II

103D CONGRESS

2D SESSION S. 2357

To achieve universal health insurance coverage, and for other purposes.

IN THE SENATE OF THE UNITED STATES

AUGUST 3 (legislative day, JULY 20), 1994

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

A BILL

To achieve universal health insurance coverage, and for other

purposes.

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

3 SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

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

5 ‘‘Health Security Act’’.

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

7 this Act is as follows:

Sec. 1. Short title; table of contents.

TITLE I—IMPROVED ACCESS TO STANDARDIZED AND

AFFORDABLE HEALTH PLANS

Subtitle A—Rules and Definitions of General Applicability

PART 1—RULES OF GENERAL APPLICABILITY

Sec. 1001. Access to standardized coverage.
2

•S 2357

Sec. 1002. Standard health plan principles.

Sec. 1003. Protection of consumer choice.

PART 2—DEFINITIONS

Sec. 1011. Definitions relating to health plans.

Sec. 1012. Definitions relating to employment and income.

Sec. 1013. Other general definitions.

Subtitle B—Health Plan Standards

PART 1—ESTABLISHMENT AND APPLICATION OF STANDARDS

Sec. 1101. Establishment of National standards.

Sec. 1102. General rules.

PART 2—INSURANCE MARKET REFORM

Sec. 1111. Guaranteed issue, availability, and renewability.

Sec. 1112. Enrollment.

Sec. 1113. Coverage of dependents.

Sec. 1114. Nondiscrimination based on health status.

Sec. 1115. Benefits.

Sec. 1116. Community rating requirements.

Sec. 1117. Risk adjustment and reinsurance.

Sec. 1118. Financial solvency requirements and consumer protection against

provider claims.

PART 3—DELIVERY SYSTEM REFORM

Sec. 1121. Prohibition of discrimination.

Sec. 1122. Quality assurance standards.

Sec. 1123. Consumer grievance process.

Sec. 1124. Health security cards.

Sec. 1125. Information and marketing standards.

Sec. 1126. Information regarding a patient’s right to self-determination in

health care services.

Sec. 1127. Contracts with purchasing cooperatives.

Sec. 1128. Health plan arrangements with providers.

Sec. 1129. Utilization management protocols and physician incentive plans.

PART 4—SUPPLEMENTAL HEALTH BENEFITS PLANS

Sec. 1141. Supplemental health benefits plans.

Subtitle C—Benefits and Cost-Sharing

PART 1—STANDARD BENEFITS PACKAGES

Sec. 1201. General description of standard benefits packages.

Sec. 1202. Description of categories of items and services.

Sec. 1203. Definitions.

PART 2—NATIONAL HEALTH BENEFITS BOARD

Sec. 1211. Creation of National health benefits board; membership.

Sec. 1212. Qualifications of board members.

Sec. 1213. General duties and responsibilities.

Sec. 1214. Powers.
3

•S 2357

Sec. 1215. Funding.

Sec. 1216. Applicability of Federal Advisory Committee Act.

Sec. 1217. Congressional consideration of Board proposals.

Subtitle D—Access to Health Plans

PART 1—ACCESS THROUGH EMPLOYERS

Sec. 1301. General employer responsibilities.

Sec. 1302. Auditing of records.

Sec. 1303. Prohibition of certain employer discrimination.

Sec. 1304. Prohibition on self-insuring cost-sharing benefits.

Sec. 1305. Responsibilities in single-payer States.

Sec. 1306. Development of large employer purchasing groups.

Sec. 1307. Rules governing litigation involving retiree health benefits.

Sec. 1308. Enforcement.

PART 2—ACCESS THROUGH HEALTH INSURANCE PURCHASING

COOPERATIVES

SUBPART A—GENERAL REQUIREMENTS

Sec. 1321. Organization and operation.

Sec. 1322. Membership.

Sec. 1323. Agreements with standard health plans.

Sec. 1324. Membership and marketing fees.

SUBPART B—COMMUNITY-RATED EMPLOYERS

Sec. 1331. Duties of purchasing cooperatives.

SUBPART C—FEDERAL EMPLOYEES HEALTH BENEFITS PROGRAM

Sec. 1341. Requirements applicable to FEHBP.

Sec. 1342. Special rules for FEHBP supplemental plans.

Sec. 1343. Definitions.

PART 3—TREATMENT OF ASSOCIATION PLANS

Sec. 1351. Rules relating to multiple employer welfare arrangements.

Sec. 1352. Association plans.

Subtitle E—Federal Responsibilities

PART 1—SECRETARY OF HEALTH AND HUMAN SERVICES

SUBPART A—GENERAL DUTIES

Sec. 1401. General duties and responsibilities.

Sec. 1402. Annual report.

Sec. 1403. Assistance with family collections.

Sec. 1404. Advisory opinions.

Sec. 1405. Funding.

SUBPART B—RESPONSIBILITIES RELATING TO REVIEW AND APPROVAL OF

STATE SYSTEMS

Sec. 1411. Federal review and action on State systems.

Sec. 1412. Failure of participating States to meet conditions for compliance.
4

•S 2357

Sec. 1413. Reduction in payments for health programs by Secretary of Health

and Human Services.

Sec. 1414. Review of Federal determinations.

Sec. 1415. Federal support for State implementation.

SUBPART C—RESPONSIBILITIES IN ABSENCE OF STATE SYSTEMS

Sec. 1421. Application of subpart.

Sec. 1422. Federal assumption of responsibilities in non-participating States.

Sec. 1423. Imposition of surcharge on premiums under federally-operated system.

Sec. 1424. Return to State operation.

SUBPART D—ESTABLISHMENT OF CLASS FACTORS FOR CHARGING PREMIUMS

Sec. 1431. Premium class and age class factors.

SUBPART E—RISK ADJUSTMENT AND REINSURANCE METHODOLOGY FOR

PAYMENT OF PLANS

Sec. 1435. Development of a risk adjustment and reinsurance methodology.

SUBPART F—RESPONSIBILITIES FOR FINANCIAL REQUIREMENTS

Sec. 1441. Capital standards for community-rated plans.

Sec. 1442. Standard for guaranty funds.

SUBPART G—OPEN ENROLLMENT

Sec. 1445. Periods of authorized changes in enrollment.

Sec. 1446. Distribution of comparative information.

Sec. 1455. Reports.

PART 2—ESSENTIAL COMMUNITY PROVIDERS

Sec. 1461. Certification.

Sec. 1462. Categories of providers automatically certified.

Sec. 1463. Standards for additional providers.

Sec. 1464. Certification process; review; termination of certifications.

Sec. 1465. Notification of participating States.

Sec. 1466. Health plan requirement.

Sec. 1467. Recommendation on continuation of requirement.

Sec. 1468. Definitions.

PART 3—SPECIFIC RESPONSIBILITIES OF SECRETARY OF LABOR

Sec. 1481. Responsibilities of Secretary of Labor.

Sec. 1482. Federal role with respect to multi-State self-insured health plans.

Sec. 1483. Assistance with employer collections.

Sec. 1484. Penalties for failure of large employer purchasing groups to meet requirements.

Sec. 1485. Applicability of ERISA enforcement mechanisms for enforcement of

certain requirements.

Sec. 1486. Workplace wellness program.

PART 4—OFFICE OF RURAL HEALTH POLICY

Sec. 1491. Office of rural health policy.

Subtitle F—Participating State Responsibilities
5

•S 2357

PART 1—GENERAL RESPONSIBILITIES

Sec. 1501. State plan and certification of standard health plans and supplemental health benefits plans.

Sec. 1502. Community rating areas and health plan service areas.

Sec. 1503. Open enrollment periods.

Sec. 1504. Risk adjustment program.

Sec. 1505. Guaranty funds.

Sec. 1506. Enrollment activities.

Sec. 1507. Rural and medically underserved areas.

Sec. 1508. Public access sites.

Sec. 1509. Requirements relating to possessions of the United States.

Sec. 1510. Right of recovery of certain taxes against providers.

PART 2—TREATMENT OF STATE LAWS

Sec. 1511. Preemption of certain State laws relating to health plans.

Sec. 1512. Override of restrictive State practice laws.

PART 3—STATE FLEXIBILITY

SUBPART A—EXISTING STATE LAWS

Sec. 1521. Continuance of existing Federal law waivers.

Sec. 1522. Hawaii prepaid Health Care Act.

Sec. 1523. Alternative State provider payment systems.

Sec. 1524. Alternative State hospital services payment systems.

SUBPART B—REQUIREMENTS FOR STATE SINGLE-PAYER SYSTEMS

Sec. 1531. Single-payer system described.

Sec. 1532. General requirements for single-payer systems.

Sec. 1533. Special rules for States operating statewide single-payer system.

Sec. 1534. Special rules for community rating area-specific single-payer systems.

SUBPART C—EARLY IMPLEMENTATION OF COMPREHENSIVE STATE PROGRAMS

Sec. 1541. Early implementation of comprehensive State programs.

Subtitle G—Miscellaneous Provisions

Sec. 1601. Provision of items or services contrary to religious belief or moral

conviction.

Sec. 1602. Antidiscrimination.

TITLE II—NEW BENEFITS

Subtitle A—Coverage of Outpatient Prescription Drugs in Medicare

Sec. 2000. References in subtitle.

PART 1—COVERAGE OF OUTPATIENT PRESCRIPTION DRUGS

Sec. 2001. Coverage of outpatient prescription drugs.

Sec. 2002. Payment rules and related requirements for covered outpatient

drugs.

Sec. 2003. Medicare rebates for covered outpatient drugs.

Sec. 2004. Prescription drug payment review commission.

Sec. 2005. Coverage of home infusion drug therapy services.
6

•S 2357

Sec. 2006. Medicare drug benefit plans.

Sec. 2007. Payment for covered outpatient drug benefit under medicare contracts with HMOs and CMPS.

Sec. 2008. Maintenance of effort.

Subtitle B—Home and Community-Based Services

PART 1—HOME AND COMMUNITY-BASED SERVICES FOR INDIVIDUALS WITH

DISABILITIES

Sec. 2101. State programs for home and community-based services for individuals with disabilities.

Sec. 2102. State plans.

Sec. 2103. Individuals with disabilities defined.

Sec. 2104. Home and community-based services covered under State plan.

Sec. 2105. Cost sharing.

Sec. 2106. Quality assurance and safeguards.

Sec. 2107. Advisory groups.

Sec. 2108. Payments to States.

Sec. 2109. Appropriations; allotments to States.

Sec. 2110. Federal evaluations.

PART 2—GRANTS RELATING TO THE DEVELOPMENT OF HOSPITAL LINKAGE

PROGRAMS

Sec. 2111. Information and technical assistance grants relating to development

of hospital linkage programs.

Subtitle C—Long-Term Care Insurance Improvement and Accountability

Sec. 2200. Short title.

PART 1—PROMULGATION OF STANDARDS AND MODEL BENEFITS

Sec. 2201. Standards.

PART 2—ESTABLISHMENT AND IMPLEMENTATION OF LONG-TERM CARE

INSURANCE POLICY STANDARDS

Sec. 2211. Implementation of policy standards.

Sec. 2212. Regulation of sales practices.

Sec. 2213. Additional responsibilities for carriers.

Sec. 2214. Renewability standards for issuance, and basic for cancellation of

policies.

Sec. 2215. Benefit standards.

Sec. 2216. Nonforfeiture.

Sec. 2217. Limit of period of contestability and right to return.

Sec. 2218. Civil money penalty.

PART 3—LONG-TERM CARE INSURANCE POLICIES, DEFINITION AND

ENDORSEMENTS

Sec. 2221. Long-term care insurance policy defined.

Sec. 2222. Code of conduct with respect to endorsements.

Subtitle D—Life Care

Sec. 2301. Short title.

Sec. 2302. Life care: public insurance program for nursing home care.
7

•S 2357

Subtitle E—Study and Report

Sec. 2401. Study of issues related to end of life care.

TITLE III—HEALTH PROFESSIONS WORKFORCE

Subtitle A—Workforce Priorities Under Federal Payments

Sec. 3000. Definitions.

PART 1—INSTITUTIONAL COSTS OF GRADUATE MEDICAL EDUCATION;

WORKFORCE PRIORITIES

SUBPART A—NATIONAL COUNCIL REGARDING WORKFORCE PRIORITIES

Sec. 3001. National Council on Graduate Medical Education.

SUBPART B—AUTHORIZED POSITIONS IN SPECIALTY TRAINING

Sec. 3011. Cooperation regarding approved physician training programs.

Sec. 3012. Annual authorization of total number of graduate medical education

positions.

Sec. 3013. Annual authorization of number of specialty positions; requirements

regarding primary health care.

Sec. 3014. National Council recommendation of number of graduate medical

education positions.

Sec. 3015. Allocations among specialities and programs.

SUBPART C—COSTS OF GRADUATE MEDICAL EDUCATION

CHAPTER 1—OPERATION OF APPROVED PHYSICIAN TRAINING PROGRAMS

Sec. 3031. Federal formula payments to qualified entities for the costs of the

operation of approved physician training programs.

Sec. 3032. Application for payments.

Sec. 3033. Availability of funds for payments; annual amount of payments.

Sec. 3034. Payments for dental and podiatric positions.

CHAPTER 2—ACADEMIC HEALTH CENTERS AND OTHER ELIGIBLE

INSTITUTIONS

Sec. 3051. Federal formula payments to academic health centers and other eligible institutions.

Sec. 3052. Request for payments.

Sec. 3053. Availability of funds for payments; annual amount of payments.

SUBPART D—TRANSITIONAL PROVISIONS

Sec. 3055. Transitional payments to institutions.

Sec. 3056. Waiver of foreign country residence requirement with respect to

international medical graduates.

PART 2—HEALTH PROFESSIONS SCHOOLS PAYMENTS

SUBPART A—PAYMENTS TO MEDICAL SCHOOLS

Sec. 3061. Federal payments to medical schools.

Sec. 3062. Application for payments.

Sec. 3063. Authorization of appropriations; annual amount of payments.
8

•S 2357

SUBPART B—PAYMENTS TO NURSING PROGRAMS

Sec. 3071. Federal payments to graduate nurse training programs.

Sec. 3072. National Council on Graduate Nurse Training.

SUBPART C—PAYMENTS TO DENTAL SCHOOLS

Sec. 3073. Dental schools.

SUBPART D—PAYMENTS TO SCHOOLS OF PUBLIC HEALTH

Sec. 3074. Schools of public health.

PART 3—RELATED PROGRAMS

SUBPART A—WORKFORCE DEVELOPMENT

Sec. 3081. Programs of the Secretary of Health and Human Services.

Sec. 3082. Programs of the Secretary of Labor.

Sec. 3083. Requirement for certain programs regarding redeployment of health

care workers.

SUBPART B—TRANSITIONAL PROVISIONS FOR WORKFORCE STABILITY

Sec. 3091. Application.

Sec. 3092. Definitions.

Sec. 3093. Obligations of displacing employer and affiliated enterprises in event

of displacement.

Sec. 3094. Employment with successors.

Sec. 3095. Collective bargaining obligations during transition period.

Sec. 3096. General provisions.

Subtitle B—Academic Health Centers

Sec. 3131. Discretionary grants regarding access to centers.

Subtitle C—Health Research Initiatives

PART 1—PROGRAMS FOR CERTAIN AGENCIES

Sec. 3201. Biomedical, behavioral and health services research.

Sec. 3202. Health services research.

Sec. 3203. AHCPR guidelines and standards.

PART 2—FUNDING FOR PROGRAM

Sec. 3211. Authorizations of appropriations.

PART 3—MEDICAL TECHNOLOGY IMPACT STUDY

Sec. 3221. Medical technology impact study.

Subtitle D—Core Functions of Public Health Programs; National Initiatives

Regarding Preventive Health

PART 1—FUNDING

Sec. 3301. Authorizations of appropriations.

PART 2—CORE FUNCTIONS OF PUBLIC HEALTH PROGRAMS
9

•S 2357

Sec. 3311. Purposes.

Sec. 3312. Grants to States for core functions of public health.

Sec. 3313. Submission of information.

Sec. 3314. Reports.

Sec. 3315. Application for grant.

Sec. 3316. Allocations for certain activities.

Sec. 3317. Definitions.

Sec. 3318. Single application and uniform reporting systems for core functions

of public health and public health categorical grant programs

administered by the centers for disease control and prevention.

PART 3—NATIONAL INITIATIVES REGARDING HEALTH PROMOTION AND

DISEASE PREVENTION

SUBPART A—GENERAL GRANTS

Sec. 3331. Grants for national prevention initiatives.

Sec. 3332. Priorities.

Sec. 3333. Submission of information.

Sec. 3334. Application for grant.

SUBPART B—DEVELOPMENT OF TELEMEDICINE IN RURAL UNDERSERVED

AREAS

Sec. 3341. Grants for development of rural telemedicine.

Sec. 3342. Report and evaluation of telemedicine.

Sec. 3343. Regulations on reimbursement of telemedicine.

Sec. 3344. Authorization of appropriations.

Sec. 3345. Definitions.

Subtitle E—Health Services for Medically Underserved Populations

PART 1—INITIATIVES FOR ACCESS TO HEALTH CARE

SUBPART A—AUTHORIZATION OF APPROPRIATIONS

Sec. 3411. Authorizations of appropriations.

SUBPART B—DEVELOPMENT OF COMMUNITY HEALTH GROUPS AND HEALTH

CARE SITES AND SERVICES

Sec. 3421. Grants and contracts for development of plans and networks and the

expansion and development of health care sites and services.

Sec. 3422. Certain uses of awards.

Sec. 3423. Application.

Sec. 3424. Purposes and conditions.

SUBPART C—CAPITAL COST OF DEVELOPMENT OF COMMUNITY HEALTH

GROUPS AND OTHER PURPOSES

Sec. 3441. Direct loans and grants.

Sec. 3442. Certain requirements.

Sec. 3443. Defaults; right of recovery.

Sec. 3444. Provisions regarding construction or expansion of facilities.

Sec. 3445. Application for assistance.

Sec. 3446. Administration of programs.
10

•S 2357

SUBPART D—ENABLING AND SUPPLEMENTAL SERVICES

Sec. 3461. Grants and contracts for enabling and supplemental services.

Sec. 3462. Authorizations of appropriations.

PART 2—NATIONAL HEALTH SERVICE CORPS

Sec. 3471. Authorizations of appropriations.

Sec. 3472. Allocation for participation of nurses in scholarship and loan repayment programs.

Sec. 3473. Allocation for participation of psychiatrists, psychologists, and clinical social workers in scholarship and loan repayment programs.

PART 3—PAYMENTS TO HOSPITALS SERVING VULNERABLE POPULATIONS

Sec. 3481. Payments to hospitals.

Sec. 3482. Identification of eligible hospitals.

Sec. 3483. Amount of payments.

Sec. 3484. Base year.

Subtitle F—Mental Health; Substance Abuse

PART 1—AUTHORITIES REGARDING PARTICIPATING STATES

Sec. 3510. Integration of mental health and substance abuse systems.

Sec. 3511. Report on integration of mental health systems.

PART 2—ASSISTANCE FOR STATE MANAGED MENTAL HEALTH AND

SUBSTANCE ABUSE PROGRAMS

Sec. 3531. Availability of assistance.

Sec. 3532. Plan requirements.

Sec. 3533. Additional Federal responsibilities.

Sec. 3534. Authorization of appropriations.

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

Services

PART 1—HEALTHY STUDENTS-HEALTHY SCHOOLS GRANTS FOR SCHOOL

HEALTH EDUCATION

Sec. 3601. Purposes.

Sec. 3602. Healthy students-healthy schools grants.

Sec. 3603. Healthy Students-Healthy Schools Interagency Task Force.

Sec. 3604. Duties of the Secretary.

PART 5—SCHOOL-RELATED HEALTH SERVICES

SUBPART A—DEVELOPMENT AND OPERATION

Sec. 3681. Authorization of appropriations.

Sec. 3682. Eligibility for grants.

Sec. 3683. Preferences.

Sec. 3684. Planning and development grants.

Sec. 3685. Grants for operation of school health services.

SUBPART B—CAPITAL COSTS OF DEVELOPING PROJECTS

Sec. 3691. Funding.
11

•S 2357

Subtitle H—Public Health Service Initiative

Sec. 3695. Public health service initiative.

Subtitle I—Additional Provisions Regarding Public Health

Sec. 3901. Curriculum development and implementation regarding domestic violence and women’s health.

Sec. 3902. Community scholarship programs.

Subtitle J—Occupational Safety and Health

Sec. 3903. Occupational injury and illness prevention.

Subtitle K—Full Funding for WIC

Sec. 3905. Full funding for WIC.

Subtitle L—Border Health Improvement

Sec. 3908. Border Health Commission.

TITLE IV—MEDICARE AND MEDICAID

Sec. 4000. References in title.

Subtitle A—Medicare

PART 1—INTEGRATION OF MEDICARE BENEFICIARIES

Sec. 4001. Individual election to remain in certain health plans.

Sec. 4002. Enrollment and termination of enrollment.

PART 2—PROVISIONS RELATING TO PART A

Sec. 4101. Inpatient hospital services update for PPS hospitals.

Sec. 4102. Reduction in payments for capital-related costs for inpatient hospital

services.

Sec. 4103. Reductions in disproportionate share payments.

Sec. 4104. Extension of freeze on updates to routine service cost limits for

skilled nursing facilities.

Sec. 4105. Medicare-dependent, small rural hospitals.

Sec. 4106. Provisions relating to rural health transition grant program.

Sec. 4107. Payments for sole community hospitals with teaching programs and

multihospital campuses.

Sec. 4108. Moratorium on designation of new long-term hospitals.

Sec. 4109. Revised payment methodology for rehabilitation and long-term care

hospitals.

Sec. 4110. Termination of indirect medical education payments.

Sec. 4111. Limited service hospital program.

Sec. 4112. Subacute care study.

PART 3—PROVISIONS RELATING TO PART B

Sec. 4201. Updates for physicians’ services.

Sec. 4202. Substitution of real GDP to adjust for volume and intensity; repeal

of restriction on maximum reduction permitted in default update.
12

•S 2357

Sec. 4203. Payment for physicians’ services relating to inpatient stays in certain hospitals.

Sec. 4204. Changes in underserved area bonus payments.

Sec. 4205. Correction of MVPS upward bias.

Sec. 4206. Demonstration projects for medicare State-based performance

standard rate of increase.

Sec. 4207. Elimination of formula-driven overpayments for certain outpatient

hospital services.

Sec. 4208. Eye or eye and ear hospitals.

Sec. 4209. Imposition of coinsurance on laboratory services.

Sec. 4210. Application of competitive acquisition process for part B items and

services.

Sec. 4211. Application of competitive acquisition procedures for laboratory services.

Sec. 4212. Expanded coverage for physician assistants and nurse practitioners.

Sec. 4213. Elimination of balance billing.

Sec. 4214. Development and implementation of resource-based methodology for

practice expenses.

Sec. 4215. Payments for durable medical equipment.

Sec. 4216. General part B premium.

PART 4—PROVISIONS RELATING TO PARTS A AND B

Sec. 4301. Medicare secondary payer changes.

Sec. 4302. Increase in medicare secondary payer coverage for end stage renal

disease services to 24 months.

Sec. 4303. Expansion of centers of excellence.

Sec. 4304. Reduction in routine cost limits for home health services.

Sec. 4305. Imposition of 20 percent coinsurance on home health services under

medicare.

Sec. 4306. Termination of graduate medical education payments.

Sec. 4307. Medicare select.

Subtitle B—Medicaid Program

PART 1—INTEGRATION OF CERTAIN MEDICAID ELIGIBLES INTO REFORMED

HEALTH CARE SYSTEM

Sec. 4601. Limiting coverage under medicaid of items and services covered

under standard benefit package.

PART 2—COORDINATED CARE SERVICES FOR DISABLED MEDICAID

ELIGIBLES

Sec. 4605. Coordinated care services for disabled medicaid eligibles.

PART 3—PAYMENTS TO HOSPITALS SERVING VULNERABLE POPULATIONS

Sec. 4611. Replacement of DSH payment provisions with provisions relating to

payments to hospitals serving vulnerable populations.

PART 4—MEDICAID LONG-TERM CARE PROVISIONS

Sec. 4615. Increased resource disregard for individuals receiving certain services.

Sec. 4616. Frail elderly demonstration project waivers.
13

•S 2357

Sec. 4617. Elimination of requirement of prior institutionalization with respect

to habilitation services furnished under a waiver for home or

community-based services.

Sec. 4618. Elimination of rule regarding availability of beds in certain institutions.

Sec. 4619. Preadmission screening for mentally retarded individuals.

PART 5—MISCELLANEOUS

Sec. 4621. Medicaid coverage of all certified nurse practitioner and clinical

nurse specialist services.

Sec. 4622. Relief from third party liability requirements when cost-effective.

TITLE V—QUALITY AND CONSUMER PROTECTION

Subtitle A—Quality Management and Improvement

Sec. 5001. National quality council.

Sec. 5002. National goals and performance measures of quality.

Sec. 5003. Standards and performance measures for health plans.

Sec. 5004. Plan data analysis and consumer surveys.

Sec. 5005. Evaluation and reporting of quality performance.

