (a) In General.--Subsection (c) of section 501 (relating to 
exemption from tax on corporations, certain trusts, etc.) is amended by 
adding at the end thereof the following new paragraph:
            ``(26) Any regional alliance described in section 1301 of 
        the Health Security Act. Such an alliance shall be treated as 
        not described in any other paragraph of this subsection.''
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to taxable years beginning after the date of the enactment of 
this Act.

   Subtitle G--Tax Treatment of Long-term Care Insurance and Services

                                                  Title VII, Subtitle G

SEC. 7701. QUALIFIED LONG-TERM CARE SERVICES TREATED AS MEDICAL CARE.

    (a) General Rule.--Paragraph (1) of section 213(d) (defining 
medical care) is amended by striking ``or'' at the end of subparagraph 
(B), by redesignating subparagraph (C) as subparagraph (D), and by 
inserting after subparagraph (B) the following new subparagraph:
                    ``(C) for qualified long-term care services (as 
                defined in subsection (g)), or''.
    (b) Qualified Long-Term Care Services Defined.--Section 213 
(relating to the deduction for medical, dental, etc., expenses) is 
amended by adding at the end thereof the following new subsection:
    ``(g) Qualified Long-Term Care Services.--For purposes of this 
section--
            ``(1) In general.--The term `qualified long-term care 
        services' means necessary diagnostic, curing, mitigating, 
        treating, preventive, therapeutic, and rehabilitative services, 
        and maintenance and personal care services (whether performed 
        in a residential or nonresidential setting) which--
                    ``(A) are required by an individual during any 
                period the individual is an incapacitated individual 
                (as defined in paragraph (2)),
                    ``(B) have as their primary purpose--
                            ``(i) the provision of needed assistance 
                        with 1 or more activities of daily living (as 
                        defined in paragraph (3)), or
                            ``(ii) protection from threats to health 
                        and safety due to severe cognitive impairment, 
                        and
                    ``(C) are provided pursuant to a continuing plan of 
                care prescribed by a licensed professional (as defined 
                in paragraph (4)).
            ``(2) Incapacitated individual.--The term `incapacitated 
        individual' means any individual who--
                    ``(A) is unable to perform, without substantial 
                assistance from another individual (including 
                assistance involving cueing or substantial 
                supervision), at least 2 activities of daily living as 
                defined in paragraph (3), or
                    ``(B) has severe cognitive impairment as defined by 
                the Secretary in consultation with the Secretary of 
                Health and Human Services.
        Such term shall not include any individual otherwise meeting 
        the requirements of the preceding sentence unless a licensed 
        professional within the preceding 12-month period has certified 
        that such individual meets such requirements.
            ``(3) Activities of daily living.--Each of the following is 
        an activity of daily living:
                    ``(A) Eating.
                    ``(B) Toileting.
                    ``(C) Transferring.
                    ``(D) Bathing.
                    ``(E) Dressing.
            ``(4) Licensed professional.--The term `licensed 
        professional' means--
                    ``(A) a physician or registered professional nurse, 
                or
                    ``(B) any other individual who meets such 
                requirements as may be prescribed by the Secretary 
                after consultation with the Secretary of Health and 
                Human Services.
            ``(5) Certain services not included.--The term `qualified 
        long-term care services' shall not include any services 
        provided to an individual--
                    ``(A) by a relative (directly or through a 
                partnership, corporation, or other entity) unless the 
                relative is a licensed professional with respect to 
                such services, or
                    ``(B) by a corporation or partnership which is 
                related (within the meaning of section 267(b) or 
                707(b)) to the individual.
        For purposes of this paragraph, the term `relative' means an 
        individual bearing a relationship to the individual which is 
        described in paragraphs (1) through (8) of section 152(a).''
    (c) Technical Amendments.--
            (1) Subparagraph (D) of section 213(d)(1) (as redesignated 
        by subsection (a)) is amended to read as follows:
                    ``(D) for insurance (including amounts paid as 
                premiums under part B of title XVIII of the Social 
                Security Act, relating to supplementary medical 
                insurance for the aged) covering medical care referred 
                to in--
                            ``(i) subparagraphs (A) and (B), or
                            ``(ii) subparagraph (C), but only if such 
                        insurance is provided under a qualified long-
                        term care insurance policy (as defined in 
                        section 7702B(b)) and the amount paid for such 
                        insurance is not disallowed under section 
                        7702B(d)(4).''
            (2) Paragraph (6) of section 213(d) is amended--
                    (A) by striking ``subparagraphs (A) and (B)'' and 
                inserting ``subparagraph (A), (B), and (C)'', and
                    (B) by striking ``paragraph (1)(C)'' in 
                subparagraph (A) and inserting ``paragraph (1)(D)''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1995.

SEC. 7702. TREATMENT OF LONG-TERM CARE INSURANCE.

    (a) General Rule.--Chapter 79 (relating to definitions) is amended 
by inserting after section 7702A the following new section:

``SEC. 7702B. TREATMENT OF LONG-TERM CARE INSURANCE.

    ``(a) In General.--For purposes of this title--
            ``(1) a qualified long-term care insurance policy (as 
        defined in subsection (b)) shall be treated as an accident and 
        health insurance contract,
            ``(2) amounts (other than policyholder dividends (as 
        defined in section 808) or premium refunds) received under a 
        qualified long-term care insurance policy shall be treated as 
        amounts received for personal injuries and sickness and shall 
        be treated as reimbursement for expenses actually incurred for 
        medical care (as defined in section 213(d)),
            ``(3) any plan of an employer providing coverage under a 
        qualified long-term care insurance policy shall be treated as 
        an accident and health plan with respect to such coverage,
            ``(4) amounts paid for a qualified long-term care insurance 
        policy providing the benefits described in subsection (b)(6)(B) 
        shall be treated as payments made for insurance for purposes of 
        section 213(d)(1)(D), and
            ``(5) a qualified long-term care insurance policy shall be 
        treated as a guaranteed renewable contract subject to the rules 
        of section 816(e).
    ``(b) Qualified Long-Term Care Insurance Policy.--For purposes of 
this title--
            ``(1) In general.--The term `qualified long-term care 
        insurance policy' means any long-term care insurance policy (as 
        defined in section 2304 of the Health Security Act) that--
                    ``(A) satisfies the requirements of subpart B of 
                part 3 of subtitle B of title II of the Health Security 
                Act,
                    ``(B) limits benefits under such policy to 
                individuals who are certified by a licensed 
                professional (as defined in section 213(g)(4)) within 
                the preceding 12-month period as being unable to 
                perform, without substantial assistance from another 
                individual (including assistance involving cueing or 
                substantial supervision), 2 or more activities of daily 
                living (as defined in section 213(g)(3)), or who have a 
                severe cognitive impairment (as defined in section 
                213(g)(2)(B)), and
                    ``(C) satisfies the requirements of paragraphs (2), 
                (3), (4), (5), and (6).
            ``(2) Premium requirements.--The requirements of this 
        paragraph are met with respect to a policy if such policy 
        provides that premium payments may not be made earlier than the 
        date such payments would have been made if the contract 
        provided for level annual payments over the life expectancy of 
        the insured or 20 years, whichever is shorter. A policy shall 
        not be treated as failing to meet the requirements of the 
        preceding sentence solely by reason of a provision in the 
        policy providing for a waiver of premiums if the insured 
        becomes an individual certified in accordance with paragraph 
        (1)(B).
            ``(3) Prohibition of cash value.--The requirements of this 
        paragraph are met if the policy does not provide for a cash 
        value or other money that can be paid, assigned, pledged as 
        collateral for a loan, or borrowed, other than as provided in 
        paragraph (4).
            ``(4) Refunds of premiums and dividends.--The requirements 
        of this paragraph are met with respect to a policy if such 
        policy provides that--
                    ``(A) policyholder dividends are required to be 
                applied as a reduction in future premiums or, to the 
                extent permitted under paragraph (6), to increase 
                benefits described in subsection (a)(2), and
                    ``(B) refunds of premiums upon a partial surrender 
                or a partial cancellation are required to be applied as 
                a reduction in future premiums, and
                    ``(C) any refund on the death of the insured, or on 
                a complete surrender or cancellation of the policy, 
                cannot exceed the aggregate premiums paid under the 
                contract.
        Any refund on a complete surrender or cancellation of the 
        policy shall be includible in gross income to the extent that 
        any deduction or exclusion was allowable with respect to the 
        premiums.
            ``(5) Coordination with other entitlements.--The 
        requirements of this paragraph are met with respect to a policy 
        if such policy does not cover expenses incurred to the extent 
        that such expenses are also covered under title XVIII of the 
        Social Security Act or are covered under comprehensive health 
        coverage described in section 1101 of the Health Security Act.
            ``(6) Maximum benefit.--
                    ``(A) In general.--The requirements of this 
                paragraph are met if the benefits payable under the 
                policy for any period (whether on a periodic basis or 
                otherwise) shall not exceed the dollar amount in effect 
                for such period.
                    ``(B) Nonreimbursement payments permitted.--
                Benefits shall include all payments described in 
                subsection (a)(2) to or on behalf of an insured 
                individual without regard to the expenses incurred 
                during the period to which the payments relate. For 
                purposes of section 213(a), such payments shall be 
                treated as compensation for expenses paid for medical 
                care.
                    ``(C) Dollar amount.--The dollar amount in effect 
                under this paragraph shall be $150 per day (or the 
                equivalent amount within the calendar year in the case 
                of payments on other than a per diem basis).
                    ``(D) Adjustments for increased costs.--
                            ``(i) In general.--In the case of any 
                        calendar year after 1996, the dollar amount in 
                        effect under subparagraph (C) for any period or 
                        portion thereof occurring during such calendar 
                        year shall be equal to the sum of--
                                    ``(I) the amount in effect under 
                                subparagraph (C) for the preceding 
                                calendar year (after application of 
                                this subparagraph), plus
                                    ``(II) the product of the amount 
                                referred to in subclause (I) multiplied 
                                by the cost-of-living adjustment for 
                                the calendar year of the amount under 
                                subclause (I).
                            ``(ii) Cost-of-living adjustment.--For 
                        purposes of clause (i), the cost-of-living 
                        adjustment for any calendar year is the 
                        percentage (if any) by which the cost index 
                        under clause (iii) for the preceding calendar 
                        year exceeds such index for the second 
                        preceding calendar year.
                            ``(iii) Cost index.--The Secretary, in 
                        consultation with the Secretary of Health and 
                        Human Services, shall before January 1, 1997, 
                        establish a cost index to measure increases in 
                        costs of nursing home and similar facilities. 
                        The Secretary may from time to time revise such 
                        index to the extent necessary to accurately 
                        measure increases or decreases in such costs.
                            ``(iv) Special rule for calendar year 
                        1997.--Notwithstanding clause (ii), for 
                        purposes of clause (i), the cost-of-living 
                        adjustment for calendar year 1997 is the sum of 
                        1 \1/2\ percent plus the percentage by which 
                        the CPI for calendar year 1996 (as defined in 
                        section 1(f)(4)) exceeds the CPI for calendar 
                        year 1995 (as so defined).
                    ``(E) Period.--For purposes of this paragraph, a 
                period begins on the date that an individual has a 
                condition which would qualify for certification under 
                subsection (b)(1)(B) and ends on the earlier of the 
                date upon which--
                            ``(i) such individual has not been so 
                        certified within the preceding 12-months, or
                            ``(ii) the individual's condition ceases to 
                        be such as to qualify for certification under 
                        subsection (b)(1)(B).
                    ``(F) Aggregation rule.--For purposes of this 
                paragraph, all policies issued with respect to the same 
                insured shall be treated as one policy.
    ``(c) Treatment of Long-Term Care Insurance Policies.--For purposes 
of this title, any amount received or coverage provided under a long-
term care insurance policy that is not a qualified long-term care 
insurance policy shall not be treated as an amount received for 
personal injuries or sickness or provided under an accident and health 
plan and shall not be treated as excludible from gross income under any 
provision of this title.
    ``(d) Treatment of Coverage Provided as Part of a Life Insurance 
Contract.--Except as otherwise provided in regulations prescribed by 
the Secretary, in the case of any long-term care insurance coverage 
(whether or not qualified) provided by rider on a life insurance 
contract--
            ``(1) In general.--This section shall apply as if the 
        portion of the contract providing such coverage is a separate 
        contract or policy.
            ``(2) Premiums and charges for long-term care coverage.--
        Premium payments for coverage under a long-term care insurance 
        policy and charges against the life insurance contract's cash 
        surrender value (within the meaning of section 7702(f)(2)(A)) 
        for such coverage shall be treated as premiums for purposes of 
        subsection (b)(2).
            ``(3) Application of 7702.--Section 7702(c)(2) (relating to 
        the guideline premium limitation) shall be applied by 
        increasing the guideline premium limitation with respect to a 
        life insurance contract, as of any date--
                    ``(A) by the sum of any charges (but not premium 
                payments) described in paragraph (2) made to that date 
                under the contract, less
                    ``(B) any such charges the imposition of which 
                reduces the premiums paid for the contract (within the 
                meaning of section 7702(f)(1)).
            ``(4) Application of section 213.--No deduction shall be 
        allowed under section 213(a) for charges against the life 
        insurance contract's cash surrender value described in 
        paragraph (2), unless such charges are includible in income as 
        a result of the application of section 72(e)(10) and the 
        coverage provided by the rider is a qualified long-term care 
        insurance policy under subsection (b).
For purposes of this subsection, the term `portion' means only the 
terms and benefits under a life insurance contract that are in addition 
to the terms and benefits under the contract without regard to the 
coverage under a long-term care insurance policy.
    ``(e) Prohibition of Discrimination.--
            ``(1) In general.--Notwithstanding subsection (a)(3), any 
        plan of an employer providing coverage under a qualified long-
        term care insurance policy shall qualify as an accident and 
        health plan with respect to such coverage only if--
                    ``(A) the plan allows all employees, except as 
                provided in paragraph (2), to participate, and
                    ``(B) the benefits provided under the plan are 
                identical for all employees that choose to participate.
            ``(2) Exclusion of certain employees.--For purposes of 
        paragraph (1), there may be excluded from consideration--
                    ``(A) employees who have not completed 3 years of 
                service;
                    ``(B) employees who have not attained age 25;
                    ``(C) part-time or seasonal employees; and
                    ``(D) employees who are nonresident aliens and who 
                receive no earned income (within the meaning of section 
                911(d)(2)) from the employer which constitutes income 
                from sources within the United States (within the 
                meaning of section 861(a)(3)).
    ``(f) Regulations.--The Secretary shall prescribe such regulations 
as may be necessary to carry out the requirements of this section, 
including regulations to prevent the avoidance of this section by 
providing long-term care insurance coverage under a life insurance 
contract and to provide for the proper allocation of amounts between 
the long-term care and life insurance portions of a contract.''.
    (b) Clerical Amendment.--The table of sections for chapter 79 is 
amended by inserting after the item relating to section 7702A the 
following new item:

                              ``Sec. 7702B. Treatment of long-term care 
                                        insurance.''.
    (c) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to policies issued after December 31, 1995. Solely for 
        purposes of the preceding sentence, a policy issued prior to 
        January 1, 1996, that satisfies the requirements of a qualified 
        long-term care insurance policy as set forth in section 
        7702B(b) shall, on and after January 1, 1996, be treated as 
        being issued after December 31, 1995.
            (2) Transition rule.--If, after the date of enactment of 
        this Act and before January 1, 1996, a policy providing for 
        long-term care insurance coverage is exchanged solely for a 
        qualified long-term care insurance policy (as defined in 
        section 7702B(b)), no gain or loss shall be recognized on the 
        exchange. If, in addition to a qualified long-term care 
        insurance policy, money or other property is received in the 
        exchange, then any gain shall be recognized to the extent of 
        the sum of the money and the fair market value of the other 
        property received. For purposes of this paragraph, the 
        cancellation of a policy providing for long-term care insurance 
        coverage and reinvestment of the cancellation proceeds in a 
        qualified long-term care insurance policy within 60 days 
        thereafter shall be treated as an exchange.
            (3) Issuance of certain riders permitted.--For purposes of 
        determining whether section 7702 or 7702A of the Internal 
        Revenue Code of 1986 applies to any contract, the issuance, 
        whether before, on, or after December 31, 1995, of a rider on a 
        life insurance contract providing long-term care insurance 
        coverage shall not be treated as a modification or material 
        change of such contract.

SEC. 7703. TAX TREATMENT OF ACCELERATED DEATH BENEFITS UNDER LIFE 
              INSURANCE CONTRACTS.

    (a) General Rule.--Section 101 (relating to certain death benefits) 
is amended by adding at the end thereof the following new subsection:
    ``(g) Treatment of Certain Accelerated Death Benefits.--
            ``(1) In general.--For purposes of this section, any amount 
        distributed to an individual under a life insurance contract on 
        the life of an insured who is a terminally ill individual (as 
        defined in paragraph (3)) shall be treated as an amount paid by 
        reason of the death of such insured.
            ``(2) Necessary conditions.--
                    ``(A) Paragraph (1) shall not apply to any 
                distribution unless--
                            ``(i) the distribution is not less than the 
                        present value (determined under subparagraph 
                        (B)) of the reduction in the death benefit 
                        otherwise payable in the event of the death of 
                        the insured, and
                            ``(ii) the percentage derived from dividing 
                        the cash surrender value of the contract, if 
                        any, immediately after the distribution by the 
                        cash surrender value of the contract 
                        immediately before the distribution is equal to 
                        or greater than the percentage derived by 
                        dividing the death benefit immediately after 
                        the distribution by the death benefit 
                        immediately before the distribution.
                    ``(B) The present value of the reduction in the 
                death benefit occurring on the distribution must be 
                determined by--
                            ``(i) using as the discount rate a rate not 
                        to exceed the highest rate set forth in 
                        subparagraph (C), and
                            ``(ii) assuming that the death benefit (or 
                        the portion thereof) would have been paid at 
                        the end of a period that is no more than the 
                        insured's life expectancy from the date of the 
                        distribution or 12 months, whichever is 
                        shorter.
                    ``(C) Rates.--The rates set forth in this 
                subparagraph are the following:
                            ``(i) the 90-day Treasury bill yield,
                            ``(ii) the rate described as Moody's 
                        Corporate Bond Yield Average-Monthly Average 
                        Corporates as published by Moody's Investors 
                        Service, Inc., or any successor thereto for the 
                        calendar month ending 2 months before the date 
                        on which the rate is determined,
                            ``(iii) the rate used to compute the cash 
                        surrender values under the contract during the 
                        applicable period plus 1 percent per annum, and
                            ``(iv) the maximum permissible interest 
                        rate applicable to policy loans under the 
                        contract.
            ``(3) Terminally ill individual.--For purposes of this 
        subsection, the term `terminally ill individual' means an 
        individual who the insurer has determined, after receipt of an 
        acceptable certification by a licensed physician, has an 
        illness or physical condition which can reasonably be expected 
        to result in death within 12 months of the date of 
        certification.
            ``(4) Application of section 72(e)(10).--For purposes of 
        section 72(e)(10) (relating to the treatment of modified 
        endowment contracts), section 72(e)(4)(A)(i) shall not apply to 
        distributions described in paragraph (1).''
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to taxable years beginning after December 31, 1993.

SEC. 7704. TAX TREATMENT OF COMPANIES ISSUING QUALIFIED ACCELERATED 
              DEATH BENEFIT RIDERS.

    (a) Qualified Accelerated Death Benefit Riders Treated as Life 
Insurance.--Section 818 (relating to other definitions and special 
rules) is amended by adding at the end thereof the following new 
subsection:
    ``(g) Qualified Accelerated Death Benefit Riders Treated as Life 
Insurance.--For purposes of this part--
            ``(1) In general.--Any reference to a life insurance 
        contract shall be treated as including a reference to a 
        qualified accelerated death benefit rider on such contract.
            ``(2) Qualified accelerated death benefit riders.--For 
        purposes of this subsection, the term `qualified accelerated 
        death benefit rider' means any rider on a life insurance 
        contract which provides for a distribution to an individual 
        upon the insured becoming a terminally ill individual (as 
        defined in section 101(g)(3)).
    (b) Definitions of Life Insurance and Modified Endowment 
Contracts.--Paragraph (5)(A) of section 7702(f) is amended by striking 
``or'' at the end of clause (iv), by redesignating clause (v) as clause 
(vi), and by inserting after clause (iv) the following new clause:
                            ``(v) any qualified accelerated death 
                        benefit rider (as defined in section 818(g)), 
                        or''.
    (c) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to contracts issued after December 31, 1993.
            (2) Transitional rule.--For purposes of determining whether 
        section 7702 or 7702A of the Internal Revenue Code of 1986 
        applies to any contract, the issuance, whether before, on, or 
        after December 31, 1993, of a rider on a life insurance 
        contract permitting the acceleration of death benefits (as 
        described in section 101(g) of such Code) shall not be treated 
        as a modification or material change of such contract.

                                                  Title VII, Subtitle H

        Subtitle H--Tax Incentives for Health Services Providers

SEC. 7801. NONREFUNDABLE CREDIT FOR CERTAIN PRIMARY HEALTH SERVICES 
              PROVIDERS.

    (a) In General.--Subpart A of part IV of subchapter A of chapter 1 
(relating to nonrefundable personal credits) is amended by inserting 
after section 22 the following new section:

``SEC. 23. PRIMARY HEALTH SERVICES PROVIDERS.

    ``(a) Allowance of Credit.--There shall be allowed as a credit 
against the tax imposed by this chapter for the taxable year an amount 
equal to the product of--
            ``(1) the number of months during such taxable year--
                    ``(A) during which the taxpayer is a qualified 
                primary health services provider, and
                    ``(B) which are within the taxpayer's mandatory 
                service period, and
            ``(2) $1,000 ($500 in the case of a qualified practitioner 
        who is not a physician).
    ``(b) Qualified Primary Health Services Provider.--For purposes of 
this section, the term `qualified primary health services provider' 
means, with respect to any month, any qualified practitioner who--
            ``(1) has in effect a certification by the Bureau as a 
        provider of primary health services and such certification is, 
        when issued, for a health professional shortage area in which 
        the qualified practitioner is commencing the providing of 
        primary health services,
            ``(2) is providing primary health services full time in the 
        health professional shortage area identified in such 
        certification, and
            ``(3) has not received a scholarship under the National 
        Health Service Corps Scholarship Program or any loan repayments 
        under the National Health Service Corps Loan Repayment Program.
For purposes of paragraph (2), a provider shall be treated as providing 
services in a health professional shortage area when such area ceases 
to be such an area if it was such an area when the provider commenced 
providing services in the area.
    ``(c) Mandatory Service Period.--For purposes of this section, the 
term `mandatory service period' means the period of 60 consecutive 
calendar months beginning with the first month the taxpayer is a 
qualified primary health services provider. A taxpayer shall not have 
more than 1 mandatory service period.
    ``(d) Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Bureau.--The term `Bureau' means the Bureau of 
        Primary Health Care, Health Resources and Services 
        Administration of the United States Public Health Service.
            ``(2) Qualified practitioner.--The term `qualified 
        practitioner' means a physician, a physician assistant, a nurse 
        practitioner, or a certified nurse-midwife.
            ``(3) Physician.--The term `physician' has the meaning 
        given to such term by section 1861(r) of the Social Security 
        Act.
            ``(4) Physician assistant; nurse practitioner.--The terms 
        `physician assistant' and `nurse practitioner' have the 
        meanings given to such terms by section 1861(aa)(5) of the 
        Social Security Act.
            ``(5) Certified nurse-midwife.--The term `certified nurse-
        midwife' has the meaning given to such term by section 
        1861(gg)(2) of the Social Security Act.
            ``(6) Primary health services.--The term `primary health 
        services' has the meaning given such term by section 330(b)(1) 
        of the Public Health Service Act.
            ``(7) Health professional shortage area.--The term `health 
        professional shortage area' has the meaning given such term by 
        section 332(a)(1)(A) of the Public Health Service Act.
    ``(e) Recapture of Credit.--
            ``(1) In general.--If there is a recapture event during any 
        taxable year, then--
                    ``(A) no credit shall be allowed under subsection 
                (a) for such taxable year and any succeeding taxable 
                year, and
                    ``(B) the tax of the taxpayer under this chapter 
                for such taxable year shall be increased by an amount 
                equal to the product of--
                            ``(i) the applicable percentage, and
                            ``(ii) the aggregate unrecaptured credits 
                        allowed to such taxpayer under this section for 
                        all prior taxable years.
            ``(2) Applicable recapture percentage.--
                    ``(A) In general.--For purposes of this subsection, 
                the applicable recapture percentage shall be determined 
                from the following table:

                    ``If the recapture
                                                  The applicable recap-
                      event occurs during:
                                                    ture percentage is:
                            Months 1-24..............           100    
                            Months 25-36.............            75    
                            Months 37-48.............            50    
                            Months 49-60.............            25    
                            Months 61 and thereafter.            0.    
                    ``(B) Timing.--For purposes of subparagraph (A), 
                month 1 shall begin on the first day of the mandatory 
                service period.
            ``(3) Recapture event defined.--
                    ``(A) In general.--For purposes of this subsection, 
                the term `recapture event' means the failure of the 
                taxpayer to be a qualified primary health services 
                provider for any month during the taxpayer's mandatory 
                service period.
                    ``(B) Cessation of designation.--The cessation of 
                the designation of any area as a health professional 
                shortage area after the beginning of the mandatory 
                service period for any taxpayer shall not constitute a 
                recapture event.
                    ``(C) Secretarial waiver.--The Secretary, in 
                consultation with the Secretary of Health and Human 
                Services, may waive any recapture event caused by 
                extraordinary circumstances.
            ``(4) No credits against tax; minimum tax.--Any increase in 
        tax under this subsection shall not be treated as a tax imposed 
        by this chapter for purposes of determining the amount of any 
        credit under subpart A, B, or D of this part or for purposes of 
        section 55.''
    (b) Clerical Amendment.--The table of sections for subpart A of 
part IV of subchapter A of chapter 1 is amended by inserting after the 
item relating to section 22 the following new item:

                              ``Sec. 23. Primary health services 
                                        providers.''
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1994.

