Calendar No. 427

103D CONGRESS

2D SESSION S. 2096

AN ACT

To improve private health insurance, to provide eqother purposes. health care cost reduction measures, and for form Federal health care programs, to provide uitable tax treatment of health insurance, to reMAY 16, 1994

Read the second time and placed on the calendar
II

Calendar No. 427

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

MAY 16, 1994

Read the second time and placed on the calendar

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

2 this Act is as follows:

Sec. 1. Short title; table of contents; definitions.

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.
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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

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—
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1 (A) an employer-sponsored health plan, or

2 (B) the medicare program under title

3 XVIII of the Social Security Act.

4 The term ‘‘eligible individual’’ includes the spouse

5 and any dependent of such individual unless such

6 spouse or dependent is not an eligible individual.

7 (4) ELIGIBLE SMALL EMPLOYER.—The term

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

9 calendar year, an employer that normally employs

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

11 business day. For the purposes of this paragraph,

12 the term ‘‘employee’’ includes a self-employed indi13 vidual.

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

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

16 medical service policy or certificate, hospital or medi17 cal service plan contract, or health maintenance or18 ganization group contract and, in States which have

19 distinct licensure requirements, a multiple employer

20 welfare arrangement, but does not include any of the

21 following offered by an insurer—

22 (A) accident only, dental only, disability

23 only insurance, or long-term care only insur24 ance;
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1 (B) coverage issued as a supplement to li2 ability insurance or Medicare;

3 (C) workmen’s compensation or similar in4 surance; or

5 (D) automobile medical-payment insur6 ance.

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

8 person that offers a health plan to an eligible small

9 employer or eligible individual.

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

11 the Secretary of Health and Human Services.

12 TITLE I—IMPROVING PRIVATE

13 HEALTH INSURANCE

14 Subtitle A—Federal and State

15 Roles

16 SEC. 101. FEDERAL REFORM AND STATE IMPLEMENTA17 TION.

18 (a) CERTIFICATION OF STATE HEALTH REFORM

19 PROGRAMS.—

20 (1) CERTIFICATION.—The Secretary shall es21 tablish by regulation a process by which each State

22 shall submit a health reform program to the Sec23 retary, and the Secretary shall determine and certify

24 whether such State program is consistent with the

25 requirements of section 103.
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1 (2) PERIODIC REVIEW.—The Secretary may,

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

3 such program has been originally certified to ensure

4 continued compliance with section 103 and may de5 certify such program based on such review.

6 SEC. 102. APPLICABLE REGULATORY AUTHORITY FOR

7 HEALTH PLANS.

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

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

10 individuals residing in such State meet the requirements

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

12 (b) EXCEPTIONS.—

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

14 shall ensure that health plans established pursuant

15 to the requirements of the Employee Retirement In16 come Security Act of 1974 (29 U.S.C. 1001 et seq.)

17 meet the requirements under section 112 for AHPs.

18 (2) INADEQUATE STATE PLANS.—The Secretary

19 shall ensure that health plans in a State meet the

20 requirements of sections 111 and 112, as applicable,

21 if the Secretary does not certify the health reform

22 program submitted by such State or if the Secretary

23 decertifies the State’s program.
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1 (c) EFFECTIVE DATE.—The requirements of this

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

3 on or after the later of—

4 (1) January 1, 1996; or

5 (2) in the case of a State which the Secretary

6 identifies as requiring State legislation in order to

7 implement this title, the first day of the first cal8 endar quarter beginning after the close of the first

9 regular legislative session of the State legislature

10 that begins after enactment of this Act, but not be11 fore January 1, 1996.

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

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

14 such session shall be deemed to be a regular legislative

15 session of the State legislature.

16 SEC. 103. STATE HEALTH REFORM PROGRAM REQUIRE17 MENTS.

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

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

20 reform program must include the following requirements,

21 in addition to any other requirements established by the

22 Secretary by regulation for carrying out this Act:

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

24 shall establish health plan market areas, ensuring

25 that—
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1 (A) every resident resides within 1 such

2 market area based on place of residence;

3 (B) market areas do not overlap;

4 (C) a metropolitan statistical area is not

5 included in more than 1 such market area; and

6 (D) the maximum number of State resi7 dents have the opportunity to select from com8 peting health plans and AHPs that are likely to

9 be available in such market areas.

10 (2) INTERSTATE COORDINATION.—A State shall

11 coordinate its health reform program with the pro12 grams of bordering and nearby States so that—

13 (A) 1 health plan market area covers a

14 metropolitan statistical area which crosses State

15 borders; and

16 (B) residents of a State may have access

17 to providers of health care services of bordering

18 or nearby States.

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

20 ensure that certified health plans and AHPs offered

21 to residents of the State (other than those plans reg22 ulated by the Secretary of Labor under section

23 102(b)(1)) meet the requirements of section 111 and

24 112, respectively.
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1 (4) NO BENEFIT MANDATES, ANTIMANAGED

2 CARE REQUIREMENTS.—A State shall ensure that

3 AHPs are not—

4 (A) required to cover any service in the

5 standard benefits package not otherwise re6 quired by the Secretary under section 113;

7 (B) prohibited or limited from including fi8 nancial incentives for enrollees to use the serv9 ices of participating providers;

10 (C) prohibited or limited from restricting

11 coverage of services to those—

12 (i) provided by a participating pro13 vider; or

14 (ii) authorized by a designated partici15 pating provider;

16 (D) restricted in the amount of payment

17 made to participating providers for services pro18 vided to enrollees or restricted in the ability of

19 such AHPs to pay participating providers for

20 services provided to enrollees on a per-enrollee

21 basis;

22 (E) prohibited or limited from restricting

23 the location, number, type, or professional

24 qualifications of participating providers;
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1 (F) prohibited or limited from requiring

2 that services be authorized by a primary care

3 physician selected by the enrollee from a list of

4 available participating providers;

5 (G) prohibited or limited in the use of uti6 lization review procedures or criteria;

7 (H) required to make public utilization re8 view procedures or criteria;

9 (I) prohibited or limited from determining

10 the location or hours of operation of a utiliza11 tion review, provided that emergency services

12 furnished during the hours in which the utiliza13 tion review program is not open are not subject

14 to utilization review;

15 (J) required to pay providers for the ex16 penses associated with responding to requests

17 for information needed to conduct utilization re18 view;

19 (K) restricted in the amount of payment

20 made for the conduct of utilization review;

21 (L) restricted in the access to medical in22 formation or personnel required to conduct uti23 lization review;
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1 (M) required to define utilization review as

2 the practice of medicine or another health care

3 profession; or

4 (N) required to ensure that utilization re5 view be conducted—

6 (i) by a resident of the State in which

7 the treatment is to be offered or by an in8 dividual licensed in such State, or

9 (ii) by a physician in any particular

10 specialty or with any board certified spe11 cialty of the same medical specialty as the

12 provider whose services are being rendered.

13 (5) SMALL BUSINESS PURCHASING POOL.—

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

15 that small group purchasing pools meet the re16 quirements of section 121.

17 (B) STATE-SPONSORED POOLS.—If, any

18 market area established by the State (or market

19 area that is within the borders of more than 1

20 State) does not have a small group purchasing

21 group in operation that meets the requirements

22 of section 121, the State shall sponsor such a

23 pool meeting the requirements of section 121.
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1 (6) HEALTH DISCOUNT PROGRAM.—A State

2 shall establish a health discount program meeting

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

4 (7) MEDICAL LIABILITY REFORM.—A State

5 shall ensure that medical liability laws in the State

6 meet the requirements of subtitle A of title V.

7 (b) STATE FLEXIBILITY.—

8 (1) IN GENERAL.—The Secretary shall ensure

9 that State health reform programs are consistent

10 with—

11 (A) a nationwide private health insurance

12 system;

13 (B) cost control based on cost-conscious

14 consumers and fair competition among compet15 ing health plans based on the cost and quality

16 of such plans; and

17 (C) freedom for residents to choose and

18 pay for health care providers and health insur19 ance as such residents wish.

20 (2) FLEXIBILITY.—The Secretary may allow

21 States to propose alterations to the framework of

22 this Act if such alterations are consistent with para23 graph (1), do not increase the Federal budget deficit

24 in any year, and—
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1 (A) the State had enacted a State health

2 reform program prior to enactment of this Act

3 that supercedes provisions of this Act; or

4 (B) the State can demonstrate that provi5 sions of this Act do not provide sufficient access

6 to health care services for residents of a portion

7 of the State (particularly in underserved rural

8 areas) and alterations to the State health re9 form program will improve access without jeop10 ardizing the quality of health care and without

11 undue State regulation of health care providers.

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

13 may not certify any State health reform program

14 which proposes to create a single payer health insur15 ance plan in any portion of the State.

16 (c) ENFORCEMENT.—If a State does not have a cer17 tified State health reform program, Federal spending for

18 health discounts in the State under title III shall be lim19 ited to the level of Federal spending that would have oc20 curred in such State under title XIX of the Social Security

21 Act (42 U.S.C. 1396 et seq.) if this Act had not been en22 acted.
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1 Subtitle B—Health Plan

2 Requirements

3 SEC. 111. CERTIFIED HEALTH PLAN REQUIREMENTS.

4 (a) IN GENERAL.—To be certified as meeting the re5 quirements of this section, a health plan shall meet the

6 requirements of the following subsections.

7 (b) LIMITATION IN PREEXISTING CONDITION

8 CLAUSES.—

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

10 the requirements of this subsection, a health plan

11 may, subject to the succeeding provisions of this

12 subsection, exclude coverage with respect to services

13 related to treatment of a preexisting condition, but

14 the period of such exclusion may not exceed 6

15 months. The exclusion of coverage shall not apply to

16 services furnished to newborns.

17 (2) CREDITING OF PREVIOUS COVERAGE.—

18 (A) IN GENERAL.—A health plan shall pro19 vide that if an individual under such plan is in

20 a period of continuous coverage (as defined in

21 subparagraph (B)) with respect to particular

22 services as of the date of initial coverage under

23 such plan, any period of exclusion of coverage

24 with respect to a preexisting condition for such

25 services or type of services shall be reduced by
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1 1 month for each month in the period of contin2 uous coverage.

3 (B) PERIOD OF CONTINUOUS COVERAGE.—

4 For purposes of this paragraph, the term ‘‘pe5 riod of continuous coverage’’ means, with re6 spect to particular services, the period begin7 ning on the date an individual is enrolled under

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

9 Security Act, or other health benefits arrange10 ment which provides benefits with respect to

11 such services and ends on the date the individ12 ual is not so enrolled for a continuous period of

13 more than 3 months.

14 (3) PREEXISTING CONDITION.—For purposes of

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

16 means, with respect to coverage under a health plan

17 issued, a condition which has been diagnosed or

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

19 before the first date of such coverage (without re20 gard to any waiting period).

21 (c) SMALL GROUP MARKET REFORM.—To be cer22 tified as meeting the requirements of this subsection, a

23 health plan shall meet the following:

24 (1) GUARANTEED ELIGIBILITY.—
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1 (A) IN GENERAL.—No health plan may ex2 clude from coverage—

3 (i) any eligible individual who does not

4 qualify for assistance under section 311, or

5 (ii) any eligible employee to whom

6 coverage is made available by an eligible

7 small employer.

8 (B) WAITING PERIODS.—Subparagraph

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

10 employee is excluded from coverage under the

11 health plan solely by reason of a requirement

12 applicable to all employees that a minimum pe13 riod of service with the eligible small employer

14 is required before the employee is eligible for

15 such coverage.

16 (2) GUARANTEED AVAILABILITY.—

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

18 to any eligible small employer or eligible indi19 vidual in a health plan market area shall be

20 made available to all eligible small employers

21 and eligible individuals in the health plan mar22 ket area.

23 (B) STATE OPTION.—To ensure availabil24 ity, each State may require all health plans of25 fered to eligible small employers or eligible indi-
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1 viduals in a health plan market area be made

2 available through small group purchasing pools,

3 and that such pools be open to all eligible small

4 employers and eligible individuals.

5 (3) GUARANTEED RENEWABILITY.—

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

7 an eligible small employer or eligible individual

8 shall be renewed, at the option of the eligible

9 small employer or eligible individual, unless the

10 plan is terminated for a reason specified in sub11 paragraph (B) or (C).

12 (B) TERMINATION OF SMALL EMPLOYER

13 OR INDIVIDUAL BUSINESS.—An insurer is not

14 required to renew a health plan with respect to

15 an eligible small employer or such an eligible in16 dividual, as the case may be, if the insurer—

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

18 plans issued to eligible small employers or

19 eligible individuals, as the case may be, in

20 a health plan market area; and

21 (ii) provides notice to the applicable

22 regulatory authority in the State and to

23 each eligible small employer or eligible in24 dividual covered under a plan of such ter-
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1 mination at least 180 days before the date

2 of expiration of the plan.

3 In the case of such a termination, the insurer

4 may not provide for issuance of any health in5 surance plan to an eligible small employer or el6 igible individual, as the case may be, in the

7 State during the 5-year period beginning on the

8 date of termination of the last plan not so re9 newed.

10 (C) GROUNDS FOR REFUSAL TO RENEW.—

11 (i) IN GENERAL.—An insurer may

12 refuse to renew, or may terminate, a

13 health plan only for—

14 (I) nonpayment of premiums,

15 (II) fraud or misrepresentation,

16 or

17 (III) failure to maintain mini18 mum participation rates (consistent

19 with clause (ii).

20 (ii) MINIMUM PARTICIPATION

21 RATES.—An insurer may require, with re22 spect to a health plan issued to an eligible

23 small employer, that a minimum percent24 age of eligible employees who do not other25 wise have health plan coverage are enrolled
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1 in such plan if such percentage is applied

2 uniformly to all plans offered to employers

3 of comparable size.

4 (4) PREMIUMS.—

5 (A) LIMITATION ON PREMIUM VARI6 ATION.—

7 (i) IN GENERAL.—The premium

8 charged by an insurer for each type of ben9 efits package offered as a certified health

10 plan to any eligible employee or eligible in11 dividual in a health plan market area with12 in a class of family enrollment and age

13 band may not exceed the premium charged

14 for the same benefits package offered to

15 any other eligible employee or eligible indi16 vidual by more than 20 percent.

17 (ii) ENROLLMENT CLASS.—For pur18 poses of this subparagraph, the classes of

19 family enrollment are—

20 (I) individual;

21 (II) couple;

22 (III) individual with children;

23 and

24 (IV) couple with children.
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1 (iii) AGE BANDS.—The Secretary shall

2 establish appropriate age bands with re3 spect to principal enrollees for determining

4 the compliance with this subparagraph.

5 (B) RISK ADJUSTMENTS.—

6 (i) IN GENERAL.—Premiums paid to

7 health plans offered in the small group

8 market in a health plan market area shall

9 be adjusted to reflect the relative risk of

10 enrollees in such plan compared to all eligi11 ble employees and eligible individuals in

12 the health plan market area.

13 (ii) MODEL PROGRAMS.—The Sec14 retary shall establish model risk adjust15 ment programs that States may adopt to

16 ensure compliance with clause (i).

17 (d) PARITY COVERAGE OF SEVERE MENTAL ILL18 NESSES.—

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

20 the requirements of this subsection, a health plan

21 shall provide parity coverage for all severe mental ill22 nesses (as defined in regulations by the Secretary),

23 including parity cost-sharing for services necessary

24 to treat such illnesses.

25 (2) DEFINITION.—
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1 (A) IN GENERAL.—Except as provided in

2 subparagraph (B), for purposes of paragraph

3 (1), the Secretary shall define severe mental ill4 ness through diagnosis, disability, and duration,

5 and include in such definition the following dis6 orders with psychotic symptoms:

7 (i) Schizophrenia.

8 (ii) Schizoaffective disorder.

9 (iii) Manic depressive disorder.

10 (iv) Autism.

11 (v) Severe forms of other disorders

12 such as major depression, panic disorder,

13 and obsessive compulsive disorder.

14 (B) CHILDREN.—For purposes of para15 graph (1), the Secretary shall define severe

16 mental illness for individuals under age 22 to

17 also include—

18 (i) psychotic disorders;

19 (ii) attention deficit hyperactivity dis20 order;

21 (iii) autism and pervasive development

22 disorder;

23 (iv) severe childhood eating disorders;

24 (v) Tourette’s syndrome; and
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1 (vi) any behavioral disorder that

2 would result in conduct which may place

3 the individual or another individual in dan4 ger of death or serious bodily injury.

5 (3) DIAGNOSIS.—For purposes of paragraph

6 (1), services necessary to properly diagnose an indi7 vidual’s mental health disorder shall be considered

8 services necessary to treat a severe mental illness.

9 SEC. 112. ADDITIONAL REQUIREMENTS FOR ACCOUNTABLE

10 HEALTH PLANS.

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

12 health plan must meet the requirements of the following

13 subsections of this section in addition to the requirements

14 of section 111.

15 (b) GENERAL REQUIREMENTS.—A health plan

16 shall—

17 (1) provide all medically necessary and effective

18 health benefits (as covered by the benefits package

19 specified in an AHP contract) for a fixed premium

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

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

22 the general public objective measures of the quality

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

24 health care on the health status of enrollees, and en-
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1 rollee satisfaction with the plan’s cost, quality, and

2 service.

3 (c) CAPACITY LIMITS AND NONDISCRIMINATION.—

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

5 the applicable regulatory authority to impose a limit

6 on enrollment if enrollment beyond the limit is—

7 (A) not discriminatory and is based on a

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

9 (B) is necessary to ensure quality of care

10 for enrollees.

11 (2) PROHIBITION OF DISCRIMINATION BASED

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

13 limit, or condition the coverage under (or benefits

14 of) the plan based on the health status of the indi15 vidual, claims experience of an individual, receipt of

16 health care by an individual, receipt of public sub17 sidies by an individual, lack of evidence of insurabil18 ity of an individual, or any other characteristic of an

19 individual that may relate to the utilization of health

20 care services.

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

22 discriminate in the drawing of service area bound23 aries on the basis of race, ethnicity, socio-economic

24 status, age, or anticipated need for health services.
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1 (d) ADJUSTED COMMUNITY RATING IN THE SMALL

2 GROUP MARKET.—

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

4 standard premium for each type of benefits package

5 offered to eligible employees of eligible small employ6 ers and eligible individuals in a health plan market

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

8 class of family enrollment and the age of the prin9 cipal enrollee.

10 (2) EXEMPTION FOR SMALL GROUP PURCHAS11 ING POOLS.—The standard premium charged for a

12 health plan offered to eligible employees of eligible

13 small employers and eligible individuals through a

14 small group purchasing pool may be lower than the

15 premium required pursuant to paragraph (1) if at

16 least 30 percent of all health plan premiums paid in

17 the small group market in the health plan market

18 area are made through such a pool.

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

20 subsection, the classes of family enrollment are—

21 (A) individual;

22 (B) couple;

23 (C) individual with children; and

24 (D) couple with children.
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1 (4) AGE BANDS.—The Secretary may establish

2 appropriate age bands with respect to principal en3 rollees for determining the compliance with this sub4 section.

5 (e) QUALITY ASSURANCE.—

6 (1) INTERNAL QUALITY ASSURANCE AND QUAL7 ITY IMPROVEMENT PROGRAM.—A health plan offer8 ing covered services that must or may be obtained

9 from participating providers must administer an in10 ternal quality assurance and quality improvement

11 program that—

12 (A) meets the following criteria:

13 (i) Is clearly identified and fully ex14 plained to all participants in the program.

15 (ii) Is coordinated with other medical

16 management activities.

17 (iii) Communicates findings to provid18 ers and consumers with the primary goal

19 of improving care outcomes.

20 (iv) Measures the impact of such find21 ings on the care delivered by providers.

22 (v) Documents the monitoring and

23 evaluation of the quality of care to identify

24 areas for improvement.
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1 (vi) Develops and implements explicit

2 strategies to improve care.

3 (vii) Collects and analyzes data to fa4 cilitate evaluation of improvement strate5 gies.

6 (viii) Measures the effect of such

7 strategies on care outcomes and the quality

8 of care.

9 (ix) Incorporates a credentialing proc10 ess that encompasses initial credentialing,

11 recredentialing, recertifying or reappoint12 ment of providers, or both.

13 (x) Is accountable directly to the gov14 erning body of the AHP or, in instances in

15 which the governing body’s participation in

16 quality assurance is not direct, to a des17 ignated committee of senior management;

18 or

19 (B) is accredited by an independent orga20 nization, such as the National Committee for

21 Quality Assurance, that conducts objective qual22 ity reviews based upon comparable criteria.

23 (2) MEASURING AND COMPARING QUALITY.—

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

25 comply with a process, established by the Sec-
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1 retary by regulation, by which such plan shall

2 provide to the appropriate regulatory authority

3 (in an electronic form) standardized informa4 tion necessary to—

5 (i) objectively measure and evaluate

6 the performance of such plan;

7 (ii) fairly compare the performance of

8 such plan with other AHPs; and

9 (iii) assess the health status of enroll10 ees in such plan to allow fair risk adjust11 ments among competing AHPs.

12 (B) REQUIRED DATA.—The Secretary shall

13 establish by regulation the necessary informa14 tion such plan must provide, including—

15 (i) quality measures, especially meas16 ures of health outcomes, including the clin17 ical health, functional status, and well

18 being of enrollees before and after treat19 ments and other services provided by the

20 plan;

21 (ii) measures of patient access and

22 satisfaction;

23 (iii) membership and utilization infor24 mation;

25 (iv) financial information;
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1 (v) health plan management activities

2 information; and

3 (vi) any other information determined

4 to be necessary by the Secretary for ensur5 ing fair competition among AHPs based on

6 cost and quality.

7 (C) USE OF DATA.—

8 (i) IN GENERAL.—The Secretary shall

9 establish by regulation a process by which

10 such standardized information may be dis11 tributed by the appropriate regulatory au12 thority in a manner that promotes ac13 countability to AHP enrollees and fair

14 competition among AHPs based on cost

15 and quality.

16 (ii) WIDE ACCESS.—The Secretary

17 shall ensure that small business purchasing

18 pools and State health discount programs

19 have access to such information to ensure

20 fair competition among AHPs in those

21 such pools and health discount programs.

22 (iii) PATIENT CONFIDENTIALITY.—

23 The Secretary shall ensure by regulation

24 that the confidentiality of medical records

25 of individual enrollees is protected.
29

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1 (f) MARKET CONDUCT REQUIREMENTS.—

2 (1) REQUIRED WRITTEN MATERIALS.—A health

3 plan shall provide written descriptions of the

4 plan’s—

5 (A) covered benefits, services, and proce6 dures that clearly and fully describe any and all

7 limitations of coverage, use of participating pro8 viders and other limits on enrollees’ use of serv9 ices; and

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

11 copayments, deductibles, coinsurance, and es12 tablished aggregate maximums on out-of-pocket

13 costs.

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

15 promotional materials, and other communications

16 with enrollees of the public must be factually accu17 rate and understandable to diverse populations.

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

19 maintain procedures for hearing and resolving grievances

20 between the plan (and any entity or individual through

21 which the plan provides health care services) and the en22 rollees.

23 (h) POINT OF SERVICE PLAN.—A health plan offer24 ing covered services that must be obtained from participat25 ing providers shall make available an alternative insurance
30

•S 2096 PCS

1 plan that provides for a point of service option under

2 which an enrollee may select any licensed health care pro3 vider to obtain services and such a plan shall pay such

4 provider not less than 50 percent of the cost of such pro5 vider’s services. A health plan may charge a higher pre6 mium for such an alternative insurance plan.

