II

103D CONGRESS

2D SESSION S. 2096

To improve private health insurance, to provide equitable tax treatment of

health insurance, to reform Federal health care programs, to provide

health care cost reduction measures, and for other purposes.

IN THE SENATE OF THE UNITED STATES

MAY 10 (legislative day, MAY 2), 1994

Mr. DOMENICI introduced the following bill; which was read the first time

A BILL

To improve private health insurance, to provide equitable

tax treatment of health insurance, to reform Federal

health care programs, to provide health care cost reduction measures, and for other purposes.

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

3 SECTION 1. SHORT TITLE; TABLE OF CONTENTS; DEFINI4 TIONS.

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

6 ‘‘Health Care Reform Act of 1994’’.

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

8 this Act is as follows:

Sec. 1. Short title; table of contents; definitions.
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TITLE I—IMPROVING PRIVATE HEALTH INSURANCE

Subtitle A—Federal and State Roles

Sec. 101. Federal reform and State implementation.

Sec. 102. Applicable regulatory authority for health plans.

Sec. 103. State health reform program requirements.

Subtitle B—Health Plan Requirements

Sec. 111. Certified health plan requirements.

Sec. 112. Additional requirements for accountable health plans.

Sec. 113. Standard benefits.

Subtitle C—Improved Health Plan Delivery

Sec. 121. Small group purchasing pools.

Sec. 122. Employer responsibility.

TITLE II—TAX AND ENFORCEMENT PROVISIONS

Sec. 200. Amendment of 1986 Code.

Subtitle A—General Tax Provisions

Sec. 201. Certain employer health plan contributions included in income.

Sec. 202. Deductions for costs of health plans.

TITLE III—FINANCING AND REFORMING FEDERAL PROGRAMS

Subtitle A—Medicare

Sec. 301. Medicare choice.

Sec. 302. Other medicare provisions.

Sec. 303. Income-tested medicare premiums.

Sec. 304. Medicare administrative simplification.

Subtitle B—Health Discount and Medicaid Reform

PART I—HEALTH DISCOUNT

Sec. 311. State health discount programs.

Sec. 312. Health discount program design.

Sec. 313. Financing health discounts.

PART II—TERMINATION OF AUTHORITY TO FURNISH ACUTE CARE SERVICES

UNDER THE MEDICAID PROGRAM

Sec. 321. Termination of authority to furnish acute care services under the

medicaid program.

Subtitle C—Increase in Tax on Tobacco Products

Sec. 330. Amendment of 1986 Code.

Sec. 331. Increase in excise taxes on tobacco products.

Sec. 332. Modifications of certain tobacco tax provisions.

Sec. 333. Imposition of excise tax on manufacture or importation of roll-yourown tobacco.

TITLE IV—IMPROVING ACCESS IN RURAL AREAS
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Sec. 401. Community health centers.

Sec. 402. National health service corps.

Sec. 403. Tax incentives for practice in frontier, rural, and urban underserved

areas.

Sec. 404. Incentives for primary care residents.

TITLE V—OTHER HEALTH CARE COST REDUCTION MEASURES

Subtitle A—Medical Liability Reform

Sec. 501. Federal standards for State-based medical liability reform.

Sec. 502. Certification.

Sec. 503. Relation to other laws.

Subtitle B—Antitrust Provisions

Sec. 511. Publication of guidelines for accountable health plans.

Sec. 512. Issuance of health care certificates of public advantage.

Subtitle C—Administrative Cost Savings

Sec. 521. Establishment of standards.

Sec. 522. Enforcement.

1 (c) DEFINITIONS.—For purposes of this Act:

2 (1) AHP.—The term ‘‘AHP’’ means an ac3 countable health plan.

4 (2) ELIGIBLE EMPLOYEE.—The term ‘‘eligible

5 employee’’ means an individual employed by an em6 ployer, and includes the spouse and any dependent

7 of such employee. Such term also includes an em8 ployee within the meaning of section 401(c)(1) of

9 the Internal Revenue Code of 1986.

10 (3) ELIGIBLE INDIVIDUAL.—The term ‘‘eligible

11 individual’’ means an individual who is otherwise not

12 eligible for coverage under—

13 (A) an employer-sponsored health plan, or

14 (B) the medicare program under title

15 XVIII of the Social Security Act.
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1 The term ‘‘eligible individual’’ includes the spouse

2 and any dependent of such individual unless such

3 spouse or dependent is not an eligible individual.

4 (4) ELIGIBLE SMALL EMPLOYER.—The term

5 ‘‘eligible small employer’’ means, with respect to a

6 calendar year, an employer that normally employs

7 more than 1 but less than 51 employees on a typical

8 business day. For the purposes of this paragraph,

9 the term ‘‘employee’’ includes a self-employed indi10 vidual.

11 (5) HEALTH PLAN.—The term ‘‘health plan’’

12 (including self-insured plans) means any hospital or

13 medical service policy or certificate, hospital or medi14 cal service plan contract, or health maintenance or15 ganization group contract and, in States which have

16 distinct licensure requirements, a multiple employer

17 welfare arrangement, but does not include any of the

18 following offered by an insurer—

19 (A) accident only, dental only, disability

20 only insurance, or long-term care only insur21 ance;

22 (B) coverage issued as a supplement to li23 ability insurance or Medicare;

24 (C) workmen’s compensation or similar in25 surance; or
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1 (D) automobile medical-payment insur2 ance.

3 (6) INSURER.—The term ‘‘insurer’’ means any

4 person that offers a health plan to an eligible small

5 employer or eligible individual.

6 (7) SECRETARY.—The term ‘‘Secretary’’ means

7 the Secretary of Health and Human Services.

8 TITLE I—IMPROVING PRIVATE

9 HEALTH INSURANCE

10 Subtitle A—Federal and State

11 Roles

12 SEC. 101. FEDERAL REFORM AND STATE IMPLEMENTA13 TION.

14 (a) CERTIFICATION OF STATE HEALTH REFORM

15 PROGRAMS.—

16 (1) CERTIFICATION.—The Secretary shall es17 tablish by regulation a process by which each State

18 shall submit a health reform program to the Sec19 retary, and the Secretary shall determine and certify

20 whether such State program is consistent with the

21 requirements of section 103.

22 (2) PERIODIC REVIEW.—The Secretary may,

23 from time-to-time, review a State program after

24 such program has been originally certified to ensure
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1 continued compliance with section 103 and may de2 certify such program based on such review.

3 SEC. 102. APPLICABLE REGULATORY AUTHORITY FOR

4 HEALTH PLANS.

5 (a) IN GENERAL.—Except as provided in subsection

6 (b), each State shall ensure that health plans offered to

7 individuals residing in such State meet the requirements

8 of this Act, including sections 111 and 112, as applicable.

9 (b) EXCEPTIONS.—

10 (1) ERISA PLANS.—The Secretary of Labor

11 shall ensure that health plans established pursuant

12 to the requirements of the Employee Retirement In13 come Security Act of 1974 (29 U.S.C. 1001 et seq.)

14 meet the requirements under section 112 for AHPs.

15 (2) INADEQUATE STATE PLANS.—The Secretary

16 shall ensure that health plans in a State meet the

17 requirements of sections 111 and 112, as applicable,

18 if the Secretary does not certify the health reform

19 program submitted by such State or if the Secretary

20 decertifies the State’s program.

21 (c) EFFECTIVE DATE.—The requirements of this

22 title shall apply to health plans offered, issued, or renewed

23 on or after the later of—

24 (1) January 1, 1996; or
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1 (2) in the case of a State which the Secretary

2 identifies as requiring State legislation in order to

3 implement this title, the first day of the first cal4 endar quarter beginning after the close of the first

5 regular legislative session of the State legislature

6 that begins after enactment of this Act, but not be7 fore January 1, 1996.

8 For purposes of the previous sentence, in the case of a

9 State that has a 2-year legislative session, each year of

10 such session shall be deemed to be a regular legislative

11 session of the State legislature.

12 SEC. 103. STATE HEALTH REFORM PROGRAM REQUIRE13 MENTS.

14 (a) IN GENERAL.—To be certified by the Secretary

15 as meeting the requirements of this section, a State health

16 reform program must include the following requirements,

17 in addition to any other requirements established by the

18 Secretary by regulation for carrying out this Act:

19 (1) HEALTH PLAN MARKET AREAS.—A State

20 shall establish health plan market areas, ensuring

21 that—

22 (A) every resident resides within 1 such

23 market area based on place of residence;

24 (B) market areas do not overlap;
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1 (C) a metropolitan statistical area is not

2 included in more than 1 such market area; and

3 (D) the maximum number of State resi4 dents have the opportunity to select from com5 peting health plans and AHPs that are likely to

6 be available in such market areas.

7 (2) INTERSTATE COORDINATION.—A State shall

8 coordinate its health reform program with the pro9 grams of bordering and nearby States so that—

10 (A) 1 health plan market area covers a

11 metropolitan statistical area which crosses State

12 borders; and

13 (B) residents of a State may have access

14 to providers of health care services of bordering

15 or nearby States.

16 (3) HEALTH PLAN REGULATION.—A State shall

17 ensure that certified health plans and AHPs offered

18 to residents of the State (other than those plans reg19 ulated by the Secretary of Labor under section

20 102(b)(1)) meet the requirements of section 111 and

21 112, respectively.

22 (4) NO BENEFIT MANDATES, ANTIMANAGED

23 CARE REQUIREMENTS.—A State shall ensure that

24 AHPs are not—
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1 (A) required to cover any service in the

2 standard benefits package not otherwise re3 quired by the Secretary under section 113;

4 (B) prohibited or limited from including fi5 nancial incentives for enrollees to use the serv6 ices of participating providers;

7 (C) prohibited or limited from restricting

8 coverage of services to those—

9 (i) provided by a participating pro10 vider; or

11 (ii) authorized by a designated partici12 pating provider;

13 (D) restricted in the amount of payment

14 made to participating providers for services pro15 vided to enrollees or restricted in the ability of

16 such AHPs to pay participating providers for

17 services provided to enrollees on a per-enrollee

18 basis;

19 (E) prohibited or limited from restricting

20 the location, number, type, or professional

21 qualifications of participating providers;

22 (F) prohibited or limited from requiring

23 that services be authorized by a primary care

24 physician selected by the enrollee from a list of

25 available participating providers;
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1 (G) prohibited or limited in the use of uti2 lization review procedures or criteria;

3 (H) required to make public utilization re4 view procedures or criteria;

5 (I) prohibited or limited from determining

6 the location or hours of operation of a utiliza7 tion review, provided that emergency services

8 furnished during the hours in which the utiliza9 tion review program is not open are not subject

10 to utilization review;

11 (J) required to pay providers for the ex12 penses associated with responding to requests

13 for information needed to conduct utilization re14 view;

15 (K) restricted in the amount of payment

16 made for the conduct of utilization review;

17 (L) restricted in the access to medical in18 formation or personnel required to conduct uti19 lization review;

20 (M) required to define utilization review as

21 the practice of medicine or another health care

22 profession; or

23 (N) required to ensure that utilization re24 view be conducted—
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1 (i) by a resident of the State in which

2 the treatment is to be offered or by an in3 dividual licensed in such State, or

4 (ii) by a physician in any particular

5 specialty or with any board certified spe6 cialty of the same medical specialty as the

7 provider whose services are being rendered.

8 (5) SMALL BUSINESS PURCHASING POOL.—

9 (A) IN GENERAL.—A State shall ensure

10 that small group purchasing pools meet the re11 quirements of section 121.

12 (B) STATE-SPONSORED POOLS.—If, any

13 market area established by the State (or market

14 area that is within the borders of more than 1

15 State) does not have a small group purchasing

16 group in operation that meets the requirements

17 of section 121, the State shall sponsor such a

18 pool meeting the requirements of section 121.

19 (6) HEALTH DISCOUNT PROGRAM.—A State

20 shall establish a health discount program meeting

21 the requirements of part I of subtitle B of title III.

22 (7) MEDICAL LIABILITY REFORM.—A State

23 shall ensure that medical liability laws in the State

24 meet the requirements of subtitle A of title V.

25 (b) STATE FLEXIBILITY.—
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1 (1) IN GENERAL.—The Secretary shall ensure

2 that State health reform programs are consistent

3 with—

4 (A) a nationwide private health insurance

5 system;

6 (B) cost control based on cost-conscious

7 consumers and fair competition among compet8 ing health plans based on the cost and quality

9 of such plans; and

10 (C) freedom for residents to choose and

11 pay for health care providers and health insur12 ance as such residents wish.

13 (2) FLEXIBILITY.—The Secretary may allow

14 States to propose alterations to the framework of

15 this Act if such alterations are consistent with para16 graph (1), do not increase the Federal budget deficit

17 in any year, and—

18 (A) the State had enacted a State health

19 reform program prior to enactment of this Act

20 that supercedes provisions of this Act; or

21 (B) the State can demonstrate that provi22 sions of this Act do not provide sufficient access

23 to health care services for residents of a portion

24 of the State (particularly in underserved rural

25 areas) and alterations to the State health re-
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1 form program will improve access without jeop2 ardizing the quality of health care and without

3 undue State regulation of health care providers.

4 (3) NO SINGLE PAYER PLANS.—The Secretary

5 may not certify any State health reform program

6 which proposes to create a single payer health insur7 ance plan in any portion of the State.

8 (c) ENFORCEMENT.—If a State does not have a cer9 tified State health reform program, Federal spending for

10 health discounts in the State under title III shall be lim11 ited to the level of Federal spending that would have oc12 curred in such State under title XIX of the Social Security

13 Act (42 U.S.C. 1396 et seq.) if this Act had not been en14 acted.

15 Subtitle B—Health Plan

16 Requirements

17 SEC. 111. CERTIFIED HEALTH PLAN REQUIREMENTS.

18 (a) IN GENERAL.—To be certified as meeting the re19 quirements of this section, a health plan shall meet the

20 requirements of the following subsections.

21 (b) LIMITATION IN PREEXISTING CONDITION

22 CLAUSES.—

23 (1) IN GENERAL.—To be certified as meeting

24 the requirements of this subsection, a health plan

25 may, subject to the succeeding provisions of this
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1 subsection, exclude coverage with respect to services

2 related to treatment of a preexisting condition, but

3 the period of such exclusion may not exceed 6

4 months. The exclusion of coverage shall not apply to

5 services furnished to newborns.

6 (2) CREDITING OF PREVIOUS COVERAGE.—

7 (A) IN GENERAL.—A health plan shall pro8 vide that if an individual under such plan is in

9 a period of continuous coverage (as defined in

10 subparagraph (B)) with respect to particular

11 services as of the date of initial coverage under

12 such plan, any period of exclusion of coverage

13 with respect to a preexisting condition for such

14 services or type of services shall be reduced by

15 1 month for each month in the period of contin16 uous coverage.

17 (B) PERIOD OF CONTINUOUS COVERAGE.—

18 For purposes of this paragraph, the term ‘‘pe19 riod of continuous coverage’’ means, with re20 spect to particular services, the period begin21 ning on the date an individual is enrolled under

22 a health plan, titles XVIII or XIX of the Social

23 Security Act, or other health benefits arrange24 ment which provides benefits with respect to

25 such services and ends on the date the individ-
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1 ual is not so enrolled for a continuous period of

2 more than 3 months.

3 (3) PREEXISTING CONDITION.—For purposes of

4 this subsection, the term ‘‘preexisting condition’’

5 means, with respect to coverage under a health plan

6 issued, a condition which has been diagnosed or

7 treated during the 3-month period ending on the day

8 before the first date of such coverage (without re9 gard to any waiting period).

10 (c) SMALL GROUP MARKET REFORM.—To be cer11 tified as meeting the requirements of this subsection, a

12 health plan shall meet the following:

13 (1) GUARANTEED ELIGIBILITY.—

14 (A) IN GENERAL.—No health plan may ex15 clude from coverage—

16 (i) any eligible individual who does not

17 qualify for assistance under section 311, or

18 (ii) any eligible employee to whom

19 coverage is made available by an eligible

20 small employer.

21 (B) WAITING PERIODS.—Subparagraph

22 (A)(ii) shall not apply to any period an eligible

23 employee is excluded from coverage under the

24 health plan solely by reason of a requirement

25 applicable to all employees that a minimum pe-
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1 riod of service with the eligible small employer

2 is required before the employee is eligible for

3 such coverage.

4 (2) GUARANTEED AVAILABILITY.—

5 (A) IN GENERAL.—A health plan offered

6 to any eligible small employer or eligible indi7 vidual in a health plan market area shall be

8 made available to all eligible small employers

9 and eligible individuals in the health plan mar10 ket area.

11 (B) STATE OPTION.—To ensure availabil12 ity, each State may require all health plans of13 fered to eligible small employers or eligible indi14 viduals in a health plan market area be made

15 available through small group purchasing pools,

16 and that such pools be open to all eligible small

17 employers and eligible individuals.

18 (3) GUARANTEED RENEWABILITY.—

19 (A) IN GENERAL.—A health plan issued to

20 an eligible small employer or eligible individual

21 shall be renewed, at the option of the eligible

22 small employer or eligible individual, unless the

23 plan is terminated for a reason specified in sub24 paragraph (B) or (C).
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1 (B) TERMINATION OF SMALL EMPLOYER

2 OR INDIVIDUAL BUSINESS.—An insurer is not

3 required to renew a health plan with respect to

4 an eligible small employer or such an eligible in5 dividual, as the case may be, if the insurer—

6 (i) elects not to renew all of its health

7 plans issued to eligible small employers or

8 eligible individuals, as the case may be, in

9 a health plan market area; and

10 (ii) provides notice to the applicable

11 regulatory authority in the State and to

12 each eligible small employer or eligible in13 dividual covered under a plan of such ter14 mination at least 180 days before the date

15 of expiration of the plan.

16 In the case of such a termination, the insurer

17 may not provide for issuance of any health in18 surance plan to an eligible small employer or el19 igible individual, as the case may be, in the

20 State during the 5-year period beginning on the

21 date of termination of the last plan not so re22 newed.

23 (C) GROUNDS FOR REFUSAL TO RENEW.—
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1 (i) IN GENERAL.—An insurer may

2 refuse to renew, or may terminate, a

3 health plan only for—

4 (I) nonpayment of premiums,

5 (II) fraud or misrepresentation,

6 or

7 (III) failure to maintain mini8 mum participation rates (consistent

9 with clause (ii).

10 (ii) MINIMUM PARTICIPATION

11 RATES.—An insurer may require, with re12 spect to a health plan issued to an eligible

13 small employer, that a minimum percent14 age of eligible employees who do not other15 wise have health plan coverage are enrolled

16 in such plan if such percentage is applied

17 uniformly to all plans offered to employers

18 of comparable size.

19 (4) PREMIUMS.—

20 (A) LIMITATION ON PREMIUM VARI21 ATION.—

22 (i) IN GENERAL.—The premium

23 charged by an insurer for each type of ben24 efits package offered as a certified health

25 plan to any eligible employee or eligible in-
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1 dividual in a health plan market area with2 in a class of family enrollment and age

3 band may not exceed the premium charged

4 for the same benefits package offered to

5 any other eligible employee or eligible indi6 vidual by more than 20 percent.

7 (ii) ENROLLMENT CLASS.—For pur8 poses of this subparagraph, the classes of

9 family enrollment are—

10 (I) individual;

11 (II) couple;

12 (III) individual with children;

13 and

14 (IV) couple with children.

15 (iii) AGE BANDS.—The Secretary shall

16 establish appropriate age bands with re17 spect to principal enrollees for determining

18 the compliance with this subparagraph.

19 (B) RISK ADJUSTMENTS.—

20 (i) IN GENERAL.—Premiums paid to

21 health plans offered in the small group

22 market in a health plan market area shall

23 be adjusted to reflect the relative risk of

24 enrollees in such plan compared to all eligi-
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1 ble employees and eligible individuals in

2 the health plan market area.

3 (ii) MODEL PROGRAMS.—The Sec4 retary shall establish model risk adjust5 ment programs that States may adopt to

6 ensure compliance with clause (i).

7 (d) PARITY COVERAGE OF SEVERE MENTAL ILL8 NESSES.—

9 (1) IN GENERAL.—To be certified as meeting

10 the requirements of this subsection, a health plan

11 shall provide parity coverage for all severe mental ill12 nesses (as defined in regulations by the Secretary),

13 including parity cost-sharing for services necessary

14 to treat such illnesses.

15 (2) DEFINITION.—

16 (A) IN GENERAL.—Except as provided in

17 subparagraph (B), for purposes of paragraph

18 (1), the Secretary shall define severe mental ill19 ness through diagnosis, disability, and duration,

20 and include in such definition the following dis21 orders with psychotic symptoms:

22 (i) Schizophrenia.

23 (ii) Schizoaffective disorder.

24 (iii) Manic depressive disorder.

25 (iv) Autism.
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1 (v) Severe forms of other disorders

2 such as major depression, panic disorder,

3 and obsessive compulsive disorder.

4 (B) CHILDREN.—For purposes of para5 graph (1), the Secretary shall define severe

6 mental illness for individuals under age 22 to

7 also include—

8 (i) psychotic disorders;

9 (ii) attention deficit hyperactivity dis10 order;

11 (iii) autism and pervasive development

12 disorder;

13 (iv) severe childhood eating disorders;

14 (v) Tourette’s syndrome; and

15 (vi) any behavioral disorder that

16 would result in conduct which may place

17 the individual or another individual in dan18 ger of death or serious bodily injury.

19 (3) DIAGNOSIS.—For purposes of paragraph

20 (1), services necessary to properly diagnose an indi21 vidual’s mental health disorder shall be considered

22 services necessary to treat a severe mental illness.
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1 SEC. 112. ADDITIONAL REQUIREMENTS FOR ACCOUNTABLE

2 HEALTH PLANS.

3 (a) CERTIFICATION.—To be certified as an AHP, a

4 health plan must meet the requirements of the following

5 subsections of this section in addition to the requirements

6 of section 111.

7 (b) GENERAL REQUIREMENTS.—A health plan

8 shall—

9 (1) provide all medically necessary and effective

10 health benefits (as covered by the benefits package

11 specified in an AHP contract) for a fixed premium

12 for each enrollee for a specified period of time; and

13 (2) collect and report to the plan’s enrollees and

14 the general public objective measures of the quality

15 of the plan’s health care, the impact of the plan’s

16 health care on the health status of enrollees, and en17 rollee satisfaction with the plan’s cost, quality, and

18 service.

19 (c) CAPACITY LIMITS AND NONDISCRIMINATION.—

20 (1) IN GENERAL.—A health plan may apply to

21 the applicable regulatory authority to impose a limit

22 on enrollment if enrollment beyond the limit is—

23 (A) not discriminatory and is based on a

24 ‘‘first-come, first-served’’ enrollment policy, and

25 (B) is necessary to ensure quality of care

26 for enrollees.
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1 (2) PROHIBITION OF DISCRIMINATION BASED

2 ON HEALTH STATUS.—A health plan may not deny,

3 limit, or condition the coverage under (or benefits

4 of) the plan based on the health status of the indi5 vidual, claims experience of an individual, receipt of

6 health care by an individual, receipt of public sub7 sidies by an individual, lack of evidence of insurabil8 ity of an individual, or any other characteristic of an

9 individual that may relate to the utilization of health

10 care services.

11 (3) SERVICE AREAS.—A health plan may not

12 discriminate in the drawing of service area bound13 aries on the basis of race, ethnicity, socio-economic

14 status, age, or anticipated need for health services.

15 (d) ADJUSTED COMMUNITY RATING IN THE SMALL

16 GROUP MARKET.—

17 (1) IN GENERAL.—A health plan shall charge a

18 standard premium for each type of benefits package

19 offered to eligible employees of eligible small employ20 ers and eligible individuals in a health plan market

21 area, but may elect to adjust the premium for the

22 class of family enrollment and the age of the prin23 cipal enrollee.

24 (2) EXEMPTION FOR SMALL GROUP PURCHAS25 ING POOLS.—The standard premium charged for a
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1 health plan offered to eligible employees of eligible

2 small employers and eligible individuals through a

3 small group purchasing pool may be lower than the

4 premium required pursuant to paragraph (1) if at

5 least 30 percent of all health plan premiums paid in

6 the small group market in the health plan market

7 area are made through such a pool.

8 (3) ENROLLMENT CLASS.—For purposes of this

9 subsection, the classes of family enrollment are—

10 (A) individual;

11 (B) couple;

12 (C) individual with children; and

13 (D) couple with children.

14 (4) AGE BANDS.—The Secretary may establish

15 appropriate age bands with respect to principal en16 rollees for determining the compliance with this sub17 section.

18 (e) QUALITY ASSURANCE.—

19 (1) INTERNAL QUALITY ASSURANCE AND QUAL20 ITY IMPROVEMENT PROGRAM.—A health plan offer21 ing covered services that must or may be obtained

22 from participating providers must administer an in23 ternal quality assurance and quality improvement

24 program that—

25 (A) meets the following criteria:
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1 (i) Is clearly identified and fully ex2 plained to all participants in the program.

3 (ii) Is coordinated with other medical

4 management activities.

5 (iii) Communicates findings to provid6 ers and consumers with the primary goal

7 of improving care outcomes.

8 (iv) Measures the impact of such find9 ings on the care delivered by providers.

10 (v) Documents the monitoring and

11 evaluation of the quality of care to identify

12 areas for improvement.

13 (vi) Develops and implements explicit

14 strategies to improve care.

15 (vii) Collects and analyzes data to fa16 cilitate evaluation of improvement strate17 gies.

18 (viii) Measures the effect of such

19 strategies on care outcomes and the quality

20 of care.