SEC. 7802. EXPENSING OF MEDICAL EQUIPMENT.

    (a) In General.--Paragraph (1) of section 179(b) (relating to 
dollar limitation on expensing of certain depreciable business assets) 
is amended to read as follows:
            ``(1) Dollar limitation.--
                    ``(A) General rule.--The aggregate cost which may 
                be taken into account under subsection (a) for any 
                taxable year shall not exceed $17,500.
                    ``(B) Health care property.--The aggregate cost 
                which may be taken into account under subsection (a) 
                shall be increased by the lesser of--
                            ``(i) the cost of section 179 property 
                        which is health care property placed in service 
                        during the taxable year, or
                            ``(ii) $10,000.''
    (b)  Definition.--Section 179(d) (relating to definitions) is 
amended by adding at the end the following new paragraph:
            ``(11) Health care property.--For purposes of this section, 
        the term `health care property' means section 179 property--
                    ``(A) which is medical equipment used in the 
                screening, monitoring, observation, diagnosis, or 
                treatment of patients in a laboratory, medical, or 
                hospital environment,
                    ``(B) which is owned (directly or indirectly) and 
                used by a physician (as defined in section 1861(r) of 
                the Social Security Act) in the active conduct of such 
                physician's full-time trade or business of providing 
                primary health services (as defined in section 
                330(b)(1) of the Public Health Service Act) in a health 
                professional shortage area (as defined in section 
                332(a)(1)(A) of the Public Health Service Act), and
                    ``(C) substantially all the use of which is in such 
                area.''
    (c) Effective Date.--The amendments made by this section shall 
apply to property placed in service after December 31, 1994.

                                                  Title VII, Subtitle I

                  Subtitle I--Miscellaneous Provisions

SEC. 7901. CREDIT FOR COST OF PERSONAL ASSISTANCE SERVICES REQUIRED BY 
              EMPLOYED INDIVIDUALS.

    (a) In General.--Subpart A of part IV of subchapter A of chapter 1 
(relating to nonrefundable personal credits) is amended by inserting 
after section 23 the following new section:

``SEC. 24. COST OF PERSONAL ASSISTANCE SERVICES REQUIRED BY EMPLOYED 
              INDIVIDUALS.

    ``(a) Allowance of Credit.--
            ``(1) In general.--In the case of an eligible individual, 
        there shall be allowed as a credit against the tax imposed by 
        this chapter for the taxable year an amount equal to the 
        applicable percentage of the personal assistance expenses paid 
        or incurred by the taxpayer during such taxable year.
            ``(2) Applicable percentage.--For purposes of paragraph 
        (1), the term `applicable percentage' means 50 percent reduced 
        (but not below zero) by 10 percentage points for each $5,000 by 
        which the modified adjusted gross income (as defined in section 
        59B(d)(2)) of the taxpayer for the taxable year exceeds 
        $45,000. In the case of a married individual filing a separate 
        return, the preceding sentence shall be applied by substituting 
        `$2,500' for `$5,000' and `$22,500' for `$45,000'.
    ``(b) Limitation.--The amount of personal assistance expenses 
incurred for the benefit of an individual which may be taken into 
account under subsection (a) for the taxable year shall not exceed the 
lesser of--
            ``(1) $15,000, or
            ``(2) such individual's earned income (as defined in 
        section 32(c)(2)) for the taxable year.
In the case of a joint return, the amount under the preceding sentence 
shall be determined separately for each spouse.
    ``(c) Eligible Individual.--For purposes of this section, the term 
`eligible individual' means any individual (other than a nonresident 
alien) who, by reason of any medically determinable physical impairment 
which can be expected to result in death or which has lasted or can be 
expected to last for a continuous period of not less than 12 months, is 
unable to engage in any substantial gainful activity without personal 
assistance services appropriate to carry out activities of daily 
living. An individual shall not be treated as an eligible individual 
unless such individual furnishes such proof thereof (in such form and 
manner, and at such times) as the Secretary may require.
    ``(d) Other Definitions.--For purposes of this section--
            ``(1) Personal assistance expenses.--The term `personal 
        assistance expenses' means expenses for--
                    ``(A) personal assistance services appropriate to 
                carry out activities of daily living in or outside the 
                home,
                    ``(B) homemaker/chore services incidental to the 
                provision of such personal assistance services,
                    ``(C) in the case of an individual with a cognitive 
                impairment, assistance with life skills,
                    ``(D) communication services,
                    ``(E) work-related support services,
                    ``(F) coordination of services described in this 
                paragraph,
                    ``(G) assistive technology and devises, including 
                assessment of the need for particular technology and 
                devices and training of family members, and
                    ``(H) modifications to the principal place of abode 
                of the individual to the extent the expenses for such 
                modifications would (but for subsection (e)(2)) be 
                expenses for medical care (as defined by section 213) 
                of such individual.
            ``(2) Activities of daily living.--The term `activities of 
        daily living' means the activities referred to in section 
        213(g)(3).
    ``(e) Special Rules.--
            ``(1) Payments to related persons.--No credit shall be 
        allowed under this section for any amount paid by the taxpayer 
        to any person who is related (within the meaning of section 267 
        or 707(b)) to the taxpayer.
            ``(2) Coordination with medical expense deduction.--Any 
        amount taken into account in determining the credit under this 
        section shall not be taken into account in determining the 
        amount of the deduction under section 213.
            ``(3) Basis reduction.--For purposes of this subtitle, if a 
        credit is allowed under this section for any expense with 
        respect to any property, the increase in the basis of such 
        property which would (but for this paragraph) result from such 
        expense shall be reduced by the amount of the credit so 
        allowed.
    ``(f) Cost-of-Living Adjustment.--In the case of any taxable year 
beginning after 1996, the $45,000 and $22,500 amounts in subsection 
(a)(2) and the $15,000 amount in subsection (b) shall be increased by 
an amount equal to--
            ``(1) such dollar amount, multiplied by
            ``(2) the cost-of-living adjustment determined under 
        section 1(f)(3) for the calendar year in which the taxable year 
        begins by substituting `calendar year 1995' for `calendar year 
        1992' in subparagraph (B) thereof.
If any increase determined under the preceding sentence is not a 
multiple of $1,000, such increase shall be rounded to the nearest 
multiple of $1,000.''
    (b) Technical Amendment.--Subsection (a) of section 1016 is amended 
by striking ``and'' at the end of paragraph (24), by striking the 
period at the end of paragraph (25) and inserting ``, and'', and by 
adding at the end thereof the following new paragraph:
            ``(26) in the case of any property with respect to which a 
        credit has been allowed under section 23, to the extent 
        provided in section 23(e)(3).''
    (c) Clerical Amendment.--The table of sections for subpart A of 
part IV of subchapter A of chapter 1 is amended by inserting after the 
item relating to section 22 the following new item:

                              ``Sec. 23. Cost of personal assistance 
                                        services required by employed 
                                        individuals.''
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1995.

SEC. 7902. DENIAL OF TAX-EXEMPT STATUS FOR BORROWINGS OF HEALTH CARE-
              RELATED ENTITIES.

    (a) In General.--Paragraph (6) of section 141(b) (relating to 
private business use) is amended by adding at the end thereof the 
following new subparagraph:
                    ``(C) Certain health care-related entities.--Use 
                by--
                            ``(i) any regional alliance described in 
                        section 1301 of the Health Security Act,
                            ``(ii) any corporate alliance described in 
                        section 1311 of such Act, and
                            ``(iii) any guaranty fund described in 
                        section 1204 of such Act,
                shall be treated as private business use by an 
                organization that is not a 501(c)(3) organization.''
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to obligations issued after the date of the enactment of this 
Act.

SEC. 7903. DISCLOSURE OF RETURN INFORMATION FOR ADMINISTRATION OF 
              CERTAIN PROGRAMS UNDER THE HEALTH SECURITY ACT.

    (a) In General.--Subparagraph (D) of section 6103(l)(7) (relating 
to disclosure of return information to Federal, State, and local 
agencies administering certain programs) is amended by striking ``and'' 
at the end of clause (viii), by striking the period at the end of 
clause (ix) and inserting ``; and'', and by inserting after clause (ix) 
the following new clause:
                            ``(x) assistance provided under the Health 
                        Security Act.''
    (b) Information Not Available to Local Agencies.--Subparagraph (D) 
of section 6103(l)(7) is amended by adding at the end thereof the 
following new sentence: ``Subparagraphs (A) and (B) shall be applied 
without regard to any reference to any local agency with respect to the 
program referred to in clause (x).''

     TITLE VIII--HEALTH AND HEALTH-RELATED PROGRAMS OF THE FEDERAL 
                               GOVERNMENT

                                                             Title VIII

                       table of contents of title

                                                                   Page
                Subtitle A--Military Health Care Reform

Sec. 8001. Uniformed services health plans..................       1207
               Subtitle B--Department of Veterans Affairs

Sec. 8101. Benefits and eligibility through Department of          1218
                            Veterans Affairs Medical System.
Sec. 8102. Organization of Department of Veterans Affairs          1227
                            facilities as health plans.
         Subtitle C--Federal Employees Health Benefits Program

Sec. 8201. Definitions......................................       1233
Sec. 8202. FEHBP termination................................       1234
Sec. 8203. Treatment of Federal employees, annuitants, and         1235
                            other individuals (who would 
                            otherwise have been eligible for 
                            FEHBP) under health plans.
Sec. 8204. Treatment of individuals residing abroad.........       1245
Sec. 8205. Transition and savings provisions................       1246
Sec. 8206. Regulations......................................       1248
Sec. 8207. Technical and conforming amendments..............       1248
                   Subtitle D--Indian Health Service

Sec. 8301. Definitions......................................       1249
Sec. 8302. Eligibility and health service coverage of              1250
                            Indians.
Sec. 8303. Supplemental Indian health care benefits.........       1252
Sec. 8304. Health plan and health alliance requirements.....       1252
Sec. 8305. Exemption of tribal governments and tribal              1253
                            organizations from employer 
                            payments.
Sec. 8306. Provision of health services to non-enrollees and       1253
                            non-Indians.
Sec. 8307. Payment by other payers..........................       1258
Sec. 8308. Contracting authority............................       1258
Sec. 8309. Consultation.....................................       1258
Sec. 8310. Infrastructure...................................       1259
Sec. 8311. Financing........................................       1259
Sec. 8312. Rule of construction.............................       1261
Sec. 8313. Authorizations of appropriations.................       1261
Sec. 8314. Payment of premium discount equivalent amounts          1261
                            for unemployed Indians.
 Subtitle E--Amendments to the Employee Retirement Income Security Act 
                                of 1974

Sec. 8401. Group health plan defined........................       1262
Sec. 8402. Limitation on coverage of group health plans            1263
                            under title I of ERISA.
Sec. 8403. Amendments relating to continuation coverage.....       1269
Sec. 8404. Additional amendments relating to group health          1271
                            plans.
Sec. 8405. Plan claims procedures...........................       1272
Sec. 8406. Effective dates..................................       1273
                Subtitle F--Special Fund for WIC Program

Sec. 8501. Additional funding for special supplemental food        1274
                            program for women, infants, and 
                            children (WIC).

                Subtitle A--Military Health Care Reform

SEC. 8001. UNIFORMED SERVICES HEALTH PLANS.

                                                 Title VIII, Subtitle A

    (a) Establishment of Plans.--(1) Chapter 55 of title 10, United 
States Code, is amended by inserting after section 1073 the following 
new section:
``Sec. 1073a. Uniformed Services Health Plans: establishment and 
              coordination with national health care reform
    ``(a) Establishment Authorized.--(1) The Secretary of Defense, in 
consultation with the other administering Secretaries, may establish 
one or more Uniformed Services Health Plans pursuant to this section in 
order to provide health care services to members of the uniformed 
services on active duty for a period of more than 30 days and persons 
described in subsection (e)(2).
    ``(2) The establishment and operation of a Uniformed Services 
Health Plan shall be carried out in accordance with regulations 
prescribed by the Secretary of Defense, in consultation with the other 
administering Secretaries. The Secretary shall assure that such 
regulations conform, to the maximum extent practicable, to the 
requirements for health plans set forth in the Health Security Act.
    ``(b) Use of Uniformed Services Facilities and Other Health Care 
Providers.--(1) A Uniformed Services Health Plan may rely upon the use 
of facilities of the uniformed services for the provision of health 
care services to persons enrolled in the plan, supplemented by the use 
of civilian health care providers or health plans under agreements 
entered into by the Secretary of Defense.
    ``(2) An agreement with a civilian health care provider or a health 
plan under paragraph (1) may be entered into without regard to 
provisions of law requiring the use of competitive procedures. An 
agreement with a health plan may provide for the sharing of resources 
with the health plan that is a party to the agreement.
    ``(c) Health Care Services Under a Plan.--(1) Subject to paragraph 
(2), a Uniformed Services Health Plan shall provide to persons enrolled 
in the plan at least the items and services in the comprehensive 
benefit package under the Health Security Act.
    ``(2)(A) In addition, a Uniformed Services Health Plan shall 
guarantee to each person described in subparagraph (B) who is enrolled 
in the plan those health care services that the person would be 
entitled to receive under this chapter in the absence of this section. 
In the case of a person described in subparagraph (B) who is a covered 
beneficiary, such health care services shall consist of the types of 
health care services described in section 1079(a) of this title.
    ``(B) A person referred to in subparagraph (A) is a member of the 
uniformed services on active duty for a period of more than 30 days as 
of December 31, 1994, or any person who is a covered beneficiary as of 
that date, who is (or afterwards becomes) enrolled in a Uniformed 
Services Health Plan.
    ``(d) Preemption of Conflicting State Requirements.--In carrying 
out responsibilities under the Health Security Act, a State (or State-
established entity)--
            ``(1) may not impose any standard or requirement on a 
        Uniformed Services Health Plan that is inconsistent with this 
        section or any regulation prescribed under this section or 
        other Federal law regarding the operation of this section; and
            ``(2) may not deny certification of a Uniformed Services 
        Health Plan as a health plan under the Health Security Act on 
        the basis of a conflict between a rule of a State or health 
        alliance and this section or any regulation prescribed under 
        this section or other Federal law regarding the operation of 
        this section.
    ``(e) Enrollment.--(1) Except as authorized by the administering 
Secretary concerned, each member of a uniformed service on active duty 
for a period of more than 30 days shall be required to enroll in a 
Uniformed Services Health Plan available to the member.
    ``(2) After enrolling members described in paragraph (1), 
opportunities for further enrollment in a Uniformed Services Health 
Plan shall be offered by the administering Secretaries to covered 
beneficiaries in the following order of priority:
            ``(A) Spouses and children of members of the uniformed 
        services who are on active duty for a period of more than 30 
        days.
            ``(B) Persons described in subsection (c) of section 1086 
        of this title. The administering Secretary concerned may 
        disregard the exclusion set forth in subsection (d)(1) of such 
        section in the case of a person described in subsection (c) of 
        such section who is enrolled in the supplementary medical 
        insurance program under part B of title XVIII of the Social 
        Security Act (42 U.S.C. 1395j et seq.).
    ``(3) With respect to a member described in paragraph (1) or a 
covered beneficiary described in paragraph (2) who enrolls in a 
Uniformed Services Health Plan, participation in such a plan shall be 
the exclusive source of health care services available to the member or 
person under this chapter.
    ``(f) Effect of Failure to Enroll.--(1) Except as provided in 
paragraph (2), if a person described in subsection (e)(2) declines the 
opportunity offered by the administering Secretaries to enroll in a 
Uniformed Services Health Plan, the person shall not be entitled or 
eligible for health care services in facilities of the uniformed 
services or pursuant to a contract entered into under this chapter. 
However, nothing in this paragraph shall be construed to effect the 
right of a person to a premium payment by the Secretary of Defense if 
the person is enrolled in another health plan under the Health Security 
Act and is otherwise entitled to such a payment under subsection (h).
    ``(2) A person described in subsection (e)(2) who is enrolled with 
a health plan that is not a Uniformed Services Health Plan may receive 
the items and services in the comprehensive benefit package in a 
facility of the uniformed services only if--
            ``(A) the Secretary of Defense authorizes the provision of 
        a particular item or service in the package to the person;
            ``(B) the Secretary determines that the provision of the 
        item or service involved will not interfere with the provision 
        of health care services to members of the uniformed services or 
        persons enrolled in a Uniformed Services Health Plan; and
            ``(C) the health plan in which the person is enrolled 
        agrees to pay the actual and full cost of the items and 
        services in the package actually provided to the person.
    ``(3) The administering Secretaries shall assure that all rights 
and entitlements under this chapter of any person described in 
subsection (e)(2) are fully preserved if the person--
            ``(A) is not offered the opportunity to enroll in a 
        Uniformed Services Health Plan; and
            ``(B) is not otherwise enrolled in a health plan provided 
        through a health alliance under the Health Security Act.
    ``(g) Special Rule for Other Payers.--(1)(A) In the case of a 
person who is enrolled in the supplementary medical insurance program 
under part B of title XVIII of the Social Security Act (42 U.S.C. 1395j 
et seq.) and who is also enrolled in a Uniformed Services Health Plan, 
Medicare shall be responsible for making a premium payment on behalf of 
the person. The payment responsibilities of Medicare under this 
paragraph shall be in the same amounts and under the same terms and 
conditions under which the Secretary of Health and Human Services makes 
payments to eligible organizations with a risk-sharing contract under 
section 1876 of the Social Security Act. A premium payment by Medicare 
under this paragraph shall be the person's exclusive benefit under 
Medicare.
    ``(B) In this paragraph, the term `Medicare' means any program 
administered under title XVIII of the Social Security Act (42 U.S.C. 
1395c et seq.).
    ``(2) Nothing in this section shall affect the payment of the 
retiree discount under the Health Security Act on behalf of a person 
who is enrolled in a Uniformed Services Health Plan if the person is 
otherwise eligible for the retiree discount.
    ``(h) Payment Responsibilities of the Secretary.--(1) In the case 
of a person described in subsection (e)(2) who is not enrolled in a 
Uniformed Services Health Plan, the Secretary may make a premium 
payment for the person's enrollment through a health alliance in 
another health plan. In determining the amount of the payment, the 
Secretary shall consider the amount of any retiree discount payable 
under the Health Security Act on behalf of the person and the amount of 
any premium credits attributable to employer payments with respect to 
employment of the person.
    ``(2) The Secretary shall not make a payment pursuant to this 
subsection in connection with any person enrolled in a health plan of 
the Department of Veterans Affairs or a health program of the Indian 
Health Service.
    ``(i) Payment Responsibilities of Persons Enrolled in a Uniformed 
Services Health Plan.--(1) In the case of an active duty member who is 
enrolled in a Uniformed Services Health Plan, the administering 
Secretaries may not impose or collect from the member a cost-share 
charge of any kind (whether a premium, copayment, deductible, 
coinsurance charge, or other charge) other than subsistence charges 
authorized under section 1075 of this title.
    ``(2) Subject to paragraph (3), persons described in subsection 
(e)(2) who are enrolled in a Uniformed Services Health Plan shall have 
such payment responsibilities as the Secretary establishes, but not to 
exceed payment of a family share under section 1343 of a premium and 
cost sharing. Payment obligations established under this paragraph may 
not exceed those obligations otherwise required under the national 
standards for health plans established pursuant to the Health Security 
Act.
    ``(3)(A) Persons described in subsection (e)(2) who enroll in a 
Uniformed Services Health Plan and who (in the absence of this section) 
would be covered beneficiaries under section 1079 or 1086 of this title 
continuously since December 31, 1994, shall have, as a group, out-of-
pocket costs in 1995 no greater than the lesser of--
            ``(i) the out-of-pocket costs in effect for such 
        beneficiaries under section 1075, 1078, 1079(b), or 1086(b) of 
        this title (whichever applies) on December 31, 1994; and
            ``(ii) those obligations otherwise required under the 
        national standards for health plans established pursuant to the 
        Health Security Act.
    ``(B) Members of the uniformed services on active duty as of 
December 31, 1994, who afterward become covered beneficiaries under 
section 1079 or 1086 of this title (or would become covered 
beneficiaries in the absence of this section) without a break in 
eligibility for health care services under this chapter shall have, as 
a group, out-of-pocket costs as covered beneficiaries no higher than 
the out-of-pocket costs in effect for similarly situated covered 
beneficiaries described in subparagraph (A).
    ``(C) The limitation on out-of-pocket costs established pursuant to 
subparagraph (A) may be adjusted for years after 1995 by an appropriate 
economic index, as determined by the Secretary of Defense.
    ``(4) The Secretary of Defense shall establish the payment 
requirements under paragraph (2), and enforce the limitations on such 
requirements specified in paragraph (3), in regulations prescribed 
pursuant to subsection (a).
    ``(j) Financial Account.--There is hereby established in the 
Department of Defense a financial account to which shall be credited 
all premium payments and other receipts from other payers and 
beneficiaries made in connection with any person enrolled in a 
Uniformed Services Health Plan. The account shall be administered by 
the Secretary of Defense, and funds in the account may be used by the 
Secretary for any purpose directly related to the delivery and 
financing of health care services under this chapter, including 
operations, maintenance, personnel, procurement, contributions toward 
construction projects, and related costs. Funds in the account shall 
remain available until expended.''.
    (2) The table of sections at the beginning of such chapter is 
amended by inserting after the item relating to section 1073 the 
following new item:

``1073a. Uniformed Services Health Plans: establishment and 
                            coordination with national health care 
                            reform.''.
    (b) Definition.--Section 1072 of such title is amended by adding at 
the end the following new paragraph:
            ``(6) The term `Uniformed Services Health Plan' means a 
        plan established by the Secretary of Defense under section 
        1073a(a) of this title in order to provide health care services 
        to members of the uniformed services on active duty and other 
        covered beneficiaries under this chapter.''.
    (c) Report on Establishment.--If the Secretary of Defense 
determines to establish any Uniformed Services Health Plan under 
section 1073a of title 10, United States Code, as added by subsection 
(a), the Secretary shall submit to Congress a report describing the 
Plans proposed to be initially offered under such section. The report 
required by this subsection shall be submitted not later than 30 days 
before the date on which the Secretary first issues proposed rules 
under subsection (a) of such section to establish any such Plan.