Sec. 5006. Development and dissemination of practice guidelines.

Sec. 5007. Research on health care quality.

Sec. 5008. Quality improvement foundations.

Sec. 5009. Consumer information and advocacy.

Sec. 5010. Authorization of appropriations.

Sec. 5011. Role of health plans in quality management.

Sec. 5012. Information on health care providers.

Sec. 5013. Conforming amendments to Public Health Service Act.

Subtitle B—Administrative Simplification

PART 1—PURPOSE AND DEFINITIONS

Sec. 5101. Purpose.

Sec. 5102. Definitions.

PART 2—STANDARDS FOR DATA ELEMENTS AND INFORMATION

TRANSACTIONS

Sec. 5111. General requirements on secretary.

Sec. 5112. Standards for data elements of health information.

Sec. 5113. Information transaction standards.

Sec. 5114. Standards relating to written claims submitted by individuals and

written explanations of benefits.

Sec. 5115. Timetables for adoption of standards.

PART 3—REQUIREMENTS WITH RESPECT TO CERTAIN TRANSACTIONS AND

INFORMATION

Sec. 5121. Requirements with respect to certain transactions and information.

Sec. 5122. Timetables for compliance with requirements.

PART 4—ACCESSING HEALTH INFORMATION

Sec. 5131. Accessing health information for authorized purposes.

Sec. 5132. Responding to access requests.
14

•S 2357

Sec. 5133. Length of time information should be accessible.

Sec. 5134. Timetables for adoption of standards and compliance.

PART 5—STANDARDS AND CERTIFICATION FOR HEALTH INFORMATION

NETWORK

Sec. 5141. Standards and certification for health information network services.

Sec. 5142. Ensuring availability of information.

PART 6—PENALTIES

Sec. 5151. General penalty for failure to comply with requirements and standards.

PART 7—MISCELLANEOUS PROVISIONS

Sec. 5161. Imposition of additional requirements.

Sec. 5162. Effect on State law.

Sec. 5164. Health information continuity.

Sec. 5165. Protection of commercial information.

Sec. 5166. Payment for health care services or health plan premiums.

Sec. 5167. Health security cards.

Sec. 5168. Misuse of health security card or personal health identifier.

Sec. 5169. Direct billing for clinical laboratory services.

Sec. 5170. Authorization of appropriations.

PART 8—ASSISTANCE TO THE SECRETARY

Sec. 5171. General requirement on secretary.

Sec. 5172. Health information advisory committee.

PART 9—DEMONSTRATION PROJECTS FOR COMMUNITY-BASED CLINICAL

INFORMATION SYSTEMS

Sec. 5181. Grants for demonstration projects.

PART 10—MEDICARE AND MEDICAID COVERAGE DATA BANK

Sec. 5191. Repeal of medicare and medicaid coverage data bank.

Subtitle C—Privacy of Health Information

PART 1—FINDINGS AND DEFINITIONS

Sec. 5201. Findings and purposes.

Sec. 5202. Definitions.

PART 2—AUTHORIZED DISCLOSURES

SUBPART A—GENERAL PROVISIONS

Sec. 5206. General rules regarding disclosure.

Sec. 5207. Authorizations for disclosure of protected health information.

Sec. 5208. Certified health information network services.

SUBPART B—SPECIFIC DISCLOSURES RELATING TO PATIENT

Sec. 5211. Disclosures for treatment and financial and administrative transactions.

Sec. 5212. Next of kin and directory information.
15

•S 2357

Sec. 5213. Emergency circumstances.

SUBPART C—DISCLOSURE FOR OVERSIGHT, PUBLIC HEALTH, AND RESEARCH

PURPOSES

Sec. 5216. Oversight.

Sec. 5217. Public health.

Sec. 5218. Health research.

SUBPART D—DISCLOSURE FOR JUDICIAL, ADMINISTRATIVE, AND LAW

ENFORCEMENT PURPOSES

Sec. 5221. Judicial and administrative purposes.

Sec. 5222. Law enforcement.

SUBPART E—DISCLOSURE PURSUANT TO GOVERNMENT SUBPOENA OR

WARRANT

Sec. 5226. Government subpoenas and warrants.

Sec. 5227. Access procedures for law enforcement subpoenas and warrants.

Sec. 5228. Challenge procedures for law enforcement warrants and subpoenas.

SUBPART F—DISCLOSURE PURSUANT TO PRIVATE PARTY SUBPOENA

Sec. 5231. Private party subpoenas.

Sec. 5232. Access procedures for private party subpoenas.

Sec. 5233. Challenge procedures for private party subpoenas.

PART 3—PROCEDURES FOR ENSURING SECURITY OF PROTECTED HEALTH

INFORMATION

SUBPART A—ESTABLISHMENT OF SAFEGUARDS

Sec. 5236. Establishment of safeguards.

Sec. 5237. Accounting for disclosures.

SUBPART B—REVIEW OF PROTECTED HEALTH INFORMATION BY SUBJECTS OF

THE INFORMATION

Sec. 5241. Inspection of protected health information.

Sec. 5242. Amendment of protected health information.

Sec. 5243. Notice of information practices.

SUBPART C—STANDARDS FOR ELECTRONIC DISCLOSURES

Sec. 5246. Standards for electronic disclosures.

PART 4—SANCTIONS

SUBPART A—NO SANCTIONS FOR PERMISSIBLE ACTIONS

Sec. 5251. No liability for permissible disclosures.

Sec. 5252. No liability for institutional review board determinations.

Sec. 5253. Reliance on certified entity.

SUBPART B—CIVIL SANCTIONS

Sec. 5256. Civil penalty.

Sec. 5257. Civil action.
16

•S 2357

SUBPART C—CRIMINAL SANCTIONS

Sec. 5261. Wrongful disclosure of protected health information.

PART 5—ADMINISTRATIVE PROVISIONS

Sec. 5266. Relationship to other laws.

Sec. 5267. Rights of incompetents.

Sec. 5268. Exercise of rights.

Subtitle D—Expanded Efforts To Combat Health Care Fraud and Abuse

Affecting Federal Outlay Programs

PART 1—IMPROVED ENFORCEMENT

Sec. 5301. Health care fraud and abuse affecting Federal outlay programs.

Sec. 5302. Establishment of Federal outlay program fraud and abuse control

account.

Sec. 5303. Use of funds by Inspector General.

Sec. 5304. Rewards for information leading to prosecution and conviction.

PART 2—CIVIL PENALTIES AND RIGHTS OF ACTION

Sec. 5311. Civil monetary penalties.

Sec. 5312. Permitting parties to bring actions on own behalf.

Sec. 5313. Exclusion from program participation.

PART 3—AMENDMENTS TO CRIMINAL LAW

Sec. 5321. Health care fraud.

Sec. 5322. Theft or embezzlement.

Sec. 5323. False Statements.

Sec. 5324. Bribery and graft.

Sec. 5325. Injunctive relief relating to health care offenses.

Sec. 5326. Grand jury disclosure.

Sec. 5327. Forfeitures for violations of fraud statutes.

PART 4—AMENDMENTS TO CIVIL FALSE CLAIMS ACT

Sec. 5331. Amendments to Civil False claims Act.

PART 5—EFFECTIVE DATE

Sec. 5341. Effective date.

Subtitle E—Medical Liability Reform

PART 1—SYSTEM REFORMS

Sec. 5401. Federal tort reform.

Sec. 5402. State-based alternative dispute resolution mechanisms.

Sec. 5403. Requirement of certificate of merit.

Sec. 5404. Limitation on amount of attorney’s contingency fees.

Sec. 5405. Periodic payment of awards.

Sec. 5406. Federal study on medical negligence.

PART 2—DEMONSTRATION PROJECT RELATING TO MEDICAL MALPRACTICE

LIABILITY
17

•S 2357

Sec. 5411. Pilot program applying practice guidelines to medical malpractice liability actions.

Sec. 5412. Enterprise liability demonstration project.

Subtitle F—Remedies and Enforcement

PART 1—REVIEW OF BENEFIT DETERMINATIONS FOR ENROLLED

INDIVIDUALS

SUBPART A—GENERAL RULES

Sec. 5501. Health plan claims procedure.

Sec. 5502. Review in area complaint review offices of grievances based on acts

or practices by health plans.

Sec. 5503. Initial proceedings in complaint review offices.

Sec. 5504. Hearings before hearing officers in complaint review offices.

Sec. 5505. Civil money penalties.

SUBPART B—EARLY RESOLUTION PROGRAMS

Sec. 5511. Establishment of early resolution programs in complaint review offices.

Sec. 5512. Initiation of participation in mediation proceedings.

Sec. 5513. Mediation proceedings.

Sec. 5514. Legal effect of participation in mediation proceedings.

Sec. 5515. Enforcement of settlement agreements.

Sec. 5516. Due process for health care providers.

PART 2—ADDITIONAL REMEDIES AND ENFORCEMENT PROVISIONS

Sec. 5531. Judicial review of Federal action on State systems.

Sec. 5532. Civil enforcement.

Sec. 5533. Priority of certain bankruptcy claims.

Sec. 5534. Private right to enforce State responsibilities.

Sec. 5535. Private right to enforce Federal responsibilities in operating a system in a State.

Sec. 5536. Enforcement of consumer protections.

Sec. 5537. Discrimination claims.

Sec. 5538. Nondiscrimination in federally assisted programs.

Sec. 5539. Civil and administration action by essential community provider.

Sec. 5540. Facial constitutional challenges.

Sec. 5541. Treatment of plans as parties in civil actions.

Sec. 5542. Whistleblower protections.

Sec. 5543. General nonpreemption of rights and remedies.

Subtitle G—Repeal of Exemption

Sec. 5601. Repeal of exemption for health insurance.

TITLE VI—INDIVIDUAL AND EMPLOYER SUBSIDIES

Subtitle A—Individual Premium and Cost-Sharing Assistance

Sec. 6001. Requirement to operate State program.

Sec. 6002. Assistance with standard health plan premiums.

Sec. 6003. Assistance with cost-sharing for standard health plans.

Sec. 6004. Eligibility determinations.

Sec. 6005. End-of-year reconciliation for premium assistance.
18

•S 2357

Sec. 6006. Enrollment outreach.

Sec. 6007. Payments to States.

Sec. 6008. Definitions and determinations of income.

Subtitle B—Employer Subsidies

Sec. 6101. Purpose.

Sec. 6102. Eligible employers.

Sec. 6103. Employer certification.

Sec. 6104. Amount of subsidy.

Sec. 6105. Definition.

TITLE VII—REVENUE PROVISIONS

Sec. 7000. Amendment of 1986 Code.

Subtitle A—Financing Provisions

PART 1—INCREASE IN TAX ON TOBACCO PRODUCTS

Sec. 7101. Increase in excise taxes on tobacco products.

Sec. 7102. Modifications of certain tobacco tax provisions.

Sec. 7103. Imposition of excise tax on manufacture or importation of roll-yourown tobacco.

PART 2—HEALTH RELATED ASSESSMENTS

Sec. 7111. Assessments on insured and self-insured health plans.

Sec. 7112. High cost health plan assessment.

PART 3—RECAPTURE OF CERTAIN HEALTH CARE SUBSIDIES

Sec. 7121. Recapture of certain health care subsidies received by high-income

individuals.

PART 4—OTHER PROVISIONS

Sec. 7131. Increase in tax on certain hollow point and large caliber handgun

ammunition.

Sec. 7132. Modification to self-employment tax treatment of certain S corporation shareholders and partners.

Sec. 7133. Extending medicare coverage of, and application of hospital insurance tax to, all State and local government employees.

Subtitle B—Tax Treatment of Employer-Provided Health Care

PART 1—GENERAL PROVISIONS

Sec. 7201. Limitation on exclusion for employer-provided health benefits.

Sec. 7202. Health benefits may not be provided under cafeteria plans.

Sec. 7203. Increase in deduction for health insurance costs of self-employed individuals.

Sec. 7204. Limitation on prepayment of medical insurance premiums.

PART 2—VOLUNTARY EMPLOYER HEALTH CARE CONTRIBUTIONS

Sec. 7111. Tax treatment of voluntary employer health care contributions.

Subtitle C—Exempt Health Care Organizations
19

•S 2357

PART 1—GENERAL PROVISIONS

Sec. 7301. Qualification and disclosure requirements for nonprofit health care

organizations.

Sec. 7302. Excise taxes for private inurement by tax-exempt health care organizations.

Sec. 7303. Treatment of health maintenance organizations, parent organizations, and health insurance purchasing cooperatives.

Sec. 7304. Tax treatment of taxable organizations providing health insurance

and other prepaid health care services.

Sec. 7305. Repeal of section 833.

Sec. 7306. Tax exemption for high-risk insurance pools.

PART 2—TAX TREATMENT OF SECTION 501(c)(3) BONDS

Sec. 748. Tax treatment of 501(c)(3) bonds similar to governmental bonds.

Subtitle D—Tax Treatment of Long-Term Care Insurance and Services

Sec. 7401. Qualified long-term care services treated as medical care.

Sec. 7402. Treatment of long-term care insurance.

Sec. 7403. Tax treatment of accelerated death benefits under life insurance

contracts.

Sec. 7404. Tax treatment of companies issuing qualified accelerated death benefit riders.

Subtitle E—Other Revenue Provisions

PART 1—EMPLOYMENT STATUS PROVISIONS

Sec. 7501. Employment status proposal required from Department of the

Treasury.

Sec. 7502. Increase in services reporting penalties.

PART 2—TAX INCENTIVES FOR HEALTH SERVICES PROVIDERS

Sec. 7511. Nonrefundable credit for certain primary health services providers.

Sec. 7512. Expensing of medical equipment.

PART 3—MISCELLANEOUS PROVISIONS

Sec. 7521. Post-retirement medical and life insurance reserves.

Sec. 7522. Credit for cost of personal assistance services required by employed

individuals.

Sec. 7523. Disclosure of return information for administration of certain programs under the Health Security Act.

Subtitle F—Graduate Medical Education and Academic Health Centers Trust

Fund

Sec. 7601. Establishment of Graduate Medical Education and Academic Health

Centers Trust Fund.

TITLE VIII—OTHER FEDERAL PROGRAMS

Subtitle A—Indian Health Service

Sec. 8101. Purposes.

Sec. 8102. Definitions.
20

•S 2357

Sec. 8103. Eligibility and health service coverage of Indians.

Sec. 8104. Supplemental Indian health care benefits.

Sec. 8105. Provision of health services to non-Indians.

Sec. 8106. Essential community providers.

Sec. 8107. Payment by other providers.

Sec. 8108. Contracting authority.

Sec. 8109. Consultation.

Sec. 8110. Transitional studies.

Sec. 8111. Loans and loan guarantees.

Sec. 8112. Simplification of billing.

Sec. 8113. Long-term care demonstrations.

Sec. 8114. Technical assistance.

Sec. 8115. Public health programs.

Sec. 8116. Survey of health services available to Indian veterans.

Sec. 8117. Rule of construction.

Sec. 8118. Authorization of appropriations.

Sec. 8119. Funding methodology.

TITLE IX—WORKERS COMPENSATION MEDICAL SERVICES

Sec. 9000. Application of information requirements.

Sec. 9001. Provision of care in disputed cases.

Sec. 9002. Demonstration projects.

Sec. 9003. Commission on Workers Compensation Medical Services.

TITLE X—PREMIUM FINANCING

Subtitle A—National Health Care Cost and Coverage Commission

Sec. 10001. National Health Care Cost And Coverage Commission.

Sec. 10002. Composition.

Sec. 10003. Duties of Commission.

Sec. 10004. Congressional consideration of Commission recommendations.

Sec. 10005. Operation of the Commission.

Subtitle B—Employer and Individual Premium Requirements and Assistance

Sec. 10101. Application of subtitle.

Sec. 10102. Definitions.

PART 1—EMPLOYER PREMIUM PAYMENTS

Sec. 10111. Obligation.

Sec. 10112. Community-rated employers.

Sec. 10113. Experience rated employers.

PART 2—FAMILY PAYMENT RESPONSIBILITIES

SUBPART A—FAMILY SHARE

Sec. 10131. Enrollment and premium payments.

Sec. 10132. Family share of premiums.

Sec. 10133. Amount of premium.

Sec. 10134. Collection shortfall add-on.

Sec. 10135. Family credit.

Sec. 10136. Premium subsidy.

Sec. 10137. No loss of coverage.
21

•S 2357

SUBPART B—PAYMENT OF FAMILY CREDIT BY CERTAIN FAMILIES

Sec. 10141. Payment of family credit by nonworking and part-time certain

families.

Sec. 10142. Limitation of liability based on income.

TITLE XI—ENSURING HEALTH CARE REFORM FINANCING

Sec. 11001. Ensuring health care reform financing.

1 TITLE I—IMPROVED ACCESS TO

2 STANDARDIZED AND AFFORD3 ABLE HEALTH PLANS

4 Subtitle A—Rules and Definitions

5 of General Applicability

6 PART 1—RULES OF GENERAL APPLICABILITY

7 SEC. 1001. ACCESS TO STANDARDIZED COVERAGE.

8 (a) IN GENERAL.—A participating State system shall

9 require that each health plan (whether insured or self-in10 sured) or long-term care policy issued, sold, offered for

11 sale, or operated in the State shall be certified by the ap12 propriate certifying authority as one of the following:

13 (1) A certified standard health plan.

14 (2) A certified supplemental health benefits

15 plan.

16 (3) A certified long-term care policy under part

17 2 of subtitle B of title II.

18 (b) FEDERAL CERTIFICATION OF MULTISTATE

19 SELF-INSURED PLANS.—For Federal certification of

20 multistate self-insured health plans, see section 1482.
22

•S 2357

1 SEC. 1002. STANDARD HEALTH PLAN PRINCIPLES.

2 In accordance with this Act, the following principles

3 shall apply to all standard health plans:

4 (1) No standard health plan may discriminate

5 on the basis of medical history, health status, pre6 existing medical conditions, or genetic predisposition

7 to medical conditions.

8 (2) A standard health plan—

9 (A) shall offer an annual open enrollment

10 period and accept all eligible individuals for cov11 erage;

12 (B) shall not impose a rider that serves to

13 exclude coverage to an individual; and

14 (C) shall not impose waiting periods before

15 coverage begins.

16 (3) A standard health plan shall ensure that all

17 medically necessary or appropriate services, as de18 fined in the benefits package, are provided.

19 (4) Health benefits coverage shall be portable

20 from one standard health plan to another.

21 Nothing in this section shall be construed so as to relieve

22 a standard health plan of any obligation or requirement

23 imposed under this Act.

24 SEC. 1003. PROTECTION OF CONSUMER CHOICE.

25 Nothing in this Act shall be construed as prohibiting

26 the following:
23

•S 2357

1 (1) An individual from purchasing any health

2 care services.

3 (2) An individual from purchasing supplemental

4 insurance (offered consistent with this Act) to cover

5 health care services not included within the standard

6 benefits package established under subtitle C.

7 (3) An individual who is not an eligible individ8 ual from purchasing health insurance.

9 (4) Employers from providing coverage for ben10 efits in addition to such standard benefits package

11 (subject to part 1 of subtitle D).

12 (5) An individual from obtaining (at the ex13 pense of such individual) health care from any

14 health care provider of such individual’s choice.

15 PART 2—DEFINITIONS

16 SEC. 1011. DEFINITIONS RELATING TO HEALTH PLANS.

17 Except as otherwise specifically provided, in this Act

18 the following definitions and rules apply:

19 (1) HEALTH PLAN.—

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

21 means any plan or arrangement which provides,

22 or pays the cost of, health benefits. Such term

23 does not include the following, or any combina24 tion thereof:
24

•S 2357

1 (i) Coverage only for accidental death

2 or dismemberment.

3 (ii) Coverage providing wages or pay4 ments in lieu of wages for any period dur5 ing which the employee is absent from

6 work on account of sickness or injury.

7 (iii) A medicare supplemental policy

8 (as defined in section 1882(g)(1) of the

9 Social Security Act).

10 (iv) Coverage issued as a supplement

11 to liability insurance.

12 (v) Worker’s compensation or similar

13 insurance.

14 (vi) Automobile medical-payment in15 surance.

16 (vii) A long-term care policy, including

17 a nursing home fixed indemnity policy (un18 less the Secretary determines that such a

19 policy provides sufficiently comprehensive

20 coverage of a benefit so that it should be

21 treated as a health plan).

22 (viii) An equivalent health care pro23 gram.
25

•S 2357

1 (ix) Such other plan or arrangement

2 as the Secretary determines is not a health

3 plan.

4 Such term includes any plan or arrangement

5 not described in any preceding subparagraph

6 which provides for benefit payments, on a peri7 odic basis, for a specified disease or illness or

8 period of hospitalization without regard to the

9 costs incurred or services rendered during the

10 period to which the payments relate.

11 (B) INSURED HEALTH PLAN.—

12 (i) IN GENERAL.—The term ‘‘insured

13 health plan’’ means any health plan which

14 is a hospital or medical service policy or

15 certificate, hospital or medical service plan

16 contract, or health maintenance organiza17 tion group contract offered by a carrier.

18 (ii) CARRIER.—The term ‘‘carrier’’

19 means a licensed insurance company, a

20 hospital or medical service corporation (in21 cluding an existing Blue Cross or Blue

22 Shield organization, within the meaning of

23 section 833(c)(2) of Internal Revenue Code

24 of 1986 as in effect before the date of the

25 enactment of this Act), a health mainte-
26

•S 2357

1 nance organization, or other entity licensed

2 or certified by the State to provide health

3 insurance or health benefits. The Secretary

4 may issue regulations that provide for af5 filiated carriers to be treated as a single

6 carrier where appropriate under this Act.

7 (C) SELF-INSURED HEALTH PLAN.—The

8 term ‘self-insured health plan’ means an em9 ployee welfare benefit plan, church plan, or

10 other arrangement which—

11 (i) provides health benefits funded in

12 a manner other than through the purchase

13 of one or more insured health plans, but

14 (ii) does not include any coverage or

15 insurance described in clauses (i) through

16 (ix) of subparagraph (A).

17 (2) CERTIFIED STANDARD HEALTH PLAN.—

18 (A) IN GENERAL.—The term ‘‘certified

19 standard health plan’’ means a standard health

20 plan which is certified by the appropriate cer21 tifying authority as meeting the other applicable

22 requirements of this title.

23 (B) STANDARD HEALTH PLAN.—The term

24 ‘‘standard health plan’’ means a health plan

25 which provides for the standard benefits pack-
27

•S 2357

1 age or the alternative standard benefits package

2 established under subtitle C.

3 (3) CERTIFIED SUPPLEMENTAL HEALTH BENE4 FITS PLAN.—

5 (A) IN GENERAL.—The term ‘‘certified

6 supplemental health benefits plan’’ means a

7 supplemental health benefits plan which is cer8 tified by the appropriate certifying authority as

9 meeting the applicable requirements of part 4

10 of subtitle B.

11 (B) SUPPLEMENTAL HEALTH BENEFITS

12 PLAN.—The term ‘‘supplemental health benefits

13 plan’’ means an insured or self-insured health

14 plan which provides health benefits which con15 sist of supplemental services or cost-sharing de16 scribed in part 4 of subtitle B. Such term does

17 not include a plan which provides for benefit

18 payments, on a periodic basis, for a specified

19 disease or illness or period of hospitalization

20 without regard to the costs incurred or services

21 rendered during the period to which the pay22 ments relate.

23 (4) CERTIFIED LONG-TERM CARE INSURANCE

24 POLICY.—
28

•S 2357

1 (A) IN GENERAL.—The term ‘‘certified

2 long-term care insurance policy’’ means a long3 term care insurance policy which is certified by

4 the applicable certifying authority as meeting

5 the applicable requirements of part 2 of subtitle

6 B of title II.

7 (B) LONG-TERM CARE INSURANCE POL8 ICY.—The term ‘‘long-term care insurance pol9 icy’’ has the meaning given such term by sec10 tion 2721.

11 (5) TERMS AND RULES RELATING TO COMMU12 NITY AND EXPERIENCE RATING.—

13 (A) COMMUNITY-RATED PLAN.—The term

14 ‘‘community-rated plan’’ means a health plan

15 provided to community-rated individuals which

16 meets the requirements of section 1116.

17 (B) COMMUNITY-RATED EMPLOYER.—The

18 term ‘‘community-rated employer’’ means, with

19 respect to an employee, an employer that is not

20 an experience-rated employer with respect to

21 such employee.

22 (C) COMMUNITY-RATED INDIVIDUAL.—The

23 term ‘‘community-rated individual’’ means an

24 individual who is not an experience-rated indi25 vidual.
29

•S 2357

1 (D) EXPERIENCE-RATED PLAN.—

2 (i) IN GENERAL.—The term ‘‘experi3 ence-rated plan’’ means a health plan

4 which—

5 (I) is a self-insured health plan

6 of an experience-rated employer, or

7 (II) is an insured health plan

8 which is experience-rated,

9 but any such plan may cover only experi10 ence-rated individuals.

11 (ii) COMMUNITY RATING OF GOVERN12 MENT PLANS.—Such term shall not include

13 a government plan of a State or local gov14 ernment.