21 (ix) Incorporates a credentialing proc22 ess that encompasses initial credentialing,

23 recredentialing, recertifying or reappoint24 ment of providers, or both.
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1 (x) Is accountable directly to the gov2 erning body of the AHP or, in instances in

3 which the governing body’s participation in

4 quality assurance is not direct, to a des5 ignated committee of senior management;

6 or

7 (B) is accredited by an independent orga8 nization, such as the National Committee for

9 Quality Assurance, that conducts objective qual10 ity reviews based upon comparable criteria.

11 (2) MEASURING AND COMPARING QUALITY.—

12 (A) IN GENERAL.—A health plan shall

13 comply with a process, established by the Sec14 retary by regulation, by which such plan shall

15 provide to the appropriate regulatory authority

16 (in an electronic form) standardized informa17 tion necessary to—

18 (i) objectively measure and evaluate

19 the performance of such plan;

20 (ii) fairly compare the performance of

21 such plan with other AHPs; and

22 (iii) assess the health status of enroll23 ees in such plan to allow fair risk adjust24 ments among competing AHPs.
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1 (B) REQUIRED DATA.—The Secretary shall

2 establish by regulation the necessary informa3 tion such plan must provide, including—

4 (i) quality measures, especially meas5 ures of health outcomes, including the clin6 ical health, functional status, and well

7 being of enrollees before and after treat8 ments and other services provided by the

9 plan;

10 (ii) measures of patient access and

11 satisfaction;

12 (iii) membership and utilization infor13 mation;

14 (iv) financial information;

15 (v) health plan management activities

16 information; and

17 (vi) any other information determined

18 to be necessary by the Secretary for ensur19 ing fair competition among AHPs based on

20 cost and quality.

21 (C) USE OF DATA.—

22 (i) IN GENERAL.—The Secretary shall

23 establish by regulation a process by which

24 such standardized information may be dis25 tributed by the appropriate regulatory au-
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1 thority in a manner that promotes ac2 countability to AHP enrollees and fair

3 competition among AHPs based on cost

4 and quality.

5 (ii) WIDE ACCESS.—The Secretary

6 shall ensure that small business purchasing

7 pools and State health discount programs

8 have access to such information to ensure

9 fair competition among AHPs in those

10 such pools and health discount programs.

11 (iii) PATIENT CONFIDENTIALITY.—

12 The Secretary shall ensure by regulation

13 that the confidentiality of medical records

14 of individual enrollees is protected.

15 (f) MARKET CONDUCT REQUIREMENTS.—

16 (1) REQUIRED WRITTEN MATERIALS.—A health

17 plan shall provide written descriptions of the

18 plan’s—

19 (A) covered benefits, services, and proce20 dures that clearly and fully describe any and all

21 limitations of coverage, use of participating pro22 viders and other limits on enrollees’ use of serv23 ices; and

24 (B) out-of-pocket costs, including

25 copayments, deductibles, coinsurance, and es-
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•S 2096 IS

1 tablished aggregate maximums on out-of-pocket

2 costs.

3 (2) ADVERTISING.—All health plan advertising,

4 promotional materials, and other communications

5 with enrollees of the public must be factually accu6 rate and understandable to diverse populations.

7 (g) ENROLLEE GRIEVANCES.—A health plan shall

8 maintain procedures for hearing and resolving grievances

9 between the plan (and any entity or individual through

10 which the plan provides health care services) and the en11 rollees.

12 (h) POINT OF SERVICE PLAN.—A health plan offer13 ing covered services that must be obtained from participat14 ing providers shall make available an alternative insurance

15 plan that provides for a point of service option under

16 which an enrollee may select any licensed health care pro17 vider to obtain services and such a plan shall pay such

18 provider not less than 50 percent of the cost of such pro19 vider’s services. A health plan may charge a higher pre20 mium for such an alternative insurance plan.

21 (i) FINANCIAL SOLVENCY.—

22 (1) IN GENERAL.—A health plan shall be re23 quired to demonstrate evidence of adequate capital24 ization and other indicators of fiscal health, includ25 ing—
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•S 2096 IS

1 (A) total assets greater than total

2 unsubordinated liabilities;

3 (B) sufficient cash flow and adequate li4 quidity to meet obligations as such obligations

5 become due;

6 (C) an insolvency protection plan; and

7 (D) insurance or other acceptable arrange8 ments to protect the health plan against liabil9 ity and casualty risks, including professional li10 ability.

11 (2) INSOLVENCY.—

12 (A) Enrollees in the health plan shall be

13 held harmless from incurring liability for any

14 fees that are the legal obligation of an insolvent

15 plan.

16 (B) A health plan offering coverage in a

17 market area in which an AHP has become in18 solvent shall be required to accept enrollment of

19 enrollees of such insolvent AHP, subject to ca20 pacity limits.

21 (j) MEDICAL LIABILITY REFORM.—A health plan

22 shall comply with requirements established pursuant to

23 section 501(d).
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•S 2096 IS

1 (k) ADMINISTRATIVE COST REDUCTION.—A health

2 plan shall comply with the requirements established pursu3 ant to subtitle C of title V.

4 (l) PARTICIPATION IN HEALTH DISCOUNT PRO5 GRAMS.—Except for health plans established pursuant to

6 the Employee Retirement Income Security Act of 1974

7 (29 U.S.C. 1001 et seq.), a health plan shall comply with

8 the requirements established by the State in accordance

9 with subtitle B of title III for making AHPs available to

10 individuals eligible for health discounts.

11 SEC. 113. STANDARD BENEFITS.

12 (a) STANDARD BENEFITS PACKAGE.—The Secretary

13 shall promulgate regulations establishing a standard bene14 fits package meeting the following requirements:

15 (1) COVERAGE.—The standard benefits package

16 shall cover—

17 (A) inpatient and outpatient hospital serv18 ices;

19 (B) physician services;

20 (C) diagnostic services and tests;

21 (D) outpatient prescription drugs;

22 (E) preventive services; and

23 (F) such other services as determined nec24 essary and appropriate by the Secretary.
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•S 2096 IS

1 (2) PARITY COVERAGE OF SEVERE MENTAL ILL2 NESSES.—The standard benefits package shall be

3 consistent with the requirement for parity coverage

4 of severe mental illnesses, pursuant to section

5 111(d).

6 (3) COST SHARING.—The Secretary shall estab7 lish for the standard benefits package—

8 (A) a cost-sharing arrangement consistent

9 with health care delivered by health mainte10 nance organizations, including an annual limit

11 on an enrollee’s out-of-pocket expenses (exclud12 ing an enrollee’s expenses for services provided

13 under an AHP point of service option);

14 (B) a cost-sharing arrangement consistent

15 with health care covered by fee-for-service

16 health insurance which is actuarially equivalent

17 to the arrangement established under subpara18 graph (A); and

19 (C) any other actuarially equivalent cost20 sharing arrangements consistent with other

21 health care delivery systems.

22 (b) NOMINAL COST-SHARING BENEFITS PACKAGE.—

23 For each cost-sharing arrangement established under sub24 section (a)(3), the Secretary shall also establish a nominal

25 cost-sharing benefits package for purposes of determining
33

•S 2096 IS

1 health discounts for poor eligible individuals and poor eli2 gible employees under part I of subtitle B of title III. Such

3 benefits packages shall cover the same services as the

4 standard benefits package but with cost-sharing require5 ments that are not excessive for such individuals and em6 ployees.

7 (c) ALTERNATIVE BENEFITS PACKAGE.—For each

8 cost-sharing arrangement established under subsection

9 (a)(3), the Secretary shall also establish an alternative

10 benefits package that may be necessary for determining

11 health discounts for low income eligible individuals and

12 low income eligible employees under part I of subtitle B

13 of title III. Such alternative benefits packages shall cover

14 the same services as the standard benefits package but

15 with cost-sharing requirements that are sufficient to de16 crease the average actuarial value of the standard benefits

17 package by 50 percent.

18 Subtitle C—Improved Health Plan

19 Delivery

20 SEC. 121. SMALL GROUP PURCHASING POOLS.

21 (a) IN GENERAL.—Each small group purchasing pool

22 in a health plan market area in a State shall provide a

23 process for eligible employees of eligible small employers

24 and eligible individuals who are not entitled to health dis25 counts under part I of subtitle B of title III to have the
34

•S 2096 IS

1 opportunity to select annually from among competing

2 AHPs offering the standard benefits package (and, for

3 poor eligible employees, the nominal cost-sharing benefits

4 package) at an adjusted community rate for the coverage

5 period.

6 (b) REQUIREMENTS.—Each small group purchasing

7 pool shall—

8 (1) be established as a private, not-for-profit

9 corporation serving eligible small employers and eli10 gible individuals in a health plan market area;

11 (2) contract with eligible small employers and

12 eligible individuals to provide services for a defined

13 period for a fixed administrative fee per coverage pe14 riod;

15 (3) be governed by a board of directors elected

16 by members of the pool;

17 (4) contract only with AHPs capable of provid18 ing coverage to the members of the pool throughout

19 the health plan market area;

20 (5) require all AHPs to offer at least the stand21 ard benefits package and any other package of bene22 fits as specified by the pool, and, if an AHP offers

23 covered services that must be obtained from partici24 pating providers, the alternative point of service in25 surance plan for such AHP;
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•S 2096 IS

1 (6) provide information to members concerning

2 the cost and quality of the competing AHPs offered

3 through the pool; and

4 (7) offer to provide administrative services to

5 members for the collection of premiums to be for6 warded to AHPs.

7 (c) PROHIBITIONS.—Small group purchasing groups

8 may not—

9 (1) decline to contract with an AHP if the in10 surer seeks to offer to members of the pool and the

11 plan meets the requirements of subsection (b);

12 (2) decline membership to any eligible small

13 employer or eligible individual located in the health

14 plan market area;

15 (3) negotiate AHP premiums on behalf of mem16 bers; or

17 (4) negotiate payment rates for health care pro18 viders contracting with AHPs offered through the

19 pool.

20 SEC. 122. EMPLOYER RESPONSIBILITY.

21 (a) AHP AVAILABILITY.—

22 (1) IN GENERAL.—Each employer shall—

23 (A) offer to each eligible employee enroll24 ment in an AHP providing a standard benefits

25 package that serves the area in which the em-
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•S 2096 IS

1 ployee resides, both on an individual basis, and,

2 if applicable and at the employee’s option, on a

3 family basis, and, if an AHP offers covered

4 services that must be obtained from participat5 ing providers, the alternative point of service in6 surance plan for such AHP;

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

8 for deduction from wages or other compensa9 tion of amount of any premiums due for such

10 enrollment (taking into account the amount of

11 any employer contribution); and

12 (C) if such employer is an eligible small

13 employer, also make available an AHP provid14 ing the nominal cost-sharing benefits package.

15 Nothing in this paragraph shall be construed as pre16 venting an employer from offering, or an employee

17 from electing enrollment in, an AHP that serves the

18 area in which the employee is employed, rather than

19 the area in which the employee resides.

20 (2) SMALL EMPLOYERS.—Each eligible small

21 employer may comply with the requirements of this

22 subsection by participating in a small group pur23 chasing pool.

24 (b) ENFORCEMENT.—
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1 (1) CIVIL MONEY PENALTIES FOR FAILURE TO

2 OFFER COVERAGE OR PROVIDE FOR WAGE DEDUC3 TION.—Failure to offer coverage or provide for de4 duction from wages required under subsection (a)(1)

5 is subject to a civil monetary penalty (not to exceed

6 $500) for each day in which the violation continues.

7 (2) DIRECT ENFORCEMENT.—The obligation to

8 offer coverage under subsection (a) with respect to

9 an eligible employee is directly enforceable by civil

10 action by the employee. In any such action, if the

11 employee substantially prevails, the employee is enti12 tled to reasonable attorneys’ fees.

13 TITLE II—TAX AND

14 ENFORCEMENT PROVISIONS

15 SEC. 200. AMENDMENT OF 1986 CODE.

16 Except as otherwise expressly provided, whenever in

17 this title an amendment or repeal is expressed in terms

18 of an amendment to, or repeal of, a section or other provi19 sion, the reference shall be considered to be made to a

20 section or other provision of the Internal Revenue Code

21 of 1986.
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1 Subtitle A—General Tax Provisions

2 SEC. 201. CERTAIN EMPLOYER HEALTH PLAN CONTRIBU3 TIONS INCLUDED IN INCOME.

4 (a) EXCLUSION FOR EMPLOYER HEALTH PLAN CON5 TRIBUTIONS LIMITED TO CONTRIBUTIONS TO ACCOUNT6 ABLE HEALTH PLANS OR CERTIFIED HEALTH PLANS.—

7 (1) IN GENERAL.—Section 106 (relating to con8 tributions by employer to accident and health plans)

9 is amended to read as follows:

10 ‘‘SEC. 106. CONTRIBUTIONS BY EMPLOYER TO HEALTH

11 PLANS.

12 ‘‘Except as provided in section 91, gross income of

13 an employee does not include employer-provided coverage

14 under an accountable health plan (within the meaning of

15 section 112 of the Health Care Reform Act of 1994) or

16 employer-provided coverage under a certified health plan

17 (within the meaning of section 111 of such Act)’’.

18 (2) CLERICAL AMENDMENT.—The table of sec19 tions of part III of subchapter B of chapter 1 is

20 amended by striking the item relating to section 106

21 and inserting the following new item:

‘‘Sec. 106. Contributions by employer to health plans.’’.

22 (b) INCLUSION IN INCOME.—

23 (1) IN GENERAL.—Part II of subchapter B of

24 chapter 1 (relating to items specifically included in
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•S 2096 IS

1 gross income) is amended by adding at the end the

2 following new section:

3 ‘‘SEC. 91. EXCESS EMPLOYER CONTRIBUTIONS TO HEALTH

4 PLANS.

5 ‘‘(a) GENERAL RULE.—Notwithstanding section 106,

6 if—

7 ‘‘(1) an employee is covered by an accountable

8 health plan or a certified health plan at any time

9 during any month, and

10 ‘‘(2) there is an excess employer contribution

11 with respect to the employee to such plan for such

12 month,

13 the gross income of such employee for the taxable year

14 which includes such month shall include an amount equal

15 to such excess employer contribution for such month.

16 ‘‘(b) EXCESS EMPLOYER CONTRIBUTION DE17 FINED.—

18 ‘‘(1) IN GENERAL.—For purposes of this sec19 tion, the term ‘excess employer contribution’ means,

20 with respect to an employee enrolled in an account21 able health plan or a certified health plan for any

22 month, the excess of—

23 ‘‘(A) the employer contribution to such

24 plan for such month, over
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•S 2096 IS

1 ‘‘(B) the applicable percentage of the ap2 plicable dollar limit for such employee for such

3 month.

4 ‘‘(2) APPLICABLE DOLLAR LIMIT.—

5 ‘‘(A) IN GENERAL.—For purposes of para6 graph (1) and except as provided in subpara7 graph (B), the applicable dollar limit for an em8 ployee for any month is equal to—

9 ‘‘(i) in the case of individual coverage,

10 $340,

11 ‘‘(ii) in the case of couple coverage,

12 $690,

13 ‘‘(iii) in the case of individual with de14 pendent child or children coverage, $670,

15 and

16 ‘‘(iv) in the case of couple with de17 pendent child or children, $910.

18 For any calendar year beginning after 2000,

19 the dollar amounts specified in this paragraph

20 for such year shall equal the dollar amounts

21 under this paragraph for the previous calendar

22 year increased by the percentage increase in the

23 per capita Gross Domestic Product for the pre24 vious calendar year.
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•S 2096 IS

1 ‘‘(B) REDUCTION OF APPLICABLE DOLLAR

2 LIMIT.—

3 ‘‘(i) IN GENERAL.—Each dollar

4 amount contained in clauses (i), (ii), (iii),

5 and (iv) of subparagraph (A) for the cal6 endar year shall be reduced (but not below

7 50 percent of such dollar amount) by the

8 amount determined under clause (ii).

9 ‘‘(ii) AMOUNT OF REDUCTION.—The

10 amount determined under this clause with

11 respect to any dollar amount shall be the

12 amount which bears the same ratio to 50

13 percent of such dollar amount as the ex14 cess of—

15 ‘‘(I) the taxpayer’s adjusted

16 gross income (determined without re17 gard to this section) for the taxable

18 year ending in the calendar year, over

19 ‘‘(II) the applicable income

20 amount,

21 bears to $25,000.

22 ‘‘(iii) APPLICABLE INCOME

23 AMOUNT.—For purposes of clause (ii)(II),

24 the term ‘applicable income amount’ means
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•S 2096 IS

1 $75,000 ($50,000, in the case of a tax2 payer described in section 1(c)).

3 ‘‘(3) APPLICABLE PERCENTAGE.—For purposes

4 of paragraph (1), the applicable percentage for any

5 taxable year—

6 ‘‘(A) in the case of an accountable health

7 plan, is 100 percent, and

8 ‘‘(B) in the case of a certified health plan,

9 is 100 percent reduced by 20 percentage points

10 (but not below zero percent) for each taxable

11 year beginning after December 31, 1996.

12 ‘‘(c) SPECIAL RULE FOR MULTIEMPLOYER HEALTH

13 PLANS.—In the case of employer contributions with re14 spect to any employee made to a multiemployer health

15 plan on a basis other than per employee per month, the

16 Secretary may by regulations prescribe the method of de17 termining that portion of such contributions that is not

18 included in gross income of the employee.

19 ‘‘(d) OTHER DEFINITIONS AND SPECIAL RULES.—

20 For purposes of this section—

21 ‘‘(1) ACCOUNTABLE OR CERTIFIED HEALTH

22 PLAN.—The terms ‘accountable health plan’ and

23 ‘certified health plan’ have the meanings given to

24 such terms by section 106.
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•S 2096 IS

1 ‘‘(2) EMPLOYEE INCLUDES FORMER EM2 PLOYEE.—The term ‘employee’ includes a former

3 employee.

4 ‘‘(3) DETERMINATION OF EMPLOYER CON5 TRIBUTION.—

6 ‘‘(A) IN GENERAL.—The employer con7 tribution to any accountable health plan or cer8 tified health plan for any month shall be that

9 portion of the cost of such plan for such month

10 which is incurred by the employer.

11 ‘‘(B) SELF-INSURED PLAN MAY USE AN12 NUAL ESTIMATES.—An employer who maintains

13 a self-insured health plan may elect (in such

14 manner and at such time as may be provided

15 in regulations) to determine the actual employer

16 contribution under subsection (b)(1)(A) for any

17 period of not more than 12 months on the basis

18 of a reasonable estimate of the cost of providing

19 coverage for such month. To the extent prac20 ticable, such estimate shall be made on an actu21 arial basis, and in the making of any such esti22 mate, there shall be taken into account such

23 factors as may be required under regulations.

24 ‘‘(C) EMPLOYEES ONLY TAKEN INTO AC25 COUNT FOR PERIODS COVERED.—For purposes
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•S 2096 IS

1 of determining the employer contribution,

2 amounts shall be taken into account with re3 spect to an employee only for periods during

4 which such employee is covered by the plan.

5 ‘‘(4) COVERAGE FOR ONLY PART OF MONTH.—

6 If an employee is covered under an accountable

7 health plan or certified health plan for only a por8 tion of a month, the amount required to be included

9 under subsection (a) in the gross income of such em10 ployee with respect to such month shall be an

11 amount which bears the same ratio to the excess em12 ployer contribution for such month as such portion

13 bears to the entire month.

14 ‘‘(5) CERTAIN RELATED EMPLOYERS TREATED

15 AS 1 EMPLOYER.—Rules similar to the rules pro16 vided by subsections (b) and (c) of section 414 shall

17 apply.

18 ‘‘(6) MONTH.—The term ‘month’ means a cal19 endar month.

20 ‘‘(7) MULTIEMPLOYER HEALTH PLAN.—The

21 term ‘multiemployer health plan’ means an account22 able health plan which is part of an employee wel23 fare benefit plan (within the meaning of section 3(1)

24 of the Employee Retirement Income Security Act of

25 1974)—
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•S 2096 IS

1 ‘‘(A) to which more than 1 employer is re2 quired to contribute, and

3 ‘‘(B) which is maintained pursuant to 1 or

4 more collective bargaining agreements between

5 1 or more employee organizations and more

6 than 1 employer.’’.

7 (2) CLERICAL AMENDMENT.—The table of sec8 tions for part II of subchapter B of chapter 1 is

9 amended by adding at the end the following:

‘‘Sec. 91. Excess employer contributions to health plans.’’.

10 (c) EMPLOYMENT TAX AMENDMENTS.—

11 (1) GENERAL RULE.—Chapter 25 (relating to

12 general provisions relating to employment taxes) is

13 amended by adding at the end the following new sec14 tion:

15 ‘‘SEC. 3510. TREATMENT OF EXCESS EMPLOYER CONTRIBU16 TIONS.

17 ‘‘(a) IN GENERAL.—For purposes of this subtitle and

18 section 209 of the Social Security Act, any amount re19 quired to be included in the gross income of an employee

20 under section 91(a) with respect to any month—

21 ‘‘(1) shall be treated as paid in cash to such

22 employee at the close of such month, and

23 ‘‘(2) shall not be treated as paid under a health

24 or similar plan of the employer.
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•S 2096 IS

1 For purposes of paragraph (1), an employer may elect to

2 prorate any such amount to any payroll period (or portion

3 thereof) covering such month rather than treat it as being

4 paid at the close of such month.

5 ‘‘(b) SPECIAL RULES IN THE CASE OF SELF-IN6 SURED PLANS.—

7 ‘‘(1) SAFE HARBOR FOR EMPLOYEES WHOSE

8 ESTIMATES ARE AT LEAST 95 PERCENT OF ACTUAL

9 EMPLOYER CONTRIBUTIONS.—In the case of an em10 ployer who maintains a self-insured health plan, if

11 for any calendar year the excess of—

12 ‘‘(A) the actual employer contributions de13 termined under section 91 with respect to all

14 employees for such year, over

15 ‘‘(B) the amount estimated by the em16 ployer under section 91(d)(3)(B) as the em17 ployer contributions with respect to all employ18 ees for such year,

19 is not greater than 5 percent of the amount deter20 mined under subparagraph (A) then, except as pro21 vided in paragraph (2), no penalty shall be imposed

22 under section 6672 on the employer for failure to

23 pay, or to deduct and withhold, any tax imposed by

24 this subtitle on such excess.
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•S 2096 IS

1 ‘‘(2) EMPLOYER MUST PAY CERTAIN TAXES ON

2 EXCESS.—Paragraph (1) shall not apply to any tax

3 imposed, or required to be deducted and withheld,

4 under sections 3111, 3221, 3301, and 3402 on the

5 excess described in paragraph (1) unless the em6 ployer pays any such tax within the time prescribed

7 by the Secretary under regulations.

8 ‘‘(3) SPECIAL RULES FOR EMPLOYEE’S SOCIAL

9 SECURITY TAX AND CREDIT.—In the case of the ex10 cess described in paragraph (1)—

11 ‘‘(A) no tax shall be imposed by section

12 3101, and

13 ‘‘(B) the amount of such excess shall not

14 be taken into account for purposes of section

15 209 of the Social Security Act.

16 ‘‘(c) LIABILITY FOR WITHHOLDING AND PAYMENT

17 OF TAX.—

18 ‘‘(1) IN GENERAL.—Except as provided in para19 graph (2), the applicable payer shall withhold, and

20 be liable for, payment of any tax required to be

21 withheld or paid under this subtitle on any amount

22 described in subsection (a).

23 ‘‘(2) SPECIAL RULES FOR MULTIEMPLOYER

24 HEALTH PLANS.—In the case of any multiemployer

25 health plan, the plan administrator shall comply
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•S 2096 IS

1 with such rules with respect to the withholding of,

2 and liability for, any tax required to be withheld or

3 paid under this subtitle as the Secretary may require

4 by regulations.

5 ‘‘(d) DEFINITIONS.—For purposes of this section—

6 ‘‘(1) APPLICABLE PAYER.—The term ‘applica7 ble payer’ means the payer of remuneration for serv8 ices which qualifies the employee for coverage under

9 a multiemployer health plan.

10 ‘‘(2) EMPLOYEE.—The term ‘employee’ does

11 not include a former employee.

12 ‘‘(3) MULTIEMPLOYER HEALTH PLAN.—The

13 term ‘multiemployer health plan’ has the meaning

14 given such term by section 91(d)(7).’’.

15 (2) CLERICAL AMENDMENT.—The table of sec16 tions for chapter 25 is amended by adding at the

17 end the following new item:

‘‘Sec. 3510. Treatment of excess employer contributions.’’.

18 (d) EFFECTIVE DATES.—

19 (1) IN GENERAL.—The amendments made by

20 subsections (a) and (b) shall apply to taxable years

21 beginning after December 31, 1995.

22 (2) EMPLOYMENT TAX.—The amendments

23 made by subsection (c) shall take effect on and after

24 January 1, 1996.
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1 SEC. 202. DEDUCTIONS FOR COSTS OF HEALTH PLANS.

2 (a) BUSINESS EXPENSE DEDUCTION FOR HEALTH

3 INSURANCE.—Section 162 (relating to trade or business

4 expenses) is amended by redesignating subsection (m) as

5 subsection (n) and by inserting after subsection (l) the fol6 lowing new subsection:

7 ‘‘(m) GROUP HEALTH PLANS.—The amount of ex8 penses paid or incurred by an employer for a group health

9 plan shall not be allowed as a deduction under this sec10 tion—

11 ‘‘(1) unless the plan is an accountable health

12 plan or certified health plan (as defined in section

13 106),

14 ‘‘(2) unless such employer does not vary the

15 amount incurred among plans offered to each em16 ployee (other than with respect to the benefits pack17 age and family class of enrollment coverage), and

18 ‘‘(3) with respect to each employee, to the ex19 tent such amount exceeds the applicable dollar limit

20 for such employee (within the meaning of section

21 91(b)(2) (without regard to subparagraph (B) there22 of) and determined on an annual basis).’’.