7 (i) FINANCIAL SOLVENCY.—

8 (1) IN GENERAL.—A health plan shall be re9 quired to demonstrate evidence of adequate capital10 ization and other indicators of fiscal health, includ11 ing—

12 (A) total assets greater than total

13 unsubordinated liabilities;

14 (B) sufficient cash flow and adequate li15 quidity to meet obligations as such obligations

16 become due;

17 (C) an insolvency protection plan; and

18 (D) insurance or other acceptable arrange19 ments to protect the health plan against liabil20 ity and casualty risks, including professional li21 ability.

22 (2) INSOLVENCY.—

23 (A) Enrollees in the health plan shall be

24 held harmless from incurring liability for any
31

•S 2096 PCS

1 fees that are the legal obligation of an insolvent

2 plan.

3 (B) A health plan offering coverage in a

4 market area in which an AHP has become in5 solvent shall be required to accept enrollment of

6 enrollees of such insolvent AHP, subject to ca7 pacity limits.

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

9 shall comply with requirements established pursuant to

10 section 501(d).

11 (k) ADMINISTRATIVE COST REDUCTION.—A health

12 plan shall comply with the requirements established pursu13 ant to subtitle C of title V.

14 (l) PARTICIPATION IN HEALTH DISCOUNT PRO15 GRAMS.—Except for health plans established pursuant to

16 the Employee Retirement Income Security Act of 1974

17 (29 U.S.C. 1001 et seq.), a health plan shall comply with

18 the requirements established by the State in accordance

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

20 individuals eligible for health discounts.

21 SEC. 113. STANDARD BENEFITS.

22 (a) STANDARD BENEFITS PACKAGE.—The Secretary

23 shall promulgate regulations establishing a standard bene24 fits package meeting the following requirements:
32

•S 2096 PCS

1 (1) COVERAGE.—The standard benefits package

2 shall cover—

3 (A) inpatient and outpatient hospital serv4 ices;

5 (B) physician services;

6 (C) diagnostic services and tests;

7 (D) outpatient prescription drugs;

8 (E) preventive services; and

9 (F) such other services as determined nec10 essary and appropriate by the Secretary.

11 (2) PARITY COVERAGE OF SEVERE MENTAL ILL12 NESSES.—The standard benefits package shall be

13 consistent with the requirement for parity coverage

14 of severe mental illnesses, pursuant to section

15 111(d).

16 (3) COST SHARING.—The Secretary shall estab17 lish for the standard benefits package—

18 (A) a cost-sharing arrangement consistent

19 with health care delivered by health mainte20 nance organizations, including an annual limit

21 on an enrollee’s out-of-pocket expenses (exclud22 ing an enrollee’s expenses for services provided

23 under an AHP point of service option);

24 (B) a cost-sharing arrangement consistent

25 with health care covered by fee-for-service
33

•S 2096 PCS

1 health insurance which is actuarially equivalent

2 to the arrangement established under subpara3 graph (A); and

4 (C) any other actuarially equivalent cost5 sharing arrangements consistent with other

6 health care delivery systems.

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

8 For each cost-sharing arrangement established under sub9 section (a)(3), the Secretary shall also establish a nominal

10 cost-sharing benefits package for purposes of determining

11 health discounts for poor eligible individuals and poor eli12 gible employees under part I of subtitle B of title III. Such

13 benefits packages shall cover the same services as the

14 standard benefits package but with cost-sharing require15 ments that are not excessive for such individuals and em16 ployees.

17 (c) ALTERNATIVE BENEFITS PACKAGE.—For each

18 cost-sharing arrangement established under subsection

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

20 benefits package that may be necessary for determining

21 health discounts for low income eligible individuals and

22 low income eligible employees under part I of subtitle B

23 of title III. Such alternative benefits packages shall cover

24 the same services as the standard benefits package but

25 with cost-sharing requirements that are sufficient to de-
34

•S 2096 PCS

1 crease the average actuarial value of the standard benefits

2 package by 50 percent.

3 Subtitle C—Improved Health Plan

4 Delivery

5 SEC. 121. SMALL GROUP PURCHASING POOLS.

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

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

8 process for eligible employees of eligible small employers

9 and eligible individuals who are not entitled to health dis10 counts under part I of subtitle B of title III to have the

11 opportunity to select annually from among competing

12 AHPs offering the standard benefits package (and, for

13 poor eligible employees, the nominal cost-sharing benefits

14 package) at an adjusted community rate for the coverage

15 period.

16 (b) REQUIREMENTS.—Each small group purchasing

17 pool shall—

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

19 corporation serving eligible small employers and eli20 gible individuals in a health plan market area;

21 (2) contract with eligible small employers and

22 eligible individuals to provide services for a defined

23 period for a fixed administrative fee per coverage pe24 riod;
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•S 2096 PCS

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

2 by members of the pool;

3 (4) contract only with AHPs capable of provid4 ing coverage to the members of the pool throughout

5 the health plan market area;

6 (5) require all AHPs to offer at least the stand7 ard benefits package and any other package of bene8 fits as specified by the pool, and, if an AHP offers

9 covered services that must be obtained from partici10 pating providers, the alternative point of service in11 surance plan for such AHP;

12 (6) provide information to members concerning

13 the cost and quality of the competing AHPs offered

14 through the pool; and

15 (7) offer to provide administrative services to

16 members for the collection of premiums to be for17 warded to AHPs.

18 (c) PROHIBITIONS.—Small group purchasing groups

19 may not—

20 (1) decline to contract with an AHP if the in21 surer seeks to offer to members of the pool and the

22 plan meets the requirements of subsection (b);

23 (2) decline membership to any eligible small

24 employer or eligible individual located in the health

25 plan market area;
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•S 2096 PCS

1 (3) negotiate AHP premiums on behalf of mem2 bers; or

3 (4) negotiate payment rates for health care pro4 viders contracting with AHPs offered through the

5 pool.

6 SEC. 122. EMPLOYER RESPONSIBILITY.

7 (a) AHP AVAILABILITY.—

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

9 (A) offer to each eligible employee enroll10 ment in an AHP providing a standard benefits

11 package that serves the area in which the em12 ployee resides, both on an individual basis, and,

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

14 family basis, and, if an AHP offers covered

15 services that must be obtained from participat16 ing providers, the alternative point of service in17 surance plan for such AHP;

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

19 for deduction from wages or other compensa20 tion of amount of any premiums due for such

21 enrollment (taking into account the amount of

22 any employer contribution); and

23 (C) if such employer is an eligible small

24 employer, also make available an AHP provid25 ing the nominal cost-sharing benefits package.
37

•S 2096 PCS

1 Nothing in this paragraph shall be construed as pre2 venting an employer from offering, or an employee

3 from electing enrollment in, an AHP that serves the

4 area in which the employee is employed, rather than

5 the area in which the employee resides.

6 (2) SMALL EMPLOYERS.—Each eligible small

7 employer may comply with the requirements of this

8 subsection by participating in a small group pur9 chasing pool.

10 (b) ENFORCEMENT.—

11 (1) CIVIL MONEY PENALTIES FOR FAILURE TO

12 OFFER COVERAGE OR PROVIDE FOR WAGE DEDUC13 TION.—Failure to offer coverage or provide for de14 duction from wages required under subsection (a)(1)

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

16 $500) for each day in which the violation continues.

17 (2) DIRECT ENFORCEMENT.—The obligation to

18 offer coverage under subsection (a) with respect to

19 an eligible employee is directly enforceable by civil

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

21 employee substantially prevails, the employee is enti22 tled to reasonable attorneys’ fees.
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1 TITLE II—TAX AND

2 ENFORCEMENT PROVISIONS

3 SEC. 200. AMENDMENT OF 1986 CODE.

4 Except as otherwise expressly provided, whenever in

5 this title an amendment or repeal is expressed in terms

6 of an amendment to, or repeal of, a section or other provi7 sion, the reference shall be considered to be made to a

8 section or other provision of the Internal Revenue Code

9 of 1986.

10 Subtitle A—General Tax Provisions

11 SEC. 201. CERTAIN EMPLOYER HEALTH PLAN CONTRIBU12 TIONS INCLUDED IN INCOME.

13 (a) EXCLUSION FOR EMPLOYER HEALTH PLAN CON14 TRIBUTIONS LIMITED TO CONTRIBUTIONS TO ACCOUNT15 ABLE HEALTH PLANS OR CERTIFIED HEALTH PLANS.—

16 (1) IN GENERAL.—Section 106 (relating to con17 tributions by employer to accident and health plans)

18 is amended to read as follows:

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

20 PLANS.

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

22 an employee does not include employer-provided coverage

23 under an accountable health plan (within the meaning of

24 section 112 of the Health Care Reform Act of 1994) or
39

•S 2096 PCS

1 employer-provided coverage under a certified health plan

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

3 (2) CLERICAL AMENDMENT.—The table of sec4 tions of part III of subchapter B of chapter 1 is

5 amended by striking the item relating to section 106

6 and inserting the following new item:

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

7 (b) INCLUSION IN INCOME.—

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

9 chapter 1 (relating to items specifically included in

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

11 following new section:

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

13 PLANS.

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

15 if—

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

17 health plan or a certified health plan at any time

18 during any month, and

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

20 with respect to the employee to such plan for such

21 month,

22 the gross income of such employee for the taxable year

23 which includes such month shall include an amount equal

24 to such excess employer contribution for such month.
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•S 2096 PCS

1 ‘‘(b) EXCESS EMPLOYER CONTRIBUTION DE2 FINED.—

3 ‘‘(1) IN GENERAL.—For purposes of this sec4 tion, the term ‘excess employer contribution’ means,

5 with respect to an employee enrolled in an account6 able health plan or a certified health plan for any

7 month, the excess of—

8 ‘‘(A) the employer contribution to such

9 plan for such month, over

10 ‘‘(B) the applicable percentage of the ap11 plicable dollar limit for such employee for such

12 month.

13 ‘‘(2) APPLICABLE DOLLAR LIMIT.—

14 ‘‘(A) IN GENERAL.—For purposes of para15 graph (1) and except as provided in subpara16 graph (B), the applicable dollar limit for an em17 ployee for any month is equal to—

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

19 $340,

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

21 $690,

22 ‘‘(iii) in the case of individual with de23 pendent child or children coverage, $670,

24 and
41

•S 2096 PCS

1 ‘‘(iv) in the case of couple with de2 pendent child or children, $910.

3 For any calendar year beginning after 2000,

4 the dollar amounts specified in this paragraph

5 for such year shall equal the dollar amounts

6 under this paragraph for the previous calendar

7 year increased by the percentage increase in the

8 per capita Gross Domestic Product for the pre9 vious calendar year.

10 ‘‘(B) REDUCTION OF APPLICABLE DOLLAR

11 LIMIT.—

12 ‘‘(i) IN GENERAL.—Each dollar

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

14 and (iv) of subparagraph (A) for the cal15 endar year shall be reduced (but not below

16 50 percent of such dollar amount) by the

17 amount determined under clause (ii).

18 ‘‘(ii) AMOUNT OF REDUCTION.—The

19 amount determined under this clause with

20 respect to any dollar amount shall be the

21 amount which bears the same ratio to 50

22 percent of such dollar amount as the ex23 cess of—

24 ‘‘(I) the taxpayer’s adjusted

25 gross income (determined without re-
42

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1 gard to this section) for the taxable

2 year ending in the calendar year, over

3 ‘‘(II) the applicable income

4 amount,

5 bears to $25,000.

6 ‘‘(iii) APPLICABLE INCOME

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

8 the term ‘applicable income amount’ means

9 $75,000 ($50,000, in the case of a tax10 payer described in section 1(c)).

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

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

13 taxable year—

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

15 plan, is 100 percent, and

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

17 is 100 percent reduced by 20 percentage points

18 (but not below zero percent) for each taxable

19 year beginning after December 31, 1996.

20 ‘‘(c) SPECIAL RULE FOR MULTIEMPLOYER HEALTH

21 PLANS.—In the case of employer contributions with re22 spect to any employee made to a multiemployer health

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

24 Secretary may by regulations prescribe the method of de-
43

•S 2096 PCS

1 termining that portion of such contributions that is not

2 included in gross income of the employee.

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

4 For purposes of this section—

5 ‘‘(1) ACCOUNTABLE OR CERTIFIED HEALTH

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

7 ‘certified health plan’ have the meanings given to

8 such terms by section 106.

9 ‘‘(2) EMPLOYEE INCLUDES FORMER EM10 PLOYEE.—The term ‘employee’ includes a former

11 employee.

12 ‘‘(3) DETERMINATION OF EMPLOYER CON13 TRIBUTION.—

14 ‘‘(A) IN GENERAL.—The employer con15 tribution to any accountable health plan or cer16 tified health plan for any month shall be that

17 portion of the cost of such plan for such month

18 which is incurred by the employer.

19 ‘‘(B) SELF-INSURED PLAN MAY USE AN20 NUAL ESTIMATES.—An employer who maintains

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

22 manner and at such time as may be provided

23 in regulations) to determine the actual employer

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

25 period of not more than 12 months on the basis
44

•S 2096 PCS

1 of a reasonable estimate of the cost of providing

2 coverage for such month. To the extent prac3 ticable, such estimate shall be made on an actu4 arial basis, and in the making of any such esti5 mate, there shall be taken into account such

6 factors as may be required under regulations.

7 ‘‘(C) EMPLOYEES ONLY TAKEN INTO AC8 COUNT FOR PERIODS COVERED.—For purposes

9 of determining the employer contribution,

10 amounts shall be taken into account with re11 spect to an employee only for periods during

12 which such employee is covered by the plan.

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

14 If an employee is covered under an accountable

15 health plan or certified health plan for only a por16 tion of a month, the amount required to be included

17 under subsection (a) in the gross income of such em18 ployee with respect to such month shall be an

19 amount which bears the same ratio to the excess em20 ployer contribution for such month as such portion

21 bears to the entire month.

22 ‘‘(5) CERTAIN RELATED EMPLOYERS TREATED

23 AS 1 EMPLOYER.—Rules similar to the rules pro24 vided by subsections (b) and (c) of section 414 shall

25 apply.
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1 ‘‘(6) MONTH.—The term ‘month’ means a cal2 endar month.

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

4 term ‘multiemployer health plan’ means an account5 able health plan which is part of an employee wel6 fare benefit plan (within the meaning of section 3(1)

7 of the Employee Retirement Income Security Act of

8 1974)—

9 ‘‘(A) to which more than 1 employer is re10 quired to contribute, and

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

12 more collective bargaining agreements between

13 1 or more employee organizations and more

14 than 1 employer.’’.

15 (2) CLERICAL AMENDMENT.—The table of sec16 tions for part II of subchapter B of chapter 1 is

17 amended by adding at the end the following:

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

18 (c) EMPLOYMENT TAX AMENDMENTS.—

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

20 general provisions relating to employment taxes) is

21 amended by adding at the end the following new sec22 tion:
46

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1 ‘‘SEC. 3510. TREATMENT OF EXCESS EMPLOYER CONTRIBU2 TIONS.

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

4 section 209 of the Social Security Act, any amount re5 quired to be included in the gross income of an employee

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

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

8 employee at the close of such month, and

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

10 or similar plan of the employer.

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

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

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

14 paid at the close of such month.

15 ‘‘(b) SPECIAL RULES IN THE CASE OF SELF-IN16 SURED PLANS.—

17 ‘‘(1) SAFE HARBOR FOR EMPLOYEES WHOSE

18 ESTIMATES ARE AT LEAST 95 PERCENT OF ACTUAL

19 EMPLOYER CONTRIBUTIONS.—In the case of an em20 ployer who maintains a self-insured health plan, if

21 for any calendar year the excess of—

22 ‘‘(A) the actual employer contributions de23 termined under section 91 with respect to all

24 employees for such year, over

25 ‘‘(B) the amount estimated by the em26 ployer under section 91(d)(3)(B) as the em-
47

•S 2096 PCS

1 ployer contributions with respect to all employ2 ees for such year,

3 is not greater than 5 percent of the amount deter4 mined under subparagraph (A) then, except as pro5 vided in paragraph (2), no penalty shall be imposed

6 under section 6672 on the employer for failure to

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

8 this subtitle on such excess.

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

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

11 imposed, or required to be deducted and withheld,

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

13 excess described in paragraph (1) unless the em14 ployer pays any such tax within the time prescribed

15 by the Secretary under regulations.

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

17 SECURITY TAX AND CREDIT.—In the case of the ex18 cess described in paragraph (1)—

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

20 3101, and

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

22 be taken into account for purposes of section

23 209 of the Social Security Act.

24 ‘‘(c) LIABILITY FOR WITHHOLDING AND PAYMENT

25 OF TAX.—
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•S 2096 PCS

1 ‘‘(1) IN GENERAL.—Except as provided in para2 graph (2), the applicable payer shall withhold, and

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

4 withheld or paid under this subtitle on any amount

5 described in subsection (a).

6 ‘‘(2) SPECIAL RULES FOR MULTIEMPLOYER

7 HEALTH PLANS.—In the case of any multiemployer

8 health plan, the plan administrator shall comply

9 with such rules with respect to the withholding of,

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

11 paid under this subtitle as the Secretary may require

12 by regulations.

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

14 ‘‘(1) APPLICABLE PAYER.—The term ‘applica15 ble payer’ means the payer of remuneration for serv16 ices which qualifies the employee for coverage under

17 a multiemployer health plan.

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

19 not include a former employee.

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

21 term ‘multiemployer health plan’ has the meaning

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

23 (2) CLERICAL AMENDMENT.—The table of sec24 tions for chapter 25 is amended by adding at the

25 end the following new item:

‘‘Sec. 3510. Treatment of excess employer contributions.’’.
49

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1 (d) EFFECTIVE DATES.—

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

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

4 beginning after December 31, 1995.

5 (2) EMPLOYMENT TAX.—The amendments

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

7 January 1, 1996.

8 SEC. 202. DEDUCTIONS FOR COSTS OF HEALTH PLANS.

9 (a) BUSINESS EXPENSE DEDUCTION FOR HEALTH

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

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

12 subsection (n) and by inserting after subsection (l) the fol13 lowing new subsection:

14 ‘‘(m) GROUP HEALTH PLANS.—The amount of ex15 penses paid or incurred by an employer for a group health

16 plan shall not be allowed as a deduction under this sec17 tion—

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

19 plan or certified health plan (as defined in section

20 106),

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

22 amount incurred among plans offered to each em23 ployee (other than with respect to the benefits pack24 age and family class of enrollment coverage), and
50

•S 2096 PCS

1 ‘‘(3) with respect to each employee, to the ex2 tent such amount exceeds the applicable dollar limit

3 for such employee (within the meaning of section

4 91(b)(2) (without regard to subparagraph (B) there5 of) and determined on an annual basis).’’.

6 (b) PERMANENT EXTENSION AND INCREASE IN

7 HEALTH INSURANCE TAX DEDUCTION FOR SELF-EM8 PLOYED INDIVIDUALS.—

9 (1) PERMANENT EXTENSION OF DEDUCTION.—

10 (A) IN GENERAL.—Subsection (l) of sec11 tion 162 (relating to special rules for health in12 surance costs of self-employed individuals) is

13 amended by striking paragraph (6).

14 (B) EFFECTIVE DATE.—The amendment

15 made by this paragraph shall apply to taxable

16 years beginning after December 31, 1993.

17 (2) INCREASE IN AMOUNT OF DEDUCTION; IN18 SURANCE PURCHASED MUST MEET CERTAIN STAND19 ARDS.—

20 (A) INCREASE IN AMOUNT OF DEDUC21 TION.—Paragraph (1) of section 162(l) is

22 amended—

23 (i) by striking ‘‘25 percent of’’ and in24 serting ‘‘100 percent of’’, and
51

•S 2096 PCS

1 (ii) by striking ‘‘dependents.’’ and in2 serting ‘‘dependents, and only to the extent

3 such amount does not exceed the applica4 ble dollar limit for such taxpayer (within

5 the meaning of section 91(b)(2) and deter6 mined on an annual basis).’’

7 (B) INSURANCE PURCHASED MUST MEET

8 CERTAIN STANDARDS.—Paragraph (2) of sec9 tion 162(l) is amended by adding at the end the

10 following new subparagraph:

11 ‘‘(C) INSURANCE MUST MEET CERTAIN

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

13 insurance which is an accountable health plan

14 or certified health plan (as defined in section

15 106).’’.

16 (C) TREATMENT OF MULTIEMPLOYER

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

18 is amended by adding at the end the following

19 new paragraph:

20 ‘‘(6) TREATMENT OF MULTIEMPLOYER HEALTH

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

22 paid into a multiemployer health plan (as defined in

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

24 paid for insurance which constitutes medical care.’’.
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1 (c) EFFECTIVE DATE.—Except as provided in sub2 section (b)(1)(B), the amendments made by this section

3 shall apply to taxable years beginning after December 31,

4 1995.

5 TITLE III—FINANCING AND RE6 FORMING FEDERAL PRO7 GRAMS

8 Subtitle A—Medicare

9 SEC. 301. MEDICARE CHOICE.

10 (a) IN GENERAL.—Section 1876 of the Social Secu11 rity Act (42 U.S.C. 1395mm) is amended to read as fol12 lows:

13 ‘‘MEDICARE CHOICE

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

15 MARKET AREAS.—The Secretary shall establish various

16 medicare market areas within the United States in such

17 manner as to—

18 ‘‘(1) ensure that each individual entitled to ben19 efits under part A and enrolled under part B, or en20 rolled under part B only, resides in a medicare mar21 ket area;

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

23 statistical area within one medicare market area;

24 and

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

26 who will have the opportunity for a meaningful
53

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1 choice among competing medicare health plans

2 under contract with the Secretary under this section.

3 ‘‘(b) MEDICARE HEALTH PLANS.—

4 ‘‘(1) CONTRACTS WITH MEDICARE HEALTH

5 PLANS.—The Secretary shall enter into a contract

6 with any medicare health plan desiring to do busi7 ness in a medicare market area and to receive pay8 ment under this section, but only if the Secretary

9 certifies that such plan meets the requirements of

10 paragraph (2).

11 ‘‘(2) CERTIFICATION REQUIREMENTS.—Each

12 medicare health plan must—

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

14 plan by the appropriate regulatory authority

15 pursuant to title I of the Health Care Reform

16 Act of 1994;

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

18 provide those services covered by this title

19 (hereafter in this section referred to as ‘medi20 care benefits’) when medically necessary for a

21 uniform monthly premium for a year;

22 ‘‘(C) not discriminate against beneficiaries

23 based on their health status, claims experience,

24 medical history, or other factors that are gen-
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1 erally related with utilization of health care

2 services;

3 ‘‘(D) demonstrate the ability to provide

4 medicare benefits to all potential enrollees

5 throughout the medicare market area, unless

6 the Secretary determines it appropriate for such

7 plan to provide services to a subset of such

8 market area;

9 ‘‘(E) collect and provide such standard in10 formation as the Secretary shall prescribe by

11 regulation as necessary to evaluate the perform12 ance and quality of such plan, including en13 rollee satisfaction, to compare such performance

14 and quality with competing plans, and to pre15 pare comparative materials for distribution to

16 beneficiaries;

17 ‘‘(F) demonstrate the ability to integrate

18 additional benefits into such plan for qualified

19 medicare beneficiaries as provided in section

20 321 of the Health Care Reform Act of 1994;

21 and

22 ‘‘(G) offer the supplementary coverage

23 plans established by the Secretary under sub24 section (g)(3)(B).