               Subtitle B--Department of Veterans Affairs

                                                 Title VIII, Subtitle B

SEC. 8101. BENEFITS AND ELIGIBILITY THROUGH DEPARTMENT OF VETERANS 
              AFFAIRS MEDICAL SYSTEM.

    (a) DVA As a Participant in Health Care Reform.--
            (1) In general.--Title 38, United States Code, is amended 
        by inserting after chapter 17 the following new chapter:

    ``CHAPTER 18--ELIGIBILITY AND BENEFITS UNDER HEALTH SECURITY ACT

                        ``SUBCHAPTER I--GENERAL

``1801. Definitions.
                      ``SUBCHAPTER II--ENROLLMENT

``1811. Enrollment: veterans.
``1812. Enrollment: CHAMPVA eligibles.
``1813. Enrollment: family members.
                       ``SUBCHAPTER III--BENEFITS

``1821. Benefits for VA enrollees.
``1822. Chapter 17 benefits.
``1823. Supplemental benefits packages and policies.
``1824. Limitation regarding veterans enrolled with health plans 
                            outside Department.
                   ``SUBCHAPTER IV--FINANCIAL MATTERS

``1831. Premiums, copayments, etc.
``1832. Medicare coverage and reimbursement.
``1833. Recovery of cost of certain care and services.
``1834. Health Plan Funds.

                        ``SUBCHAPTER I--GENERAL

``Sec. 1801. Definitions
    ``For purposes of this chapter:
            ``(1) The term `health plan' means an entity that has been 
        certified under the Health Security Act as a health plan.
            ``(2) The term `VA health plan' means a health plan that is 
        operated by the Secretary under section 7341 of this title.
            ``(3) The term `VA enrollee' means an individual enrolled 
        under the Health Security Act in a VA health plan.

                      ``SUBCHAPTER II--ENROLLMENT

``Sec. 1811. Enrollment: veterans
    ``Each veteran who is an eligible individual within the meaning of 
section 1001 of the Health Security Act may enroll with a VA health 
plan. A veteran who wants to receive the comprehensive benefit package 
through the Department shall enroll with a VA health plan.
``Sec. 1812. Enrollment: CHAMPVA eligibles
    ``An individual who is eligible for benefits under section 1713 of 
this title and who is eligible to enroll in a health plan pursuant to 
section 1001 of the Health Security Act may enroll under that Act with 
a VA health plan in the same manner as a veteran.
``Sec. 1813. Enrollment: family members
    ``(a) The Secretary may authorize a VA health plan to enroll 
members of the family of an enrollee under section 1811 or 1812 of this 
title, subject to payment of premiums, deductibles, copayments, and 
coinsurance as required under the Health Security Act.
    ``(b) For purposes of subsection (a), an enrollee's family is those 
individuals (other than the enrollee) included within the term `family' 
as defined in section 1011(b) of the Health Security Act.

                       ``SUBCHAPTER III--BENEFITS

``Sec. 1821. Benefits for VA enrollees
    ``The Secretary shall ensure that each VA health plan provides to 
each individual enrolled with it the items and services in the 
comprehensive benefit package under the Health Security Act.
``Sec. 1822. Chapter 17 benefits
    ``The Secretary shall provide to veterans the care and services 
that are authorized to be provided under chapter 17 of this title in 
accordance with the terms and conditions applicable to that veteran and 
that care under such chapter, notwithstanding that such care and 
services are not included in the comprehensive benefit package.
``Sec. 1823. Supplemental benefits packages and policies
    ``A VA health plan may offer supplemental health benefits policies 
for health care services not provided under chapter 17 of this title 
and cost sharing policies consistent with the requirements of part 2 of 
subtitle E of title I of the Health Security Act.
``Sec. 1824. Limitation regarding veterans enrolled with health plans 
              outside Department
    ``A veteran who is residing in a regional alliance area in which 
the Department operates a health plan and who is enrolled in a health 
plan that is not operated by the Department may be provided the items 
and services in the comprehensive benefit package by a VA health plan 
only if the plan is reimbursed for the actual and full cost of the care 
provided.

                   ``SUBCHAPTER IV--FINANCIAL MATTERS

``Sec. 1831. Premiums, copayments, etc.
    ``(a) In the case of a veteran described in subsection (b) who is a 
VA enrollee, the Secretary may not impose or collect from the veteran a 
cost-share charge of any kind (whether a premium, copayment, 
deductible, coinsurance charge, or other charge). The Secretary shall 
make such arrangements as necessary with health alliances in order to 
carry out this subsection.
    ``(b) The veterans referred to in subsection (a) are the following:
            ``(1) Any veteran with a service-connected disability.
            ``(2) Any veteran whose discharge or release from the 
        active military, naval or air service was for a disability 
        incurred or aggravated in the line of duty.
            ``(3) Any veteran who is in receipt of, or who, but for a 
        suspension pursuant to section 1151 of this title (or both such 
        a suspension and the receipt of retired pay), would be entitled 
        to disability compensation, but only to the extent that such a 
        veteran's continuing eligibility for such care is provided for 
        in the judgment or settlement provided for in such section.
            ``(4) Any veteran who is a former prisoner of war.
            ``(5) Any veteran of the Mexican border period or World War 
        I.
            ``(6) Any veteran who is unable to defray the expenses of 
        necessary care as determined under section 1722(a) of this 
        title.
    ``(c) In the case of a VA enrollee who is not described in 
subsection (b), the Secretary shall charge premiums and establish 
copayments, deductibles, and coinsurance amounts. The premium rate, and 
the rates for deductibles and copayments, for each VA health plan shall 
be established by that health plan based on rules established by the 
health alliance under which it is operating.
    ``(d) In the case of a veteran with a service-connected disability 
who is enrolled in a VA health plan and who has net earnings from self-
employment, the Secretary shall, under regulations prescribed by the 
Secretary, provide for a reduction in any premium payment (or alliance 
credit repayment) owed by the veteran under section 6126 or 6111 of the 
Health Security Act by virtue of the veteran's net earnings from self-
employment.
``Sec. 1832. Medicare coverage and reimbursement
    ``(a) For purposes of any program administered by the Secretary of 
Health and Human Services under title XVIII of the Social Security Act, 
a Department facility shall be deemed to be a Medicare provider.
    ``(b)(1) A VA health plan shall be considered to be a Medicare HMO.
    ``(2) For purposes of this section, the term `Medicare HMO' means 
an eligible organization under section 1876 of the Social Security Act.
    ``(c) In the case of care provided to a veteran other than a 
veteran described in section 1831(b) of this title who is eligible for 
benefits under the Medicare program under title XVIII of the Social 
Security Act, the Secretary of Health and Human Services shall 
reimburse a VA health plan or Department health-care facility providing 
services as a Medicare provider or Medicare HMO in the same amounts and 
under the same terms and conditions as that Secretary reimburses other 
Medicare providers or Medicare HMOs, respectively. The Secretary of 
Health and Human Services shall include with each such reimbursement a 
Medicare explanation of benefits.
    ``(d) When the Secretary provides care to a veteran for which the 
Secretary receives reimbursement under this section, the Secretary 
shall require the veteran to pay to the Department any applicable 
deductible or copayment that is not covered by Medicare.
``Sec. 1833. Recovery of cost of certain care and services
    ``(a) In the case of an individual provided care or services 
through a VA health plan who has coverage under a supplemental health 
insurance policy pursuant to part 2 of subtitle E of title I of the 
Health Security Act or under any other provision of law, or who has 
coverage under a Medicare supplemental health insurance plan (as 
defined in the Health Security Act) or under any other provision of 
law, the Secretary has the right to recover or collect charges for care 
or services (as determined by the Secretary, but not including care or 
services for a service-connected disability) from the party providing 
that coverage to the extent that the individual (or the provider of the 
care or services) would be eligible to receive payment for such care or 
services from such party if the care or services had not been furnished 
by a department or agency of the United States.
    ``(b) The provisions of subsections (b) through (f) of section 1729 
of this title shall apply with respect to claims by the United States 
under subsection (a) in the same manner as they apply to claims under 
subsection (a) of that section.
``Sec. 1834. Health Plan Fund
    ``(a) There is hereby established in the Treasury a revolving fund 
to be known as the `Department of Veterans Affairs Health Plan Fund'.
    ``(b) Any amount received by the Department by reason of the 
furnishing of health care by a VA health plan or the enrollment of an 
individual with a VA health plan (including amounts received as 
premiums, premium discount payments, copayments or coinsurance, and 
deductibles, amounts received as third-party reimbursements, and 
amounts received as reimbursements from another health plan for care 
furnished to one of its enrollees) shall be credited to the revolving 
fund.
    ``(c) Notwithstanding subsection (b), the Department may not retain 
amounts received for care furnished to a VA enrollee in a case in which 
the costs of such care have been covered by appropriations. Such 
amounts shall be deposited in the General Fund of the Treasury.
    ``(d) Amounts in the revolving fund are hereby made available for 
the expenses of the delivery by a VA health plan of the items and 
services in the comprehensive benefit package and any supplemental 
benefits package or policy offered by that health plan.''.
            (2) The table of chapters at the beginning of part II of 
        title 38, United States Code, is amended by inserting after the 
        item relating to chapter 17 the following new item:

``18. Benefits and Eligibility Under Health Security Act....   1801.''.
    (b) Preservation of Existing Benefits for Facilities Not Operating 
as Health Plans.--(1) Chapter 17 of title 38, United States Code, is 
amended by inserting after section 1704 the following new section:
``Sec. 1705. Facilities not operating within health plans; veterans not 
              eligible to enroll in health plans
    ``The provisions of this chapter shall apply with respect to the 
furnishing of care and services--
            ``(1) by any facility of the Department that is not 
        operating as or within a health plan certified as a health plan 
        under the Health Security Act; and
            ``(2) by any facility of the Department (whether or not 
        operating as or within a health plan certified as a health plan 
        under the Health Security Act) in the case of a veteran who is 
        not an eligible individual with the meaning of section 1001 of 
        the Health Security Act.''.
    (2) The table of sections at the beginning of such chapter is 
amended by inserting after the item relating to section 1704 the 
following new item:

``1705. Facilities not operating within health plans; veterans not 
                            eligible to enroll in health plans.''.

SEC. 8102. ORGANIZATION OF DEPARTMENT OF VETERANS AFFAIRS FACILITIES AS 
              HEALTH PLANS.

    (a) In General.--Chapter 73 of title 38, United States Code, is 
amended--
            (1) by redesignating subchapter IV as subchapter V; and
            (2) by inserting after subchapter III the following new 
        subchapter:

 ``SUBCHAPTER IV--PARTICIPATION AS PART OF NATIONAL HEALTH CARE REFORM

``Sec. 7341. Organization of health care facilities as health plans
    ``(a) The Secretary shall organize health plans and operate 
Department facilities as or within health plans under the Health 
Security Act. The Secretary shall prescribe regulations establishing 
standards for the operation of Department health care facilities as or 
within health plans under that Act. In prescribing those standards, the 
Secretary shall assure that they conform, to the maximum extent 
practicable, to the requirements for health plans generally set forth 
in part 1 of subtitle E of title I of the Health Security Act.
    ``(b) Within a geographic area or region, health care facilities of 
the Department located within that area or region may be organized to 
operate as a single health plan encompassing all Department facilities 
within that area or region or may be organized to operate as several 
health plans.
    ``(c) In carrying out responsibilities under the Health Security 
Act, a State (or a State-established entity)--
            ``(1) may not impose any standard or requirement on a VA 
        health plan that is inconsistent with this section or any 
        regulation prescribed under this section or other Federal laws 
        regarding the operation of this section; and
            ``(2) may not deny certification of a VA health plan under 
        the Health Security Act on the basis of a conflict between a 
        rule of a State or health alliance and this section or 
        regulations prescribed under this section or other Federal laws 
        regarding the operation of this section.
``Sec. 7342. Contract authority for facilities operating as or within 
              health plans
    ``The Secretary may enter into a contract (without regard to 
provisions of law requiring the use of competitive procedures) for the 
provision of services by a VA health plan in any case in which the 
Secretary determines that such contracting is more cost-effective than 
providing such services directly through Department facilities or when 
such contracting is necessary because of geographic inaccessibility.
``Sec. 7343. Resource sharing authority: facilities operating as or 
              within health plans
    ``The Secretary may enter into agreements under section 8153 of 
this title with other health care plans, with health care providers, 
and with other health industry organizations, and with individuals, for 
the sharing of resources of the Department through facilities of the 
Department operating as or within health plans.
``Sec. 7344. Administrative and personnel flexibility
    ``(a) In order to carry out this subchapter, the Secretary may--
            ``(1) carry out administrative reorganizations of the 
        Department without regard to those provisions of section 510 of 
        this title following subsection (a) of that section; and
            ``(2) enter into contracts for the performance of services 
        previously performed by employees of the Department without 
        regard to section 8110(c) of this title.
    ``(b) The Secretary may establish alternative personnel systems or 
procedures for personnel at facilities operating as or with health 
plans under the Health Security Act whenever the Secretary considers 
such action necessary in order to carry out the terms of that Act, 
except that the Secretary shall provide for preference eligibles (as 
defined in section 2108 of title 5, United States Code) in a manner 
comparable to the preference for such eligibles under subchapter I of 
chapter 33, and subchapter I of chapter 35, of such title.
    ``(c) Subject to the provisions of section 1404 of the Health 
Security Act, the Secretary may carry out appropriate promotional, 
advertising, and marketing activities to inform individuals of the 
availability of facilities of the Department operating as or within 
health plans. Such activities may only be carried out using 
nonappropriated funds.
``Sec. 7345. Veterans Health Care Investment Fund
    ``(a) There is hereby authorized to be appropriated to the 
Department, in addition to amounts otherwise authorized to be 
appropriated to the Department for VA health plans, such amounts as are 
necessary for the Secretary of the Treasury to fulfill the requirement 
of subsection (b).
    ``(b) For each of fiscal years 1995, 1996, and 1997, the Secretary 
of the Treasury shall, subject to subsection (a), credit to a special 
fund (in this section referred to as the `Fund') of the Treasury an 
amount equal to--
            ``(1) $1,000,000,000 for fiscal year 1995;
            ``(2) $600,000,000 for fiscal year 1996; and
            ``(3) $1,700,000,000 for fiscal year 1997.
    ``(c)(1) Subject to paragraph (2), amounts in the Fund shall be 
available to the Secretary only for the VA health plans authorized 
under this chapter.
    ``(2) For fiscal year 1995, 1996, or 1997, the amount credited to 
the Fund for the fiscal year shall be available for use by the 
Secretary under paragraph (1) only if appropriations Acts for that 
fiscal year, without addition of amounts provided under subsection (a) 
for the Fund, provide new budget authority for the Department of 
Veterans Affairs Medical Care account, for that fiscal year, of no less 
than the amount for that account proposed in the budget of the 
President for that fiscal year under section 1105 of title 31.
    ``(d) The Secretary shall submit to Congress, no later than March 
1, 1997, a report concerning the operation of the Department of 
Veterans Affairs health care system in preparing for, and operating 
under, national health care reform under the Health Security Act during 
fiscal years 1995 and 1996. The report shall include a discussion of--
            ``(1) the adequacy of amounts in the Fund for the operation 
        of VA health plans;
            ``(2) the quality of care provided by such plans;
            ``(3) the ability of such plans to attract patients; and
            ``(4) the need (if any) for additional funds for the Fund 
        in fiscal years after fiscal year 1997.
``Sec. 7346. Funding provisions: grants and other sources of assistance
    ``The Secretary may apply for and accept, if awarded, any grant or 
other source of funding that is intended to meet the needs of special 
populations and that but for this section is unavailable to facilities 
of the Department or to health plans operated by the Government if 
funds obtained through the grant or other source of funding will be 
used through a facility of the Department operating as or within a 
health plan.''.
    (b) Clerical Amendment.--The table of sections at the beginning of 
chapter 73 is amended by striking out the item relating to the heading 
for subchapter IV and inserting in lieu thereof the following:

 ``Subchapter IV--Participation as Part of National Health Care Reform

``7341. Organization of health care facilities as health plans.
``7342. Contract authority for facilities operating as or within health 
                            plans.
``7343. Resource sharing authority: facilities operating as or within 
                            health plans.
``7344. Administrative and personnel flexibility.
``7345. Veterans Health Care Investment Fund.
``7346. Funding provisions: grants and other sources of assistance.
                ``Subchapter V--Research Corporations''.

    (c) Transition Provision.--The limitation in the second sentence of 
section 7344(c) of title 38, United States Code, as added by subsection 
(a), shall not apply during fiscal year 1994.

                                                 Title VIII, Subtitle C

         Subtitle C--Federal Employees Health Benefits Program

SEC. 8201. DEFINITIONS.

    Except as otherwise specifically provided, in this subtitle:
            (1) Abroad.--The term ``abroad'' means outside the United 
        States.
            (2) Annuitant, etc.--The terms ``annuitant'', ``employee'', 
        and ``Government'', have the same respective meanings as are 
        given such terms by section 8901 of title 5, United States Code 
        (as last in effect).
            (3) Employees health benefits fund.--The term ``Employees 
        Health Benefits Fund'' means the fund under section 8909 of 
        title 5, United States Code (as last in effect).
            (4) FEHBP.--The term ``FEHBP'' means the health insurance 
        program under chapter 89 of title 5, United States Code (as 
        last in effect).
            (5) FEHBP plan.--The term ``FEHBP plan'' has the same 
        meaning as is given the term ``health benefits plan'' by 
        section 8901(6) of title 5, United States Code (as last in 
        effect).
            (6) FEHBP termination date.--The term ``FEHBP termination 
        date'' means the date (specified in section 8202) after which 
        FEHBP ceases to be in effect.
            (7) Retired employees health benefits fund.--The term 
        ``Retired Employees Health Benefits Fund'' means the fund under 
        section 8 of the Retired Federal Employees Health Benefits Act 
        (Public Law 86-724; 74 Stat. 851), as last in effect.
            (8) RFEHBP.--The term ``RFEHBP'' means the health insurance 
        program under the Retired Federal Employees Health Benefits 
        Act.

SEC. 8202. FEHBP TERMINATION.

    Chapter 89 of title 5, United States Code, is repealed effective as 
of December 31, 1997, and all contracts under such chapter shall 
terminate not later than such date.

SEC. 8203. TREATMENT OF FEDERAL EMPLOYEES, ANNUITANTS, AND OTHER 
              INDIVIDUALS (WHO WOULD OTHERWISE HAVE BEEN ELIGIBLE FOR 
              FEHBP) UNDER HEALTH PLANS.

    (a) Applicability.--This section sets forth rules applicable, after 
the FEHBP termination date, with respect to individuals who--
            (1) are eligible individuals under section 1001; and
            (2) but for this subtitle, would be eligible to enroll in 
        an FEHBP plan.
    (b) Federal Employees.--
            (1) Same treatment as non-federal employees.--A Federal 
        employee shall be treated in the same way, for purposes of 
        provisions of this Act outside of this subtitle, as if that 
        individual were a non-Federal employee, including for purposes 
        of any requirements relating to enrollment, family premium 
        payments, and employer premium payments.
            (2) Employer premium payments.--Any employer premium 
        payment required with respect to the employment of a Federal 
        employee shall be payable from the appropriation or fund from 
        which any Government contribution on behalf of such employee 
        would have been payable under FEHBP.
            (3) Offer of fehbp supplemental plans.--The Federal 
        Government shall offer to Federal employees one or more FEHBP 
        supplemental plans developed under subsection (f)(1).
            (4) Definitions.--In this subsection:
                    (A) Federal employee.--The term ``Federal 
                employee'' means an ``employee'' as defined by section 
                8201.
                    (B) Non-federal employee.--The term ``non-Federal 
                employee'' means an ``employee'' as defined by section 
                1901.
    (c) Annuitants.--
            (1) Health plan.--
                    (A) Authority to make certain withholdings from 
                annuities.--
                            (i) In general.--The Office of Personnel 
                        Management may, on the request of an annuitant 
                        enrolled in a health plan, withhold from the 
                        annuity of such annuitant any premiums required 
                        for such enrollment. The Office shall forward 
                        any amounts so withheld to the appropriate fund 
                        or as otherwise indicated in the request. A 
                        request under this subparagraph shall contain 
                        such information, and otherwise be made in such 
                        form and manner, as the Office shall by 
                        regulation prescribe.
                            (ii) References.--Any reference in clause 
                        (i) to the Office of Personnel Management 
                        shall, for purposes of any annuity (including 
                        monthly compensation under subchapter I of 
                        chapter 81 of title 5, United States Code) 
                        payable under provisions of law which are 
                        administered by a Government entity other than 
                        the Office, be considered to be a reference to 
                        such other Government entity.
                    (B) Payment of alliance credit liability for 
                annuitants below age 55.--In the case of an annuitant 
                who does not satisfy the eligibility requirements under 
                section 6114, a Government contribution shall be made 
                equal to such amount as is necessary to reduce the 
                employee's liability under section 6111 to zero.
            (2) FEHBP supplemental plan.--
                    (A) Current annuitants.--
                            (i) In general.--Each current annuitant--
                                    (I) shall be eligible to enroll in 
                                FEHBP supplemental plans developed 
                                under subsection (f)(1); and
                                    (II) shall be eligible for the 
                                Government contribution amount 
                                described in clause (ii) toward the 
                                premium for such a plan.
                            (ii) Government contribution amount.--The 
                        Office of Personnel Management shall specify a 
                        level of Government contribution under this 
                        subparagraph for an FEHBP supplemental plan. 
                        Such level--
                                    (I) shall reasonably reflect the 
                                portion of the Government contributions 
                                (last provided under FEHBP) 
                                attributable to the portion of FEHBP 
                                benefits which the plan is designed to 
                                replace; and
                                    (II) shall be applied toward 
                                premiums for such a plan.
                    (B) Future annuitants.--In the case of a future 
                annuitant, the Federal Government shall offer to such 
                an annuitant one or more FEHBP supplemental plans 
                developed under subsection (f)(1).
                    (C) Definitions.--In this paragraph:
                            (i) Current annuitant.--The term ``current 
                        annuitant'' means an individual who is residing 
                        in a State on January 1, 1998, and, on the day 
                        before such date, was--
                                    (I) enrolled in an FEHBP plan as an 
                                annuitant; or
                                    (II) covered under an FEHBP plan as 
                                a family member (but only if such 
                                individual would otherwise have been 
                                eligible to enroll in an FEHBP plan as 
                                an annuitant).
                            (ii) Future annuitant.--The term ``future 
                        annuitant'' means an annuitant who is not a 
                        current annuitant.
    (d) Individuals Who Would Not Be Eligible for a Government 
Contribution Under FEHBP.--
            (1) In general.--In the case of an individual described in 
        paragraph (2)--
                    (A) the Federal Government may, but is not required 
                to, offer one or more FEHBP supplemental plans 
                developed under subsection (f)(1); and
                    (B) no Government contribution shall be payable 
                with respect to the premium for such a plan.
            (2) Applicability.--This subsection shall apply with 
        respect to any individual who (but for this subtitle) would be 
        eligible to enroll in an FEHBP plan, but would not be eligible 
        for a Government contribution toward any such plan.
    (e) Medicare-Eligible Individuals.--
            (1) Current medicare-eligible individuals.--
                    (A) In general.--Each current medicare-eligible 
                individual--
                            (i) shall be eligible to enroll in medicare 
                        supplemental plans developed under subsection 
                        (f)(2); and
                            (ii) if such individual would (but for this 
                        subtitle) have been eligible for a Government 
                        contribution under FEHBP (assuming such 
                        individual were then enrolled thereunder), 
                        shall be eligible for the Government medicare 
                        contribution amount described in subparagraph 
                        (B) toward the premium for such a plan or 
                        toward the premium for enrollment with an 
                        eligible organization under a risk-sharing 
                        contract under section 1876 of the Social 
                        Security Act).
                    (B) Medicare contribution amount.--The Office of 
                Personnel Management shall specify a level of 
                Government contribution under this paragraph for an 
                FEHBP medicare supplemental plan. Such level--
                            (i) shall reasonably reflect the portion of 
                        the Government contributions (last provided 
                        under FEHBP) attributable to the portion of 
                        FEHBP benefits which the plan is designed to 
                        replace; and
                            (ii) except as otherwise provided in 
                        paragraph (3), shall be applied toward premiums 
                        for such a plan.
            (2) Future medicare-eligible individuals.--In the case of a 
        future medicare-eligible individual, the Federal Government 
        may, but is not required to--
                    (A) offer to such a medicare-eligible individual 
                one or more FEHBP medicare supplemental plans developed 
                under subsection (f)(2); and
                    (B) make a Government contribution with respect to 
                the premium for such a plan.
            (3) Application of contribution toward medicare hmo 
        option.--
                    (A) Election.--A medicare-eligible individual may 
                elect to have the amount of the Government contribution 
                described in paragraph (1)(B) or referred to in 
                paragraph (2)(B) applied toward premiums for enrollment 
                with an eligible organization under a risk-sharing 
                contract under section 1876 of the Social Security Act.
                    (B) Level contribution rule.--The level of such 
                Government contribution on behalf of an individual 
                shall be determined without taking into account any 
                election under subparagraph (A).
            (4) Definitions.--In this subsection:
                    (A) Current medicare-eligible individual.--The term 
                ``current medicare-eligible individual'' means an 
                individual who is residing in a State on January 1, 
                1998, and, on the day before such date, was a medicare-
                eligible individual.
                    (B) Future medicare-eligible individual.--The term 
                ``future medicare-eligible individual'' means a 
                medicare-eligible individual who is not a current 
                medicare-eligible individual.
            (5) Inapplicability.--Subsections (b) through (d) shall not 
        apply with respect to a medicare-eligible individual.
    (f) Development of Supplemental Plans.--
            (1) FEHBP supplemental plans.--The Office of Personnel 
        Management shall develop one or more FEHBP supplemental plans 
        which are supplemental health benefit policies or cost sharing 
        policies (as defined in section 1421(b)). Each such plan 
        shall--
                    (A) be consistent with the applicable requirements 
                of part 2 of subtitle E of title I (including the 
                requirements under section 1423(f)); and
                    (B) reflect (taking into consideration the benefits 
                in the comprehensive benefit package) the overall level 
                of benefits last generally afforded under FEHBP.
            (2) FEHBP medicare supplemental plans.--The Office of 
        Personnel Management shall develop one or more medicare 
        supplemental plans. Each such plan shall--
                    (A) offer benefits which shall include the core 
                group of basic benefits identified under section 
                1882(p)(2) of the Social Security Act; and
                    (B) reflect (taking into consideration the benefits 
                provided under the medicare program) the overall level 
                of benefits last generally afforded under FEHBP.
    (g) Authorization of appropriations.--The Government contributions 
authorized by this section on behalf of an annuitant (including an 
annuitant who is a medicare-eligible individual) shall be paid from 
annual appropriations which are authorized to be made for that purpose 
and which may be made available until expended.
    (h) Fund.--
            (1) Establishment.--There shall be established in the 
        Treasury of the United States a fund into which shall be paid 
        all contributions relating to any--
                    (A) FEHBP supplemental plan developed under 
                subsection (f)(1);
                    (B) FEHBP medicare supplemental plan developed 
                under subsection (f)(2); or
                    (C) health insurance program established under 
                section 8204.
            (2) Administration and use.--The fund shall be administered 
        by the Office of Personnel Management, and any monies in the 
        fund shall be available for purposes of the plan or program 
        (referred to in paragraph (1)) to which they are attributable.