23 (b) PERMANENT EXTENSION AND INCREASE IN

24 HEALTH INSURANCE TAX DEDUCTION FOR SELF-EM25 PLOYED INDIVIDUALS.—

26 (1) PERMANENT EXTENSION OF DEDUCTION.—
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•S 2096 IS

1 (A) IN GENERAL.—Subsection (l) of sec2 tion 162 (relating to special rules for health in3 surance costs of self-employed individuals) is

4 amended by striking paragraph (6).

5 (B) EFFECTIVE DATE.—The amendment

6 made by this paragraph shall apply to taxable

7 years beginning after December 31, 1993.

8 (2) INCREASE IN AMOUNT OF DEDUCTION; IN9 SURANCE PURCHASED MUST MEET CERTAIN STAND10 ARDS.—

11 (A) INCREASE IN AMOUNT OF DEDUC12 TION.—Paragraph (1) of section 162(l) is

13 amended—

14 (i) by striking ‘‘25 percent of’’ and in15 serting ‘‘100 percent of’’, and

16 (ii) by striking ‘‘dependents.’’ and in17 serting ‘‘dependents, and only to the extent

18 such amount does not exceed the applica19 ble dollar limit for such taxpayer (within

20 the meaning of section 91(b)(2) and deter21 mined on an annual basis).’’

22 (B) INSURANCE PURCHASED MUST MEET

23 CERTAIN STANDARDS.—Paragraph (2) of sec24 tion 162(l) is amended by adding at the end the

25 following new subparagraph:
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•S 2096 IS

1 ‘‘(C) INSURANCE MUST MEET CERTAIN

2 STANDARDS.—Paragraph (1) shall apply only to

3 insurance which is an accountable health plan

4 or certified health plan (as defined in section

5 106).’’.

6 (C) TREATMENT OF MULTIEMPLOYER

7 HEALTH PLANS.—Subsection (l) of section 162

8 is amended by adding at the end the following

9 new paragraph:

10 ‘‘(6) TREATMENT OF MULTIEMPLOYER HEALTH

11 PLANS.—For purposes of this subsection, an amount

12 paid into a multiemployer health plan (as defined in

13 section 91(d)(7) shall be deemed to be an amount

14 paid for insurance which constitutes medical care.’’.

15 (c) EFFECTIVE DATE.—Except as provided in sub16 section (b)(1)(B), the amendments made by this section

17 shall apply to taxable years beginning after December 31,

18 1995.
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1 TITLE III—FINANCING AND RE2 FORMING FEDERAL PRO3 GRAMS

4 Subtitle A—Medicare

5 SEC. 301. MEDICARE CHOICE.

6 (a) IN GENERAL.—Section 1876 of the Social Secu7 rity Act (42 U.S.C. 1395mm) is amended to read as fol8 lows:

9 ‘‘MEDICARE CHOICE

10 ‘‘SEC. 1876. (a) ESTABLISHMENT OF MEDICARE

11 MARKET AREAS.—The Secretary shall establish various

12 medicare market areas within the United States in such

13 manner as to—

14 ‘‘(1) ensure that each individual entitled to ben15 efits under part A and enrolled under part B, or en16 rolled under part B only, resides in a medicare mar17 ket area;

18 ‘‘(2) maintain all portions of each metropolitan

19 statistical area within one medicare market area;

20 and

21 ‘‘(3) maximize the number of such individuals

22 who will have the opportunity for a meaningful

23 choice among competing medicare health plans

24 under contract with the Secretary under this section.

25 ‘‘(b) MEDICARE HEALTH PLANS.—
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•S 2096 IS

1 ‘‘(1) CONTRACTS WITH MEDICARE HEALTH

2 PLANS.—The Secretary shall enter into a contract

3 with any medicare health plan desiring to do busi4 ness in a medicare market area and to receive pay5 ment under this section, but only if the Secretary

6 certifies that such plan meets the requirements of

7 paragraph (2).

8 ‘‘(2) CERTIFICATION REQUIREMENTS.—Each

9 medicare health plan must—

10 ‘‘(A) be certified as an accountable health

11 plan by the appropriate regulatory authority

12 pursuant to title I of the Health Care Reform

13 Act of 1994;

14 ‘‘(B) except as provided in paragraph (3),

15 provide those services covered by this title

16 (hereafter in this section referred to as ‘medi17 care benefits’) when medically necessary for a

18 uniform monthly premium for a year;

19 ‘‘(C) not discriminate against beneficiaries

20 based on their health status, claims experience,

21 medical history, or other factors that are gen22 erally related with utilization of health care

23 services;

24 ‘‘(D) demonstrate the ability to provide

25 medicare benefits to all potential enrollees
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1 throughout the medicare market area, unless

2 the Secretary determines it appropriate for such

3 plan to provide services to a subset of such

4 market area;

5 ‘‘(E) collect and provide such standard in6 formation as the Secretary shall prescribe by

7 regulation as necessary to evaluate the perform8 ance and quality of such plan, including en9 rollee satisfaction, to compare such performance

10 and quality with competing plans, and to pre11 pare comparative materials for distribution to

12 beneficiaries;

13 ‘‘(F) demonstrate the ability to integrate

14 additional benefits into such plan for qualified

15 medicare beneficiaries as provided in section

16 321 of the Health Care Reform Act of 1994;

17 and

18 ‘‘(G) offer the supplementary coverage

19 plans established by the Secretary under sub20 section (g)(3)(B).

21 ‘‘(3) COST SHARING.—

22 ‘‘(A) ACTUARIALLY EQUIVALENT MEDI23 CARE BENEFITS.—Each medicare health plan

24 must offer either—
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1 ‘‘(i) medicare benefits, including the

2 cost-sharing requirements otherwise pro3 vided in this title; or

4 ‘‘(ii) actuarially equivalent medicare

5 benefits, as established by the Secretary in

6 regulations, which are medicare benefits,

7 but with cost-sharing requirements that

8 are actuarially equivalent to the cost-shar9 ing requirements otherwise provided in this

10 title and consistent with common practices

11 among health maintenance organizations

12 and other managed care health plans.

13 In establishing actuarially equivalent medicare

14 benefits, the Secretary shall not include in the

15 calculation any change in costs associated with

16 alternative forms of health care delivery, man17 agement, or utilization control.

18 ‘‘(B) OUT-OF-NETWORK COST SHARING.—

19 Each medicare health plan may require enroll20 ees to pay higher cost sharing for services than

21 is otherwise required by this title (or required

22 in the actuarially equivalent alternative) if—

23 ‘‘(i) the plan maintains a network of

24 providers for all medicare benefits that

25 would not require higher cost sharing; and
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•S 2096 IS

1 ‘‘(ii) the plan provides enrollees with

2 such information.

3 ‘‘(4) CAPACITY LIMITS.—Each medicare health

4 plan may apply to have limits placed on the number

5 of beneficiaries that may enroll in the plan in an en6 rollment period if the plan can demonstrate—

7 ‘‘(A) that enrolling more than the limit

8 would impair the plan’s ability to provide serv9 ices to other enrollees; and

10 ‘‘(B) enrollment in the plan is on a first11 come first-served basis, except for individuals

12 enrolled in the prior year.

13 ‘‘(c) EMPLOYER-SPONSORED HEALTH PLANS.—

14 ‘‘(1) CRITERIA FOR CERTIFICATION.—The Sec15 retary shall prescribe, by regulation, criteria for cer16 tifying medicare health plans sponsored by employ17 ers which will be offered only to current or former

18 employees, including requirements that such health

19 plans—

20 ‘‘(A) are certified as accountable health

21 plans pursuant to title I of the Health Care Re22 form Act of 1994;

23 ‘‘(B) provide benefits that cover at least

24 those services covered by this title at a premium

25 for the enrollee that does not exceed the base
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•S 2096 IS

1 beneficiary premium (as defined pursuant to

2 subsection (f)); and

3 ‘‘(C) are available to all eligible current

4 and former employees in the medicare market

5 area.

6 ‘‘(2) SECONDARY PAYER COVERAGE.—To be

7 certified under paragraph (1), employer-sponsored

8 health plans shall accept, at the option of individuals

9 eligible only for secondary coverage under this title

10 pursuant to section 1862(b), a fixed monthly pay11 ment from the Secretary to provide such individuals

12 coverage at least actuarially equivalent to the sec13 ondary coverage available to such individuals under

14 this title.

15 ‘‘(d) MANAGING MEDICARE CHOICE.—

16 ‘‘(1) MEDICARE HEALTH PLAN TOTAL MONTH17 LY PREMIUMS.—Before the beginning of each cal18 endar year, each medicare health plan or employer19 sponsored health plan under contract pursuant to

20 subsection (b) or (c) shall submit to the Secretary

21 the total monthly premium that such plan intends to

22 charge in such year.

23 ‘‘(2) ANNUAL OPEN ENROLLMENT.—

24 ‘‘(A) IN GENERAL.—The Secretary shall

25 provide for an annual open enrollment period
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1 during which all individuals entitled to benefits

2 under part A and enrolled under part B, or en3 rolled under part B only, residing in a medicare

4 market area—

5 ‘‘(i) shall choose enrollment for the

6 next calendar year in—

7 ‘‘(I) a medicare health plan in

8 such area,

9 ‘‘(II) an employer-sponsored

10 health plan, or

11 ‘‘(III) coverage otherwise pro12 vided under this title (hereafter in this

13 section referred to as ‘medicare fee14 for-service’); and

15 ‘‘(ii) may choose supplementary bene16 fits offered by such health plan or a medi17 care supplemental policy (certified under

18 section 1882).

19 ‘‘(B) SECONDARY PAYER.—Individuals who

20 are eligible for secondary coverage under this

21 title pursuant to section 1862(b), may not en22 roll in a medicare health plan but may enroll in

23 an employer-sponsored health plan, to which the

24 Secretary shall make a monthly payment, pur25 suant to subsection (e)(2)(C).
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1 ‘‘(C) PERIOD OF ENROLLMENT.—

2 ‘‘(i) IN GENERAL.—Except as pro3 vided in clauses (ii), (iii), and (iv), an indi4 vidual may not choose another enrollment

5 until the next annual period provided

6 under subparagraph (A).

7 ‘‘(ii) ENROLLMENT UPON ELIGI8 BILITY.—The Secretary shall provide an

9 enrollment period of 30 days to any indi10 vidual beginning 30 days before the date

11 such individual first becomes entitled to

12 benefits under part A or enrolled under

13 part B only. Such enrollment shall be ef14 fective on the date of such entitlement.

15 ‘‘(iii) TERMINATION OF PLAN.—If a

16 contract for a medicare health plan under

17 this section is terminated during any cal18 endar year, the Secretary shall provide for

19 an enrollment period of 30 days to any in20 dividual enrolled in such plan beginning on

21 the date of such termination.

22 ‘‘(iv) INDIVIDUAL NO LONGER IN

23 AREA.—An individual terminating resi24 dence in a medicare market area may ter25 minate enrollment with the medicare
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1 health plan of such area as of the begin2 ning of the first calendar month following

3 the date on which the request is made for

4 such termination, and the Secretary shall

5 provide for an open enrollment period of

6 30 days to such individual for enrollment

7 in the new medicare market area in which

8 such individual resides beginning on the

9 date of such termination. In the case of an

10 individual’s termination of enrollment, the

11 medicare health plan shall provide the indi12 vidual with a copy of the written request

13 for termination of enrollment and a written

14 explanation of the period (ending on the

15 effective date of the termination) during

16 which the individual continues to be en17 rolled with the plan and may not receive

18 medicare benefits other than through such

19 plan.

20 ‘‘(v) EFFECTIVE DATE OF NEW EN21 ROLLMENT.—Enrollment under clause (iii)

22 or (iv) shall be effective 30 days after the

23 end of the enrollment period, or, if the

24 Secretary determines that such date is not
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1 feasible, such other date as the Secretary

2 specifies.

3 ‘‘(D) DEFAULT ENROLLMENT.—

4 ‘‘(i) IN GENERAL.—If an individual

5 does not choose an enrollment option dur6 ing an enrollment period under this para7 graph, such individual shall be automati8 cally enrolled in—

9 ‘‘(I) the same option into which

10 such individual enrolled in the preced11 ing enrollment period; or

12 ‘‘(II) if the individual was not en13 rolled in such preceding period, the

14 medicare fee-for-service.

15 ‘‘(ii) NO MEDICARE HEALTH PLANS IN

16 AREA.—If there are no medicare health

17 plans in the medicare market area in

18 which the individual resides, such individ19 ual shall be automatically enrolled in the

20 medicare fee-for-service.

21 ‘‘(3) INFORMATION REGARDING MEDICARE OP22 TIONS IN MARKET AREA.—

23 ‘‘(A) IN GENERAL.—The Secretary shall

24 provide each individual making an enrollment

25 decision during any enrollment period described
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1 in paragraph (2) with the following information,

2 in comparative form, regarding the medicare

3 health plans and medicare fee-for-service avail4 able in the medicare market area in which such

5 individual resides:

6 ‘‘(i) The individual’s premiums for

7 medicare benefits.

8 ‘‘(ii) The individual’s premiums for

9 any supplementary benefits.

10 ‘‘(iii) Enrollee restrictions.

11 ‘‘(iv) Quality information, including

12 enrollee satisfaction and health outcomes.

13 ‘‘(v) Any other necessary information

14 as determined by the Secretary.

15 ‘‘(B) MARKETING REQUIREMENTS.—The

16 Secretary shall prescribe the procedures and

17 conditions under which a medicare health plan

18 that has entered into a contract with the Sec19 retary under this section may inform individ20 uals eligible to enroll under this section with the

21 plan about the plan. No brochures, application

22 forms, or other promotional or informational

23 material may be distributed by such plan to (or

24 for the use of) individuals eligible to enroll with

25 the plan under this section unless—
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1 ‘‘(i) at least 45 days before its dis2 tribution, the plan has submitted the mate3 rial to the Secretary for review;

4 ‘‘(ii) the material is made available to

5 all individuals eligible to enroll in the medi6 care health plan in the medicare market

7 area; and

8 ‘‘(iii) the Secretary has not dis9 approved the distribution of the material.

10 The Secretary shall review all such material

11 submitted and shall disapprove such material if

12 the Secretary determines, in the Secretary’s dis13 cretion, that the material is materially inac14 curate or misleading or otherwise makes a ma15 terial misrepresentation.

16 ‘‘(4) RISK ADJUSTMENTS.—

17 ‘‘(A) IN GENERAL.—The Secretary shall

18 adjust the payments made to medicare health

19 plans and employer-sponsored health plans

20 under this title to reflect the relative health

21 risks of classes of beneficiaries enrolled in such

22 plans in the medicare market area. The Sec23 retary may define appropriate classes of bene24 ficiaries, based on age, disability status, and

25 such other factors as the Secretary determines
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1 to be appropriate, so as to ensure actuarial

2 equivalence and the efficient delivery of health

3 care. The Secretary may add to, modify, or sub4 stitute for such classes, if such changes will im5 prove the determination of actuarial equiva6 lence.

7 ‘‘(B) PENALTIES FOR DISCRIMINATION.—

8 The Secretary shall have the authority to im9 pose financial penalties on medicare health

10 plans or employer-sponsored health plans that

11 knowingly violate the prohibition against dis12 crimination against potential enrollees based on

13 their health status, claims experience, medical

14 history, or other factors that are generally re15 lated with utilization of health care services.

16 ‘‘(5) PAYMENTS TO PLANS.—

17 ‘‘(A) IN GENERAL.—The Secretary shall

18 forward to each medicare health plan or em19 ployer-sponsored health plan the medicare per

20 capita rate for the medicare market area, as de21 termined under subsection (e), for every bene22 ficiary enrolled in such plan for that month, ex23 cluding any beneficiary premium but reflecting

24 any adjustments required pursuant to para25 graph (4)(A).
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1 ‘‘(B) COLLECTION OF BENEFICIARY PRE2 MIUMS AND REBATES.—

3 ‘‘(i) PREMIUMS.—Each medicare

4 health plan or employer-sponsored plan

5 shall be responsible for collecting pre6 miums owed by beneficiaries for enrolling

7 in such plan, including premiums for medi8 care benefits and any supplementary bene9 fits.

10 ‘‘(ii) REBATES.—Any medicare health

11 plan or employer-sponsored plan which

12 charges a total monthly premium which is

13 less than the medicare per capita rate for

14 an enrollee shall be responsible for paying

15 to such enrollee a rebate equal to the ex16 cess medicare per capita rate or may use

17 such rebate to offset any premium owed by

18 the enrollee for any supplementary benefits

19 selected by the enrollee.

20 ‘‘(C) SOURCE OF PAYMENT.—The amounts

21 paid to medicare health plans and employer22 sponsored health plans shall be made from the

23 Federal Hospital Insurance Trust Fund and

24 the Supplementary Insurance Trust Fund
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1 based on an allocation determined by the Sec2 retary.

3 ‘‘(e) MEDICARE PER CAPITA RATE.—

4 ‘‘(1) ANNOUNCEMENT.—With respect to each

5 medicare market area, the Secretary shall announce,

6 not later than October 1 (beginning with 1995) the

7 per capita rate that will apply to such market area

8 beginning with the enrollment year (which coincides

9 with the next calendar year).

10 ‘‘(2) PER CAPITA RATE.—

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

12 subparagraphs (B) and (C), the per capita rate

13 for a medicare market area shall be equal to

14 the lesser of the maximum per capita rate or

15 the sum of—

16 ‘‘(i) the excess of—

17 ‘‘(I) the benchmark premium for

18 such area, over

19 ‘‘(II) the base beneficiary pre20 mium for such area; and

21 ‘‘(ii) the applicable percentage of the

22 excess of—

23 ‘‘(I) the fee-for-service per capita

24 costs (hereafter in this section re-
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•S 2096 IS

1 ferred to as ‘FFSPCC’) for such area,

2 over

3 ‘‘(II) such benchmark premium.

4 For purposes of the preceding sentence, the ap5 plicable percentage shall be determined by the

6 following table:

Applicable

‘‘Enrollment year: percentage:

1996 ......................................................................................... 90

1997 ......................................................................................... 80

1998 ......................................................................................... 70

1999 ......................................................................................... 60

2000 and thereafter ................................................................. 50.

7 ‘‘(B) SECONDARY PAYER PER CAPITA

8 RATE.—For individuals who are eligible for sec9 ondary coverage under this title pursuant to

10 section 1862(b) and elect to enroll in an em11 ployer-sponsored health plan, the Secretary

12 shall determine a per capita rate for each medi13 care market area equal to the costs of providing

14 secondary coverage to all individuals in such

15 market area divided by the number of individ16 uals eligible for such coverage in such market

17 area.

18 ‘‘(C) RURAL ENROLLEES.—

19 ‘‘(i) FIVE-YEAR BONUS.—For enroll20 ment periods beginning in 1996 through

21 2000, the per capita rate in each medicare

22 market area (otherwise determined under
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•S 2096 IS

1 this paragraph) shall be increased by 10

2 percent (without regard to the maximum

3 established under paragraph (3)) with re4 spect to each individual enrolling in a med5 icare health plan or employer-sponsored

6 health plan who resides in an underserved

7 rural area within such market area, as de8 termined by the Secretary.

9 ‘‘(ii) IMPROVE ACCESS.—The bonus

10 amount paid under this subparagraph shall

11 be used by such health plans to improve

12 access and coordinated service delivery in

13 the underserved rural area in which the

14 enrollee resides. The bonus amount shall

15 not reduce the premiums owed by the en16 rollee for medicare benefits or any supple17 mentary coverage.

18 ‘‘(iii) STUDY AND RECOMMENDA19 TIONS.—The Secretary shall report to the

20 Congress at the end of the 5-year period

21 described in clause (ii) on the status of

22 health care access in underserved rural

23 areas and shall make recommendations re24 garding continuation of bonus per capita

25 payments.
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1 ‘‘(3) MAXIMUM PER CAPITA RATE.—

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

3 subparagraph (E), the maximum per capita

4 rate in any medicare market area shall be the

5 excess of—

6 ‘‘(i) the product of—

7 ‘‘(I) FFSPCC in all medicare

8 market areas, and

9 ‘‘(II) an adjustment factor for

10 such market area; over

11 ‘‘(ii) the fee-for-service beneficiary

12 premium required pursuant to subsection

13 (f)(2)(B)(ii).

14 ‘‘(B) ADJUSTMENT FACTOR.—For pur15 poses of subparagraph (A)(i)(II), and except as

16 provided in subparagraph (D):

17 ‘‘(i) FFSPCC RATIO LESS THAN .8.—

18 For medicare market areas with a

19 FFSPCC ratio less than or equal to .8, the

20 adjustment factor shall be .8.

21 ‘‘(ii) FFSPCC RATIO BETWEEN .8 AND

22 .95.—For medicare market areas with a

23 FFSPCC ratio less than .95 but greater

24 than .8, the adjustment factor shall be the

25 sum of .85, plus—
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•S 2096 IS

1 ‘‘(I) .1, multiplied by

2 ‘‘(II) the ratio of the excess of

3 the FFSPCC ratio over .8, to .15.

4 ‘‘(iii) FFSPCC RATIO BETWEEN .95

5 AND 1.05.—For medicare market areas

6 with a FFSPCC ratio of at least .95 but

7 less than 1.05, the adjustment factor shall

8 be the FFSPCC ratio.

9 ‘‘(iv) FFSPCC RATIO BETWEEN 1.05

10 AND 1.2.—For medicare market areas with

11 a FFSPCC ratio of at least 1.05 but less

12 than 1.2, the adjustment factor shall be

13 the sum of 1.05, plus—

14 ‘‘(I) .1, multiplied by

15 ‘‘(II) the ratio of the excess of

16 the FFSPCC ratio over 1.05, to .15.

17 ‘‘(v) FFSPCC RATIO GREATER THAN

18 1.2.—For medicare market areas with a

19 FFSPCC ratio greater than or equal to

20 1.2, the adjustment factor shall be 1.2.

21 ‘‘(C) FFSPCC RATIO.—For purposes of

22 subparagraph (B), for each medicare market

23 area, the Secretary shall determine a FFSPCC

24 ratio by dividing FFSPCC in such market area

25 by FFSPCC for all medicare market areas.
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1 ‘‘(D) BUDGET NEUTRALITY.—The Sec2 retary shall change the adjustment factors as

3 necessary to ensure that total spending under

4 this title shall not exceed the level of spending

5 that would occur if the maximum per capita

6 rate in each medicare market area were equal

7 to the FFSPCC in each such market area.

8 ‘‘(E) ALTERNATIVE FORMULA.—The Sec9 retary may substitute an alternative formula for

10 determining the maximum rate in each medi11 care market area. Such an alternative formula

12 shall generally conform to the pattern of adjust13 ment factors specified in subparagraph (B), ex14 cept that such formula shall maintain a consist15 ent mathematical relationship between the ad16 justment factor and the FFSPCC ratio in each

17 such market area in a manner that achieves

18 budget neutrality.

19 ‘‘(4) DEFINITIONS.—For purposes of this sub20 section:

21 ‘‘(A) BENCHMARK PREMIUM.—The bench22 mark premium for a medicare market area shall

23 be equal to the sum of—

24 ‘‘(i) the lowest health plan total

25 monthly premium submitted by a medicare
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•S 2096 IS

1 health plan in such area for the enrollment

2 year; and

3 ‘‘(ii) the applicable percentage of the

4 excess of—

5 ‘‘(I) the average of all medicare

6 health plan total monthly premiums

7 submitted in such area, over

8 ‘‘(II) the lowest health plan total

9 monthly premium in such area.

10 For purposes of the preceding sentence, the ap11 plicable percentage shall be determined by the

12 following table:

Applicable

‘‘Enrollment year: percentage:

1996 ......................................................................................... 80

1997 ......................................................................................... 60

1998 ......................................................................................... 40

1999 and thereafter ................................................................. 20.

13 ‘‘(B) FEE-FOR-SERVICE PER CAPITA

14 COSTS.—The Secretary shall determine

15 FFSPCC for a medicare market area by divid16 ing—

17 ‘‘(i) the total spending for medicare

18 benefits (not including beneficiary cost

19 sharing) for individuals who reside in such

20 area, who are not enrolled in a medicare

21 health plan or employer-sponsored health
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•S 2096 IS

1 plan, and who are not in secondary payer

2 status; by

3 ‘‘(ii) the number of such individuals.

4 The Secretary shall make such other adjust5 ments as may be necessary to allow an accurate

6 comparison of FFSPCC for the medicare mar7 ket area with total monthly premiums charged

8 by medicare health plans in such area.

9 ‘‘(f) BENEFICIARY PREMIUMS.—For purposes of this

10 section:

11 ‘‘(1) BASE BENEFICIARY PREMIUM.—The base

12 beneficiary premium for each medicare market area

13 shall be equal to the product of—

14 ‘‘(A) the ratio of the monthly premium de15 termined under section 1839 to the national av16 erage cost per beneficiary under this title in

17 1995, as determined by the Secretary; and

18 ‘‘(B) the benchmark premium for such

19 area.

20 ‘‘(2) MONTHLY BENEFICIARY PREMIUMS.—

21 ‘‘(A) HEALTH PLAN BENEFICIARY PRE22 MIUM.—To be enrolled for coverage in a medi23 care health plan during an enrollment year for

24 medicare benefits, each beneficiary shall pay a

25 monthly premium equal to the excess of—
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1 ‘‘(i) the premium charged by the plan

2 selected by the beneficiary; over

3 ‘‘(ii) the medicare per capita rate in

4 the medicare market area in which the

5 beneficiary resides.