15 (E) EXPERIENCE-RATED EMPLOYER.—

16 (i) IN GENERAL.—The term ‘‘experi17 ence-rated employer’’ means, with respect

18 to any calendar year—

19 (I) any employer if, on each of

20 20 days during the preceding calendar

21 year (each day being in a different

22 week), such employer (or any prede23 cessor) employed more than 500 em24 ployees for some portion of the day; or
30

•S 2357

1 (II) a multiemployer plan or

2 rural electric cooperative or rural tele3 phone cooperative association plan

4 that covers 500 or more individuals.

5 (ii) SPECIAL RULE FOR LEASING

6 BUSINESSES.—In the case of an employer

7 the primary trade or business of which is

8 employee leasing—

9 (I) all of the employees which

10 such employer leases to other employ11 ers shall be treated as community12 rated individuals, and

13 (II) this Act shall be applied sep14 arately with respect to its other em15 ployees.

16 (iii) U.S. POSTAL SERVICE.—Such

17 term includes the United States Postal

18 Service.

19 (F) EXPERIENCE-RATED INDIVIDUAL.—

20 The term ‘‘experience-rated individual’’ means

21 an individual who is an employee of an experi22 ence-rated employer or a member of a plan de23 scribed in subparagraph (E)(i)(II).

24 (6) SPECIAL RULE FOR SPOUSES AND DEPEND25 ENTS.—If any individual is offered coverage under a
31

•S 2357

1 health plan as the spouse or a dependent of a pri2 mary enrollee of such plan, such individual shall

3 have the status of such enrollee unless such individ4 ual is eligible to elect other coverage and so elects.

5 SEC. 1012. DEFINITIONS RELATING TO EMPLOYMENT AND

6 INCOME.

7 Except as otherwise specifically provided, in this Act

8 the following definitions and rules apply:

9 (1) EMPLOYER, EMPLOYEE, EMPLOYMENT, AND

10 WAGES DEFINED.—Except as provided in this sec11 tion—

12 (A) the terms ‘‘wages’’ and ‘‘employment’’

13 have the meanings given such terms under sec14 tion 3121 of the Internal Revenue Code of

15 1986,

16 (B) the term ‘‘employee’’ has the meaning

17 given such term under section 3121 of such

18 Code, subject to the provisions of chapter 25 of

19 such Code, and

20 (C) the term ‘‘employer’’ has the same

21 meaning as the term ‘‘employer’’ as used in

22 such section 3121.

23 (2) EXCEPTIONS.—For purposes of paragraph

24 (1)—

25 (A) EMPLOYMENT.—
32

•S 2357

1 (i) EMPLOYMENT INCLUDED.—Para2 graphs (1), (2), (5), (7) (other than

3 clauses (i) through (iv) of subparagraph

4 (C) and clauses (i) through (v) of subpara5 graph (F)), (8), (9), (10), (11), (13), (15),

6 (18), and (19) of section 3121(b) of the

7 Internal Revenue Code of 1986 shall not

8 apply.

9 (ii) EXCLUSION OF INMATES AS EM10 PLOYEES.—Employment shall not include

11 services performed in a penal institution by

12 an inmate thereof or in a hospital or other

13 health care institution by a patient thereof.

14 (B) WAGES.—Paragraph (1) of section

15 3121(a) of the Internal Revenue Code of 1986

16 shall not apply.

17 (C) EMPLOYEES.—

18 (i) TREATMENT OF SELF-EM19 PLOYED.—The term ‘‘employee’’ includes a

20 self-employed individual.

21 (ii) EXCLUSION OF CERTAIN FOREIGN

22 EMPLOYMENT.—The term ‘‘employee’’ does

23 not include an individual with respect to

24 service, if the individual is not a citizen or
33

•S 2357

1 resident of the United States and the serv2 ice is performed outside the United States.

3 (3) AGGREGATION RULES FOR EMPLOYERS.—

4 For purposes of this Act—

5 (A) all employers treated as a single em6 ployer under subsection (a) or (b) of section 52

7 of the Internal Revenue Code of 1986 shall be

8 treated as a single employer, and

9 (B) under regulations of the Secretary of

10 Labor, all employees of organizations which are

11 under common control with one or more organi12 zations which are exempt from income tax

13 under subtitle A of the Internal Revenue Code

14 of 1986 shall be treated as employed by a single

15 employer.

16 The regulations prescribed under subparagraph (B)

17 shall be based on principles similar to the principles

18 which apply to taxable organizations under subpara19 graph (A).

20 SEC. 1013. OTHER GENERAL DEFINITIONS.

21 Except as otherwise specifically provided, in this Act

22 the following definitions apply:

23 (1) APPROPRIATE CERTIFYING AUTHORITY.—

24 The term ‘‘appropriate certifying authority’’

25 means—
34

•S 2357

1 (A) except as provided in subparagraph

2 (B), in the case of a standard health plan, a

3 supplemental health benefits plan, or a long4 term care insurance plan, the State commis5 sioner or superintendent of insurance or other

6 State authority in the participating State; or

7 (B) in the case of a multistate self-insured

8 health plan or a multistate self-insured supple9 mental health benefits plan, the Secretary of

10 Labor.

11 (2) COMMUNITY RATING AREA.—The term

12 ‘‘community rating area’’ means an area specified by

13 a State under section 1502(a).

14 (3) EQUIVALENT HEALTH CARE PROGRAM.—

15 The term ‘‘equivalent health care program’’ means—

16 (A) part A or part B of the medicare pro17 gram under title XVIII of the Social Security

18 Act,

19 (B) the medicaid program under title XIX

20 of the Social Security Act,

21 (C) the health care program for active

22 military personnel under title 10, United States

23 Code,
35

•S 2357

1 (D) the veterans health care program

2 under chapter 17 of title 38, United States

3 Code,

4 (E) the Civilian Health and Medical Pro5 gram of the Uniformed Services (CHAMPUS),

6 as defined in section 1073(4) of title 10, United

7 States Code,

8 (F) the Indian health service program

9 under the Indian Health Care Improvement Act

10 (25 U.S.C. 1601 et seq.), and

11 (G) a State single-payer system approved

12 by the Secretary under subpart B of part 3 of

13 subtitle F.

14 (4) ESSENTIAL COMMUNITY PROVIDER.—The

15 term ‘‘essential community provider’’ means an en16 tity certified as such a provider under subpart B of

17 part 2 of subtitle E.

18 (5) HEALTH PLAN SPONSOR.—The term

19 ‘‘health plan sponsor’’ means—

20 (A) with respect to a community-rated

21 plan, the carrier providing the plan,

22 (B) with respect to an insured experience23 rated plan, the carrier providing the plan, and
36

•S 2357

1 (C) with respect to a self-insured experi2 ence-rated plan, the experience-rated employer

3 providing the plan.

4 (6) MEDICARE PROGRAM.—The term ‘‘medicare

5 program’’ means the health insurance program

6 under title XVIII of the Social Security Act.

7 (7) MEDICARE-ELIGIBLE INDIVIDUAL.—The

8 term ‘‘medicare-eligible individual’’ means an indi9 vidual who is entitled to benefits under part A of the

10 medicare program.

11 (8) MULTIEMPLOYER PLAN.—The term ‘‘multi12 employer plan’’ has the meaning given such term in

13 section 3(37) of the Employee Retirement Income

14 Security Act of 1974, and includes any plan that is

15 treated as such a plan under title I of such Act.

16 (9) NAIC.—The term ‘‘NAIC’’ means the Na17 tional Association of Insurance Commissioners.

18 (10) PARTICIPATING PROVIDER.—The term

19 ‘‘participating provider’’ means, with respect to a

20 health plan, a provider of health care services who

21 is a member of a provider network of the plan.

22 (11) PARTICIPATING STATE.—The term ‘‘par23 ticipating State’’ means a State establishing a State

24 program under this title.
37

•S 2357

1 (12) PURCHASING COOPERATIVE.—The term

2 ‘‘purchasing cooperative’’ means a health insurance

3 cooperative established under part 2 of subtitle D.

4 (13) RESIDENCE.—

5 (A) IN GENERAL.—An individual is consid6 ered to reside in the location in which the indi7 vidual maintains a primary residence (as estab8 lished under rules of the Secretary).

9 (B) MULTIPLE RESIDENCES.—Under such

10 rules and subject to section 1112, in the case

11 of an individual who maintains more than one

12 residence, the primary residence of the individ13 ual shall be determined taking into account the

14 proportion of time spent at each residence.

15 (C) COUPLE.—In the case of a couple only

16 one spouse of which is a qualifying employee,

17 except as the Secretary may provide, the resi18 dence of the employee shall be the residence of

19 the couple.

20 (14) RURAL ELECTRIC COOPERATIVE.—The

21 term ‘‘rural electric cooperative’’ has the meaning

22 given such term in section 3(40)(A)(iv) of the Em23 ployee Retirement Income Security Act of 1974.

24 (15) RURAL TELEPHONE COOPERATIVE ASSO25 CIATIONS.—The term ‘‘rural telephone cooperative
38

•S 2357

1 association’’ has the meaning given such term in

2 section 3(40)(A)(v) of the Employee Retirement In3 come Security Act of 1974.

4 (16) SECRETARY.—The term ‘‘Secretary’’

5 means the Secretary of Health and Human Services.

6 (17) STATE.—The term ‘‘State’’ includes the

7 District of Columbia, Puerto Rico, the Virgin Is8 lands, Guam, American Samoa, and the Northern

9 Mariana Islands.

10 (18) UNITED STATES.—The term ‘‘United

11 States’’ means the 50 States, the District of Colum12 bia, Puerto Rico, the Virgin Islands, Guam, Amer13 ican Samoa, and Northern Mariana Islands.

14 Subtitle B—Health Plan Standards

15 PART 1—ESTABLISHMENT AND APPLICATION OF

16 STANDARDS

17 SEC. 1101. ESTABLISHMENT OF NATIONAL STANDARDS.

18 In order for a standard health plan to be eligible to

19 be certified as a standard health plan by a participating

20 State, the standard health plan shall meet the require21 ments of this Act, including the following uniform national

22 standards established in this subtitle and described in reg23 ulations promulgated by the Secretary:

24 (1) The insurance market reform standards of

25 part 2.
39

•S 2357

1 (2) The delivery system reform standards of

2 part 3.

3 (3) Standards for participation in a guaranty

4 fund established by the State under section 1505

5 (established by the Secretary of Labor in the case of

6 multistate self-insured standard health plans).

7 (4) Standards for the collection and reporting

8 of data in accordance with subtitle B of title V.

9 (5) Standards for effective grievance procedures

10 that enrollees may utilize in pursuing complaints in

11 accordance with subtitle C of title V.

12 SEC. 1102. GENERAL RULES.

13 (a) CONSTRUCTION.—Whenever in this subtitle a re14 quirement or standard is imposed on a standard health

15 plan, the requirement or standard is deemed to have been

16 imposed on the insurer or sponsor of the plan or policy

17 in relation to that plan or policy.

18 (b) USE OF INTERIM, FINAL REGULATIONS.—In

19 order to permit the timely implementation of the provi20 sions of this subtitle, the Secretary and the Secretary of

21 Labor are each authorized to issue regulations under this

22 subtitle on an interim basis that become final on the date

23 of publication, subject to change based on subsequent pub24 lic comment.
40

•S 2357

1 PART 2—INSURANCE MARKET REFORM

2 SEC. 1111. GUARANTEED ISSUE, AVAILABILITY, AND RE3 NEWABILITY.

4 (a) GUARANTEED ISSUE.—Except as otherwise pro5 vided in this section, a standard health plan sponsor—

6 (1) offering a community-rated standard health

7 plan shall offer such plan to any community-rated

8 individual applying for coverage (either directly with

9 the plan or through an employer or a purchasing co10 operative); and

11 (2) offering an experience-rated standard health

12 plan shall offer such plan to any experience-rated in13 dividual eligible for coverage under the plan through

14 such individual’s experience-rated employer.

15 No plan may engage in any practice that has the effect

16 of attracting or limiting enrollees on the basis of personal

17 characteristics, such as occupation or affiliation with any

18 person or entity, or those characteristics described in sec19 tion 1602.

20 (b) AVAILABILITY.—

21 (1) IN GENERAL.—A community-rated standard

22 health plan shall be made available to community23 rated individuals throughout the entire community

24 rating area in which such plan is offered, including

25 through any employer purchasing cooperative choos26 ing to offer such plan.
41

•S 2357

1 (2) GEOGRAPHIC LIMITATIONS.—

2 (A) NONNETWORK PLANS.—A community3 rated nonnetwork plan (as defined in section

4 1127(d(2)(A)) may deny coverage under the

5 plan to a community-rated individual who re6 sides outside the community rating area in

7 which such plan is offered.

8 (B) NETWORK PLANS.—A community9 rated network plan (as defined in section

10 1127(e)(5)(A)) may deny coverage under the

11 plan to a community-rated individual who re12 sides outside the health plan service area in

13 which such plan is offered.

14 (C) RULES REGARDING DENIALS.—No de15 nial may be made under subparagraph (A) or

16 (B) unless such denial is applied uniformly,

17 without regard to health status, insurability of

18 individuals, or other characteristics described in

19 section 1602.

20 (3) CAPACITY LIMITATIONS.—

21 (A) IN GENERAL.—With the approval of

22 the appropriate regulatory authority, a stand23 ard health plan may limit enrollment because of

24 the plan’s capacity to deliver services or to

25 maintain financial stability. If such a limitation
42

•S 2357

1 is imposed, the limitation may not be imposed

2 on a basis of personal characteristics, such as

3 occupation or affiliation with any person or en4 tity, or those characteristics described in section

5 1602.

6 (B) RESTRICTIONS.—If such a limitation

7 is imposed—

8 (i) the plan may only enroll individ9 uals under the plan consistent with rules

10 established by the State consistent with

11 subparagraph (C); and

12 (ii) the plan may not discriminate

13 based on the method through which a fam14 ily seeks enrollment under the plan.

15 (C) STATE OVERSIGHT.—Each State shall,

16 in accordance with rules promulgated by the

17 Secretary, establish procedures and methods to

18 assure equal opportunity of enrollment for all

19 families, regardless of when during the open en20 rollment period, or the method by which, the

21 enrollment has been sought.

22 (c) RENEWABILITY; LIMITATION ON TERMI23 NATION.—

24 (1) IN GENERAL.—Except as provided in para25 graphs (2) and (3), a standard health plan that is
43

•S 2357

1 issued to an individual shall be renewed, at the op2 tion of the individual.

3 (2) GROUNDS FOR REFUSAL TO RENEW OR

4 TERMINATE.—A standard health plan sponsor may

5 refuse to renew, or may terminate, a standard health

6 plan under this title only for—

7 (A) in the case of plan in a participating

8 State and any community rating area in such

9 State with respect to which the requirements of

10 title X have not become effective, nonpayment

11 of premiums;

12 (B) fraud on the part of the individual re13 lating to such plan; or

14 (C) misrepresentation of material facts on

15 the part of the individual relating to an applica16 tion for coverage or claim for benefits.

17 (3) TERMINATION OF PLANS.—A standard

18 health plan may elect not to renew or make available

19 the standard health plan through a particular type

20 of delivery system in a community rating area, but

21 only if the standard health plan—

22 (A) elects not to renew all of its standard

23 health plans using such delivery system in such

24 community rating area; and
44

•S 2357

1 (B) provides notice to the appropriate cer2 tifying authority and each individual covered

3 under the plan of such termination at least 180

4 days before the date of expiration of the plan.

5 In such case, a standard health plan sponsor may not pro6 vide for the issuance of any standard health plan using

7 such a delivery system in such community rating area dur8 ing a 5-year period beginning on the date of the termi9 nation of the last plan not so renewed. For purposes of

10 this paragraph, the term ‘‘delivery system’’ means a deliv11 ery system used by a network plan (as defined in section

12 1128(e)(5)(A)) or a nonnetwork plan.

13 (d) CERTAIN EXCLUDED PLANS.—The provisions of

14 this section, other than subsections (c) and (e)(2)(B), shall

15 not apply to any religious fraternal benefit society in exist16 ence as of September 1993, which bears the risk of provid17 ing insurance to its members, and which is an organiza18 tion described in section 501(c)(8) of the Internal Revenue

19 Code of 1986 which is exempt from taxation under section

20 501(a) of such Code.

21 (e) APPLICATION OF INTERIM STANDARDS.—

22 (1) IN GENERAL.—During the interim stand23 ards application period, a health plan sponsor may

24 only offer a health plan in a State if such plan spon25 sor publicly discloses the health plans such sponsor
45

•S 2357

1 offers in the State and each offered plan meets the

2 standards specified in paragraph (2).

3 (2) SPECIFIED STANDARDS.—

4 (A) ISSUE AND AVAILABILITY.—The stand5 ards specified in subsections (a) and (b) if the

6 individual or group applies for coverage during

7 the open enrollment period required under sec8 tion 1112(h).

9 (B) RENEWAL.—The standards specified

10 in subsection (c), except paragraph (3) shall be

11 applied by substituting ‘‘State’’ for ‘‘community

12 rating area’’.

13 (3) INTERIM STANDARDS APPLICATION PERI14 ODS.—The interim standards application period is—

15 (A) in the case of the standard specified in

16 paragraph (2)(A), on or after January 1, 1995,

17 and before January 1, 1997; and

18 (B) in the case of the standard specified in

19 paragraph (2)(B), on or after August 1, 1994,

20 and before January 1, 1997.

21 (4) PREEMPTION.—The requirements of this

22 subsection do not preempt any State law unless

23 State law directly conflicts with such requirements.

24 The provision of additional protections under State

25 law shall not be considered to directly conflict with
46

•S 2357

1 such requirements. The Secretary may issue letter

2 determinations with respect to whether this sub3 section preempts a provision of State law.

4 (5) CONSTRUCTION.—The provisions of this

5 subsection shall be construed in a manner that

6 assures, to the greatest extent practicable, continuity

7 of health benefits under health plans in effect on the

8 effective date of this title.

9 (6) SPECIAL RULES FOR ACQUISITIONS AND

10 TRANSFERS.—The Secretary may issue regulations

11 regarding the application of this subsection in the

12 case of health plans (or groups of such plans) which

13 are transferred from one health plan sponsor to an14 other sponsor through assumption, acquisition, or

15 otherwise.

16 SEC. 1112. ENROLLMENT.

17 (a) IN GENERAL.—Each standard health plan shall

18 establish an enrollment process consistent with this sec19 tion.

20 (b) ANNUAL OPEN ENROLLMENT PERIOD.—Each

21 standard health plan shall permit eligible individuals to

22 enroll (or change enrollment) in the plan during each an23 nual open enrollment period for each community rating

24 area specified by the appropriate certifying authority

25 under section 1503.
47

•S 2357

1 (c) ADDITIONAL PERIODS OF AUTHORIZED CHANGES

2 IN ENROLLMENT.—

3 (1) IN GENERAL.—Each standard health plan

4 shall provide for changes in enrollment with respect

5 to such other periods and occurrences (including

6 changes in residence, appropriate changes in employ7 ment, and the insolvency of carriers or experience8 rated employers) for which an individual is author9 ized to change enrollment in standard health plans,

10 as the Secretary shall specify.

11 (2) DISENROLLMENT FOR CAUSE.—

12 (A) IN GENERAL.—The Secretary shall es13 tablish procedures by which individuals enrolled

14 in a standard health plan may disenroll from

15 such plan for good cause (as defined by Sec16 retary) at any time during a year and enroll in

17 another standard health plan. Such procedures

18 shall be implemented by participating States in

19 a manner that ensures continuity of coverage

20 for the standard benefits package or the alter21 native standard benefits package for such indi22 viduals during the year.

23 (B) ADDITIONAL REMEDIES.—In the case

24 of an individual who changes enrollment from a

25 plan for good cause due to a pattern of
48

•S 2357

1 underservice under a plan, the Secretary may

2 provide rules under which the carrier providing

3 the standard health plan is liable, to the subse4 quent standard health plan in which the indi5 vidual is enrolled, for excess costs (as identified

6 in accordance with such rules) during the pe7 riod for which it may be reasonably anticipated

8 that the individual would (but for such cause)

9 have continued enrollment with the original

10 standard health plan.

11 (d) EFFECTIVENESS OF CHANGE OF ENROLL12 MENT.—Except as the Secretary may provide, changes in

13 enrollment during an annual open enrollment period under

14 subsection (a) shall take effect as determined by the ap15 propriate certifying authority. The Secretary shall also

16 provide when a change of enrollment under subsection (c)

17 becomes effective.

18 (e) DIRECT ENROLLMENT.—

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

20 each community-rated standard health plan shall

21 provide for the direct enrollment of community-rated

22 individuals in the plan under methods and proce23 dures established by the Secretary.

24 (2) ENROLLMENT PROCESSES.—The Secretary

25 shall provide standards for States to ensure the
49

•S 2357

1 broad availability and processing of enrollment

2 forms, including direct enrollment through the mail,

3 and other such processes as the Secretary may des4 ignate.

5 (f) MARKETING FEES.—A community-rated standard

6 health plan may impose a marketing fee surcharge for

7 community-rated individuals enrolling in the plan through

8 an agent, broker, or other authorized sales method, or

9 through a direct enrollment process. Such surcharge shall

10 be in addition to the highest marketing fee of such plan

11 for community-rated individuals enrolled in such a plan

12 through any purchasing cooperative in the community rat13 ing area.

14 (g) CHANGE OF ENROLLMENT.—As used in this sec15 tion, the term ‘‘change of enrollment’’ includes, with re16 spect to an individual—

17 (1) a change in the standard health plan in

18 which the individual is enrolled,

19 (2) a change in the type of family enrollment,

20 and

21 (3) the enrollment of the individual at the time

22 the individual’s status changes to a community-rated

23 individual, experience-rated individual, or a premium

24 subsidy-eligible individual under section 6002.

25 (h) APPLICATION OF INTERIM STANDARD.—
50

•S 2357

1 (1) IN GENERAL.—During the interim standard

2 application period, a health plan sponsor may only

3 offer a health plan in a State if such plan sponsor

4 publicly discloses the health plans such sponsor of5 fers in the State and each offered plan provides for

6 an annual open enrollment period of at least 30

7 days.

8 (2) INTERIM STANDARD APPLICATION PERI9 ODS.—The interim standard application period is on

10 or after January 1, 1995, and before January 1,

11 1997.

12 (3) APPLICATION OF RULES.—Paragraphs (4),

13 (5), and (6) of section 1111(d) shall apply to this

14 subsection.

15 SEC. 1113. COVERAGE OF DEPENDENTS.

16 (a) IN GENERAL.—Except as otherwise provided in

17 this Act, a standard health plan shall enroll all members

18 of the same family (as defined in subsection (b)).

19 (b) FAMILY DEFINED.—In this Act, unless otherwise

20 provided, the term ‘‘family’’—

21 (1) means, with respect to an individual who is

22 not a child (as defined in subsection (c)), the indi23 vidual; and

24 (2) includes the following persons (if any):

25 (A) The individual’s spouse.
51

•S 2357

1 (B) The individual’s children (and, if appli2 cable, the children of the individual’s spouse).

3 (c) CLASSES OF ENROLLMENT; TERMINOLOGY.—

4 (1) IN GENERAL.—In this Act, each of the fol5 lowing is a separate class of enrollment:

6 (A) Coverage only of an individual (re7 ferred to in this Act as the ‘‘individual’’ enroll8 ment or class of enrollment).

9 (B) Coverage only of a child (referred to in

10 this Act as the ‘single child’ enrollment or class

11 of enrollment).

12 (C) Coverage only of one or more children

13 (referred to in this Act as the ‘multiple chil14 dren’ enrollment or class of enrollment).

15 (D) Coverage of a married couple without

16 children (referred to in this Act as the ‘‘couple17 only’’ enrollment or class of enrollment).

18 (E) Coverage of an individual and one or

19 more children (referred to in this Act as the

20 ‘‘single parent’’ enrollment or class of enroll21 ment).

22 (F) Coverage of a married couple and one

23 or more children (referred to in this Act as the

24 ‘‘dual parent’’ enrollment or class of enroll25 ment).
52

•S 2357

1 (2) REFERENCES TO FAMILY AND COUPLE

2 CLASSES OF ENROLLMENT.—In this Act:

3 (A) FAMILY.—The terms ‘‘family enroll4 ment’’ and ‘‘family class of enrollment’’, refer

5 to enrollment in a class of enrollment described

6 in any subparagraph of paragraph (1) (other

7 than subparagraph (A)).

8 (B) COUPLE.—The term ‘‘couple class of

9 enrollment’’ refers to enrollment in a class of

10 enrollment described in subparagraph (D) or

11 (F) of paragraph (1).

12 (d) SPOUSE; MARRIED; COUPLE.—

13 (1) IN GENERAL.—In this Act, the terms

14 ‘‘spouse’’ and ‘‘married’’ mean, with respect to a

15 person, another individual who is the spouse of the

16 person or married to the person, as determined

17 under applicable State law.

18 (2) COUPLE.—The term ‘‘couple’’ means an in19 dividual and the individual’s spouse.