SEC. 8204. TREATMENT OF INDIVIDUALS RESIDING ABROAD.

    (a) In General.--After the FEHBP termination date, individuals 
residing abroad who (but for this subtitle) would be eligible to enroll 
in an FEHBP plan shall be eligible for health insurance under a program 
which the Office of Personnel Management shall by regulation establish.
    (b) Requirement.--To the extent practicable, coverage and benefits 
provided to individuals under such program shall be equal to the 
coverage and benefits which would be available to them if they were 
residing in the United States.
    (c) Government Contributions.--Any Government contribution payable 
under such program shall be made from the appropriation or fund from 
which any Government contribution would have been payable under FEHBP 
(if any) on behalf of the individual involved, except that, in the case 
of an annuitant, any such contribution shall be payable from amounts 
appropriated pursuant to section 8203(g).

SEC. 8205. TRANSITION AND SAVINGS PROVISIONS.

    (a) Employees Health Benefits Fund.--
            (1) Temporary continued availability.--Notwithstanding 
        section 8202, the Employees Health Benefits Fund shall be 
        maintained, and amounts in such Fund shall remain available, 
        after the FEHBP termination date, for such period of time as 
        the Office of Personnel Management considers necessary in order 
        to satisfy any outstanding claims.
            (2) Final disbursement.--After the end of the period 
        referred to in paragraph (1), any amounts remaining in the Fund 
        shall be disbursed (between the Government and former 
        participants in FEHBP) in accordance with a plan which the 
        Office shall prepare, consistent with the cost-sharing ratio 
        between the Government and plan enrollees during the final 
        contract term. The details of any such plan shall be submitted 
        to the President and the Congress at least 1 year before the 
        date of its proposed implementation.
    (b) Proceedings.--After the FEHBP termination date, chapter 89 of 
title 5, United States Code (as last in effect) shall be considered to 
have remained in effect for purposes of any suit, action, or other 
proceeding with respect to any liability incurred or violation which 
occurred on or before such date.
    (c) RFEHBA.--
            (1) Repeal.--The Retired Federal Employees Health Benefits 
        Act (Public Law 86-724; 74 Stat. 849) is repealed effective as 
        of the FEHBP termination date.
            (2) Related provisions.--After the FEHBP termination date--
                    (A) the Retired Employees Health Benefits Fund 
                shall temporarily remain available, and amounts in that 
                fund shall subsequently be disbursed, in a manner 
                comparable to that provided for under subsection (a); 
                and
                    (B) retired employees who (but for this subtitle) 
                would be eligible for coverage under the Retired 
                Federal Employees Health Benefits Act shall be treated, 
                for purposes of this subtitle, as if they were 
                annuitants (subject to any differences in the overall 
                level of coverage or benefits last generally afforded 
                to annuitants under FEHBP and to retired employees 
                under RFEHBP, respectively).
            (3) Regulations.--Regulations prescribed under section 8206 
        to carry out this subsection shall include any necessary 
        provisions relating to individuals residing abroad.

SEC. 8206. REGULATIONS.

    The Office of Personnel Management shall prescribe any regulations 
which may be necessary to carry out this subtitle.

SEC. 8207. TECHNICAL AND CONFORMING AMENDMENTS.

    (a) OPM's Annual Report on FEHBP.--Subsection (c) of section 1308 
of title 5, United States Code, is repealed.
    (b) Other References to FEHBP.--Any reference in any provision of 
law to the health insurance program under chapter 89 of title 5, United 
States Code (or any aspect of such program) shall be considered to be a 
reference to the health insurance program under this subtitle (or 
corresponding aspect), subject to such clarification as may be 
provided, or except as may otherwise be provided, in regulations 
prescribed by the agency or other authority responsible for the 
administration of such provision.
    (c) Omnibus Budget Reconciliation Act of 1993.--Effective as of the 
date of the enactment of this Act, section 11101(b)(3) of the Omnibus 
Budget Reconciliation Act of 1993 (Public Law 103-66; 107 Stat. 413) is 
amended by striking ``September 30, 1998'' and inserting ``December 31, 
1997''.
    (d) Effective Date.--Except as provided in subsection (c), this 
section and the amendments made by this section shall take effect on 
the day after the FEHBP termination date.

                                                 Title VIII, Subtitle D

                   Subtitle D--Indian Health Service

SEC. 8301. DEFINITIONS.

    For the purposes of this subtitle--
            (1) the term ``health program of the Indian Health 
        Service'' means a program which provides health services under 
        this Act through a facility of the Indian Health Service, a 
        tribal organization under the authority of the Indian Self-
        Determination Act or a self-governance compact, or an urban 
        Indian program;
            (2) the term ``reservation'' means the reservation of any 
        federally recognized Indian tribe, former Indian reservations 
        in Oklahoma, and lands held by incorporated Native groups, 
        regional corporations, and village corporations under the 
        provisions of the Alaska Native Claims Settlement Act (43 
        U.S.C. 1601 et seq.);
            (3) the term ``urban Indian program'' means any program 
        operated pursuant to title V of the Indian Health Care 
        Improvement Act; and
            (4) the terms ``Indian'', ``Indian tribe'', ``tribal 
        organization'', ``urban Indian'', ``urban Indian 
        organization'', and ``service unit'' have the same meaning as 
        when used in the Indian Health Care Improvement Act (25 U.S.C. 
        1601 et seq.).

SEC. 8302. ELIGIBILITY AND HEALTH SERVICE COVERAGE OF INDIANS.

    (a) Eligibility.--An eligible individual, as defined in section 
1001(c), is eligible to enroll in a health program of the Indian Health 
Service if the individual is--
            (1) an Indian, or a descendent of a member of an Indian 
        tribe who belongs to and is regarded as an Indian by the Indian 
        community in which the individual lives, who resides on or near 
        an Indian reservation or in a geographical area designated by 
        statute as meeting the requirements of being on or near an 
        Indian reservation notwithstanding the lack of an Indian 
        reservation;
            (2) an urban Indian; or
            (3) an Indian described in section 809(b) of the Indian 
        Health Care Improvement Act (25 U.S.C. 1679(b)).
    (b) Election.--An individual described in subsection (a) may elect 
a health program of the Indian Health Service instead of a health plan.
    (c) Enrollment for Benefits.--An individual who elects a health 
program of the Indian Health Service under subsection (b) shall enroll 
in such program through a service unit, tribal organization, or urban 
Indian program. An individual who enrolls in such program is not 
subject to any charge for health insurance premiums, deductibles, 
copayments, coinsurance, or any other cost for health services provided 
under such program.
    (d) Payments by Individuals Who Do not Enroll.--If an individual 
described in subsection (a) does not enroll in a health program of the 
Indian Health Service, no payment shall be made by the Indian Health 
Service to the individual (or on behalf of the individual) with respect 
to premiums charged for enrollment in an applicable health plan or any 
other cost of health services under the applicable health plan which 
the individual is required to pay.

SEC. 8303. SUPPLEMENTAL INDIAN HEALTH CARE BENEFITS.

    (a) In General.--All individuals described in sections 8302(a) 
remain eligible for such benefits under the laws administered by the 
Indian Health Service as supplement the comprehensive benefit package. 
The individual shall not be subject to any charge or any other cost for 
such benefits.
    (b) Authorization of Appropriations.--In addition to amounts 
otherwise authorized to be appropriated, there is authorized to be 
appropriated to carry out this section $180,000,000 for fiscal year 
1995, $200,000,000 for each of the fiscal years 1996 through 1999, and 
such sums as may be necessary for fiscal year 2000 and each fiscal year 
thereafter.

SEC. 8304. HEALTH PLAN AND HEALTH ALLIANCE REQUIREMENTS.

    (a) Comprehensive Benefit Package.--The Secretary shall ensure that 
the comprehensive benefit package is provided by all health programs of 
the Indian Health Service effective January 1, 1999, notwithstanding 
section 1001(a).
    (b) Applicable Requirements of Health Plans.--In addition to 
subsection (a), the Secretary shall determine which other requirements 
relating to health plans apply to health programs of the Indian Health 
Service.
    (c) Certification.--Effective January 1, 1999, all health programs 
of the Indian Health Service must meet the certification requirements 
for health plans, as required by the Secretary under this section, as 
certified from time to time by the Secretary. Before January 1, 1999, 
all such health programs shall, to the extent practicable, meet such 
certification requirements.
    (d) Health Alliance Requirements.--The Secretary shall determine 
which requirements relating to health alliances apply to the Indian 
Health Service.

SEC. 8305. EXEMPTION OF TRIBAL GOVERNMENTS AND TRIBAL ORGANIZATIONS 
              FROM EMPLOYER PAYMENTS.

    A tribal government and a tribal organization under the Indian 
Self-Determination and Educational Assistance Act or a self-governance 
compact shall be exempt from making employer premium payments as an 
employer under section 6121.

SEC. 8306. PROVISION OF HEALTH SERVICES TO NON-ENROLLEES AND NON-
              INDIANS.

    (a) Contracts With Health Plans.--
            (1) In general.--A health program of the Indian Health 
        Service, a service unit, a tribal organization, or an urban 
        Indian organization operating within a health program may enter 
        into a contract with a health plan for the provision of health 
        care services to individuals enrolled in such health plan if 
        the program, unit, or organization determines that the 
        provision of such health services will not result in a denial 
        or diminution of health services to any individual described in 
        section 8302(a) who is enrolled for health services provided by 
        such program, unit, or organization.
            (2) Reimbursement.--Any contract entered into pursuant to 
        paragraph (1) shall provide for reimbursement to such program, 
        unit, or organization in accordance with the essential 
        community provider provisions of section 1431(c), as determined 
        by the Secretary.
    (b) Family Treatment.--
            (1) Determination to open enrollment.--A health program of 
        the Indian Health Service may open enrollment to family members 
        of individuals described in section 8302(a).
            (2) Election.--If a health program of the Indian Health 
        Service opens enrollment to family members of individuals 
        described in section 8302(a), an individual described in that 
        section may elect family enrollment in the health program 
        instead of in a health plan.
            (3) Enrollment.--
                    (A) In general.--An individual who elects family 
                enrollment under paragraph (2) in a health program of 
                the Indian Health Service shall enroll in such program.
                    (B) Applicable individual charges.--The individual 
                who enrolls in such program under subparagraph (A) is 
                not subject to any charge for health insurance 
                premiums, deductibles, copayments, coinsurance, or any 
                other cost for health services provided under such 
                program attributable to the individual, but the family 
                members who are not eligible for a health program of 
                the Indian Health Service under section 8302(a) are 
                subject to all such charges.
                    (C) Applicable employer charges.--Employers, other 
                than tribal governments and tribal organizations exempt 
                under section 8305, are liable for making employer 
                premium payments as an employer under section 6121 in 
                the case of any family member enrolled under this 
                subsection who is not eligible for a health program of 
                the Indian Health Service under section 8302(a).
            (4) Premium.--
                    (A) Establishment and collection.--The Secretary 
                shall establish premiums for all family members 
                enrolled in a health program of the Indian Health 
                Service under this paragraph who are not eligible for a 
                health program of the Indian Health Service under 
                section 8302(a). The Secretary shall collect each 
                premium payment owed under this paragraph.
                    (B) Reduction.--The Secretary shall provide for a 
                process for premium reduction which is the same as the 
                process, and uses the same standards, used by regional 
                alliances for the areas in which individuals described 
                in subparagraph (A) reside, except that in computing 
                the family share of the premiums the Secretary shall 
                use the lower of the premium quoted or the reduced 
                weighted average accepted bid for the reference 
                regional alliance.
                    (C) Payment by secretary.--The Secretary shall 
                provide for payment to each health program of the 
                Indian Health Service, in the same manner as payments 
                under section 6201, amounts equivalent to the amount of 
                payments that would have been made to a regional 
                alliance if the individuals described in subparagraph 
                (A) were enrolled in a regional alliance health plan 
                (with a final accepted bid equal to the reduced 
                weighted average accepted bid premium for the regional 
                alliance).
    (c) Essential Community Provider.--
            (1) Health services.--If a health program of the Indian 
        Health Service, a service unit, a tribal organization, or an 
        urban Indian organization operating within a health program 
        elects to be an essential community provider under section 
        1431, an individual described in paragraph (2) enrolled in a 
        health plan other than a health program of the Indian Health 
        Service may receive health services from that essential 
        community provider.
            (2) Individual covered.--An individual referred to in 
        paragraph (1) is an individual who--
                    (A) is described in section 8302(a); or
                    (B) is a family member described in subsection (b) 
                who does not enroll in a health program of the Indian 
                Health Service.

SEC. 8307. PAYMENT BY OTHER PAYERS.

    (a) Payment for Services Provided by Indian Health Service 
Programs.--Nothing in this subtitle shall be construed as amending 
section 206, 401, or 402 of the Indian Health Care Improvement Act 
(relating to payments on behalf of Indians for health services from 
other Federal programs or from other third party payers).
    (b) Payment for Services Provided by Contractors.--Nothing in this 
subtitle shall be construed as affecting any other provision of law, 
regulation, or judicial or administrative interpretation of law or 
policy concerning the status of the Indian Health Service as the payer 
of last resort for Indians eligible for contract health services under 
a health program of the Indian Health Service.

SEC. 8308. CONTRACTING AUTHORITY.

    Section 601(d)(1)(B) of the Indian Health Care Improvement Act (25 
U.S.C. 1661(d)(1)(B)) is amended by inserting ``(including personal 
services for the provision of direct health care services)'' after 
``goods and services''.

SEC. 8309. CONSULTATION.

    The Secretary shall consult with representatives of Indian tribes, 
tribal organizations, and urban Indian organizations annually 
concerning health care reform initiatives that affect Indian 
communities.

SEC. 8310. INFRASTRUCTURE.

    (a) Facilities.--The Secretary, acting through the Indian Health 
Service, may expend amounts appropriated pursuant to section 8313 for 
the construction and renovation of hospitals, health centers, health 
stations, and other facilities for the purpose of improving and 
expanding such facilities to enable the delivery of the full array of 
items and services guaranteed in the comprehensive benefit package.
    (b) Capital Financing.--There is established in the Indian Health 
Service a revolving loan program. Under the program, the Secretary, 
acting through the Indian Health Service, shall provide guaranteed 
loans under such terms and conditions as the Secretary may prescribe to 
providers within the Indian Health Service system to improve and expand 
health care facilities to enable the delivery of the full array of 
items and services guaranteed in the comprehensive benefit package.

SEC. 8311. FINANCING.

    (a) Establishment of Fund.--Each health program of the Indian 
Health Service shall establish a comprehensive benefit package fund 
(hereafter in this section referred to as the ``fund'').
    (b) Deposits.--There shall be deposited into the fund the 
following:
            (1) All amounts received as employer premium payments 
        pursuant to section 1351(e)(3).
            (2) All amounts received as family premium payments and 
        premium discount payments pursuant to section 8306(b)(4).
            (3) All amounts appropriated for the fund for the purpose 
        of providing the comprehensive benefit package to individuals 
        enrolled in a health program of the Indian Health Service.
            (4) Any other amount received with respect to health 
        services for the comprehensive benefit package.
    (c) Administration and Expenditures.--
            (1) Management.--The fund shall be managed by the health 
        program of the Indian Health Service.
            (2) Expenditures.--Expenditures may be made from the fund 
        to provide for the delivery of the items and services of the 
        comprehensive benefit package under the health program of the 
        Indian Health Service.
            (3) Availability of funds.--Amounts in the fund established 
        by a service unit of the Indian Health Service under this 
        section shall be available without further appropriation and 
        shall remain available until expended for payments for the 
        delivery of the items and services in the comprehensive benefit 
        package.

SEC. 8312. RULE OF CONSTRUCTION.

    Unless otherwise provided by this Act, no part of this Act shall be 
construed to rescind or otherwise modify any obligations, findings, or 
purposes contained in the Indian Health Care Improvement Act (25 U.S.C. 
1601 et seq.) and in the Indian Self-Determination and Education 
Assistance Act.

SEC. 8313. AUTHORIZATIONS OF APPROPRIATIONS.

    (a) Authorization of Appropriations.--For the purpose of carrying 
out this subtitle, there are authorized to be appropriated $40,000,000 
for fiscal year 1995, $180,000,000 for fiscal year 1996, and 
$200,000,000 for each of the fiscal years 1997 through 2000.
    (b) Relation to Other Funds.--The authorizations of appropriations 
established in subsection (a) are in addition to any other 
authorizations of appropriations that are available for the purposes of 
carrying out this subtitle.

SEC. 8314. PAYMENT OF PREMIUM DISCOUNT EQUIVALENT AMOUNTS FOR 
              UNEMPLOYED INDIANS.

    (a) Determination.--The Secretary shall determine (and certify to 
the Secretary of the Treasury) for each fiscal year (beginning with 
fiscal year 1998) an amount equivalent to the aggregate amount of the 
premium discounts (established in section 6104) that would have been 
paid to individuals described in subsection (c) if such individuals had 
been enrolled in regional alliance health plans.
    (b) Payment.--For each fiscal year for which an amount is certified 
to the Secretary of the Treasury under subsection (a), from the funds 
available under section 9102, such Secretary shall pay the amount so 
certified to the Indian Health Service for the purpose of providing the 
comprehensive benefit package.
    (c) Individual Described.--For purposes of this section, an 
individual described in this subsection is an individual described in 
section 8302(a) who is not a qualifying employee or a family member of 
such an employee.

                                                 Title VIII, Subtitle E

 Subtitle E--Amendments to the Employee Retirement Income Security Act 
                                of 1974

SEC. 8401. GROUP HEALTH PLAN DEFINED.

    Section 3 of the Employee Retirement Income Security Act of 1974 
(29 U.S.C. 1002) is amended by adding at the end the following new 
paragraph:
    ``(42) The term `group health plan' means an employee welfare 
benefit plan which provides medical care (as defined in section 213(d) 
of the Internal Revenue Code of 1986) to participants or beneficiaries 
directly or through insurance, reimbursement, or otherwise.''.

SEC. 8402. LIMITATION ON COVERAGE OF GROUP HEALTH PLANS UNDER TITLE I 
              OF ERISA.