6 ‘‘(B) FEE-FOR-SERVICE BENEFICIARY PRE7 MIUM.—

8 ‘‘(i) IN GENERAL.—To be enrolled for

9 coverage in a medicare fee-for-service in a

10 medicare market area during an enroll11 ment year for medicare benefits, each ben12 eficiary shall pay a monthly premium equal

13 to the estimated FFSPCC for the medicare

14 market area, multiplied by the ratio deter15 mined under paragraph (1)(A).

16 ‘‘(g) SUPPLEMENTARY COVERAGE PLANS.—

17 ‘‘(1) IN GENERAL.—The Secretary shall ensure

18 that all supplementary coverage plans meet the re19 quirements of this subsection, in addition to any re20 quirements that may be applicable under section

21 1882.

22 ‘‘(2) COORDINATION WITH MEDICARE

23 CHOICE.—Supplementary coverage plans may only

24 be offered to beneficiaries during the same annual

25 open enrollment period during which beneficiaries
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1 select medicare coverage and must be offered to all

2 beneficiaries in the same medicare market area for

3 the same, uniform monthly premium during the en4 rollment period.

5 ‘‘(3) STANDARD BENEFITS.—

6 ‘‘(A) IN GENERAL.—Medicare health plans

7 may only offer standardized supplementary cov8 erage plans, as established by the Secretary,

9 after consultation with the National Association

10 of Insurance Commissioners.

11 ‘‘(B) REQUIRED OPTIONS.—Among the

12 standardized plans, the Secretary shall include

13 a plan—

14 ‘‘(i) covering only outpatient prescrip15 tion drugs; and

16 ‘‘(ii) which, together with medicare

17 benefits, would resemble coverage typically

18 offered by health maintenance organiza19 tions to employer groups, including an an20 nual out-of-pocket maximum beneficiary li21 ability (covering coinsurance, copayments,

22 and deductibles).

23 ‘‘(4) ONE SPONSOR.—A sponsor of supple24 mentary coverage may not offer such coverage to a

25 beneficiary selecting a medicare health plan from a
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1 different sponsor, except that sponsors of supple2 mentary coverage may offer such coverage to any in3 dividual selecting medicare fee-for-service.

4 ‘‘(5) SURCHARGE ON CERTAIN PLANS.—Not5 withstanding any other provision of this section, if

6 an individual chooses to purchase a medicare supple7 mental policy certified pursuant to section 1882 and

8 the coverage under such policy results in increased

9 costs to the program under this title, the monthly

10 beneficiary premium otherwise applicable under this

11 section shall be increased by a surcharge actuarially

12 equivalent to such increased costs.

13 ‘‘(6) DEFINITIONS.—The term ‘supplementary

14 coverage plan’ means any health insurance coverage

15 offered by a medicare health plan or medicare sup16 plemental policy (as defined in section 1882) that

17 covers health care costs not covered as medicare

18 benefits and for which the enrollee must pay a pre19 mium.’’.

20 (b) CONFORMING AMENDMENTS.—

21 (1) Section 1882(c) of the Social Security Act

22 (42 U.S.C. 1395ss(c)) is amended—

23 (A) by striking ‘‘with respect to paragraph

24 (3)’’ and inserting ‘‘with respect to paragraphs

25 (3) and (6)’’,
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•S 2096 IS

1 (B) by striking ‘‘and’’ at the end of para2 graph (4),

3 (C) by striking the period at the end of

4 paragraph (5) and inserting ‘‘; and’’, and

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

6 paragraph:

7 ‘‘(6) agrees—

8 ‘‘(A) to offer such policy during the annual

9 open enrollment period specified in section

10 1876(c)(2) at a uniform monthly premium to

11 all beneficiaries in a medicare market area es12 tablished under section 1876(a); and

13 ‘‘(B) not to discriminate against bene14 ficiaries based on their health status, claims ex15 perience, medical history, or other factors that

16 are generally related with utilization of health

17 care services.’’.

18 (2) Section 1882(s) of such Act (42 U.S.C.

19 1395ss(s)) is amended—

20 (A) by striking paragraph (2),

21 (B) by striking ‘‘paragraphs (1) and (2)’’

22 in paragraph (3) and inserting ‘‘paragraph

23 (1)’’, and

24 (C) by redesignating paragraph (3) as

25 paragraph (2).
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1 (3) Section 1839(e) of such Act (42 U.S.C.

2 1395r(e)) is amended to read as follows:

3 ‘‘(e) Notwithstanding the provisions of subsection (a),

4 the monthly premium for each individual enrolled under

5 this part for each month—

6 ‘‘(1) in 1994 shall be $41.10;

7 ‘‘(2) in 1995 shall be $46.10; and

8 ‘‘(3) after December 1995 shall be an amount

9 equal to 25 percent of the monthly actuarial rate for

10 enrollees age 65 and over, as determined under sub11 section (a)(1) and applicable to such month.’’.

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

13 this section shall apply to contracts entered into with re14 spect to calendar years beginning after December 31,

15 1995.

16 SEC. 302. OTHER MEDICARE PROVISIONS.

17 (a) APPLICATION OF COMPETITIVE ACQUISITION FOR

18 FEE-FOR-SERVICE ITEMS AND SERVICES.—

19 (1) GENERAL RULE.—Part B of title XVIII of

20 the Social Security Act (42 U.S.C. 1395j et seq.) is

21 amended by inserting after section 1846 the follow22 ing:

23 ‘‘COMPETITIVE ACQUISITION FOR ITEMS AND SERVICES

24 ‘‘SEC. 1847. (a) ESTABLISHMENT OF BIDDING

25 AREAS.—
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1 ‘‘(1) IN GENERAL.—The Secretary shall, in

2 each medicare market area, award a contract or con3 tracts for the furnishing under this part of the items

4 and services described in subsection (c) on or after

5 January 1, 1996.

6 ‘‘(2) ALTERNATIVE AREAS.—The Secretary

7 may establish areas other than medicare market

8 areas for competitive acquisition of an item or serv9 ice described in subsection (c), if the establishment

10 of such an area increases the availability and acces11 sibility of suppliers and the probability and amount

12 of savings to be realized by the use of such competi13 tive acquisition in such area.

14 ‘‘(b) AWARDING OF CONTRACTS IN AREAS.—

15 ‘‘(1) IN GENERAL.—The Secretary shall con16 duct a competition among individuals and entities

17 supplying items and services under this part for

18 each competitive acquisition area established under

19 subsection (a) for each class of items and services.

20 ‘‘(2) CONDITIONS FOR AWARDING CONTRACT.—

21 The Secretary may not award a contract to any indi22 vidual or entity under the competition conducted

23 pursuant to paragraph (1) to furnish an item or

24 service under this part unless the Secretary finds

25 that the individual or entity—
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•S 2096 IS

1 ‘‘(A) meets quality standards specified by

2 the Secretary for the furnishing of such item or

3 service; and

4 ‘‘(B) offers to furnish a total quantity of

5 such item or service that is sufficient to meet

6 the expected need within the competitive acqui7 sition area.

8 ‘‘(3) CONTENTS OF CONTRACT.—A contract en9 tered into with an individual or entity under the

10 competition conducted pursuant to paragraph (1)

11 shall specify (for all of the items and services within

12 a class)—

13 ‘‘(A) the quantity of items and services the

14 entity shall provide; and

15 ‘‘(B) such other terms and conditions as

16 the Secretary may require.

17 ‘‘(c) SERVICES DESCRIBED.—The items and services

18 to which the provisions of this section shall apply are as

19 follows:

20 ‘‘(1) Magnetic resonance imaging tests and

21 computerized axial tomography scans, including a

22 physician’s interpretation of the results of such tests

23 and scans.

24 ‘‘(2) Oxygen and oxygen equipment.

25 ‘‘(3) Clinical diagnostic laboratory tests.
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1 ‘‘(4) Such other items and services for which

2 the Secretary determines that the use of competitive

3 acquisition under this section will be appropriate and

4 cost-effective.’’.

5 (2) ITEMS AND SERVICES TO BE FURNISHED

6 ONLY THROUGH COMPETITIVE ACQUISITION.—Sec7 tion 1862(a) of such Act (42 U.S.C. 1395y(a)) is

8 amended—

9 (A) by striking ‘‘or’’ at the end of para10 graph (15),

11 (B) by striking the period at the end of

12 paragraph (16) and inserting ‘‘; or’’, and

13 (C) by inserting after paragraph (16) the

14 following new paragraph:

15 ‘‘(17) where such expenses are for an item or

16 service furnished in a competitive acquisition area

17 (as established by the Secretary under section

18 1847(a)) by an individual or entity other than the

19 supplier with whom the Secretary has entered into

20 a contract under section 1847(b) for the furnishing

21 of such item or service in that area, unless the Sec22 retary finds that such expenses were incurred in a

23 case of urgent need.’’.

24 (3) REDUCTION IN PAYMENT AMOUNTS IF COM25 PETITIVE ACQUISITION FAILS TO ACHIEVE MINIMUM
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1 REDUCTION IN PAYMENTS.—Notwithstanding any

2 other provision of title XVIII of the Social Security

3 Act (42 U.S.C. 1395 et seq.), if the establishment

4 of competitive acquisition areas under section 1847

5 of such Act (as added by paragraph (1)) and the

6 limitation of coverage for items and services under

7 part B of such title (42 U.S.C. 1395j et seq.) to

8 items and services furnished by providers with com9 petitive acquisition contracts under such section does

10 not result in a reduction of at least 10 percent in

11 the projected payment amount that would have ap12 plied to the item or service under such part B if the

13 item or service had not been furnished through com14 petitive acquisition under such section, the Secretary

15 shall reduce the payment amount by such percentage

16 as the Secretary determines necessary to result in

17 such a reduction.

18 (4) EFFECTIVE DATE.—The amendments made

19 by this subsection shall apply to items and services

20 furnished under part B of title XVIII of the Social

21 Security Act (42 U.S.C. 1395j et seq.) on or after

22 January 1, 1995.

23 (b) EXPANSION OF CENTERS OF EXCELLENCE.—

24 (1) IN GENERAL.—The Secretary shall use a

25 competitive process to contract with centers of excel-
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•S 2096 IS

1 lence for cataract surgery, coronary artery by-pass

2 surgery, and such other services as the Secretary de3 termines to be appropriate for individuals enrolled in

4 medicare fee-for-service. Payment under title XVIII

5 of the Social Security Act (42 U.S.C. 1395 et seq.)

6 will be made for services subject to such contracts

7 on the basis of negotiated or all-inclusive rates as

8 follows:

9 (A) The center shall cover services pro10 vided in a medicare market area (established

11 pursuant to section 1876(a) of the Social Secu12 rity Act) for years beginning with fiscal year

13 1996.

14 (B) The amount of payment made by the

15 Secretary to the center under title XVIII of the

16 Social Security Act (42 U.S.C. et seq.) for serv17 ices covered under the project shall be less than

18 the aggregate amount of the payments that the

19 Secretary would have made to the center for

20 such services had the project not been in effect.

21 (C) The Secretary shall make payments to

22 the center on such a basis for the following

23 services furnished to individuals enrolled in

24 medicare fee-for-service and entitled to benefits

25 under such title:
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1 (i) Facility, professional, and related

2 services relating to cataract surgery.

3 (ii) Coronary artery by-pass surgery

4 and related services.

5 (iii) Such other services as the Sec6 retary and the center may agree to cover

7 under the agreement.

8 (2) REBATE OF PORTION OF SAVINGS.—In the

9 case of any services provided under a demonstration

10 project conducted under paragraph (1), the Sec11 retary shall make a payment to each individual to

12 whom such services are furnished (at such time and

13 in such manner as the Secretary may provide) in an

14 amount equal to 10 percent of the amount by

15 which—

16 (A) the amount of payment that would

17 have been made by the Secretary under title

18 XVIII of the Social Security Act (42 U.S.C.

19 1395 et seq.) to the center for such services if

20 the services had not been provided under the

21 project, exceeds

22 (B) the amount of payment made by the

23 Secretary under such title to the center for such

24 services.

25 (c) MEDICARE SECONDARY PAYER CHANGES.—
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1 (1) EXTENSION OF DATA MATCH.—

2 (A) Section 1862(b)(5)(C) of the Social

3 Security Act (42 U.S.C. 1395y(b)(5)(C)) is

4 amended by striking clause (iii).

5 (B) Section 6103(l)(12) of the Internal

6 Revenue Code of 1986 is amended by striking

7 subparagraph (F).

8 (2) REPEAL OF SUNSET ON APPLICATION TO

9 DISABLED EMPLOYEES OF EMPLOYERS WITH MORE

10 THAN 100 EMPLOYEES.—Section 1862(b)(1)(B)(iii)

11 of such Act (42 U.S.C. 1395y(b)(1)(B)(iii)), as

12 amended by section 13561(b) of the Omnibus Budg13 et Reconciliation Act of 1993, is amended—

14 (A) in the heading, by striking ‘‘SUNSET’’

15 and inserting ‘‘EFFECTIVE DATE’’, and

16 (B) by striking ‘‘, and before October 1,

17 1998’’.

18 (3) EXTENSION OF PERIOD FOR END STAGE

19 RENAL DISEASE BENEFICIARIES.—Section

20 1862(b)(1)(C) of such Act (42 U.S.C.

21 1395y(b)(1)(C)), as amended by section 13561(c) of

22 the Omnibus Budget Reconciliation Act of 1993, is

23 amended in the second sentence by striking ‘‘and on

24 or before October 1, 1998,’’.
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•S 2096 IS

1 (d) REDUCTION IN UPDATE FOR INPATIENT HOS2 PITAL SERVICES.—Section 1886(b)(3)(B)(i) of the Social

3 Security Act (42 U.S.C. 1395ww(b)(3)(B)(i)), as amended

4 by section 13501(a)(1) of the Omnibus Budget Reconcili5 ation Act of 1993, is amended—

6 (1) in subclause (XII)—

7 (A) by striking ‘‘fiscal year 1997’’ and in8 serting ‘‘for each of the fiscal years 1997

9 through 2000’’, and

10 (B) by striking ‘‘0.5 percentage point’’ and

11 inserting ‘‘2.0 percentage points’’; and

12 (2) in subclause (XIII), by striking ‘‘fiscal year

13 1998’’ and inserting ‘‘fiscal year 2003’’.

14 (e) REDUCTION IN ADJUSTMENT FOR INDIRECT

15 MEDICAL EDUCATION.—

16 (1) IN GENERAL.—Section 1886(d)(5)(B)(ii) of

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

18 1395ww(d)(5)(B)(ii)) is amended to read as follows:

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

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

21 to the nth power) ¥ 1), where ‘r’ is the ratio of the

22 hospital’s full-time equivalent interns and residents

23 to beds and ‘n’ equals .405. For discharges occur24 ring on or after—
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•S 2096 IS

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

2 1995, ‘c’ is equal to 1.89, and

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

4 0.74.’’.

5 (2) NO RESTANDARDIZATION OF PAYMENT

6 AMOUNTS REQUIRED.—Section 1886(d)(2)(C)(i) of

7 such Act (42 U.S.C. 1395ww(d)(2)(C)(i)) is amend8 ed by striking ‘‘of 1985’’ and inserting ‘‘of 1985,

9 but not taking into account the amendments made

10 by section 302(e)(1) of the Health Care Reform Act

11 of 1994’’.

12 (f) ELIMINATION OF BAD DEBT RECOGNITION FOR

13 HOSPITAL SERVICES.—

14 (1) IN GENERAL.—Effective October 1, 1995,

15 in making any payment to hospitals under title

16 XVIII of the Social Security Act (42 U.S.C. 1395 et

17 seq.), the Secretary shall discontinue payments

18 under title XVIII of such Act to providers of service

19 for reasonable costs relating to unrecovered costs as20 sociated with unpaid deductible and coinsurance

21 amounts incurred under such title.

22 (2) CONFORMING AMENDMENTS.—

23 (A) IN GENERAL.—(i) Subsection (c) of

24 section 4008 of the Omnibus Budget Reconcili25 ation Act of 1987 is repealed.
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•S 2096 IS

1 (ii) Section 1833 of the Social Security Act

2 (42 U.S.C. 1395l) is amended—

3 (I) in subsection (l)(5), by striking

4 subparagraph (C), and

5 (II) in subsection (r), by striking

6 paragraph (4).

7 (B) EFFECTIVE DATE.—The amendments

8 made by subparagraph (A) shall take effect on

9 October 1, 1995.

10 (g) EXTENSION OF FREEZE ON UPDATES TO ROU11 TINE SERVICE COSTS OF SKILLED NURSING FACILI12 TIES.—

13 (1) PAYMENTS BASED ON COST LIMITS.—Sec14 tion 1888(a) of the Social Security Act (42 U.S.C.

15 1395yy(a)) is amended by striking ‘‘112 percent’’

16 each place it appears and inserting ‘‘100 percent

17 (adjusted by such amount as the Secretary deter18 mines to be necessary to preserve the savings result19 ing from the enactment of section 13503(a)(1) of

20 the Omnibus Budget Reconciliation Act of 1993)’’.

21 (2) PAYMENTS DETERMINED ON PROSPECTIVE

22 BASIS.—Section 1888(d)(2)(B) of such Act (42

23 U.S.C. 1395yy(d)(2)(B)) is amended by striking

24 ‘‘105 percent’’ and inserting ‘‘100 percent (adjusted

25 by such amount as the Secretary determines to be
89

•S 2096 IS

1 necessary to preserve the savings resulting from the

2 enactment of section 13503(b) of the Omnibus

3 Budget Reconciliation Act of 1993)’’.

4 (3) EFFECTIVE DATE.—The amendments made

5 by paragraphs (1) and (2) shall apply to cost report6 ing periods beginning on or after October 1, 1995.

7 (h) ESTABLISHMENT OF CUMULATIVE EXPENDI8 TURE GOALS FOR PHYSICIAN SERVICES.—

9 (1) USE OF CUMULATIVE PERFORMANCE

10 STANDARD.—Section 1848(f)(2) of the Social Secu11 rity Act (42 U.S.C. 1395w–4(f)(2)) is amended—

12 (A) in subparagraph (A)—

13 (i) in the heading, by striking ‘‘IN

14 GENERAL’’ and inserting ‘‘FISCAL YEARS

15 1991 THROUGH 1994.—’’,

16 (ii) in the matter preceding clause (i),

17 by striking ‘‘a fiscal year (beginning with

18 fiscal year 1991)’’ and inserting ‘‘fiscal

19 years 1991, 1992, 1993, and 1994’’, and

20 (iii) in the matter following clause

21 (iv), by striking ‘‘subparagraph (B)’’ and

22 inserting ‘‘subparagraph (C)’’;

23 (B) in subparagraph (B), by striking ‘‘sub24 paragraph (A)’’ and inserting ‘‘subparagraphs

25 (A) and (B)’’;
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•S 2096 IS

1 (C) by redesignating subparagraphs (B)

2 and (C) as subparagraphs (C) and (D); and

3 (D) by inserting after subparagraph (A)

4 the following new subparagraph:

5 ‘‘(B) FISCAL YEARS BEGINNING WITH FIS6 CAL YEAR 1995.—Unless Congress otherwise

7 provides, the performance standard rate of in8 crease, for all physicians’ services and for each

9 category of physicians’ services, for a fiscal year

10 beginning with fiscal year 1995 shall be equal

11 to the performance standard rate of increase

12 determined under this paragraph for the pre13 vious fiscal year, increased by the product of—

14 ‘‘(i) 1 plus the Secretary’s estimate of

15 the weighted average percentage increase

16 (divided by 100) in the fees for all physi17 cians’ services or for the category of physi18 cians’ services, respectively, under this part

19 for portions of calendar years included in

20 the fiscal year involved,

21 ‘‘(ii) 1 plus the Secretary’s estimate of

22 the percentage increase or decrease (di23 vided by 100) in the average number of in24 dividuals enrolled under this part (other
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•S 2096 IS

1 than HMO enrollees) from the previous fis2 cal year to the fiscal year involved,

3 ‘‘(iii) 1 plus the Secretary’s estimate

4 of the average annual percentage growth

5 (divided by 100) in volume and intensity of

6 all physicians’ services or of the category

7 of physicians’ services, respectively, under

8 this part for the 5-fiscal-year period ending

9 with the preceding fiscal year (based upon

10 information contained in the most recent

11 annual report made pursuant to section

12 1841(b)(2)), and

13 ‘‘(iv) 1 plus the Secretary’s estimate

14 of the percentage increase or decrease (di15 vided by 100) in expenditures for all physi16 cians’ services or of the category of physi17 cians’ services, respectively, in the fiscal

18 year (compared with the previous fiscal

19 year) which are estimated to result from

20 changes in law or regulations affecting the

21 percentage increase described in clause (i)

22 and which is not taken into account in the

23 percentage increase described in clause (i),
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•S 2096 IS

1 minus 1, multiplied by 100, and reduced by the

2 performance standard factor (specified in sub3 paragraph (C)).’’.

4 (2) TREATMENT OF DEFAULT UPDATE.—

5 (A) IN GENERAL.—Section 1848(d)(3)(B)

6 of such Act (42 U.S.C. 1395w–4(d)(3)(B)) is

7 amended—

8 (i) in clause (i)—

9 (I) in the heading, by striking

10 ‘‘IN GENERAL’’ and inserting ‘‘1992

11 THROUGH 1996’’, and

12 (II) by striking ‘‘for a year’’ and

13 inserting ‘‘for 1992, 1993, 1994,

14 1995, and 1996’’; and

15 (ii) by adding after clause (ii) the fol16 lowing new clause:

17 ‘‘(iii) YEARS BEGINNING WITH 1997.—

18 ‘‘(I) IN GENERAL.—The update

19 for a category of physicians’ services

20 for a year beginning with 1997 pro21 vided under subparagraph (A) shall be

22 increased or decreased by the same

23 percentage by which the cumulative

24 percentage increase in actual expendi25 tures for such category of physicians’
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•S 2096 IS

1 services for such year was less or

2 greater, respectively, than the per3 formance standard rate of increase

4 (established under subsection (f)) for

5 such category of services for such

6 year.

7 ‘‘(II) CUMULATIVE PERCENTAGE

8 INCREASE DEFINED.—In subclause

9 (I), the ‘cumulative percentage in10 crease in actual expenditures’ for a

11 year shall be equal to the product of

12 the adjusted increases for each year

13 beginning with 1995 up to and includ14 ing the year involved, minus 1 and

15 multiplied by 100. In the previous

16 sentence, the ‘adjusted increase’ for a

17 year is equal to 1 plus the percentage

18 increase in actual expenditures for the

19 year.’’.

20 (B) CONFORMING AMENDMENT.—Section

21 1848(d)(3)(A)(i) of such Act (42 U.S.C.

22 1395w–4(d)(3)(A)(i)) is amended by striking

23 ‘‘subparagraph (B)’’ and inserting ‘‘subpara24 graphs (B) and (C)’’.
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1 (i) LIMITATIONS ON PAYMENT FOR PHYSICIANS’

2 SERVICES FURNISHED BY HIGH-COST HOSPITAL MEDI3 CAL STAFFS.—

4 (1) IN GENERAL.—

5 (A) LIMITATIONS DESCRIBED.—Part B of

6 title XVIII of the Social Security Act (42

7 U.S.C. 1395j et seq.), as amended by section

8 302(a)(1), is amended by inserting after section

9 1848 the following new section:

10 ‘‘LIMITATIONS ON PAYMENT FOR PHYSICIANS’ SERVICES

11 FURNISHED BY HIGH-COST HOSPITAL MEDICAL STAFFS

12 ‘‘SEC. 1849. (a) SERVICES SUBJECT TO REDUC13 TION.—

14 ‘‘(1) DETERMINATION OF HOSPITAL-SPECIFIC

15 PER ADMISSION RELATIVE VALUE.—Not later than

16 October 1 of each year (beginning with 1997), the

17 Secretary shall determine for each hospital—

18 ‘‘(A) the hospital-specific per admission

19 relative value under subsection (b)(2) for the

20 following year; and

21 ‘‘(B) whether such hospital-specific relative

22 value is projected to exceed the allowable aver23 age per admission relative value applicable to

24 the hospital for the following year under sub25 section (b)(1).
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1 ‘‘(2) REDUCTION FOR SERVICES AT HOSPITALS

2 EXCEEDING ALLOWABLE AVERAGE PER ADMISSION

3 RELATIVE VALUE.—If the Secretary determines

4 (under paragraph (1)) that a medical staff’s hos5 pital-specific per admission relative value for a year

6 (beginning with 1998) is projected to exceed the al7 lowable average per admission relative value applica8 ble to the medical staff for the year, the Secretary

9 shall reduce (in accordance with subsection (c)) the

10 amount of payment otherwise determined under this

11 part for each physician’s service furnished during

12 the year to an inpatient of the hospital by an indi13 vidual who is a member of the hospital’s medical

14 staff.

15 ‘‘(3) TIMING OF DETERMINATION; NOTICE TO

16 HOSPITALS AND CARRIERS.—Not later than October

17 1 of each year (beginning with 1997), the Secretary

18 shall notify the medical executive committee of each

19 hospital (as set forth in the Standards of the Joint

20 Commission on the Accreditation of Health Organi21 zations) of the determinations made with respect to

22 the medical staff under paragraph (1).

23 ‘‘(b) DETERMINATION OF ALLOWABLE AVERAGE

24 PER ADMISSION RELATIVE VALUE AND HOSPITAL-SPE25 CIFIC PER ADMISSION RELATIVE VALUES.—
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1 ‘‘(1) ALLOWABLE AVERAGE PER ADMISSION

2 RELATIVE VALUE.—

3 ‘‘(A) URBAN HOSPITALS.—In the case of a

4 hospital located in an urban area, the allowable

5 average per admission relative value established

6 under this subsection for a year is equal to 125

7 percent (or 120 percent for years after 1999) of

8 the median of 1996 hospital-specific per admis9 sion relative values determined under paragraph

10 (2) for all hospital medical staffs.