20 (e) CHILD DEFINED.—

21 (1) IN GENERAL.—In this Act, except as other22 wise provided, the term ‘‘child’’ means an individual

23 who is a child (as determined under paragraph (3))

24 who—
53

•S 2357

1 (A) is under 25 years of age or is disabled,

2 and

3 (B) is unmarried.

4 The Secretary may adjust the age limitation in sub5 paragraph (A) with respect to part-time or full-time

6 students.

7 (2) APPLICATION OF STATE LAW.—Subject to

8 paragraph (3), determinations of whether a person

9 is the child of another person shall be made in ac10 cordance with applicable State law.

11 (3) NATIONAL RULES.—The Secretary may es12 tablish such national rules respecting individuals

13 who will be treated as children under this Act as the

14 Secretary determines to be necessary. Such rules

15 shall be consistent with the following principles:

16 (A) STEP CHILD.—A child includes a step

17 child who is an individual living with an adult

18 in a parent-child relationship.

19 (B) DISABLED CHILD.—A child includes

20 an unmarried dependent individual regardless

21 of age who is incapable of self-support because

22 of mental or physical disability which existed

23 before age 25.
54

•S 2357

1 (C) CERTAIN INTERGENERATIONAL FAMI2 LIES.—A child includes the grandchild of an in3 dividual if—

4 (i) the parent of the grandchild is a

5 child and the parent and grandchild are

6 living with the grandparent; or

7 (ii) the grandparent has legal custody

8 of the grandchild.

9 (D) TREATMENT OF EMANCIPATED MI10 NORS.—An emancipated minor shall not be

11 treated as a child.

12 (E) CHILDREN PLACED FOR ADOPTION.—

13 (i) IN GENERAL.—A child includes a

14 child who is placed for adoption with an in15 dividual, except when the child is a child in

16 State-supervised care.

17 (ii) PLACED FOR ADOPTION.—The

18 term ‘‘placed for adoption’’ in connection

19 with any placement for adoption of a child

20 with any individual, means the assumption

21 and retention by such individual of a legal

22 obligation for total or partial support of

23 such child in anticipation of the adoption

24 of such child.

25 (f) ADDITIONAL RULES.—
55

•S 2357

1 (1) IN GENERAL.—The Secretary shall provide

2 for such additional exceptions and special rules, in3 cluding rules relating to—

4 (A) families in which members are not re5 siding in the same area or in which children are

6 not residing with their parents,

7 (B) changes in family composition occur8 ring during a year,

9 (C) treatment of children in State-super10 vised care, and

11 (D) treatment of children of parents who

12 are separated or divorced,

13 as the Secretary finds appropriate.

14 (2) CHILDREN IN STATE-SUPERVISED CARE.—

15 (A) IN GENERAL.—In the case of a child

16 in State-supervised care (as described in sub17 paragraph (B)), the child shall be considered as

18 a family of one and enrolled by the State agen19 cy who has been awarded temporary or perma20 nent custody of the child (or which has legal re21 sponsibility for the child) in a high cost-sharing

22 plan unless the State agency has established a

23 special health service delivery system designated

24 to customize and more efficiently provide health

25 services to children in State-supervised care, in
56

•S 2357

1 which case the State agency will enroll the child

2 in the plan appropriate to ensure access to such

3 a special health service delivery system.

4 (B) CHILDREN IN STATE-SUPERVISED

5 CARE.—For purposes of subparagraph (A), the

6 term ‘‘child in State-supervised care’’ means

7 any child who is residing away from the child’s

8 parents and is temporarily or permanently, on

9 a voluntary or involuntary basis, under the re10 sponsibility of a public child welfare or juvenile

11 services agency or court. Such term includes

12 any child who is not yet made a ward of the

13 court or adjudicated as a delinquent residing in

14 emergency shelter care, any child in the phys15 ical custody of public or private agencies, and

16 any child who is with foster parents, or other

17 group or residential care providers. Such term

18 also includes any child who is legally adopted

19 and for whom the Federal or State government

20 is providing adoption assistance payments.

21 (g) APPLICATION OF INTERIM STANDARDS.—

22 (1) IN GENERAL.—During the interim stand23 ards application period, a health plan sponsor may

24 only offer a health plan in a State if such plan meets

25 the standards specified in this section.
57

•S 2357

1 (2) INTERIM STANDARDS APPLICATION PERI2 ODS.—The interim standards application period is

3 on or after January 1, 1995, and before January 1,

4 1997.

5 (3) APPLICATION OF RULES.—Paragraphs (4),

6 (5), and (6) of section 1111(d) shall apply to this

7 subsection.

8 SEC. 1114. NONDISCRIMINATION BASED ON HEALTH STA9 TUS.

10 (a) NO LIMITS ON COVERAGE; NO PRE-EXISTING

11 CONDITION LIMITS.—Except as provided in subsection

12 (b), a standard health plan may not—

13 (1) terminate, restrict, or limit coverage or es14 tablish premiums based on the health status, medi15 cal condition, claims experience, receipt of health

16 care, medical history, anticipated need for health

17 care services, disability, or lack of evidence of insur18 ability of an individual;

19 (2) terminate, restrict, or limit coverage in any

20 portion of the plan’s community rating area, except

21 as provided in section 1111(b)(2);

22 (3) except as provided in section 1111(c)(2),

23 cancel coverage for any community-rated individual

24 until that individual is enrolled in another applicable

25 standard health plan;
58

•S 2357

1 (4) impose waiting periods before coverage be2 gins; or

3 (5) impose a rider that serves to exclude cov4 erage of particular individuals or particular health

5 conditions.

6 (b) TREATMENT OF PREEXISTING CONDITION EX7 CLUSIONS.—

8 (1) IN GENERAL.—Subject to paragraph (4),

9 before January 1, 2002, a standard health plan may

10 impose a limitation or exclusion of benefits relating

11 to treatment of a condition based on the fact that

12 the condition preexisted the effective date of the

13 plan with respect to an individual if—

14 (A) the condition was diagnosed or treated

15 during the 3-month period ending on the day

16 before the date of enrollment under the plan;

17 (B) the limitation or exclusion extends for

18 a period not more than 6 months after the date

19 of enrollment under the plan;

20 (C) the limitation or exclusion does not

21 apply to an individual who, as of the date of

22 birth, was covered under the plan; or

23 (D) the limitation or exclusion does not re24 late to pregnancy.
59

•S 2357

1 (2) CONTINUOUS COVERAGE.—A standard

2 health plan shall provide that if an individual under

3 such plan is in a period of continuous coverage with

4 respect to particular services as of the date of enroll5 ment under such plan, any period of exclusion of

6 coverage with respect to a preexisting condition as

7 permitted under paragraph (1) shall be prohibited.

8 (3) DEFINITIONS.—As used in this subsection:

9 (A) PERIOD OF CONTINUOUS COVERAGE.—

10 The term ‘‘period of continuous coverage’’

11 means, with respect to particular services, the

12 period beginning on the date an individual is

13 enrolled under a standard health plan or an

14 equivalent health care program which provides

15 benefits with respect to such services and ends

16 on the date the individual is not so enrolled for

17 a continuous period of more than 3 months.

18 (B) PREEXISTING CONDITION.—The term

19 ‘‘preexisting condition’’ means, with respect to

20 coverage under a standard health plan, a condi21 tion which was diagnosed, or which was treated,

22 within the 3-month period ending on the day

23 before the first date of such coverage (without

24 regard to any waiting period).
60

•S 2357

1 (4) NO EXCLUSION DURING AMNESTY PERIOD

2 OR WITH RESPECT TO A SUBSIDY-ELIGIBLE INDIVID3 UAL.—This subsection shall not apply—

4 (A) during the first annual open enroll5 ment period specified by the appropriate certify6 ing authority under section 1503, and

7 (B) with respect to the enrollment of an

8 individual eligible for a premium subsidy under

9 subtitle A of title VI.

10 (c) APPLICATION OF INTERIM STANDARD.—

11 (1) IN GENERAL.—During the interim standard

12 application period, a health plan sponsor may only

13 offer a health plan in a State if such plan meets the

14 standard specified in paragraph (2).

15 (2) SPECIFIED STANDARDS.—

16 (A) EXCLUSION.—The standards specified

17 in subsection (b) by substituting—

18 (i) ‘‘6-month’’ for ‘‘3-month’’ in para19 graph (1)(A), and

20 (ii) ‘‘major medical insurance plan or

21 other plan offering coverage similar to the

22 benefits included in the standard benefits

23 package as established under subtitle C’’

24 for ‘‘standard health plan’’.
61

•S 2357

1 (B) COVERAGE.—A self-insured health

2 plan may not reduce or limit coverage of any

3 condition or course of treatment that is ex4 pected to cost more than $2,500 during any 12-

5 month period.

6 (3) INTERIM STANDARDS APPLICATION PE7 RIOD.—The interim standards application period

8 is—

9 (A) in the case of the standard specified in

10 paragraph (2)(A), on or after January 1, 1995,

11 and before January 1, 1997, and

12 (B) in the case of the standard specified in

13 paragraph (2)(B), on or after August 1, 1994,

14 and before January 1, 1997.

15 (4) APPLICATION OF RULES.—Paragraphs (4),

16 (5), and (6) of section 1111(e) shall apply to this

17 subsection.

18 SEC. 1115. BENEFITS.

19 (a) IN GENERAL.—A standard health plan shall offer

20 to all enrollees in the plan the standard benefits package

21 or the alternative standard benefits package established

22 under subtitle C.

23 (b) ALTERNATIVE STANDARD BENEFITS PACK24 AGE.—
62

•S 2357

1 (1) IN GENERAL.—A carrier may only offer a

2 standard health plan with an alternative standard

3 benefits package in a community rating area if such

4 carrier also offers a standard health plan with a

5 standard benefits package in such area.

6 (2) INCLUSION IN RISK ADJUSTMENT AND RE7 INSURANCE PROGRAMS.—Any standard health plan

8 with an alternative standard benefits packages shall

9 be included in any reinsurance or risk adjustment

10 program under section 1117 operating in the com11 munity rating area in which such plan is offered.

12 (3) OFFER PROHIBITED IF MANDATES RE13 QUIRED.—A carrier may not offer an alternative

14 benefits package in a participating State and any

15 community rating area in such State with respect to

16 which the requirements of title X have become effec17 tive.

18 SEC. 1116. COMMUNITY RATING REQUIREMENTS.

19 (a) APPLICABILITY.—Except as provided in sub20 section (e), the provisions of this section shall apply to

21 community-rated standard health plans.

22 (b) STANDARD PREMIUMS WITH RESPECT TO COM23 MUNITY-RATED INDIVIDUALS.—Subject to subsection (d),

24 each community-rated standard health plan shall establish

25 within each community rating area in which the plan is
63

•S 2357

1 to be offered a standard premium for individual enroll2 ment for the standard benefits package and the alternative

3 standard benefits package established under subtitle C.

4 (c) UNIFORM PREMIUMS WITHIN COMMUNITY RAT5 ING AREAS.—

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

7 the standard premium described in subsection (b)

8 for all community-rated individuals within a commu9 nity rating area shall be the same.

10 (2) APPLICATION TO ENROLLEES.—

11 (A) IN GENERAL.—The premium charged

12 for coverage in a standard health plan shall be

13 the product of—

14 (i) the standard premium (established

15 under paragraph (1));

16 (ii) in the case of enrollment other

17 than individual enrollment, the family ad18 justment factor specified under subpara19 graph (B); and

20 (iii) the age adjustment factor (speci21 fied under subparagraph (C)).

22 (B) FAMILY ADJUSTMENT FACTOR.—The

23 Secretary, in consultation with the NAIC, shall

24 develop a family adjustment factor that reflects

25 the relative actuarial costs of benefit packages
64

•S 2357

1 based on the applicable family enrollment (as

2 compared with such costs for individual enroll3 ment).

4 (C) AGE ADJUSTMENT FACTOR.—The Sec5 retary, in consultation with the NAIC, shall

6 specify, within 6 months of the date of the en7 actment of this Act, uniform age categories and

8 rating increments for age adjustment factors

9 that reflect the relative actuarial costs of bene10 fit packages among enrollees. The highest age

11 adjustment factor may not exceed twice the

12 lowest age adjustment factor for individuals 18

13 to 65 years of age. The Secretary shall also

14 provide for the gradual phaseout of age adjust15 ment factors by January 1, 2002.

16 (d) LOWER PREMIUM THROUGH PURCHASING CO17 OPERATIVES.—Notwithstanding any other provision of

18 this section, no premium may be charged to a community19 rated individual by a community-rated standard health

20 plan in a community rating area which is not the same

21 premium negotiated for such plan offered through any

22 purchasing cooperative in such area.

23 (e) EXPERIENCE RATING.—
65

•S 2357

1 (1) APPLICABILITY.—The provisions of this

2 subsection shall apply to experience-rated standard

3 health plans.

4 (2) RATING.—For purposes of applying this

5 section to experience-rated employers, the employees

6 of the employer involved shall constitute the commu7 nity with respect to the determination of the pre8 mium.

9 (3) PREMIUMS.—An experience-rated standard

10 health plan may not vary the premium imposed with

11 respect to experience-rated individuals enrolled in

12 the plan, except as may be allowed under this sec13 tion with respect to geographic and family coverage

14 factors (as determined by the Secretary of Labor)

15 under the plan.

16 SEC. 1117. RISK ADJUSTMENT AND REINSURANCE.

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

18 (b), each standard health plan shall participate in a stand19 ard health plan risk adjustment program and a reinsur20 ance program implemented by the State in accordance

21 with section 1504.

22 (b) MULTISTATE PLANS.—Each multistate self-in23 sured standard health plan shall participate in a reinsur24 ance program developed by the Secretary of Labor under

25 section 1482.
66

•S 2357

1 SEC. 1118. FINANCIAL SOLVENCY REQUIREMENTS AND

2 CONSUMER PROTECTION AGAINST PRO3 VIDER CLAIMS.

4 (a) SOLVENCY PROTECTION.—Each standard health

5 plan shall meet financial solvency requirements to assure

6 protection of enrollees with respect to potential insolvency.

7 Each standard health plan shall meet requirements relat8 ing to capital and solvency established by the Secretary

9 under section 1401(h).

10 (b) PROTECTION AGAINST PROVIDER CLAIMS.—In

11 the case of a failure of a standard health plan to make

12 payments with respect to the standard benefits covered

13 under the plan for any reason, an individual who is en14 rolled under the plan is not liable to any health care pro15 vider with respect to the provision of health services within

16 such set of benefits for payments in excess of the amount

17 for which the enrollee would have been liable if the plan

18 were to have made payments in a timely manner.

19 PART 3—DELIVERY SYSTEM REFORM

20 SEC. 1121. PROHIBITION OF DISCRIMINATION.

21 (a) IN GENERAL.—Each standard health plan shall

22 comply with the antidiscrimination requirements of section

23 1602.

24 (b) ADDITIONAL ANTIDISCRIMINATION REQUIRE25 MENTS.—
67

•S 2357

1 (1) IN GENERAL.—No standard health plan

2 may discriminate on the basis of the provider’s sta3 tus as a member of a health care profession for the

4 purposes of selecting among providers of health serv5 ices for participation in a provider network, but only

6 if the State authorizes members of that profession to

7 render the services in question and such services are

8 covered in the standard benefits package established

9 under subtitle C.

10 (2) RULE OF CONSTRUCTION.—Nothing in

11 paragraph (1)(B) shall be construed as requiring

12 any standard health plan to:

13 (A) include in a network any individual

14 provider;

15 (B) establish any defined ratio of different

16 categories of health professionals; or

17 (C) establish any specific utilization review

18 or internal quality standards other than that re19 quired in other provisions of this Act.

20 SEC. 1122. QUALITY ASSURANCE STANDARDS.

21 (a) IN GENERAL.—Each standard health plan shall

22 comply with the plan performance standards in accordance

23 with subtitle A of title V. Each standard health plan shall

24 establish procedures, including ongoing quality improve25 ment procedures, to ensure that the health care services
68

•S 2357

1 provided to enrollees under the plan will be provided under

2 reasonable standards of quality of care consistent with

3 prevailing professionally recognized standards of medical

4 practice and the quality standards established under sub5 title A of title V.

6 (b) INTERNAL QUALITY ASSURANCE PROGRAM.—

7 Each standard health plan shall establish, and commu8 nicate to its enrollees and its providers, an ongoing inter9 nal program, including periodic reporting, to monitor and

10 evaluate the quality and cost effectiveness of its health

11 care services, pursuant to standards established by the

12 National Quality Council.

13 SEC. 1123. CONSUMER GRIEVANCE PROCESS.

14 Each standard health plan shall demonstrate to the

15 appropriate certifying authority the capability to admin16 ister the plan in a manner which ensures due process for

17 all enrollees under rules established by the Secretary.

18 SEC. 1124. HEALTH SECURITY CARDS.

19 Each standard health plan shall issue a health secu20 rity card to each individual enrolled in such plan in accord21 ance with subtitle B of title V and regulations promul22 gated by the Secretary.

23 SEC. 1125. INFORMATION AND MARKETING STANDARDS.

24 (a) IN GENERAL.—Each standard health plan shall

25 provide information to the participating State and each
69

•S 2357

1 purchasing cooperative through which such plan is offered

2 in accordance with sections 1401(d) and 5009, other ap3 plicable information requirements of this Act, and rules

4 promulgated by the Secretary.

5 (b) MARKETING METHODS; ADVERTISING MATE6 RIALS.—A standard health plan may utilize direct market7 ing, agency, or other arrangements to distribute health

8 plan information, subject to applicable fair marketing

9 practices laws and standards established by the State or

10 by the Secretary, including standards to prevent selective

11 marketing. All advertising, promotional materials, and

12 other communications with health plan members and the

13 general public must be factually accurate and responsive

14 to the needs of served populations. A standard health plan

15 may not distribute marketing materials to an area smaller

16 than the entire community rating area of the plan.

17 (c) PAYMENT OF AGENT COMMISSIONS.—A standard

18 health plan—

19 (1) may pay a commission or other remunera20 tion to an agent or broker in marketing the plan to

21 individuals or groups, but

22 (2) may not vary such remuneration based, di23 rectly or indirectly, on the anticipated or actual

24 claims experience associated with the group or indi25 viduals to which the plan was sold.
70

•S 2357

1 (d) MATERIALS IN APPROPRIATE LANGUAGES.—In

2 the case of a community rating area that includes a sig3 nificant number or proportion of residents with limited

4 English proficiency, each standard health plan in such

5 area shall provide all materials under this Act at an appro6 priate reading level and in the native languages of such

7 residents, as appropriate.

8 SEC. 1126. INFORMATION REGARDING A PATIENT’S RIGHT

9 TO SELF-DETERMINATION IN HEALTH CARE

10 SERVICES.

11 (a) IN GENERAL.—Each standard health plan shall

12 provide written information to each individual enrolling in

13 such plan of such individual’s right under State law

14 (whether statutory or as recognized by the courts of the

15 State) to make decisions concerning medical care, includ16 ing the right to accept or refuse medical treatment and

17 the right to formulate advance directives (as defined in

18 section 1866(f)(3) of the Social Security Act (42 U.S.C.

19 1395cc(f)(3))), and the written policies of the standard

20 health plan with respect to such right.

21 (b) PROMOTION OF SHARED DECISION MAKING.—

22 Each standard health plan shall promote shared decision

23 making by assuring that patients are appropriately in24 formed about health care treatment options.
71

•S 2357

1 SEC. 1127. CONTRACTS WITH PURCHASING COOPERATIVES.

2 (a) CONTRACTS WITH COOPERATIVES.—A commu3 nity-rated standard health plan provided by a carrier shall

4 enter into contracts with each purchasing cooperative

5 seeking such a contract in the community rating area

6 served by the plan.

7 (b) PRICING.—No community-rated standard health

8 plan shall offer a rate to a purchasing cooperative in the

9 community rating area served by the plan that is more

10 than the premium rate determined under section 1116.

11 Such a plan may charge a marketing fee as specified

12 under section 1324(b)(1).

13 SEC. 1128. HEALTH PLAN ARRANGEMENTS WITH PROVID14 ERS.

15 (a) PROVIDERS OUTSIDE AREA.—A State may not

16 limit the ability of any plan to contract with a provider

17 of health services located outside of the geographic bound18 aries of a community rating area or the State.

19 (b) TREATMENT OF COST-SHARING.—Each standard

20 health plan which provides the standard benefits package

21 shall include in its payments to providers such additional

22 reimbursements as may be necessary to reflect cost-shar23 ing reductions to which individuals are entitled under sub24 title A of title VI.

25 (c) PROVIDER VERIFICATION.—Each standard health

26 plan shall ensure that all health care providers reimbursed
72

•S 2357

1 by the plan are authorized under State law to provide ap2 plicable services. Each standard health plan shall—

3 (1) verify the credentials of practitioners and

4 facilities;

5 (2) ensure that all providers meet applicable

6 State licensing and certification standards;

7 (3) ensure that each health care provider par8 ticipating in the plan annually discloses information

9 regarding operations, ownership, finances, and

10 workforce necessary to evaluate the providers com11 pliance with this Act;

12 (4) oversee the quality and performance of par13 ticipating providers, consistent with section 1122;

14 and

15 (5) investigate and resolve consumer complaints

16 against participating providers.

17 (d) REQUIREMENTS FOR NONNETWORK PLANS.—

18 (1) IN GENERAL.—Each standard health plan

19 shall demonstrate, based on standards established by

20 the Secretary, arrangements with a sufficient num21 ber, distribution, and variety of qualified health pro22 fessionals that will accept the plan’s payment rates

23 in full to ensure that all nonnetwork items and serv24 ices covered by the standard benefits package estab25 lished under subtitle C are available and accessible
73

•S 2357

1 to all enrollees throughout the community rating

2 area with reasonable promptness and in a manner

3 which assures continuity.

4 (2) DEFINITIONS RELATING TO NONNETWORK

5 PLANS.—For purposes of this Act:

6 (A) NONNETWORK PLAN DEFINED.—The

7 term ‘‘nonnetwork plan’’ means a standard

8 health plan that does not utilize a provider net9 work (as defined in subsection (e)(5)(B)).

10 (B) NONNETWORK ITEMS AND SERV11 ICES.—The term ‘‘nonnetwork items and serv12 ices’’ means items or services provided to an in13 dividual enrolled under a standard health plan

14 by a health care provider who is not a member

15 of a provider network of the plan.

16 (e) REQUIREMENTS FOR NETWORK PLANS.—

17 (1) AGREEMENTS.—Each standard health plan

18 shall enter into agreements or have such other ar19 rangements with a sufficient number, distribution,

20 and variety of qualified health professionals within

21 the network that will accept the plan’s payment

22 rates as payments in full to ensure that all services

23 covered by the standard benefit package established

24 under subtitle C are available and accessible to all

25 enrollees throughout the health plan service area (es-
74

•S 2357

1 tablished under section 1502(d)) with reasonable

2 promptness and in a manner which assure continu3 ity.

4 (2) GATEKEEPER.—With respect to each stand5 ard health plan that utilizes a gatekeeper or similar

6 process to approve health care services, such plan

7 shall ensure that such gatekeeper or process does

8 not create an undue burden for enrollees with com9 plex or chronic health conditions and shall ensure

10 access to relevant specialists for the continued care

11 of such enrollees when medically indicated. In cases

12 of a patient with a severe, complex, or chronic health

13 condition, such plan shall determine, in conjunction

14 with the enrollee and the enrollee’s primary care

15 provider, whether it is medically necessary or appro16 priate to use a specialist or a care coordinator from

17 an interdisciplinary team as the gatekeeper or in the

18 health care approval process.

19 (3) CONTINUED CARE.—Each standard health

20 plan shall develop and implement mechanisms for

21 coordinating the delivery of care among different

22 providers so as to enhance continuity of care for the

23 patient.

24 (4) ELIGIBLE CENTERS OF SPECIALIZED

25 TREATMENT EXPERTISE.—
75

•S 2357

1 (A) IN GENERAL.—Each standard health

2 plan must demonstrate that adults, children,

3 and individuals with disabilities have access to

4 specialized treatment expertise when medically

5 indicated by meeting evaluation criteria estab6 lished by the Secretary. In establishing such

7 criteria, the Secretary may consider a process

8 by which a standard health plan could be

9 deemed to meet such evaluation criteria if such

10 plan demonstrates referrals to designated cen11 ters of specialized care when medically nec12 essary or appropriate, informs enrollees of the

13 availability of referral care, and ensures compli14 ance with section 1123.

15 (B) ELIGIBLE CENTERS.—The Secretary

16 shall establish criteria for designating centers of

17 specialized care and shall designate eligible cen18 ters based on such criteria. The criteria shall

19 include requirements for staff credentials and

20 experience, and requirements for measured out21 comes in the diagnosis and treatment of pa22 tients. The Secretary shall develop additional

23 criteria for outcomes of specialized treatment as

24 research findings become available. To be des-
76

•S 2357

1 ignated as a center of specialized care, a center

2 shall—

3 (i) attract patients from outside the

4 center’s local geographic region, from

5 across the State or the Nation; and

6 (ii) either sponsor, participate in, or

7 have medical staff who participate in peer8 reviewed research.