25 ‘‘(3) COST SHARING.—
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1 ‘‘(A) ACTUARIALLY EQUIVALENT MEDI2 CARE BENEFITS.—Each medicare health plan

3 must offer either—

4 ‘‘(i) medicare benefits, including the

5 cost-sharing requirements otherwise pro6 vided in this title; or

7 ‘‘(ii) actuarially equivalent medicare

8 benefits, as established by the Secretary in

9 regulations, which are medicare benefits,

10 but with cost-sharing requirements that

11 are actuarially equivalent to the cost-shar12 ing requirements otherwise provided in this

13 title and consistent with common practices

14 among health maintenance organizations

15 and other managed care health plans.

16 In establishing actuarially equivalent medicare

17 benefits, the Secretary shall not include in the

18 calculation any change in costs associated with

19 alternative forms of health care delivery, man20 agement, or utilization control.

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

22 Each medicare health plan may require enroll23 ees to pay higher cost sharing for services than

24 is otherwise required by this title (or required

25 in the actuarially equivalent alternative) if—
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•S 2096 PCS

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

2 providers for all medicare benefits that

3 would not require higher cost sharing; and

4 ‘‘(ii) the plan provides enrollees with

5 such information.

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

7 plan may apply to have limits placed on the number

8 of beneficiaries that may enroll in the plan in an en9 rollment period if the plan can demonstrate—

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

11 would impair the plan’s ability to provide serv12 ices to other enrollees; and

13 ‘‘(B) enrollment in the plan is on a first14 come first-served basis, except for individuals

15 enrolled in the prior year.

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

17 ‘‘(1) CRITERIA FOR CERTIFICATION.—The Sec18 retary shall prescribe, by regulation, criteria for cer19 tifying medicare health plans sponsored by employ20 ers which will be offered only to current or former

21 employees, including requirements that such health

22 plans—

23 ‘‘(A) are certified as accountable health

24 plans pursuant to title I of the Health Care Re25 form Act of 1994;
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•S 2096 PCS

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

2 those services covered by this title at a premium

3 for the enrollee that does not exceed the base

4 beneficiary premium (as defined pursuant to

5 subsection (f)); and

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

7 and former employees in the medicare market

8 area.

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

10 certified under paragraph (1), employer-sponsored

11 health plans shall accept, at the option of individuals

12 eligible only for secondary coverage under this title

13 pursuant to section 1862(b), a fixed monthly pay14 ment from the Secretary to provide such individuals

15 coverage at least actuarially equivalent to the sec16 ondary coverage available to such individuals under

17 this title.

18 ‘‘(d) MANAGING MEDICARE CHOICE.—

19 ‘‘(1) MEDICARE HEALTH PLAN TOTAL MONTH20 LY PREMIUMS.—Before the beginning of each cal21 endar year, each medicare health plan or employer22 sponsored health plan under contract pursuant to

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

24 the total monthly premium that such plan intends to

25 charge in such year.
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1 ‘‘(2) ANNUAL OPEN ENROLLMENT.—

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

3 provide for an annual open enrollment period

4 during which all individuals entitled to benefits

5 under part A and enrolled under part B, or en6 rolled under part B only, residing in a medicare

7 market area—

8 ‘‘(i) shall choose enrollment for the

9 next calendar year in—

10 ‘‘(I) a medicare health plan in

11 such area,

12 ‘‘(II) an employer-sponsored

13 health plan, or

14 ‘‘(III) coverage otherwise pro15 vided under this title (hereafter in this

16 section referred to as ‘medicare fee17 for-service’); and

18 ‘‘(ii) may choose supplementary bene19 fits offered by such health plan or a medi20 care supplemental policy (certified under

21 section 1882).

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

23 are eligible for secondary coverage under this

24 title pursuant to section 1862(b), may not en25 roll in a medicare health plan but may enroll in
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1 an employer-sponsored health plan, to which the

2 Secretary shall make a monthly payment, pur3 suant to subsection (e)(2)(C).

4 ‘‘(C) PERIOD OF ENROLLMENT.—

5 ‘‘(i) IN GENERAL.—Except as pro6 vided in clauses (ii), (iii), and (iv), an indi7 vidual may not choose another enrollment

8 until the next annual period provided

9 under subparagraph (A).

10 ‘‘(ii) ENROLLMENT UPON ELIGI11 BILITY.—The Secretary shall provide an

12 enrollment period of 30 days to any indi13 vidual beginning 30 days before the date

14 such individual first becomes entitled to

15 benefits under part A or enrolled under

16 part B only. Such enrollment shall be ef17 fective on the date of such entitlement.

18 ‘‘(iii) TERMINATION OF PLAN.—If a

19 contract for a medicare health plan under

20 this section is terminated during any cal21 endar year, the Secretary shall provide for

22 an enrollment period of 30 days to any in23 dividual enrolled in such plan beginning on

24 the date of such termination.
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1 ‘‘(iv) INDIVIDUAL NO LONGER IN

2 AREA.—An individual terminating resi3 dence in a medicare market area may ter4 minate enrollment with the medicare

5 health plan of such area as of the begin6 ning of the first calendar month following

7 the date on which the request is made for

8 such termination, and the Secretary shall

9 provide for an open enrollment period of

10 30 days to such individual for enrollment

11 in the new medicare market area in which

12 such individual resides beginning on the

13 date of such termination. In the case of an

14 individual’s termination of enrollment, the

15 medicare health plan shall provide the indi16 vidual with a copy of the written request

17 for termination of enrollment and a written

18 explanation of the period (ending on the

19 effective date of the termination) during

20 which the individual continues to be en21 rolled with the plan and may not receive

22 medicare benefits other than through such

23 plan.

24 ‘‘(v) EFFECTIVE DATE OF NEW EN25 ROLLMENT.—Enrollment under clause (iii)
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•S 2096 PCS

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

2 end of the enrollment period, or, if the

3 Secretary determines that such date is not

4 feasible, such other date as the Secretary

5 specifies.

6 ‘‘(D) DEFAULT ENROLLMENT.—

7 ‘‘(i) IN GENERAL.—If an individual

8 does not choose an enrollment option dur9 ing an enrollment period under this para10 graph, such individual shall be automati11 cally enrolled in—

12 ‘‘(I) the same option into which

13 such individual enrolled in the preced14 ing enrollment period; or

15 ‘‘(II) if the individual was not en16 rolled in such preceding period, the

17 medicare fee-for-service.

18 ‘‘(ii) NO MEDICARE HEALTH PLANS IN

19 AREA.—If there are no medicare health

20 plans in the medicare market area in

21 which the individual resides, such individ22 ual shall be automatically enrolled in the

23 medicare fee-for-service.

24 ‘‘(3) INFORMATION REGARDING MEDICARE OP25 TIONS IN MARKET AREA.—
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•S 2096 PCS

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

2 provide each individual making an enrollment

3 decision during any enrollment period described

4 in paragraph (2) with the following information,

5 in comparative form, regarding the medicare

6 health plans and medicare fee-for-service avail7 able in the medicare market area in which such

8 individual resides:

9 ‘‘(i) The individual’s premiums for

10 medicare benefits.

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

12 any supplementary benefits.

13 ‘‘(iii) Enrollee restrictions.

14 ‘‘(iv) Quality information, including

15 enrollee satisfaction and health outcomes.

16 ‘‘(v) Any other necessary information

17 as determined by the Secretary.

18 ‘‘(B) MARKETING REQUIREMENTS.—The

19 Secretary shall prescribe the procedures and

20 conditions under which a medicare health plan

21 that has entered into a contract with the Sec22 retary under this section may inform individ23 uals eligible to enroll under this section with the

24 plan about the plan. No brochures, application

25 forms, or other promotional or informational
63

•S 2096 PCS

1 material may be distributed by such plan to (or

2 for the use of) individuals eligible to enroll with

3 the plan under this section unless—

4 ‘‘(i) at least 45 days before its dis5 tribution, the plan has submitted the mate6 rial to the Secretary for review;

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

8 all individuals eligible to enroll in the medi9 care health plan in the medicare market

10 area; and

11 ‘‘(iii) the Secretary has not dis12 approved the distribution of the material.

13 The Secretary shall review all such material

14 submitted and shall disapprove such material if

15 the Secretary determines, in the Secretary’s dis16 cretion, that the material is materially inac17 curate or misleading or otherwise makes a ma18 terial misrepresentation.

19 ‘‘(4) RISK ADJUSTMENTS.—

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

21 adjust the payments made to medicare health

22 plans and employer-sponsored health plans

23 under this title to reflect the relative health

24 risks of classes of beneficiaries enrolled in such

25 plans in the medicare market area. The Sec-
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•S 2096 PCS

1 retary may define appropriate classes of bene2 ficiaries, based on age, disability status, and

3 such other factors as the Secretary determines

4 to be appropriate, so as to ensure actuarial

5 equivalence and the efficient delivery of health

6 care. The Secretary may add to, modify, or sub7 stitute for such classes, if such changes will im8 prove the determination of actuarial equiva9 lence.

10 ‘‘(B) PENALTIES FOR DISCRIMINATION.—

11 The Secretary shall have the authority to im12 pose financial penalties on medicare health

13 plans or employer-sponsored health plans that

14 knowingly violate the prohibition against dis15 crimination against potential enrollees based on

16 their health status, claims experience, medical

17 history, or other factors that are generally re18 lated with utilization of health care services.

19 ‘‘(5) PAYMENTS TO PLANS.—

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

21 forward to each medicare health plan or em22 ployer-sponsored health plan the medicare per

23 capita rate for the medicare market area, as de24 termined under subsection (e), for every bene25 ficiary enrolled in such plan for that month, ex-
65

•S 2096 PCS

1 cluding any beneficiary premium but reflecting

2 any adjustments required pursuant to para3 graph (4)(A).

4 ‘‘(B) COLLECTION OF BENEFICIARY PRE5 MIUMS AND REBATES.—

6 ‘‘(i) PREMIUMS.—Each medicare

7 health plan or employer-sponsored plan

8 shall be responsible for collecting pre9 miums owed by beneficiaries for enrolling

10 in such plan, including premiums for medi11 care benefits and any supplementary bene12 fits.

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

14 plan or employer-sponsored plan which

15 charges a total monthly premium which is

16 less than the medicare per capita rate for

17 an enrollee shall be responsible for paying

18 to such enrollee a rebate equal to the ex19 cess medicare per capita rate or may use

20 such rebate to offset any premium owed by

21 the enrollee for any supplementary benefits

22 selected by the enrollee.

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

24 paid to medicare health plans and employer25 sponsored health plans shall be made from the
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1 Federal Hospital Insurance Trust Fund and

2 the Supplementary Insurance Trust Fund

3 based on an allocation determined by the Sec4 retary.

5 ‘‘(e) MEDICARE PER CAPITA RATE.—

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

7 medicare market area, the Secretary shall announce,

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

9 per capita rate that will apply to such market area

10 beginning with the enrollment year (which coincides

11 with the next calendar year).

12 ‘‘(2) PER CAPITA RATE.—

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

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

15 for a medicare market area shall be equal to

16 the lesser of the maximum per capita rate or

17 the sum of—

18 ‘‘(i) the excess of—

19 ‘‘(I) the benchmark premium for

20 such area, over

21 ‘‘(II) the base beneficiary pre22 mium for such area; and

23 ‘‘(ii) the applicable percentage of the

24 excess of—
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•S 2096 PCS

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

2 costs (hereafter in this section re3 ferred to as ‘FFSPCC’) for such area,

4 over

5 ‘‘(II) such benchmark premium.

6 For purposes of the preceding sentence, the ap7 plicable percentage shall be determined by the

8 following table:

Applicable

‘‘Enrollment year: percentage:

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

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

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

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

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

9 ‘‘(B) SECONDARY PAYER PER CAPITA

10 RATE.—For individuals who are eligible for sec11 ondary coverage under this title pursuant to

12 section 1862(b) and elect to enroll in an em13 ployer-sponsored health plan, the Secretary

14 shall determine a per capita rate for each medi15 care market area equal to the costs of providing

16 secondary coverage to all individuals in such

17 market area divided by the number of individ18 uals eligible for such coverage in such market

19 area.

20 ‘‘(C) RURAL ENROLLEES.—

21 ‘‘(i) FIVE-YEAR BONUS.—For enroll22 ment periods beginning in 1996 through
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•S 2096 PCS

1 2000, the per capita rate in each medicare

2 market area (otherwise determined under

3 this paragraph) shall be increased by 10

4 percent (without regard to the maximum

5 established under paragraph (3)) with re6 spect to each individual enrolling in a med7 icare health plan or employer-sponsored

8 health plan who resides in an underserved

9 rural area within such market area, as de10 termined by the Secretary.

11 ‘‘(ii) IMPROVE ACCESS.—The bonus

12 amount paid under this subparagraph shall

13 be used by such health plans to improve

14 access and coordinated service delivery in

15 the underserved rural area in which the

16 enrollee resides. The bonus amount shall

17 not reduce the premiums owed by the en18 rollee for medicare benefits or any supple19 mentary coverage.

20 ‘‘(iii) STUDY AND RECOMMENDA21 TIONS.—The Secretary shall report to the

22 Congress at the end of the 5-year period

23 described in clause (ii) on the status of

24 health care access in underserved rural

25 areas and shall make recommendations re-
69

•S 2096 PCS

1 garding continuation of bonus per capita

2 payments.

3 ‘‘(3) MAXIMUM PER CAPITA RATE.—

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

5 subparagraph (E), the maximum per capita

6 rate in any medicare market area shall be the

7 excess of—

8 ‘‘(i) the product of—

9 ‘‘(I) FFSPCC in all medicare

10 market areas, and

11 ‘‘(II) an adjustment factor for

12 such market area; over

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

14 premium required pursuant to subsection

15 (f)(2)(B)(ii).

16 ‘‘(B) ADJUSTMENT FACTOR.—For pur17 poses of subparagraph (A)(i)(II), and except as

18 provided in subparagraph (D):

19 ‘‘(i) FFSPCC RATIO LESS THAN .8.—

20 For medicare market areas with a

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

22 adjustment factor shall be .8.

23 ‘‘(ii) FFSPCC RATIO BETWEEN .8 AND

24 .95.—For medicare market areas with a

25 FFSPCC ratio less than .95 but greater
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•S 2096 PCS

1 than .8, the adjustment factor shall be the

2 sum of .85, plus—

3 ‘‘(I) .1, multiplied by

4 ‘‘(II) the ratio of the excess of

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

6 ‘‘(iii) FFSPCC RATIO BETWEEN .95

7 AND 1.05.—For medicare market areas

8 with a FFSPCC ratio of at least .95 but

9 less than 1.05, the adjustment factor shall

10 be the FFSPCC ratio.

11 ‘‘(iv) FFSPCC RATIO BETWEEN 1.05

12 AND 1.2.—For medicare market areas with

13 a FFSPCC ratio of at least 1.05 but less

14 than 1.2, the adjustment factor shall be

15 the sum of 1.05, plus—

16 ‘‘(I) .1, multiplied by

17 ‘‘(II) the ratio of the excess of

18 the FFSPCC ratio over 1.05, to .15.

19 ‘‘(v) FFSPCC RATIO GREATER THAN

20 1.2.—For medicare market areas with a

21 FFSPCC ratio greater than or equal to

22 1.2, the adjustment factor shall be 1.2.

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

24 subparagraph (B), for each medicare market

25 area, the Secretary shall determine a FFSPCC
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1 ratio by dividing FFSPCC in such market area

2 by FFSPCC for all medicare market areas.

3 ‘‘(D) BUDGET NEUTRALITY.—The Sec4 retary shall change the adjustment factors as

5 necessary to ensure that total spending under

6 this title shall not exceed the level of spending

7 that would occur if the maximum per capita

8 rate in each medicare market area were equal

9 to the FFSPCC in each such market area.

10 ‘‘(E) ALTERNATIVE FORMULA.—The Sec11 retary may substitute an alternative formula for

12 determining the maximum rate in each medi13 care market area. Such an alternative formula

14 shall generally conform to the pattern of adjust15 ment factors specified in subparagraph (B), ex16 cept that such formula shall maintain a consist17 ent mathematical relationship between the ad18 justment factor and the FFSPCC ratio in each

19 such market area in a manner that achieves

20 budget neutrality.

21 ‘‘(4) DEFINITIONS.—For purposes of this sub22 section:

23 ‘‘(A) BENCHMARK PREMIUM.—The bench24 mark premium for a medicare market area shall

25 be equal to the sum of—
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1 ‘‘(i) the lowest health plan total

2 monthly premium submitted by a medicare

3 health plan in such area for the enrollment

4 year; and

5 ‘‘(ii) the applicable percentage of the

6 excess of—

7 ‘‘(I) the average of all medicare

8 health plan total monthly premiums

9 submitted in such area, over

10 ‘‘(II) the lowest health plan total

11 monthly premium in such area.

12 For purposes of the preceding sentence, the ap13 plicable percentage shall be determined by the

14 following table:

Applicable

‘‘Enrollment year: percentage:

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

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

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

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

15 ‘‘(B) FEE-FOR-SERVICE PER CAPITA

16 COSTS.—The Secretary shall determine

17 FFSPCC for a medicare market area by divid18 ing—

19 ‘‘(i) the total spending for medicare

20 benefits (not including beneficiary cost

21 sharing) for individuals who reside in such

22 area, who are not enrolled in a medicare
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•S 2096 PCS

1 health plan or employer-sponsored health

2 plan, and who are not in secondary payer

3 status; by

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

5 The Secretary shall make such other adjust6 ments as may be necessary to allow an accurate

7 comparison of FFSPCC for the medicare mar8 ket area with total monthly premiums charged

9 by medicare health plans in such area.

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

11 section:

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

13 beneficiary premium for each medicare market area

14 shall be equal to the product of—

15 ‘‘(A) the ratio of the monthly premium de16 termined under section 1839 to the national av17 erage cost per beneficiary under this title in

18 1995, as determined by the Secretary; and

19 ‘‘(B) the benchmark premium for such

20 area.

21 ‘‘(2) MONTHLY BENEFICIARY PREMIUMS.—

22 ‘‘(A) HEALTH PLAN BENEFICIARY PRE23 MIUM.—To be enrolled for coverage in a medi24 care health plan during an enrollment year for
74

•S 2096 PCS

1 medicare benefits, each beneficiary shall pay a

2 monthly premium equal to the excess of—

3 ‘‘(i) the premium charged by the plan

4 selected by the beneficiary; over

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

6 the medicare market area in which the

7 beneficiary resides.

8 ‘‘(B) FEE-FOR-SERVICE BENEFICIARY PRE9 MIUM.—

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

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

12 medicare market area during an enroll13 ment year for medicare benefits, each ben14 eficiary shall pay a monthly premium equal

15 to the estimated FFSPCC for the medicare

16 market area, multiplied by the ratio deter17 mined under paragraph (1)(A).

18 ‘‘(g) SUPPLEMENTARY COVERAGE PLANS.—

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

20 that all supplementary coverage plans meet the re21 quirements of this subsection, in addition to any re22 quirements that may be applicable under section

23 1882.

24 ‘‘(2) COORDINATION WITH MEDICARE

25 CHOICE.—Supplementary coverage plans may only
75

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1 be offered to beneficiaries during the same annual

2 open enrollment period during which beneficiaries

3 select medicare coverage and must be offered to all

4 beneficiaries in the same medicare market area for

5 the same, uniform monthly premium during the en6 rollment period.

7 ‘‘(3) STANDARD BENEFITS.—

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

9 may only offer standardized supplementary cov10 erage plans, as established by the Secretary,

11 after consultation with the National Association

12 of Insurance Commissioners.

13 ‘‘(B) REQUIRED OPTIONS.—Among the

14 standardized plans, the Secretary shall include

15 a plan—

16 ‘‘(i) covering only outpatient prescrip17 tion drugs; and

18 ‘‘(ii) which, together with medicare

19 benefits, would resemble coverage typically

20 offered by health maintenance organiza21 tions to employer groups, including an an22 nual out-of-pocket maximum beneficiary li23 ability (covering coinsurance, copayments,

24 and deductibles).
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1 ‘‘(4) ONE SPONSOR.—A sponsor of supple2 mentary coverage may not offer such coverage to a

3 beneficiary selecting a medicare health plan from a

4 different sponsor, except that sponsors of supple5 mentary coverage may offer such coverage to any in6 dividual selecting medicare fee-for-service.

7 ‘‘(5) SURCHARGE ON CERTAIN PLANS.—Not8 withstanding any other provision of this section, if

9 an individual chooses to purchase a medicare supple10 mental policy certified pursuant to section 1882 and

11 the coverage under such policy results in increased

12 costs to the program under this title, the monthly

13 beneficiary premium otherwise applicable under this

14 section shall be increased by a surcharge actuarially

15 equivalent to such increased costs.

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

17 coverage plan’ means any health insurance coverage

18 offered by a medicare health plan or medicare sup19 plemental policy (as defined in section 1882) that

20 covers health care costs not covered as medicare

21 benefits and for which the enrollee must pay a pre22 mium.’’.

23 (b) CONFORMING AMENDMENTS.—

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

25 (42 U.S.C. 1395ss(c)) is amended—
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•S 2096 PCS

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

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

3 (3) and (6)’’,

4 (B) by striking ‘‘and’’ at the end of para5 graph (4),

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

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

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

9 paragraph:

10 ‘‘(6) agrees—

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

12 open enrollment period specified in section

13 1876(c)(2) at a uniform monthly premium to

14 all beneficiaries in a medicare market area es15 tablished under section 1876(a); and

16 ‘‘(B) not to discriminate against bene17 ficiaries based on their health status, claims ex18 perience, medical history, or other factors that

19 are generally related with utilization of health

20 care services.’’.

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

22 1395ss(s)) is amended—

23 (A) by striking paragraph (2),
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1 (B) by striking ‘‘paragraphs (1) and (2)’’

2 in paragraph (3) and inserting ‘‘paragraph

3 (1)’’, and

4 (C) by redesignating paragraph (3) as

5 paragraph (2).

6 (3) Section 1839(e) of such Act (42 U.S.C.

7 1395r(e)) is amended to read as follows:

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

9 the monthly premium for each individual enrolled under

10 this part for each month—

11 ‘‘(1) in 1994 shall be $41.10;

12 ‘‘(2) in 1995 shall be $46.10; and

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

14 equal to 25 percent of the monthly actuarial rate for

15 enrollees age 65 and over, as determined under sub16 section (a)(1) and applicable to such month.’’.

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

18 this section shall apply to contracts entered into with re19 spect to calendar years beginning after December 31,

20 1995.

21 SEC. 302. OTHER MEDICARE PROVISIONS.

22 (a) APPLICATION OF COMPETITIVE ACQUISITION FOR

23 FEE-FOR-SERVICE ITEMS AND SERVICES.—

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

25 the Social Security Act (42 U.S.C. 1395j et seq.) is
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1 amended by inserting after section 1846 the follow2 ing:

3 ‘‘COMPETITIVE ACQUISITION FOR ITEMS AND SERVICES

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

5 AREAS.—

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

7 each medicare market area, award a contract or con8 tracts for the furnishing under this part of the items

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

10 January 1, 1996.

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

12 may establish areas other than medicare market

13 areas for competitive acquisition of an item or serv14 ice described in subsection (c), if the establishment

15 of such an area increases the availability and acces16 sibility of suppliers and the probability and amount

17 of savings to be realized by the use of such competi18 tive acquisition in such area.