11 ‘‘(B) RURAL HOSPITALS.—In the case of a

12 hospital located in a rural area, the allowable

13 average per admission relative value established

14 under this subsection for 1998 and each suc15 ceeding year, is equal to 140 percent of the me16 dian of the 1996 hospital-specific per admission

17 relative values determined under paragraph (2)

18 for all hospital medical staffs.

19 ‘‘(2) HOSPITAL-SPECIFIC PER ADMISSION REL20 ATIVE VALUE.—

21 ‘‘(A) IN GENERAL.—The hospital-specific

22 per admission relative value projected for a hos23 pital (other than a teaching hospital) for a cal24 endar year, shall be equal to the average per

25 admission relative value (as determined under
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•S 2096 IS

1 section 1848(c)(2)) for physicians’ services fur2 nished to inpatients of the hospital by the hos3 pital’s medical staff (excluding interns and resi4 dents) during the second year preceding such

5 calendar year, adjusted for variations in case6 mix and disproportionate share status among

7 hospitals (as determined by the Secretary under

8 subparagraph (C)).

9 ‘‘(B) SPECIAL RULE FOR TEACHING HOS10 PITALS.—The hospital-specific relative value

11 projected for a teaching hospital in a calendar

12 year shall be equal to the sum of—

13 ‘‘(i) the average per admission relative

14 value (as determined under section

15 1848(c)(2)) for physicians’ services fur16 nished to inpatients of the hospital by the

17 hospital’s medical staff (excluding interns

18 and residents) during the second year pre19 ceding such calendar year; and

20 ‘‘(ii) the equivalent per admission rel21 ative value (as determined under section

22 1848(c)(2)) for physicians’ services fur23 nished to inpatients of the hospital by in24 terns and residents of the hospital during

25 the second year preceding such calendar
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•S 2096 IS

1 year, adjusted for variations in case-mix,

2 disproportionate share status, and teaching

3 status among hospitals (as determined by

4 the Secretary under subparagraph (C)).

5 The Secretary shall determine such equiva6 lent relative value unit per admission for

7 interns and residents based on the best

8 available data for teaching hospitals and

9 may make such adjustment in the aggre10 gate.

11 ‘‘(C) ADJUSTMENT FOR TEACHING AND

12 DISPROPORTIONATE SHARE HOSPITALS.—The

13 Secretary shall adjust the allowable per admis14 sion relative values otherwise determined under

15 this paragraph to take into account the needs

16 of teaching hospitals and hospitals receiving ad17 ditional payments under subparagraphs (F) and

18 (G) of section 1886(d)(5). The adjustment for

19 teaching status or disproportionate share shall

20 not be less than zero.

21 ‘‘(c) AMOUNT OF REDUCTION.—The amount of pay22 ment otherwise made under this part for a physician’s

23 service that is subject to a reduction under subsection (a)

24 during a year shall be reduced 15 percent, in the case of

25 a service furnished by a member of the medical staff of
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1 the hospital for which the Secretary determines under sub2 section (a)(1) that the hospital medical staff’s projected

3 relative value per admission exceeds the allowable average

4 per admission relative value.

5 ‘‘(d) RECONCILIATION OF REDUCTIONS BASED ON

6 HOSPITAL-SPECIFIC RELATIVE VALUE PER ADMISSION

7 WITH ACTUAL RELATIVE VALUES.—

8 ‘‘(1) DETERMINATION OF ACTUAL AVERAGE

9 PER ADMISSION RELATIVE VALUE.—Not later than

10 October 1 of each year (beginning with 1999), the

11 Secretary shall determine the actual average per ad12 mission relative value (as determined pursuant to

13 section 1848(c)(2)) for the physicians’ services fur14 nished by members of a hospital’s medical staff to

15 inpatients of the hospital during the previous year,

16 on the basis of claims for payment for such services

17 that are submitted to the Secretary not later than

18 90 days after the last day of such previous year. The

19 actual average per admission shall be adjusted by

20 the appropriate case-mix, disproportionate share fac21 tor, and teaching factor for the hospital medical

22 staff (as determined by the Secretary under sub23 section (b)(2)(C)). Notwithstanding any other provi24 sion of this title, no payment may be made under

25 this part for any physician’s service furnished by a
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•S 2096 IS

1 member of a hospital’s medical staff to an inpatient

2 of the hospital during a year unless the hospital sub3 mits a claim to the Secretary for payment for such

4 service not later than 90 days after the last day of

5 the year.

6 ‘‘(2) RECONCILIATION WITH REDUCTIONS

7 TAKEN.—In the case of a hospital for which the pay8 ment amounts for physicians’ services furnished by

9 members of the hospital’s medical staff to inpatients

10 of the hospital were reduced under this section for

11 a year—

12 ‘‘(A) if the actual average per admission

13 relative value for such hospital’s medical staff

14 during the year (as determined by the Secretary

15 under paragraph (1)) did not exceed the allow16 able average per admission relative value appli17 cable to the hospital’s medical staff under sub18 section (b)(1) for the year, the Secretary shall

19 reimburse the fiduciary agent for the medical

20 staff by the amount by which payments for

21 such services were reduced for the year under

22 subsection (c), including interest at an appro23 priate rate determined by the Secretary;

24 ‘‘(B) if the actual average per admission

25 relative value for such hospital’s medical staff
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•S 2096 IS

1 during the year is less than 15 percentage

2 points above the allowable average per admis3 sion relative value applicable to the hospital’s

4 medical staff under subsection (b)(1) for the

5 year, the Secretary shall reimburse the fidu6 ciary agent for the medical staff, as a percent

7 of the total allowed charges for physicians’ serv8 ices performed in such hospital (prior to the

9 withhold), the difference between 15 percentage

10 points and the actual number of percentage

11 points that the staff exceeds the limit allowable

12 average per admission relative value, including

13 interest at an appropriate rate determined by

14 the Secretary; and

15 ‘‘(C) if the actual average per admission

16 relative value for such hospital’s medical staff

17 during the year exceeded the allowable average

18 per admission relative value applicable to the

19 hospital’s medical staff by 15 percentage points

20 or more, none of the withhold is paid to the fi21 duciary agent for the medical staff.

22 ‘‘(3) MEDICAL EXECUTIVE COMMITTEE OF A

23 HOSPITAL.—Each medical executive committee of a

24 hospital whose medical staff is projected to exceed

25 the allowable relative value per admission for a year,
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1 shall have one year from the date of notification that

2 such medical staff is projected to exceed the allow3 able relative value per admission to designate a fidu4 ciary agent for the medical staff to receive and dis5 burse any appropriate withhold amount made by the

6 carrier.

7 ‘‘(4) ALTERNATIVE REIMBURSEMENT TO MEM8 BERS OF STAFF.—At the request of a fiduciary

9 agent for the medical staff, if the fiduciary agent for

10 the medical staff is owed the reimbursement de11 scribed in paragraph (2)(B) for excess reductions in

12 payments during a year, the Secretary shall make

13 such reimbursement to the members of the hospital’s

14 medical staff, on a pro-rata basis according to the

15 proportion of physicians’ services furnished to inpa16 tients of the hospital during the year that were fur17 nished by each member of the medical staff.

18 ‘‘(e) DEFINITIONS.—In this section, the following

19 definitions apply:

20 ‘‘(1) MEDICAL STAFF.—An individual furnish21 ing a physician’s service is considered to be on the

22 medical staff of a hospital—

23 ‘‘(A) if (in accordance with requirements

24 for hospitals established by the Joint Commis-
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1 sion on Accreditation of Health Organiza2 tions)—

3 ‘‘(i) the individual is subject to by4 laws, rules, and regulations established by

5 the hospital to provide a framework for the

6 self-governance of medical staff activities;

7 ‘‘(ii) subject to such bylaws, rules, and

8 regulations, the individual has clinical

9 privileges granted by the hospital’s govern10 ing body; and

11 ‘‘(iii) under such clinical privileges,

12 the individual may provide physicians’

13 services independently within the scope of

14 the individual’s clinical privileges, or

15 ‘‘(B) if such physician provides at least one

16 service to a medicare beneficiary in such hos17 pital.

18 ‘‘(2) RURAL AREA; URBAN AREA.—The terms

19 ‘rural area’ and ‘urban area’ have the meaning given

20 such terms under section 1886(d)(2)(D).

21 ‘‘(3) TEACHING HOSPITAL.—The term ‘teaching

22 hospital’ means a hospital which has a teaching pro23 gram approved as specified in section 1861(b)(6).’’.

24 (B) CONFORMING AMENDMENTS.—(i) Sec25 tion 1833(a)(1)(N) of such Act (42 U.S.C.
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1 1395l(a)(1)(N)) is amended by inserting ‘‘(sub2 ject to reduction under section 1849)’’ after

3 ‘‘1848(a)(1)’’.

4 (ii) Section 1848(a)(1)(B) of such Act (42

5 U.S.C. 1395w–4(a)(1)(B)) is amended by strik6 ing ‘‘this subsection,’’ and inserting ‘‘this sub7 section and section 1849,’’.

8 (2) REQUIRING PHYSICIANS TO IDENTIFY HOS9 PITAL AT WHICH SERVICE FURNISHED.—Section

10 1848(g)(4)(A)(i) of such Act (42 U.S.C. 1395w–

11 4(g)(4)(A)(i)) is amended by striking ‘‘beneficiary,’’

12 and inserting ‘‘beneficiary (and, in the case of a

13 service furnished to an inpatient of a hospital, report

14 the hospital identification number on such claim

15 form),’’.

16 (3) EFFECTIVE DATE.—The amendments made

17 by this subsection shall apply to services furnished

18 on or after January 1, 1998.

19 (j) IMPOSITION OF COINSURANCE ON LABORATORY

20 SERVICES.—

21 (1) IN GENERAL.—Paragraphs (1)(D) and

22 (2)(D) of section 1833(a) of the Social Security Act

23 (42 U.S.C. 1395l(a)) are each amended—

24 (A) by striking ‘‘(or 100 percent’’ and all

25 that follows through ‘‘the first opinion))’’, and
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1 (B) by striking ‘‘100 percent of such nego2 tiated rate’’ and inserting ‘‘80 percent of such

3 negotiated rate’’.

4 (2) EFFECTIVE DATE.—The amendments made

5 by paragraph (1) shall apply to tests furnished on

6 or after January 1, 1995.

7 (k) REDUCTION IN ROUTINE COST LIMITS FOR

8 HOME HEALTH SERVICES.—

9 (1) REDUCTION IN UPDATE TO MAINTAIN

10 FREEZE IN 1996.—Section 1861(v)(1)(L)(i) of the

11 Social Security Act (42 U.S.C. 1395x(v)(1)(L)(i)) is

12 amended—

13 (A) in subclause (II), by striking ‘‘or’’ at

14 the end,

15 (B) in subclause (III), by striking ‘‘112

16 percent,’’ and inserting ‘‘and before July 1,

17 1996, 112 percent, or’’, and

18 (C) by inserting after subclause (III) the

19 following new subclause:

20 ‘‘(IV) July 1, 1996, 100 percent (adjusted by

21 such amount as the Secretary determines to be nec22 essary to preserve the savings resulting from the en23 actment of section 13564(a)(1) of the Omnibus

24 Budget Reconciliation Act of 1993),’’.
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1 (2) BASING LIMITS IN SUBSEQUENT YEARS ON

2 MEDIAN OF COSTS.—

3 (A) IN GENERAL.—Section

4 1861(v)(1)(L)(i) of such Act (U.S.C.

5 1395x(v)(1)(L)(i)), as amended by paragraph

6 (1), is amended in the matter following

7 subclause (IV) by striking ‘‘the mean’’ and in8 serting ‘‘the median’’.

9 (B) EFFECTIVE DATE.—The amendment

10 made by subparagraph (A) shall apply to cost

11 reporting periods beginning on or after July 1,

12 1997.

13 (l) IMPOSITION OF COPAYMENT FOR CERTAIN HOME

14 HEALTH VISITS.—

15 (1) IN GENERAL.—

16 (A) PART A.—Section 1813(a) of the So17 cial Security Act (42 U.S.C. 1395e(a)) is

18 amended by adding at the end the following

19 new paragraph:

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

21 furnished to an individual under this part shall be reduced

22 by a copayment amount equal to 10 percent of the average

23 of all per visit costs for home health services furnished

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

25 (as determined by the Secretary on a prospective basis for
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•S 2096 IS

1 services furnished during a calendar year), unless such

2 services were furnished to the individual during the 30-

3 day period that begins on the date the individual is dis4 charged as an inpatient from a hospital.’’.

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

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

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

8 ‘‘to home health services,’’ and by striking

9 the comma after ‘‘opinion)’’,

10 (ii) in subparagraph (D), by striking

11 ‘‘and’’ at the end,

12 (iii) in subparagraph (E), by striking

13 the semicolon at the end and inserting ‘‘;

14 and’’, and

15 (iv) by adding at the end the following

16 new subparagraph:

17 ‘‘(F) with respect to home health serv18 ices—

19 ‘‘(i) the lesser of —

20 ‘‘(I) the reasonable cost of such

21 services, as determined under section

22 1861(v), or

23 ‘‘(II) the customary charges with

24 respect to such services,
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1 less the amount a provider may charge as

2 described in clause (ii) of section

3 1866(a)(2)(A),

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

5 a public provider of services, or by another

6 provider which demonstrates to the satis7 faction of the Secretary that a significant

8 portion of its patients are low income (and

9 requests that payment be made under this

10 clause), free of charge or at nominal

11 charges to the public, the amount deter12 mined in accordance with section

13 1814(b)(2), or

14 ‘‘(iii) if (and for so long as) the condi15 tions described in section 1814(b)(3) are

16 met, the amounts determined under the re17 imbursement system described in such sec18 tion,

19 less a copayment amount equal to 10 percent of

20 the average of all per visit costs for home

21 health services furnished under this title deter22 mined under section 1861(v)(1)(L) (as deter23 mined by the Secretary on a prospective basis

24 for services furnished during a calendar year),

25 unless such services were furnished to the indi-
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•S 2096 IS

1 vidual during the 30-day period that begins on

2 the date the individual is discharged as an inpa3 tient from a hospital;’’.

4 (C) PROVIDER CHARGES.—Section

5 1866(a)(2)(A)(i) of such Act (42 U.S.C.

6 1395cc(a)(2)(A)(i)) is amended—

7 (i) by striking ‘‘deduction or coinsur8 ance’’ and inserting ‘‘deduction, coinsur9 ance, or copayment’’, and

10 (ii) by striking ‘‘or (a)(4)’’ and insert11 ing ‘‘(a)(4), or (a)(5)’’.

12 (2) EFFECTIVE DATE.—The amendments made

13 by paragraph (1) shall apply to home health services

14 furnished on or after July 1, 1995.

15 (m) REDUCTION IN HOSPITAL OUTPATIENT SERV16 ICES THROUGH ESTABLISHMENT OF PROSPECTIVE PAY17 MENT SYSTEM.—

18 (1) IN GENERAL.—Section 1833(a)(2)(B) of the

19 Social Security Act (42 U.S.C. 1395l(a)(2)(B)) is

20 amended by striking ‘‘section 1886)—’’ and all that

21 follows and inserting the following: ‘‘section 1886),

22 an amount equal to a prospectively determined pay23 ment rate established by the Secretary that provides

24 for payments for such items and services to be based

25 upon a national rate adjusted to take into account
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1 the relative costs of furnishing such items and serv2 ices in various geographic areas, except that for

3 items and services furnished during cost reporting

4 periods (or portions thereof) in years beginning with

5 1995, such amount shall be equal to 90 percent of

6 the amount that would otherwise have been deter7 mined;’’.

8 (2) ESTABLISHMENT OF PROSPECTIVE PAY9 MENT SYSTEM.—Not later than July 1, 1995, the

10 Secretary shall establish the prospective payment

11 system for hospital outpatient services necessary to

12 carry out section 1833(a)(2)(B) of the Social Secu13 rity Act (as amended by paragraph (1)).

14 (3) EFFECTIVE DATE.—The amendment made

15 by paragraph (1) shall apply to items and services

16 furnished on or after July 1, 1995.

17 SEC. 303. INCOME-TESTED MEDICARE PREMIUMS.

18 (a) IN GENERAL.—Subchapter A of chapter 1 of the

19 Internal Revenue Code of 1986 (relating to determination

20 of tax liability) is amended by adding at the end the fol21 lowing new part:

22 ‘‘PART VIII—CERTAIN MEDICARE SUBSIDIES

23 RECEIVED BY HIGH-INCOME INDIVIDUALS

‘‘Sec. 59B. Recapture of certain medicare subsidies.
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1 ‘‘SEC. 59B. RECAPTURE OF CERTAIN MEDICARE SUBSIDIES.

2 ‘‘(a) IMPOSITION OF RECAPTURE AMOUNT.—In the

3 case of an individual, if the modified adjusted gross in4 come of the taxpayer for the taxable year exceeds the

5 threshold amount, such taxpayer shall pay (in addition to

6 any other amount imposed by this subtitle) a recapture

7 amount for such taxable year equal to the aggregate of

8 the Medicare recapture amounts (if any) for months dur9 ing such year that a premium is paid under section 1876

10 of the Social Security Act for the coverage of the individ11 ual under such title.

12 ‘‘(b) MEDICARE RECAPTURE AMOUNT FOR

13 MONTH.—For purposes of this section, the Medicare re14 capture amount for any month is the amount equal to the

15 excess of—

16 ‘‘(1) either—

17 ‘‘(A) the total monthly premium charged

18 by the medicare health plan in which the indi19 vidual was enrolled (as determined under sec20 tion 1876(d)(1) of the Social Securty Act), or

21 ‘‘(B) the fee-for-service per capita costs (as

22 defined in section 1876(e)(4)(B) of such Act)

23 for individuals enrolled in medicare fee-for-serv24 ice during the month in the medicare market

25 area in which the individual was residing, over

26 ‘‘(2) the sum of—
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•S 2096 IS

1 ‘‘(A) the monthly beneficiary premium

2 owed by the individual (as determined by sec3 tion 1876(f)(2) of such Act), and

4 ‘‘(B) 50 percent of the benchmark pre5 mium in the medicare market area in which the

6 individual was residing (as determined under

7 section 1876(e)(4)(A) of such Act).

8 ‘‘(c) PHASE IN OF RECAPTURE AMOUNT.—If the

9 modified adjusted gross income of the taxpayer for any

10 taxable year exceeds the threshold amount by less than

11 $25,000, the recapture amount imposed by this section for

12 such taxable year shall be an amount which bears the

13 same ratio to the recapture amount which would (but for

14 this subsection) be imposed by this section for such tax15 able year as such excess bears to $25,000.

16 ‘‘(d) OTHER DEFINITIONS AND SPECIAL RULES.—

17 For purposes of this section—

18 ‘‘(1) THRESHOLD AMOUNT.—The term ‘thresh19 old amount’ means—

20 ‘‘(A) except as otherwise provided in this

21 paragraph, $75,000,

22 ‘‘(B) $100,000 in the case of a joint re23 turn, and

24 ‘‘(C) zero in the case of a taxpayer who—
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•S 2096 IS

1 ‘‘(i) is married (as determined under

2 section 7703) but does not file a joint re3 turn for such year, and

4 ‘‘(ii) does not live apart from his

5 spouse at all times during the taxable year.

6 ‘‘(2) MODIFIED ADJUSTED GROSS INCOME.—

7 The term ‘modified adjusted gross income’ means

8 adjusted gross income—

9 ‘‘(A) determined without regard to sections

10 135, 911, 931, and 933, and

11 ‘‘(B) increased by the amount of interest

12 received or accrued by the taxpayer during the

13 taxable year which is exempt from tax.

14 ‘‘(3) JOINT RETURNS.—In the case of a joint

15 return—

16 ‘‘(A) the recapture amount under sub17 section (a) shall be the sum of the recapture

18 amounts determined separately for each spouse,

19 and

20 ‘‘(B) subsections (a) and (c) shall be ap21 plied by taking into account the combined modi22 fied adjusted gross income of the spouses.

23 ‘‘(4) COORDINATION WITH OTHER PROVI24 SIONS.—
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1 ‘‘(A) TREATED AS TAX FOR SUBTITLE F.—

2 For purposes of subtitle F, the recapture

3 amount imposed by this section shall be treated

4 as if it were a tax imposed by section 1.

5 ‘‘(B) NOT TREATED AS TAX FOR CERTAIN

6 PURPOSES.—The recapture amount imposed by

7 this section shall not be treated as a tax im8 posed by this chapter for purposes of determin9 ing—

10 ‘‘(i) the amount of any credit allow11 able under this chapter, or

12 ‘‘(ii) the amount of the minimum tax

13 under section 55.

14 ‘‘(C) TREATED AS PAYMENT FOR MEDICAL

15 INSURANCE.—The recapture amount imposed

16 by this section shall be treated as an amount

17 paid for insurance covering medical care, within

18 the meaning of section 213(d).’’.

19 (b) TRANSFERS TO MEDICARE TRUST FUNDS.—

20 (1) IN GENERAL.—There are hereby appro21 priated to the Hospital Insurance and the Supple22 mental Medical Insurance Trust Funds amounts

23 equivalent to the aggregate increase in liabilities

24 under chapter 1 of the Internal Revenue Code of

25 1986 which is attributable to the application of sec-
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•S 2096 IS

1 tion 59B(a)(1) of such Code, as added by this sec2 tion.

3 (2) TRANSFERS.—The amounts appropriated

4 by paragraph (1) shall be transferred from time to

5 time (but not less frequently than quarterly) from

6 the general fund of the Treasury on the basis of es7 timates made by the Secretary of the Treasury of

8 the amounts referred to in paragraph (1), and shall

9 be allocated between the Hospital Insurance and the

10 Supplemental Medical Insurance Trust Funds ac11 cording to a formula established by the Secretary of

12 Health and Human Services. Any quarterly payment

13 shall be made on the first day of such quarter and

14 shall take into account the recapture amounts re15 ferred to in such section 59B(a)(1) for such quarter.

16 Proper adjustments shall be made in the amounts

17 subsequently transferred to the extent prior esti18 mates were in excess of or less than the amounts re19 quired to be transferred.

20 (c) REPORTING REQUIREMENTS.—

21 (1) Paragraph (1) of section 6050F(a) of the

22 Internal Revenue Code of 1986 (relating to returns

23 relating to social security benefits) is amended by

24 striking ‘‘and’’ at the end of subparagraph (B) and
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1 by inserting after subparagraph (C) the following

2 new subparagraph:

3 ‘‘(D) the number of months during the cal4 endar year for which a premium was paid under

5 section 1876 of the Social Security Act for the

6 coverage of such individual under such part,

7 and’’.

8 (2) Paragraph (2) of section 6050F(b) of such

9 Code (relating to statements to be furnished with re10 spect to whom information is required) is amended

11 to read as follows:

12 ‘‘(2) the information required to be shown on

13 such return with respect to such individual.’’.

14 (3) Subparagraph (A) of section 6050F(c)(1) of

15 such Code (defining appropriate Federal official) is

16 amended by inserting before the comma ‘‘and in the

17 case of the information specified in subsection

18 (a)(1)(D)’’.

19 (4) The heading for section 6050F of such

20 Code is amended by inserting ‘‘AND MEDICARE

21 COVERAGE’’ before the period.

22 (5) The item relating to section 6050F in the

23 table of sections for subpart B of part III of sub24 chapter A of chapter 61 is amended by inserting

25 ‘‘and Medicare coverage’’ before the period.
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1 (d) WAIVER OF CERTAIN ESTIMATED TAX PEN2 ALTIES.—No addition to tax shall be imposed under sec3 tion 6654 of the Internal Revenue Code of 1986 (relating

4 to failure to pay estimated income tax) for any period be5 fore April 16, 1997, with respect to any underpayment

6 to the extent that such underpayment resulted from sec7 tion 59B(a) of the Internal Revenue Code of 1986, as

8 added by this section.

9 (e) CLERICAL AMENDMENT.—The table of parts for

10 subchapter A of chapter 1 is amended by adding at the

11 end thereof the following new item:

‘‘Part VIII. Certain medicare subsidies received by high-income

individuals.’’.

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

13 this section shall apply to periods after December 31,

14 1995, in taxable years ending after such date.

15 SEC. 304. MEDICARE ADMINISTRATIVE SIMPLIFICATION.

16 (a) CONSOLIDATION OF PARTS A AND B.—By not

17 later than October 1, 1995, the Secretary shall submit to

18 the Congress a proposal to consolidate entitlement for part

19 A of the title XVIII of the Social Security Act (42 U.S.C.

20 1395c et seq.) and enrollment in part B of such title (42

21 U.S.C. 1395j et seq.) into eligibility or enrollment into the

22 entire medicare program under such title. In preparing

23 such a proposal, the Secretary shall consider phasing in

24 such a consolidation, and shall ensure that no beneficiary
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•S 2096 IS

1 shall pay higher premiums for coverage under such pro2 gram than under such program as of the date of the enact3 ment of this Act.

4 (b) CONSOLIDATION OF FEE-FOR-SERVICE ADMINIS5 TRATION.—

6 (1) IN GENERAL.—The Secretary shall take

7 such steps as may be necessary to consolidate the

8 administration (including processing systems) of

9 parts A and B of the medicare program (under title

10 XVIII of the Social Security Act), including medi11 care supplemental policies, over a 5-year period.

12 (2) COMBINATION OF INTERMEDIARY AND CAR13 RIER FUNCTIONS.—In taking such steps, the Sec14 retary may contract with a single entity that com15 bines the fiscal intermediary and carrier functions in

16 each area except where the Secretary finds that spe17 cial regional or national contracts are appropriate.