9 (C) LIMITATION.—A State may not estab10 lish rules or policies that require or encourage

11 standard health plans to give preference to cen12 ters of specialized treatment expertise within

13 the State or within the community rating area.

14 A standard health plan shall not prohibit an

15 academic health center, teaching hospital, or

16 other center for specialized care with which it

17 contracts from contracting with one or more

18 other plans.

19 (D) SPECIALIZED TREATMENT EXPER20 TISE.—For purposes of this paragraph, the

21 term ‘‘specialized treatment expertise’’, with re22 spect to the treatment of a health condition by

23 an eligible center, means expertise in diagnosing

24 and treating unusual diseases or conditions, di25 agnosing and treating diseases or conditions
77

•S 2357

1 which are unusually difficult to diagnose or

2 treat, and providing other specialized health

3 care.

4 (5) DEFINITIONS RELATING TO NETWORK

5 PLANS.—For purposes of this Act:

6 (A) NETWORK PLAN DEFINED.—The term

7 ‘‘network plan’’ means a standard health plan

8 that utilizes a provider network.

9 (B) PROVIDER NETWORK DEFINED.—The

10 term ‘‘provider network’’ means, with respect to

11 a standard health plan, providers that have en12 tered into an agreement with the plan under

13 which such providers are obligated to provide

14 items and services in the standard benefits

15 package established under subtitle C to individ16 uals enrolled in the plan, or have an agreement

17 to provide services on a fee-for-service basis.

18 (C) NETWORK ITEMS AND SERVICES.—The

19 term ‘‘network items and services’’ means items

20 or services provided to an individual enrolled

21 under a standard health plan by a health care

22 provider who is a member of a provider network

23 of the plan.

24 (f) EMERGENCY AND URGENT CARE SERVICES.—
78

•S 2357

1 (1) IN GENERAL.—Each standard health plan

2 shall cover emergency and urgent care services pro3 vided to enrollees, without regard to whether or not

4 the provider furnishing such services has a contrac5 tual (or other) arrangement with the plan to provide

6 items or services to enrollees of the plan and in the

7 case of emergency services without regard to prior

8 authorization.

9 (2) PAYMENT AMOUNTS.—In the case of emer10 gency and urgent care provided to an enrollee out11 side of a standard health plan’s community rating

12 area, the payment amounts of the plan shall be

13 based on the applicable fee schedule described in

14 subsection (g).

15 (g) APPLICATION OF PLAN FEE SCHEDULE.—

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

17 each standard health plan that provides for payment

18 for services on a fee-for-service basis and has not es19 tablished an agreement or contractual arrangement

20 with providers specifying a basis for payment shall

21 make such payment to such providers under a fee

22 schedule established by the plan.

23 (2) RULE OF CONSTRUCTION.—Nothing in the

24 paragraph (1) shall be construed to prevent a stand25 ard health plan from providing for a different basis
79

•S 2357

1 or level of payment than the fee schedule established

2 under such paragraph as part of a contractual

3 agreement with participating providers under the

4 plan.

5 (h) PHYSICIAN PARTICIPATION PROGRAM; REQUIRE6 MENT OF DIRECT BILLING.—

7 (1) PHYSICIAN PARTICIPATION PROGRAM.—

8 (A) IN GENERAL.—Each standard health

9 plan shall establish a program under which par10 ticipating physicians shall agree to accept the

11 plan’s payment schedule as payment in full, and

12 agree not to charge patients more than the

13 cost-sharing required by such plan. Each such

14 plan shall make available the list of participat15 ing physicians to enrollees and prospective en16 rollees.

17 (B) COVERAGE UNDER AGREEMENTS WITH

18 PLANS.—The agreements or other arrange19 ments entered into under subsection (e)(1) be20 tween a standard health plan and the health

21 care providers providing the standard benefits

22 package established under subtitle C to individ23 uals enrolled with the plan shall prohibit a pro24 vider from engaging in balance billing described

25 in subparagraph (A).
80

•S 2357

1 (2) DIRECT BILLING.—

2 (A) IN GENERAL.—A provider may not

3 charge or collect from an enrollee amounts that

4 are payable by the standard health plan (includ5 ing any cost-sharing reduction assistance pay6 able by the plan) and shall submit charges to

7 such plan in accordance with any applicable re8 quirements of subtitle B of title V (relating to

9 health information systems).

10 (B) PROHIBITION.—An individual or entity

11 that performs clinical laboratory services may

12 not present or cause to be presented, a claim,

13 bill, or demand for payment to any person other

14 than the individual receiving such services, or to

15 the standard health plan of the individual, ex16 cept that the Secretary may by regulation es17 tablish appropriate exceptions to the require18 ment of this subparagraph.

19 (3) PROHIBITION OF BALANCE BILLING OF

20 TAXES.—Any agreement entered into between a

21 standard health plan and a provider shall prohibit

22 the provider from charging patients the amount of

23 any tax recovered from the provider under section

24 4518 of the Internal Revenue Code of 1986.
81

•S 2357

1 (4) RULE OF CONSTRUCTION.—Nothing in this

2 Act shall be construed to—

3 (A) require or force an individual to re4 ceive health care solely through the individual’s

5 standard health plan; or

6 (B) prohibit any individual from privately

7 contracting with any health care provider and

8 paying for the treatment or service provider by

9 such provider on a cash basis or any other basis

10 as agreed to between the individual and the

11 provider.

12 (i) RELATION TO DETENTION.—A standard health

13 plan is not required to provide any reimbursement to any

14 detention facility for services performed in that facility for

15 detainees in the facility.

16 SEC. 1129. UTILIZATION MANAGEMENT PROTOCOLS AND

17 PHYSICIAN INCENTIVE PLANS.

18 (a) REQUIRING CONSUMER DISCLOSURE.—Each

19 standard health plan shall disclose upon request to enroll20 ees (and prospective enrollees) and to participating provid21 ers (and prospective providers), the protocols and financial

22 incentives used by the plan, including utilization manage23 ment protocols and physician incentive plans for control24 ling utilization and costs, while protecting proprietary
82

•S 2357

1 business information to the extent specified by the Sec2 retary.

3 (b) UTILIZATION MANAGEMENT.—The utilization re4 view and management activities of each standard health

5 plan, provided either directly or through contract, shall

6 meet the following standards as defined by the Secretary:

7 (1) PERSONNEL.—All review determinations

8 shall be made by health professionals who are li9 censed, certified, or otherwise credentialed and who

10 are qualified to review utilization of the treatment

11 being sought.

12 (2) REVIEW PROCESS.—Each standard health

13 plan shall base utilization management on current

14 scientific knowledge, stress the efficient delivery of

15 health care and quality outcomes, rely primarily on

16 evaluating and comparing practice patterns rather

17 than routine case-by-case review, be consistent and

18 timely in application, and have a process for making

19 review determinations for urgent and emergency

20 care 24 hours a day.

21 (3) NO FINANCIAL INCENTIVE.—Utilization

22 management by each standard health plan may not

23 create financial incentives for reviewers or providers

24 to reduce or limit medically necessary or appropriate

25 services.
83

•S 2357

1 (c) PHYSICIAN INCENTIVE PLANS.—A standard

2 health plan may not operate a physician incentive plan un3 less such incentive plan meets the requirements of section

4 1876(i)(8)(A) of the Social Security Act (42 U.S.C.

5 1395mm(i)(8)(A)).

6 PART 4—SUPPLEMENTAL HEALTH BENEFITS

7 PLANS

8 SEC. 1141. SUPPLEMENTAL HEALTH BENEFITS PLANS.

9 (a) TREATMENT OF SUPPLEMENTAL HEALTH BENE10 FITS PLANS.—

11 (1) IN GENERAL.—Nothing in this Act may be

12 construed as preventing a standard health plan

13 sponsor from offering and pricing (in a manner that

14 is separate from the offering and pricing of the

15 standard health plans offered by such sponsor in the

16 community rating area) supplemental health benefits

17 plans pursuant to the State certification plan, the

18 requirements of this section, and regulations promul19 gated by the Secretary.

20 (2) PLANS DEFINED.—In this Act:

21 (A) SUPPLEMENTAL HEALTH BENEFITS

22 PLAN.—The term ‘‘supplemental health benefits

23 plan’’ means a supplemental services plan or a

24 cost-sharing plan.
84

•S 2357

1 (B) SUPPLEMENTAL SERVICES PLAN.—

2 The term ‘‘supplemental services plan’’ means a

3 health plan which provides—

4 (i) coverage for services and items not

5 included in the standard benefits package

6 established under subtitle C,

7 (ii) coverage for items and services in8 cluded in such package but not covered be9 cause of a limitation in amount, duration,

10 or scope of benefits, or

11 (iii) both.

12 (C) COST-SHARING PLAN.—The term

13 ‘‘cost-sharing plan’’ means a health plan which

14 provides coverage for deductibles and coinsur15 ance imposed as part of the standard benefits

16 package established under subtitle C.

17 (b) REQUIREMENTS FOR SUPPLEMENTAL SERVICES

18 PLANS.—

19 (1) APPLICATION OF CERTAIN HEALTH PLAN

20 STANDARDS.—

21 (A) IN GENERAL.—The standards specified

22 in subparagraph (B) shall apply with respect to

23 each supplemental services plan in the same

24 manner as such standards apply with respect to

25 a certified standard health plan.
85

•S 2357

1 (B) SPECIFIED STANDARDS.—The stand2 ards specified in this subparagraph are as fol3 lows:

4 (i) Section 1111 (relating to guaran5 teed issue, availability, and renewability).

6 (ii) Section 1112 (relating to enroll7 ment).

8 (iii) Section 1114 (relating to non9 discrimination based on health status).

10 (iv) Section 1116 (relating to rating

11 limitations for community-rated market).

12 (2) NO DUPLICATIVE HEALTH BENEFITS.—A

13 standard health plan sponsor or any other entity

14 may not offer any supplemental services plan that—

15 (A) duplicates the standard benefits pack16 age established under subtitle C, or

17 (B) duplicates any coverage provided under

18 the medicare program to any medicare-eligible

19 individual.

20 (3) RESTRICTIONS ON MARKETING ABUSES.—

21 Not later than May 1, 1995, the Secretary shall de22 velop minimum standards that prohibit marketing

23 practices by standard health plan sponsors and other

24 entities offering supplemental services plans that in25 volve—
86

•S 2357

1 (A) providing monetary incentives for, or

2 tying or otherwise conditioning, the sale of the

3 plan to enrollees in a certified standard health

4 plan of the sponsor or entity;

5 (B) linking in any manner to the plan’s

6 standard benefits package; or

7 (C) using or disclosing to any party infor8 mation about the health status or claims experi9 ence of participants in a certified standard

10 health plan for the purpose of marketing a sup11 plemental services plan.

12 (c) REQUIREMENTS FOR COST-SHARING PLANS.—

13 (1) RULES FOR OFFERING OF POLICIES.—A

14 cost-sharing plan may be offered to an individual

15 only if—

16 (A) the plan is offered by the standard

17 health plan in which the individual is enrolled;

18 (B) the standard health plan offers the

19 plan to all individuals enrolled in the standard

20 health plan;

21 (C) the individual is not enrolled in an al22 ternative benefits package; and

23 (D) the plan is offered only during the en24 rollment periods for standard health plans spec25 ified in section 1112.
87

•S 2357

1 (2) PROHIBITION OF COVERAGE OF

2 COPAYMENTS.—A cost-sharing plan may not provide

3 any benefits relating to any copayments established

4 under subtitle C.

5 (3) EQUIVALENT COVERAGE FOR ALL SERV6 ICES.—A cost-sharing plan shall provide coverage

7 for items and services in the standard benefits pack8 age to the same extent as the plan provides coverage

9 for all items and services in the package.

10 (4) REQUIREMENTS FOR PRICING.—

11 (A) IN GENERAL.—The price of any cost12 sharing plan shall—

13 (i) be the same for each individual or

14 class of family to whom the plan is offered;

15 (ii) include any expected increase in

16 utilization resulting from the purchase of

17 the plan by individuals enrolled in the

18 standard health plan; and

19 (iii) not result in a loss-ratio of less

20 than 90 percent.

21 (B) LOSS-RATIO DEFINED.—In subpara22 graph (A)(iii), a ‘‘loss-ratio’’ is the ratio of the

23 premium returned to the consumer in payout

24 relative to the total premium collected.
88

•S 2357

1 Subtitle C—Benefits and Cost2 Sharing

3 PART 1—STANDARD BENEFITS PACKAGES

4 SEC. 1201. GENERAL DESCRIPTION OF STANDARD BENE5 FITS PACKAGES.

6 (a) STANDARD BENEFITS PACKAGE.—For purposes

7 of this title, a standard benefits package is a benefits

8 package that—

9 (1)(A) provides all of the items and services

10 under the categories of health care items and serv11 ices described in section 1202; and

12 (B) provides for at least one of the 3 cost-shar13 ing schedules established under section 1213(c)(2)

14 by the National Health Benefits Board established

15 under section 1211 (referred to in this part as the

16 ‘‘Board’’) for such a package; and

17 (2) has an actuarial value that is equivalent to

18 the actuarial value of the benefits package provided

19 by the Blue Cross/Blue Shield Standard Option

20 under the Federal Employees Health Benefits Pro21 gram as in effect during 1994, adjusted for an aver22 age population and adjusted for the particular cost23 sharing schedule provided for in the package.
89

•S 2357

1 (b) ALTERNATIVE STANDARD BENEFITS PACK2 AGE.—For purposes of this title, an alternative standard

3 benefits package is a benefits package that—

4 (1)(A) provides all of the items and services

5 under the categories of health care items and serv6 ices described in section 1202; and

7 (B) provides for the very high deductible cost8 sharing schedule established under section

9 1213(c)(3) by the Board for such a package; and

10 (2) has an actuarial value that is less than the

11 actuarial value of the benefits package provided by

12 the Blue Cross/Blue Shield Standard Option under

13 the Federal Employees Health Benefits Program as

14 in effect during 1994, adjusted for an average popu15 lation.

16 (c) ACTUARIAL VALUES.—The Board shall determine

17 the actuarial values referred to in subsections (a)(2) and

18 (b)(2).

19 SEC. 1202. DESCRIPTION OF CATEGORIES OF ITEMS AND

20 SERVICES.

21 (a) IN GENERAL.—The categories of health care

22 items and services described in this section are the follow23 ing, as defined by the Board under section 1213(a):
90

•S 2357

1 (1) HOSPITAL SERVICES.—The hospital (as de2 fined in section 1203(7)) services described in this

3 paragraph include the following:

4 (A) Inpatient hospital services.

5 (B) Outpatient hospital services.

6 (C) 24-hour a day hospital emergency serv7 ices.

8 (2) HEALTH PROFESSIONAL SERVICES.—The

9 items and services described in this paragraph are—

10 (A) health professional services (as defined

11 in section 1203(3)), including consultations,

12 that are provided in a home, office, or other

13 ambulatory care setting, or an institutional set14 ting; and

15 (B) services and supplies (including drugs

16 and biologicals which cannot be self-adminis17 tered) furnished as incident to such health pro18 fessional services.

19 (3) EMERGENCY AND AMBULATORY MEDICAL

20 AND SURGICAL SERVICES.—The items and services

21 described in this paragraph are 24-hour a day emer22 gency services and ambulatory medical or surgical

23 services provided in a facility that is legally author24 ized to provide such services in the State in which

25 such services are provided.
91

•S 2357

1 (4) CLINICAL PREVENTIVE SERVICES.—The

2 items and services described in this paragraph are

3 clinical preventive services, including services for

4 high risk populations, age-appropriate immuniza5 tions, tests, and clinician visits furnished consistent

6 with any periodicity schedule specified by the Board

7 under section 1213(a)(2)(B).

8 (5) MENTAL ILLNESS AND SUBSTANCE ABUSE

9 SERVICES.—The items and services described in this

10 paragraph are mental illness and substance abuse

11 services, including inpatient, outpatient, residential

12 non-hospital, and intensive non-residential services,

13 for the treatment of mental illness and substance

14 abuse disorders (as defined in section 1203(9)).

15 (6) FAMILY PLANNING SERVICES AND SERVICES

16 FOR PREGNANT WOMEN.—The services described in

17 this section include the following items and services:

18 (A) Voluntary comprehensive family plan19 ning services, including counseling and edu20 cation.

21 (B) Contraceptive drugs and devices that

22 are subject to approval by the Secretary under

23 the Federal Food, Drug, and Cosmetic Act.

24 (C) Services for pregnant women.
92

•S 2357

1 (7) HOSPICE CARE.—The hospice care de2 scribed in this paragraph is items and services pro3 vided for end of life care (as defined in section

4 1203(6)).

5 (8) HOME HEALTH CARE.—

6 (A) IN GENERAL.—The home health care

7 described in this paragraph is home health care

8 (as defined in section 1203(4)) and home infu9 sion drug therapy services (as defined in section

10 1203(5)).

11 (B) LIMITATIONS.—Coverage for home

12 health care is subject to the following limita13 tions:

14 (i) INPATIENT TREATMENT ALTER15 NATIVE.—Such care is covered only as an

16 alternative to inpatient treatment in a hos17 pital, skilled nursing facility (as defined in

18 section 1203(15)), or rehabilitation facility

19 (as defined in section 1203(14)) after an

20 illness, injury, disorder, or other health

21 condition.

22 (ii) REEVALUATION.—At the end of

23 each 60-day period of home health care,

24 the need for continued care shall be re25 evaluated by the person who is primarily
93

•S 2357

1 responsible for providing the home health

2 care. Additional periods of care are covered

3 only if such person determines that the re4 quirement in clause (i) is satisfied.

5 (9) EXTENDED CARE SERVICES—

6 (A) IN GENERAL.—The extended care serv7 ices described in this section are the items and

8 services described in section 1861(h) of the So9 cial Security Act, when provided to an inpatient

10 of a skilled nursing facility or a rehabilitation

11 facility.

12 (B) LIMITATIONS.—Extended care services

13 are covered only as an alternative to receiving

14 inpatient hospital services as a result of an ill15 ness, injury, disorder, or other health condition.

16 (10) AMBULANCE SERVICES.—

17 (A) IN GENERAL.—The ambulance services

18 described in this paragraph are covered only

19 when indicated by the medical condition of the

20 individual receiving such services. Such services

21 include the following:

22 (i) Ground transportation by ambu23 lance.

24 (ii) Air or water transportation by an

25 aircraft or vessel equipped for transporting
94

•S 2357

1 an injured or sick individual in cases in

2 which there is no other method of trans3 portation or where use of another method

4 of transportation is contra-indicated by the

5 medical condition of such individual.

6 (11) OUTPATIENT LABORATORY, RADIOLOGY,

7 AND DIAGNOSTIC SERVICES.—The items and services

8 described in this paragraph are laboratory, radiol9 ogy, and diagnostic services provided upon prescrip10 tion to individuals who are not inpatients of a hos11 pital, hospice, skilled nursing facility, or rehabilita12 tion facility.

13 (12) OUTPATIENT PRESCRIPTION DRUGS.—The

14 items described in this paragraph are the following

15 used for a medically accepted indication (as defined

16 in section 1203(8)):

17 (A) Outpatient prescription drugs.

18 (B) Blood clotting factors (as defined in

19 section 1203(1)).

20 (C) Drugs used for home infusion therapy.

21 (D) Biologicals.

22 (E) Accessories and supplies used directly

23 with the items described in subparagraphs (A)

24 through (D).
95

•S 2357

1 (13) OUTPATIENT REHABILITATION SERV2 ICES.—

3 (A) IN GENERAL.—The outpatient rehabili4 tation services described in this paragraph

5 are—

6 (i) outpatient occupational therapy;

7 (ii) outpatient physical therapy;

8 (iii) outpatient respiratory therapy;

9 and

10 (iv) outpatient speech-language pa11 thology services and outpatient audiology

12 services.

13 (B) LIMITATIONS.—Coverage for out14 patient rehabilitation services is subject to the

15 following limitations:

16 (i) SERVICE LIMITATION.—Such serv17 ices include only items or services used to

18 restore or maintain functional capacity or

19 prevent or minimize limitations on physical

20 and cognitive functions as a result of an

21 illness, injury, disorder, or other health

22 condition, including attaining new func23 tional abilities at an age-appropriate rate.

24 (ii) REEVALUATION.—At the end of

25 each 60-day period of outpatient rehabili-
96

•S 2357

1 tation services, the need for continued

2 services shall be reevaluated by the person

3 who is primarily responsible for providing

4 the services. Additional periods of services

5 are covered only if such person determines

6 that the requirement of paragraph (1) is

7 satisfied.

8 (14) DURABLE MEDICAL EQUIPMENT AND

9 PROSTHETIC AND ORTHOTIC DEVICES.—

10 (A) IN GENERAL.—The items and services

11 described in this paragraph are—

12 (i) durable medical equipment (as de13 fined in section 1203(2);

14 (ii) prosthetic devices (as defined in

15 section 1203(12);

16 (iii) orthotics (as defined in section

17 1203(10)) and prosthetics (as defined in

18 section 1203(11)); and

19 (iv) accessories and supplies used di20 rectly with the equipment or devices de21 scribed in clauses (i) through (iv).

22 (B) REPAIR, MAINTENANCE, ETC.—The

23 items and services described in this paragraph

24 include the following with respect to the equip-
97

•S 2357

1 ment and devices described in subparagraph

2 (A):

3 (i) Repair and maintenance of such

4 equipment or devices.

5 (ii) Replacement of such equipment or

6 devices when required due to loss, irrep7 arable damage, wear, or because of a

8 change in the patient’s condition.

9 (iii) Fitting and training for the use

10 of such equipment or devices.

11 (15) VISION CARE, HEARING AIDS, AND DENTAL

12 CARE.—

13 (A) IN GENERAL.—The items described in

14 this paragraph are the vision care described in

15 subparagraph (B), dental care described in sub16 paragraph (C), and hearing care described in

17 subparagraph (D).

18 (B) VISION CARE.—The vision care de19 scribed in this subparagraph is routine eye ex20 aminations, diagnosis, and treatment for defects

21 in vision furnished to individuals who are under

22 22 years of age, including eyeglasses and con23 tact lenses furnished according to a periodicity

24 schedule established by the Board.

25 (C) DENTAL CARE.—
98

•S 2357

1 (i) INDIVIDUALS UNDER 22.—The

2 dental care described in this subparagraph

3 shall include the following, as specified by

4 the Board, furnished to individuals who

5 are under 22 years of age:

6 (I) Emergency dental treatment.

7 (II) Prevention and diagnosis of

8 dental disease.

9 (III) Treatment of dental dis10 ease.

11 (IV) Space maintenance proce12 dures to prevent orthodontic complica13 tions.

14 (V) Interceptive orthodontic

15 treatment to prevent severe malocclu16 sion.

17 (ii) INDIVIDUALS OVER 22.—The den18 tal care described in this subparagraph for

19 individuals who are over 22 years of age is

20 emergency dental treatment, as specified

21 by the Board.

22 (D) HEARING CARE.—The hearing care

23 items and services described in this paragraph

24 are the following when furnished to an individ25 ual who is under 22 years of age:
99

•S 2357

1 (i) Routine ear examinations and di2 agnosis for defects in hearing as part of a

3 physician visit.

4 (ii) Hearing aids when recommended

5 by a physician or audiologist.

6 (16) INVESTIGATIONAL TREATMENTS.—The

7 items and services described in this paragraph are

8 items and services required to provide patient care

9 pursuant to the design of a qualified investigational

10 treatment (as defined in section 1203(13)).

11 (b) LIMITATION.—

12 (1) IN GENERAL.—Items and services under the

13 categories described in subsection (a) shall be fur14 nished to health plan enrollees when medically nec15 essary or appropriate.

16 (2) DEFINITION.—For purposes of this subtitle,

17 the term ‘‘medically necessary or appropriate’’ when

18 referring to an item or service means an item or

19 service intended to maintain or improve the biologi20 cal, psychological, or functional condition of a health

21 plan enrollee or to prevent or mitigate an adverse

22 health outcome to an enrollee.

23 SEC. 1203. DEFINITIONS.

24 For purposes of this subtitle:
100

•S 2357

1 (1) BLOOD CLOTTING FACTORS.—The term

2 ‘‘blood clotting factors’’ has the meaning given such

3 term in section 1861(s)(2)(I) of the Social Security

4 Act.

5 (2) DURABLE MEDICAL EQUIPMENT.—The term

6 ‘‘durable medical equipment’’ has the meaning given

7 such term in section 1861(n) of the Social Security

8 Act.

9 (3) HEALTH PROFESSIONAL SERVICES.—The

10 term ‘‘health professional services’’ means profes11 sional services that—

12 (A) are lawfully provided by a physician; or

13 (B) would be described in subparagraph

14 (A) if provided by a physician, but are provided

15 by another person who is legally authorized to

16 provide such services in the State in which the

17 services are provided.

18 (4) HOME HEALTH CARE.—The term ‘‘home

19 health care’’ means the items and services described

20 in section 1861(m) of the Social Security Act.