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

20 ‘‘(1) IN GENERAL.—The Secretary shall con21 duct a competition among individuals and entities

22 supplying items and services under this part for

23 each competitive acquisition area established under

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

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

26 The Secretary may not award a contract to any indi-
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1 vidual or entity under the competition conducted

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

3 service under this part unless the Secretary finds

4 that the individual or entity—

5 ‘‘(A) meets quality standards specified by

6 the Secretary for the furnishing of such item or

7 service; and

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

9 such item or service that is sufficient to meet

10 the expected need within the competitive acqui11 sition area.

12 ‘‘(3) CONTENTS OF CONTRACT.—A contract en13 tered into with an individual or entity under the

14 competition conducted pursuant to paragraph (1)

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

16 a class)—

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

18 entity shall provide; and

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

20 the Secretary may require.

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

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

23 follows:

24 ‘‘(1) Magnetic resonance imaging tests and

25 computerized axial tomography scans, including a
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1 physician’s interpretation of the results of such tests

2 and scans.

3 ‘‘(2) Oxygen and oxygen equipment.

4 ‘‘(3) Clinical diagnostic laboratory tests.

5 ‘‘(4) Such other items and services for which

6 the Secretary determines that the use of competitive

7 acquisition under this section will be appropriate and

8 cost-effective.’’.

9 (2) ITEMS AND SERVICES TO BE FURNISHED

10 ONLY THROUGH COMPETITIVE ACQUISITION.—Sec11 tion 1862(a) of such Act (42 U.S.C. 1395y(a)) is

12 amended—

13 (A) by striking ‘‘or’’ at the end of para14 graph (15),

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

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

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

18 following new paragraph:

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

20 service furnished in a competitive acquisition area

21 (as established by the Secretary under section

22 1847(a)) by an individual or entity other than the

23 supplier with whom the Secretary has entered into

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

25 of such item or service in that area, unless the Sec-
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1 retary finds that such expenses were incurred in a

2 case of urgent need.’’.

3 (3) REDUCTION IN PAYMENT AMOUNTS IF COM4 PETITIVE ACQUISITION FAILS TO ACHIEVE MINIMUM

5 REDUCTION IN PAYMENTS.—Notwithstanding any

6 other provision of title XVIII of the Social Security

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

8 of competitive acquisition areas under section 1847

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

10 limitation of coverage for items and services under

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

12 items and services furnished by providers with com13 petitive acquisition contracts under such section does

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

15 the projected payment amount that would have ap16 plied to the item or service under such part B if the

17 item or service had not been furnished through com18 petitive acquisition under such section, the Secretary

19 shall reduce the payment amount by such percentage

20 as the Secretary determines necessary to result in

21 such a reduction.

22 (4) EFFECTIVE DATE.—The amendments made

23 by this subsection shall apply to items and services

24 furnished under part B of title XVIII of the Social
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1 Security Act (42 U.S.C. 1395j et seq.) on or after

2 January 1, 1995.

3 (b) EXPANSION OF CENTERS OF EXCELLENCE.—

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

5 competitive process to contract with centers of excel6 lence for cataract surgery, coronary artery by-pass

7 surgery, and such other services as the Secretary de8 termines to be appropriate for individuals enrolled in

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

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

11 will be made for services subject to such contracts

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

13 follows:

14 (A) The center shall cover services pro15 vided in a medicare market area (established

16 pursuant to section 1876(a) of the Social Secu17 rity Act) for years beginning with fiscal year

18 1996.

19 (B) The amount of payment made by the

20 Secretary to the center under title XVIII of the

21 Social Security Act (42 U.S.C. et seq.) for serv22 ices covered under the project shall be less than

23 the aggregate amount of the payments that the

24 Secretary would have made to the center for

25 such services had the project not been in effect.
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1 (C) The Secretary shall make payments to

2 the center on such a basis for the following

3 services furnished to individuals enrolled in

4 medicare fee-for-service and entitled to benefits

5 under such title:

6 (i) Facility, professional, and related

7 services relating to cataract surgery.

8 (ii) Coronary artery by-pass surgery

9 and related services.

10 (iii) Such other services as the Sec11 retary and the center may agree to cover

12 under the agreement.

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

14 case of any services provided under a demonstration

15 project conducted under paragraph (1), the Sec16 retary shall make a payment to each individual to

17 whom such services are furnished (at such time and

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

19 amount equal to 10 percent of the amount by

20 which—

21 (A) the amount of payment that would

22 have been made by the Secretary under title

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

24 1395 et seq.) to the center for such services if
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1 the services had not been provided under the

2 project, exceeds

3 (B) the amount of payment made by the

4 Secretary under such title to the center for such

5 services.

6 (c) MEDICARE SECONDARY PAYER CHANGES.—

7 (1) EXTENSION OF DATA MATCH.—

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

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

10 amended by striking clause (iii).

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

12 Revenue Code of 1986 is amended by striking

13 subparagraph (F).

14 (2) REPEAL OF SUNSET ON APPLICATION TO

15 DISABLED EMPLOYEES OF EMPLOYERS WITH MORE

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

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

18 amended by section 13561(b) of the Omnibus Budg19 et Reconciliation Act of 1993, is amended—

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

21 and inserting ‘‘EFFECTIVE DATE’’, and

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

23 1998’’.

24 (3) EXTENSION OF PERIOD FOR END STAGE

25 RENAL DISEASE BENEFICIARIES.—Section
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1 1862(b)(1)(C) of such Act (42 U.S.C.

2 1395y(b)(1)(C)), as amended by section 13561(c) of

3 the Omnibus Budget Reconciliation Act of 1993, is

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

5 or before October 1, 1998,’’.

6 (d) REDUCTION IN UPDATE FOR INPATIENT HOS7 PITAL SERVICES.—Section 1886(b)(3)(B)(i) of the Social

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

9 by section 13501(a)(1) of the Omnibus Budget Reconcili10 ation Act of 1993, is amended—

11 (1) in subclause (XII)—

12 (A) by striking ‘‘fiscal year 1997’’ and in13 serting ‘‘for each of the fiscal years 1997

14 through 2000’’, and

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

16 inserting ‘‘2.0 percentage points’’; and

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

18 1998’’ and inserting ‘‘fiscal year 2003’’.

19 (e) REDUCTION IN ADJUSTMENT FOR INDIRECT

20 MEDICAL EDUCATION.—

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

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

23 1395ww(d)(5)(B)(ii)) is amended to read as follows:

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

25 teaching adjustment factor is equal to c * (((1+r)
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1 to the nth power) ¥ 1), where ‘r’ is the ratio of the

2 hospital’s full-time equivalent interns and residents

3 to beds and ‘n’ equals .405. For discharges occur4 ring on or after—

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

6 1995, ‘c’ is equal to 1.89, and

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

8 0.74.’’.

9 (2) NO RESTANDARDIZATION OF PAYMENT

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

11 such Act (42 U.S.C. 1395ww(d)(2)(C)(i)) is amend12 ed by striking ‘‘of 1985’’ and inserting ‘‘of 1985,

13 but not taking into account the amendments made

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

15 of 1994’’.

16 (f) ELIMINATION OF BAD DEBT RECOGNITION FOR

17 HOSPITAL SERVICES.—

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

19 in making any payment to hospitals under title

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

21 seq.), the Secretary shall discontinue payments

22 under title XVIII of such Act to providers of service

23 for reasonable costs relating to unrecovered costs as24 sociated with unpaid deductible and coinsurance

25 amounts incurred under such title.
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1 (2) CONFORMING AMENDMENTS.—

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

3 section 4008 of the Omnibus Budget Reconcili4 ation Act of 1987 is repealed.

5 (ii) Section 1833 of the Social Security Act

6 (42 U.S.C. 1395l) is amended—

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

8 subparagraph (C), and

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

10 paragraph (4).

11 (B) EFFECTIVE DATE.—The amendments

12 made by subparagraph (A) shall take effect on

13 October 1, 1995.

14 (g) EXTENSION OF FREEZE ON UPDATES TO ROU15 TINE SERVICE COSTS OF SKILLED NURSING FACILI16 TIES.—

17 (1) PAYMENTS BASED ON COST LIMITS.—Sec18 tion 1888(a) of the Social Security Act (42 U.S.C.

19 1395yy(a)) is amended by striking ‘‘112 percent’’

20 each place it appears and inserting ‘‘100 percent

21 (adjusted by such amount as the Secretary deter22 mines to be necessary to preserve the savings result23 ing from the enactment of section 13503(a)(1) of

24 the Omnibus Budget Reconciliation Act of 1993)’’.
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1 (2) PAYMENTS DETERMINED ON PROSPECTIVE

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

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

4 ‘‘105 percent’’ and inserting ‘‘100 percent (adjusted

5 by such amount as the Secretary determines to be

6 necessary to preserve the savings resulting from the

7 enactment of section 13503(b) of the Omnibus

8 Budget Reconciliation Act of 1993)’’.

9 (3) EFFECTIVE DATE.—The amendments made

10 by paragraphs (1) and (2) shall apply to cost report11 ing periods beginning on or after October 1, 1995.

12 (h) ESTABLISHMENT OF CUMULATIVE EXPENDI13 TURE GOALS FOR PHYSICIAN SERVICES.—

14 (1) USE OF CUMULATIVE PERFORMANCE

15 STANDARD.—Section 1848(f)(2) of the Social Secu16 rity Act (42 U.S.C. 1395w–4(f)(2)) is amended—

17 (A) in subparagraph (A)—

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

19 GENERAL’’ and inserting ‘‘FISCAL YEARS

20 1991 THROUGH 1994.—’’,

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

22 by striking ‘‘a fiscal year (beginning with

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

24 years 1991, 1992, 1993, and 1994’’, and
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1 (iii) in the matter following clause

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

3 inserting ‘‘subparagraph (C)’’;

4 (B) in subparagraph (B), by striking ‘‘sub5 paragraph (A)’’ and inserting ‘‘subparagraphs

6 (A) and (B)’’;

7 (C) by redesignating subparagraphs (B)

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

9 (D) by inserting after subparagraph (A)

10 the following new subparagraph:

11 ‘‘(B) FISCAL YEARS BEGINNING WITH FIS12 CAL YEAR 1995.—Unless Congress otherwise

13 provides, the performance standard rate of in14 crease, for all physicians’ services and for each

15 category of physicians’ services, for a fiscal year

16 beginning with fiscal year 1995 shall be equal

17 to the performance standard rate of increase

18 determined under this paragraph for the pre19 vious fiscal year, increased by the product of—

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

21 the weighted average percentage increase

22 (divided by 100) in the fees for all physi23 cians’ services or for the category of physi24 cians’ services, respectively, under this part
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1 for portions of calendar years included in

2 the fiscal year involved,

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

4 the percentage increase or decrease (di5 vided by 100) in the average number of in6 dividuals enrolled under this part (other

7 than HMO enrollees) from the previous fis8 cal year to the fiscal year involved,

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

10 of the average annual percentage growth

11 (divided by 100) in volume and intensity of

12 all physicians’ services or of the category

13 of physicians’ services, respectively, under

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

15 with the preceding fiscal year (based upon

16 information contained in the most recent

17 annual report made pursuant to section

18 1841(b)(2)), and

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

20 of the percentage increase or decrease (di21 vided by 100) in expenditures for all physi22 cians’ services or of the category of physi23 cians’ services, respectively, in the fiscal

24 year (compared with the previous fiscal

25 year) which are estimated to result from
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1 changes in law or regulations affecting the

2 percentage increase described in clause (i)

3 and which is not taken into account in the

4 percentage increase described in clause (i),

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

6 performance standard factor (specified in sub7 paragraph (C)).’’.

8 (2) TREATMENT OF DEFAULT UPDATE.—

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

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

11 amended—

12 (i) in clause (i)—

13 (I) in the heading, by striking

14 ‘‘IN GENERAL’’ and inserting ‘‘1992

15 THROUGH 1996’’, and

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

17 inserting ‘‘for 1992, 1993, 1994,

18 1995, and 1996’’; and

19 (ii) by adding after clause (ii) the fol20 lowing new clause:

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

22 ‘‘(I) IN GENERAL.—The update

23 for a category of physicians’ services

24 for a year beginning with 1997 pro25 vided under subparagraph (A) shall be
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1 increased or decreased by the same

2 percentage by which the cumulative

3 percentage increase in actual expendi4 tures for such category of physicians’

5 services for such year was less or

6 greater, respectively, than the per7 formance standard rate of increase

8 (established under subsection (f)) for

9 such category of services for such

10 year.

11 ‘‘(II) CUMULATIVE PERCENTAGE

12 INCREASE DEFINED.—In subclause

13 (I), the ‘cumulative percentage in14 crease in actual expenditures’ for a

15 year shall be equal to the product of

16 the adjusted increases for each year

17 beginning with 1995 up to and includ18 ing the year involved, minus 1 and

19 multiplied by 100. In the previous

20 sentence, the ‘adjusted increase’ for a

21 year is equal to 1 plus the percentage

22 increase in actual expenditures for the

23 year.’’.

24 (B) CONFORMING AMENDMENT.—Section

25 1848(d)(3)(A)(i) of such Act (42 U.S.C.
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1 1395w–4(d)(3)(A)(i)) is amended by striking

2 ‘‘subparagraph (B)’’ and inserting ‘‘subpara3 graphs (B) and (C)’’.

4 (i) LIMITATIONS ON PAYMENT FOR PHYSICIANS’

5 SERVICES FURNISHED BY HIGH-COST HOSPITAL MEDI6 CAL STAFFS.—

7 (1) IN GENERAL.—

8 (A) LIMITATIONS DESCRIBED.—Part B of

9 title XVIII of the Social Security Act (42

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

11 302(a)(1), is amended by inserting after section

12 1848 the following new section:

13 ‘‘LIMITATIONS ON PAYMENT FOR PHYSICIANS’ SERVICES

14 FURNISHED BY HIGH-COST HOSPITAL MEDICAL STAFFS

15 ‘‘SEC. 1849. (a) SERVICES SUBJECT TO REDUC16 TION.—

17 ‘‘(1) DETERMINATION OF HOSPITAL-SPECIFIC

18 PER ADMISSION RELATIVE VALUE.—Not later than

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

20 Secretary shall determine for each hospital—

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

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

23 following year; and

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

25 value is projected to exceed the allowable aver26 age per admission relative value applicable to
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1 the hospital for the following year under sub2 section (b)(1).

3 ‘‘(2) REDUCTION FOR SERVICES AT HOSPITALS

4 EXCEEDING ALLOWABLE AVERAGE PER ADMISSION

5 RELATIVE VALUE.—If the Secretary determines

6 (under paragraph (1)) that a medical staff’s hos7 pital-specific per admission relative value for a year

8 (beginning with 1998) is projected to exceed the al9 lowable average per admission relative value applica10 ble to the medical staff for the year, the Secretary

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

12 amount of payment otherwise determined under this

13 part for each physician’s service furnished during

14 the year to an inpatient of the hospital by an indi15 vidual who is a member of the hospital’s medical

16 staff.

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

18 HOSPITALS AND CARRIERS.—Not later than October

19 1 of each year (beginning with 1997), the Secretary

20 shall notify the medical executive committee of each

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

22 Commission on the Accreditation of Health Organi23 zations) of the determinations made with respect to

24 the medical staff under paragraph (1).
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1 ‘‘(b) DETERMINATION OF ALLOWABLE AVERAGE

2 PER ADMISSION RELATIVE VALUE AND HOSPITAL-SPE3 CIFIC PER ADMISSION RELATIVE VALUES.—

4 ‘‘(1) ALLOWABLE AVERAGE PER ADMISSION

5 RELATIVE VALUE.—

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

7 hospital located in an urban area, the allowable

8 average per admission relative value established

9 under this subsection for a year is equal to 125

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

11 the median of 1996 hospital-specific per admis12 sion relative values determined under paragraph

13 (2) for all hospital medical staffs.

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

15 hospital located in a rural area, the allowable

16 average per admission relative value established

17 under this subsection for 1998 and each suc18 ceeding year, is equal to 140 percent of the me19 dian of the 1996 hospital-specific per admission

20 relative values determined under paragraph (2)

21 for all hospital medical staffs.

22 ‘‘(2) HOSPITAL-SPECIFIC PER ADMISSION REL23 ATIVE VALUE.—

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

25 per admission relative value projected for a hos-
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1 pital (other than a teaching hospital) for a cal2 endar year, shall be equal to the average per

3 admission relative value (as determined under

4 section 1848(c)(2)) for physicians’ services fur5 nished to inpatients of the hospital by the hos6 pital’s medical staff (excluding interns and resi7 dents) during the second year preceding such

8 calendar year, adjusted for variations in case9 mix and disproportionate share status among

10 hospitals (as determined by the Secretary under

11 subparagraph (C)).

12 ‘‘(B) SPECIAL RULE FOR TEACHING HOS13 PITALS.—The hospital-specific relative value

14 projected for a teaching hospital in a calendar

15 year shall be equal to the sum of—

16 ‘‘(i) the average per admission relative

17 value (as determined under section

18 1848(c)(2)) for physicians’ services fur19 nished to inpatients of the hospital by the

20 hospital’s medical staff (excluding interns

21 and residents) during the second year pre22 ceding such calendar year; and

23 ‘‘(ii) the equivalent per admission rel24 ative value (as determined under section

25 1848(c)(2)) for physicians’ services fur-
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1 nished to inpatients of the hospital by in2 terns and residents of the hospital during

3 the second year preceding such calendar

4 year, adjusted for variations in case-mix,

5 disproportionate share status, and teaching

6 status among hospitals (as determined by

7 the Secretary under subparagraph (C)).

8 The Secretary shall determine such equiva9 lent relative value unit per admission for

10 interns and residents based on the best

11 available data for teaching hospitals and

12 may make such adjustment in the aggre13 gate.

14 ‘‘(C) ADJUSTMENT FOR TEACHING AND

15 DISPROPORTIONATE SHARE HOSPITALS.—The

16 Secretary shall adjust the allowable per admis17 sion relative values otherwise determined under

18 this paragraph to take into account the needs

19 of teaching hospitals and hospitals receiving ad20 ditional payments under subparagraphs (F) and

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

22 teaching status or disproportionate share shall

23 not be less than zero.

24 ‘‘(c) AMOUNT OF REDUCTION.—The amount of pay25 ment otherwise made under this part for a physician’s
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1 service that is subject to a reduction under subsection (a)

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

3 a service furnished by a member of the medical staff of

4 the hospital for which the Secretary determines under sub5 section (a)(1) that the hospital medical staff’s projected

6 relative value per admission exceeds the allowable average

7 per admission relative value.

8 ‘‘(d) RECONCILIATION OF REDUCTIONS BASED ON

9 HOSPITAL-SPECIFIC RELATIVE VALUE PER ADMISSION

10 WITH ACTUAL RELATIVE VALUES.—

11 ‘‘(1) DETERMINATION OF ACTUAL AVERAGE

12 PER ADMISSION RELATIVE VALUE.—Not later than

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

14 Secretary shall determine the actual average per ad15 mission relative value (as determined pursuant to

16 section 1848(c)(2)) for the physicians’ services fur17 nished by members of a hospital’s medical staff to

18 inpatients of the hospital during the previous year,

19 on the basis of claims for payment for such services

20 that are submitted to the Secretary not later than

21 90 days after the last day of such previous year. The

22 actual average per admission shall be adjusted by

23 the appropriate case-mix, disproportionate share fac24 tor, and teaching factor for the hospital medical

25 staff (as determined by the Secretary under sub-
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1 section (b)(2)(C)). Notwithstanding any other provi2 sion of this title, no payment may be made under

3 this part for any physician’s service furnished by a

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

5 of the hospital during a year unless the hospital sub6 mits a claim to the Secretary for payment for such

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

8 the year.

9 ‘‘(2) RECONCILIATION WITH REDUCTIONS

10 TAKEN.—In the case of a hospital for which the pay11 ment amounts for physicians’ services furnished by

12 members of the hospital’s medical staff to inpatients

13 of the hospital were reduced under this section for

14 a year—

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

16 relative value for such hospital’s medical staff

17 during the year (as determined by the Secretary

18 under paragraph (1)) did not exceed the allow19 able average per admission relative value appli20 cable to the hospital’s medical staff under sub21 section (b)(1) for the year, the Secretary shall

22 reimburse the fiduciary agent for the medical

23 staff by the amount by which payments for

24 such services were reduced for the year under
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1 subsection (c), including interest at an appro2 priate rate determined by the Secretary;

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

4 relative value for such hospital’s medical staff

5 during the year is less than 15 percentage

6 points above the allowable average per admis7 sion relative value applicable to the hospital’s

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

9 year, the Secretary shall reimburse the fidu10 ciary agent for the medical staff, as a percent

11 of the total allowed charges for physicians’ serv12 ices performed in such hospital (prior to the

13 withhold), the difference between 15 percentage

14 points and the actual number of percentage

15 points that the staff exceeds the limit allowable

16 average per admission relative value, including

17 interest at an appropriate rate determined by

18 the Secretary; and

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

20 relative value for such hospital’s medical staff

21 during the year exceeded the allowable average

22 per admission relative value applicable to the

23 hospital’s medical staff by 15 percentage points

24 or more, none of the withhold is paid to the fi25 duciary agent for the medical staff.
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1 ‘‘(3) MEDICAL EXECUTIVE COMMITTEE OF A

2 HOSPITAL.—Each medical executive committee of a

3 hospital whose medical staff is projected to exceed

4 the allowable relative value per admission for a year,

5 shall have one year from the date of notification that

6 such medical staff is projected to exceed the allow7 able relative value per admission to designate a fidu8 ciary agent for the medical staff to receive and dis9 burse any appropriate withhold amount made by the

10 carrier.

11 ‘‘(4) ALTERNATIVE REIMBURSEMENT TO MEM12 BERS OF STAFF.—At the request of a fiduciary

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

14 the medical staff is owed the reimbursement de15 scribed in paragraph (2)(B) for excess reductions in

16 payments during a year, the Secretary shall make

17 such reimbursement to the members of the hospital’s

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

19 proportion of physicians’ services furnished to inpa20 tients of the hospital during the year that were fur21 nished by each member of the medical staff.

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

23 definitions apply:
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1 ‘‘(1) MEDICAL STAFF.—An individual furnish2 ing a physician’s service is considered to be on the

3 medical staff of a hospital—

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

5 for hospitals established by the Joint Commis6 sion on Accreditation of Health Organiza7 tions)—

8 ‘‘(i) the individual is subject to by9 laws, rules, and regulations established by

10 the hospital to provide a framework for the

11 self-governance of medical staff activities;

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

13 regulations, the individual has clinical

14 privileges granted by the hospital’s govern15 ing body; and

16 ‘‘(iii) under such clinical privileges,

17 the individual may provide physicians’

18 services independently within the scope of

19 the individual’s clinical privileges, or

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

21 service to a medicare beneficiary in such hos22 pital.

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

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

25 such terms under section 1886(d)(2)(D).
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1 ‘‘(3) TEACHING HOSPITAL.—The term ‘teaching

2 hospital’ means a hospital which has a teaching pro3 gram approved as specified in section 1861(b)(6).’’.

4 (B) CONFORMING AMENDMENTS.—(i) Sec5 tion 1833(a)(1)(N) of such Act (42 U.S.C.