    (a) In General.--Section 4 of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1003) is amended--
            (1) in subsection (a), by striking ``subsection (b)'' and 
        inserting ``subsections (b) and (c)'';
            (2) in subsection (b), by striking ``The provisions'' and 
        inserting ``Except as provided in subsection (c), the 
        provisions''; and
            (3) by adding at the end the following new subsection:
    ``(c) Coverage of Group Health Plans.--
            ``(1) Limited inclusion.--This title shall apply to a group 
        health plan only to the extent provided in this subsection.
            ``(2) Coverage under certain provisions with respect to 
        certain plans.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), parts 1, 4, and 6 of subtitle B shall 
                apply to--
                            ``(i) a group health plan which is 
                        maintained by--
                                    ``(I) a corporate alliance (as 
                                defined in section 1311(a) of the 
                                Health Security Act), or
                                    ``(II) a member of a corporate 
                                alliance (as so defined) whose eligible 
                                sponsor is described in section 
                                1311(b)(1)(C) (relating to rural 
                                electric cooperatives and rural 
                                telephone cooperative associations), 
                                and
                            ``(ii) a group health plan not described in 
                        clause (i) which provides benefits which are 
                        permitted under paragraph (4) of section 1003 
                        of the Health Security Act.
                    ``(B) Inapplicability with respect to state-
                certified health plans.--Subparagraph (A) shall not 
                apply with respect to any plan or portion thereof which 
                consists of a State-certified health plan (as defined 
                in section 1400(c) of the Health Security Act). The 
                Secretary shall provide by regulation for treatment as 
                a separate group health plan of any arrangement which 
                would otherwise be treated under this title as part of 
                a group health plan to the extent necessary to carry 
                out the purposes of this title.
            ``(3) Civil actions by corporate alliance participants, 
        beneficiaries, and fiduciaries and by the secretary.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), in the case of a group health plan to 
                which parts 1, 4, and 6 of subtitle B apply under 
                paragraph (2), section 502 shall apply with respect to 
                a civil action described in such section brought--
                            ``(i) by a participant, beneficiary, or 
                        fiduciary under such plan, or
                            ``(ii) by the Secretary.
                    ``(B) Exception where review is otherwise available 
                under health security act.--Subparagraph (A) shall not 
                apply with respect to any cause of action for which, 
                under section 5202(d) of the Health Security Act, 
                proceedings under sections 5203 and 5204 of such Act 
                pursuant to complaints filed under section 5202(b) of 
                such Act, and review under section 5205 of such Act of 
                determinations made under such section 5204, are the 
                exclusive means of review.
            ``(4) Definitions and enforcement provisions.--Sections 3, 
        501, 502, 503, 504, 505, 506, 507, 508, 509, 510, and 511 and 
        the preceding subsections of this section shall apply to a 
        group health plan to the extent necessary to effectively carry 
        out, and enforce the requirements under, the provisions of this 
        title as they apply pursuant to this subsection.
            ``(5) Applicability of preemption rules.--Section 514 shall 
        apply in the case of any group health plan to which parts 1, 4, 
        and 6 of subtitle B apply under paragraph (2).''.
    (b) Reporting and Disclosure Requirements Applicable to Group 
Health Plans.--
            (1) In general.--Part 1 of subtitle B of title I of such 
        Act is amended--
                    (A) in the heading for section 110 (29 U.S.C. 
                1030), by adding ``by pension plans'' at the end;
                    (B) by redesignating section 111 (29 U.S.C. 1031) 
                as section 112; and
                    (C) by inserting after section 110 the following 
                new section:

                 ``special rules for group health plans

    ``Sec. 111. (a) In General.--The Secretary may by regulation 
provide special rules for the application of this part to group health 
plans which are consistent with the purposes of this title and the 
Health Security Act and which take into account the special needs of 
participants, beneficiaries, and health care providers under such 
plans.
    ``(b) Expeditious Reporting and Disclosure.--Such special rules may 
include rules providing for--
            ``(1) reductions in the periods of time referred to in this 
        part,
            ``(2) increases in the frequency of reports and disclosures 
        required under this part, and
            ``(3) such other changes in the provisions of this part as 
        may result in more expeditious reporting and disclosure of plan 
        terms and changes in such terms to the Secretary and to plan 
        participants and beneficiaries,
to the extent that the Secretary determines that the rules described in 
this subsection are necessary to ensure timely reporting and disclosure 
of information consistent with the purposes of this part and the Health 
Security Act as they relate to group health plans.
    ``(c) Additional Requirements.--Such special rules may include 
rules providing for reporting and disclosure to the Secretary and to 
participants and beneficiaries of additional information or at 
additional times with respect to group health plans to which this part 
applies under section 4(c)(2), if such reporting and disclosure would 
be comparable to and consistent with similar requirements applicable 
under the Health Security Act with respect to plans maintained by 
regional alliances (as defined in such section 1301 of such Act) and 
applicable regulations of the Secretary of Health and Human Services 
prescribed thereunder.''.
            (2) Clerical amendment.--The table of contents in section 1 
        of such Act is amended by striking the items relating to 
        sections 110 and 111 and inserting the following new items:

``Sec. 110. Alternative methods of compliance by pension plans.
``Sec. 111. Special rules for group health plans.
``Sec. 112. Repeal and effective date.''.
    (d) Exclusion of Plans Maintained by Regional Alliances from 
Treatment as Multiple Employer Welfare Arrangements.--Section 3(40)(A) 
of such Act (29 U.S.C. 1002(40)(A)) is amended--
            (1) in clause (ii), by striking ``or'';
            (2) in clause (iii), by striking the period and inserting 
        ``, or''; and
            (3) by adding after clause (iii) the following new clause:
            ``(iv) by a regional alliance (as defined in section 1301 
        of the Health Security Act).''.

SEC. 8403. AMENDMENTS RELATING TO CONTINUATION COVERAGE.

    (a) Period of Coverage.--Subparagraph (D) of section 602(2) of the 
Employee Retirement Income Security Act of 1974 (29 U.S.C. 1162(1)) is 
amended--
            (1) by striking ``or'' at the end of clause (i), by 
        striking the period at the end of clause (ii) and inserting ``, 
        or'', and by adding at the end the following new clause:
                            ``(iii) eligible for coverage under a 
                        comprehensive benefit package described in 
                        section 1101 of the Health Security Act.'', and
            (2) by striking ``or medicare entitlement'' in the heading 
        and inserting ``, medicare entitlement, or health security act 
        eligibility''.
    (b) Qualified Beneficiary.--Section 607(3) of such Act (29 U.S.C. 
1167(3)) is amended by adding at the end the following new 
subparagraph:
                    ``(D) Special rule for individuals covered by 
                health security act.--The term `qualified beneficiary' 
                shall not include any individual who, upon termination 
                of coverage under a group health plan, is eligible for 
                coverage under a comprehensive benefit package 
                described in section 1101 of the Health Security Act.''
    (c) Repeal Upon Implementation of Health Security Act.--
            (1) In general.--Part 6 of subtitle B of title I of such 
        Act (29 U.S.C. 601 et seq.) is amended by striking sections 601 
        through 608 and by redesignating section 609 as section 601.
            (2) Conforming amendments.--
                    (A) Section 502(a)(7) of such Act (29 U.S.C. 
                1132(a)(7)) is amended by striking ``609(a)(2)(A)'' and 
                inserting ``601(a)(2)(A)''.
                    (B) Section 502(c)(1) is amended by striking 
                ``paragraph (1) or (4) of section 606 or''.
                    (C) Section 514 of such Act (29 U.S.C. 1144) is 
                amended by striking ``609'' each place it appears in 
                subsections (b)(7) and (b)(8) and inserting ``601''.
                    (D) The table of contents in section 1 of such Act 
                is amended by striking the items relating to sections 
                601 through 609 and inserting the following new item:

``Sec. 601. Additional standards for group health plans.''
    (d) Effective Date.--
            (1) Subsections (a) and (b).--The amendments made by 
        subsections (a) and (b) shall take effect on the date of the 
        enactment of this Act.
            (2) Subsection (c).--The amendments made by subsection (c) 
        shall take effect on the earlier of--
                    (A) January 1, 1998, or
                    (B) the first day of the first calendar year 
                following the calendar year in which all States have in 
                effect plans under which individuals are eligible for 
                coverage under a comprehensive benefit package 
                described in section 1101 of this Act.

SEC. 8404. ADDITIONAL AMENDMENTS RELATING TO GROUP HEALTH PLANS.

    (a) Regulations of the National Health Board Regarding Cases of 
Adoption.--Section 601(c) of the Employee Retirement Income Security 
Act of 1974 (as redesignated by section 8403) is amended by adding at 
the end the following new paragraph:
            ``(4) Regulations by national health board.--The preceding 
        provisions of this subsection shall apply except to the extent 
        otherwise provided in regulations of the National Health Board 
        under the Health Security Act.''.
    (b) Coverage of Pediatric Vaccines.--Section 601(d) of such Act (as 
redesignated by section 8403) is amended by adding at the end the 
following new sentence: ``The preceding sentence shall cease to apply 
to a group health plan upon becoming a corporate alliance health plan 
pursuant to an effective election of the plan sponsor to be a corporate 
alliance under section 1311 of the Health Security Act.''.
    (c) Technical Corrections.--Effective as if included in the 
enactment of the Omnibus Budget Reconciliation Act of 1993--
            (1) Subsection (a)(2)(B)(ii) of section 609 of the Employee 
        Retirement Income Security Act of 1974 is amended by striking 
        ``section 13822'' and inserting ``section 13623''.
            (2) Subsection (a)(4) of such section 609 is amended by 
        striking ``section 13822'' and inserting ``section 13623''.
            (3) Subsection (d) of such section 609 is amended by 
        striking ``section 13830'' and inserting ``section 13631''.

SEC. 8405. PLAN CLAIMS PROCEDURES.

    Section 503 of the Employee Retirement Income Security Act of 1974 
(29 U.S.C. 1133) is amended--
            (1) by inserting ``(a) In General.--'' after ``Sec. 503.''; 
        and
            (2) by adding at the end the following new subsection:
    ``(b) Group Health Plans.--In addition to the requirements of 
subsection (a), a group health plan to which parts 1 and 4 apply under 
section 4(c)(2) shall comply with the requirements of section 5201 of 
the Health Security Act (relating to health plan claims procedure).''.

SEC. 8406. EFFECTIVE DATES.

    Except as otherwise provided in this subtitle, the amendments made 
by this subtitle shall take effect on the earlier of--
            (1) January 1, 1998, or
            (2) such date or dates as may be prescribed in regulations 
        of the National Health Board in connection with plans whose 
        participants or beneficiaries reside in any State which becomes 
        a participating State under section 1200 of this Act before 
        January 1, 1998.

                Subtitle F--Special Fund for WIC Program

SEC. 8501. ADDITIONAL FUNDING FOR SPECIAL SUPPLEMENTAL FOOD PROGRAM FOR 
              WOMEN, INFANTS, AND CHILDREN (WIC).

                                                 Title VIII, Subtitle F

    (a) Authorization of Additional Appropriations.--There is hereby 
authorized to be appropriated for the special supplemental food program 
for women, infants, and children (WIC) under section 17 of the Child 
Nutrition Act of 1966, in addition to amounts otherwise authorized to 
be appropriated for such program, such amounts as are necessary for the 
Secretary of the Treasury to fulfill the requirements of subsection 
(b).
    (b) WIC Fund.--
            (1) Credit.--For each of fiscal years 1996 through 2000, 
        the Secretary of the Treasury shall credit to a special fund of 
        the Treasury an amount equal to--
                    (A) $254,000,000 for fiscal year 1996,
                    (B) $407,000,000 for fiscal year 1997,
                    (C) $384,000,000 for fiscal year 1998,
                    (D) $398,000,000 for fiscal year 1999, and
                    (E) $411,000,000 for fiscal year 2000.
            (2) Availability.--Subject to paragraph (3), amounts in 
        such fund--
                    (A) shall be available only for the program 
                authorized under section 17 of the Child Nutrition Act 
                of 1966, exclusive of activities authorized under 
                section 17(m) of such Act, and
                    (B) shall be paid to the Secretary of Agriculture 
                for such purposes.
            (3) Limitation.--For a fiscal year specified in paragraph 
        (1), the amount credited to such fund for the fiscal year shall 
        be available for use in such program only if appropriations 
        Acts for the fiscal year, without the addition of amounts 
        provided under subsection (a) for the fund, provide new budget 
        authority for the program of no less than--
                    (A) $3,660,000,000 for fiscal year 1996,
                    (B) $3,759,000,000 for fiscal year 1997,
                    (C) $3,861,000,000 for fiscal year 1998,
                    (D) $3,996,000,000 for fiscal year 1999, and
                    (E) $4,136,000,000 for fiscal year 2000.

                                                               Title IX

                TITLE IX--AGGREGATE GOVERNMENT PAYMENTS

                       table of contents of title

                                                                   Page
                TITLE IX--AGGREGATE GOVERNMENT PAYMENTS

                  Subtitle A--Aggregate State Payments

              Part 1--State Maintenance of Effort Payment

Sec. 9001. State maintenance-of-effort payment relating to         1277
                            non-cash assistance recipients.
Sec. 9002. Non-cash baseline amounts........................       1278
Sec. 9003. Updating of baseline amounts.....................       1282
Sec. 9004. Non-cash assistance child and adult defined......       1284
                     Part 2--State Premium Payments

Sec. 9011. State premium payment relating to cash assistance       1285
                            recipients.
Sec. 9012. Determination of AFDC per capita premium amount         1286
                            for regional alliances.
Sec. 9013. Determination of SSI per capita premium amount          1291
                            for regional alliances.
Sec. 9014. Determination of number of AFDC and SSI                 1292
                            recipients.
Sec. 9015. Regional alliance adjustment factors.............       1293
              Part 3--General and Miscellaneous Provisions

Sec. 9021. Timing and manner of payments....................       1294
Sec. 9022. Review of payment level..........................       1294
Sec. 9023. Special rules for Puerto Rico and other                 1295
                            territories.
            Subtitle B--Aggregate Federal Alliance Payments

Sec. 9101. Federal premium payments for cash assistance            1296
                            recipients.
Sec. 9102. Capped Federal alliance payments.................       1298
     Subtitle C--Borrowing Authority to Cover Cash-Flow Shortfalls

Sec. 9201. Borrowing authority to cover cash-flow shortfalls       1308

                  Subtitle A--Aggregate State Payments

                                                   Title IX, Subtitle A

              PART 1--STATE MAINTENANCE OF EFFORT PAYMENT

SEC. 9001. STATE MAINTENANCE-OF-EFFORT PAYMENT RELATING TO NON-CASH 
              ASSISTANCE RECIPIENTS.

    (a) Payment.--Each participating State shall provide for each year 
(beginning with State's first year) for payment to regional alliances 
in the State in the amounts specified in subsection (b).
    (b) Amount.--Subject to sections 6005, 9023, and 9201(c)(2), the 
total amount of such payment for a year shall be equal to the 
following:
            (1) First year.--In the case of the first year for a State, 
        the sum of--
                    (A) the State non-cash, non-DSH baseline amount for 
                the State, determined under section 9002(a)(1) and 
                updated under section 9003(a)(1), and
                    (B) the State non-cash, DSH baseline amount for the 
                State, determined under section 9002(a)(2) and updated 
                under section 9003(a)(2).
            (2) Subsequent year.--In the case of any succeeding year, 
        the sum computed under paragraph (1) for the first year updated 
        to the year involved under section 9003(b) .
    (c) Division Among Regional Alliances.--In the case of a State with 
more than one regional alliance, the payment required to be made under 
this section shall be distributed among the regional alliances in an 
equitable manner (determined by the State) that takes into account, for 
each regional alliance, the proportion of the non-cash baseline amount 
(described in section 9002) that is attributable to individuals who 
resided in the alliance area of the regional alliance.

                                                   Title IX, Subtitle A

SEC. 9002. NON-CASH BASELINE AMOUNTS.

    (a) Baseline Amounts.--
            (1) Non-dsh amount.--The Secretary shall determine for each 
        State a non-cash, non-DSH baseline amount which is equal to the 
        sum of the following:
                    (A) Expenditures for comprehensive benefit package 
                for non-cash assistance children.--The aggregate State 
                medicaid expenditures in fiscal year 1993 (as defined 
                in subsection (b)(1)) for the comprehensive benefit 
                package for non-cash assistance children (as defined in 
                section 9004(a)).
                    (B) Expenditures for comprehensive benefit package 
                for non-cash assistance adults.--The aggregate State 
                medicaid expenditures in fiscal year 1993 for the 
                comprehensive benefit package for non-cash assistance 
                adults (as defined in section 9004(b)).
                    (C) Expenditures for additional benefits for 
                certain children receiving afdc or ssi.--The aggregate 
                medicaid expenditures in fiscal year 1993 for all 
                medically necessary items and services described in 
                section 1905(a) of the Social Security Act (including 
                items and services described in section 1905(r) of such 
                Act but excluding long-term care services described in 
                section 1933(c) of such Act) for qualified children 
                described in section 1934(b)(1) of such Act who are 
                AFDC or SSI recipients.
            (2) DSH amount.--The Secretary shall determine for each 
        State a non-cash, DSH baseline amount which is equal to the DSH 
        expenditures in fiscal year 1993 (as defined in subsection 
        (b)(2)).
    (b) State Medicaid Expenditures and DSH Expenditures Defined.--
            (1) Aggregate state medicaid expenditures.--
                    (A) In general.--In this section, the term 
                ``aggregate State medicaid expenditures'' means, with 
                respect to specified individuals and a State in fiscal 
                year 1993, the amount of payments under the State 
                medicaid plan with respect to medical assistance 
                furnished for such individuals for calendar quarters in 
                fiscal year 1993, less the amount of Federal financial 
                participation paid to the State with respect to such 
                assistance, and not including any DSH expenditures.
                    (B) Limited to payments for services.--In applying 
                subparagraph (A), payments under the State medicaid 
                plan shall not be included unless Federal financial 
                participation is provided with respect to such payments 
                under section 1903(a)(1) of the Social Security Act and 
                such payments shall not include payments for medicare 
                cost-sharing (as defined in section 1905(p)(3) of the 
                Social Security Act).
            (2) DSH expenditures.--In this section, the term ``DSH 
        expenditures'' means, with respect to fiscal year 1993, 
        payments made under section 1923 of the Social Security Act in 
        fiscal year 1993 multiplied by proportion of payments for 
        medical assistance for hospital services (including psychiatric 
        hospital services) under the State medicaid plan in fiscal year 
        1993 that is attributable to non-cash assistance adults and 
        non-cash assistance children.
            (3) Adjustment authorized to take into account cash flow 
        variations.--If the Secretary finds that a State took an action 
        that had the effect of shifting the timing of medical 
        assistance payments under the State medicaid plan between 
        quarters or fiscal years in a manner so that the payments made 
        in fiscal year 1993 do not accurately reflect the value of the 
        medical assistance provided with respect to items and services 
        furnished in that fiscal year, the Secretary may provide for 
        such adjustment in the amounts computed under this subsection 
        as may be necessary so that the non-cash baseline amounts 
        determined under this section accurately reflects such value.
            (4) Treatment of disallowances.--The amounts determined 
        under this subsection shall take into account amounts (or an 
        estimate of amounts) disallowed.
    (c) Application to Particular Items and Services in Comprehensive 
Benefit Package.--For purposes of subsection (a)(1), in determining the 
aggregate State medicaid expenditures for a category of items and 
services (within the comprehensive benefit package) furnished in a 
State, there shall be counted only that proportion of such expenditures 
that were attributable to items and services included in the 
comprehensive benefit package (taking into account any limitation on 
amount, duration, or scope of items and services included in such 
package).

SEC. 9003. UPDATING OF BASELINE AMOUNTS.

    (a) Initial Update Through the First Year.--
            (1) Non-cash, non-dsh baseline amount.--The Secretary shall 
        update the non-cash, non-DSH baseline amount determined under 
        section 9002(a)(1) for each State from fiscal year 1993 through 
        the first year, by the following percentage:
                    (A) If such first year is 1996, the applicable 
                percentage is 56.6 percent.
                    (B) If such first year is 1997, the applicable 
                percentage is 78.1 percent.
                    (C) If such first year is 1998, the applicable 
                percentage is 102.2 percent.
            (2) Non-cash, dsh baseline amount.--The Secretary shall 
        update the non-cash, DSH baseline amount determined under 
        section 9002(a)(2) for each State from fiscal year 1993 through 
        the first year, by the following percentage:
                    (A) If such first year is 1996, the applicable 
                percentage is 45.9 percent.
                    (B) If such first year is 1997, the applicable 
                percentage is 61.8 percent.
                    (C) If such first year is 1998, the applicable 
                percentage is 79.0 percent.
            (3) Adjustment authorized to take into account cash flow 
        variations.--In determining the updates under paragraphs (1) 
        and (2), the Secretary may provide for an adjustment in a 
        manner similar to the adjustment permitted under section 
        9002(b)(3).
    (b) Update For Subsequent Years.--For each State for each year 
after the first year, the Board shall update the non-cash baseline 
amount (as previously updated under this subsection) by the product 
of--
            (1) 1 plus the general health care inflation factor (as 
        defined in section 6001(a)(3)) for the year, and
            (2) 1 plus the annual percentage increase in the population 
        of the United States of individuals who are under 65 years of 
        age (as estimated by the Board based on projections made by the 
        Bureau of Labor Statistics of the Department of Labor) for the 
        year.

SEC. 9004. NON-CASH ASSISTANCE CHILD AND ADULT DEFINED.

    (a) Non-Cash Assistance Child.--In this part, the term ``non-cash 
assistance child'' means a child described in section 1934(b)(1) of the 
Social Security Act (as inserted by section 4222(a)) who is not a 
medicare-eligible individual.
    (b) Non-Cash Assistance Adult.--In this part, the term ``non-cash 
assistance adult'' means an individual who is--
            (1) over 21 years,
            (2) is a citizen or national of the United States or an 
        alien who is lawfully admitted for permanent residence or 
        otherwise permanently residing in the United States under color 
        of law, and
            (3) is not an AFDC or SSI recipient or a medicare-eligible 
        individual.

                     PART 2--STATE PREMIUM PAYMENTS

SEC. 9011. STATE PREMIUM PAYMENT RELATING TO CASH ASSISTANCE 
              RECIPIENTS.

    (a) In General.--Subject to subsection (c), each participating 
State shall provide in each year (beginning with the State's first 
year) for payment to each regional alliance in the State of an amount 
equal to the State medical assistance percentage (as defined in 
subsection (b)) of 95 percent of the sum of the following products:
            (1) AFDC portion.--The product of--
                    (A) the AFDC per capita premium amount for the 
                regional alliance for the year (determined under 
                section 9012(a)), and
                    (B) the number of AFDC recipients residing in the 
                alliance area in the year (as determined under section 
                9014(b)(1)).
            (2) SSI portion.--The product of--
                    (A) the SSI per capita premium amount for the 
                regional alliance for the year (determined under 
                section 9013), and
                    (B) the number of SSI recipients residing in the 
                alliance area in the year (as determined under section 
                9014(b)(1)).
    (b) State Medical Assistance Percentage Defined.--In subsection 
(a), the term ``State medical assistance percentage'' means, for a 
State for a quarter in a fiscal year, 100 percent minus the Federal 
medical assistance percentage (as defined in section 1905(b) of the 
Social Security Act) for the State for the fiscal year.
    (c) Additional Amount.--The amount of payment under subsection (a) 
for a State for a year shall be increased by the State medical 
assistance percentage multiplied by the sum of the following:
            (1) Amount of special increase in premium discount.--The 
        aggregate increase in the premium discounts under section 6104 
        for AFDC and SSI families enrolled in regional alliance health 
        plans in the State that is attributable to subsection (b)(2) of 
        such section, and
            (2) Amount of basic cost sharing reduction.--The amount of 
        any cost sharing reduction under section 1371(c)(1) for such 
        families.

SEC. 9012. DETERMINATION OF AFDC PER CAPITA PREMIUM AMOUNT FOR REGIONAL 
              ALLIANCES.

    (a) In General.--For each regional alliance in a State for each 
year, the Secretary shall determine an AFDC per capita premium amount 
in accordance with this section. Such amount is equal to--
            (1) the per capita State medicaid expenditures for the 
        comprehensive benefit package for AFDC recipients for the State 
        for the year (as determined under subsection (b)), multiplied 
        by
            (2) the regional alliance adjustment factor (determined 
        under section 9015) for the year for the regional alliance.
    (b) Per Capita State Medicaid Expenditures Defined.--The ``per 
capita State medicaid expenditures for the comprehensive benefit 
package for AFDC recipients'' for a State for a year is equal to the 
base per capita expenditures (described in subsection (c)), updated to 
the year involved under subsection (d)).
    (c) Base Per Capita Expenditures.--The ``base per capita 
expenditures'' described in this subsection, for a State for a year, 
is--
            (1) the baseline medicaid expenditures (as defined in 
        subsection (e)) for the State, divided by
            (2) the number of AFDC recipients enrolled in the State 
        medicaid plan in fiscal year 1993, as determined under section 
        9014(a).
    (d) Updating.--
            (1) Initial update through year before first year.--
                    (A) In general.--The Secretary shall update the 
                base per capita expenditures described in subsection 
                (c) for each State from fiscal year 1993 through the 
                year before first year, by the applicable percentage 
                specified in subparagraph (B), or, if less, the 
                increase percentage specified in subparagraph (C).
                    (B) Applicable percentage.--For purposes of 
                subparagraph (A), the applicable percentage specified 
                in this subparagraph, in the case of a State in which 
                the first year is--
                            (i) 1996 is 32.2 percent,
                            (ii) 1997 is 46.6 percent, or
                            (iii) 1998 is 62.1 percent.
                    (C) Increase percentage.--
                            (i) In general.--The increase percentage 
                        for a State specified in this subparagraph is 
                        the Secretary's estimate of the percentage 
                        increase in the per capita expenditures 
                        specified in clause (ii) from fiscal year 1993 
                        through the year before the first year, 
                        adjusted so as to eliminate any change in 
                        medicaid expenditures that is attributable to a 
                        reduction in the scope of services, an 
                        arbitrary reduction in payment rates, or a 
                        reduction in access to high quality services 
                        under the State medicaid plan.
                            (ii) Per capita expenditures.--The per 
                        capita expenditures specified in this clause 
                        for a year is the quotient of the baseline 
                        medicaid expenditures for the State for the 
                        year, divided by the number of AFDC recipients 
                        enrolled in the State medicaid plan for the 
                        year.
                    (D) Adjustment authorized to take into account cash 
                flow variations.--In determining the update under 
                paragraph (1), the Secretary may provide for an 
                adjustment in a manner similar to the adjustment 
                permitted under section 9002(b)(3).
            (2) Update for subsequent years.--For each State for the 
        first year and for each year after the first year, the Board 
        shall update the base per capita expenditures described in 
        subsection (c) (as previously updated under this subsection) by 
        a factor equal to 1 plus the general health care inflation 
        factor (as defined in section 6001(a)(3)) for the year.
    (e) Determination of Baseline Medicaid Expenditures.--
            (1) In general.--For purposes of subsection (c)(1), the 
        ``baseline medicaid expenditures'' for a State is the gross 
        amount of payments under the State medicaid plan with respect 
        to medical assistance furnished, for items and services 
        included in the comprehensive benefit package, for AFDC 
        recipients for calendar quarters in fiscal year 1993, but does 
        not include such expenditures for which no Federal financial 
        participation is provided under such plan.
            (2) Disproportionate share payments not included.--In 
        applying paragraph (1), payments made under section 1923 of the 
        Social Security Act shall not be counted in the gross amount of 
        payments.
            (3) Treatment of disallowances.--The amount determined 
        under this subsection shall take into account amounts (or an 
        estimate of amounts) disallowed.
    (f) Application to Particular Items and Services in Comprehensive 
Benefit Package.--For purposes of this section, in determining the per 
capita State medicaid expenditures for a category of items and services 
(within the comprehensive benefit package) furnished in a State, there 
shall be counted only that proportion of such expenditures (determined 
only with respect to medical assistance furnished to AFDC recipients) 
that were attributable to items and services included in the 
comprehensive benefit package (taking into account any limitation on 
amount, duration, or scope of items and services included in such 
package).