21 (5) HOME INFUSION DRUG THERAPY SERV22 ICES.—The term ‘‘home infusion drug therapy serv23 ices’’ means the home infusion drug therapy services

24 described in section 1861(ll) of the Social Security

25 Act.
101

•S 2357

1 (6) HOSPICE CARE.—The term ‘‘hospice care’’

2 means the items and services described in paragraph

3 (1) of section 1861(dd) of the Social Security Act,

4 except that in applying such section for purposes of

5 this paragraph—

6 (A) paragraphs (4)(B) and (5) shall be

7 disregarded; and

8 (B) all references to the Secretary of

9 Health and Human Services shall be treated as

10 references to the Board.

11 (7) HOSPITAL.—The term ‘‘hospital’’ has the

12 meaning given such term in section 1861(e) of the

13 Social Security Act, except that such term shall in14 clude a facility operated by the uniformed services,

15 the Department of Veterans Affairs, and the Indian

16 Health Service that is primarily engaged in provid17 ing services to inpatients that are equivalent to the

18 services provided by a hospital defined in such sec19 tion 1861(e).

20 (8) MEDICALLY ACCEPTED INDICATION.—The

21 term ‘‘medically accepted indication’’ means with re22 spect to the use of a drug, any use which has been

23 approved by the Food and Drug Administration for

24 the drug, and includes another use of the drug if—
102

•S 2357

1 (A) the drug has been approved by the

2 Food and Drug Administration; and

3 (B) such use is supported by one or more

4 citations which are included (or approved for

5 inclusion) in one or more of the following com6 pendia: the American Hospital Formulary Serv7 ice-Drug Information, the American Medical

8 Association Drug Evaluations, the United

9 States Pharmacopoeia-Drug Information, and

10 other authoritative compendia as identified by

11 the Secretary.

12 (9) MENTAL ILLNESS AND SUBSTANCE ABUSE

13 DISORDERS.—The term ‘‘mental illness and sub14 stance abuse disorder’’ means a mental or substance

15 abuse disorder listed in the Diagnostic and Statis16 tical Manual of Mental Disorders, Fourth Edition,

17 or the International Classification of Diseases, 9th

18 Revision, the Clinical Modification, Third Edition, or

19 revised versions of such manuals or texts.

20 (10) ORTHOTICS.—The term ‘‘orthotics’’ in21 cludes—

22 (A) an accessory or supply used directly

23 with a prosthetic device to achieve therapeutic

24 benefits and proper functioning; and

25 (B) leg, arm, back, and neck braces.
103

•S 2357

1 (11) PROSTHETICS.—The term ‘‘prosthetics’’

2 includes artificial legs, arms, and eyes.

3 (12) PROSTHETIC DEVICES.—The term ‘‘pros4 thetic devices’’ means devices that replace all or part

5 of the function of a body organ.

6 (13) QUALIFIED INVESTIGATIONAL TREAT7 MENT.—The term ‘‘qualified investigational treat8 ment’’ means an investigational treatment that is

9 part of a peer-reviewed and approved research pro10 gram (as defined by the Secretary) or research trials

11 approved by the Secretary, the Directors of the Na12 tional Institutes of Health, the Commissioner of the

13 Food and Drug Administration, the Secretary of

14 Veterans Affairs, the Secretary of Defense, or a

15 qualified nongovernmental research entity as defined

16 in guidelines of the National Institutes of Health, in17 cluding guidelines for cancer center support grants

18 designated by the National Cancer Institute.

19 (14) REHABILITATION FACILITY.—The term

20 ‘‘rehabilitation facility’’ means an institution (or a

21 distinct part of an institution) which is established

22 and operated for the purpose of providing diagnostic,

23 therapeutic, and rehabilitation services to individuals

24 for rehabilitation from illness, injury, disorder, or

25 other health condition. An entity qualifying as a hos-
104

•S 2357

1 pital for as defined in paragraph (7) may also qual2 ify as a rehabilitation facility for the purposes of

3 section 1202(a)(9).

4 (15) SKILLED NURSING FACILITY.—The term

5 ‘‘skilled nursing facility’’ means an institution (or a

6 distinct part of an institution) which is primarily en7 gaged in providing to residents—

8 (A) skilled nursing care and related serv9 ices for residents who require medical or nurs10 ing care; or

11 (B) rehabilitation services to residents for

12 rehabilitation from illness, injury, disorder, or

13 other health condition.

14 PART 2—NATIONAL HEALTH BENEFITS BOARD

15 SEC. 1211. CREATION OF NATIONAL HEALTH BENEFITS

16 BOARD; MEMBERSHIP.

17 (a) IN GENERAL.—There is hereby established a Na18 tional Health Benefits Board (referred to in this part as

19 the ‘‘Board’’).

20 (b) COMPOSITION.—The Board is composed of 7

21 members appointed by the President, by and with the ad22 vice and consent of the Senate. No more than 4 members

23 of the Board may be affiliated with the same political

24 party. Members shall be appointed not later than 90 days

25 after the date of the enactment of this title.
105

•S 2357

1 (c) CHAIR.—The President shall designate one of the

2 members of the Board as chair.

3 (d) TERMS.—

4 (1) IN GENERAL.—Except as provided in para5 graph (2), the term of each member of the Board

6 is 6 years and begins when the term of the prede7 cessor of that member ends.

8 (2) INITIAL TERMS.—The initial terms of the

9 members of the Board first taking office after the

10 date of the enactment of this title, shall expire as

11 designated by the President, two at the end of two

12 years, two at the end of four years, and three at the

13 end of six years.

14 (3) CONTINUATION IN OFFICE.—Upon the expi15 ration of a term of office, a member shall continue

16 to serve until a successor is appointed and qualified.

17 (e) VACANCIES.—

18 (1) IN GENERAL.—If a vacancy occurs, other

19 than by expiration of term, a successor shall be ap20 pointed by the President, by and with the consent of

21 the Senate, to fill such vacancy. The appointment

22 shall be for the remainder of the term of the prede23 cessor.

24 (2) NO IMPAIRMENT OF FUNCTION.—A vacancy

25 in the membership of the Board does not impair the
106

•S 2357

1 authority of the remaining members to exercise all

2 of the powers of the Board.

3 (3) ACTING CHAIR.—The Board may designate

4 a member to act as chair during any period in which

5 there is no chair designated by the President.

6 (f) MEETINGS; QUORUM.—

7 (1) MEETINGS.—The chair shall preside at

8 meetings of the Board, and in the absence of the

9 chair, the Board shall elect a member to act as chair

10 pro tempore.

11 (2) FREQUENCY.—The Board shall meet not

12 less frequently than 4 times each year.

13 (3) QUORUM.—Four members of the Board

14 shall constitute a quorum thereof.

15 SEC. 1212. QUALIFICATIONS OF BOARD MEMBERS.

16 (a) CITIZENSHIP.—Each member of the Board shall

17 be a citizen of the United States.

18 (b) BASIS OF SELECTION.—Board members shall be

19 selected on the basis of their experience and expertise in

20 relevant subjects, including the practice of medicine, nurs21 ing, or other clinical practices, health care financing and

22 delivery, State health systems, consumer protection, busi23 ness, law, and delivery of care to vulnerable populations.

24 (c) PAY AND TRAVEL EXPENSES.—

25 (1) PAY.—
107

•S 2357

1 (A) CHAIR.—The chair of the Board shall

2 be paid at a rate equal to the daily equivalent

3 of the minimum annual rate of basic pay pay4 able for level II of the Executive Schedule

5 under section 5315 of title 5, United States

6 Code, for each day (including travel time) dur7 ing which the chair is engaged in the actual

8 performance of duties vested in the Board.

9 (B) MEMBERS.—Each member of the

10 Board shall be paid at a rate equal to the daily

11 equivalent of the minimum annual rate of basic

12 pay payable for level III of the Executive

13 Schedule under section 5315 of title 5, United

14 States Code, for each day (including travel

15 time) during which the member is engaged in

16 the actual performance of duties vested in the

17 Board.

18 (2) TRAVEL EXPENSES.—Members of the

19 Board shall receive travel expenses, including per

20 diem in lieu of subsistence, in accordance with sec21 tions 5702 and 5703 of title 5, United States Code.

22 SEC. 1213. GENERAL DUTIES AND RESPONSIBILITIES.

23 (a) CLARIFICATION AND REFINEMENT OF ITEMS

24 AND SERVICES.—
108

•S 2357

1 (1) IN GENERAL.—The Board shall promulgate

2 such regulations or establish such guidelines as may

3 be necessary to clarify and refine the items and serv4 ices under the categories of health care items and

5 services described in section 1202 in accordance with

6 the requirements of subsections (a)(2) and (b)(2) of

7 section 1201.

8 (2) SCHEDULES FOR ITEMS AND SERVICES.—

9 (A) IN GENERAL.—The Board shall estab10 lish and update periodicity schedules for the

11 items and services in the categories of health

12 care items and services described in section

13 1202.

14 (B) SPECIAL RULE WITH RESPECT TO

15 CLINICAL PREVENTIVE SERVICES.—With re16 spect to clinical preventive services, the

17 Board—

18 (i) shall specify and define specific

19 items and services as clinical preventive

20 services and shall establish and update a

21 periodicity schedule for such items and

22 services; and

23 (ii) in specifying clinical preventive

24 services and establishing and updating pe25 riodicity schedules under clause (i), the
109

•S 2357

1 Board shall consult with experts in clinical

2 preventive services, including the U.S. Pre3 ventive Services Task Force, the Advisory

4 Committee on Immunization Practices, the

5 American College of Obstetricians and

6 Gynecologists, and the American Academy

7 of Pediatrics.

8 (3) MENTAL ILLNESS AND SUBSTANCE ABUSE

9 SERVICES.—

10 (A) PARITY.—

11 (i) IN GENERAL.—The Board shall

12 design mental illness and substance abuse

13 services so as to achieve parity with serv14 ices for other medical conditions. Except as

15 provided in clause (iii), day or visit limits

16 or cost-sharing requirements may not be

17 applied to mental illness and substance

18 abuse services that are not applied to serv19 ices for other medical conditions.

20 (ii) PARITY DEFINED.—For purposes

21 of this subparagraph, the term ‘‘parity’’

22 means comprehensive, coverage for all

23 medically necessary or appropriate mental

24 illness and substance abuse services in in-
110

•S 2357

1 patient, outpatient, residential, and inten2 sive non-residential settings.

3 (iii) SPECIAL RULE.—

4 (I) EFFECT ON OTHER BENE5 FITS.—If the Board determines that

6 parity of mental illness and substance

7 abuse services with services for other

8 medical conditions cannot be achieved

9 without imposing unduly burdensome

10 cost-sharing requirements on other

11 services, the Board may design mental

12 illness and substance abuse services

13 such that they include the following

14 limits:

15 (aa) Inpatient hospital care

16 may be limited, but in the case of

17 mental illness the limit may not

18 be set at a level below 30 days

19 per year, and in the case of sub20 stance abuse services the limit

21 may not be set at a level below

22 the level sufficient to provide de23 toxification services.

24 (bb) After the first 5 visits

25 for outpatient adult psycho-
111

•S 2357

1 therapy, the coinsurance for such

2 services may be set at a level

3 higher than the coinsurance for

4 other services, but no higher than

5 a 50 percent coinsurance level.

6 (cc) Consistent with the

7 process described in section

8 3510, the Board shall ensure

9 that parity for mental illness and

10 substance abuse services with

11 services for other medical condi12 tions is established no later than

13 January 1, 2001.

14 (II) LEGISLATIVE PROPOSAL.—If

15 the Board finds that establishing par16 ity for mental illness and substance

17 abuse services with services for other

18 medical conditions cannot be achieved

19 by January 1, 2001, without imposing

20 unduly burdensome cost-sharing on all

21 services, the Board shall develop a

22 legislative proposal for an extension of

23 such date. Not later than January 1,

24 2000, the Board shall submit to the

25 Congress an implementing bill which
112

•S 2357

1 contains such statutory provisions as

2 are necessary or appropriate to imple3 ment the legislative proposal devel4 oped under the preceding sentence.

5 (B) MANAGEMENT OF SERVICES.—

6 (i) IN GENERAL.—The Board shall

7 develop standards for the appropriate man8 agement of mental illness and substance

9 abuse services. Such standards shall in10 clude quality managed care techniques.

11 (ii) QUALITY MANAGED CARE.—For

12 purposes of clause (i), the term ‘‘quality

13 managed care’’ refers to the administration

14 of benefits through methods of central in15 take, preauthorization, and utilization re16 view under circumstances that protect indi17 viduals from unwarranted denial of serv18 ices.

19 (C) SETTINGS.—The Board shall give pri20 ority to ensuring that mental illness and sub21 stance abuse services are provided in the least

22 restrictive setting that is clinically appropriate

23 and encouraging the use of outpatient and in24 tensive nonresidential treatments to the great25 est extent possible.
113

•S 2357

1 (b) DETERMINING MEDICAL NECESSITY OR APPRO2 PRIATENESS.—

3 (1) IN GENERAL.—The Board shall be author4 ized to establish—

5 (A) criteria for determinations of medical

6 necessity or appropriateness;

7 (B) procedures for determinations of medi8 cal necessity or appropriateness; and

9 (C) regulations or guidelines to be used in

10 determining whether an item or service under

11 the categories of health care items and services

12 described in section 1202 is medically necessary

13 or appropriate.

14 (2) REQUIREMENTS.—The Board shall include

15 the following in establishing criteria, procedures, and

16 regulations under this subsection:

17 (A) SPECIAL RULES WITH RESPECT TO EN18 ROLLEES UNDER 22 YEARS OF AGE.—In making

19 any determination with respect to medical ne20 cessity or appropriateness with respect to an

21 enrollee under 22 years of age, the Board shall

22 consider whether the item or service is—

23 (i) is appropriate for the age and

24 health status of the enrollee;
114

•S 2357

1 (ii) will prevent or ameliorate the ef2 fects of a condition, illness, injury, or dis3 order;

4 (iii) will aid the overall physical and

5 mental growth and development of the en6 rollee; or

7 (iv) will assist in achieving or main8 taining maximum functional capacity in

9 performing daily activities.

10 This subparagraph shall apply to all items and

11 services under the categories of health care

12 items and services described in section 1202 as

13 clarified and refined by the Board under sub14 section (a).

15 (B) CONSULTATIONS WITH EXPERT AU16 THORITIES.—The Board shall consider the

17 opinions of experts from academia, medical spe18 cialty groups, industry, and government in es19 tablishing criteria, procedures, and regulations

20 with regard to medical necessity or appropriate21 ness.

22 (C) RECOMMENDATIONS TO SECRETARY.—

23 In the absence of sufficient evidence to develop

24 regulations with respect to any particular cov25 erage determination, the Board shall rec-
115

•S 2357

1 ommend to the Secretary specific areas for

2 which priorities should be given to undertake

3 clinical trials or establish practice guidelines.

4 (3) HEALTH PLAN REQUIREMENTS.—The regu5 lations established by the Board under this sub6 section shall provide that health plans shall—

7 (A) in making any determination with re8 spect to medical necessity or appropriateness,

9 consider the criteria and procedures established

10 by the Board under this subsection;

11 (B) be guided by—

12 (i) the initial determination of medical

13 necessity or appropriateness with respect

14 to an item or service made by an enrollee

15 and the health professional furnishing such

16 item or service; and

17 (ii) available scientific evidence; and

18 (C) if a health plan has developed a treat19 ment guideline or utilization protocol, or has

20 made a general coverage determination, the

21 plan shall—

22 (i) provide a copy of, and a written

23 statement of the basis for, the guideline,

24 protocol, or determination at least 60 days

25 prior to the effective date of such guide-
116

•S 2357

1 line, protocol, or determination, to each af2 fected provider with which the plan has a

3 contract and the government entity which

4 certifies the plan;

5 (ii) provide any or all of such informa6 tion upon request to enrollees, potential

7 enrollees, or other interested parties, in8 cluding provider groups and specialty orga9 nizations; and

10 (iii) revise such guidelines, protocols,

11 or determinations periodically, or, if new

12 scientific evidence becomes available, as

13 soon as possible after such evidence is

14 available.

15 (c) COST-SHARING.—The Board shall establish cost16 sharing schedules to be provided by health plans providing

17 a standard benefits package or an alternative standard

18 benefits package. In establishing such cost-sharing sched19 ules, the Board shall meet the following requirements:

20 (1) ANNUAL BASIS.—The Board shall review

21 and update cost-sharing schedules as determined ap22 propriate by the Board, but on at least an annual

23 basis.

24 (2) PLANS PROVIDING STANDARD BENEFITS

25 PACKAGE.—
117

•S 2357

1 (A) IN GENERAL.—The Board shall estab2 lish 3 cost-sharing schedules for health plans

3 providing the standard benefits package which

4 permit a variety of delivery system options, in5 cluding fee-for-service, preferred provider orga6 nizations, point of service, and managed care.

7 Such cost-sharing schedules shall consist of—

8 (i) a low cost-sharing schedule;

9 (ii) a high cost-sharing schedule; and

10 (iii) a combination cost-sharing sched11 ule.

12 (B) ACTUARIAL VALUE OF HIGH COST13 SHARING SCHEDULE.—A standard benefit pack14 age that provides for the cost-sharing schedule

15 established by the Board under this paragraph

16 that has the lowest actuarial value relative to

17 the actuarial values of all other cost-sharing

18 schedules established by the Board under this

19 paragraph, shall have an actuarial value that is

20 equivalent to the actuarial value of the benefits

21 package provided by the Blue Cross/Blue Shield

22 Standard Option under the Federal Employees

23 Health Benefits Program as in effect during

24 1994, adjusted for an average population (as

25 determined by the Board).
118

•S 2357

1 (3) PLANS PROVIDING ALTERNATIVE STANDARD

2 BENEFITS PACKAGE.—The Board shall establish

3 only one very high deductible cost-sharing schedule

4 for health plans providing the alternative standard

5 benefits package. Such cost-sharing schedule shall

6 provide for a higher deductible than any deductible

7 under a schedule established for health plans provid8 ing a standard benefits package.

9 (4) CLINICAL PREVENTIVE SERVICES.—No

10 cost-sharing schedule established by the Board may

11 include cost-sharing for clinical preventive services

12 and prenatal care.

13 (5) COST-SHARING RULES.—Cost-sharing

14 schedules established by the Board may include

15 copayments, coinsurance, deductibles, and out-of16 pocket limits. The copayments, coinsurance,

17 deductibles and out-of-pocket limits on cost-sharing

18 for a year under the schedules shall be applied based

19 upon expenses incurred for covered items and serv20 ices furnished in the year.

21 (6) LIFETIME LIMITS.—No cost-sharing sched22 ule established by the Board may include lifetime

23 limits.

24 (d) LEGISLATIVE PROPOSALS ON ACTUARIAL

25 EQUIVALENCE AND HEALTH SERVICE CATEGORIES.—
119

•S 2357

1 (1) IN GENERAL.—The Board may develop leg2 islative proposals for modifications to the actuarial

3 equivalence provisions of section 1201 and the cat4 egories of health care items and services under sec5 tion 1202.

6 (2) IMPLEMENTING BILL.—The Board shall

7 submit to the Congress an implementing bill which

8 contains such statutory provisions as are necessary

9 or appropriate to implement the legislative proposals

10 developed under paragraph (1).

11 (e) REPORTS.—

12 (1) DENTAL CARE.—The Board shall undertake

13 a study to determine the costs of providing—

14 (A) preventive dental care to all adults;

15 (B) restorative dental care to all adults;

16 and

17 (C) preventive dental care to adults with

18 developmental, cognitive, and other mental dis19 abilities.

20 Not later than July 1, 1996, the Board shall pre21 pare and submit to the Secretary and the Congress,

22 a report concerning such study.

23 (2) IN VITRO FERTILIZATION.—The Board shall

24 undertake a study to determine the costs of provid25 ing coverage for in vitro fertilization in the standard
120

•S 2357

1 benefits package. Not later than July 1, 1996, the

2 Board shall prepare and submit to the Secretary and

3 the Congress, a report concerning such study.

4 (f) OTHER REQUIREMENTS.—The Board shall satisfy

5 any other requirements imposed on the Board under this

6 title.

7 SEC. 1214. POWERS.

8 (a) EXECUTIVE DIRECTOR; STAFF.—

9 (1) EXECUTIVE DIRECTOR.—

10 (A) IN GENERAL.—The Board shall, with11 out regard to section 5311(b) of title 5, United

12 States Code, appoint an Executive Director.

13 (B) PAY.—The Executive Director shall be

14 paid at a rate equivalent to a rate for the Sen15 ior Executive Service.

16 (2) STAFF.—

17 (A) IN GENERAL.—Subject to subpara18 graphs (B) and (C), the Executive Director,

19 with the approval of the Board, may appoint

20 and fix the pay of additional personnel.

21 (B) PAY.—The Executive Director may

22 make such appointments without regard to the

23 provisions of title 5, United States Code, gov24 erning appointments in the competitive service,

25 and any personnel so appointed may be paid
121

•S 2357

1 without regard to the provisions of chapter 51

2 and subchapter III of chapter 53 of such title,

3 relating to classification and General Schedule

4 pay rates, except that an individual so ap5 pointed may not receive pay in excess of 120

6 percent of the annual rate of basic pay payable

7 for GS–15 of the General Schedule.

8 (C) DETAILED PERSONNEL.—Upon re9 quest of the Executive Director, the head of any

10 Federal department or agency may detail any

11 of the personnel of that department or agency

12 to the Board to assist the Board in carrying out

13 its duties under this Act.

14 (b) CONTRACT AUTHORITY.—To the extent provided

15 in advance in appropriations Acts, the Board may contract

16 with any person (including an agency of the Federal Gov17 ernment) for studies and analysis as required to execute

18 its functions. Any employee of the Executive Branch may

19 be detailed to the Board to assist the Board in carrying

20 out its duties.

21 (c) CONSULTATIONS WITH EXPERTS.—The Board

22 may consult with any outside expert individuals or groups

23 that the Board determines appropriate in performing its

24 duties under section 1213. The Board may establish advi25 sory committees.
122

•S 2357

1 (d) ACCESS TO INFORMATION.—The Board may se2 cure directly from any department or agency of the United

3 States information necessary to enable it to carry out its

4 functions, to the extent such information is otherwise

5 available to a department or agency of the United States.

6 Upon request of the chair, the head of that department

7 or agency shall furnish that information to the Board.

8 (e) DELEGATION OF AUTHORITY.—Except as other9 wise provided, the Board may delegate any function to

10 such officers and employees as the Board may designate

11 and may authorize such successive redelegations of such

12 functions with the Board as the Board deems to be nec13 essary or appropriate. No delegation of functions by the

14 Board shall relieve the Board of responsibility for the ad15 ministration of such functions.

16 (f) RULEMAKING.—The Board is authorized to estab17 lish such rules as may be necessary to carry out this sub18 title.

19 SEC. 1215. FUNDING.

20 (a) AUTHORIZATION OF APPROPRIATIONS.—There

21 are authorized to be appropriated to the Board

22 $5,000,000 for each year and such additional sums as may

23 be necessary to carry out the purposes of this part.

24 (b) SUBMISSION OF BUDGET.—Under the procedures

25 of chapter 11 of title 31, United States Code, the budget
123

•S 2357

1 for the Board for a fiscal year shall be reviewed by the

2 Director of the Office of Management and Budget and

3 submitted to the Congress as part of the President’s sub4 mission of the Budget of the United States for the fiscal

5 year.

6 SEC. 1216. APPLICABILITY OF FEDERAL ADVISORY COM7 MITTEE ACT.

8 The Federal Advisory Committee Act (5 U.S.C. App.)

9 shall not apply to the Board.

10 SEC. 1217. CONGRESSIONAL CONSIDERATION OF BOARD

11 PROPOSALS.

12 (a) IN GENERAL.—Any implementing bill described

13 in section 1213 shall be considered by Congress under the

14 procedures for consideration described in subsection (b).

15 (b) CONGRESSIONAL CONSIDERATION.—

16 (1) RULES OF HOUSE OF REPRESENTATIVES

17 AND SENATE.—This subsection is enacted by Con18 gress—

19 (A) as an exercise of the rulemaking power

20 of the House of Representatives and the Sen21 ate, respectively, and as such is deemed a part

22 of the rules of each House, respectively, but ap23 plicable only with respect to the procedure to be

24 followed in that House in the case of an imple25 menting bill described in subsection (a), and su-
124

•S 2357

1 persedes other rules only to the extent that

2 such rules are inconsistent therewith; and

3 (B) with full recognition of the constitu4 tional right of either House to change the rules

5 (so far as relating to the procedure of that

6 House) at any time, in the same manner and

7 to the same extent as in the case of any other

8 rule of that House.

9 (2) INTRODUCTION AND REFERRAL.—On the

10 day on which the implementing bill described in sub11 section (a) is transmitted to the House of Represent12 atives and the Senate, such bill shall be introduced

13 (by request) in the House of Representatives by the

14 Majority Leader of the House, for himself or herself

15 and the Minority Leader of the House, or by Mem16 bers of the House designated by the Majority Leader

17 and Minority Leader of the House and shall be in18 troduced (by request) in the Senate by the Majority

19 Leader of the Senate, for himself or herself and the

20 Minority Leader of the Senate, or by Members of

21 the Senate designated by the Majority Leader and

22 Minority Leader of the Senate. If either House is

23 not in session on the day on which the implementing

24 bill is transmitted, the bill shall be introduced in the

25 House, as provided in the preceding sentence, on the
125

•S 2357

1 first day thereafter on which the House is in session.