18 No medicare market area (established under section

19 1876(a) of the Social Security Act) may be subject

20 to more than 1 entity.

21 (3) STREAMLINED PROCESSING SYSTEMS.—In

22 carrying out this subsection, the Secretary may en23 sure—
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•S 2096 IS

1 (A) a streamlined, standardized, and

2 paperless process for handling all fee-for-service

3 claims, and

4 (B) that payments under title XVIII of the

5 Social Security Act (42 U.S.C. 1395 et seq.)

6 are made first by the medicare program and

7 medicare supplemental policies before providers

8 can bill beneficiaries for services using stand9 ardized forms.

10 (4) SUPERSEDING CONFLICTING REQUIRE11 MENTS.—The provisions of sections 1816 and 1842

12 of the Social Security Act (42 U.S.C. 1395h and

13 1395u) (including provider nominating provisions in

14 such section 1816) are superseded to the extent re15 quired to carry out this subsection.

16 Subtitle B—Health Discount and

17 Medicaid Reform

18 PART I—HEALTH DISCOUNT

19 SEC. 311. STATE HEALTH DISCOUNT PROGRAMS.

20 (a) IN GENERAL.—To be certified by the Secretary

21 as meeting the requirements of this Act, each State shall

22 include within the State health reform plan a State admin23 istered program, consistent with this subtitle and such

24 other requirements as determined necessary by the Sec25 retary and issued in regulations, under which eligible per-
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•S 2096 IS

1 sons shall receive premium assistance (hereafter in this

2 part referred to as ‘‘health discounts’’) for purchasing

3 health care coverage from AHPs.

4 (b) CATEGORIES OF ELIGIBILITY.—Persons who oth5 erwise meet the criteria for entitlement under this part

6 shall be divided into the following categories of eligibility:

7 (1) Eligible individuals, as defined in section

8 1(c)(3).

9 (2) Eligible employees, as defined in section

10 1(c)(2).

11 (c) SWITCHING CATEGORIES OF ELIGIBILITY.—Indi12 viduals and employees who are determined to be in 1 cat13 egory of eligibility under subsection (b) but whose cir14 cumstances change and cause such individuals and em15 ployees to fall within the other such category shall remain

16 in the category of eligibility in which such individuals and

17 employees were originally placed until the next open en18 rollment period under section 312(a)(2).

19 SEC. 312. HEALTH DISCOUNT PROGRAM DESIGN.

20 (a) ELIGIBLE INDIVIDUALS.—

21 (1) IN GENERAL.—A State health discount pro22 gram shall allow each eligible individual who other23 wise meets the requirements for entitlement under

24 this part to select from among competing AHPs in

25 the market area in which such individual resides
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1 based on the price and quality of the competing

2 AHPs and to use the discount to which such individ3 ual is entitled only to offset the premium charged by

4 the AHP for the benefits package selected by the in5 dividual.

6 (2) ANNUAL OPEN ENROLLMENT.—

7 (A) IN GENERAL.—A State health discount

8 program shall provide for an annual open en9 rollment period during which each eligible indi10 vidual shall choose enrollment in an AHP to

11 which the health discount to which such individ12 ual is entitled shall be paid.

13 (B) ENROLLMENT UPON ELIGIBILITY.—

14 Eligible individuals shall have an open enroll15 ment period upon becoming eligible for a health

16 discount.

17 (C) PERIOD OF ENROLLMENT.—After se18 lecting an AHP during an open enrollment pe19 riod, an eligible individual may not choose an20 other AHP to which a health discount may be

21 paid until the next annual open enrollment pe22 riod, except that—

23 (i) an eligible individual moving to a

24 new market area in the State shall be pro-
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•S 2096 IS

1 vided with a new open enrollment period,

2 and

3 (ii) an eligible individual in an AHP

4 that is terminated from the health discount

5 program shall be provided with a new open

6 enrollment period.

7 (3) COMPARATIVE INFORMATION ON ENROLL8 MENT OPTIONS.—During an open enrollment period,

9 a State health discount program shall provide to the

10 individual such information as may be necessary to

11 ensure such individual may compare the price and

12 quality of the AHPs available in the market area, in13 cluding—

14 (A) premiums by type of benefits package

15 of the competing AHPs,

16 (B) any restrictions by AHPs on enrollees’

17 selection or use of health care providers and

18 services,

19 (C) quality information, including enrollee

20 satisfaction and measures of health outcomes,

21 (D) appeal rights of enrollees, and

22 (E) any other necessary information, as

23 determined by the Secretary.

24 (4) AHP BENEFITS AND PREMIUMS.—AHPs,

25 other than AHPs offered by employers as self-in-
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1 sured plans under the Employee Retirement Income

2 Security Act of 1974 (29 U.S.C. 1001 et seq.), in

3 order to be certified pursuant to section 112 of this

4 Act, shall—

5 (A) agree to participate in the State health

6 discount program and make available to eligible

7 individuals—

8 ‘‘(i) the standard benefits package, as

9 determined by the Secretary pursuant to

10 section 113(a),

11 ‘‘(ii) the nominal cost-sharing benefits

12 package, as determined by the Secretary

13 pursuant to section 113(b), and

14 ‘‘(iii) the alternative benefits package,

15 as determined by the Secretary pursuant

16 to section 113(c), if required pursuant to

17 section 313, and

18 (B) submit, for each benefits package for

19 each enrollment period, a uniform monthly pre20 mium for all eligible individuals in the market

21 area, allowing adjustments in such premium

22 only for those factors provided in section

23 112(d).

24 (5) DISCOUNTS.—Each eligible individual who

25 otherwise meets the criteria for entitlement under
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•S 2096 IS

1 this part shall be entitled to a health discount, as

2 determined under subsection (c).

3 (6) INDIVIDUAL PREMIUMS.—To enroll in an

4 AHP, an eligible individual must pay a premium

5 equal to the excess of—

6 (A) the premium charged by the AHP for

7 the benefits package selected by the individual,

8 over

9 (B) the discount to which the individual is

10 entitled.

11 (7) PAYMENTS TO AHPS.—

12 (A) IN GENERAL.—A State health discount

13 program shall collect premiums from eligible in14 dividuals and forward to AHPs such premiums

15 and health discounts to which such individuals

16 are entitled.

17 (B) RISK ADJUSTMENT.—

18 (i) IN GENERAL.—A State health dis19 count program shall adjust the health dis20 counts paid to the AHPs to reflect the rel21 ative health risks of classes of eligible indi22 viduals choosing to enroll in such plans in

23 a market area. The Secretary may define

24 appropriate classes of eligible individuals,

25 based on age, disability status, and such
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•S 2096 IS

1 other factors as the Secretary determines

2 to be appropriate.

3 (ii) PENALTIES FOR DISCRIMINA4 TION.—A State health discount program

5 shall have the authority to impose financial

6 penalties on AHPs that knowingly violate

7 the prohibition against discrimination

8 against potential enrollees based on their

9 health status, claims experience, medical

10 history, or other factors that are generally

11 related with utilization of health care serv12 ices.

13 (b) ELIGIBLE EMPLOYEES.—

14 (1) IN GENERAL.—An eligible employee who

15 otherwise meets the criteria for entitlement under

16 this part and is enrolled in an AHP in a market

17 area in a State shall get a health discount which

18 may only be used to reduce the employee’s premium

19 for enrolling in such AHP.

20 (2) DISCOUNTS.—Each eligible employee who

21 otherwise meets the criteria for entitlement under

22 this part shall be entitled to a health discount, as

23 determined under subsection (c).

24 (3) PAYMENTS TO AHPS.—A State health dis25 count program shall forward to AHPs such health
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•S 2096 IS

1 discounts to which such eligible employees are enti2 tled.

3 (c) DETERMINING DISCOUNTS.—

4 (1) BENCHMARK.—

5 (A) IN GENERAL.—Each calendar year, a

6 State health discount program shall determine

7 benchmark monthly premiums for the calendar

8 year for each class of family enrollment within

9 each category of eligibility and within each mar10 ket area.

11 (B) AHP BENEFITS AND PREMIUMS.—For

12 purposes of determining discounts, AHP pre13 miums shall be—

14 (i) for poor eligible individuals, those

15 AHP premiums submitted pursuant to

16 subsection (a)(4)(ii),

17 (ii) for low income eligible individuals,

18 those AHP premiums submitted pursuant

19 to subsection (a)(4)(i), or, if required by

20 section 313, subsection (a)(4)(iii),

21 (iii) for poor eligible employees, those

22 AHP premiums charged for the nominal

23 cost-sharing benefits package in the small

24 group market pursuant to section 112(d),

25 and
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1 (iv) for low income eligible employees,

2 those AHP premiums charged for the

3 standard benefits package in the small

4 group market pursuant to section 112(d),

5 except that AHPs may be required to es6 tablish separate monthly premiums for the

7 alternative benefits package pursuant to

8 section 313.

9 (C) CALCULATION.—The benchmark

10 monthly premium shall equal the sum of the

11 lowest premium charged by an AHP for the ap12 plicable benefits package plus the applicable

13 percentage of the excess of—

14 (i) the average of all monthly pre15 miums charged by AHPs, over

16 (ii) the lowest premium charged by an

17 AHP.

18 For purposes of the preceding sentence, the ap19 plicable percentage shall be determined by fol20 lowing table:

Applicable

Year: percentage:

1996 ......................................................................................... 80

1997 ......................................................................................... 60

1998 ......................................................................................... 40

1999 and thereafter ................................................................. 20

21 (2) POOR ELIGIBLE INDIVIDUALS AND EMPLOY22 EES.—For poor eligible individuals and poor eligible
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1 employees, the amount of the discount shall be equal

2 to the benchmark for each category of eligibility.

3 (3) LOW INCOME ELIGIBLE INDIVIDUALS AND

4 EMPLOYEES.—For low income eligible individuals

5 and low income eligible employees, the amount of the

6 discount shall be equal to the benchmark for each

7 category of eligibility multiplied by—

8 (A) 100 percent, reduced by

9 (B) each percentage point by which the eli10 gible individual’s or eligible employee’s family

11 adjusted total income exceeds 100 percent of

12 the Federal poverty line.

13 (4) DEFINITIONS.—For purposes of this part:

14 (A) POOR ELIGIBLE INDIVIDUALS AND EM15 PLOYEES.—The terms ‘‘poor eligible individual’’

16 and ‘‘poor eligible employee’’ mean an eligible

17 individual or eligible employee with family ad18 justed total income not in excess of 100 percent

19 of the Federal poverty line.

20 (B) LOW INCOME ELIGIBLE INDIVIDUALS

21 AND EMPLOYEES.—The terms ‘‘low income eli22 gible individual’’ and ‘‘low income eligible em23 ployee’’ mean an eligible individual or eligible

24 employee with family adjusted total income ex-
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•S 2096 IS

1 ceeding 100 percent but not 200 percent of the

2 Federal poverty line.

3 (C) FAMILY ADJUSTED TOTAL INCOME.—

4 (i) IN GENERAL.—The term ‘‘family

5 adjusted total income’’ means, with respect

6 to an eligible individual or eligible em7 ployee, the sum of the modified total in8 come for the individual or employee and all

9 the other eligible family members.

10 (ii) MODIFIED FAMILY INCOME.—The

11 term ‘‘modified family income’’ means the

12 sum of—

13 (I) the adjusted gross income (as

14 defined in section 62(a) of the Inter15 nal Revenue Code of 1986) of the tax16 payer and family members for the tax17 able year determined without regard

18 to sections 911, 931, and 933 of such

19 Code, determined without the applica20 tion of paragraphs (6) and (7) of sec21 tion 62(a) of such Code and without

22 the application of section 162(l) of

23 such Code, plus

24 (II) the interest received or ac25 crued by the taxpayer and family
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1 members during such taxable year

2 which is exempt from income, plus

3 (III) the amount of social secu4 rity benefits (described in section

5 86(d) of such Code) which is not in6 cludable in gross income of the tax7 payer and family members under sec8 tion 86 of such Code.

9 (D) FEDERAL POVERTY LINE.—The term

10 ‘‘Federal poverty line’’ means the income offi11 cial poverty line as defined by the Office of

12 Management and Budget, and revised annually

13 in accordance with section 673(2) of the Omni14 bus Budget Reconciliation Act of 1981.

15 (d) APPLICATIONS FOR HEALTH DISCOUNTS.—

16 (1) IN GENERAL.—Any individual who seeks as17 sistance under this part shall submit a written appli18 cation to the State health discount program.

19 (2) BASIS FOR DETERMINATION.—Subject to

20 annual enforcement under subsection (e), health dis21 counts under this part shall be based on 4 times the

22 family adjusted total income during the 3 months

23 preceding the month in which the application is

24 filed.
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1 (3) FORM AND CONTENTS.—An application for

2 assistance under this part shall be in a form and

3 manner specified by the State health discount pro4 gram and shall require—

5 (A) the provision of information necessary

6 to make the determinations described in sub7 section (b), and

8 (B) with respect to eligible employees, the

9 provision of information with respect to the

10 AHP in which the employee is enrolled (or in

11 the process of enrolling).

12 (4) VERIFICATION.—The State health discount

13 program shall provide for verification, on a sample

14 or other basis, of the information supplied in appli15 cations under this part.

16 (5) PENALTIES FOR INACCURATE INFORMA17 TION.—

18 (A) UNDERSTATED INCOME.—A State

19 health discount program shall require individ20 uals who knowingly understate income reported

21 in an application to pay interest on the excess

22 health discounts paid on behalf of such individ23 ual, in addition to repayment of the health dis24 count.
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•S 2096 IS

1 (B) MISREPRESENTATION.—A State

2 health discount program shall require individ3 uals who knowingly misrepresent material infor4 mation in an application for health discounts

5 under this part to pay $1000 or, if greater, 3

6 times the excess health discounts paid based on

7 such material misrepresentations.

8 (e) ANNUAL ENFORCEMENT OF HEALTH DISCOUNT

9 ENTITLEMENT.—

10 (1) ANNUAL INCOME STATEMENT.—An individ11 ual receiving health discounts under this part in any

12 year shall file with the State health discount pro13 gram, by not later than April 15 of the following

14 year, a statement verifying total adjusted family in15 come for the taxable year ending during the previous

16 year. Such a statement shall provide information

17 necessary to determine the family adjusted total in18 come during the year and the number of family

19 members as of the last day of the year.

20 (2) USE OF INCOME TAX RETURNS.—The State

21 health discount program shall provide a process

22 under which the filing of a Federal income tax re23 turn shall constitute the filing of an income state24 ment under paragraph (1).
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•S 2096 IS

1 (3) RECONCILIATION BASED ON ACTUAL AN2 NUAL INCOME.—

3 (A) IN GENERAL.—Based on the informa4 tion reported in the statement filed under para5 graph (1), the State health discount program

6 shall compute the annual health discount that

7 should have been paid on behalf of the eligible

8 individual or employee.

9 (B) RECONCILIATION.—If the health dis10 count computed is—

11 (i) greater than the health discount

12 paid, the program shall provide for pay13 ment to the individual or employee an

14 amount equal to the amount of the

15 underpayment, or

16 (ii) less than the health discount paid,

17 the program shall require the individual or

18 employee to repay the excess health dis19 count.

20 (4) FAILURE TO FILE.—If an individual re21 quired to file an income statement under this sub22 section fails to file such a statement, the State

23 health discount program shall disqualify such indi24 vidual for health discounts after May 1 of such year.

25 The program shall waive the application of this dis-
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•S 2096 IS

1 qualification if there is established, to the satisfac2 tion of the program, good cause for the failure to file

3 the statement on a timely basis.

4 (5) PENALTIES.—Any individual providing false

5 information in a statement under paragraph (1) is

6 subject to criminal penalties to the same extent as

7 such penalties may be imposed under section

8 1128B(a) of the Social Security Act (42 U.S.C.

9 1320a–7b(a)) with respect to an individual described

10 in clause (ii) of such section.

11 (6) NOTICE.—A State health discount program

12 shall provide for written notice each year of the re13 quirement under paragraph (1) to all individuals to

14 whom the requirement applies.

15 (7) TRANSMITTAL OF INFORMATION.—The Sec16 retary of the Treasury shall transmit annually to the

17 State such information relating to the adjusted total

18 income of individuals for the taxable year ending in

19 the previous year as may be necessary to verify the

20 reconciliation of health discounts under this sub21 section.

22 (f) SMALL GROUP PURCHASING POOLS.—A State

23 may contract with small group purchasing pools to admin24 ister portions of the health discount program, as appro25 priate.
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•S 2096 IS

1 SEC. 313. FINANCING HEALTH DISCOUNTS.

2 (a) IN GENERAL.—Health discounts shall be financed

3 with—

4 (1) available Federal spending,

5 (2) required State Medicaid maintenance of ef6 fort spending and State matching amounts, and

7 (3) optional State supplementation.

8 (b) AVAILABLE FEDERAL SPENDING.—

9 (1) IN GENERAL.—For purposes of subsection

10 (a), Federal spending for health discounts in a fiscal

11 year shall be limited to the excess of—

12 (A) the amount specified in paragraph (2),

13 over

14 (B) the estimated Federal expenditures

15 under titles XVIII and XIX of the Social Secu16 rity Act (42 U.S.C. 1395 et seq.) for such year.

17 (2) SPECIFIED AMOUNT.—For purposes of

18 paragraph (1), the amount specified in this para19 graph for fiscal year—

20 (A) 1996, is $282,800,000,000,

21 (B) 1997, is $311,000,000,000,

22 (C) 1998, is $343,100,000,000,

23 (D) 1999, is $378,800,000,000,

24 (E) 2000, is $416,300,000,000,

25 (F) 2001, is $449,600,000,000,

26 (G) 2002, is $481,100,000,000,
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•S 2096 IS

1 (H) 2003, is $510,000,000,000,

2 (I) 2004, is $540,600,000,000, and

3 (J) 2005 and any succeeding fiscal year, is

4 the specified amount under this paragraph for

5 the previous fiscal year increased by the per6 centage increase in the Gross Domestic Product

7 for the previous fiscal year.

8 (3) LOOK BACK PROCEDURE.—The Secretary

9 shall reduce (or increase) the amount specified in

10 paragraph (2) for any fiscal year (beginning with

11 1997) by the amount by which actual Federal ex12 penditures for titles XVIII and XlX of the Social

13 Security Act (42 U.S.C. 1395 et seq.) and Federal

14 spending for health discounts for the preceding year

15 are greater than (or less than) the amounts specified

16 in paragraph (2) for the preceding fiscal year (deter17 mined after the application of this paragraph).

18 (c) STATE SPENDING.—For purposes of subsection

19 (a)—

20 (1) MAINTENANCE OF EFFORT.—

21 (A) IN GENERAL.—For each calendar

22 quarter beginning after December 31, 1995, a

23 State shall make available for the health dis24 count program administered by the State under

25 this part an amount equal to one-quarter of the
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•S 2096 IS

1 annual maintenance of effort amount for the

2 State for the fiscal year in which such quarter

3 occurs as determined under subparagraph (B).

4 (B) ANNUAL STATE MAINTENANCE OF EF5 FORT AMOUNT.—

6 (i) IN GENERAL.—Except as provided

7 in subparagraph (C), the annual mainte8 nance of effort amount for any fiscal year

9 shall equal the base maintenance of effort

10 amount determined pursuant to clause (ii),

11 updated by the index in clause (iii) for

12 such fiscal year.

13 (ii) BASE AMOUNT.—For each State,

14 the base maintenance of effort amount

15 shall be the amount of total State expendi16 tures during fiscal year 1994 under title

17 XIX of the Social Security Act (42 U.S.C.

18 1396 et seq.) for acute care services.

19 (iii) INDEX.—

20 (I) IN GENERAL.—The Director

21 of the Office of Management and

22 Budget shall determine the index by

23 which the base amounts shall be up24 dated for each fiscal year after fiscal

25 year 1994 by determining the pro-
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•S 2096 IS

1 jected change from the preceding fis2 cal year in medicaid acute care spend3 ing (Federal and State) projected in

4 the baseline in effect at the time of

5 enactment of this Act.

6 (II) OUT YEARS.—For fiscal

7 years after the last fiscal year in the

8 baseline projections, the index shall

9 reflect overall change from the preced10 ing fiscal year in the Gross Domestic

11 Product.

12 (iv) ACUTE CARE SERVICES.—For

13 purposes of this subparagraph, the term

14 ‘‘acute care services’’ means all of the care

15 and services furnished under a State plan

16 under title XIX of the Social Security Act

17 (42 U.S.C. 1936 et seq.) except the follow18 ing:

19 (I) Nursing facility services (as

20 defined in section 1905(f) of the So21 cial Security Act (42 U.S.C.

22 1396d(f))).

23 (II) Intermediate care facility for

24 the mentally retarded services (as de-
139

•S 2096 IS

1 fined in section 1905(d) of such Act

2 (42 U.S.C. 1396d(d))).

3 (III) Personal care services (as

4 described in section 1905(a)(24) of

5 such Act (42 U.S.C. 1396d(a)(24))).

6 (IV) Private duty nursing serv7 ices (as referred to in section

8 1905(a)(8) of such Act (42 U.S.C.

9 1396d(a)(8))).

10 (V) Home or community-based

11 services furnished under a waiver

12 granted under subsection (c), (d), or

13 (e) of section 1915 of such Act (42

14 U.S.C. 1396n).

15 (VI) Home and community care

16 furnished to functionally disabled el17 derly individuals under section 1929

18 of such Act (42 U.S.C. 1396t).

19 (VII) Community supported liv20 ing arrangements services under sec21 tion 1930 of such Act (42 U.S.C.

22 1396v).

23 (VIII) Case-management services

24 (as described in section 1915(g)(2) of

25 such Act (42 U.S.C. 1396n(g)(2))).
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•S 2096 IS

1 (IX) Home health care services

2 (as referred to in section 1905(a)(7)

3 of such Act (42 U.S.C. 1396d(a)(7))).

4 (X) Hospice care (as defined in

5 section 1905(o) of such Act (42

6 U.S.C. 1396d(o))).

7 (C) EXCEPTION.—For fiscal years begin8 ning in the first calendar year in which the an9 nual health discount entitlement is the maxi10 mum allowable (pursuant to subsection (d)), the

11 State maintenance of effort amount shall be the

12 amount for the preceding fiscal year increased

13 by the estimated overall growth in spending for

14 health discounts in the State as determined by

15 the Secretary.

16 (D) ADMINISTRATIVE EXPENSES.—A State

17 health discount program shall allocate a suffi18 cient portion of State maintenance of effort

19 spending to finance State expenses for admin20 istering the program.

21 (2) STATE MATCHING AMOUNTS.—For each cal22 endar quarter after December 31, 1995, each State

23 shall be required to pay 10 percent of the excess

24 of—
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•S 2096 IS

1 (A) the total costs of health discounts in a

2 State in such quarter, over

3 (B) the amount equal to—

4 (i) the State maintenance of effort

5 amount for such quarter, divided by

6 (ii) 1, minus the Federal medical as7 sistance percentage for the State under

8 title XIX of the Social Security Act (42

9 U.S.C. 1396 et seq.) for such fiscal year.

10 (3) OPTIONAL STATE SUPPLEMENTATION.—A

11 State, using State funds, may provide health dis12 counts in excess of the amount that eligible individ13 uals and eligible employees would otherwise be enti14 tled to pursuant to subsection (d) and to eligible in15 dividuals and eligible employees who would not oth16 erwise be entitled to such discounts.

17 (d) DETERMINING ENTITLEMENT TO HEALTH DIS18 COUNTS.—

19 (1) IN GENERAL.—At the beginning of each fis20 cal year, the Secretary shall establish the level of en21 titlement to health discounts for the upcoming cal22 endar year by setting—

23 (A) the maximum annual income allowed

24 for each category of eligibility under which eligi-
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•S 2096 IS

1 ble individuals and eligible employees are enti2 tled to health discounts, and

3 (B) the alternative benefits package used,

4 if necessary, for calculating the benchmarks

5 and health discounts for low income eligible in6 dividuals and low income eligible employees.

7 The Secretary shall set the level of entitlement for

8 a fiscal year so that the estimated total Federal

9 spending on health discounts does not exceed the

10 available Federal spending amount for such fiscal

11 year.

12 (2) STATE SPENDING.—In determining the an13 nual level of entitlement, the Secretary shall include

14 in the determination the State maintenance of effort

15 spending and State matching amounts but not op16 tional State supplementation.

17 (3) ORDER OF ENTITLEMENT.—

18 (A) POOR INDIVIDUALS AND EMPLOY19 EES.—

20 (i) IN GENERAL.—In any year, the

21 Secretary shall first ensure that all poor el22 igible individuals and poor eligible employ23 ees are entitled to health discounts based

24 on the nominal cost-sharing benefits pack25 age determined pursuant to section 113(b).
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•S 2096 IS

1 (ii) EXCESS SPENDING.—If the Sec2 retary determines that such a level of enti3 tlement would cause Federal spending to

4 exceed available amounts, the Secretary

5 shall reduce the maximum family adjusted

6 total income allowed for entitlement to

7 health discounts to such a level so as to

8 eliminate any estimated excess spending.

9 (B) OUT-OF-POCKET MAXIMUM FOR LOW

10 INCOME INDIVIDUALS AND EMPLOYEES.—

11 (i) IN GENERAL.—If, in any year, the

12 Secretary determines that all poor eligible

13 individuals and poor eligible employees

14 may be entitled to health discounts based

15 on the nominal cost-sharing benefits pack16 age, then the Secretary shall next ensure

17 that all low income eligible individuals and

18 low income eligible employees are entitled

19 to health discounts based on the alter20 native benefits package determined pursu21 ant to section 113(c).