6 1395l(a)(1)(N)) is amended by inserting ‘‘(sub7 ject to reduction under section 1849)’’ after

8 ‘‘1848(a)(1)’’.

9 (ii) Section 1848(a)(1)(B) of such Act (42

10 U.S.C. 1395w–4(a)(1)(B)) is amended by strik11 ing ‘‘this subsection,’’ and inserting ‘‘this sub12 section and section 1849,’’.

13 (2) REQUIRING PHYSICIANS TO IDENTIFY HOS14 PITAL AT WHICH SERVICE FURNISHED.—Section

15 1848(g)(4)(A)(i) of such Act (42 U.S.C. 1395w–

16 4(g)(4)(A)(i)) is amended by striking ‘‘beneficiary,’’

17 and inserting ‘‘beneficiary (and, in the case of a

18 service furnished to an inpatient of a hospital, report

19 the hospital identification number on such claim

20 form),’’.

21 (3) EFFECTIVE DATE.—The amendments made

22 by this subsection shall apply to services furnished

23 on or after January 1, 1998.

24 (j) IMPOSITION OF COINSURANCE ON LABORATORY

25 SERVICES.—
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1 (1) IN GENERAL.—Paragraphs (1)(D) and

2 (2)(D) of section 1833(a) of the Social Security Act

3 (42 U.S.C. 1395l(a)) are each amended—

4 (A) by striking ‘‘(or 100 percent’’ and all

5 that follows through ‘‘the first opinion))’’, and

6 (B) by striking ‘‘100 percent of such nego7 tiated rate’’ and inserting ‘‘80 percent of such

8 negotiated rate’’.

9 (2) EFFECTIVE DATE.—The amendments made

10 by paragraph (1) shall apply to tests furnished on

11 or after January 1, 1995.

12 (k) REDUCTION IN ROUTINE COST LIMITS FOR

13 HOME HEALTH SERVICES.—

14 (1) REDUCTION IN UPDATE TO MAINTAIN

15 FREEZE IN 1996.—Section 1861(v)(1)(L)(i) of the

16 Social Security Act (42 U.S.C. 1395x(v)(1)(L)(i)) is

17 amended—

18 (A) in subclause (II), by striking ‘‘or’’ at

19 the end,

20 (B) in subclause (III), by striking ‘‘112

21 percent,’’ and inserting ‘‘and before July 1,

22 1996, 112 percent, or’’, and

23 (C) by inserting after subclause (III) the

24 following new subclause:
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1 ‘‘(IV) July 1, 1996, 100 percent (adjusted by

2 such amount as the Secretary determines to be nec3 essary to preserve the savings resulting from the en4 actment of section 13564(a)(1) of the Omnibus

5 Budget Reconciliation Act of 1993),’’.

6 (2) BASING LIMITS IN SUBSEQUENT YEARS ON

7 MEDIAN OF COSTS.—

8 (A) IN GENERAL.—Section

9 1861(v)(1)(L)(i) of such Act (U.S.C.

10 1395x(v)(1)(L)(i)), as amended by paragraph

11 (1), is amended in the matter following

12 subclause (IV) by striking ‘‘the mean’’ and in13 serting ‘‘the median’’.

14 (B) EFFECTIVE DATE.—The amendment

15 made by subparagraph (A) shall apply to cost

16 reporting periods beginning on or after July 1,

17 1997.

18 (l) IMPOSITION OF COPAYMENT FOR CERTAIN HOME

19 HEALTH VISITS.—

20 (1) IN GENERAL.—

21 (A) PART A.—Section 1813(a) of the So22 cial Security Act (42 U.S.C. 1395e(a)) is

23 amended by adding at the end the following

24 new paragraph:
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1 ‘‘(5) The amount payable for home health services

2 furnished to an individual under this part shall be reduced

3 by a copayment amount equal to 10 percent of the average

4 of all per visit costs for home health services furnished

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

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

7 services furnished during a calendar year), unless such

8 services were furnished to the individual during the 30-

9 day period that begins on the date the individual is dis10 charged as an inpatient from a hospital.’’.

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

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

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

14 ‘‘to home health services,’’ and by striking

15 the comma after ‘‘opinion)’’,

16 (ii) in subparagraph (D), by striking

17 ‘‘and’’ at the end,

18 (iii) in subparagraph (E), by striking

19 the semicolon at the end and inserting ‘‘;

20 and’’, and

21 (iv) by adding at the end the following

22 new subparagraph:

23 ‘‘(F) with respect to home health serv24 ices—

25 ‘‘(i) the lesser of —
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1 ‘‘(I) the reasonable cost of such

2 services, as determined under section

3 1861(v), or

4 ‘‘(II) the customary charges with

5 respect to such services,

6 less the amount a provider may charge as

7 described in clause (ii) of section

8 1866(a)(2)(A),

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

10 a public provider of services, or by another

11 provider which demonstrates to the satis12 faction of the Secretary that a significant

13 portion of its patients are low income (and

14 requests that payment be made under this

15 clause), free of charge or at nominal

16 charges to the public, the amount deter17 mined in accordance with section

18 1814(b)(2), or

19 ‘‘(iii) if (and for so long as) the condi20 tions described in section 1814(b)(3) are

21 met, the amounts determined under the re22 imbursement system described in such sec23 tion,

24 less a copayment amount equal to 10 percent of

25 the average of all per visit costs for home
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1 health services furnished under this title deter2 mined under section 1861(v)(1)(L) (as deter3 mined by the Secretary on a prospective basis

4 for services furnished during a calendar year),

5 unless such services were furnished to the indi6 vidual during the 30-day period that begins on

7 the date the individual is discharged as an inpa8 tient from a hospital;’’.

9 (C) PROVIDER CHARGES.—Section

10 1866(a)(2)(A)(i) of such Act (42 U.S.C.

11 1395cc(a)(2)(A)(i)) is amended—

12 (i) by striking ‘‘deduction or coinsur13 ance’’ and inserting ‘‘deduction, coinsur14 ance, or copayment’’, and

15 (ii) by striking ‘‘or (a)(4)’’ and insert16 ing ‘‘(a)(4), or (a)(5)’’.

17 (2) EFFECTIVE DATE.—The amendments made

18 by paragraph (1) shall apply to home health services

19 furnished on or after July 1, 1995.

20 (m) REDUCTION IN HOSPITAL OUTPATIENT SERV21 ICES THROUGH ESTABLISHMENT OF PROSPECTIVE PAY22 MENT SYSTEM.—

23 (1) IN GENERAL.—Section 1833(a)(2)(B) of the

24 Social Security Act (42 U.S.C. 1395l(a)(2)(B)) is

25 amended by striking ‘‘section 1886)—’’ and all that
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1 follows and inserting the following: ‘‘section 1886),

2 an amount equal to a prospectively determined pay3 ment rate established by the Secretary that provides

4 for payments for such items and services to be based

5 upon a national rate adjusted to take into account

6 the relative costs of furnishing such items and serv7 ices in various geographic areas, except that for

8 items and services furnished during cost reporting

9 periods (or portions thereof) in years beginning with

10 1995, such amount shall be equal to 90 percent of

11 the amount that would otherwise have been deter12 mined;’’.

13 (2) ESTABLISHMENT OF PROSPECTIVE PAY14 MENT SYSTEM.—Not later than July 1, 1995, the

15 Secretary shall establish the prospective payment

16 system for hospital outpatient services necessary to

17 carry out section 1833(a)(2)(B) of the Social Secu18 rity Act (as amended by paragraph (1)).

19 (3) EFFECTIVE DATE.—The amendment made

20 by paragraph (1) shall apply to items and services

21 furnished on or after July 1, 1995.

22 SEC. 303. INCOME-TESTED MEDICARE PREMIUMS.

23 (a) IN GENERAL.—Subchapter A of chapter 1 of the

24 Internal Revenue Code of 1986 (relating to determination
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1 of tax liability) is amended by adding at the end the fol2 lowing new part:

3 ‘‘PART VIII—CERTAIN MEDICARE SUBSIDIES

4 RECEIVED BY HIGH-INCOME INDIVIDUALS

‘‘Sec. 59B. Recapture of certain medicare subsidies.

5 ‘‘SEC. 59B. RECAPTURE OF CERTAIN MEDICARE SUBSIDIES.

6 ‘‘(a) IMPOSITION OF RECAPTURE AMOUNT.—In the

7 case of an individual, if the modified adjusted gross in8 come of the taxpayer for the taxable year exceeds the

9 threshold amount, such taxpayer shall pay (in addition to

10 any other amount imposed by this subtitle) a recapture

11 amount for such taxable year equal to the aggregate of

12 the Medicare recapture amounts (if any) for months dur13 ing such year that a premium is paid under section 1876

14 of the Social Security Act for the coverage of the individ15 ual under such title.

16 ‘‘(b) MEDICARE RECAPTURE AMOUNT FOR

17 MONTH.—For purposes of this section, the Medicare re18 capture amount for any month is the amount equal to the

19 excess of—

20 ‘‘(1) either—

21 ‘‘(A) the total monthly premium charged

22 by the medicare health plan in which the indi23 vidual was enrolled (as determined under sec24 tion 1876(d)(1) of the Social Securty Act), or
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1 ‘‘(B) the fee-for-service per capita costs (as

2 defined in section 1876(e)(4)(B) of such Act)

3 for individuals enrolled in medicare fee-for-serv4 ice during the month in the medicare market

5 area in which the individual was residing, over

6 ‘‘(2) the sum of—

7 ‘‘(A) the monthly beneficiary premium

8 owed by the individual (as determined by sec9 tion 1876(f)(2) of such Act), and

10 ‘‘(B) 50 percent of the benchmark pre11 mium in the medicare market area in which the

12 individual was residing (as determined under

13 section 1876(e)(4)(A) of such Act).

14 ‘‘(c) PHASE IN OF RECAPTURE AMOUNT.—If the

15 modified adjusted gross income of the taxpayer for any

16 taxable year exceeds the threshold amount by less than

17 $25,000, the recapture amount imposed by this section for

18 such taxable year shall be an amount which bears the

19 same ratio to the recapture amount which would (but for

20 this subsection) be imposed by this section for such tax21 able year as such excess bears to $25,000.

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

23 For purposes of this section—

24 ‘‘(1) THRESHOLD AMOUNT.—The term ‘thresh25 old amount’ means—
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1 ‘‘(A) except as otherwise provided in this

2 paragraph, $75,000,

3 ‘‘(B) $100,000 in the case of a joint re4 turn, and

5 ‘‘(C) zero in the case of a taxpayer who—

6 ‘‘(i) is married (as determined under

7 section 7703) but does not file a joint re8 turn for such year, and

9 ‘‘(ii) does not live apart from his

10 spouse at all times during the taxable year.

11 ‘‘(2) MODIFIED ADJUSTED GROSS INCOME.—

12 The term ‘modified adjusted gross income’ means

13 adjusted gross income—

14 ‘‘(A) determined without regard to sections

15 135, 911, 931, and 933, and

16 ‘‘(B) increased by the amount of interest

17 received or accrued by the taxpayer during the

18 taxable year which is exempt from tax.

19 ‘‘(3) JOINT RETURNS.—In the case of a joint

20 return—

21 ‘‘(A) the recapture amount under sub22 section (a) shall be the sum of the recapture

23 amounts determined separately for each spouse,

24 and
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1 ‘‘(B) subsections (a) and (c) shall be ap2 plied by taking into account the combined modi3 fied adjusted gross income of the spouses.

4 ‘‘(4) COORDINATION WITH OTHER PROVI5 SIONS.—

6 ‘‘(A) TREATED AS TAX FOR SUBTITLE F.—

7 For purposes of subtitle F, the recapture

8 amount imposed by this section shall be treated

9 as if it were a tax imposed by section 1.

10 ‘‘(B) NOT TREATED AS TAX FOR CERTAIN

11 PURPOSES.—The recapture amount imposed by

12 this section shall not be treated as a tax im13 posed by this chapter for purposes of determin14 ing—

15 ‘‘(i) the amount of any credit allow16 able under this chapter, or

17 ‘‘(ii) the amount of the minimum tax

18 under section 55.

19 ‘‘(C) TREATED AS PAYMENT FOR MEDICAL

20 INSURANCE.—The recapture amount imposed

21 by this section shall be treated as an amount

22 paid for insurance covering medical care, within

23 the meaning of section 213(d).’’.

24 (b) TRANSFERS TO MEDICARE TRUST FUNDS.—
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1 (1) IN GENERAL.—There are hereby appro2 priated to the Hospital Insurance and the Supple3 mental Medical Insurance Trust Funds amounts

4 equivalent to the aggregate increase in liabilities

5 under chapter 1 of the Internal Revenue Code of

6 1986 which is attributable to the application of sec7 tion 59B(a)(1) of such Code, as added by this sec8 tion.

9 (2) TRANSFERS.—The amounts appropriated

10 by paragraph (1) shall be transferred from time to

11 time (but not less frequently than quarterly) from

12 the general fund of the Treasury on the basis of es13 timates made by the Secretary of the Treasury of

14 the amounts referred to in paragraph (1), and shall

15 be allocated between the Hospital Insurance and the

16 Supplemental Medical Insurance Trust Funds ac17 cording to a formula established by the Secretary of

18 Health and Human Services. Any quarterly payment

19 shall be made on the first day of such quarter and

20 shall take into account the recapture amounts re21 ferred to in such section 59B(a)(1) for such quarter.

22 Proper adjustments shall be made in the amounts

23 subsequently transferred to the extent prior esti24 mates were in excess of or less than the amounts re25 quired to be transferred.
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1 (c) REPORTING REQUIREMENTS.—

2 (1) Paragraph (1) of section 6050F(a) of the

3 Internal Revenue Code of 1986 (relating to returns

4 relating to social security benefits) is amended by

5 striking ‘‘and’’ at the end of subparagraph (B) and

6 by inserting after subparagraph (C) the following

7 new subparagraph:

8 ‘‘(D) the number of months during the cal9 endar year for which a premium was paid under

10 section 1876 of the Social Security Act for the

11 coverage of such individual under such part,

12 and’’.

13 (2) Paragraph (2) of section 6050F(b) of such

14 Code (relating to statements to be furnished with re15 spect to whom information is required) is amended

16 to read as follows:

17 ‘‘(2) the information required to be shown on

18 such return with respect to such individual.’’.

19 (3) Subparagraph (A) of section 6050F(c)(1) of

20 such Code (defining appropriate Federal official) is

21 amended by inserting before the comma ‘‘and in the

22 case of the information specified in subsection

23 (a)(1)(D)’’.
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1 (4) The heading for section 6050F of such

2 Code is amended by inserting ‘‘AND MEDICARE

3 COVERAGE’’ before the period.

4 (5) The item relating to section 6050F in the

5 table of sections for subpart B of part III of sub6 chapter A of chapter 61 is amended by inserting

7 ‘‘and Medicare coverage’’ before the period.

8 (d) WAIVER OF CERTAIN ESTIMATED TAX PEN9 ALTIES.—No addition to tax shall be imposed under sec10 tion 6654 of the Internal Revenue Code of 1986 (relating

11 to failure to pay estimated income tax) for any period be12 fore April 16, 1997, with respect to any underpayment

13 to the extent that such underpayment resulted from sec14 tion 59B(a) of the Internal Revenue Code of 1986, as

15 added by this section.

16 (e) CLERICAL AMENDMENT.—The table of parts for

17 subchapter A of chapter 1 is amended by adding at the

18 end thereof the following new item:

‘‘Part VIII. Certain medicare subsidies received by high-income

individuals.’’.

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

20 this section shall apply to periods after December 31,

21 1995, in taxable years ending after such date.

22 SEC. 304. MEDICARE ADMINISTRATIVE SIMPLIFICATION.

23 (a) CONSOLIDATION OF PARTS A AND B.—By not

24 later than October 1, 1995, the Secretary shall submit to
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1 the Congress a proposal to consolidate entitlement for part

2 A of the title XVIII of the Social Security Act (42 U.S.C.

3 1395c et seq.) and enrollment in part B of such title (42

4 U.S.C. 1395j et seq.) into eligibility or enrollment into the

5 entire medicare program under such title. In preparing

6 such a proposal, the Secretary shall consider phasing in

7 such a consolidation, and shall ensure that no beneficiary

8 shall pay higher premiums for coverage under such pro9 gram than under such program as of the date of the enact10 ment of this Act.

11 (b) CONSOLIDATION OF FEE-FOR-SERVICE ADMINIS12 TRATION.—

13 (1) IN GENERAL.—The Secretary shall take

14 such steps as may be necessary to consolidate the

15 administration (including processing systems) of

16 parts A and B of the medicare program (under title

17 XVIII of the Social Security Act), including medi18 care supplemental policies, over a 5-year period.

19 (2) COMBINATION OF INTERMEDIARY AND CAR20 RIER FUNCTIONS.—In taking such steps, the Sec21 retary may contract with a single entity that com22 bines the fiscal intermediary and carrier functions in

23 each area except where the Secretary finds that spe24 cial regional or national contracts are appropriate.

25 No medicare market area (established under section
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1 1876(a) of the Social Security Act) may be subject

2 to more than 1 entity.

3 (3) STREAMLINED PROCESSING SYSTEMS.—In

4 carrying out this subsection, the Secretary may en5 sure—

6 (A) a streamlined, standardized, and

7 paperless process for handling all fee-for-service

8 claims, and

9 (B) that payments under title XVIII of the

10 Social Security Act (42 U.S.C. 1395 et seq.)

11 are made first by the medicare program and

12 medicare supplemental policies before providers

13 can bill beneficiaries for services using stand14 ardized forms.

15 (4) SUPERSEDING CONFLICTING REQUIRE16 MENTS.—The provisions of sections 1816 and 1842

17 of the Social Security Act (42 U.S.C. 1395h and

18 1395u) (including provider nominating provisions in

19 such section 1816) are superseded to the extent re20 quired to carry out this subsection.
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1 Subtitle B—Health Discount and

2 Medicaid Reform

3 PART I—HEALTH DISCOUNT

4 SEC. 311. STATE HEALTH DISCOUNT PROGRAMS.

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

6 as meeting the requirements of this Act, each State shall

7 include within the State health reform plan a State admin8 istered program, consistent with this subtitle and such

9 other requirements as determined necessary by the Sec10 retary and issued in regulations, under which eligible per11 sons shall receive premium assistance (hereafter in this

12 part referred to as ‘‘health discounts’’) for purchasing

13 health care coverage from AHPs.

14 (b) CATEGORIES OF ELIGIBILITY.—Persons who oth15 erwise meet the criteria for entitlement under this part

16 shall be divided into the following categories of eligibility:

17 (1) Eligible individuals, as defined in section

18 1(c)(3).

19 (2) Eligible employees, as defined in section

20 1(c)(2).

21 (c) SWITCHING CATEGORIES OF ELIGIBILITY.—Indi22 viduals and employees who are determined to be in 1 cat23 egory of eligibility under subsection (b) but whose cir24 cumstances change and cause such individuals and em25 ployees to fall within the other such category shall remain
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1 in the category of eligibility in which such individuals and

2 employees were originally placed until the next open en3 rollment period under section 312(a)(2).

4 SEC. 312. HEALTH DISCOUNT PROGRAM DESIGN.

5 (a) ELIGIBLE INDIVIDUALS.—

6 (1) IN GENERAL.—A State health discount pro7 gram shall allow each eligible individual who other8 wise meets the requirements for entitlement under

9 this part to select from among competing AHPs in

10 the market area in which such individual resides

11 based on the price and quality of the competing

12 AHPs and to use the discount to which such individ13 ual is entitled only to offset the premium charged by

14 the AHP for the benefits package selected by the in15 dividual.

16 (2) ANNUAL OPEN ENROLLMENT.—

17 (A) IN GENERAL.—A State health discount

18 program shall provide for an annual open en19 rollment period during which each eligible indi20 vidual shall choose enrollment in an AHP to

21 which the health discount to which such individ22 ual is entitled shall be paid.

23 (B) ENROLLMENT UPON ELIGIBILITY.—

24 Eligible individuals shall have an open enroll-
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1 ment period upon becoming eligible for a health

2 discount.

3 (C) PERIOD OF ENROLLMENT.—After se4 lecting an AHP during an open enrollment pe5 riod, an eligible individual may not choose an6 other AHP to which a health discount may be

7 paid until the next annual open enrollment pe8 riod, except that—

9 (i) an eligible individual moving to a

10 new market area in the State shall be pro11 vided with a new open enrollment period,

12 and

13 (ii) an eligible individual in an AHP

14 that is terminated from the health discount

15 program shall be provided with a new open

16 enrollment period.

17 (3) COMPARATIVE INFORMATION ON ENROLL18 MENT OPTIONS.—During an open enrollment period,

19 a State health discount program shall provide to the

20 individual such information as may be necessary to

21 ensure such individual may compare the price and

22 quality of the AHPs available in the market area, in23 cluding—

24 (A) premiums by type of benefits package

25 of the competing AHPs,
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1 (B) any restrictions by AHPs on enrollees’

2 selection or use of health care providers and

3 services,

4 (C) quality information, including enrollee

5 satisfaction and measures of health outcomes,

6 (D) appeal rights of enrollees, and

7 (E) any other necessary information, as

8 determined by the Secretary.

9 (4) AHP BENEFITS AND PREMIUMS.—AHPs,

10 other than AHPs offered by employers as self-in11 sured plans under the Employee Retirement Income

12 Security Act of 1974 (29 U.S.C. 1001 et seq.), in

13 order to be certified pursuant to section 112 of this

14 Act, shall—

15 (A) agree to participate in the State health

16 discount program and make available to eligible

17 individuals—

18 (i) the standard benefits package, as

19 determined by the Secretary pursuant to

20 section 113(a),

21 (ii) the nominal cost-sharing benefits

22 package, as determined by the Secretary

23 pursuant to section 113(b), and

24 (iii) the alternative benefits package,

25 as determined by the Secretary pursuant
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1 to section 113(c), if required pursuant to

2 section 313, and

3 (B) submit, for each benefits package for

4 each enrollment period, a uniform monthly pre5 mium for all eligible individuals in the market

6 area, allowing adjustments in such premium

7 only for those factors provided in section

8 112(d).

9 (5) DISCOUNTS.—Each eligible individual who

10 otherwise meets the criteria for entitlement under

11 this part shall be entitled to a health discount, as

12 determined under subsection (c).

13 (6) INDIVIDUAL PREMIUMS.—To enroll in an

14 AHP, an eligible individual must pay a premium

15 equal to the excess of—

16 (A) the premium charged by the AHP for

17 the benefits package selected by the individual,

18 over

19 (B) the discount to which the individual is

20 entitled.

21 (7) PAYMENTS TO AHPS.—

22 (A) IN GENERAL.—A State health discount

23 program shall collect premiums from eligible in24 dividuals and forward to AHPs such premiums
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1 and health discounts to which such individuals

2 are entitled.

3 (B) RISK ADJUSTMENT.—

4 (i) IN GENERAL.—A State health dis5 count program shall adjust the health dis6 counts paid to the AHPs to reflect the rel7 ative health risks of classes of eligible indi8 viduals choosing to enroll in such plans in

9 a market area. The Secretary may define

10 appropriate classes of eligible individuals,

11 based on age, disability status, and such

12 other factors as the Secretary determines

13 to be appropriate.