2 The implementing bill introduced in the House of

3 Representatives and the Senate shall be referred to

4 the appropriate committees of each House.

5 (3) AMENDMENTS PROHIBITED.—No amend6 ment to an implementing bill shall be in order in ei7 ther the House of Representatives or the Senate and

8 no motion to suspend the application of this sub9 section shall be in order in either House, nor shall

10 it be in order in either House for the Presiding Offi11 cer to entertain a request to suspend the application

12 of this subsection by unanimous consent.

13 (4) PERIOD FOR COMMITTEE AND FLOOR CON14 SIDERATION.—

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

16 subparagraph (B), if the committee or commit17 tees of either House to which an implementing

18 bill has been referred have not reported it at

19 the close of the 45th day after its introduction,

20 such committee or committees shall be auto21 matically discharged from further consideration

22 of the implementing bill and it shall be placed

23 on the appropriate calendar. A vote on final

24 passage of the implementing bill shall be taken

25 in each House on or before the close of the
126

•S 2357

1 45th day after the implementing bill is reported

2 by the committees or committee of that House

3 to which it was referred, or after such commit4 tee or committees have been discharged from

5 further consideration of the implementing bill.

6 If prior to the passage by one House of an im7 plementing bill of that House, that House re8 ceives the same implementing bill from the

9 other House then—

10 (i) the procedure in that House shall

11 be the same as if no implementing bill had

12 been received from the other House; but

13 (ii) the vote on final passage shall be

14 on the implementing bill of the other

15 House.

16 (B) COMPUTATION OF DAYS.—For pur17 poses of subparagraph (A), in computing a

18 number of days in either House, there shall be

19 excluded—

20 (i) the days on which either House is

21 not in session because of an adjournment

22 of more than 3 days to a day certain, or

23 an adjournment of the Congress sine die;

24 and
127

•S 2357

1 (ii) any Saturday and Sunday not ex2 cluded under clause (i) when either House

3 is not in session.

4 (5) FLOOR CONSIDERATION IN THE HOUSE OF

5 REPRESENTATIVES.—

6 (A) MOTION TO PROCEED.—A motion in

7 the House of Representatives to proceed to the

8 consideration of an implementing bill shall be

9 highly privileged and not debatable. An amend10 ment to the motion shall not be in order, nor

11 shall it be in order to move to reconsider the

12 vote by which the motion is agreed to or dis13 agreed to.

14 (B) DEBATE.—Debate in the House of

15 Representatives on an implementing bill shall

16 be limited to not more than 20 hours, which

17 shall be divided equally between those favoring

18 and those opposing the bill. A motion further to

19 limit debate shall not be debatable. It shall not

20 be in order to move to recommit an implement21 ing bill or to move to reconsider the vote by

22 which an implementing bill is agreed to or dis23 agreed to.

24 (C) MOTION TO POSTPONE.—Motions to

25 postpone, made in the House of Representatives
128

•S 2357

1 with respect to the consideration of an imple2 menting bill, and motions to proceed to the con3 sideration of other business, shall be decided

4 without debate.

5 (D) APPEALS.—All appeals from the deci6 sions of the Chair relating to the application of

7 the Rules of the House of Representatives to

8 the procedure relating to an implementing bill

9 shall be decided without debate.

10 (E) GENERAL RULES APPLY.—Except to

11 the extent specifically provided in the preceding

12 provisions of this paragraph, consideration of

13 an implementing bill shall be governed by the

14 Rules of the House of Representatives applica15 ble to other bills and resolutions in similar cir16 cumstances.

17 (6) FLOOR CONSIDERATION IN THE SENATE.—

18 (A) MOTION TO PROCEED.—A motion in

19 the Senate to proceed to the consideration of an

20 implementing bill shall be privileged and not de21 batable. An amendment to the motion shall not

22 be in order, nor shall it be in order to move to

23 reconsider the vote by which the motion is

24 agreed to or disagreed to.
129

•S 2357

1 (B) GENERAL DEBATE.—Debate in the

2 Senate on an implementing bill, and all debat3 able motions and appeals in connection there4 with, shall be limited to not more than 20

5 hours. The time shall be equally divided be6 tween, and controlled by, the Majority Leader

7 and the Minority Leader or their designees.

8 (C) DEBATE OF MOTIONS AND APPEALS.—

9 Debate in the Senate on any debatable motion

10 or appeal in connection with an implementing

11 bill shall be limited to not more than one hour,

12 to be equally divided between, and controlled

13 by, the mover and the manager of the imple14 menting bill, except that in the event the man15 ager of the implementing bill is in favor of any

16 such motion or appeal, the time in opposition

17 thereto, shall be controlled by the Minority

18 Leader or his designee. Such leaders, or either

19 of them, may, from time under their control on

20 the passage of an implementing bill, allot addi21 tional time to any Senator during the consider22 ation of any debatable motion or appeal.

23 (D) OTHER MOTIONS.—A motion in the

24 Senate to further limit debate is not debatable.
130

•S 2357

1 A motion to recommit an implementing bill is

2 not in order.

3 Subtitle D—Access to Health Plans

4 PART 1—ACCESS THROUGH EMPLOYERS

5 SEC. 1301. GENERAL EMPLOYER RESPONSIBILITIES.

6 (a) OFFER OF PLANS.—

7 (1) IN GENERAL.—Each employer—

8 (A) shall make available to each employee

9 of the employer the opportunity—

10 (i) in the case of an experienced-rated

11 employer, to enroll through the employer in

12 one of at least 3 certified experience-rated

13 standard health plans which provide the

14 standard benefits package established

15 under subtitle C, including, if available, a

16 high cost-sharing plan, a combination cost17 sharing plan, and a low cost-sharing plan

18 as established under such subtitle; or

19 (ii) in the case of a community-rated

20 employer—

21 (I) to enroll in any community22 rated plan offered through a purchas23 ing cooperative operating in the com24 munity rating area in which such em25 ployer is located, and if such coopera-
131

•S 2357

1 tive is not a purchasing cooperative

2 described in section 1341, then also

3 through a cooperative so described;

4 and

5 (II) at the option of the em6 ployer, to enroll through the employer

7 in one of at least 3 certified commu8 nity-rated standard health plans

9 which provide the standard benefits

10 package established under subtitle C,

11 including, if available, a high cost12 sharing plan, a combination cost-shar13 ing plan, and a low cost-sharing plan

14 as established under such subtitle;

15 and

16 (B) shall provide, upon request, payroll

17 withholding of the employee’s premiums.

18 (2) WAIVER OF REQUIREMENT.—The Governor

19 of a participating State (or, the Secretary of Labor,

20 in the case of sponsors of multistate self-insured

21 health plans) may waive the requirement under

22 paragraph (1) for any employer in a rural area of

23 such State which demonstrates an insufficient popu24 lation density to support 3 types of certified stand25 ard health plans. Such an employer shall at least
132

•S 2357

1 offer a high cost-sharing plan as established under

2 subtitle C.

3 (3) PROHIBITION ON OFFERING OF ALTER4 NATIVE PACKAGE.—No employer may offer an alter5 native standard benefits package established under

6 subtitle C.

7 (b) FORWARDING OF INFORMATION.—

8 (1) INFORMATION REGARDING PLANS.—An em9 ployer must provide each employee of such em10 ployer—

11 (A) with information provided by the State

12 under section 1508 regarding all certified

13 standard health plans offered in the community

14 rating area in which the employer is located,

15 and

16 (B) if the employer knows that an em17 ployee resides in another community rating

18 area, information regarding how to obtain infor19 mation on certified standard health plans of20 fered to residents of such other community rat21 ing area.

22 (2) INFORMATION REGARDING EMPLOYEES.—

23 An employer shall forward the name and address

24 (and any other necessary identifying information
133

•S 2357

1 specified by the Secretary) of each employee enroll2 ing through the employer—

3 (A) to the certified standard health plan in

4 which such employee is enrolling, or

5 (B) to the purchasing cooperative (if any)

6 through which such employee is enrolling.

7 SEC. 1302. AUDITING OF RECORDS.

8 Each employer shall maintain such records, and pro9 vide the participating State for the area in which the em10 ployer maintains its principal place of employment (as

11 specified by the Secretary of Labor) with access to such

12 records, as may be necessary to verify and audit the infor13 mation reported under this Act.

14 SEC. 1303. PROHIBITION OF CERTAIN EMPLOYER DISCRIMI15 NATION.

16 (a) IN GENERAL.—No employer may discriminate

17 with respect to an employee on the basis of the family sta18 tus of the employee or on the basis of the class of family

19 enrollment selected with respect to the employee.

20 (b) OTHER PROHIBITIONS.—For the prohibition of

21 other employer discriminatory practices, see section 4522

22 of the Internal Revenue Code of 1986.
134

•S 2357

1 SEC. 1304. PROHIBITION ON SELF-INSURING COST-SHAR2 ING BENEFITS.

3 A community-rated employer (and an experience4 rated employer with respect to employees who are commu5 nity-rated eligible individuals) may provide benefits to em6 ployees that consist of the benefits included in a cost-shar7 ing plan (as defined in section 1141(a)(2)(C)) only

8 through a contribution toward the purchase of a cost-shar9 ing plan which is funded primarily through insurance.

10 SEC. 1305. RESPONSIBILITIES IN SINGLE-PAYER STATES.

11 In the case of an individual who resides in a single12 payer State and an employer with respect to employees

13 who reside in such a State, the responsibilities of such in14 dividual and employer under such system shall supersede

15 the obligations of the individual and employer under this

16 subtitle.

17 SEC. 1306. DEVELOPMENT OF LARGE EMPLOYER PURCHAS18 ING GROUPS.

19 (a) IN GENERAL.—Nothing in this title shall be con20 strued as prohibiting 2 or more experience-rated employ21 ers from joining together to purchase insurance for their

22 employees, except that each such employer shall be respon23 sible for meeting the employer’s requirements under this

24 title with respect to its employees.

25 (b) RULES BY SECRETARY.—The Secretary of Labor

26 shall provide rules for large employer purchasing groups
135

•S 2357

1 similar to the rules applicable to purchasing cooperatives,

2 including rules regarding fiduciary responsibilities and fi3 nancial management.

4 (c) NO USE OF PURCHASING COOPERATIVES.—An

5 experience-rated employer shall be ineligible to purchase

6 health insurance through a purchasing cooperative, except

7 with respect to health insurance for individuals described

8 in paragraphs (1) and (2) of section 1307(d).

9 SEC. 1307. RULES GOVERNING LITIGATION INVOLVING RE10 TIREE HEALTH BENEFITS.

11 (a) MAINTENANCE OF BENEFITS.—

12 (1) IN GENERAL.—If—

13 (A) retiree health benefits or plan or plan

14 sponsor payments in connection with such bene15 fits are to be or have been terminated or re16 duced under an employee welfare benefit plan;

17 and

18 (B) an action is brought by any participant

19 or beneficiary to enjoin or otherwise modify

20 such termination or reduction,

21 the court without requirement of any additional

22 showing shall promptly order the plan and plan

23 sponsor to maintain the retiree health benefits and

24 payments at the level in effect immediately before

25 the termination or reduction while the action is
136

•S 2357

1 pending in any court. No security or other undertak2 ing shall be required of any participant or bene3 ficiary as a condition for issuance of such relief. An

4 order requiring such maintenance of benefits may be

5 refused or dissolved only upon determination by the

6 court, on the basis of clear and convincing evidence,

7 that the action is clearly without merit.

8 (2) MODIFICATIONS.—Nothing in this section

9 shall preclude a court from modifying the obligation

10 of a plan or plan sponsor to the extent retiree bene11 fits are otherwise being paid.

12 (b) BURDEN OF PROOF.—In addition to the relief au13 thorized in subsection (a) or otherwise available, if, in any

14 action described in subsection (a), the terms of the em15 ployee welfare benefit plan summary plan description or

16 other materials distributed to employees at the time of a

17 participant’s retirement or disability are silent or are am18 biguous, either on their face or after consideration of ex19 trinsic evidence, as to whether retiree health benefits and

20 payments may be terminated or reduced for a participant

21 and his or her beneficiaries after the participant’s retire22 ment or disability, then the benefits and payments shall

23 not be terminated or reduced for the participant and his

24 or her beneficiaries unless the plan or plan sponsor estab25 lishes by a preponderance of the evidence that the sum-
137

•S 2357

1 mary plan description and other materials about retiree

2 benefits—

3 (1) were distributed to the participant at least

4 90 days in advance of retirement or disability;

5 (2) did not promise retiree health benefits for

6 the lifetime of the participant and his or her spouse;

7 and

8 (3) clearly and specifically disclosed that the

9 plan allowed such termination or reduction as to the

10 participant after the time of his or her retirement or

11 disability.

12 The disclosure described in paragraph (3) must have been

13 made prominently and in language which can be under14 stood by the average plan participant.

15 (c) REPRESENTATION.—Notwithstanding any other

16 provision of law, an employee representative of any retired

17 employee or the employee’s spouse or dependents may—

18 (1) bring an action described in this section on

19 behalf of such employee, spouse, or dependents; or

20 (2) appear in such an action on behalf of such

21 employee, spouse or dependents.

22 (d) RETIREE HEALTH BENEFITS.—For the purposes

23 of this section, the term ‘‘retiree health benefits’’ means

24 health benefits (including coverage) which are provided

25 to—
138

•S 2357

1 (1) retired or disabled employees who, imme2 diately before the termination or reduction, are enti3 tled to receive such benefits upon retirement or be4 coming disabled; and

5 (2) their spouses and dependents.

6 (e) EFFECTIVE DATE.—The amendments made by

7 this section shall apply to actions relating to terminations

8 or reductions of retiree health benefits which are pending

9 or brought, on or after July 20, 1993.

10 SEC. 1308. ENFORCEMENT.

11 In the case of a person that violates a requirement

12 of this subtitle, the Secretary of Labor may impose a civil

13 money penalty, in an amount not to exceed $10,000, for

14 each violation with respect to each individual.

15 PART 2—ACCESS THROUGH HEALTH INSURANCE

16 PURCHASING COOPERATIVES

17 Subpart A—General Requirements

18 SEC. 1321. ORGANIZATION AND OPERATION.

19 (a) DESIGNATION OF COOPERATIVES.—A State shall

20 certify health insurance purchasing cooperatives (in this

21 Act referred to as ‘‘purchasing cooperatives’’) in accord22 ance with this part. Each cooperative shall be chartered

23 under State law and operated as a not-for-profit corpora24 tion.

25 (b) BOARD OF DIRECTORS.—
139

•S 2357

1 (1) IN GENERAL.—Each cooperative shall be

2 governed by a Board of Directors to be composed of

3 representatives of community-rated employers, com4 munity-rated employees, and community-rated indi5 viduals as elected by the members of the purchasing

6 cooperative.

7 (2) INITIAL BOARD.—The initial Board of Di8 rectors of a purchasing cooperative shall be com9 posed of members selected by the sponsoring entity

10 of the cooperative. Subsequent members of the

11 Board of Directors shall be elected as provided for

12 under paragraph (1) after being nominated by a

13 nominating committee appointed by the preceding

14 Board of Directors.

15 (c) ESTABLISHMENT BY STATE OR LOCAL GOVERN16 MENT.—A State or local government may establish or

17 sponsor a purchasing cooperative to serve a community

18 rating area. The Secretary shall establish special rules

19 concerning the legal and governing structure of a State

20 or local government purchasing cooperative.

21 (d) MEMBERSHIP.—A purchasing cooperative shall

22 accept all community-rated employers, community-rated

23 employees, and community-rated individuals residing with24 in the area served by the cooperative as members if such

25 employers, employees, or individuals request such mem-
140

•S 2357

1 bership. Members of a cooperative shall have voting rights

2 to select members of the Board of Directors consistent

3 with rules established by the State.

4 (e) PROHIBITION.—An insurer may not form or un5 derwrite a purchasing cooperative but may administer

6 such a cooperative.

7 (f) DUTIES OF COOPERATIVES.—Each purchasing

8 cooperative shall—

9 (1) negotiate (regarding premiums and market10 ing fees) with and enter into agreements with stand11 ard health plans under section 1323;

12 (2) enter into agreements with community-rated

13 employers;

14 (3) enroll community-rated employees and com15 munity-rated individuals in standard health plans;

16 (4) collect premiums and make payments to

17 standard health plans on behalf of community-rated

18 employers and community-rated individuals;

19 (5) provide for coordination with other purchas20 ing cooperatives;

21 (6) provide comparative information to the pub22 lic and the participating State on standard health

23 plans offered through the purchasing cooperative

24 from information provided by the plans under sec25 tion 1125;
141

•S 2357

1 (7) have the capability of accepting data from

2 standard health plans as required under subtitle B

3 of title V;

4 (8) comply with such fiduciary responsibility, fi5 nancial management, and administrative require6 ments as the Secretary may establish; and

7 (9) carry out other functions provided for under

8 this title.

9 (g) LIMITATION ON ACTIVITIES.—A cooperative shall

10 not—

11 (1) perform any activity (including review, ap12 proval, or enforcement) relating to payment rates for

13 providers;

14 (2) perform any activity (including certification

15 or enforcement) relating to compliance of standard

16 health plans with the requirements of this Act;

17 (3) assume insurance risk; or

18 (4) perform other activities identified by the

19 State as being inconsistent with the performance of

20 its duties under this Act.

21 (h) RULES OF CONSTRUCTION.—

22 (1) MULTIPLE COOPERATIVES.—Noting in this

23 section shall be construed to prevent a State from

24 certifying or establishing more than one purchasing

25 cooperative in a community rating area.
142

•S 2357

1 (2) EXCLUSIVE COOPERATIVE.—

2 (A) IN GENERAL.—Nothing in this section

3 shall be construed as requiring a State to cer4 tify or establish more than one purchasing co5 operative serving a community rating area.

6 (B) SPECIAL RULES.—If a State chooses

7 to certify only one purchasing cooperative in a

8 community rating area, then such cooperative

9 (other than a cooperative established under sec10 tion 1341) may not negotiate regarding pre11 miums as described in subsection (f)(1) and,

12 notwithstanding section 1323(a)(1), shall enter

13 into an agreement with each standard health

14 plan operating in the area which desires such

15 an agreement.

16 (3) SINGLE ORGANIZATION SERVING MULTIPLE

17 COMMUNITY RATING AREAS.—Nothing in this sec18 tion shall be construed as preventing a single not19 for-profit corporation from being the purchasing co20 operative for more than one community rating area.

21 (4) VOLUNTARY PARTICIPATION.—Nothing in

22 this section shall be construed as requiring any com23 munity-rated individual, community-rated employee,

24 or community-rated employer to purchase a stand25 ard health plan exclusively through a cooperative.
143

•S 2357

1 SEC. 1322. MEMBERSHIP.

2 (a) IN GENERAL.—A purchasing cooperative shall

3 offer all community-rated individuals and community4 rated employees residing within the community rating

5 area served by the cooperative the opportunity to enroll

6 in any standard health plan that has entered into an

7 agreement with the cooperative under section 1323.

8 (b) ENROLLMENT PROCESS.—A purchasing coopera9 tive shall establish an enrollment process in accordance

10 with rules established by the Secretary.

11 (c) COORDINATION AMONG PURCHASING COOPERA12 TIVES.—Each participating State shall establish rules con13 sistent with this section for coordination among purchas14 ing cooperatives in cases in which community-rated em15 ployers are located in one community rating area and their

16 community-rated employees reside in a different commu17 nity rating area.

18 SEC. 1323. AGREEMENTS WITH STANDARD HEALTH PLANS.

19 (a) AGREEMENTS.—

20 (1) IN GENERAL.—Except as provided in para21 graph (2), each purchasing cooperative for a commu22 nity rating area may enter into an agreement under

23 this section with any standard health plan that the

24 purchasing cooperative desires to be made available

25 through such purchasing cooperative.

26 (2) MINIMUM REQUIREMENT.—
144

•S 2357

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

2 subparagraph (B), each purchasing cooperative

3 shall enter into an agreement under paragraph

4 (1) with at least 3 types of standard health

5 plans which provide the standard benefits pack6 age established under subtitle C, including, if

7 available, a high cost-sharing plan, a combina8 tion cost-sharing plan, and a low cost-sharing

9 plan as established under such subtitle.

10 (B) WAIVER OF REQUIREMENT.—The Gov11 ernor of a participating State may waive the re12 quirement under subparagraph (A), in a man13 ner consistent with section 1301(a)(2)), for any

14 purchasing cooperative in a rural area of such

15 State which demonstrates an insufficient popu16 lation density to support 3 types of standard

17 health plans. Such a purchasing cooperative

18 shall at least offer a high cost-sharing plan as

19 established under such subtitle.

20 (3) LIMITATION.—A purchasing cooperative

21 may not enter into an agreement under this section

22 with a standard health plan unless such plan is cer23 tified by the State under subtitle E.

24 (4) TERMINATION OF AGREEMENT.—An agree25 ment under paragraph (1) shall remain in effect for
145

•S 2357

1 a 12-month period. The State shall establish a proc2 ess for the termination of agreements entered into

3 under this section and a process for appealing such

4 termination under this paragraph. In accordance

5 with rules established by the State—

6 (A) a cooperative may terminate an agree7 ment with a standard health plan if the health

8 plan’s certification for the community rating

9 area involved is terminated or if the health plan

10 fails to fulfill the requirements of the agree11 ment; and

12 (B) a standard health plan may appeal the

13 termination of an agreement with a cooperative

14 under this paragraph to the State in accordance

15 with rules and procedures established by the

16 State.

17 (b) RECEIPT OF GROSS PREMIUMS.—

18 (1) IN GENERAL.—A purchasing cooperative

19 may require that a standard health plan with which

20 such cooperative has an agreement under this sec21 tion provide for the payment of premiums directly to

22 the cooperative in accordance with rules promulgated

23 by the Secretary.

24 (2) FORWARDING OF PREMIUMS.—A purchas25 ing cooperative that requires direct payment of pre-
146

•S 2357

1 miums under paragraph (1) shall forward to the

2 standard health plan the amounts collected on the

3 behalf of the enrollees in such plan in accordance

4 with the State program of reinsurance and risk ad5 justment.

6 (3) CERTIFIED STANDARD HEALTH PLANS RE7 TAIN RISK OF NONPAYMENT.—Nothing in this sub8 section shall be construed as placing upon a pur9 chasing cooperative any risk associated with the fail10 ure of individuals and employers to make prompt

11 payment of premiums (other than the portion of the

12 premium representing the purchasing cooperative

13 administrative fee under section 1324(a)).

14 SEC. 1324. MEMBERSHIP AND MARKETING FEES.

15 (a) COOPERATIVE FEES.—A purchasing cooperative

16 shall charge members a uniform membership fee to cover

17 the cost of activities undertaken by the cooperative (in18 cluding all administrative costs incurred by the coopera19 tive).

20 (b) MARKETING FEES.—

21 (1) IN GENERAL.—A purchasing cooperative

22 shall charge members a separate marketing fee

23 which a standard health plan may charge to cover

24 the cost of marketing and administrative activities

25 undertaken by such plan in such cooperative.
147

•S 2357

1 (2) NEGOTIATION.—A purchasing cooperative

2 and a standard health plan shall negotiate the mar3 keting fee. Such negotiated fee shall not be binding

4 on such health plan with respect to other purchasing

5 cooperatives through which the plan is offered.

6 (3) LIMITATION.—In no case shall a marketing

7 fee assessed by a standard health plan offered out8 side of a purchasing cooperative be lower than the

9 weighted average of the marketing fees negotiated

10 with all purchasing cooperatives for the community

11 rating area involved.

12 (c) DISCLOSURE AND MULTIPLE COOPERATIVES.—

13 (1) DISCLOSURE.—A purchasing cooperative

14 shall, prior to the time of enrollment, publish the

15 membership fee of such cooperative and the market16 ing fees for each standard health plan offered

17 through the cooperative. Such fees shall be cal18 culated and identified as separate charges from the

19 premium charged by the standard health plans of20 fered by the purchasing cooperative.

21 (2) SUBMISSIONS TO STATE.—

22 (A) IN GENERAL.—Each purchasing coop23 erative in a community rating area shall provide

24 the State with information on the fees described
148

•S 2357

1 in paragraph (1) under rules developed by the

2 State.

3 (B) DOCUMENTATION.—Pursuant to regu4 lations issued by the Secretary, standard health

5 plans shall submit actuarial data and such

6 other documentation as the State may require

7 in order to verify the basis for variation in mar8 keting fees across cooperatives and other insur9 ance distribution sources. States shall use such

10 information in order to make a determination

11 that each plan’s marketing fees are based on le12 gitimate variation in marketing and distribution

13 costs across alternative distribution sources.

14 (3) MULTIPLE COOPERATIVES.—In community

15 rating areas in which States have certified multiple

16 purchasing cooperatives, such cooperatives may com17 pete for members on the basis of the fees described

18 in this section.