22 (ii) EXCESS SPENDING.—If the Sec23 retary determines that providing entitle24 ment to health discounts for low income el25 igible individuals and low income eligible
144

•S 2096 IS

1 employees based on the alternative benefits

2 package would (together with spending on

3 poor eligible individuals and poor eligible

4 employees under subparagraph (B)) cause

5 Federal spending to exceed available

6 amounts, the Secretary may only set the

7 maximum family adjusted total income al8 lowed for entitlement to health discounts

9 (based on the alternative benefits package)

10 for such low income individuals and em11 ployees at such a level so as to eliminate

12 any estimated excess spending.

13 (C) STANDARD BENEFITS PACKAGE FOR

14 LOW INCOME INDIVIDUALS AND EMPLOYEES.—

15 (i) IN GENERAL.—If the Secretary de16 termines that all eligible individuals and el17 igible employees described in subpara18 graphs (A)(i) and (B)(i) may be entitled to

19 health discounts, then the Secretary shall

20 ensure that low income eligible individuals

21 and low income eligible employees are enti22 tled to health discounts based on the

23 standard benefits package determined pur24 suant to section 113(a).
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•S 2096 IS

1 (ii) EXCESS SPENDING.—If the Sec2 retary determines that providing such a

3 level of entitlement would cause Federal

4 spending to exceed available amounts, the

5 Secretary shall increase the value of the al6 ternative benefits package above the value

7 provided under section 113(c) but below

8 the standard benefits package so as to

9 eliminate any estimated excess spending.

10 (4) EXCEPTION FOR MEDICAID-ELIGIBLES.—

11 For fiscal years 1996 through 2000, any individual

12 who—

13 (A) would have been eligible for medicaid

14 acute services based on eligibility standards on

15 the date of the enactment of this Act, and

16 (B) is otherwise an eligible individual or el17 igible employee,

18 shall be considered to be a poor eligible individual or

19 poor eligible employee for purposes of paragraph

20 (3)(A) and shall be entitled to health discounts

21 based on the nominal cost-sharing benefits package

22 without regard to the limit in available Federal

23 spending and prior to the entitlement of other indi24 viduals under such paragraph.
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•S 2096 IS

1 PART II—TERMINATION OF AUTHORITY TO FUR2 NISH ACUTE CARE SERVICES UNDER THE

3 MEDICAID PROGRAM

4 SEC. 321. TERMINATION OF AUTHORITY TO FURNISH

5 ACUTE CARE SERVICES UNDER THE MEDIC6 AID PROGRAM.

7 Title XIX of the Social Security Act (42 U.S.C. 1396

8 et seq.) is amended by redesignating section 1931 as sec9 tion 1932 and by inserting after section 1930 the following

10 new section:

11 ‘‘TERMINATION OF AUTHORITY TO FURNISH ACUTE CARE

12 SERVICES

13 ‘‘SEC. 1931. (a) IN GENERAL.—Except as provided

14 in subsection (b), the authority provided by this title to

15 furnish acute care services to any individual eligible for

16 medical assistance under this title shall terminate on De17 cember 31, 1994.

18 ‘‘(b) EXCEPTION FOR QUALIFIED MEDICARE BENE19 FICIARIES.—

20 ‘‘(1) IN GENERAL.—Individuals entitled to ben21 efits under section 1905(p) shall remain entitled to

22 such benefits under State plans.

23 ‘‘(2) ADDITIONAL BENEFIT.—Each state plan

24 shall include as a mandatory benefit under section

25 1905(p)(3) the payment of premiums for qualified
147

•S 2096 IS

1 medicare beneficiaries to medicare health plans as

2 provided in section 1876.

3 ‘‘(c) REPORT ON CONFORMING CHANGES.—By not

4 later than 90 days after the date of the enactment of the

5 Health Care Reform Act of 1994 the Secretary shall sub6 mit to Congress a report on changes in laws that should

7 be made in order to conform those laws to the termination

8 of authority under this section.

9 ‘‘(d) ACUTE CARE SERVICES.—The term ‘acute care

10 services’ means all of the care and services furnished

11 under a State plan under this title, except the following:

12 ‘‘(1) Nursing facility services (as defined in sec13 tion 1905(f)).

14 ‘‘(2) Intermediate care facility for the mentally

15 retarded services (as defined in section 1905(d)).

16 ‘‘(3) Personal care services (as described in sec17 tion 1905(a)(24)).

18 ‘‘(4) Private duty nursing services (as referred

19 to in section 1905(a)(8)).

20 ‘‘(5) Home or community-based services fur21 nished under a waiver granted under subsection (c),

22 (d), or (e) of section 1915).

23 ‘‘(6) Home and community care furnished to

24 functionally disabled elderly individuals under sec25 tion 1929.
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•S 2096 IS

1 ‘‘(7) Community supported living arrangements

2 services under section 1930.

3 ‘‘(8) Case-management services (as described in

4 section 1915(g)(2)).

5 ‘‘(9) Home health care services (as referred to

6 in section 1905(a)(7)).

7 ‘‘(10) Hospice care (as defined in section

8 1905(o)).’’.

9 Subtitle C—Increase in Tax on

10 Tobacco Products

11 SEC. 330. AMENDMENT OF 1986 CODE.

12 Except as otherwise expressly provided, whenever in

13 this subtitle an amendment or repeal is expressed in terms

14 of an amendment to, or repeal of, a section or other provi15 sion, the reference shall be considered to be made to a

16 section or other provision of the Internal Revenue Code

17 of 1986.

18 SEC. 331. INCREASE IN EXCISE TAXES ON TOBACCO PROD19 UCTS.

20 (a) CIGARETTES.—Subsection (b) of section 5701 is

21 amended—

22 (1) by striking ‘‘$12 per thousand ($10 per

23 thousand on cigarettes removed during 1991 or

24 1992)’’ in paragraph (1) and inserting ‘‘$30 per

25 thousand’’, and
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•S 2096 IS

1 (2) by striking ‘‘$25.20 per thousand ($21 per

2 thousand on cigarettes removed during 1991 or

3 1992)’’ in paragraph (2) and inserting ‘‘$63 per

4 thousand’’.

5 (b) CIGARS.—Subsection (a) of section 5701 is

6 amended—

7 (1) by striking ‘‘$1.125 cents per thousand

8 (93.75 cents per thousand on cigars removed during

9 1991 or 1992)’’ in paragraph (1) and inserting

10 ‘‘$19.125 cents per thousand’’, and

11 (2) by striking ‘‘equal to’’ and all that follows

12 in paragraph (2) and inserting ‘‘equal to 31.875 per13 cent of the price for which sold but not more than

14 $75 per thousand.’’

15 (c) CIGARETTE PAPERS.—Subsection (c) of section

16 5701 is amended by striking ‘‘0.75 cent (0.625 cent on

17 cigarette papers removed during 1991 or 1992)’’ and in18 serting ‘‘1.875 cents’’.

19 (d) CIGARETTE TUBES.—Subsection (d) of section

20 5701 is amended by striking ‘‘1.5 cents (1.25 cents on

21 cigarette tubes removed during 1991 or 1992)’’ and in22 serting ‘‘3.75 cents’’.

23 (e) SMOKELESS TOBACCO.—Subsection (e) of section

24 5701 is amended—
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•S 2096 IS

1 (1) by striking ‘‘36 cents (30 cents on snuff re2 moved during 1991 or 1992)’’ in paragraph (1) and

3 inserting ‘‘$6.36’’, and

4 (2) by striking ‘‘12 cents (10 cents on chewing

5 tobacco removed during 1991 or 1992)’’ in para6 graph (2) and inserting ‘‘$6.12’’.

7 (f) PIPE TOBACCO.—Subsection (f) of section 5701

8 is amended by striking ‘‘67.5 cents (56.25 cents on pipe

9 tobacco removed during 1991 or 1992)’’ and inserting

10 ‘‘$6.675 cents’’.

11 (g) EFFECTIVE DATE.—The amendments made by

12 this section shall apply to articles removed (as defined in

13 section 5702(k) of the Internal Revenue Code of 1986,

14 as amended by this Act) after September 30, 1995.

15 (h) FLOOR STOCKS TAXES.—

16 (1) IMPOSITION OF TAX.—On tobacco products

17 and cigarette papers and tubes manufactured in or

18 imported into the United States which are removed

19 before October 1, 1995, and held on such date for

20 sale by any person, there is hereby imposed a tax in

21 an amount equal to the excess of—

22 (A) the tax which would be imposed under

23 section 5701 of the Internal Revenue Code of

24 1986 on the article if the article had been re25 moved on such date, over
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•S 2096 IS

1 (B) the prior tax (if any) imposed under

2 section 5701 or 7652 of such Code on such ar3 ticle.

4 (2) AUTHORITY TO EXEMPT CIGARETTES HELD

5 IN VENDING MACHINES.—To the extent provided in

6 regulations prescribed by the Secretary, no tax shall

7 be imposed by paragraph (1) on cigarettes held for

8 retail sale on October 1, 1995, by any person in any

9 vending machine. If the Secretary provides such a

10 benefit with respect to any person, the Secretary

11 may reduce the $500 amount in paragraph (3) with

12 respect to such person.

13 (3) CREDIT AGAINST TAX.—Each person shall

14 be allowed as a credit against the taxes imposed by

15 paragraph (1) an amount equal to $500. Such credit

16 shall not exceed the amount of taxes imposed by

17 paragraph (1) for which such person is liable.

18 (4) LIABILITY FOR TAX AND METHOD OF PAY19 MENT.—

20 (A) LIABILITY FOR TAX.—A person hold21 ing cigarettes on October 1, 1995, to which any

22 tax imposed by paragraph (1) applies shall be

23 liable for such tax.

24 (B) METHOD OF PAYMENT.—The tax im25 posed by paragraph (1) shall be paid in such
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•S 2096 IS

1 manner as the Secretary shall prescribe by reg2 ulations.

3 (C) TIME FOR PAYMENT.—The tax im4 posed by paragraph (1) shall be paid on or be5 fore December 31, 1995.

6 (5) ARTICLES IN FOREIGN TRADE ZONES.—

7 Notwithstanding the Act of June 18, 1934 (48 Stat.

8 998; 19 U.S.C. 81a) and any other provision of law,

9 any article which is located in a foreign trade zone

10 on October 1, 1995, shall be subject to the tax im11 posed by paragraph (1) if—

12 (A) internal revenue taxes have been deter13 mined, or customs duties liquidated, with re14 spect to such article before such date pursuant

15 to a request made under the 1st proviso of sec16 tion 3(a) of such Act, or

17 (B) such article is held on such date under

18 the supervision of a customs officer pursuant to

19 the 2d proviso of such section 3(a).

20 (6) DEFINITIONS.—For purposes of this sub21 section—

22 (A) IN GENERAL.—Terms used in this sub23 section which are also used in section 5702 of

24 the Internal Revenue Code of 1986 shall have

25 the respective meanings such terms have in
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•S 2096 IS

1 such section, and such term shall include arti2 cles first subject to the tax imposed by section

3 5701 of such Code by reason of the amend4 ments made by this Act.

5 (B) SECRETARY.—The term ‘‘Secretary’’

6 means the Secretary of the Treasury.

7 (7) CONTROLLED GROUPS.—Rules similar to

8 the rules of section 5061(e)(3) of such Code shall

9 apply for purposes of this subsection.

10 (8) OTHER LAWS APPLICABLE.—All provisions

11 of law, including penalties, applicable with respect to

12 the taxes imposed by section 5701 of such Code

13 shall, insofar as applicable and not inconsistent with

14 the provisions of this subsection, apply to the floor

15 stocks taxes imposed by paragraph (1), to the same

16 extent as if such taxes were imposed by such section

17 5701. The Secretary may treat any person who bore

18 the ultimate burden of the tax imposed by para19 graph (1) as the person to whom a credit or refund

20 under such provisions may be allowed or made.

21 SEC. 332. MODIFICATIONS OF CERTAIN TOBACCO TAX PRO22 VISIONS.

23 (a) EXEMPTION FOR EXPORTED TOBACCO PROD24 UCTS AND CIGARETTE PAPERS AND TUBES TO APPLY

25 ONLY TO ARTICLES MARKED FOR EXPORT.—
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•S 2096 IS

1 (1) Subsection (b) of section 5704 is amended

2 by adding at the end the following new sentence:

3 ‘‘Tobacco products and cigarette papers and tubes

4 may not be transferred or removed under this sub5 section unless such products or papers and tubes

6 bear such marks, labels, or notices as the Secretary

7 shall by regulations prescribe.’’.

8 (2) Section 5761 is amended by redesignating

9 subsections (c) and (d) as subsections (d) and (e),

10 respectively, and by inserting after subsection (b)

11 the following new subsection:

12 ‘‘(c) SALE OF TOBACCO PRODUCTS AND CIGARETTE

13 PAPERS AND TUBES FOR EXPORT.—Except as provided

14 in subsections (b) and (d) of section 5704—

15 ‘‘(1) every person who sells, relands, or receives

16 within the jurisdiction of the United States any to17 bacco products or cigarette papers or tubes which

18 have been labeled or shipped for exportation under

19 this chapter,

20 ‘‘(2) every person who sells or receives such

21 relanded tobacco products or cigarette papers or

22 tubes, and

23 ‘‘(3) every person who aids or abets in such

24 selling, relanding, or receiving,
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•S 2096 IS

1 shall, in addition to the tax and any other penalty provided

2 in this title, be liable for a penalty equal to the greater

3 of $1,000 or 5 times the amount of the tax imposed by

4 this chapter. All tobacco products and cigarette papers

5 and tubes relanded within the jurisdiction of the United

6 States, and all vessels, vehicles, and aircraft used in such

7 relanding or in removing such products, papers, and tubes

8 from the place where relanded, shall be forfeited to the

9 United States.’’.

10 (3) Subsection (a) of section 5761 is amended

11 by striking ‘‘subsection (b)’’ and inserting ‘‘sub12 section (b) or (c)’’.

13 (4) Subsection (d) of section 5761, as redesig14 nated by paragraph (2), is amended by striking

15 ‘‘The penalty imposed by subsection (b)’’ and insert16 ing ‘‘The penalties imposed by subsections (b) and

17 (c)’’.

18 (5)(A) Subpart F of chapter 52 is amended by

19 adding at the end the following new section:

20 ‘‘SEC. 5754. RESTRICTION ON IMPORTATION OF PRE21 VIOUSLY EXPORTED TOBACCO PRODUCTS.

22 ‘‘(a) IN GENERAL.—Tobacco products and cigarette

23 papers and tubes previously exported from the United

24 States may be imported or brought into the United States

25 only as provided in section 5704(d).
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•S 2096 IS

1 ‘‘(b) CROSS REFERENCE.—

‘‘For penalty for the sale of cigarettes in the United States which are labeled for export, see section

5761(d).’’.

2 (B) The table of sections for subpart F of chap3 ter 52 of such Code is amended by adding at the

4 end the following new item:

‘‘Sec. 5754. Restriction on importation of previously exported tobacco products.’’.

5 (b) IMPORTERS REQUIRED TO BE QUALIFIED.—

6 (1) Sections 5712, 5713(a), 5721, 5722,

7 5762(a)(1), 5763(b) and 5763(c) are each amended

8 by inserting ‘‘or importer’’ after ‘‘manufacturer’’.

9 (2) The heading of subsection (b) of section

10 5763 is amended by inserting ‘‘QUALIFIED IMPORT11 ERS,’’ after ‘‘MANUFACTURERS,’’.

12 (3) The heading for subchapter B of chapter 52

13 is amended by inserting ‘‘and Importers’’ after

14 ‘‘Manufacturers’’.

15 (4) The item relating to subchapter B in the

16 table of subchapters for chapter 52 is amended by

17 inserting ‘‘and importers’’ after ‘‘manufacturers’’.

18 (c) REPEAL OF TAX-EXEMPT SALES TO EMPLOYEES

19 OF CIGARETTE MANUFACTURERS.—

20 (1) Subsection (a) of section 5704 is amend21 ed—
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1 (A) by striking ‘‘EMPLOYEE USE OR’’ in

2 the heading, and

3 (B) by striking ‘‘for use or consumption by

4 employees or’’ in the text.

5 (2) Subsection (e) of section 5723 is amended

6 by striking ‘‘for use or consumption by their employ7 ees, or for experimental purposes’’ and inserting

8 ‘‘for experimental purposes’’.

9 (d) REPEAL OF TAX-EXEMPT SALES TO UNITED

10 STATES.—Subsection (b) of section 5704 is amended by

11 striking ‘‘and manufacturers may similarly remove such

12 articles for use of the United States;’’.

13 (e) BOOKS OF 25 OR FEWER CIGARETTE PAPERS

14 SUBJECT TO TAX.—Subsection (c) of section 5701 is

15 amended by striking ‘‘On each book or set of cigarette

16 papers containing more than 25 papers,’’ and inserting

17 ‘‘On cigarette papers,’’.

18 (f) STORAGE OF TOBACCO PRODUCTS.—Subsection

19 (k) of section 5702 is amended by inserting ‘‘under section

20 5704’’ after ‘‘internal revenue bond’’.

21 (g) AUTHORITY TO PRESCRIBE MINIMUM MANUFAC22 TURING ACTIVITY REQUIREMENTS.—Section 5712 is

23 amended by striking ‘‘or’’ at the end of paragraph (1),

24 by redesignating paragraph (2) as paragraph (3), and by

25 inserting after paragraph (1) the following new paragraph:
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1 ‘‘(2) the activity proposed to be carried out at

2 such premises does not meet such minimum capacity

3 or activity requirements as the Secretary may pre4 scribe, or’’.

5 (h) EFFECTIVE DATE.—The amendments made by

6 this section shall apply to articles removed (as defined in

7 section 5702(k) of the Internal Revenue Code of 1986,

8 as amended by this Act) after September 30, 1995.

9 SEC. 333. IMPOSITION OF EXCISE TAX ON MANUFACTURE

10 OR IMPORTATION OF ROLL-YOUR-OWN TO11 BACCO.

12 (a) IN GENERAL.—Section 5701 (relating to rate of

13 tax) is amended by redesignating subsection (g) as sub14 section (h) and by inserting after subsection (f) the follow15 ing new subsection:

16 ‘‘(g) ROLL-YOUR-OWN TOBACCO.—On roll-your-own

17 tobacco, manufactured in or imported into the United

18 States, there shall be imposed a tax of $6 per pound (and

19 a proportionate tax at the like rate on all fractional parts

20 of a pound).’’.

21 (b) ROLL-YOUR-OWN TOBACCO.—Section 5702 (re22 lating to definitions) is amended by adding at the end the

23 following new subsection:

24 ‘‘(p) ROLL-YOUR-OWN TOBACCO.—The term ‘roll25 your-own tobacco’ means any tobacco which, because of
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1 its appearance, type, packaging, or labeling, is suitable for

2 use and likely to be offered to, or purchased by, consumers

3 as tobacco for making cigarettes.’’.

4 (c) TECHNICAL AMENDMENTS.—

5 (1) Subsection (c) of section 5702 is amended

6 by striking ‘‘and pipe tobacco’’ and inserting ‘‘pipe

7 tobacco, and roll-your-own tobacco’’.

8 (2) Subsection (d) of section 5702 is amend9 ed—

10 (A) in the material preceding paragraph

11 (1), by striking ‘‘or pipe tobacco’’ and inserting

12 ‘‘pipe tobacco, or roll-your-own tobacco’’, and

13 (B) by striking paragraph (1) and insert14 ing the following new paragraph:

15 ‘‘(1) a person who produces cigars, cigarettes,

16 smokeless tobacco, pipe tobacco, or roll-your-own to17 bacco solely for his own personal consumption or

18 use, and’’.

19 (3) The chapter heading for chapter 52 is

20 amended to read as follows:

21 ‘‘CHAPTER 52—TOBACCO PRODUCTS AND

22 CIGARETTE PAPERS AND TUBES’’.

23 (4) The table of chapters for subtitle E is

24 amended by striking the item relating to chapter 52

25 and inserting the following new item:
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‘‘CHAPTER 52. Tobacco products and cigarette papers and

tubes.’’.

1 (d) EFFECTIVE DATE.—

2 (1) IN GENERAL.—The amendments made by

3 this section shall apply to roll-your-own tobacco re4 moved (as defined in section 5702(k) of the Internal

5 Revenue Code of 1986, as amended by this Act)

6 after September 30, 1995.

7 (2) TRANSITIONAL RULE.—Any person who—

8 (A) on the date of the enactment of this

9 Act is engaged in business as a manufacturer of

10 roll-your-own tobacco or as an importer of to11 bacco products or cigarette papers and tubes,

12 and

13 (B) before October 1, 1995, submits an

14 application under subchapter B of chapter 52

15 of such Code to engage in such business,

16 may, notwithstanding such subchapter B, continue

17 to engage in such business pending final action on

18 such application. Pending such final action, all pro19 visions of such chapter 52 shall apply to such appli20 cant in the same manner and to the same extent as

21 if such applicant were a holder of a permit under

22 such chapter 52 to engage in such business.
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1 TITLE IV—IMPROVING ACCESS

2 IN RURAL AREAS

3 SEC. 401. COMMUNITY HEALTH CENTERS.

4 Section 330(g)(1)(A) of the Public Health Service

5 Act (42 U.S.C. 254c(g)(1)(A)) is amended by striking

6 ‘‘and such sums’’ and inserting ‘‘such sums’’ and by in7 serting before the period the following: ‘‘, $800,000,000

8 for fiscal year 1995, $960,000,000 for fiscal year 1996,

9 $1,100,000,000 for fiscal year 1997, and $1,200,000,000

10 for fiscal year 1998’’.

11 SEC. 402. NATIONAL HEALTH SERVICE CORPS.

12 Section 338H(b)(1) of the Public Health Act (42

13 U.S.C. 254q(b)(1)) is amended by striking ‘‘and such

14 sums’’ and inserting ‘‘such sums’’ and by inserting before

15 the period the following: ‘‘, $96,000,000 for fiscal year

16 1995, $115,000,000 for fiscal year 1996, $138,000,000

17 for fiscal year 1997, and $160,000,000 for fiscal year

18 1998’’.

19 SEC. 403. TAX INCENTIVES FOR PRACTICE IN FRONTIER,

20 RURAL, AND URBAN UNDERSERVED AREAS.

21 (a) REFUNDABLE CREDIT FOR CERTAIN PRIMARY

22 HEALTH SERVICES PROVIDERS.—

23 (1) IN GENERAL.—Subpart C of part IV of sub24 chapter A of chapter 1 of the Internal Revenue Code

25 of 1986 (relating to refundable credits) is amended
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1 by inserting after section 34 the following new sec2 tion:

3 ‘‘SEC. 34A. PRIMARY HEALTH SERVICES PROVIDERS.

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

5 qualified primary health services provider, there is allowed

6 as a credit against the tax imposed by this subtitle for

7 any taxable year in a mandatory service period an amount

8 equal to the product of—

9 ‘‘(1) the lesser of—

10 ‘‘(A) the number of months of such period

11 occurring in such taxable year, or

12 ‘‘(B) 36 months, reduced by the number of

13 months taken into account under this para14 graph with respect to such provider for all pre15 ceding taxable years (whether or not in the

16 same mandatory service period), multiplied by

17 ‘‘(2) $1,000 ($500 in the case of a qualified

18 primary health services provider who is a physician

19 assistant or a nurse practitioner).

20 ‘‘(b) QUALIFIED PRIMARY HEALTH SERVICES PRO21 VIDER.—For purposes of this section, the term ‘qualified

22 primary health services provider’ means any physician,

23 physician assistant, or nurse practitioner who for any

24 month during a mandatory service period is certified by

25 the Bureau to be a primary health services provider who—
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1 ‘‘(1) is providing primary health services—

2 ‘‘(A) full-time, and

3 ‘‘(B) to individuals at least 80 percent of

4 whom reside in a health professional shortage

5 area (as defined in subsection (d)(2)),

6 ‘‘(2) is not receiving during such year a scholar7 ship under the National Health Service Corps Schol8 arship Program or a loan repayment under the Na9 tional Health Service Corps Loan Repayment Pro10 gram,

11 ‘‘(3) is not fulfilling service obligations under

12 such Programs, and

13 ‘‘(4) has not defaulted on such obligations.

14 ‘‘(c) MANDATORY SERVICE PERIOD.—For purposes

15 of this section, the term ‘mandatory service period’ means

16 the period of 60 consecutive calendar months beginning

17 with the first month the taxpayer is a qualified primary

18 health services provider.

19 ‘‘(d) DEFINITIONS AND SPECIAL RULES.—For pur20 poses of this section—

21 ‘‘(1) BUREAU.—The term ‘Bureau’ means the

22 Bureau of Health Care Delivery and Assistance,

23 Health Resources and Services Administration of the

24 United States Public Health Service.
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1 ‘‘(2) HEALTH PROFESSIONAL SHORTAGE

2 AREA.—The term ‘health professional shortage area’

3 means—

4 ‘‘(A) a geographic area in which there are

5 6 or fewer individuals residing per square mile,

6 ‘‘(B) a health professional shortage area

7 (as defined in section 332(a)(1)(A) of the Pub8 lic Health Service Act),

9 ‘‘(C) an area which is determined by the

10 Secretary of Health and Human Services as

11 equivalent to an area described in subparagraph

12 (A) and which is designated by the Bureau of

13 the Census as not urbanized, or

14 ‘‘(D) a community that is certified as un15 derserved by the Secretary for purposes of par16 ticipation in the rural health clinic program

17 under title XVIII of the Social Security Act.

18 ‘‘(3) PHYSICIAN.—The term ‘physician’ has the

19 meaning given to such term by section 1861(r) or

20 the Social Security Act.