SEC. 9013. DETERMINATION OF SSI PER CAPITA PREMIUM AMOUNT FOR REGIONAL 
              ALLIANCES.

    For each regional alliance in a State for each year, the Secretary 
shall determine an SSI per capita premium amount in accordance with 
this section. Such amount shall be determined in the same manner as the 
AFDC per capita premium amount for the regional alliance is determined 
under section 9012 except that, for purposes of this section--
            (1) any reference in such section (or in sections referred 
        to in such section) to an ``AFDC recipient'' is deemed a 
        reference to an ``SSI recipient'', and
            (2) the following percents shall be substituted for the 
        percents specified in section 9012(d)(1)(B):
                    (A) For 1996, 29.4 percent.
                    (B) For 1997, 43.7 percent.
                    (C) For 1998, 58.8 percent.

SEC. 9014. DETERMINATION OF NUMBER OF AFDC AND SSI RECIPIENTS.

    (a) Baseline.--For purposes of section 9012 and section 9013, the 
number of AFDC recipients and SSI recipients for a State for fiscal 
year 1993 shall be determined based on actual reports submitted by the 
State to the Secretary. In the case of individuals who were not 
recipients for the entire fiscal year, the number shall take into 
account only the portion of the year in which they were such 
recipients. The Secretary may audit such reports.
    (b) Subsequent Years.--
            (1) Payments.--For purposes of section 9011(a), the number 
        of AFDC and SSI recipients enrolled in regional alliance health 
        plans for a regional alliance shall be determined on a monthly 
        basis based on actual enrollment.
            (2) Computation of regional adjustment factors and blended 
        plan payment rates.--For purposes of computing regional 
        alliance adjustment factors under section 9015 and the AFDC and 
        SSI proportions under section 6202, the number of AFDC and SSI 
        recipients for a regional alliance in a State for a year 
        (beginning with 1997) shall be determined by the State before 
        the date the State is required to compute AFDC and SSI 
        proportions under section 6202 based on the best available 
        estimate of such proportion in the previous year.

SEC. 9015. REGIONAL ALLIANCE ADJUSTMENT FACTORS.

    (a) In General.--If a State--
            (1) has more than one regional alliance operating in the 
        State for a year, the State shall compute under this section a 
        regional alliance adjustment factor for each such regional 
        alliance for the year in accordance with subsection (b), or
            (2) has only one regional alliance for a year, the regional 
        alliance adjustment factor under this section is 1.
    (b) Rules.--The adjustment factors under subsection (a)(1) for a 
year shall be computed in a manner so that--
            (1) such factors for the different regional alliances 
        reflect--
                    (A) the variation in regional alliance per capita 
                premium targets (determined under section 6003), and
                    (B) the variation in base per capita expenditures 
                for medicaid across regional alliances; and
            (2) the weighted average of such factors is 1.
    (c) Use of Same Data.--The weighted average under subsection (b)(2) 
shall be determined based on the number of AFDC recipients or SSI 
recipients (as the case may be) enrolled in each regional alliance in a 
State (as determined for each regional alliance under section 
9014(b)(2)).
    (d) Clarification of Separate Computations.--Determinations of 
adjustment factors under this section shall be made separately for AFDC 
recipients and for SSI recipients.

              PART 3--GENERAL AND MISCELLANEOUS PROVISIONS

SEC. 9021. TIMING AND MANNER OF PAYMENTS.

    The provisions of paragraphs (1) and (2) of section 9101(b) apply 
to payments by a State under this subtitle in the same manner as they 
apply to payments by the Secretary under section 9101, and any 
reference in such provisions to the Secretary is deemed a reference to 
the State.

SEC. 9022. REVIEW OF PAYMENT LEVEL.

    (a) In General.--The National Health Board shall review from time 
to time the appropriateness of the levels of payments required of 
States under this subtitle.
    (b) Report.--The Board may report to the Congress on such 
adjustments as should be made to assure an equitable distribution of 
State payments under this Act, taking into account the revenue base in 
each of the States.
    (c) Limit on Authority.--Nothing in this subtitle shall be 
construed as permitting the Board to change the amount of the payments 
required by States under the previous sections in this subtitle.

SEC. 9023. SPECIAL RULES FOR PUERTO RICO AND OTHER TERRITORIES.

    (a) Waiver Authority.--Notwithstanding any other requirement of 
this title or title VI, the Secretary may waive or modify any 
requirement of this title or title VI (other than financial 
contribution and subsidy requirements) with respect to Puerto Rico, the 
Virgin Islands, Guam, American Samoa, and the Northern Mariana Islands, 
consistent with this section, to accommodate their unique geographic 
and social conditions and features of their health care systems.
    (b) Territorial Maintenance of Effort and Division of Financial 
Responsibility.--
            (1) In general.--In the case of such a Commonwealth or 
        territory, the Secretary shall determine the State payments 
        under part 1 taking into account--
                    (A) payments that qualify for Federal financial 
                participation under the medicaid program,
                    (B) payments that would qualify for such 
                participation in the absence of section 1108(c) of the 
                Social Security Act, and
                    (C) other factors that the Secretary may consider.
            (2) Cash assistance recipients.--With respect to such 
        Commonwealths and territories not covered under the 
        supplementary security income program, in this Act, the term 
        ``SSI recipient'' includes an individual receiving aid under a 
        territorial program for the aged, blind, or disabled under the 
        Social Security Act.

                                                   Title IX, Subtitle B

            Subtitle B--Aggregate Federal Alliance Payments

SEC. 9101. FEDERAL PREMIUM PAYMENTS FOR CASH ASSISTANCE RECIPIENTS.

    (a) Amount.--
            (1) In general.--The Secretary shall provide each year 
        (beginning with a State's first year) for payment to each 
        regional alliance of an amount equal to the Federal medical 
        assistance percentage (as defined in section 1905(b) of the 
        Social Security Act) of (A) 95 percent of the sum of the 
        products described in section 9011(a) for that State for that 
        fiscal year, plus (B) the sum described in section 9011(c).
            (2) Special rules for single-payer States.--In determining 
        the products referred to in paragraph (1) in the case of a 
        single-payer State, the State is deemed to be a single regional 
        alliance and the regional alliance adjustment factor (under 
        section 9015) is deemed to be 1.
    (b) Timing and Manner of Payment.--
            (1) In general.--Amounts required to be paid under this 
        section shall be paid on a periodic basis that reflects the 
        cash flow requirements of regional alliances for payments under 
        this section in order to meet obligations established under 
        this Act and, in consultation with the Secretary of the 
        Treasury, the cash management interests of the Federal 
        Government.
            (2) Periodic provision of information.--Each regional 
        alliance shall periodically transmit to the Secretary such 
        information as the Secretary may require to make such payments.
            (3) Reconciliation.--
                    (A) Preliminary.--At such time after the end of 
                each year as the Secretary shall specify, the State 
                shall submit to the Secretary such information as the 
                Secretary may require to do a preliminary 
                reconciliation of the amounts paid under this section 
                and the amounts due.
                    (B) Final.--No later than June 30 of each year, the 
                Secretary shall provide for a final reconciliation for 
                such payments for quarters in the previous year. 
                Amounts subsequently payable are subject to adjustment 
                to reflect the results of such reconciliation.
                    (C) Audit.--Payments under this section are subject 
                to audits by the Secretary in accordance with rules 
                established by the Secretary.

SEC. 9102. CAPPED FEDERAL ALLIANCE PAYMENTS.

    (a) Capped Entitlement.--
            (1) Payment.--The Secretary shall provide for each calendar 
        quarter (beginning on or after January 1, 1996) for payment to 
        each regional alliance of an amount equal to the capped Federal 
        alliance payment amount (as defined in subsection (b)(1)) for 
        the regional alliance for the quarter.
            (2) Entitlement.--This section constitutes budget authority 
        in advance of appropriations Acts, and represents the 
        obligation of the Federal Government to provide for the payment 
        to regional alliances of the capped Federal alliance payment 
        amount under this section.
    (b) Capped Federal Alliance Payment Amount.--
            (1) In general.--In this section, the term ``capped Federal 
        alliance payment amount'' means, for a regional alliance for a 
        calendar quarter in a year and subject to subsection (e), the 
        amount by which--
                    (A) \1/4\ of the total payment obligation 
                (described in paragraph (2)) for the alliance for the 
                year, exceeds
                    (B) \1/4\ of the total amounts receivable 
                (described in paragraph (3)) by the alliance for the 
                year.
            (2) Total payment obligation.--The total payment obligation 
        described in this paragraph for an alliance for a year is the 
        total amount payable by the alliance for the following:
                    (A) Plan payments (and certain cost sharing 
                reductions).--Payments to regional alliance health 
                plans under section 1351 (including amounts 
                attributable to cost sharing reductions under section 
                1371, not including a reduction under subsection (c)(2) 
                thereof).
                    (B) Alliance administrative expenses.--Payments 
                retained by the regional alliance for administration 
                (in accordance with section 1352).
            (3) Total amounts receivable.--The total amounts receivable 
        by a regional alliance for a year is the sum of the following:
                    (A) Premiums.--The amount payable to the regional 
                alliance for the family share of premiums, employer 
                premiums, and liabilities owed the alliance under 
                subtitle B of title VI, not taking into account any 
                failure to make or collect such payments.
                    (B) Other government payments.--The amounts payable 
                to the regional alliance under sections 9001, 9011, and 
                9101, and payable under section 1894 of the Social 
                Security Act (as added by section 4003) during the 
                year.
            (4) No payment for certain amounts.--
                    (A) Uncollected alliance premiums.--Each regional 
                alliance is responsible, under section 1345(a), for the 
                collection of all amounts owed the alliance (whether by 
                individuals, employers, or others and whether on the 
                basis of premiums owed, incorrect amounts of discounts 
                or premium, cost sharing, or other reductions made, or 
                otherwise), and no amounts are payable by the Federal 
                Goverment under this section with respect to the 
                failure to collect any such amounts.
                    (B) Administrative errors.--
                            (i) In general.--Each participating State 
                        is responsible, under section 1202(g), for the 
                        payment to regional alliances in the State of 
                        amounts attributable to administrative errors 
                        (described in clause (ii)).
                            (ii) Administrative errors described.--The 
                        administrative errors described in this clause 
                        include the following:
                                    (I) An eligibility error rate for 
                                premium discounts, liability 
                                reductions, and cost sharing reductions 
                                under sections 6104 and 6123, section 
                                6113, and section 1371, respectively, 
                                to the extent the applicable error rate 
                                exceeds the maximum permissible error 
                                rate, specified by the applicable 
                                Secretary under section 1361(b)(1)(C), 
                                with respect to the section involved.
                                    (II) Misappropriations or other 
                                regional alliance expenditures that the 
                                Secretary finds are attributable to 
                                malfeasance or misfeasance by the 
                                regional alliance or the State.
            (5) Special rules for single-payer states.--In applying 
        this subsection in the case of a single-payer State, the 
        Secretary shall develop and apply a methodology for computing 
        an amount of payment (with respect to each calendar quarter) 
        that is equivalent to the amount of payment that would have 
        been made to all regional alliances in the State for the 
        quarter if the State were not a single-payer State.
    (c) Determination of Capped Federal Alliance Payment Amounts.--
            (1) Reports.--At such time as the Secretary may require 
        before the beginning of each fiscal year, each regional 
        alliance shall submit to the Secretary such information as the 
        Secretary may require to estimate the capped Federal alliance 
        payment amount under this section for the succeeding calendar 
        year (and the portion of such year that falls in such fiscal 
        year).
            (2) Estimation.--Before the beginning of each year, the 
        Secretary shall estimate for each regional alliance the capped 
        Federal alliance payment amount for calendar quarters in such 
        year. Such estimate shall be based on factors including prior 
        financial experience in the alliance, future estimates of 
        income, wages, and employment, and other characteristics of the 
        area found relevant by the Secretary. The Secretary shall 
        transmit to Congress, on a timely basis consistent with the 
        timely appropriation of funds under this section, a report that 
        specifies an estimate of the total capped Federal alliance 
        payment amounts owed to regional alliances under this section 
        for the fiscal and calendar year involved.
    (d) Payments to Regional Alliances.--Subject to subsection (e), the 
provisions of section 9101(b) apply to payments under this section in 
the same manner as they apply to payments under section 9101.
    (e) Cap on Payments.--
            (1) In general.--The total amount of the capped Federal 
        alliance payments made under this section for quarters in a 
        fiscal year may not exceed the cap specified under paragraph 
        (2) for the fiscal year.
            (2) Cap.--Subject to paragraphs (3) and (6)--
                    (A) Fiscal years 1996 through 2000.--The cap under 
                this paragraph--
                            (i) for fiscal year 1996, is $10.3 billion,
                            (ii) for fiscal year 1997, is $28.3 
                        billion,
                            (iii) for fiscal year 1998, is $75.6 
                        billion,
                            (iv) for fiscal year 1999, is $78.9 
                        billion, and
                            (v) for fiscal year 2000, is $81.0 billion.
                    (B) Subsequent fiscal year.--The cap under this 
                paragraph for a fiscal year after fiscal year 2000 is 
                the cap under this paragraph for the previous fiscal 
                year (not taking into account paragraph (3)) multiplied 
                by the product of the factors described in subparagraph 
                (C) for that fiscal year and for each previous year 
                after fiscal year 2000.
                    (C) Factor.--The factor described in this 
                subparagraph for a fiscal year is 1 plus the following:
                            (i) CPI.--The percentage change in the CPI 
                        for the fiscal year, determined based upon the 
                        percentage change in the average of the CPI for 
                        the 12-month period ending with May 31 of the 
                        previous fiscal year over such average for the 
                        preceding 12-month period.
                            (ii) Population.--The average annual 
                        percentage change in the population of the 
                        United States during the 3-year period ending 
                        in the preceding calendar year, determined by 
                        the Board based on data supplied by the Bureau 
                        of the Census.
                            (iii) Real gdp per capita.--The average 
                        annual percentage change in the real, per 
                        capita gross domestic product of the United 
                        States during the 3-year period ending in the 
                        preceding calendar year, determined by the 
                        Board based on data supplied by the Department 
                        of Commerce.
            (3) Carryforward.--If the total of the capped Federal 
        alliance payment amounts for all regional alliances for all 
        calendar quarters in a fiscal year is less than the cap 
        specified in paragraph (2) for the fiscal year, then the amount 
        of such surplus shall be accumulated and will be available in 
        the case of a year in which the cap would otherwise be 
        breached.
            (4) Notification.--
                    (A) In general.--If the Secretary anticipates that 
                the amount of the cap, plus any carryforward from a 
                previous year accumulated under paragraph (3), will not 
                be sufficient for a fiscal year, the Secretary shall 
                notify the President, the Congress, and each regional 
                alliance. Such notification shall include information 
                about the anticipated amount of the shortfall and the 
                anticipated time when the shortfall will first occur.
                    (B) Required action.--Within 30 days after 
                receiving such a notice, the President shall submit to 
                Congress a report containing specific legislative 
                recommendations for actions which would eliminate the 
                shortfall.
            (5) Congressional consideration.--
                    (A) Expedited consideration.--If a joint resolution 
                the substance of which approves the specific 
                recommendations submitted under paragraph (4)(B) is 
                introduced, subject to subparagraph (B), the provisions 
                of section 2908 (other than subsection (a)) of the 
                Defense Base Closure and Realignment Act of 1990 shall 
                apply to the consideration of the joint resolution in 
                the same manner as such provisions apply to a joint 
                resolution described in section 2908(a) of such Act.
                    (B) Special rules.--For purposes of applying 
                subparagraph (A) with respect to such provisions, any 
                reference to the Committee on Armed Services of the 
                House of Representatives shall be deemed a reference to 
                an appropriate Committee of the House of 
                Representatives (specified by the Speaker of the House 
                of Representatives at the time of submission of 
                recommendations under paragraph (4)) and any reference 
                to the Committee on Armed Services of the Senate shall 
                be deemed a reference to an appropriate Committee of 
                the Senate (specified by the Majority Leader of the 
                Senate at the time of submission of such 
                recommendations).
            (6) Method for adjusting the cap for changes in 
        inflation.--If the inflation rate, as measured by the 
        percentage increase in the CPI, is projected to be 
        significantly different from the inflation rate projected by 
        the Council of Economic Advisors to the President as of October 
        1993, the Secretary may adjust the caps under paragraph (2) so 
        as to reflect such deviation from the projection.

                                                   Title IX, Subtitle C

     Subtitle C--Borrowing Authority to Cover Cash-flow Shortfalls

SEC. 9201. BORROWING AUTHORITY TO COVER CASH-FLOW SHORTFALLS.

    (a) In General.--The Secretary shall make available loans to 
regional alliances in order to cover any period of temporary cash-flow 
shortfall attributable to any of the following:
            (1) Any estimation discrepancy (including those described 
        in subsection (e)(1)).
            (2) A period of temporary cash-flow shortfall attributable 
        to an administrative error (described in subsection (e)(2)).
            (3) A period of temporary cash-flow shortfall relating to 
        the relative timing during the year in which amounts are 
        received and payments are required to be made.
    (b) Terms and Conditions.--
            (1) In general.--Loans shall be made under this section 
        under terms and conditions, consistent with this subsection, 
        specified by the Secretary, in consultation with the Secretary 
        of the Treasury and taking into account Treasury cash 
        management rules.
            (2) Period.--Loans under this section shall be repayable 
        with interest over a period of not to exceed 2 years.
            (3) Interest rate.--The rate of interest on such loans 
        shall be at a rate determined by the Secretary of the Treasury 
        taking into consideration the current average rate on 
        outstanding marketable obligations of the United States.
            (4) Appropriate payment adjustments.--As a condition of 
        providing a loan under subsection (a)(1), the Secretary shall 
        require the regional alliance to make such adjustments under 
        the appropriate estimation adjustment provision (described in 
        subsection (f)) in order to assure the repayment of the amount 
        so borrowed.
            (5) Limitation on loan balance outstanding to a regional 
        alliance.--The total balance of loans outstanding at any time 
        to a regional alliance shall not exceed--
                    (A) for the first year, 25 percent of the estimated 
                total premiums for the alliance for such year, or
                    (B) for a subsequent year, 25 percent of the actual 
                total premiums for the alliance for the previous year.
    (c) Repayment.--
            (1) Estimation discrepancies and timing.--Loans made under 
        paragraphs (1) and (3) of subsection (a) shall be repaid 
        through a reduction in the payment amounts otherwise required 
        to be made under section 9102 to the regional alliance.
            (2) Administrative error.--Loans made under subsection 
        (a)(2) shall be repaid through a temporary increase in the 
        amount of the State maintenance-of-effort payment required 
        under section 9001.
    (d) Reports.--The Secretary shall annually report to Congress on 
the loans made (and loan amounts repaid) under this section.
    (e) Sources of Discrepancy Described.--
            (1) Estimation discrepancies.--The estimation discrepancies 
        described in this paragraph are discrepancies in estimating the 
        following:
                    (A) The average premium payments per family under 
                section 6122(b).
                    (B) The AFDC and SSI proportions under section 
                6202.
                    (C) The distribution of enrolled families in 
                different risk categories for purposes of section 
                1351(c).
                    (D) The distribution of enrollment in excess 
                premium plans (for purposes of calculating and applying 
                the reduced weighted average accepted bid under section 
                6105(c)(1)).
                    (E) The collection shortfalls (used in computing 
                the family collection shortfall add-on under section 
                6107).
            (2) Administrative errors.--The administrative errors 
        described in this paragraph are errors described in section 
        9201(b)(4)(B)(ii).
    (f) Estimation Adjustment Provisions Described.--The estimation 
adjustment provisions, referred to in subsection (b)(4)) are the 
following adjustments (corresponding to the respective estimation 
discrepancies specified in subsection (d)(1)):
            (1) Adjustments for average premium payments per family 
        under section 6122(b)(4).
            (2) Adjustments in the AFDC and SSI proportions under 
        section 6202(d).
            (3) Adjustments pursuant to the methodology described in 
        section 1541(b)(8).
            (4) Adjustments in excess premium credit pursuant to 
        section 6105(b)(2).
            (5) Adjustment in the collection shortfall add-on under 
        section 6107(b)(2)(C)).
    (g) Advances; Limitations on Advances.--
            (1) In general.--Subject to paragraph (2), the Secretary of 
        the Treasury is authorized to advance to the Secretary, under 
        terms and conditions determined by the Secretary of the 
        Treasury, amounts sufficient to cover the loans made to 
        regional alliances by the Secretary under this section.
            (2) Limitation.--The total balance of Treasury advances 
        outstanding at any time to the Secretary under paragraph (1) 
        shall not exceed $3,500,000,000.

                                                                Title X

 TITLE X--COORDINATION OF MEDICAL PORTION OF WORKERS COMPENSATION AND 
                          AUTOMOBILE INSURANCE

                       table of contents of title

                                                                   Page
               Subtitle A--Workers Compensation Insurance

Sec. 10000. Definitions.....................................       1314
   Part 1--Health Plan Requirements Relating to Workers Compensation

Sec. 10001. Provision of workers compensation services......       1315
Sec. 10002. Payment by workers compensation carrier.........       1319
              Part 2--Requirements of Participating States

Sec. 10011. Coordination of specialized workers compensation       1320
                            providers.
Sec. 10012. Preemption of State laws restricting delivery of       1321
                            workers compensation medical 
                            benefits.
Sec. 10013. Development of supplemental schedule............       1322
Sec. 10014. Construction....................................       1322
  Part 3--Application of Information Requirements; Report on Premium 
                               Reductions

Sec. 10021. Application of information requirements.........       1323
Sec. 10022. Report on reduction in workers compensation            1324
                            premiums.
                     Part 4--Demonstration Projects

Sec. 10031. Authorization...................................       1325
Sec. 10032. Development of work-related protocols...........       1325
Sec. 10033. Development of capitation payment models........       1326
                    Subtitle B--Automobile Insurance

Sec. 10100. Definitions.....................................       1326
   Part 1--Health Plan Requirements Relating to Automobile Insurance

Sec. 10101. Provision of automobile insurance medical              1327
                            benefits through health plans.
Sec. 10102. Payment by automobile insurance carrier.........       1328
              Part 2--Requirement of Participating States

Sec. 10111. Development of supplemental schedule............       1330
Sec. 10112. Construction....................................       1330
            Part 3--Application of Information Requirements

Sec. 10121. Application of information requirements.........       1330
        Subtitle C--Commission on Integration of Health Benefits

Sec. 10201. Commission......................................       1331
            Subtitle D--Federal Employees' Compensation Act

Sec. 10301. Application of policy...........................       1333
          Subtitle E--Davis-Bacon Act and Service Contract Act

Sec. 10401. Coverage of benefits under Health Security Act..       1333
                      Subtitle F--Effective Dates

Sec. 10501. Regional alliances..............................       1334
Sec. 10502. Corporate alliances.............................       1334
Sec. 10503. Federal requirements............................       1334

                                                    Title X, Subtitle A

               Subtitle A--Workers Compensation Insurance

SEC. 10000. DEFINITIONS.