14 (ii) PENALTIES FOR DISCRIMINA15 TION.—A State health discount program

16 shall have the authority to impose financial

17 penalties on AHPs that knowingly violate

18 the prohibition against discrimination

19 against potential enrollees based on their

20 health status, claims experience, medical

21 history, or other factors that are generally

22 related with utilization of health care serv23 ices.

24 (b) ELIGIBLE EMPLOYEES.—
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1 (1) IN GENERAL.—An eligible employee who

2 otherwise meets the criteria for entitlement under

3 this part and is enrolled in an AHP in a market

4 area in a State shall get a health discount which

5 may only be used to reduce the employee’s premium

6 for enrolling in such AHP.

7 (2) DISCOUNTS.—Each eligible employee who

8 otherwise meets the criteria for entitlement under

9 this part shall be entitled to a health discount, as

10 determined under subsection (c).

11 (3) PAYMENTS TO AHPS.—A State health dis12 count program shall forward to AHPs such health

13 discounts to which such eligible employees are enti14 tled.

15 (c) DETERMINING DISCOUNTS.—

16 (1) BENCHMARK.—

17 (A) IN GENERAL.—Each calendar year, a

18 State health discount program shall determine

19 benchmark monthly premiums for the calendar

20 year for each class of family enrollment within

21 each category of eligibility and within each mar22 ket area.

23 (B) AHP BENEFITS AND PREMIUMS.—For

24 purposes of determining discounts, AHP pre25 miums shall be—
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1 (i) for poor eligible individuals, those

2 AHP premiums submitted pursuant to

3 subsection (a)(4)(ii),

4 (ii) for low income eligible individuals,

5 those AHP premiums submitted pursuant

6 to subsection (a)(4)(i), or, if required by

7 section 313, subsection (a)(4)(iii),

8 (iii) for poor eligible employees, those

9 AHP premiums charged for the nominal

10 cost-sharing benefits package in the small

11 group market pursuant to section 112(d),

12 and

13 (iv) for low income eligible employees,

14 those AHP premiums charged for the

15 standard benefits package in the small

16 group market pursuant to section 112(d),

17 except that AHPs may be required to es18 tablish separate monthly premiums for the

19 alternative benefits package pursuant to

20 section 313.

21 (C) CALCULATION.—The benchmark

22 monthly premium shall equal the sum of the

23 lowest premium charged by an AHP for the ap24 plicable benefits package plus the applicable

25 percentage of the excess of—
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1 (i) the average of all monthly pre2 miums charged by AHPs, over

3 (ii) the lowest premium charged by an

4 AHP.

5 For purposes of the preceding sentence, the ap6 plicable percentage shall be determined by fol7 lowing table:

Applicable

Year: percentage:

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

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

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

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

8 (2) POOR ELIGIBLE INDIVIDUALS AND EMPLOY9 EES.—For poor eligible individuals and poor eligible

10 employees, the amount of the discount shall be equal

11 to the benchmark for each category of eligibility.

12 (3) LOW INCOME ELIGIBLE INDIVIDUALS AND

13 EMPLOYEES.—For low income eligible individuals

14 and low income eligible employees, the amount of the

15 discount shall be equal to the benchmark for each

16 category of eligibility multiplied by—

17 (A) 100 percent, reduced by

18 (B) each percentage point by which the eli19 gible individual’s or eligible employee’s family

20 adjusted total income exceeds 100 percent of

21 the Federal poverty line.

22 (4) DEFINITIONS.—For purposes of this part:
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1 (A) POOR ELIGIBLE INDIVIDUALS AND EM2 PLOYEES.—The terms ‘‘poor eligible individual’’

3 and ‘‘poor eligible employee’’ mean an eligible

4 individual or eligible employee with family ad5 justed total income not in excess of 100 percent

6 of the Federal poverty line.

7 (B) LOW INCOME ELIGIBLE INDIVIDUALS

8 AND EMPLOYEES.—The terms ‘‘low income eli9 gible individual’’ and ‘‘low income eligible em10 ployee’’ mean an eligible individual or eligible

11 employee with family adjusted total income ex12 ceeding 100 percent but not 200 percent of the

13 Federal poverty line.

14 (C) FAMILY ADJUSTED TOTAL INCOME.—

15 (i) IN GENERAL.—The term ‘‘family

16 adjusted total income’’ means, with respect

17 to an eligible individual or eligible em18 ployee, the sum of the modified total in19 come for the individual or employee and all

20 the other eligible family members.

21 (ii) MODIFIED FAMILY INCOME.—The

22 term ‘‘modified family income’’ means the

23 sum of—

24 (I) the adjusted gross income (as

25 defined in section 62(a) of the Inter-
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1 nal Revenue Code of 1986) of the tax2 payer and family members for the tax3 able year determined without regard

4 to sections 911, 931, and 933 of such

5 Code, determined without the applica6 tion of paragraphs (6) and (7) of sec7 tion 62(a) of such Code and without

8 the application of section 162(l) of

9 such Code, plus

10 (II) the interest received or ac11 crued by the taxpayer and family

12 members during such taxable year

13 which is exempt from income, plus

14 (III) the amount of social secu15 rity benefits (described in section

16 86(d) of such Code) which is not in17 cludable in gross income of the tax18 payer and family members under sec19 tion 86 of such Code.

20 (D) FEDERAL POVERTY LINE.—The term

21 ‘‘Federal poverty line’’ means the income offi22 cial poverty line as defined by the Office of

23 Management and Budget, and revised annually

24 in accordance with section 673(2) of the Omni25 bus Budget Reconciliation Act of 1981.
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1 (d) APPLICATIONS FOR HEALTH DISCOUNTS.—

2 (1) IN GENERAL.—Any individual who seeks as3 sistance under this part shall submit a written appli4 cation to the State health discount program.

5 (2) BASIS FOR DETERMINATION.—Subject to

6 annual enforcement under subsection (e), health dis7 counts under this part shall be based on 4 times the

8 family adjusted total income during the 3 months

9 preceding the month in which the application is

10 filed.

11 (3) FORM AND CONTENTS.—An application for

12 assistance under this part shall be in a form and

13 manner specified by the State health discount pro14 gram and shall require—

15 (A) the provision of information necessary

16 to make the determinations described in sub17 section (b), and

18 (B) with respect to eligible employees, the

19 provision of information with respect to the

20 AHP in which the employee is enrolled (or in

21 the process of enrolling).

22 (4) VERIFICATION.—The State health discount

23 program shall provide for verification, on a sample

24 or other basis, of the information supplied in appli25 cations under this part.
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1 (5) PENALTIES FOR INACCURATE INFORMA2 TION.—

3 (A) UNDERSTATED INCOME.—A State

4 health discount program shall require individ5 uals who knowingly understate income reported

6 in an application to pay interest on the excess

7 health discounts paid on behalf of such individ8 ual, in addition to repayment of the health dis9 count.

10 (B) MISREPRESENTATION.—A State

11 health discount program shall require individ12 uals who knowingly misrepresent material infor13 mation in an application for health discounts

14 under this part to pay $1000 or, if greater, 3

15 times the excess health discounts paid based on

16 such material misrepresentations.

17 (e) ANNUAL ENFORCEMENT OF HEALTH DISCOUNT

18 ENTITLEMENT.—

19 (1) ANNUAL INCOME STATEMENT.—An individ20 ual receiving health discounts under this part in any

21 year shall file with the State health discount pro22 gram, by not later than April 15 of the following

23 year, a statement verifying total adjusted family in24 come for the taxable year ending during the previous

25 year. Such a statement shall provide information
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1 necessary to determine the family adjusted total in2 come during the year and the number of family

3 members as of the last day of the year.

4 (2) USE OF INCOME TAX RETURNS.—The State

5 health discount program shall provide a process

6 under which the filing of a Federal income tax re7 turn shall constitute the filing of an income state8 ment under paragraph (1).

9 (3) RECONCILIATION BASED ON ACTUAL AN10 NUAL INCOME.—

11 (A) IN GENERAL.—Based on the informa12 tion reported in the statement filed under para13 graph (1), the State health discount program

14 shall compute the annual health discount that

15 should have been paid on behalf of the eligible

16 individual or employee.

17 (B) RECONCILIATION.—If the health dis18 count computed is—

19 (i) greater than the health discount

20 paid, the program shall provide for pay21 ment to the individual or employee an

22 amount equal to the amount of the

23 underpayment, or

24 (ii) less than the health discount paid,

25 the program shall require the individual or
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1 employee to repay the excess health dis2 count.

3 (4) FAILURE TO FILE.—If an individual re4 quired to file an income statement under this sub5 section fails to file such a statement, the State

6 health discount program shall disqualify such indi7 vidual for health discounts after May 1 of such year.

8 The program shall waive the application of this dis9 qualification if there is established, to the satisfac10 tion of the program, good cause for the failure to file

11 the statement on a timely basis.

12 (5) PENALTIES.—Any individual providing false

13 information in a statement under paragraph (1) is

14 subject to criminal penalties to the same extent as

15 such penalties may be imposed under section

16 1128B(a) of the Social Security Act (42 U.S.C.

17 1320a–7b(a)) with respect to an individual described

18 in clause (ii) of such section.

19 (6) NOTICE.—A State health discount program

20 shall provide for written notice each year of the re21 quirement under paragraph (1) to all individuals to

22 whom the requirement applies.

23 (7) TRANSMITTAL OF INFORMATION.—The Sec24 retary of the Treasury shall transmit annually to the

25 State such information relating to the adjusted total
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1 income of individuals for the taxable year ending in

2 the previous year as may be necessary to verify the

3 reconciliation of health discounts under this sub4 section.

5 (f) SMALL GROUP PURCHASING POOLS.—A State

6 may contract with small group purchasing pools to admin7 ister portions of the health discount program, as appro8 priate.

9 SEC. 313. FINANCING HEALTH DISCOUNTS.

10 (a) IN GENERAL.—Health discounts shall be financed

11 with—

12 (1) available Federal spending,

13 (2) required State Medicaid maintenance of ef14 fort spending and State matching amounts, and

15 (3) optional State supplementation.

16 (b) AVAILABLE FEDERAL SPENDING.—

17 (1) IN GENERAL.—For purposes of subsection

18 (a), Federal spending for health discounts in a fiscal

19 year shall be limited to the excess of—

20 (A) the amount specified in paragraph (2),

21 over

22 (B) the estimated Federal expenditures

23 under titles XVIII and XIX of the Social Secu24 rity Act (42 U.S.C. 1395 et seq.) for such year.
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1 (2) SPECIFIED AMOUNT.—For purposes of

2 paragraph (1), the amount specified in this para3 graph for fiscal year—

4 (A) 1996, is $282,800,000,000,

5 (B) 1997, is $311,000,000,000,

6 (C) 1998, is $343,100,000,000,

7 (D) 1999, is $378,800,000,000,

8 (E) 2000, is $416,300,000,000,

9 (F) 2001, is $449,600,000,000,

10 (G) 2002, is $481,100,000,000,

11 (H) 2003, is $510,000,000,000,

12 (I) 2004, is $540,600,000,000, and

13 (J) 2005 and any succeeding fiscal year, is

14 the specified amount under this paragraph for

15 the previous fiscal year increased by the per16 centage increase in the Gross Domestic Product

17 for the previous fiscal year.

18 (3) LOOK BACK PROCEDURE.—The Secretary

19 shall reduce (or increase) the amount specified in

20 paragraph (2) for any fiscal year (beginning with

21 1997) by the amount by which actual Federal ex22 penditures for titles XVIII and XlX of the Social

23 Security Act (42 U.S.C. 1395 et seq.) and Federal

24 spending for health discounts for the preceding year

25 are greater than (or less than) the amounts specified
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1 in paragraph (2) for the preceding fiscal year (deter2 mined after the application of this paragraph).

3 (c) STATE SPENDING.—For purposes of subsection

4 (a)—

5 (1) MAINTENANCE OF EFFORT.—

6 (A) IN GENERAL.—For each calendar

7 quarter beginning after December 31, 1995, a

8 State shall make available for the health dis9 count program administered by the State under

10 this part an amount equal to one-quarter of the

11 annual maintenance of effort amount for the

12 State for the fiscal year in which such quarter

13 occurs as determined under subparagraph (B).

14 (B) ANNUAL STATE MAINTENANCE OF EF15 FORT AMOUNT.—

16 (i) IN GENERAL.—Except as provided

17 in subparagraph (C), the annual mainte18 nance of effort amount for any fiscal year

19 shall equal the base maintenance of effort

20 amount determined pursuant to clause (ii),

21 updated by the index in clause (iii) for

22 such fiscal year.

23 (ii) BASE AMOUNT.—For each State,

24 the base maintenance of effort amount

25 shall be the amount of total State expendi-
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•S 2096 PCS

1 tures during fiscal year 1994 under title

2 XIX of the Social Security Act (42 U.S.C.

3 1396 et seq.) for acute care services.

4 (iii) INDEX.—

5 (I) IN GENERAL.—The Director

6 of the Office of Management and

7 Budget shall determine the index by

8 which the base amounts shall be up9 dated for each fiscal year after fiscal

10 year 1994 by determining the pro11 jected change from the preceding fis12 cal year in medicaid acute care spend13 ing (Federal and State) projected in

14 the baseline in effect at the time of

15 enactment of this Act.

16 (II) OUT YEARS.—For fiscal

17 years after the last fiscal year in the

18 baseline projections, the index shall

19 reflect overall change from the preced20 ing fiscal year in the Gross Domestic

21 Product.

22 (iv) ACUTE CARE SERVICES.—For

23 purposes of this subparagraph, the term

24 ‘‘acute care services’’ means all of the care

25 and services furnished under a State plan
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•S 2096 PCS

1 under title XIX of the Social Security Act

2 (42 U.S.C. 1936 et seq.) except the follow3 ing:

4 (I) Nursing facility services (as

5 defined in section 1905(f) of the So6 cial Security Act (42 U.S.C.

7 1396d(f))).

8 (II) Intermediate care facility for

9 the mentally retarded services (as de10 fined in section 1905(d) of such Act

11 (42 U.S.C. 1396d(d))).

12 (III) Personal care services (as

13 described in section 1905(a)(24) of

14 such Act (42 U.S.C. 1396d(a)(24))).

15 (IV) Private duty nursing serv16 ices (as referred to in section

17 1905(a)(8) of such Act (42 U.S.C.

18 1396d(a)(8))).

19 (V) Home or community-based

20 services furnished under a waiver

21 granted under subsection (c), (d), or

22 (e) of section 1915 of such Act (42

23 U.S.C. 1396n).

24 (VI) Home and community care

25 furnished to functionally disabled el-
140

•S 2096 PCS

1 derly individuals under section 1929

2 of such Act (42 U.S.C. 1396t).

3 (VII) Community supported liv4 ing arrangements services under sec5 tion 1930 of such Act (42 U.S.C.

6 1396v).

7 (VIII) Case-management services

8 (as described in section 1915(g)(2) of

9 such Act (42 U.S.C. 1396n(g)(2))).

10 (IX) Home health care services

11 (as referred to in section 1905(a)(7)

12 of such Act (42 U.S.C. 1396d(a)(7))).

13 (X) Hospice care (as defined in

14 section 1905(o) of such Act (42

15 U.S.C. 1396d(o))).

16 (C) EXCEPTION.—For fiscal years begin17 ning in the first calendar year in which the an18 nual health discount entitlement is the maxi19 mum allowable (pursuant to subsection (d)), the

20 State maintenance of effort amount shall be the

21 amount for the preceding fiscal year increased

22 by the estimated overall growth in spending for

23 health discounts in the State as determined by

24 the Secretary.
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1 (D) ADMINISTRATIVE EXPENSES.—A State

2 health discount program shall allocate a suffi3 cient portion of State maintenance of effort

4 spending to finance State expenses for admin5 istering the program.

6 (2) STATE MATCHING AMOUNTS.—For each cal7 endar quarter after December 31, 1995, each State

8 shall be required to pay 10 percent of the excess

9 of—

10 (A) the total costs of health discounts in a

11 State in such quarter, over

12 (B) the amount equal to—

13 (i) the State maintenance of effort

14 amount for such quarter, divided by

15 (ii) 1, minus the Federal medical as16 sistance percentage for the State under

17 title XIX of the Social Security Act (42

18 U.S.C. 1396 et seq.) for such fiscal year.

19 (3) OPTIONAL STATE SUPPLEMENTATION.—A

20 State, using State funds, may provide health dis21 counts in excess of the amount that eligible individ22 uals and eligible employees would otherwise be enti23 tled to pursuant to subsection (d) and to eligible in24 dividuals and eligible employees who would not oth25 erwise be entitled to such discounts.
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•S 2096 PCS

1 (d) DETERMINING ENTITLEMENT TO HEALTH DIS2 COUNTS.—

3 (1) IN GENERAL.—At the beginning of each fis4 cal year, the Secretary shall establish the level of en5 titlement to health discounts for the upcoming cal6 endar year by setting—

7 (A) the maximum annual income allowed

8 for each category of eligibility under which eligi9 ble individuals and eligible employees are enti10 tled to health discounts, and

11 (B) the alternative benefits package used,

12 if necessary, for calculating the benchmarks

13 and health discounts for low income eligible in14 dividuals and low income eligible employees.

15 The Secretary shall set the level of entitlement for

16 a fiscal year so that the estimated total Federal

17 spending on health discounts does not exceed the

18 available Federal spending amount for such fiscal

19 year.

20 (2) STATE SPENDING.—In determining the an21 nual level of entitlement, the Secretary shall include

22 in the determination the State maintenance of effort

23 spending and State matching amounts but not op24 tional State supplementation.

25 (3) ORDER OF ENTITLEMENT.—
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•S 2096 PCS

1 (A) POOR INDIVIDUALS AND EMPLOY2 EES.—

3 (i) IN GENERAL.—In any year, the

4 Secretary shall first ensure that all poor el5 igible individuals and poor eligible employ6 ees are entitled to health discounts based

7 on the nominal cost-sharing benefits pack8 age determined pursuant to section 113(b).

9 (ii) EXCESS SPENDING.—If the Sec10 retary determines that such a level of enti11 tlement would cause Federal spending to

12 exceed available amounts, the Secretary

13 shall reduce the maximum family adjusted

14 total income allowed for entitlement to

15 health discounts to such a level so as to

16 eliminate any estimated excess spending.

17 (B) OUT-OF-POCKET MAXIMUM FOR LOW

18 INCOME INDIVIDUALS AND EMPLOYEES.—

19 (i) IN GENERAL.—If, in any year, the

20 Secretary determines that all poor eligible

21 individuals and poor eligible employees

22 may be entitled to health discounts based

23 on the nominal cost-sharing benefits pack24 age, then the Secretary shall next ensure

25 that all low income eligible individuals and
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•S 2096 PCS

1 low income eligible employees are entitled

2 to health discounts based on the alter3 native benefits package determined pursu4 ant to section 113(c).

5 (ii) EXCESS SPENDING.—If the Sec6 retary determines that providing entitle7 ment to health discounts for low income el8 igible individuals and low income eligible

9 employees based on the alternative benefits

10 package would (together with spending on

11 poor eligible individuals and poor eligible

12 employees under subparagraph (B)) cause

13 Federal spending to exceed available

14 amounts, the Secretary may only set the

15 maximum family adjusted total income al16 lowed for entitlement to health discounts

17 (based on the alternative benefits package)

18 for such low income individuals and em19 ployees at such a level so as to eliminate

20 any estimated excess spending.

21 (C) STANDARD BENEFITS PACKAGE FOR

22 LOW INCOME INDIVIDUALS AND EMPLOYEES.—

23 (i) IN GENERAL.—If the Secretary de24 termines that all eligible individuals and el25 igible employees described in subpara-
145

•S 2096 PCS

1 graphs (A)(i) and (B)(i) may be entitled to

2 health discounts, then the Secretary shall

3 ensure that low income eligible individuals

4 and low income eligible employees are enti5 tled to health discounts based on the

6 standard benefits package determined pur7 suant to section 113(a).

8 (ii) EXCESS SPENDING.—If the Sec9 retary determines that providing such a

10 level of entitlement would cause Federal

11 spending to exceed available amounts, the

12 Secretary shall increase the value of the al13 ternative benefits package above the value

14 provided under section 113(c) but below

15 the standard benefits package so as to

16 eliminate any estimated excess spending.

17 (4) EXCEPTION FOR MEDICAID-ELIGIBLES.—

18 For fiscal years 1996 through 2000, any individual

19 who—

20 (A) would have been eligible for medicaid

21 acute services based on eligibility standards on

22 the date of the enactment of this Act, and

23 (B) is otherwise an eligible individual or el24 igible employee,
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•S 2096 PCS

1 shall be considered to be a poor eligible individual or

2 poor eligible employee for purposes of paragraph

3 (3)(A) and shall be entitled to health discounts

4 based on the nominal cost-sharing benefits package

5 without regard to the limit in available Federal

6 spending and prior to the entitlement of other indi7 viduals under such paragraph.

8 PART II—TERMINATION OF AUTHORITY TO FUR9 NISH ACUTE CARE SERVICES UNDER THE

10 MEDICAID PROGRAM

11 SEC. 321. TERMINATION OF AUTHORITY TO FURNISH

12 ACUTE CARE SERVICES UNDER THE MEDIC13 AID PROGRAM.

14 Title XIX of the Social Security Act (42 U.S.C. 1396

15 et seq.) is amended by redesignating section 1931 as sec16 tion 1932 and by inserting after section 1930 the following

17 new section:

18 ‘‘TERMINATION OF AUTHORITY TO FURNISH ACUTE CARE

19 SERVICES

20 ‘‘SEC. 1931. (a) IN GENERAL.—Except as provided

21 in subsection (b), the authority provided by this title to

22 furnish acute care services to any individual eligible for

23 medical assistance under this title shall terminate on De24 cember 31, 1994.

25 ‘‘(b) EXCEPTION FOR QUALIFIED MEDICARE BENE26 FICIARIES.—
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1 ‘‘(1) IN GENERAL.—Individuals entitled to ben2 efits under section 1905(p) shall remain entitled to

3 such benefits under State plans.

4 ‘‘(2) ADDITIONAL BENEFIT.—Each state plan

5 shall include as a mandatory benefit under section

6 1905(p)(3) the payment of premiums for qualified

7 medicare beneficiaries to medicare health plans as

8 provided in section 1876.

9 ‘‘(c) REPORT ON CONFORMING CHANGES.—By not

10 later than 90 days after the date of the enactment of the

11 Health Care Reform Act of 1994 the Secretary shall sub12 mit to Congress a report on changes in laws that should

13 be made in order to conform those laws to the termination

14 of authority under this section.

15 ‘‘(d) ACUTE CARE SERVICES.—The term ‘acute care

16 services’ means all of the care and services furnished

17 under a State plan under this title, except the following:

18 ‘‘(1) Nursing facility services (as defined in sec19 tion 1905(f)).

20 ‘‘(2) Intermediate care facility for the mentally

21 retarded services (as defined in section 1905(d)).

22 ‘‘(3) Personal care services (as described in sec23 tion 1905(a)(24)).

24 ‘‘(4) Private duty nursing services (as referred

25 to in section 1905(a)(8)).
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1 ‘‘(5) Home or community-based services fur2 nished under a waiver granted under subsection (c),

3 (d), or (e) of section 1915).

4 ‘‘(6) Home and community care furnished to

5 functionally disabled elderly individuals under sec6 tion 1929.

7 ‘‘(7) Community supported living arrangements

8 services under section 1930.

9 ‘‘(8) Case-management services (as described in

10 section 1915(g)(2)).