21 ‘‘(4) PHYSICIAN ASSISTANT; NURSE PRACTI22 TIONER.—The terms ‘physician assistant’ and ‘nurse

23 practitioner’ have the meanings given to such terms

24 by section 1861(aa)(5) of the Social Security Act.
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1 ‘‘(5) PRIMARY HEALTH SERVICES PROVIDER.—

2 The term ‘primary health services provider’ means a

3 provider of primary health services (as defined in

4 section 330(b)(1) of the Public Health Service Act).

5 ‘‘(e) RECAPTURE OF CREDIT.—

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

7 there is a recapture event, then the tax of the tax8 payer under this chapter for such taxable year shall

9 be increased by an amount equal to the product of—

10 ‘‘(A) the applicable percentage, and

11 ‘‘(B) the aggregate unrecaptured credits

12 allowed to such taxpayer under this section for

13 all prior taxable years.

14 ‘‘(2) APPLICABLE RECAPTURE PERCENTAGE.—

15 ‘‘(A) IN GENERAL.—For purposes of this

16 subsection, the applicable recapture percentage

17 shall be determined from the following table:

The applicable

‘‘If the recapture recapture

event occurs during: percentage is:

Months 1–24 .............................................. 100

Months 25–36 ............................................ 75

Months 37–48 ............................................ 50

Months 49–60 ............................................ 25

Months 61 and thereafter .......................... 0.

18 ‘‘(B) TIMING.—For purposes of subpara19 graph (A), month 1 shall begin on the first day

20 of the mandatory service period.

21 ‘‘(3) RECAPTURE EVENT DEFINED.—
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1 ‘‘(A) IN GENERAL.—For purposes of this

2 subsection, the term ‘recapture event’ means

3 the failure of the taxpayer to be a qualified pri4 mary health services provider for any month

5 during any mandatory service period.

6 ‘‘(B) CESSATION OF DESIGNATION.—The

7 cessation of the designation of any area as a

8 rural health professional shortage area after the

9 beginning of the mandatory service period for

10 any taxpayer shall not constitute a recapture

11 event.

12 ‘‘(C) SECRETARIAL WAIVER.—The Sec13 retary may waive any recapture event caused by

14 extraordinary circumstances.

15 ‘‘(4) NO CREDITS AGAINST TAX.—Any increase

16 in tax under this subsection shall not be treated as

17 a tax imposed by this chapter for purposes of deter18 mining the amount of any credit under subpart A,

19 B, or D of this part.’’.

20 (2) CLERICAL AMENDMENT.—The table of sec21 tions for subpart C of part IV of subchapter A of

22 chapter 1 of such Code is amended by inserting

23 after the item relating to section 34 the following

24 new item:

‘‘Sec. 34A. Primary health services providers.’’.
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1 (3) EFFECTIVE DATE.—The amendments made

2 by this subsection shall apply to taxable years begin3 ning after the date of the enactment of this Act.

4 (b) NATIONAL HEALTH SERVICE CORPS LOAN RE5 PAYMENTS EXCLUDED FROM GROSS INCOME.—

6 (1) IN GENERAL.—Part III of subchapter B of

7 chapter 1 of the Internal Revenue Code of 1986 (re8 lating to items specifically excluded from gross in9 come) is amended by redesignating section 137 as

10 section 138 and by inserting after section 136 the

11 following new section:

12 ‘‘SEC. 137. NATIONAL HEALTH SERVICE CORPS LOAN RE13 PAYMENTS.

14 ‘‘(a) GENERAL RULE.—Gross income shall not in15 clude any qualified loan repayment.

16 ‘‘(b) QUALIFIED LOAN REPAYMENT.—For purposes

17 of this section, the term ‘qualified loan repayment’ means

18 any payment made on behalf of the taxpayer by the Na19 tional Health Service Corps Loan Repayment Program

20 under section 338B(g) of the Public Health Service Act.’’.

21 (2) CONFORMING AMENDMENT.—Paragraph (3)

22 of section 338B(g) of the Public Health Service Act

23 (42 U.S.C. 254l–1(g)) is amended by striking ‘‘Fed24 eral, State, or local’’ and inserting ‘‘State or local’’.
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1 (3) CLERICAL AMENDMENT.—The table of sec2 tions for part III of subchapter B of chapter 1 of

3 the Internal Revenue Code of 1986 is amended by

4 striking the item relating to section 136 and insert5 ing the following:

‘‘Sec. 137. National Health Service Corps loan repayments.

‘‘Sec. 138. Cross references to other Acts.’’.

6 (4) EFFECTIVE DATE.—The amendments made

7 by this subsection shall apply to payments made

8 under section 338B(g) of the Public Health Service

9 Act (42 U.S.C. 254l–1(g)) after the date of the en10 actment of this Act.

11 SEC. 404. INCENTIVES FOR PRIMARY CARE RESIDENTS.

12 (a) IN GENERAL.—Section 1886(h) of the Social Se13 curity Act (42 U.S.C. 1395 ww(h)) is amended—

14 (1) by striking paragraph (2) and inserting the

15 following new paragraph:

16 ‘‘(2) DETERMINATION OF APPROVED FTE RESI17 DENT AMOUNTS.—The Secretary shall determine an

18 approved FTE resident amount for each cost report19 ing period beginning after October 1, 1994, as fol20 lows:

21 ‘‘(A) DETERMINING NATIONAL AVERAGE

22 SALARY PER FTE RESIDENT IN FISCAL YEAR

23 1992.—The Secretary shall determine the na24 tional average salary for fiscal year 1992 for a
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1 full-time-equivalent resident in an approved

2 medical residency training program.

3 ‘‘(B) UPDATING TO A COST REPORTING

4 PERIOD THAT BEGINS IN FISCAL YEAR 1995.—

5 The Secretary shall update the amount deter6 mined under subparagraph (A) by the esti7 mated percentage change in the Consumer

8 Price Index from the midpoint of fiscal year

9 1992 to the midpoint of each cost reporting pe10 riod that begins in fiscal year 1995.

11 ‘‘(C) UPDATING TO SUBSEQUENT COST RE12 PORTING PERIODS.—For each subsequent cost

13 reporting period, the Secretary shall update the

14 amount determined under subparagraph (B) or

15 this subparagraph for an immediately preceding

16 cost reporting period by the estimated percent17 age change in the Consumer Price Index from

18 the midpoint of that preceding period to the

19 midpoint of that subsequent period, with appro20 priate adjustments to reflect previous under- or

21 over-estimations in the estimated percentage

22 change in that index.’’,

23 (2) in paragraph (3)(B)(i), by striking ‘‘hos24 pital’s’’, and
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1 (3) in paragraph (4), by striking subparagraph

2 (C) and inserting the following new subparagraph:

3 ‘‘(C) WEIGHTING FACTOR FOR CERTAIN

4 RESIDENTS.—Subject to subparagraph (D),

5 such rules shall provide, in calculating the num6 ber of full-time-equivalent residents in an ap7 proved residency program—

8 ‘‘(i) that the weighting factor for a

9 primary care (as defined by the Secretary)

10 resident, or for an intern, is 2.2;

11 ‘‘(ii) that the weighting factor for a

12 nonprimary care resident who is in the

13 resident’s initial residency period is 2.0;

14 and

15 ‘‘(iii) that the weighting factor for a

16 nonprimary care resident who is not in the

17 resident’s initial residency period is 1.2.

18 The Secretary shall make such adjustments as

19 are necessary to the weighting factors to main20 tain aggregate payments under this section to

21 all hospitals at the same level that such pay22 ments would have been made under this section

23 prior to enactment of the amendments made to

24 this section by the Health Care Reform Act of

25 1994.’’.
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1 (b) EFFECTIVE DATES.—

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

4 this section shall apply to cost reporting periods be5 ginning after October 1, 1994.

6 (2) SPECIAL RULE.—For a cost reporting pe7 riod that falls partly in fiscal year 1994 and partly

8 in fiscal year 1995, the provisions of section

9 1886(h), as in effect before the date of enactment of

10 this Act, shall apply proportionally to that part of

11 the cost reporting period that occurs before fiscal

12 year 1995.

13 TITLE V—OTHER HEALTH CARE

14 COST REDUCTION MEASURES

15 Subtitle A—Medical Liability

16 Reform

17 SEC. 501. FEDERAL STANDARDS FOR STATE-BASED MEDI18 CAL LIABILITY REFORM.

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

20 with the Attorney General, shall develop and publish medi21 cal liability reform standards in accordance with this sub22 title that States must meet in order to be certified under

23 section 502.

24 (b) BINDING ALTERNATIVE DISPUTE RESOLU25 TION.—
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1 (1) REQUIREMENTS.—The standards developed

2 under subsection (a) shall require that a State—

3 (A) require all claims of medical injury

4 arising in such State be resolved under binding

5 dispute resolution systems that—

6 (i) provide timely and impartial deci7 sions of liability and damage awards,

8 (ii) make determinations of liability

9 and damage awards based on the best sci10 entific learning and judgment of objective

11 experts,

12 (iii) provide data and standardized in13 formation regarding evidence of medical in14 juries and the causes of such injuries to

15 Federal and State agencies responsible for

16 monitoring or disciplining health care pro17 viders, and

18 (iv) do not employ lay juries or simi19 larly constituted lay decisionmaking bodies

20 to make such determinations;

21 (B) require that the decisions made

22 through the binding dispute resolution system

23 be final and not subject to further review by

24 any court, except that a party to a dispute may

25 obtain review of such decision in any court of
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1 competent jurisdiction in the State wherein the

2 decision was made if—

3 (i) the award under such decision was

4 procured by corruption, fraud, or other

5 undue means,

6 (ii) there was evident partiality or cor7 ruption on the part of the arbiter,

8 (iii) the arbiter was guilty of mis9 conduct in refusing to postpone the hear10 ing, upon sufficient cause shown, or in re11 fusing to hear evidence pertinent and ma12 terial to the controversy, or of any mis13 behavior by which the rights of any party

14 were prejudiced, or

15 (iv) the arbiter exceeded its powers or

16 so imperfectly executed them that a final

17 and definite award upon the claim was not

18 made; and

19 (C) require that where an arbiters award is

20 vacated pursuant to State provisions established

21 under subparagraph (B) that the court direct

22 that the matter be reheard by another arbiter

23 under the procedures prescribed by the State

24 dispute resolution system.
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1 (2) OPTIONS.—The standards developed under

2 subsection (a) shall permit a State to—

3 (A) allow private entities to provide all or

4 some of the dispute resolution services required

5 by the State dispute resolution system, and

6 (B) allow alternative methods for deter7 mining liability and compensation for personal

8 injuries other than provider negligence and as9 sessments of damage awards.

10 (3) BINDING ARBITRATION.—In the standards

11 developed under subsection (a), the Secretary shall

12 outline a standard arbitration process that States

13 could adopt to meet Federal criteria (so long as

14 other elements of the State system meet the require15 ments of this section) and that includes the follow16 ing:

17 (A) Decisionmaking by a 3-person arbitra18 tion panel with expertise in medical injury dis19 putes chosen from a roster of qualified and

20 independent arbitrators.

21 (B) A period to permit the discovery of evi22 dence.

23 (C) The right to a hearing.
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1 (D) The right to a decision not later than

2 6 months after the date on which the claim was

3 filed.

4 (E) The right to a written decision.

5 (c) DAMAGES.—When a claim that is subject to reso6 lution in accordance with State systems established under

7 the standards developed under subsection (a) results in a

8 finding of liability, States shall require that the damages

9 awarded adhere to the following requirements:

10 (1) Awards for noneconomic damages shall not

11 exceed $250,000.

12 (2) Awards shall be reduced for any collateral

13 source payments to which the patient is entitled for

14 the medical injury for which the claim was filed.

15 (3) In the case of an award in excess of

16 $100,000, claimants shall accept periodic payment

17 of the amount of such awards that are intended to

18 compensate the claimant for damages expected to be

19 incurred in the future such as lost income and medi20 cal expenses.

21 (4) An award of punitive damages shall not be

22 paid to the claimant, but shall be paid to the State

23 if the State has submitted a plan to the Secretary,

24 and the Secretary has certified such a plan as part

25 of certifying the State medical liability reform in ac-
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1 cordance with section 502, to use such funds to im2 prove the monitoring, disciplining, and educating of

3 health care providers in the State to ensure they

4 meet standards of competency.

5 (d) ACCOUNTABLE HEALTH PLANS.—

6 (1) IN GENERAL.—To be approved by the appli7 cable regulatory authority as an AHP under section

8 112, a health plan shall clearly identify for the pur9 chasers of the plan the individuals or entity that will

10 be responsible for any findings of liability for claims

11 of medical injury.

12 (2) ENFORCEMENT OF CONTRACTS.—A State

13 shall ensure that provisions in AHP contracts that—

14 (A) cite medical practice guidelines, cer15 tified pursuant to section 502, and which shall

16 be followed in rendering services, shall be

17 deemed to supply the standard of care to be

18 employed in determining liability under the

19 State dispute resolution system, and

20 (B) establish particular rules governing the

21 resolution of medical injury claims, consistent

22 with the State dispute resolution system, are re23 quired elements for resolving any claims of

24 medical injury for care provided in accordance

25 with the AHP.
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1 SEC. 502. CERTIFICATION.

2 (a) STATE REFORMS.—Not later than 12 months

3 after the date of enactment of this Act, the Secretary, in

4 consultation with the Attorney General, shall promulgate

5 regulations that establish the criteria and procedures by

6 which the Secretary (or individuals to whom the Secretary

7 has delegated such authority) will determine whether or

8 not a State has met the standards established under sec9 tion 501(a) and any other standards determined necessary

10 by the Secretary.

11 (b) STANDARDS FOR IMPOSING LIABILITY.—Not

12 later than 12 months after the date of enactment of this

13 Act, the Secretary shall promulgate regulations that estab14 lish the criteria to be used for the certification of medical

15 practice guidelines by the Secretary (or individuals to

16 whom the Secretary has delegated such authority), includ17 ing criteria to ensure that such guidelines—

18 (1) reflect up-to-date scientific learning and the

19 judgment of objective experts,

20 (2) are supported by proper documentation, and

21 (3) are accompanied by justifications for the

22 standards established.

23 (c) OTHER REGULATIONS.—Not later than 12

24 months after the date of enactment of this Act, the Sec25 retary of Health and Human Services shall promulgate

26 other regulations necessary to carry out this Act.
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1 SEC. 503. RELATION TO OTHER LAWS.

2 The procedures required under this Act for fairly and

3 quickly resolving claims against health care providers for

4 personal injury shall be exclusive, and no action seeking

5 recovery for any personal injury covered by this Act shall

6 be permitted in any Federal or State court except as ex7 pressly provided herein.

8 Subtitle B—Antitrust Provisions

9 SEC. 511. PUBLICATION OF GUIDELINES FOR ACCOUNT10 ABLE HEALTH PLANS.

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

12 the development and publication of explicit guidelines on

13 the application of antitrust laws to AHPs. The guidelines

14 shall be designed to facilitate AHP development and oper15 ation, consistent with the antitrust laws.

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

17 establish a review process under which an AHP (or organi18 zation that proposes to establish an AHP) may obtain a

19 prompt opinion from the Department of Justice on the

20 AHP’s conformity with the antitrust laws. If the Depart21 ment of Justice determines that an AHP conforms with

22 the antitrust laws, the AHP shall not be liable under such

23 laws regarding the development and operation of the

24 AHP, as reviewed by the Department.

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

26 term ‘‘antitrust laws’’ has the meaning given such term
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1 in subsection (a) of the first section of the Clayton Act

2 (15 U.S.C. 12(a)), except that such term includes section

3 5 of the Federal Trade Commission Act (15 U.S.C. 45)

4 to the extent such section applies to unfair methods of

5 competition.

6 SEC. 512. ISSUANCE OF HEALTH CARE CERTIFICATES OF

7 PUBLIC ADVANTAGE.

8 (a) ISSUANCE AND EFFECT OF CERTIFICATE.—The

9 Attorney General, after consultation with the Secretary,

10 shall issue in accordance with this section a certificate of

11 public advantage to each eligible health care collaborative

12 effort that complies with the requirements in effect under

13 this section on or after the expiration of the 1-year period

14 that begins on the date of the enactment of this Act (with15 out regard to whether or not the Attorney General has

16 promulgated regulations to carry out this section by such

17 date). Such collaborative effort, and the parties to such

18 effort, shall not be liable under any of the antitrust laws

19 for conduct described in such certificate and engaged in

20 by such effort if such conduct occurs while such certificate

21 is in effect.

22 (b) REQUIREMENTS APPLICABLE TO ISSUANCE OF

23 CERTIFICATES.—

24 (1) STANDARDS TO BE MET.—The Attorney

25 General shall issue a certificate to an eligible health
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1 care collaborative effort if the Attorney General

2 finds that—

3 (A) the benefits that are likely to result

4 from carrying out the effort outweigh the re5 duction in competition (if any) that is likely to

6 result from the effort, and

7 (B) such reduction in competition is rea8 sonably necessary to obtain such benefits.

9 (2) FACTORS TO BE CONSIDERED.—

10 (A) WEIGHING OF BENEFITS AGAINST RE11 DUCTION IN COMPETITION.—For purposes of

12 making the finding described in paragraph

13 (1)(A), the Attorney General shall consider

14 whether the collaborative effort is likely—

15 (i) to maintain or to increase the

16 quality of health care,

17 (ii) to increase access to health care,

18 (iii) to achieve cost efficiencies that

19 will be passed on to health care consumers,

20 such as economies of scale, reduced trans21 action costs, and reduced administrative

22 costs,

23 (iv) to preserve the operation of

24 health care facilities located in underserved

25 geographical areas,
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1 (v) to improve utilization of health

2 care resources, and

3 (vi) to reduce inefficient health care

4 resource duplication.

5 (B) NECESSITY OF REDUCTION IN COM6 PETITION.—For purposes of making the finding

7 described in paragraph (1)(B), the Attorney

8 General shall consider—

9 (i) the ability of the providers of

10 health care services that are (or are likely

11 to be) affected by the health care collabo12 rative effort and the entities responsible

13 for making payments to such providers to

14 negotiate societally optimal payment and

15 service arrangements,

16 (ii) the effects of the health care col17 laborative effort on premiums and other

18 charges imposed by the entities described

19 in clause (i), and

20 (iii) the availability of equally effi21 cient, less restrictive alternatives to achieve

22 the benefits that are intended to be

23 achieved by carrying out the effort.

24 (c) ESTABLISHMENT OF CRITERIA AND PROCE25 DURES.—Subject to subsections (d) and (e), not later than
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1 1 year after the date of the enactment of this Act, the

2 Attorney General and the Secretary shall establish jointly

3 by rule the criteria and procedures applicable to the issu4 ance of certificates under subsection (a). The rules shall

5 specify the form and content of the application to be sub6 mitted to the Attorney General to request a certificate,

7 the information required to be submitted in support of

8 such application, the procedures applicable to denying and

9 to revoking a certificate, and the procedures applicable to

10 the administrative appeal (if such appeal is authorized by

11 rule) of the denial and the revocation of a certificate. Such

12 information may include the terms of the health care col13 laborative effort (in the case of an effort in existence as

14 of the time of the application) and implementation plan

15 for the collaborative effort.

16 (d) ELIGIBLE HEALTH CARE COLLABORATIVE EF17 FORT.—To be an eligible health care collaborative effort

18 for purposes of this section, a health care collaborative ef19 fort shall submit to the Attorney General an application

20 that complies with the rules in effect under subsection (c)

21 and that includes—

22 (1) an agreement by the parties to the effort

23 that the effort will not foreclose competition by en24 tering into contracts that prevent health care provid-
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1 ers from providing health care in competition with

2 the effort,

3 (2) an agreement that the effort will submit to

4 the Attorney General annually a report that de5 scribes the operations of the effort and information

6 regarding the impact of the effort on health care

7 and on competition in health care, and

8 (3) an agreement that the parties to the effort

9 will notify the Attorney General and the Secretary of

10 the termination of the effort not later than 30 days

11 after such termination occurs.

12 (e) REVIEW OF APPLICATIONS FOR CERTIFICATES.—

13 Not later than 30 days after an eligible health care col14 laborative effort submits to the Attorney General an appli15 cation that complies with the rules in effect under sub16 section (c) and with subsection (d), the Attorney General

17 shall issue or deny the issuance of such certificate. If, be18 fore the expiration of such 30-day period, the Attorney

19 General fails to issue or deny the issuance of such certifi20 cate, the Attorney General shall be deemed to have issued

21 such certificate.

22 (f) REVOCATION OF CERTIFICATE.—Whenever the

23 Attorney General finds that a health care collaborative ef24 fort with respect to which a certificate is in effect does
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1 not meet the standards specified in subsection (b), the At2 torney General shall revoke such certificate.

3 (g) WRITTEN REASONS; JUDICIAL REVIEW.—

4 (1) DENIAL AND REVOCATION OF CERTIFI5 CATES.—If the Attorney General denies an applica6 tion for a certificate or revokes a certificate, the At7 torney General shall include in the notice of denial

8 or revocation a statement of the reasons relied upon

9 for the denial or revocation of such certificate.

10 (2) JUDICIAL REVIEW.—

11 (A) AFTER ADMINISTRATIVE PROCEED12 ING.—

13 (i) IN GENERAL.—If the Attorney

14 General denies an application submitted or

15 revokes a certificate issued under this sec16 tion after an opportunity for hearing on

17 the record, then any party to the health

18 care collaborative effort involved may com19 mence a civil action, not later than 60 days

20 after receiving notice of the denial or rev21 ocation, in an appropriate district court of

22 the United States for review of the record

23 of such denial or revocation.

24 (ii) CERTIFIED COPY OF RECORD.—As

25 part of the Attorney General’s answer, the
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1 Attorney General shall file in such court a

2 certified copy of the record on which such

3 denial or revocation is based. The findings

4 of fact of the Attorney General may be set

5 aside only if found to be unsupported by

6 substantial evidence in such record taken

7 as a whole.

8 (B) DENIAL OR REVOCATION WITHOUT AD9 MINISTRATIVE PROCEEDING.—If the Attorney

10 General denies an application submitted or re11 vokes a certificate issued under this section

12 without an opportunity for hearing on the

13 record, then any party to the health care col14 laborative effort involved may commence a civil

15 action, not later than 60 days after receiving

16 notice of the denial or revocation, in an appro17 priate district court of the United States for de

18 novo review of such denial or revocation.

19 (h) EXEMPTION.—A person shall not be liable under

20 any of the antitrust laws for conduct necessary—

21 (1) to prepare, agree to prepare, or attempt to

22 agree to prepare an application to request a certifi23 cate under this section, or
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1 (2) to attempt to enter into any health care col2 laborative effort with respect to which such a certifi3 cate is in effect.

4 (i) DEFINITIONS.—In this section:

5 (1) The term ‘‘antitrust laws’’—

6 (A) has the meaning given such term in

7 subsection (a) of the first section of the Clayton

8 Act (15 U.S.C. 12(a)), except that such term

9 includes section 5 of the Federal Trade Com10 mission Act (15 U.S.C. 45) to the extent such

11 section applies to unfair methods of competi12 tion, and

13 (B) includes any State law similar to the

14 laws referred to in subparagraph (A).

15 (2) The term ‘‘certificate’’ means a certificate

16 of public advantage authorized to be issued under

17 subsection (a).

18 (3) The term ‘‘health care collaborative effort’’

19 means an agreement (whether existing or proposed)

20 between 2 or more providers of health care services

21 that is entered into solely for the purpose of sharing

22 in the provision of health care services and that in23 volves substantial integration or financial risk-shar24 ing between the parties, but does not include the ex25 changing of information, the entering into of any
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1 agreement, or the engagement in any other conduct

2 that is not reasonably required to carry out such

3 agreement.

4 (4) The term ‘‘health care services’’ includes

5 services related to the delivery or administration of

6 health care services.

7 (5) The term ‘‘liable’’ means liable for any civil

8 or criminal violation of the antitrust laws.

9 (6) The term ‘‘provider of health care services’’

10 means any individual or entity that is engaged in the

11 delivery of health care services in a State and that

12 is required by State law or regulation to be licensed

13 or certified by the State to engage in the delivery of

14 such services in the State.

15 Subtitle C—Administrative Cost

16 Savings

17 SEC. 521. ESTABLISHMENT OF STANDARDS.

18 (a) IN GENERAL.—The Secretary shall establish,

19 after consultation with the American National Standards

20 Institute, data and transaction standards, conventions,

21 and requirements that permit the electronic interchange

22 of any health care data the Secretary determines nec23 essary for the efficient and effective administration of the

24 health care system.
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1 (b) TIMETABLE AND COVERAGE.—The Secretary

2 shall establish standards, conventions, and requirements

3 for categories of health care data in the following order

4 and at the appropriate time (as determined by the Sec5 retary):

6 (1) Financial and administrative transactions,

7 including enrollment, eligibility, claims, and claims

8 status.

9 (2) Quality measurement indicators, including

10 such data necessary to satisfy the requirements

11 under section 521.

12 (3) Patient care records.

13 (c) PRIVACY AND CONFIDENTIALITY STANDARDS.—

14 In developing the standards, conventions, and require15 ments under subsection (a), the Secretary shall ensure the

16 protection of privacy of participants in the health care sys17 tem and ensure the confidentiality in the data interchange

18 system.

19 SEC. 522. ENFORCEMENT.

20 (a) AHPS.—An AHP may not be certified by the ap21 propriate regulatory authority unless such AHP complies

22 with the standards established by the Secretary under sec23 tion 521.

24 (b) HEALTH CARE PROVIDERS.—AHPs may only

25 contract with or employ those health care providers that
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1 comply with the electronic standards established by the

2 Secretary or submit standard paper forms with the same

3 data elements to a clearinghouse which forwards the data

4 electronically to AHPs.

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