    In this subtitle:
            (1) Injured worker.--The term ``injured worker'' means, 
        with respect to a health plan, an individual enrolled under the 
        plan who has a work-related injury or illness for which workers 
        compensation medical benefits are available under State law.
            (2) Specialized workers compensation provider.--The term 
        ``specialized workers compensation provider'' means a health 
        care provider that specializes in the provision of treatment 
        relating to work-related injuries or illness, and includes 
        specialists in industrial medicine, specialists in occupational 
        therapy, and centers of excellence in industrial medicine and 
        occupational therapy.
            (3) Workers compensation medical benefits.--The term 
        ``workers compensation medical benefits'' means, with respect 
        to an enrollee who is an employee subject to the workers 
        compensation laws of a State, the comprehensive medical 
        benefits for work-related injuries and illnesses provided for 
        under such laws with respect to such an employee.
            (4) Workers compensation carrier.--The term ``workers 
        compensation carrier'' means an insurance company that 
        underwrites workers compensation medical benefits with respect 
        to one or more employers and includes an employer or fund that 
        is financially at risk for the provision of workers 
        compensation medical benefits.
            (5) Workers compensation services.--The term ``workers 
        compensation services'' means items and services included in 
        workers compensation medical benefits and includes items and 
        services (including rehabilitation services and long-term care 
        services) commonly used for treatment of work-related injuries 
        and illnesses.

   PART 1--HEALTH PLAN REQUIREMENTS RELATING TO WORKERS COMPENSATION

SEC. 10001. PROVISION OF WORKERS COMPENSATION SERVICES.

    (a) Provision of Benefits.--Subject to subsection (b)--
            (1) Requirement for certain health plans.--
                    (A) In general.--Each health plan that provides 
                services to enrollees through participating providers 
                shall enter into such contracts and arrangements as are 
                necessary (in accordance with subparagraph (B)) to 
                provide or arrange for the provision of workers 
                compensation services to such enrollees, in return for 
                payment from the workers compensation carrier under 
                section 10002.
                    (B) Provision of services.--For purposes of this 
                paragraph, a health plan provides (or arranges for the 
                provision of) workers compensation services with 
                respect to an enrollee if the services are provided 
                by--
                            (i) a participating provider in the plan,
                            (ii) any other provider with whom the plan 
                        has entered into an agreement for the provision 
                        of such services, or
                            (iii) a specialized workers compensation 
                        provider (designated by the State under 
                        10011(b)), whether or not the provider is a 
                        provider described in clause (i) or (ii).
            (2) Individual requirement.--An individual entitled to 
        workers compensation medical benefits and enrolled in a health 
        plan (whether or not the plan is described in paragraph (1)(A)) 
        shall receive workers compensation services through the 
        provision (or arrangement for the provision) of such services 
        by the health plan.
            (3) Exceptions.--
                    (A) Emergency services.--Paragraphs (1) and (2) 
                shall not apply in the case of emergency services.
                    (B) Electing veterans, military personnel and 
                indians.--Paragraphs (1) and (2) shall not apply in the 
                case of an individual described in section 1004(b) and 
                making an election described in such section.
            (4) Use of specialized workers compensation providers.--If 
        a participating State has designated under section 10011(b) 
        specialized workers compensation providers with respect to one 
        or more types of injuries or illnesses for a geographic area, 
        either a health plan or an injured worker who has an injury or 
        illness of such type may elect to provide or receive the 
        benefits under this subsection through such a provider.
    (b) Alternative Permitted.--Subsection (a) shall not be construed 
as preventing an injured worker and a workers compensation carrier from 
agreeing that workers compensation services shall be provided other 
than by or through the health plan in which the worker is enrolled.
    (c) Coordination.--
            (1) Designation of case manager.--Each health plan shall 
        employ or contract with one or more individuals, such as 
        occupational nurses, with experience in the treatment of 
        occupational illness and injury to provide case management 
        services with respect to workers compensation services provided 
        through the plan under this section.
            (2) Functions of case manager.--The health plan (through 
        the case manager described in paragraph (1)) is responsible for 
        ensuring that--
                    (A) there is plan of treatment (when appropriate) 
                for each enrollee who is an injured worker designed to 
                assure appropriate treatment and facilitate return to 
                work;
                    (B) the plan of treatment is coordinated with the 
                workers compensation carrier, the employer, or both;
                    (C) the health plan (and its providers) comply with 
                legal duties and requirements under State workers 
                compensation law; and
                    (D) if the health plan is unable to provide a 
                workers compensation service needed to treat a work-
                related injury or illness, the injured worker is 
                referred (in consultation with the workers compensation 
                carrier) to an appropriate provider.
    (c) Administration.--The Secretary of Labor shall administer this 
part and, for such purposes, the Secretary is authorized to prescribe 
such rules and regulations as may be necessary and appropriate.

SEC. 10002. PAYMENT BY WORKERS COMPENSATION CARRIER.

    (a) Payment.--
            (1) In general.--Each workers compensation carrier that is 
        liable for payment for workers compensation services furnished 
        by or through a health plan, regardless of whether or not the 
        services are included in the comprehensive benefit package, 
        shall make payment for such services.
            (2) Use of regional alliance fee schedule.--Except as 
        provided in subsection (b), such payment shall be made in 
        accordance with the applicable fee schedule established under 
        section 1322(c) or section 10013.
    (b) Alternative Payment Methodologies.--Subsection (a)(2) shall not 
apply--
            (1) in the case of a regional alliance or participating 
        State that establishes an alternative payment methodology (such 
        as payment on a negotiated fee for each case) for payment for 
        workers compensation services; or
            (2) in the case in which a workers compensation carrier and 
        the health plan negotiate alternative payment arrangements.
    (c) Limitation of Liability of Injured Worker.--Nothing in this 
part shall be construed as requiring an injured worker to make any 
payment (including payment of any cost sharing or any amount in excess 
of the applicable fee schedule) to any health plan or health care 
provider for the receipt of workers compensation services.

              PART 2--REQUIREMENTS OF PARTICIPATING STATES

SEC. 10011. COORDINATION OF SPECIALIZED WORKERS COMPENSATION PROVIDERS.

    (a) In General.--Each participating State shall coordinate access 
to services provided by specialized workers compensation providers on 
behalf of health plans, providing coverage to individuals residing in 
the State, under part 1.
    (b) Optional Designation of Specialized Workers Compensation 
Providers.--A participating State may designate such specialized 
workers compensation providers, with respect to one or more types of 
illnesses or injuries in a geographic area as the State determines to 
be appropriate, to provide under part 1 workers compensation services 
that--
            (1) are not included in the comprehensive benefit package, 
        or
            (2) are so included but are specialized services that are 
        typically provided (as determined by the State) by specialists 
        in occupational or rehabilitative medicine.
Injured workers and health plans may elect to use such providers under 
section 10001(a)(4).

SEC. 10012. PREEMPTION OF STATE LAWS RESTRICTING DELIVERY OF WORKERS 
              COMPENSATION MEDICAL BENEFITS.

    (a) In General.--Subject to section 10011(b), no State law shall 
have any effect that restricts the choice, or payment, of providers 
that may provide workers compensation services for individuals enrolled 
in a health plan.
    (b) Dispute Resolution.--A State law may provide for a method for 
resolving disputes among parties related to--
            (1) an individual's entitlement to workers compensation 
        medical benefits under State law,
            (2) the necessity and appropriateness of workers 
        compensation services provided to an injured worker, and
            (3) subject to section 10002, the reasonableness of charges 
        or fees charged for workers compensation services.

SEC. 10013. DEVELOPMENT OF SUPPLEMENTAL SCHEDULE.

    Each participating State shall develop a fee schedule applicable to 
payment for workers compensation services for which a fee is not 
included in the applicable fee schedule established under section 
1322(c).

SEC. 10014. CONSTRUCTION.

    (a) In General.--Nothing in this subtitle shall be construed as 
altering--
            (1) the effect of a State workers compensation law as the 
        exclusive remedy for work-related injuries or illnesses,
            (2) the determination of whether or not a person is an 
        injured worker and entitled to workers compensation medical 
        benefits under State law,
            (3) the scope of items and services available to injured 
        workers entitled to workers compensation medical benefits under 
        State law, or
            (4) the eligibility of any individual or class of 
        individuals for workers compensation medical benefits under 
        State law.
    (b) Early Integration.--Nothing in this subtitle shall prevent a 
State from integrating or otherwise coordinating the payment for 
workers compensation medical benefits with payment for benefits under 
health insurance or health benefit plans before the date the Commission 
submits its report under section 10201(e).

  PART 3--APPLICATION OF INFORMATION REQUIREMENTS; REPORT ON PREMIUM 
                               REDUCTIONS

SEC. 10021. APPLICATION OF INFORMATION REQUIREMENTS.

    (a) In General.--The provisions of--
            (1) part 3 of subtitle B of title V (relating to use of 
        standard forms), and
            (2) section 5101(e)(9) (relating to provision of data on 
        quality),
apply to the provision of workers compensation services in the same 
manner as such provisions apply with respect to the provision of 
services included in the comprehensive benefit package.
    (b) Rules.--The Secretary of Labor shall promulgate rules to 
clarify the responsibilities of health plans and workers compensation 
carriers in carrying out the provisions referred to in subsection (a).

SEC. 10022. REPORT ON REDUCTION IN WORKERS COMPENSATION PREMIUMS.

    (a) Study and Report.--
            (1) Study.--The Secretary of Labor shall provide for a 
        study of the impact of the provisions of this subtitle on the 
        premium rates charged to employers for workers compensation 
        insurance. Such study shall use information supplied by States 
        relating to workers compensation premiums and such other 
        information as such Secretary finds appropriate.
            (2) Report.--Such Secretary shall submit to the Congress, 
        by not later than 2 years after the date that this subtitle 
        applies in all States, a report on the findings of the study.
    (b) Workers Compensation Carrier Filings.--
            (1) In general.--Within six months after the date this 
        subtitle is effective in a participating State, each workers 
        compensation carrier (other than a self-funded employer) 
        providing workers compensation insurance in the State shall 
        make a filing with an agency designated by the State. Such 
        filing shall describe the manner in which such carrier has 
        modified (or intends to modify) its premium rates for workers 
        compensation insurance provided in the State to reflect the 
        changes brought about by the provisions in this subtitle. The 
        filing shall include such actuarial projections and assumptions 
        as necessary to support the modifications of such rates.
            (2) Report to secretary.--Each participating State shall 
        provide to the Secretary of Labor such information on filings 
        made under paragraph (1) as such Secretary may specify.

                     PART 4--DEMONSTRATION PROJECTS

SEC. 10031. AUTHORIZATION.

    The Secretary of Health and Human Services and the Secretary of 
Labor are authorized to conduct demonstration projects under this part 
in one or more States with respect to treatment of work-related 
injuries and illnesses.

SEC. 10032. DEVELOPMENT OF WORK-RELATED PROTOCOLS.

    (a) In General.--Under this part, the Secretaries, in consultation 
with States and such experts on work-related injuries and illnesses as 
the Secretaries find appropriate, shall develop protocols for the 
appropriate treatment of work-related conditions.
    (b) Testing of Protocols.--The Secretaries shall enter into 
contracts with one or more health alliances to test the validity of the 
protocols developed under subsection (a).

SEC. 10033. DEVELOPMENT OF CAPITATION PAYMENT MODELS.

    Under this part, the Secretaries shall develop, using protocols 
developed under section 10032 if possible, methods of providing for 
payment by workers compensation carriers to health plans on a per case, 
capitated payment for the treatment of specified work-related injuries 
and illnesses.

                                                    Title X, Subtitle B

                    Subtitle B--Automobile Insurance

SEC. 10100. DEFINITIONS.

    In this subtitle:
            (1) Injured individual.--The term ``injured individual'' 
        means, with respect to a health plan, an individual enrolled 
        under the plan who has an injury or illness sustained in an 
        automobile accident for which automobile insurance medical 
        benefits are available.
            (2) Automobile insurance medical benefits.--The term 
        ``automobile insurance medical benefits'' means, with respect 
        to an enrollee, the comprehensive medical benefits for injuries 
        or illnesses sustained in automobile accidents.
            (3) Automobile insurance carrier.--The term ``automobile 
        insurance carrier'' means an insurance company that underwrites 
        automobile insurance medical benefits and includes an employer 
        or fund that is financially at risk for the provision of 
        automobile insurance medical benefits.
            (4) Automobile insurance medical services.--The term 
        ``automobile insurance medical services'' means items and 
        services included in automobile insurance medical benefits and 
        includes items and services (such as rehabilitation services 
        and long-term care services) commonly used for treatment of 
        injuries and illnesses sustained in automobile accidents.

   PART 1--HEALTH PLAN REQUIREMENTS RELATING TO AUTOMOBILE INSURANCE

SEC. 10101. PROVISION OF AUTOMOBILE INSURANCE MEDICAL BENEFITS THROUGH 
              HEALTH PLANS.

    (a) In General.--An individual entitled to automobile insurance 
medical benefits and enrolled in a health plan shall receive automobile 
insurance medical services through the provision (or arrangement for 
the provision) of such services by the health plan.
    (b) Referral for Specialized Services.--Each health plan shall 
provide for such referral for automobile insurance medical services as 
may be necessary to assure appropriate treatment of injured 
individuals.
    (c) Exceptions.--Subsections (a) and (b) shall not apply in the 
case of an individual described in section 1004(b) and making an 
election described in such section.
    (d) Alternative Permitted.--Subsection (a) shall not be construed 
as preventing an injured individual and an automobile insurance carrier 
from agreeing that automobile insurance medical services shall be 
provided other than by or through the health plan in which the 
individual is enrolled.

SEC. 10102. PAYMENT BY AUTOMOBILE INSURANCE CARRIER.

    (a) Payment.--
            (1) In general.--Except as provided in subsection (b), each 
        automobile insurance carrier that is liable for payment for 
        automobile insurance medical services furnished by or through a 
        health plan, regardless of whether or not the services are 
        included in the comprehensive benefit package, shall make 
        payment for such services.
            (2) Use of regional alliance fee schedule.--Such payment 
        shall be made in accordance with the applicable fee schedule 
        established under section 1322(c) or section 10111.
    (b) Alternative Payment Methodologies.--Subsection (a) shall not 
apply--
            (1) in the case of a regional alliance or participating 
        State that establishes an alternative payment methodology (such 
        as payment on a negotiated fee for each case) for payment for 
        automobile insurance medical services; or
            (2) in the case in which a automobile insurance carrier and 
        the health plan negotiate alternative payment arrangements.
    (c) Limitation of Liability of Injured Individual.--Nothing in this 
part shall be construed as requiring an injured individual to make any 
payment (including payment of any cost sharing or any amount in excess 
of the applicable fee schedule) to any health plan or health care 
provider for the receipt of automobile insurance medical services.

              PART 2--REQUIREMENT OF PARTICIPATING STATES

SEC. 10111. DEVELOPMENT OF SUPPLEMENTAL SCHEDULE.

    Each participating State shall develop a fee schedule applicable to 
payment for automobile insurance medical services for which a fee is 
not included in the applicable fee schedule established under section 
1322(c).

SEC. 10112. CONSTRUCTION.

    Nothing in this subtitle shall be construed as altering--
            (1) the determination of whether or not a person is an 
        injured individual and entitled to automobile insurance medical 
        benefits under State law, or
            (2) the scope of items and services available to injured 
        individuals entitled to automobile insurance medical benefits 
        under State law.

            PART 3--APPLICATION OF INFORMATION REQUIREMENTS.

SEC. 10121. APPLICATION OF INFORMATION REQUIREMENTS.

    (a) In General.--The provisions of--
            (1) part 3 of subtitle B of title V (relating to use of 
        standard forms), and
            (2) section 5101(e)(9) (relating to provision of data on 
        quality),
apply to the provision of automobile insurance medical services in the 
same manner as such provisions apply with respect to the provision of 
services included in the comprehensive benefit package.
    (b) Rules.--The Secretary of Labor shall promulgate rules to 
clarify the responsibilities of health plans and automobile insurance 
carriers in carrying out the provisions referred to in subsection (a).

                                                    Title X, Subtitle C

        Subtitle C--COMMISSION ON INTEGRATION OF HEALTH BENEFITS

SEC. 10201. COMMISSION.

    (a) Establishment.--There is hereby created a Commission on 
Integration of Health Benefits (in this section referred to as the 
``Commission'').
    (b) Composition.--
            (1) In general.--The Commission shall consist of 15 members 
        appointed jointly by the Secretary of Health and Human Services 
        and the Secretary of Labor.
            (2) No compensation except travel expenses.--Members of the 
        Commission shall serve without compensation, but the 
        Secretaries shall provide that each member shall receive travel 
        expenses, including per diem in lieu of subsistence, in 
        accordance with sections 5702 and 5703 of title 5, United 
        States Code.
    (c) Duties.--The Commission shall study the feasibility and 
appropriateness of transferring financial responsibility for all 
medical benefits (including those currently covered under workers 
compensation and automobile insurance) to health plans.
    (d) Staff Support.--The Secretaries shall provide staff support for 
the Commission.
    (e) Report.--The Commission shall submit a report on its work to 
the President by not later than July 1, 1995. If such report recommends 
the integration of financial responsibility for all medical benefits in 
health plans, such report shall provide for a detailed plan as to how 
(and when) such an integration should be effected under this Act.
    (f) Termination.--The Commission shall terminate 90 days after the 
date of submission of its report under subsection (e).
    (g) Authorization of Appropriations.--There are authorized to be 
appropriated such sums as may be necessary to carry out this section.

            Subtitle D--Federal Employees' Compensation Act

SEC. 10301. APPLICATION OF POLICY.

                                                    Title X, Subtitle D

    (a) In General.--Chapter 81 of title 5, United States Code, known 
as the Federal Employees' Compensation Act shall be interpreted and 
administered consistent with the provisions of subtitle A.
    (b) Construction.--In applying subsection (a), subtitle A shall be 
applied as if the following modifications had been made in subtitle A:
            (1) Any reference in section 10000, section 10001(c)(2)(C), 
        section 10012(b), or section 10014 to a State law is deemed to 
        include a reference to chapter 81 of title 5, United States 
        Code.
            (2) The term ``workers compensation carrier'' includes the 
        Employees Compensation Fund (established under section 8147 of 
        title 5, United States Code).

          Subtitle E--Davis-Bacon Act and Service Contract Act

SEC. 10401. COVERAGE OF BENEFITS UNDER HEALTH SECURITY ACT.

                                                    Title X, Subtitle E

    (a) Davis-Bacon Act.--Subsection (b)(2) of the first section of the 
Davis Bacon Act (40 U.S.C. 276a(b)(2)) is amended in the matter 
following subparagraph (B) by inserting after ``local law'' the 
following: ``(other than benefits provided pursuant to the Health 
Security Act)''.
    (b) Service Contract Act of 1965.--The second sentence of section 
2(a)(2) of the Service Contract Act of 1965 (41 U.S.C. 351(a)(2)) is 
amended by inserting after ``local law'' the following: ``(other than 
benefits provided pursuant to the Health Security Act)''.

                      Subtitle F--Effective Dates

SEC. 10501. REGIONAL ALLIANCES.

                                                    Title X, Subtitle F

    The provisions of subtitles A and B of this title apply to regional 
alliances, and regional alliance health plans, in a State 2 years after 
the State's first year (as defined in section 1902(17)).

SEC. 10502. CORPORATE ALLIANCES.

    The provisions of subtitles A and B of this title apply to 
corporate alliances, and corporate alliance health plans, on the date 
under section 10501 that such subtitles apply to regional alliances, 
and regional alliance health plans, in the State.

SEC. 10503. FEDERAL REQUIREMENTS.

    The provisions of subtitle D of this title shall take effect on 
January 1, 1998.

                TITLE XI--TRANSITIONAL INSURANCE REFORM

                                                               Title XI

                       table of contents of title

                                                                   Page
Sec. 11001. Imposition of requirements......................       1335
Sec. 11002. Enforcement.....................................       1337
Sec. 11003. Requirements relating to preserving current            1338
                            coverage.
Sec. 11004. Restrictions on premium increases during               1340
                            transition.
Sec. 11005. Requirements relating to portability............       1350
Sec. 11006. Requirements limiting reduction of benefits.....       1353
Sec. 11007. National transitional health insurance risk pool       1354
Sec. 11008. Definitions.....................................       1358
Sec. 11009. Termination.....................................       1363

SEC. 11001. IMPOSITION OF REQUIREMENTS.

    (a) In General.--The Secretary and the Secretary of Labor shall 
apply the provisions of this title to assure, to the extent possible, 
the maintenance of current health care coverage and benefits during the 
period between the enactment of this Act and the dates its provisions 
are implemented in the various States.
    (b) Enforcement.--
            (1) Health insurance plans.--The Secretary shall enforce 
        the requirements of this title with respect to health insurance 
        plans. The Secretary shall promulgate regulations to carry out 
        the requirements under this title with respect to health 
        insurance plans. The Secretary shall promulgate regulations 
        with respect to section 11004 within 90 days after the date of 
        the enactment of this Act.
            (2) Self-insured plans.--The Secretary of Labor shall 
        enforce the requirements of this title with respect to self-
        insured plans. Such Secretary shall promulgate regulations to 
        carry out the requirements under this title as they relate to 
        self-funded plans.
            (3) Arrangements with states.--The Secretary and the 
        Secretary of Labor may enter into arrangements with a State to 
        enforce the requirements of this title with respect to health 
        insurance plans and self-insured plans issued or sold, or 
        established and maintained, in the State.
    (c) Preemption.--The requirements of this title do not preempt any 
State law unless State law directly conflicts with such requirements. 
The provision of additional protections under State law shall not be 
considered to directly conflict with such requirements. The Secretary 
(or, in the case of a self-insured plan, the Secretary of Labor) may 
issue letter determinations with respect to whether this Act preempts a 
provision of State law.
    (d) Interim Final Regulations.--Section 1911 shall apply to 
regulations issued to carry out this title. The Secretary may consult 
with States and the National Association of Insurance Commissioners in 
issuing regulations and guidelines under this title.
    (e) Construction.--The provisions of this title shall be construed 
in a manner that assures, to the greatest extent practicable, 
continuity of health benefits under health benefit plans in effect on 
the effective date of this Act.
    (f) Special Rules for Acquisitions and Transfers.--The Secretary 
may issue regulations regarding the application of this title in the 
case of health insurance plans (or groups of such plans) which are 
transferred from one insurer to another insurer through assumption, 
acquisition, or otherwise.

SEC. 11002. ENFORCEMENT.

    (a) In General.--Any health insurer or health benefit plan sponsor 
that violates a requirement of this title shall be subject to a civil 
money penalty of not more than $25,000 for each such violation. The 
provisions of section 1128A of the Social Security Act (other than 
subsections (a) and (b)) shall apply to civil money penalties under 
this subsection in the same manner as they apply to a penalty or 
proceeding under section 1128A(a) of such Act.
    (b) Equitable Remedies.--
            (1) In general.--A civil action may be brought by the 
        applicable Secretary--
                    (A) to enjoin any act or practice which violates 
                any provision of this title, or
                    (B) to obtain other appropriate equitable relief 
                (i) to redress such violations, or (ii) to enforce any 
                provision of this title, including, in the case of a 
                wrongful termination of (or refusal to renew) coverage, 
                reinstating coverage effective as of the date of the 
                violation.