11 ‘‘(9) Home health care services (as referred to

12 in section 1905(a)(7)).

13 ‘‘(10) Hospice care (as defined in section

14 1905(o)).’’.

15 Subtitle C—Increase in Tax on

16 Tobacco Products

17 SEC. 330. AMENDMENT OF 1986 CODE.

18 Except as otherwise expressly provided, whenever in

19 this subtitle an amendment or repeal is expressed in terms

20 of an amendment to, or repeal of, a section or other provi21 sion, the reference shall be considered to be made to a

22 section or other provision of the Internal Revenue Code

23 of 1986.
149

•S 2096 PCS

1 SEC. 331. INCREASE IN EXCISE TAXES ON TOBACCO PROD2 UCTS.

3 (a) CIGARETTES.—Subsection (b) of section 5701 is

4 amended—

5 (1) by striking ‘‘$12 per thousand ($10 per

6 thousand on cigarettes removed during 1991 or

7 1992)’’ in paragraph (1) and inserting ‘‘$30 per

8 thousand’’, and

9 (2) by striking ‘‘$25.20 per thousand ($21 per

10 thousand on cigarettes removed during 1991 or

11 1992)’’ in paragraph (2) and inserting ‘‘$63 per

12 thousand’’.

13 (b) CIGARS.—Subsection (a) of section 5701 is

14 amended—

15 (1) by striking ‘‘$1.125 cents per thousand

16 (93.75 cents per thousand on cigars removed during

17 1991 or 1992)’’ in paragraph (1) and inserting

18 ‘‘$19.125 cents per thousand’’, and

19 (2) by striking ‘‘equal to’’ and all that follows

20 in paragraph (2) and inserting ‘‘equal to 31.875 per21 cent of the price for which sold but not more than

22 $75 per thousand.’’

23 (c) CIGARETTE PAPERS.—Subsection (c) of section

24 5701 is amended by striking ‘‘0.75 cent (0.625 cent on

25 cigarette papers removed during 1991 or 1992)’’ and in26 serting ‘‘1.875 cents’’.
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•S 2096 PCS

1 (d) CIGARETTE TUBES.—Subsection (d) of section

2 5701 is amended by striking ‘‘1.5 cents (1.25 cents on

3 cigarette tubes removed during 1991 or 1992)’’ and in4 serting ‘‘3.75 cents’’.

5 (e) SMOKELESS TOBACCO.—Subsection (e) of section

6 5701 is amended—

7 (1) by striking ‘‘36 cents (30 cents on snuff re8 moved during 1991 or 1992)’’ in paragraph (1) and

9 inserting ‘‘$6.36’’, and

10 (2) by striking ‘‘12 cents (10 cents on chewing

11 tobacco removed during 1991 or 1992)’’ in para12 graph (2) and inserting ‘‘$6.12’’.

13 (f) PIPE TOBACCO.—Subsection (f) of section 5701

14 is amended by striking ‘‘67.5 cents (56.25 cents on pipe

15 tobacco removed during 1991 or 1992)’’ and inserting

16 ‘‘$6.675 cents’’.

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

18 this section shall apply to articles removed (as defined in

19 section 5702(k) of the Internal Revenue Code of 1986,

20 as amended by this Act) after September 30, 1995.

21 (h) FLOOR STOCKS TAXES.—

22 (1) IMPOSITION OF TAX.—On tobacco products

23 and cigarette papers and tubes manufactured in or

24 imported into the United States which are removed

25 before October 1, 1995, and held on such date for
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•S 2096 PCS

1 sale by any person, there is hereby imposed a tax in

2 an amount equal to the excess of—

3 (A) the tax which would be imposed under

4 section 5701 of the Internal Revenue Code of

5 1986 on the article if the article had been re6 moved on such date, over

7 (B) the prior tax (if any) imposed under

8 section 5701 or 7652 of such Code on such ar9 ticle.

10 (2) AUTHORITY TO EXEMPT CIGARETTES HELD

11 IN VENDING MACHINES.—To the extent provided in

12 regulations prescribed by the Secretary, no tax shall

13 be imposed by paragraph (1) on cigarettes held for

14 retail sale on October 1, 1995, by any person in any

15 vending machine. If the Secretary provides such a

16 benefit with respect to any person, the Secretary

17 may reduce the $500 amount in paragraph (3) with

18 respect to such person.

19 (3) CREDIT AGAINST TAX.—Each person shall

20 be allowed as a credit against the taxes imposed by

21 paragraph (1) an amount equal to $500. Such credit

22 shall not exceed the amount of taxes imposed by

23 paragraph (1) for which such person is liable.

24 (4) LIABILITY FOR TAX AND METHOD OF PAY25 MENT.—
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•S 2096 PCS

1 (A) LIABILITY FOR TAX.—A person hold2 ing cigarettes on October 1, 1995, to which any

3 tax imposed by paragraph (1) applies shall be

4 liable for such tax.

5 (B) METHOD OF PAYMENT.—The tax im6 posed by paragraph (1) shall be paid in such

7 manner as the Secretary shall prescribe by reg8 ulations.

9 (C) TIME FOR PAYMENT.—The tax im10 posed by paragraph (1) shall be paid on or be11 fore December 31, 1995.

12 (5) ARTICLES IN FOREIGN TRADE ZONES.—

13 Notwithstanding the Act of June 18, 1934 (48 Stat.

14 998; 19 U.S.C. 81a) and any other provision of law,

15 any article which is located in a foreign trade zone

16 on October 1, 1995, shall be subject to the tax im17 posed by paragraph (1) if—

18 (A) internal revenue taxes have been deter19 mined, or customs duties liquidated, with re20 spect to such article before such date pursuant

21 to a request made under the 1st proviso of sec22 tion 3(a) of such Act, or

23 (B) such article is held on such date under

24 the supervision of a customs officer pursuant to

25 the 2d proviso of such section 3(a).
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1 (6) DEFINITIONS.—For purposes of this sub2 section—

3 (A) IN GENERAL.—Terms used in this sub4 section which are also used in section 5702 of

5 the Internal Revenue Code of 1986 shall have

6 the respective meanings such terms have in

7 such section, and such term shall include arti8 cles first subject to the tax imposed by section

9 5701 of such Code by reason of the amend10 ments made by this Act.

11 (B) SECRETARY.—The term ‘‘Secretary’’

12 means the Secretary of the Treasury.

13 (7) CONTROLLED GROUPS.—Rules similar to

14 the rules of section 5061(e)(3) of such Code shall

15 apply for purposes of this subsection.

16 (8) OTHER LAWS APPLICABLE.—All provisions

17 of law, including penalties, applicable with respect to

18 the taxes imposed by section 5701 of such Code

19 shall, insofar as applicable and not inconsistent with

20 the provisions of this subsection, apply to the floor

21 stocks taxes imposed by paragraph (1), to the same

22 extent as if such taxes were imposed by such section

23 5701. The Secretary may treat any person who bore

24 the ultimate burden of the tax imposed by para-
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•S 2096 PCS

1 graph (1) as the person to whom a credit or refund

2 under such provisions may be allowed or made.

3 SEC. 332. MODIFICATIONS OF CERTAIN TOBACCO TAX PRO4 VISIONS.

5 (a) EXEMPTION FOR EXPORTED TOBACCO PROD6 UCTS AND CIGARETTE PAPERS AND TUBES TO APPLY

7 ONLY TO ARTICLES MARKED FOR EXPORT.—

8 (1) Subsection (b) of section 5704 is amended

9 by adding at the end the following new sentence:

10 ‘‘Tobacco products and cigarette papers and tubes

11 may not be transferred or removed under this sub12 section unless such products or papers and tubes

13 bear such marks, labels, or notices as the Secretary

14 shall by regulations prescribe.’’.

15 (2) Section 5761 is amended by redesignating

16 subsections (c) and (d) as subsections (d) and (e),

17 respectively, and by inserting after subsection (b)

18 the following new subsection:

19 ‘‘(c) SALE OF TOBACCO PRODUCTS AND CIGARETTE

20 PAPERS AND TUBES FOR EXPORT.—Except as provided

21 in subsections (b) and (d) of section 5704—

22 ‘‘(1) every person who sells, relands, or receives

23 within the jurisdiction of the United States any to24 bacco products or cigarette papers or tubes which
155

•S 2096 PCS

1 have been labeled or shipped for exportation under

2 this chapter,

3 ‘‘(2) every person who sells or receives such

4 relanded tobacco products or cigarette papers or

5 tubes, and

6 ‘‘(3) every person who aids or abets in such

7 selling, relanding, or receiving,

8 shall, in addition to the tax and any other penalty provided

9 in this title, be liable for a penalty equal to the greater

10 of $1,000 or 5 times the amount of the tax imposed by

11 this chapter. All tobacco products and cigarette papers

12 and tubes relanded within the jurisdiction of the United

13 States, and all vessels, vehicles, and aircraft used in such

14 relanding or in removing such products, papers, and tubes

15 from the place where relanded, shall be forfeited to the

16 United States.’’.

17 (3) Subsection (a) of section 5761 is amended

18 by striking ‘‘subsection (b)’’ and inserting ‘‘sub19 section (b) or (c)’’.

20 (4) Subsection (d) of section 5761, as redesig21 nated by paragraph (2), is amended by striking

22 ‘‘The penalty imposed by subsection (b)’’ and insert23 ing ‘‘The penalties imposed by subsections (b) and

24 (c)’’.
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1 (5)(A) Subpart F of chapter 52 is amended by

2 adding at the end the following new section:

3 ‘‘SEC. 5754. RESTRICTION ON IMPORTATION OF PRE4 VIOUSLY EXPORTED TOBACCO PRODUCTS.

5 ‘‘(a) IN GENERAL.—Tobacco products and cigarette

6 papers and tubes previously exported from the United

7 States may be imported or brought into the United States

8 only as provided in section 5704(d).

9 ‘‘(b) CROSS REFERENCE.—

‘‘For penalty for the sale of cigarettes in the United States which are labeled for export, see section

5761(d).’’.

10 (B) The table of sections for subpart F of chap11 ter 52 of such Code is amended by adding at the

12 end the following new item:

‘‘Sec. 5754. Restriction on importation of previously exported tobacco products.’’.

13 (b) IMPORTERS REQUIRED TO BE QUALIFIED.—

14 (1) Sections 5712, 5713(a), 5721, 5722,

15 5762(a)(1), 5763(b) and 5763(c) are each amended

16 by inserting ‘‘or importer’’ after ‘‘manufacturer’’.

17 (2) The heading of subsection (b) of section

18 5763 is amended by inserting ‘‘QUALIFIED IMPORT19 ERS,’’ after ‘‘MANUFACTURERS,’’.

20 (3) The heading for subchapter B of chapter 52

21 is amended by inserting ‘‘and Importers’’ after

22 ‘‘Manufacturers’’.
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1 (4) The item relating to subchapter B in the

2 table of subchapters for chapter 52 is amended by

3 inserting ‘‘and importers’’ after ‘‘manufacturers’’.

4 (c) REPEAL OF TAX-EXEMPT SALES TO EMPLOYEES

5 OF CIGARETTE MANUFACTURERS.—

6 (1) Subsection (a) of section 5704 is amend7 ed—

8 (A) by striking ‘‘EMPLOYEE USE OR’’ in

9 the heading, and

10 (B) by striking ‘‘for use or consumption by

11 employees or’’ in the text.

12 (2) Subsection (e) of section 5723 is amended

13 by striking ‘‘for use or consumption by their employ14 ees, or for experimental purposes’’ and inserting

15 ‘‘for experimental purposes’’.

16 (d) REPEAL OF TAX-EXEMPT SALES TO UNITED

17 STATES.—Subsection (b) of section 5704 is amended by

18 striking ‘‘and manufacturers may similarly remove such

19 articles for use of the United States;’’.

20 (e) BOOKS OF 25 OR FEWER CIGARETTE PAPERS

21 SUBJECT TO TAX.—Subsection (c) of section 5701 is

22 amended by striking ‘‘On each book or set of cigarette

23 papers containing more than 25 papers,’’ and inserting

24 ‘‘On cigarette papers,’’.
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1 (f) STORAGE OF TOBACCO PRODUCTS.—Subsection

2 (k) of section 5702 is amended by inserting ‘‘under section

3 5704’’ after ‘‘internal revenue bond’’.

4 (g) AUTHORITY TO PRESCRIBE MINIMUM MANUFAC5 TURING ACTIVITY REQUIREMENTS.—Section 5712 is

6 amended by striking ‘‘or’’ at the end of paragraph (1),

7 by redesignating paragraph (2) as paragraph (3), and by

8 inserting after paragraph (1) the following new paragraph:

9 ‘‘(2) the activity proposed to be carried out at

10 such premises does not meet such minimum capacity

11 or activity requirements as the Secretary may pre12 scribe, or’’.

13 (h) EFFECTIVE DATE.—The amendments made by

14 this section shall apply to articles removed (as defined in

15 section 5702(k) of the Internal Revenue Code of 1986,

16 as amended by this Act) after September 30, 1995.

17 SEC. 333. IMPOSITION OF EXCISE TAX ON MANUFACTURE

18 OR IMPORTATION OF ROLL-YOUR-OWN TO19 BACCO.

20 (a) IN GENERAL.—Section 5701 (relating to rate of

21 tax) is amended by redesignating subsection (g) as sub22 section (h) and by inserting after subsection (f) the follow23 ing new subsection:

24 ‘‘(g) ROLL-YOUR-OWN TOBACCO.—On roll-your-own

25 tobacco, manufactured in or imported into the United
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1 States, there shall be imposed a tax of $6 per pound (and

2 a proportionate tax at the like rate on all fractional parts

3 of a pound).’’.

4 (b) ROLL-YOUR-OWN TOBACCO.—Section 5702 (re5 lating to definitions) is amended by adding at the end the

6 following new subsection:

7 ‘‘(p) ROLL-YOUR-OWN TOBACCO.—The term ‘roll8 your-own tobacco’ means any tobacco which, because of

9 its appearance, type, packaging, or labeling, is suitable for

10 use and likely to be offered to, or purchased by, consumers

11 as tobacco for making cigarettes.’’.

12 (c) TECHNICAL AMENDMENTS.—

13 (1) Subsection (c) of section 5702 is amended

14 by striking ‘‘and pipe tobacco’’ and inserting ‘‘pipe

15 tobacco, and roll-your-own tobacco’’.

16 (2) Subsection (d) of section 5702 is amend17 ed—

18 (A) in the material preceding paragraph

19 (1), by striking ‘‘or pipe tobacco’’ and inserting

20 ‘‘pipe tobacco, or roll-your-own tobacco’’, and

21 (B) by striking paragraph (1) and insert22 ing the following new paragraph:

23 ‘‘(1) a person who produces cigars, cigarettes,

24 smokeless tobacco, pipe tobacco, or roll-your-own to-
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1 bacco solely for his own personal consumption or

2 use, and’’.

3 (3) The chapter heading for chapter 52 is

4 amended to read as follows:

5 ‘‘CHAPTER 52—TOBACCO PRODUCTS AND

6 CIGARETTE PAPERS AND TUBES’’.

7 (4) The table of chapters for subtitle E is

8 amended by striking the item relating to chapter 52

9 and inserting the following new item:

‘‘CHAPTER 52. Tobacco products and cigarette papers and

tubes.’’.

10 (d) EFFECTIVE DATE.—

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

12 this section shall apply to roll-your-own tobacco re13 moved (as defined in section 5702(k) of the Internal

14 Revenue Code of 1986, as amended by this Act)

15 after September 30, 1995.

16 (2) TRANSITIONAL RULE.—Any person who—

17 (A) on the date of the enactment of this

18 Act is engaged in business as a manufacturer of

19 roll-your-own tobacco or as an importer of to20 bacco products or cigarette papers and tubes,

21 and

22 (B) before October 1, 1995, submits an

23 application under subchapter B of chapter 52

24 of such Code to engage in such business,
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1 may, notwithstanding such subchapter B, continue

2 to engage in such business pending final action on

3 such application. Pending such final action, all pro4 visions of such chapter 52 shall apply to such appli5 cant in the same manner and to the same extent as

6 if such applicant were a holder of a permit under

7 such chapter 52 to engage in such business.

8 TITLE IV—IMPROVING ACCESS

9 IN RURAL AREAS

10 SEC. 401. COMMUNITY HEALTH CENTERS.

11 Section 330(g)(1)(A) of the Public Health Service

12 Act (42 U.S.C. 254c(g)(1)(A)) is amended by striking

13 ‘‘and such sums’’ and inserting ‘‘such sums’’ and by in14 serting before the period the following: ‘‘, $800,000,000

15 for fiscal year 1995, $960,000,000 for fiscal year 1996,

16 $1,100,000,000 for fiscal year 1997, and $1,200,000,000

17 for fiscal year 1998’’.

18 SEC. 402. NATIONAL HEALTH SERVICE CORPS.

19 Section 338H(b)(1) of the Public Health Act (42

20 U.S.C. 254q(b)(1)) is amended by striking ‘‘and such

21 sums’’ and inserting ‘‘such sums’’ and by inserting before

22 the period the following: ‘‘, $96,000,000 for fiscal year

23 1995, $115,000,000 for fiscal year 1996, $138,000,000

24 for fiscal year 1997, and $160,000,000 for fiscal year

25 1998’’.
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1 SEC. 403. TAX INCENTIVES FOR PRACTICE IN FRONTIER,

2 RURAL, AND URBAN UNDERSERVED AREAS.

3 (a) REFUNDABLE CREDIT FOR CERTAIN PRIMARY

4 HEALTH SERVICES PROVIDERS.—

5 (1) IN GENERAL.—Subpart C of part IV of sub6 chapter A of chapter 1 of the Internal Revenue Code

7 of 1986 (relating to refundable credits) is amended

8 by inserting after section 34 the following new sec9 tion:

10 ‘‘SEC. 34A. PRIMARY HEALTH SERVICES PROVIDERS.

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

12 qualified primary health services provider, there is allowed

13 as a credit against the tax imposed by this subtitle for

14 any taxable year in a mandatory service period an amount

15 equal to the product of—

16 ‘‘(1) the lesser of—

17 ‘‘(A) the number of months of such period

18 occurring in such taxable year, or

19 ‘‘(B) 36 months, reduced by the number of

20 months taken into account under this para21 graph with respect to such provider for all pre22 ceding taxable years (whether or not in the

23 same mandatory service period), multiplied by

24 ‘‘(2) $1,000 ($500 in the case of a qualified

25 primary health services provider who is a physician

26 assistant or a nurse practitioner).
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1 ‘‘(b) QUALIFIED PRIMARY HEALTH SERVICES PRO2 VIDER.—For purposes of this section, the term ‘qualified

3 primary health services provider’ means any physician,

4 physician assistant, or nurse practitioner who for any

5 month during a mandatory service period is certified by

6 the Bureau to be a primary health services provider who—

7 ‘‘(1) is providing primary health services—

8 ‘‘(A) full-time, and

9 ‘‘(B) to individuals at least 80 percent of

10 whom reside in a health professional shortage

11 area (as defined in subsection (d)(2)),

12 ‘‘(2) is not receiving during such year a scholar13 ship under the National Health Service Corps Schol14 arship Program or a loan repayment under the Na15 tional Health Service Corps Loan Repayment Pro16 gram,

17 ‘‘(3) is not fulfilling service obligations under

18 such Programs, and

19 ‘‘(4) has not defaulted on such obligations.

20 ‘‘(c) MANDATORY SERVICE PERIOD.—For purposes

21 of this section, the term ‘mandatory service period’ means

22 the period of 60 consecutive calendar months beginning

23 with the first month the taxpayer is a qualified primary

24 health services provider.
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1 ‘‘(d) DEFINITIONS AND SPECIAL RULES.—For pur2 poses of this section—

3 ‘‘(1) BUREAU.—The term ‘Bureau’ means the

4 Bureau of Health Care Delivery and Assistance,

5 Health Resources and Services Administration of the

6 United States Public Health Service.

7 ‘‘(2) HEALTH PROFESSIONAL SHORTAGE

8 AREA.—The term ‘health professional shortage area’

9 means—

10 ‘‘(A) a geographic area in which there are

11 6 or fewer individuals residing per square mile,

12 ‘‘(B) a health professional shortage area

13 (as defined in section 332(a)(1)(A) of the Pub14 lic Health Service Act),

15 ‘‘(C) an area which is determined by the

16 Secretary of Health and Human Services as

17 equivalent to an area described in subparagraph

18 (A) and which is designated by the Bureau of

19 the Census as not urbanized, or

20 ‘‘(D) a community that is certified as un21 derserved by the Secretary for purposes of par22 ticipation in the rural health clinic program

23 under title XVIII of the Social Security Act.
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1 ‘‘(3) PHYSICIAN.—The term ‘physician’ has the

2 meaning given to such term by section 1861(r) or

3 the Social Security Act.

4 ‘‘(4) PHYSICIAN ASSISTANT; NURSE PRACTI5 TIONER.—The terms ‘physician assistant’ and ‘nurse

6 practitioner’ have the meanings given to such terms

7 by section 1861(aa)(5) of the Social Security Act.

8 ‘‘(5) PRIMARY HEALTH SERVICES PROVIDER.—

9 The term ‘primary health services provider’ means a

10 provider of primary health services (as defined in

11 section 330(b)(1) of the Public Health Service Act).

12 ‘‘(e) RECAPTURE OF CREDIT.—

13 ‘‘(1) IN GENERAL.—If, during any taxable year,

14 there is a recapture event, then the tax of the tax15 payer under this chapter for such taxable year shall

16 be increased by an amount equal to the product of—

17 ‘‘(A) the applicable percentage, and

18 ‘‘(B) the aggregate unrecaptured credits

19 allowed to such taxpayer under this section for

20 all prior taxable years.

21 ‘‘(2) APPLICABLE RECAPTURE PERCENTAGE.—

22 ‘‘(A) IN GENERAL.—For purposes of this

23 subsection, the applicable recapture percentage

24 shall be determined from the following table:
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The applicable

‘‘If the recapture recapture

event occurs during: percentage is:

Months 1–24 .............................................. 100

Months 25–36 ............................................ 75

Months 37–48 ............................................ 50

Months 49–60 ............................................ 25

Months 61 and thereafter .......................... 0.

1 ‘‘(B) TIMING.—For purposes of subpara2 graph (A), month 1 shall begin on the first day

3 of the mandatory service period.

4 ‘‘(3) RECAPTURE EVENT DEFINED.—

5 ‘‘(A) IN GENERAL.—For purposes of this

6 subsection, the term ‘recapture event’ means

7 the failure of the taxpayer to be a qualified pri8 mary health services provider for any month

9 during any mandatory service period.

10 ‘‘(B) CESSATION OF DESIGNATION.—The

11 cessation of the designation of any area as a

12 rural health professional shortage area after the

13 beginning of the mandatory service period for

14 any taxpayer shall not constitute a recapture

15 event.

16 ‘‘(C) SECRETARIAL WAIVER.—The Sec17 retary may waive any recapture event caused by

18 extraordinary circumstances.

19 ‘‘(4) NO CREDITS AGAINST TAX.—Any increase

20 in tax under this subsection shall not be treated as

21 a tax imposed by this chapter for purposes of deter-
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1 mining the amount of any credit under subpart A,

2 B, or D of this part.’’.

3 (2) CLERICAL AMENDMENT.—The table of sec4 tions for subpart C of part IV of subchapter A of

5 chapter 1 of such Code is amended by inserting

6 after the item relating to section 34 the following

7 new item:

‘‘Sec. 34A. Primary health services providers.’’.