SEC. 11003. REQUIREMENTS RELATING TO PRESERVING CURRENT COVERAGE.

    (a) Prohibition of Termination.--
            (1) Group health insurance plans.--Each health insurer that 
        provides a group health insurance plan may not terminate (or 
        fail to renew) coverage for any covered employee if the 
        employer of the employee continues the plan, except in the case 
        of--
                    (A) nonpayment of required premiums,
                    (B) fraud, or
                    (C) misrepresentation of a material fact relating 
                to an application for coverage or claim for benefits.
            (2) Individual health insurance plans.--Each health insurer 
        that provides coverage to a covered individual under an 
        individual health insurance plan may not terminate (or fail to 
        renew) coverage for such individual (or a covered dependent), 
        except in the case of--
                    (A) nonpayment of required premiums,
                    (B) fraud, or
                    (C) misrepresentation of a material fact relating 
                to an application for coverage or claim for benefits.
            (2) Effective date of title.--
                    (A) In general.--This subsection shall take effect 
                on the effective date of this title and shall apply to 
                coverage on or after such date.
                    (B) Definition.--Except as otherwise provided, in 
                this title the term ``effective date of this title'' 
                means the date of the enactment of this Act.
    (b) Acceptance of New Members in a Group Health Insurance Plan.--
            (1) In general.--In the case of a health insurer that 
        provides a group health insurance plan that is in effect on the 
        effective date of this title, the insurer is required--
                    (A) to accept all individuals, and their eligible 
                dependents, who become full-time employees (as defined 
                in section 1901(b)(2)(C)) of an employer covered after 
                such effective date;
                    (B) to establish and apply premium rates that are 
                consistent with section 11004(b); and
                    (C) to limit the application of pre-existing 
                condition restrictions in accordance with section 
                11005.
            (2) Consistent application of rules relating to dependents 
        and waiting periods.--In this subsection, the term ``eligible 
        dependent'', with respect to a group health insurance plan, has 
        the meaning provided under the plan as of October 27, 1993, or, 
        in the case of a plan not established as of such date, as of 
        the date of establishment of the plan.

SEC. 11004. RESTRICTIONS ON PREMIUM INCREASES DURING TRANSITION.

    (a) Division of Health Insurance Plans by Sector.--For purposes of 
this section, each health insurer shall divide its health insurance 
business into the following 3 sectors:
            (1) Health insurance for groups with at least 100 covered 
        lives (in this section referred to as the ``large group 
        sector'')
            (2) Health insurance for groups with fewer than 100 covered 
        lives (in this section referred as the ``small group sector'').
            (3) Health insurance for individuals, and not for groups 
        (in this section referred to as the ``individual sector'').
    (b) Premium Changes to Reflect Changes in Group or Individual 
Characteristics or Terms of Coverage.--
            (1) Application.--The provisions of this subsection shall 
        apply to changes in premiums that reflect--
                    (A) changes in the number of individuals covered 
                under a plan;
                    (B) changes in the group or individual 
                characteristics (including age, gender, family 
                composition or geographic area but not including health 
                status, claims experience or duration of coverage under 
                the plan) of individuals covered under a plan;
                    (C) changes in the level of benefits (including 
                changes in cost-sharing) under the plan; and
                    (D) changes in any material terms and conditions of 
                the health insurance plan (other than factors related 
                to health status, claims experience, and duration of 
                coverage under the plan).
            (2) Specification of reference rate for each sector.--Each 
        health insurer shall calculate a reference rate for each such 
        sector. The reference rate for a sector shall be calculated so 
        that, if it were applied using the rate factors specified under 
        paragraph (3), the average premium rate for individuals and 
        groups in that sector would approximate the average premium 
        rate charged individuals and groups in the sector as of the 
        effective date of this title.
            (3) Single set of rate factors within each sector.--
                    (A) In general.--Each health insurer shall develop 
                for each sector a single set of rate factors which will 
                be used to calculate any changes in premium that relate 
                to the reasons described in subparagraphs (B) through 
                (D) of paragraph (1).
                    (B) Standards.--Such rate factors--
                            (i) shall relate to reasonable and 
                        objective differences in demographic 
                        characteristics, in the design and in levels of 
                        coverage, and in other terms and conditions of 
                        a contract,
                            (ii) shall not relate to expected health 
                        status, claims experience, or duration of 
                        coverage of the one or more groups or 
                        individuals, and
                            (iii) shall comply with regulations 
                        established under subsection (f).
            (4) Computation of Premium Changes.--
                    (A) In general.--Changes in premium rates that 
                relate to the reasons described in paragraph (1) shall 
                be calculated using the rate factors developed pursuant 
                to paragraph (3).
                    (B) Application to changes in number of covered 
                individuals.--In the case of a change in premium rates 
                related to the reason described in paragraph (1)(A), 
                the change in premium rates shall be calculated to 
                reflect, with respect to the enrollees who enroll or 
                disenroll in a health insurance plan, the sum of the 
                products, for such individuals, of the reference rate 
                (determined under paragraph (2)) and the rate factors 
                (specified under paragraph (3)) applicable to such 
                enrollees.
                    (C) Application of other factors.--
                            (i) In general.--In the case of a change in 
                        premium rates related to a reason described in 
                        subparagraph (B), (C), or (D) of paragraph (1), 
                        the change in premium rates with respect to 
                        each health insurance plan in each sector shall 
                        reflect the rate factors specified under 
                        paragraph (3) applicable to the reason as 
                        applied to the current premium charged for the 
                        health insurance plan. Such rate factors shall 
                        be applied in a manner so that the resulting 
                        adjustment, to the extent possible, reflects 
                        the premium that would have been charged under 
                        the plan if the reason for the change in 
                        premium had existed at the time that the 
                        current premium rate was calculated.
                            (ii) No reflection of change in health 
                        status.--In applying the rate factors under 
                        this subparagraph, the adjustment shall not 
                        reflect any change in the health status, claims 
                        experience or duration of coverage with respect 
                        to any employer or individual covered under the 
                        plan.
            (5) Limitation on application.--This subsection shall only 
        apply--
                    (A) to changes in premiums occurring on or after 
                the date of the enactment of this Act to groups and 
                individuals covered as of such date, and
                    (B) with respect to groups and individuals 
                subsequently covered, to changes in premiums subsequent 
                to such coverage.
            (6) Application to community-rated plans.--Nothing in this 
        subsection shall require the application of rate factors 
        related to individual or group characteristics with respect to 
        community-rated plans.
    (c) Limitations on Changes in Premiums Related to Increases in 
Health Care Costs and Utilization.--
            (1) Application.--The provisions of this subsection shall 
        apply to changes in premiums that reflect increases in health 
        care costs and utilization.
            (2) Equal increase for all plans in all sectors.--
                    (A) In general.--Subject to subparagraph (B), the 
                annual percentage increase in premiums by a health 
                insurer for health insurance plans in the individual 
                sector, small group sector, and large group sector, to 
                the extent such increase reflect increases in health 
                care costs and utilization, shall be the same for all 
                such plans in those sectors.
                    (B) Special rule for large group sector.--The 
                annual percentage increase in premiums by a health 
                insurer for health insurance plans in the large group 
                sector may vary among such plans based on the claims 
                experience of an employer (to the extent the experience 
                is credible), so long as the weighted average of such 
                increases for all such plans in the sector complies 
                with the requirement of subparagraph (A).
                    (C) Geographic application.--Subparagraphs (A) and 
                (B)--
                            (i) may be applied on a national level, or
                            (ii) may vary based on geographic area, but 
                        only if (I) such areas are sufficiently large 
                        to provide credible data on which to calculate 
                        the variation and (II) the variation is due to 
                        reasonable factors related to the objective 
                        differences among such areas in costs and 
                        utilization of health services.
                    (D) Exceptions to accommodate state rate reform 
                efforts.--Subparagraphs (A) and (B) shall not apply, in 
                accordance with guidelines of the Secretary, to the 
                extent necessary to permit a State to narrow the 
                variations in premiums among health insurance plans 
                offered by health insurers to similarly situated groups 
                or individuals within a sector.
                    (E) Exception for rates subject to prior 
                approval.--Subparagraphs (A) and (B) shall not apply to 
                premiums that are subject to prior approval by a State 
                insurance commissioner (or similar official) and are 
                approved by such official.
                    (F) Other reasons specified by the secretary.--The 
                Secretary may specify through regulations such other 
                exceptions to the provisions of this subsection as the 
                Secretary determines are required to enhance stability 
                of the health insurance market and continued 
                availability of coverage.
            (3) Even application throughout a year.--In applying the 
        provisions of this subsection to health insurance plans that 
        are renewed in different months of a year, the annual 
        percentage increase shall be applied in a consistent, even 
        manner so that any variations in the rate of increase applied 
        in consecutive months are even and continuous during the year.
            (4) Petition for exception.--A health insurer may petition 
        the Secretary (or a State acting under a contract with the 
        Secretary under section 11001(b)(3)) for an exception from the 
        application of the provisions of this subsection. The Secretary 
        may approve such an exception if--
                    (A) the health insurer demonstrates that the 
                application of this subsection would threaten the 
                financial viability of the insurer, and
                    (B) the health insurer offers an alternative method 
                for increasing premiums that is not substantially 
                discriminatory to any sector or to any group or 
                individual covered by a health insurance plan offered 
                by the insurer.
    (d) Prior Approval for Certain Rate Increases.--
            (1) In general.--If the percentage increase in the premium 
        rate for the individual and small group sector exceeds a 
        percentage specified by the Secretary under paragraph (2), 
        annualized over any 12-month period, the increase shall not 
        take effect unless the Secretary (or a State acting under a 
        contract with the Secretary under section 11001(b)(3)) has 
        approved the increase.
            (2) Percentage.--The Secretary shall specify, for each 12-
        month period beginning after the date of the enactment of this 
        Act, a percentage that will apply under paragraph (1). Such 
        percentage shall be determined taking into consideration the 
        rate of increase in health care costs and utilization, previous 
        trends in health insurance premiums, and the conditions in the 
        health insurance market. Within 30 days after the date of the 
        enactment of this Act, the Secretary shall first specify a 
        percentage under this paragraph.
    (e) Documentation of Compliance.--
            (1) Period for conformance.--Effective 1 year after the 
        date of the enactment of this Act, the premium for each health 
        insurance plan shall be conformed in a manner that complies 
        with the provisions of this section.
            (2) Methodology.--Each health insurer shall document the 
        methodology used in applying subsections (b) and (c) with 
        respect to each sector (and each applicable health plan). Such 
        documentation shall be sufficient to permit the auditing of the 
        application of such methodology to determine if such 
        application was consistent with such subsections.
            (3) Certification.--For each 6-month period in which this 
        section is effective, each health insurer shall file a 
        certification with the Secretary (or with a State with which 
        the Secretary has entered into an arrangement under section 
        11001(b)(3)) that the insurer is in compliance with such 
        requirements.
    (f) Regulations.--The Secretary shall establish regulations to 
carry out this section. Such regulations may include guidelines 
relating to the permissible variation that results from the use of 
demographic or other characteristics in the development of rate 
factors. Such guidelines may be based on the guidelines currently used 
by States in applying rate limitations under State insurance 
regulations.
    (g) Effective Period.--This section shall apply to premium 
increases occurring during the period beginning on the date of the 
enactment of this Act and ending, for a health insurance plan provided 
in a State, on the first day of the State's first year.

SEC. 11005. REQUIREMENTS RELATING TO PORTABILITY.

    (a) Treatment of Preexisting Condition Exclusions.--
            (1) In general.--Subject to the succeeding provisions of 
        this subsection, a group health benefit plan may exclude 
        coverage with respect to services related to treatment of a 
        preexisting condition, but the period of such exclusion may not 
        exceed 6 months. The exclusion of coverage shall not apply to 
        services furnished to newborns or in the case of a plan that 
        did not apply such exclusions as of the effective date of this 
        title.
            (2)  Crediting of previous coverage.--
                    (A) In general.--A group health benefit plan shall 
                provide that if an individual covered under such plan 
                is in a period of continuous coverage (as defined in 
                subparagraph (B)(i)) with respect to particular 
                services as of the date of initial coverage under such 
                plan, any period of exclusion of coverage with respect 
                to a preexisting condition for such services or type of 
                services shall be reduced by 1 month for each month in 
                the period of continuous coverage.
                    (B) Definitions.--As used in this paragraph:
                            (i) Period of continuous coverage.--The 
                        term ``period of continuous coverage'' means, 
                        with respect to particular services, the period 
                        beginning on the date an individual is enrolled 
                        under a group or individual health benefit 
                        plan, self-insured plan, the medicare program, 
                        a State medicaid plan, or other health benefit 
                        arrangement which provides benefits with 
                        respect to such services and ends on the date 
                        the individual is not so enrolled for a 
                        continuous period of more than 3 months.
                            (ii) Preexisting condition.--The term 
                        ``preexisting condition'' means, with respect 
                        to coverage under a health benefits plan, a 
                        condition which has been diagnosed or treated 
                        during the 6-month period ending on the day 
                        before the first date of such coverage (without 
                        regard to any waiting period).
    (b) Waiting Periods.--A self-insured plan, and an employer with 
respect to a group health insurance plan, may not discriminate among 
employees in the establishment of a waiting period before making health 
insurance coverage available based on the health status, claims 
experience, receipt of health care, medical history, or lack of 
evidence of insurability, of the employee or the employee's dependents.

SEC. 11006. REQUIREMENTS LIMITING REDUCTION OF BENEFITS.

    (a) In General.--A self-insured sponsor may not make a modification 
of benefits described in subsection (b).
    (b) Modification of Benefits Described.--
            (1) In general.--A modification of benefits described in 
        this subsection is any reduction or limitation in coverage, 
        effected on or after the effective date of this title, with 
        respect to any medical condition or course of treatment for 
        which the anticipated cost is likely to exceed $5,000 in any 
        12-month period.
            (2) Treatment of termination.--A modification of benefits 
        includes the termination of a plan if the sponsor, within a 
        period (specified by the Secretary of Labor) establishes a 
        substitute plan that reflects the reduction or limitation 
        described in paragraph (1).
    (c) Remedy.--Any modification made in violation of this section 
shall not be effective and the self-insured sponsor shall continue to 
provide benefits as though the modification (described in subsection 
(b)) had not occurred.

SEC. 11007. NATIONAL TRANSITIONAL HEALTH INSURANCE RISK POOL.

    (a) Establishment.--In order to assure access to health insurance 
during the transition, the Secretary is authorized to establish a 
National Transitional Health Insurance Risk Pool (in this section 
referred to as the ``national risk pool'') in accordance with this 
section.
    (b) Administration.--
            (1) In general.--The Secretary may administer the national 
        risk pool through contracts with--
                    (A) one or more existing State health insurance 
                risk pools,
                    (B) one or more private health insurers, or
                    (C) such other contracts as the Secretary deems 
                appropriate.
            (2) Coordination with state risk pools.--The Secretary may 
        enter into such arrangements with existing State health 
        insurance risk pools to coordinate the coverage under such 
        pools with the coverage under the national risk pool. Such 
        coordination may address eligibility and funding of coverage 
        for individuals currently covered under State risk pools.
    (c) Eligibility for Coverage.--The national risk pool shall provide 
health insurance coverage to individuals who are unable to secure 
health insurance coverage from private health insurers because of their 
health status or condition (as determined in accordance with rules and 
procedures specified by the Secretary).
    (d) Benefits.--
            (1) In general.--Benefits and terms of coverage provided 
        through the national risk pool shall include items and 
        services, conditions of coverage, and cost sharing (subject to 
        out-of-pocket limits on cost sharing) comparable to the 
        benefits and terms of coverage available in State health 
        insurance risk pools.
            (2) Payment rates.--Payments under the national risk pool 
        for covered items and services shall be made at rates 
        (specified by the Secretary) based on payment rates for 
        comparable items and services under the medicare program. 
        Providers who accept payment from the national risk pool shall 
        accept such payment as payment in full for the service, other 
        than for cost sharing provided under the national risk pool.
    (e) Premiums.--
            (1) In general.--Premiums for coverage in the national risk 
        pool shall be set in a manner specified by the Secretary.
            (2) Variation.--Such premiums shall vary based upon age, 
        place of residence, and other traditional underwriting factors 
        other than on the basis of health status or claims experience.
            (3) Limitation.--The premiums charged individuals shall be 
        set at a level that is no less than 150 percent of the premiums 
        that the Secretary estimates would be charged to a population 
        of average risk for the covered benefits.
    (f) Treatment of Shortfalls.--
            (1) Estimates.--The Secretary shall estimate each year the 
        extent to which the total premiums collected under subsection 
        (e) in the year are insufficient to cover the expenses of the 
        national risk pool with respect to the year.
            (2) Temporary borrowing authority.--The Secretary of the 
        Treasury is authorized to advance to the Secretary amounts 
        sufficient to cover the amount estimated under paragraph (1) 
        during the year before assessments are collected under 
        paragraph (3), except that the total balance of such Treasury 
        advances at any time shall not exceed $1,500,000,000. The 
        Secretary shall repay such amounts, with interest at a rate 
        specified by the Secretary of the Treasury, from the 
        assessments under paragraph (3).
            (3) Assessments.--
                    (A) In general.--Each health benefit plan sponsor 
                shall be liable for an assessment in the amount 
                specified in subparagraph (C).
                    (B) Amount.--For each year for which amounts are 
                advanced under paragraph (2), the Secretary shall--
                            (i) estimate the total amount of premiums 
                        (and premium equivalents) for health benefits 
                        under health benefit plans for the succeeding 
                        year, and
                            (ii) calculate a percentage equal to (I) 
                        the total amounts repayable by the Secretary to 
                        the Secretary of the Treasury under paragraph 
                        (2) for the year, divided by the amount 
                        determined under clause (i).
                    (C) Assessment amount.--The amount of an assessment 
                for a sponsor of a health benefit plan for a year shall 
                be equal to the percentage calculated under 
                subparagraph (B)(ii) (or, if less, \1/2\ of 1 percent) 
                of the total amount of premiums (and premium 
                equivalents) for health benefits under the plan for the 
                previous year.
                    (D) Self-insured plans.--The amount of premiums 
                (and premium equivalents) under this paragraph shall be 
                estimated--
                            (i) by the Secretary for health insurance 
                        plans, and
                            (ii) by the Secretary of Labor for self-
                        insured plans.
                Such estimates may be based on a methodology that 
                requires plans liable for assessment to file 
                information with the applicable Secretary.

SEC. 11008. DEFINITIONS.

    In this title:
            (1) Applicable secretary.--The term ``applicable 
        Secretary'' means--
                    (A) the Secretary with respect to health insurance 
                plans and insurers, or
                    (B) the Secretary of Labor with respect to self-
                insured plans and self-insured plan sponsors.
            (2) Covered employee.--The term ``covered employee'' means 
        an employee (or dependent of such an employee) covered under a 
        group health benefits plan.
            (3) Covered individual.--The ``covered individual'' means, 
        with respect to a health benefit plan, an individual insured, 
        enrolled, eligible for benefits, or otherwise covered under the 
        plan.
            (4) Group health benefits plan.--The term ``group health 
        benefits plan'' means a group health insurance plan and a self-
        insured plan.
            (5) Group health insurance plan.--
                    (A) In general.--The term ``group health insurance 
                plan'' means a health insurance plan offered primarily 
                to employers for the purpose of providing health 
                insurance to the employees (and dependents) of the 
                employer.
                    (B) Inclusion of association plans and mewas.--Such 
                term includes--
                            (i) any arrangement in which coverage for 
                        health benefits is offered to employers through 
                        an association, trust, or other arrangement, 
                        and
                            (ii) a multiple employer welfare 
                        arrangement (as defined in section 3(40) of the 
                        Employee Retirement Income Security Act of 
                        1974), whether funded through insurance or 
                        otherwise.
            (6) Health benefits plan.--The term ``health benefits 
        plan'' means health insurance plan and a self-insured health 
        benefit plan.
            (7) Health benefit plan sponsor.--The term ``health benefit 
        plan sponsor'' means, with respect to a health insurance plan 
        or self-insured plan, the insurer offering the plan or the 
        self-insured sponsor for the plan, respectively.
            (8) Health insurance plan.--
                    (A) In general.--Except as provided in subparagraph 
                (B), the term ``health insurance plan'' means any 
                contract of health insurance, including any hospital or 
                medical service policy or certificate, any major 
                medical policy or certificate, any hospital or medical 
                service plan contract, or health maintenance 
                organization subscriber contract offered by an insurer.
                    (B) Exception.--Such term does not include any of 
                the following--
                            (i) coverage only for accident, dental, 
                        vision, disability income, or long-term care 
                        insurance, or any combination thereof,
                            (ii) medicare supplemental health 
                        insurance,
                            (iii) coverage issued as a supplement to 
                        liability insurance,
                            (iv) worker's compensation or similar 
                        insurance, or
                            (v) automobile medical payment insurance,
                or any combination thereof.
                    (C) Stop loss insurance not covered.--Such term 
                does not include any aggregate or specific stop-loss 
                insurance or similar coverage applicable to a self-
                insured plan. The Secretary may develop rules 
                determining the applicability of this subparagraph with 
                respect to minimum premium plans or other partially 
                insured plans.
            (9) Health insurer.--The term ``health insurer'' means a 
        licensed insurance company, a prepaid hospital or medical 
        service plan, a health maintenance organization, or other 
        entity providing a plan of health insurance or health benefits 
        with respect to which the State insurance laws are not 
        preempted under section 514 of the Employee Retirement Income 
        Security Act of 1974.
            (10) Individual health insurance plan.--
                    (A) In general.--The term ``individual health 
                insurance plan'' means any health insurance plan 
                directly purchased by an individual or offered 
                primarily to individuals (including families) for the 
                purpose of permitting individuals (without regard to an 
                employer contribution) to purchase health insurance 
                coverage.
                    (B) Inclusion of association plans.--Such term 
                includes any arrangement in which coverage for health 
                benefits is offered to individuals through an 
                association, trust, list-billing arrangement, or other 
                arrangement in which the individual purchaser is 
                primarily responsible for the payment of any premium 
                associated with the contract.
                    (C) Treatment of certain association plans.--In the 
                case of a health insurance plan sponsored by an 
                association, trust, or other arrangement that provides 
                health insurance coverage both to employers and to 
                individuals, the plan shall be treated as--
                            (i) a group health insurance plan with 
                        respect to such employers, and
                            (ii) an individual health insurance plan 
                        with respect to such individuals.
            (11) Self-insured plan.--The term ``self-insured plan'' 
        means an employee welfare benefit plan or other arrangement 
        insofar as the plan or arrangement provides benefits with 
        respect to some or all of the items and services included in 
        the comprehensive benefit package (as in effect as of January 
        1, 1996) that is funded in a manner other than through the 
        purchase of one or more health insurance plans. Such term shall 
        not include a group health insurance plan described in 
        paragraph (5)(B)(ii).
            (12) Self-insured sponsor.--The term ``self-insured 
        sponsor'' includes, with respect to a self-insured plan, any 
        entity which establishes or maintains the plan.
            (13) State commissioner of insurance.--The term ``State 
        commissioner of insurance'' includes a State superintendent of 
        insurance.

SEC. 11009. TERMINATION.

    (a) Health Insurance Plans.--The provisions of this title shall not 
apply to a health insurance plan provided in a State on and after the 
first day of the first year for the State.
    (b) Self-Insured Plans.--The provisions of this title shall not 
apply to a self-insured plan that--
            (1) is sponsored by a sponsor that is an eligible sponsor 
        of a corporate alliance (described in section 1311(b)(1)), as 
        of the effective date of the election under section 1312(c); 
        and
            (2) is sponsored by a sponsor that is not such an eligible 
        sponsor, with respect to individuals or groups in a State on 
        and after the first day of the first year for the State.

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