8 (3) EFFECTIVE DATE.—The amendments made

9 by this subsection shall apply to taxable years begin10 ning after the date of the enactment of this Act.

11 (b) NATIONAL HEALTH SERVICE CORPS LOAN RE12 PAYMENTS EXCLUDED FROM GROSS INCOME.—

13 (1) IN GENERAL.—Part III of subchapter B of

14 chapter 1 of the Internal Revenue Code of 1986 (re15 lating to items specifically excluded from gross in16 come) is amended by redesignating section 137 as

17 section 138 and by inserting after section 136 the

18 following new section:

19 ‘‘SEC. 137. NATIONAL HEALTH SERVICE CORPS LOAN RE20 PAYMENTS.

21 ‘‘(a) GENERAL RULE.—Gross income shall not in22 clude any qualified loan repayment.

23 ‘‘(b) QUALIFIED LOAN REPAYMENT.—For purposes

24 of this section, the term ‘qualified loan repayment’ means

25 any payment made on behalf of the taxpayer by the Na-
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1 tional Health Service Corps Loan Repayment Program

2 under section 338B(g) of the Public Health Service Act.’’.

3 (2) CONFORMING AMENDMENT.—Paragraph (3)

4 of section 338B(g) of the Public Health Service Act

5 (42 U.S.C. 254l–1(g)) is amended by striking ‘‘Fed6 eral, State, or local’’ and inserting ‘‘State or local’’.

7 (3) CLERICAL AMENDMENT.—The table of sec8 tions for part III of subchapter B of chapter 1 of

9 the Internal Revenue Code of 1986 is amended by

10 striking the item relating to section 136 and insert11 ing the following:

‘‘Sec. 137. National Health Service Corps loan repayments.

‘‘Sec. 138. Cross references to other Acts.’’.

12 (4) EFFECTIVE DATE.—The amendments made

13 by this subsection shall apply to payments made

14 under section 338B(g) of the Public Health Service

15 Act (42 U.S.C. 254l–1(g)) after the date of the en16 actment of this Act.

17 SEC. 404. INCENTIVES FOR PRIMARY CARE RESIDENTS.

18 (a) IN GENERAL.—Section 1886(h) of the Social Se19 curity Act (42 U.S.C. 1395 ww(h)) is amended—

20 (1) by striking paragraph (2) and inserting the

21 following new paragraph:

22 ‘‘(2) DETERMINATION OF APPROVED FTE RESI23 DENT AMOUNTS.—The Secretary shall determine an

24 approved FTE resident amount for each cost report-
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1 ing period beginning after October 1, 1994, as fol2 lows:

3 ‘‘(A) DETERMINING NATIONAL AVERAGE

4 SALARY PER FTE RESIDENT IN FISCAL YEAR

5 1992.—The Secretary shall determine the na6 tional average salary for fiscal year 1992 for a

7 full-time-equivalent resident in an approved

8 medical residency training program.

9 ‘‘(B) UPDATING TO A COST REPORTING

10 PERIOD THAT BEGINS IN FISCAL YEAR 1995.—

11 The Secretary shall update the amount deter12 mined under subparagraph (A) by the esti13 mated percentage change in the Consumer

14 Price Index from the midpoint of fiscal year

15 1992 to the midpoint of each cost reporting pe16 riod that begins in fiscal year 1995.

17 ‘‘(C) UPDATING TO SUBSEQUENT COST RE18 PORTING PERIODS.—For each subsequent cost

19 reporting period, the Secretary shall update the

20 amount determined under subparagraph (B) or

21 this subparagraph for an immediately preceding

22 cost reporting period by the estimated percent23 age change in the Consumer Price Index from

24 the midpoint of that preceding period to the

25 midpoint of that subsequent period, with appro-
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1 priate adjustments to reflect previous under- or

2 over-estimations in the estimated percentage

3 change in that index.’’,

4 (2) in paragraph (3)(B)(i), by striking ‘‘hos5 pital’s’’, and

6 (3) in paragraph (4), by striking subparagraph

7 (C) and inserting the following new subparagraph:

8 ‘‘(C) WEIGHTING FACTOR FOR CERTAIN

9 RESIDENTS.—Subject to subparagraph (D),

10 such rules shall provide, in calculating the num11 ber of full-time-equivalent residents in an ap12 proved residency program—

13 ‘‘(i) that the weighting factor for a

14 primary care (as defined by the Secretary)

15 resident, or for an intern, is 2.2;

16 ‘‘(ii) that the weighting factor for a

17 nonprimary care resident who is in the

18 resident’s initial residency period is 2.0;

19 and

20 ‘‘(iii) that the weighting factor for a

21 nonprimary care resident who is not in the

22 resident’s initial residency period is 1.2.

23 The Secretary shall make such adjustments as

24 are necessary to the weighting factors to main25 tain aggregate payments under this section to
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1 all hospitals at the same level that such pay2 ments would have been made under this section

3 prior to enactment of the amendments made to

4 this section by the Health Care Reform Act of

5 1994.’’.

6 (b) EFFECTIVE DATES.—

7 (1) IN GENERAL.—Except as otherwise pro8 vided by paragraph (2), the amendments made by

9 this section shall apply to cost reporting periods be10 ginning after October 1, 1994.

11 (2) SPECIAL RULE.—For a cost reporting pe12 riod that falls partly in fiscal year 1994 and partly

13 in fiscal year 1995, the provisions of section

14 1886(h), as in effect before the date of enactment of

15 this Act, shall apply proportionally to that part of

16 the cost reporting period that occurs before fiscal

17 year 1995.

18 TITLE V—OTHER HEALTH CARE

19 COST REDUCTION MEASURES

20 Subtitle A—Medical Liability

21 Reform

22 SEC. 501. FEDERAL STANDARDS FOR STATE-BASED MEDI23 CAL LIABILITY REFORM.

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

25 with the Attorney General, shall develop and publish medi-
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1 cal liability reform standards in accordance with this sub2 title that States must meet in order to be certified under

3 section 502.

4 (b) BINDING ALTERNATIVE DISPUTE RESOLU5 TION.—

6 (1) REQUIREMENTS.—The standards developed

7 under subsection (a) shall require that a State—

8 (A) require all claims of medical injury

9 arising in such State be resolved under binding

10 dispute resolution systems that—

11 (i) provide timely and impartial deci12 sions of liability and damage awards,

13 (ii) make determinations of liability

14 and damage awards based on the best sci15 entific learning and judgment of objective

16 experts,

17 (iii) provide data and standardized in18 formation regarding evidence of medical in19 juries and the causes of such injuries to

20 Federal and State agencies responsible for

21 monitoring or disciplining health care pro22 viders, and

23 (iv) do not employ lay juries or simi24 larly constituted lay decisionmaking bodies

25 to make such determinations;
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1 (B) require that the decisions made

2 through the binding dispute resolution system

3 be final and not subject to further review by

4 any court, except that a party to a dispute may

5 obtain review of such decision in any court of

6 competent jurisdiction in the State wherein the

7 decision was made if—

8 (i) the award under such decision was

9 procured by corruption, fraud, or other

10 undue means,

11 (ii) there was evident partiality or cor12 ruption on the part of the arbiter,

13 (iii) the arbiter was guilty of mis14 conduct in refusing to postpone the hear15 ing, upon sufficient cause shown, or in re16 fusing to hear evidence pertinent and ma17 terial to the controversy, or of any mis18 behavior by which the rights of any party

19 were prejudiced, or

20 (iv) the arbiter exceeded its powers or

21 so imperfectly executed them that a final

22 and definite award upon the claim was not

23 made; and

24 (C) require that where an arbiters award is

25 vacated pursuant to State provisions established
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1 under subparagraph (B) that the court direct

2 that the matter be reheard by another arbiter

3 under the procedures prescribed by the State

4 dispute resolution system.

5 (2) OPTIONS.—The standards developed under

6 subsection (a) shall permit a State to—

7 (A) allow private entities to provide all or

8 some of the dispute resolution services required

9 by the State dispute resolution system, and

10 (B) allow alternative methods for deter11 mining liability and compensation for personal

12 injuries other than provider negligence and as13 sessments of damage awards.

14 (3) BINDING ARBITRATION.—In the standards

15 developed under subsection (a), the Secretary shall

16 outline a standard arbitration process that States

17 could adopt to meet Federal criteria (so long as

18 other elements of the State system meet the require19 ments of this section) and that includes the follow20 ing:

21 (A) Decisionmaking by a 3-person arbitra22 tion panel with expertise in medical injury dis23 putes chosen from a roster of qualified and

24 independent arbitrators.
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1 (B) A period to permit the discovery of evi2 dence.

3 (C) The right to a hearing.

4 (D) The right to a decision not later than

5 6 months after the date on which the claim was

6 filed.

7 (E) The right to a written decision.

8 (c) DAMAGES.—When a claim that is subject to reso9 lution in accordance with State systems established under

10 the standards developed under subsection (a) results in a

11 finding of liability, States shall require that the damages

12 awarded adhere to the following requirements:

13 (1) Awards for noneconomic damages shall not

14 exceed $250,000.

15 (2) Awards shall be reduced for any collateral

16 source payments to which the patient is entitled for

17 the medical injury for which the claim was filed.

18 (3) In the case of an award in excess of

19 $100,000, claimants shall accept periodic payment

20 of the amount of such awards that are intended to

21 compensate the claimant for damages expected to be

22 incurred in the future such as lost income and medi23 cal expenses.

24 (4) An award of punitive damages shall not be

25 paid to the claimant, but shall be paid to the State
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1 if the State has submitted a plan to the Secretary,

2 and the Secretary has certified such a plan as part

3 of certifying the State medical liability reform in ac4 cordance with section 502, to use such funds to im5 prove the monitoring, disciplining, and educating of

6 health care providers in the State to ensure they

7 meet standards of competency.

8 (d) ACCOUNTABLE HEALTH PLANS.—

9 (1) IN GENERAL.—To be approved by the appli10 cable regulatory authority as an AHP under section

11 112, a health plan shall clearly identify for the pur12 chasers of the plan the individuals or entity that will

13 be responsible for any findings of liability for claims

14 of medical injury.

15 (2) ENFORCEMENT OF CONTRACTS.—A State

16 shall ensure that provisions in AHP contracts that—

17 (A) cite medical practice guidelines, cer18 tified pursuant to section 502, and which shall

19 be followed in rendering services, shall be

20 deemed to supply the standard of care to be

21 employed in determining liability under the

22 State dispute resolution system, and

23 (B) establish particular rules governing the

24 resolution of medical injury claims, consistent

25 with the State dispute resolution system, are re-
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1 quired elements for resolving any claims of

2 medical injury for care provided in accordance

3 with the AHP.

4 SEC. 502. CERTIFICATION.

5 (a) STATE REFORMS.—Not later than 12 months

6 after the date of enactment of this Act, the Secretary, in

7 consultation with the Attorney General, shall promulgate

8 regulations that establish the criteria and procedures by

9 which the Secretary (or individuals to whom the Secretary

10 has delegated such authority) will determine whether or

11 not a State has met the standards established under sec12 tion 501(a) and any other standards determined necessary

13 by the Secretary.

14 (b) STANDARDS FOR IMPOSING LIABILITY.—Not

15 later than 12 months after the date of enactment of this

16 Act, the Secretary shall promulgate regulations that estab17 lish the criteria to be used for the certification of medical

18 practice guidelines by the Secretary (or individuals to

19 whom the Secretary has delegated such authority), includ20 ing criteria to ensure that such guidelines—

21 (1) reflect up-to-date scientific learning and the

22 judgment of objective experts,

23 (2) are supported by proper documentation, and

24 (3) are accompanied by justifications for the

25 standards established.
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1 (c) OTHER REGULATIONS.—Not later than 12

2 months after the date of enactment of this Act, the Sec3 retary of Health and Human Services shall promulgate

4 other regulations necessary to carry out this Act.

5 SEC. 503. RELATION TO OTHER LAWS.

6 The procedures required under this Act for fairly and

7 quickly resolving claims against health care providers for

8 personal injury shall be exclusive, and no action seeking

9 recovery for any personal injury covered by this Act shall

10 be permitted in any Federal or State court except as ex11 pressly provided herein.

12 Subtitle B—Antitrust Provisions

13 SEC. 511. PUBLICATION OF GUIDELINES FOR ACCOUNT14 ABLE HEALTH PLANS.

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

16 the development and publication of explicit guidelines on

17 the application of antitrust laws to AHPs. The guidelines

18 shall be designed to facilitate AHP development and oper19 ation, consistent with the antitrust laws.

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

21 establish a review process under which an AHP (or organi22 zation that proposes to establish an AHP) may obtain a

23 prompt opinion from the Department of Justice on the

24 AHP’s conformity with the antitrust laws. If the Depart25 ment of Justice determines that an AHP conforms with
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1 the antitrust laws, the AHP shall not be liable under such

2 laws regarding the development and operation of the

3 AHP, as reviewed by the Department.

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

5 term ‘‘antitrust laws’’ has the meaning given such term

6 in subsection (a) of the first section of the Clayton Act

7 (15 U.S.C. 12(a)), except that such term includes section

8 5 of the Federal Trade Commission Act (15 U.S.C. 45)

9 to the extent such section applies to unfair methods of

10 competition.

11 SEC. 512. ISSUANCE OF HEALTH CARE CERTIFICATES OF

12 PUBLIC ADVANTAGE.

13 (a) ISSUANCE AND EFFECT OF CERTIFICATE.—The

14 Attorney General, after consultation with the Secretary,

15 shall issue in accordance with this section a certificate of

16 public advantage to each eligible health care collaborative

17 effort that complies with the requirements in effect under

18 this section on or after the expiration of the 1-year period

19 that begins on the date of the enactment of this Act (with20 out regard to whether or not the Attorney General has

21 promulgated regulations to carry out this section by such

22 date). Such collaborative effort, and the parties to such

23 effort, shall not be liable under any of the antitrust laws

24 for conduct described in such certificate and engaged in
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1 by such effort if such conduct occurs while such certificate

2 is in effect.

3 (b) REQUIREMENTS APPLICABLE TO ISSUANCE OF

4 CERTIFICATES.—

5 (1) STANDARDS TO BE MET.—The Attorney

6 General shall issue a certificate to an eligible health

7 care collaborative effort if the Attorney General

8 finds that—

9 (A) the benefits that are likely to result

10 from carrying out the effort outweigh the re11 duction in competition (if any) that is likely to

12 result from the effort, and

13 (B) such reduction in competition is rea14 sonably necessary to obtain such benefits.

15 (2) FACTORS TO BE CONSIDERED.—

16 (A) WEIGHING OF BENEFITS AGAINST RE17 DUCTION IN COMPETITION.—For purposes of

18 making the finding described in paragraph

19 (1)(A), the Attorney General shall consider

20 whether the collaborative effort is likely—

21 (i) to maintain or to increase the

22 quality of health care,

23 (ii) to increase access to health care,

24 (iii) to achieve cost efficiencies that

25 will be passed on to health care consumers,
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1 such as economies of scale, reduced trans2 action costs, and reduced administrative

3 costs,

4 (iv) to preserve the operation of

5 health care facilities located in underserved

6 geographical areas,

7 (v) to improve utilization of health

8 care resources, and

9 (vi) to reduce inefficient health care

10 resource duplication.

11 (B) NECESSITY OF REDUCTION IN COM12 PETITION.—For purposes of making the finding

13 described in paragraph (1)(B), the Attorney

14 General shall consider—

15 (i) the ability of the providers of

16 health care services that are (or are likely

17 to be) affected by the health care collabo18 rative effort and the entities responsible

19 for making payments to such providers to

20 negotiate societally optimal payment and

21 service arrangements,

22 (ii) the effects of the health care col23 laborative effort on premiums and other

24 charges imposed by the entities described

25 in clause (i), and
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1 (iii) the availability of equally effi2 cient, less restrictive alternatives to achieve

3 the benefits that are intended to be

4 achieved by carrying out the effort.

5 (c) ESTABLISHMENT OF CRITERIA AND PROCE6 DURES.—Subject to subsections (d) and (e), not later than

7 1 year after the date of the enactment of this Act, the

8 Attorney General and the Secretary shall establish jointly

9 by rule the criteria and procedures applicable to the issu10 ance of certificates under subsection (a). The rules shall

11 specify the form and content of the application to be sub12 mitted to the Attorney General to request a certificate,

13 the information required to be submitted in support of

14 such application, the procedures applicable to denying and

15 to revoking a certificate, and the procedures applicable to

16 the administrative appeal (if such appeal is authorized by

17 rule) of the denial and the revocation of a certificate. Such

18 information may include the terms of the health care col19 laborative effort (in the case of an effort in existence as

20 of the time of the application) and implementation plan

21 for the collaborative effort.

22 (d) ELIGIBLE HEALTH CARE COLLABORATIVE EF23 FORT.—To be an eligible health care collaborative effort

24 for purposes of this section, a health care collaborative ef25 fort shall submit to the Attorney General an application
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1 that complies with the rules in effect under subsection (c)

2 and that includes—

3 (1) an agreement by the parties to the effort

4 that the effort will not foreclose competition by en5 tering into contracts that prevent health care provid6 ers from providing health care in competition with

7 the effort,

8 (2) an agreement that the effort will submit to

9 the Attorney General annually a report that de10 scribes the operations of the effort and information

11 regarding the impact of the effort on health care

12 and on competition in health care, and

13 (3) an agreement that the parties to the effort

14 will notify the Attorney General and the Secretary of

15 the termination of the effort not later than 30 days

16 after such termination occurs.

17 (e) REVIEW OF APPLICATIONS FOR CERTIFICATES.—

18 Not later than 30 days after an eligible health care col19 laborative effort submits to the Attorney General an appli20 cation that complies with the rules in effect under sub21 section (c) and with subsection (d), the Attorney General

22 shall issue or deny the issuance of such certificate. If, be23 fore the expiration of such 30-day period, the Attorney

24 General fails to issue or deny the issuance of such certifi-
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1 cate, the Attorney General shall be deemed to have issued

2 such certificate.

3 (f) REVOCATION OF CERTIFICATE.—Whenever the

4 Attorney General finds that a health care collaborative ef5 fort with respect to which a certificate is in effect does

6 not meet the standards specified in subsection (b), the At7 torney General shall revoke such certificate.

8 (g) WRITTEN REASONS; JUDICIAL REVIEW.—

9 (1) DENIAL AND REVOCATION OF CERTIFI10 CATES.—If the Attorney General denies an applica11 tion for a certificate or revokes a certificate, the At12 torney General shall include in the notice of denial

13 or revocation a statement of the reasons relied upon

14 for the denial or revocation of such certificate.

15 (2) JUDICIAL REVIEW.—

16 (A) AFTER ADMINISTRATIVE PROCEED17 ING.—

18 (i) IN GENERAL.—If the Attorney

19 General denies an application submitted or

20 revokes a certificate issued under this sec21 tion after an opportunity for hearing on

22 the record, then any party to the health

23 care collaborative effort involved may com24 mence a civil action, not later than 60 days

25 after receiving notice of the denial or rev-
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1 ocation, in an appropriate district court of

2 the United States for review of the record

3 of such denial or revocation.

4 (ii) CERTIFIED COPY OF RECORD.—As

5 part of the Attorney General’s answer, the

6 Attorney General shall file in such court a

7 certified copy of the record on which such

8 denial or revocation is based. The findings

9 of fact of the Attorney General may be set

10 aside only if found to be unsupported by

11 substantial evidence in such record taken

12 as a whole.

13 (B) DENIAL OR REVOCATION WITHOUT AD14 MINISTRATIVE PROCEEDING.—If the Attorney

15 General denies an application submitted or re16 vokes a certificate issued under this section

17 without an opportunity for hearing on the

18 record, then any party to the health care col19 laborative effort involved may commence a civil

20 action, not later than 60 days after receiving

21 notice of the denial or revocation, in an appro22 priate district court of the United States for de

23 novo review of such denial or revocation.

24 (h) EXEMPTION.—A person shall not be liable under

25 any of the antitrust laws for conduct necessary—
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1 (1) to prepare, agree to prepare, or attempt to

2 agree to prepare an application to request a certifi3 cate under this section, or

4 (2) to attempt to enter into any health care col5 laborative effort with respect to which such a certifi6 cate is in effect.

7 (i) DEFINITIONS.—In this section:

8 (1) The term ‘‘antitrust laws’’—

9 (A) has the meaning given such term in

10 subsection (a) of the first section of the Clayton

11 Act (15 U.S.C. 12(a)), except that such term

12 includes section 5 of the Federal Trade Com13 mission Act (15 U.S.C. 45) to the extent such

14 section applies to unfair methods of competi15 tion, and

16 (B) includes any State law similar to the

17 laws referred to in subparagraph (A).

18 (2) The term ‘‘certificate’’ means a certificate

19 of public advantage authorized to be issued under

20 subsection (a).

21 (3) The term ‘‘health care collaborative effort’’

22 means an agreement (whether existing or proposed)

23 between 2 or more providers of health care services

24 that is entered into solely for the purpose of sharing

25 in the provision of health care services and that in-
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1 volves substantial integration or financial risk-shar2 ing between the parties, but does not include the ex3 changing of information, the entering into of any

4 agreement, or the engagement in any other conduct

5 that is not reasonably required to carry out such

6 agreement.

7 (4) The term ‘‘health care services’’ includes

8 services related to the delivery or administration of

9 health care services.

10 (5) The term ‘‘liable’’ means liable for any civil

11 or criminal violation of the antitrust laws.

12 (6) The term ‘‘provider of health care services’’

13 means any individual or entity that is engaged in the

14 delivery of health care services in a State and that

15 is required by State law or regulation to be licensed

16 or certified by the State to engage in the delivery of

17 such services in the State.

18 Subtitle C—Administrative Cost

19 Savings

20 SEC. 521. ESTABLISHMENT OF STANDARDS.

21 (a) IN GENERAL.—The Secretary shall establish,

22 after consultation with the American National Standards

23 Institute, data and transaction standards, conventions,

24 and requirements that permit the electronic interchange

25 of any health care data the Secretary determines nec-
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1 essary for the efficient and effective administration of the

2 health care system.

3 (b) TIMETABLE AND COVERAGE.—The Secretary

4 shall establish standards, conventions, and requirements

5 for categories of health care data in the following order

6 and at the appropriate time (as determined by the Sec7 retary):

8 (1) Financial and administrative transactions,

9 including enrollment, eligibility, claims, and claims

10 status.

11 (2) Quality measurement indicators, including

12 such data necessary to satisfy the requirements

13 under section 521.

14 (3) Patient care records.

15 (c) PRIVACY AND CONFIDENTIALITY STANDARDS.—

16 In developing the standards, conventions, and require17 ments under subsection (a), the Secretary shall ensure the

18 protection of privacy of participants in the health care sys19 tem and ensure the confidentiality in the data interchange

20 system.

21 SEC. 522. ENFORCEMENT.

22 (a) AHPS.—An AHP may not be certified by the ap23 propriate regulatory authority unless such AHP complies

24 with the standards established by the Secretary under sec25 tion 521.
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1 (b) HEALTH CARE PROVIDERS.—AHPs may only

2 contract with or employ those health care providers that

3 comply with the electronic standards established by the

4 Secretary or submit standard paper forms with the same

5 data elements to a clearinghouse which forwards the data

6 electronically to AHPs.

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