19 Subpart B—Community-Rated Employers

20 SEC. 1331. DUTIES OF PURCHASING COOPERATIVES.

21 (a) IN GENERAL.—A purchasing cooperative for a

22 community rating area shall offer to enter into an agree23 ment under this section with each community-rated em24 ployer that employs individuals in the community rating

25 area and that desires to join the cooperative. An agree-
149

•S 2357

1 ment between such an employer and a cooperative shall

2 include provisions consistent with the requirements of this

3 subtitle.

4 (b) ELECTION OF ENROLLMENT.—

5 (1) IN GENERAL.—An employee of a commu6 nity-rated employer may select coverage under any

7 of the standard health plans offered through a pur8 chasing cooperative of which the employer is a mem9 ber.

10 (2) ENROLLMENT OUTSIDE THE COOPERA11 TIVE.—An employee of a community-rated employer

12 may elect to enroll in a plan offered through the

13 purchasing cooperative with which the employer has

14 entered into an agreement or directly with a stand15 ard health plan selected by the employer (if such

16 plan is not offered by the cooperative selected by the

17 employer). A community-rated employee not residing

18 in the community rating area served by the purchas19 ing cooperative selected by the employer shall enroll

20 in a standard health plan consistent with rules pro21 mulgated by the Secretary. The purchasing coopera22 tive selected by the employer shall be responsible for

23 forwarding premium payments to the appropriate

24 plan or cooperative for each community-rated em-
150

•S 2357

1 ployee in accordance with the State program of rein2 surance and risk adjustment.

3 (3) VOLUNTARY EMPLOYER CONTRIBUTION.—If

4 an employer voluntarily contributes to the cost of

5 health insurance coverage for its employees, the em6 ployer shall not be required to make a contibution

7 on behalf of an employee who elects to obtain cov8 erage directly from a standard health plan not cho9 sen by such employer or from a purchasing coopera10 tive not chosen by such employer, unless such coop11 erative is one established under section 1341.

12 (c) FORWARDING INFORMATION ON ELIGIBLE EM13 PLOYEES.—Under an agreement between an employer and

14 a cooperative, the employer must forward to the appro15 priate cooperative such information as may be required by

16 the Secretary.

17 Subpart C—Federal Employees Health Benefits

18 Program

19 SEC. 1341. REQUIREMENTS APPLICABLE TO FEHBP.

20 (a) AVAILABILITY OF PLANS.—

21 (1) COMMUNITY-RATED INDIVIDUALS.—All

22 standard health plans offered by FEHBP through a

23 purchasing cooperative joined or established by

24 FEHBP in a community rating area under sub25 section (b) shall be made available to all community-
151

•S 2357

1 rated individuals residing within that area at the

2 community-rated premium established under section

3 1116.

4 (2) FEDERAL EMPLOYEES AND ANNUITANTS.—

5 Until the date of universal coverage, any Federal

6 employee or annuitant shall obtain coverage under

7 any FEHBP plan offered through such a purchasing

8 cooperative in the community rating area in which

9 such employee or annuitant resides at the rate es10 tablished under chapter 89 of title 5, United States

11 Code, for such plan.

12 (3) OFFER OF NATIONAL PLANS.—Each pur13 chasing cooperative joined or established under para14 graph (1) shall, not later than January 1, 1998,

15 offer to community-rated individuals covered by such

16 cooperative all national FEHBP plans (including

17 employee organization plans) under rules established

18 by the Office of Personnel Management.

19 (b) AGREEMENTS WITH PURCHASING COOPERA20 TIVES.—

21 (1) IN GENERAL.—The Office of Personnel

22 Management shall make every effort to enter into an

23 agreement with a purchasing cooperative in each

24 community rating area in the United States to carry

25 out its responsibilities under this section.
152

•S 2357

1 (2) ESTABLISHMENT BY OPM.—If no purchas2 ing cooperative exists in an area or if the Office of

3 Personnel Management is unsuccessful in reaching

4 such an agreement, the Office of Personnel Manage5 ment shall establish and administer a purchasing co6 operative in such area. Such cooperative shall meet

7 all the requirements of this part except rules regard8 ing governance and fiduciary responsibility.

9 (3) DESIGNATION AS PURCHASING COOPERA10 TIVE.—All FEHBP eligible employees residing in

11 the community rating area served by a cooperative

12 described in paragraph 1 or (2) shall enroll in a

13 standard health plan through such cooperative.

14 (c) REQUIREMENT OF OPM.—

15 (1) IN GENERAL.—The Office of Personnel

16 Management is hereby authorized to take such ac17 tions as are appropriate to fulfill its responsibilities

18 under this subpart.

19 (2) RATE BLENDING.—The Office of Personnel

20 Management shall implement rules to blend during

21 the period before the date of universal coverage the

22 premiums for FEHBP plans offered through pur23 chasing cooperatives to Federal employees and com24 munity-rated individuals in each community rating

25 area.
153

•S 2357

1 (d) AMENDMENTS TO TITLE 5.—

2 (1) IN GENERAL.—Chapter 89 of title 5, United

3 States Code, is amended by adding at the end the

4 following new section:

5 ‘‘§ 8915. Relationship to the Health Security Act

6 ‘‘(a) The provisions of this chapter shall be subject

7 to the provisions of the Health Security Act, to the extent

8 of any inconsistency between such provisions.

9 ‘‘(b) Individuals who are not Federal employees or

10 annuitants and who are enrolled in a health benefits plan

11 pursuant to section 1341 of the Health Security Act shall

12 for all administrative purposes be treated separately from

13 Federal employees and annuitants enrolled under this

14 chapter.

15 ‘‘(c) No provision of the Health Security Act shall

16 be construed to authorize the payment or deposit of any

17 monies from or into the Employees Health Benefits

18 Fund.’’.

19 (2) CONFORMING AMENDMENT.—Section 8914

20 of title 5, United States Code, is amended by strik21 ing out ‘‘Any provision of law’’ and inserting in lieu

22 thereof ‘‘Except for the provisions of the Health Se23 curity Act, any provision of law’’.

24 (3) TECHNICAL AMENDMENT.—The table of

25 sections for chapter 89 of title 5, United States
154

•S 2357

1 Code, is amended by adding after the item relating

2 to section 8914 the following new item:

‘‘8915. Relationship to the Health Security Act.’’.

3 SEC. 1342. SPECIAL RULES FOR FEHBP SUPPLEMENTAL

4 PLANS.

5 (a) DEVELOPMENT.—The Office of Personnel Man6 agement shall develop FEHBP supplemental health bene7 fit plans. The Office of Personnel Management shall meet

8 and confer with representatives of Federal employees and

9 annuitants regarding the supplemental services plans and

10 the cost-sharing plans to be offered (including premium

11 contributions, if any, to be made by the Federal Govern12 ment with respect to such plans for Federal employees and

13 annuitants) through a process to be established by the Na14 tional Partnership Council.

15 (b) OFFERING.—The Federal Government shall offer

16 FEHBP supplemental health benefit plans developed in

17 accordance with subsection (a) and cost-sharing plans as

18 provided in section 1141 to Federal employees, annu19 itants, and any other community-rated individual.

20 SEC. 1343. DEFINITIONS.

21 For purposes of this subpart:

22 (1) ANNUITANT.—The term ‘‘annuitant’’ means

23 an ‘‘annuitant’’ as defined by section 8901 of title

24 5, United States Code.
155

•S 2357

1 (2) FEHBP.—The term ‘‘FEHBP’’ means the

2 health insurance program under chapter 89 of title

3 5, United States Code.

4 (3) FEDERAL EMPLOYEE.—The term ‘‘Federal

5 employee’’ means an ‘‘employee’’ as defined by sec6 tion 8901 of title 5, United States Code.

7 PART 3—TREATMENT OF ASSOCIATION PLANS

8 SEC. 1351. RULES RELATING TO MULTIPLE EMPLOYER

9 WELFARE ARRANGEMENTS.

10 (a) GENERAL RULE.—A multiple employer welfare

11 arrangement—

12 (1) shall meet all requirements of this Act ap13 plicable to standard health plans, and

14 (2) may elect to be treated as a health insur15 ance purchasing cooperative if it meets the require16 ments of part 2 and other applicable requirements of

17 this Act.

18 (b) TREATMENT FOR RATING PURPOSE.—

19 (1) IN GENERAL.—Except as provided in para20 graph (2), a plan to which subsection (a) applies

21 shall be treated as a community-rated plan and shall

22 meet all requirements of this Act applicable to a

23 community-rated plan.

24 (2) EXPERIENCE-RATED PLAN.—A plan shall

25 be treated as an experience-rated plan only if the
156

•S 2357

1 only participants in the plan are experience-rated in2 dividuals.

3 (c) COORDINATION WITH ERISA.—Section 514(b) of

4 the Employee Retirement Income Security Act of 1974

5 (29 U.S.C. 1144(b)) is amended by striking paragraph

6 (6).

7 (d) MULTIPLE EMPLOYER WELFARE ARRANGE8 MENT.—For purposes of this section, the term ‘‘multiple

9 employer welfare arrangement’’ has the meaning given

10 such term by section 3(40) of the Employer Retirement

11 Income Security Act of 1974.

12 SEC. 1352. ASSOCIATION PLANS.

13 (a) GENERAL RULE.—Any health plan to which sec14 tion 1351 does not apply which is maintained by an asso15 ciation or similar entity shall meet all requirements of this

16 Act applicable to standard health plans.

17 (b) TREATMENT FOR RATING PURPOSES.—

18 (1) IN GENERAL.—Except as provided in para19 graph (2), a plan to which subsection (a) applies

20 shall be treated as a community-rated plan and shall

21 meet all requirements of this Act applicable to a

22 community-rated plan.

23 (2) EXPERIENCE-RATED PLAN.—A plan shall

24 be treated as an experience-rated plan only if the
157

•S 2357

1 only participants in the plan are experience-rated in2 dividuals.

3 Subtitle E—Federal

4 Responsibilities

5 PART 1—SECRETARY OF HEALTH AND HUMAN

6 SERVICES

7 Subpart A—General Duties

8 SEC. 1401. GENERAL DUTIES AND RESPONSIBILITIES.

9 (a) IN GENERAL.—Except as otherwise specifically

10 provided in this Act (or with respect to the administration

11 of provisions in the Internal Revenue Code of 1986 or in

12 the Employee Retirement Income Security Act of 1974),

13 the Secretary of Health and Human Services shall admin14 ister and implement all of the provisions of this Act.

15 (b) COVERAGE AND FAMILIES.—The Secretary shall

16 develop and implement standards relating to the eligibility

17 of individuals for coverage in applicable health plans under

18 subtitle B and may provide such additional exceptions and

19 special rules relating to the treatment of family members

20 under section 1113 as the Secretary finds appropriate.

21 (c) QUALITY MANAGEMENT AND IMPROVEMENT.—

22 The Secretary shall establish and have ultimate respon23 sibility for a performance-based system of quality manage24 ment and improvement as required by section 5001.
158

•S 2357

1 (d) INFORMATION SYSTEM AND INFORMATION RE2 LATED FUNCTIONS.—

3 (1) IN GENERAL.—The Secretary shall—

4 (A) develop and implement standards to

5 establish a national health information system

6 to measure quality as required by title V;

7 (B) provide model format and content re8 quirements for summary plan descriptions;

9 (C) provide model format and content re10 quirements for comparative plan brochures

11 under section 1125; and

12 (D) provide model format and content re13 quirements for comparative purchasing coopera14 tive brochures under section 1321.

15 (2) INFORMATION RELATED FUNCTIONS.—

16 (A) DESIGNATION.—The Secretary shall

17 provide for the use of entities in the national

18 health data network to perform information re19 lated functions under this section with respect

20 to employers, States, contracting entities, and

21 purchasing cooperatives.

22 (B) FUNCTIONS.—The functions referred

23 to in subparagraph (A) shall include—

24 (i) receipt of information submitted by

25 employers under section 1301,
159

•S 2357

1 (ii) with respect to the information re2 ceived, transmittal to the States, and

3 (iii) such other functions as the Sec4 retary specifies.

5 (e) PARTICIPATING STATE REQUIREMENTS.—Con6 sistent with the provisions of subtitle F, the Secretary

7 shall—

8 (1) establish requirements for participating

9 States,

10 (2) monitor State compliance with those re11 quirements, and

12 (3) provide technical assistance,

13 in a manner that ensures access to the standard benefit

14 package for all eligible individuals.

15 (f) DEVELOPMENT OF PREMIUM AND AGE CLASS

16 FACTORS.—The Secretary shall establish premium class

17 and age class factors under subpart D.

18 (g) DEVELOPMENT OF REINSURANCE AND RISK-AD19 JUSTMENT METHODOLOGY.—The Secretary shall develop

20 a methodology for the reinsurance and risk-adjustment of

21 premium payments to community-rated and experience22 rated health plans in accordance with section 1504.

23 (h) FINANCIAL REQUIREMENTS.—

24 (1) IN GENERAL.—The Secretary shall establish

25 minimum capital requirements and requirements for
160

•S 2357

1 guaranty funds and financial reporting and auditing

2 standards under subpart F.

3 (2) FINANCIAL MANAGEMENT STANDARDS.—

4 The Secretary, in consultation with the Secretary of

5 Labor, shall establish, for purposes of section 1118,

6 standards relating to the management of finances,

7 maintenance of records, accounting practices, audit8 ing procedures, and financial reporting for States,

9 consumer purchasing cooperatives and health plans.

10 Such standards shall take into account current Fed11 eral laws and regulations relating to fiduciary re12 sponsibilities and financial management of funds.

13 (3) AUDITING STATE PERFORMANCE.—The

14 Secretary shall perform periodic financial and other

15 audits of States to assure that such States are car16 rying out their responsibilities under this Act con17 sistent with this Act. Such audits shall include au18 dits of State performance in the areas of—

19 (A) assuring enrollment of all community20 rated individuals in health plans;

21 (B) management of premium and cost

22 sharing discounts and reductions provided;

23 (C) financial management (including the

24 financial activities of cooperatives and State25 designated contracting entities); and
161

•S 2357

1 (D) assuring enforcement of the anti2 discrimination provisions of this Act.

3 (i) STANDARDS FOR HEALTH PLAN GRIEVANCE PRO4 CEDURES.—The Secretary shall establish standards for

5 health plan grievance procedures that are used by enroll6 ees in pursuing complaints.

7 (j) FIDUCIARY REQUIREMENTS.—The Secretary

8 shall, in consultation with the Secretary of Labor, develop

9 and promulgate fiduciary requirements for the manage10 ment of funds by States, plans, cooperatives, and employ11 ers.

12 (k) GUARANTY FUNDS.—The Secretary shall estab13 lish standards for guaranty funds as provided for in sec14 tion 1442.

15 (l) STANDARDS FOR UTILIZATION MANAGEMENT

16 PROGRAMS.—

17 (1) IN GENERAL.—Not later than 12 months

18 after the date of enactment of this Act, the Sec19 retary, in consultation with interested parties which

20 may include one or more accrediting organizations,

21 shall promulgate uniform Federal standards for uti22 lization management programs, to include the activi23 ties described in section 1129.

24 (2) COMPLIANCE.—States shall ensure compli25 ance with the Federal standards established under
162

•S 2357

1 paragraph (1), consistent with their role in certify2 ing health plans.

3 (3) REVIEW AND UPDATE.—The Secretary shall

4 periodically review and update utilization manage5 ment standards to reflect appropriate policies and

6 practices in health care delivery.

7 (m) COLLECTION ACTIVITIES.—The Secretary may

8 provide (through contract or otherwise) for collection ac9 tivities for the collection of amounts owed to States and

10 purchasing cooperatives for health insurance coverage sub11 ject to the provisions of this title.

12 SEC. 1402. ANNUAL REPORT.

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

14 with the National Health Benefits Board and the Health

15 Care Cost and Coverage Commission, shall prepare and

16 submit to the President and the Congress an annual re17 port concerning the overall implementation of the new

18 health care system under this Act.

19 (b) MATTERS TO BE INCLUDED.—The Secretary

20 shall include in each annual report under this section the

21 following:

22 (1) Information on Federal and State imple23 mentation.

24 (2) Data related to quality improvement.
163

•S 2357

1 (3) Recommendations or changes in the admin2 istration and regulation of laws related to health

3 care financing, delivery, and coverage.

4 SEC. 1403. ASSISTANCE WITH FAMILY COLLECTIONS.

5 The Secretary shall provide States with such tech6 nical and other assistance as may promote the efficient

7 collection of other amounts owed by families under this

8 Act.

9 SEC. 1404. ADVISORY OPINIONS.

10 (a) IN GENERAL.—Community- and provider-based

11 plans, and individuals and organizations seeking to estab12 lish such plans, shall be eligible to receive advisory opin13 ions from appropriate Federal entities, including opinions

14 concerning whether their arrangement complies with Fed15 eral self-referral, fraud and abuse, and anti-trust laws.

16 (b) REGULATIONS.—The Secretary shall issue regula17 tions setting forth the procedures for obtaining advisory

18 opinions described in subsection (a).

19 (c) TIMING OF OPINIONS.—An advisory opinions

20 shall be issued not later than 90 days after receipt of a

21 request for such opinion from a plan.

22 (d) FEES.—Applicants under this section shall pay

23 a fee, the amount of which to be determined by the Sec24 retary, to cover the costs of providing an opinion under

25 this section.
164

•S 2357

1 SEC. 1405. FUNDING.

2 There are authorized to be appropriated to the Sec3 retary, such sums as may be necessary to carry out this

4 subpart for each of the fiscal years 1995 through 1999.

5 Subpart B—Responsibilities Relating to Review and

6 Approval of State Systems

7 SEC. 1411. FEDERAL REVIEW AND ACTION ON STATE SYS8 TEMS.

9 (a) APPROVAL OF STATE SYSTEMS BY SEC10 RETARY.—

11 (1) IN GENERAL.—The Secretary shall approve

12 a State health care system for which a plan is sub13 mitted under section 1501(a) unless the Secretary

14 determines that the system (as set forth in the plan)

15 does not (or will not) meet the responsibilities for a

16 participating State under this Act.

17 (2) REGULATIONS.—Not later than July 1,

18 1995, the Secretary shall issue regulations, prescrib19 ing the requirements for State health care systems

20 under this title, except that in the case of a plan

21 submitted under section 1501(a) before the date of

22 issuance of such regulations, the Secretary shall take

23 action on such document notwithstanding the fact

24 that such regulations have not been issued.

25 (3) NO APPROVAL PERMITTED FOR YEARS

26 PRIOR TO 1996.—Except as otherwise specifically
165

•S 2357

1 provided in this Act, the Secretary may not approve

2 a State health care system under this subpart for

3 any year prior to 1996.

4 (b) REVIEW OF COMPLETENESS OF PLANS.—

5 (1) IN GENERAL.—If a State submits a plan

6 under subsection (a)(1), the Secretary shall notify

7 the State, not later than 7 working days after the

8 date of submission, whether or not the plan is com9 plete and provides the Secretary with sufficient in10 formation to approve or disapprove the document.

11 (2) ADDITIONAL INFORMATION ON INCOMPLETE

12 PLAN.—If the Secretary notifies a State that the

13 State’s plan is not complete, the State shall be pro14 vided such additional period (not to exceed 45 days)

15 as the Secretary may by regulation establish in

16 which to submit such additional information as the

17 Secretary may require. Not later than 7 working

18 days after the State submits the additional informa19 tion, the Secretary shall notify the State respecting

20 the completeness of the plan.

21 (c) ACTION ON COMPLETED DOCUMENTS.—

22 (1) IN GENERAL.—The Secretary shall make a

23 determination (and notify the State) on whether the

24 State’s plan provides for the implementation of a
166

•S 2357

1 State system that meets the applicable requirements

2 of this title—

3 (A) in the case of a State that did not re4 quire an additional period described in sub5 section (b)(2) to file a complete plan, not later

6 than 90 days after notifying a State under sub7 section (b) that the State’s plan is complete, or

8 (B) in the case of a State that required an

9 additional period described in subsection (b)(2)

10 to file a complete plan, not later than 90 days

11 after notifying a State under subsection (b)

12 that the State’s plan is complete.

13 (2) REVIEW OF COVERAGE AREA.—The Sec14 retary shall review the State designation of commu15 nity rating area boundaries to determine whether

16 such boundaries comply with sections 1502 and

17 1602, and in particular, the requirements of such

18 sections concerning non-discrimination in the estab19 lishment of coverage area boundaries.

20 (3) PLANS DEEMED APPROVED.—If the Sec21 retary does not meet the applicable deadline for

22 making a determination and providing notice under

23 paragraph (1) with respect to a State’s plan, the

24 Secretary shall be deemed to have approved the

25 State’s plan for purposes of this Act.
167

•S 2357

1 (d) OPPORTUNITY TO RESPOND TO REJECTED

2 PLAN.—

3 (1) IN GENERAL.—If (within the applicable

4 deadline under subsection (c)(1)) the Secretary noti5 fies a State that its plan does not provide for the

6 implementation of a State system that meets the ap7 plicable requirements of this title, the Secretary shall

8 provide the State with a period of 60 days in which

9 to submit such additional information and assur10 ances as the Secretary may require.

11 (2) DEADLINE FOR RESPONSE.—Not later than

12 30 days after receiving additional information and

13 assurances under paragraph (1), the Secretary shall

14 make a determination (and notify the State) on

15 whether the State’s plan provides for the implemen16 tation of a State system that meets the applicable

17 requirements of this title.

18 (3) PLAN DEEMED APPROVED.—If the Sec19 retary does not meet the deadline established under

20 paragraph (2) with respect to a State, the Secretary

21 shall be deemed to have approved the State’s plan

22 for purposes of this Act.

23 (e) APPROVAL OF PREVIOUSLY TERMINATED

24 STATES.—If the Secretary has approved a State system

25 under this part for a year but subsequently terminated
168

•S 2357

1 the approval of the system under section 1412(b)(2), the

2 Secretary shall approve the system for a succeeding year

3 if the State—

4 (1) demonstrates to the satisfaction of the Sec5 retary that the failure that formed the basis for the

6 termination no longer exists, and

7 (2) provides reasonable assurances that the

8 types of actions (or inactions) which formed the

9 basis for such termination will not recur.

10 (f) REVISIONS TO STATE SYSTEM.—

11 (1) SUBMISSION.—A State may revise a system

12 approved for a year under this section, except that

13 such revision shall not take effect unless the State

14 has submitted to the Secretary a document describ15 ing such revision and the Secretary has approved

16 such revision.

17 (2) ACTIONS ON REVISIONS.—Not later than 60

18 days after a document is submitted under paragraph

19 (1), the Secretary shall make a determination (and

20 notify the State) on whether the implementation of

21 the State system, as proposed to be revised, meets

22 the applicable requirements of this title. If the Sec23 retary fails to meet the requirement of the preceding

24 sentence, the Secretary shall be deemed to have ap-
169

•S 2357

1 proved the implementation of the State system as

2 proposed to be revised.

3 (3) REJECTION OF REVISIONS.—Subsection (d)

4 shall apply to an amendment submitted under this

5 subsection in the same manner as it applies to a

6 completed plan submitted under subsection (b).

7 SEC. 1412. FAILURE OF PARTICIPATING STATES TO MEET

8 CONDITIONS FOR COMPLIANCE.

9 (a) IN GENERAL.—In the case of a participating

10 State, if the Secretary determines that the operation of

11 the State system under this title fails to meet the applica12 ble requirements of this Act, the Secretary shall apply

13 against the State in accordance with subsection (b).

14 (b) TYPE OF SANCTION APPLICABLE.—The sanctions

15 applicable under this section are as follows:

16 (1) If the Secretary determines that the State’s

17 failure does not substantially jeopardize the ability

18 of eligible individuals in the State to obtain coverage

19 for the standard benefit package, the Secretary shall

20 reduce payments with respect to the State in accord21 ance with section 1413.

22 (2) If the Secretary determines that the failure

23 substantially jeopardizes the ability of eligible indi24 viduals in the State to obtain coverage for the stand25 ard benefit package—
170

•S 2357

1 (A) the Secretary shall terminate its ap2 proval of the State system; and

3 (B) the Secretary shall assume the respon4 sibilities described in section 1422.

5 (c) TERMINATION OF SANCTION.—A State against

6 which a sanction is imposed under this section may submit

7 information at any time to the Secretary to demonstrate

8 that the failure that led to the imposition of the sanction

9 has been corrected.

10 (d) PROTECTION OF ACCESS TO BENEFITS.—The

11 Secretary shall take actions under this section with respect

12 to a State only in a manner that assures the continuous

13 coverage of eligible individuals enrolled in community14 rated health plans.

15 SEC. 1413. REDUCTION IN PAYMENTS FOR HEALTH PRO16 GRAMS BY SECRETARY OF HEALTH AND

17 HUMAN SERVICES.

18 (a) IN GENERAL.—Upon a determination by the Sec19 retary under section 1412(b)(1), the Secretary shall re20 duce the amount of any of the payments described in sub21 section (b) that would otherwise be made to individuals

22 and entities in the State by such amount as the Secretary

23 determines to be appropriate.

24 (b) PAYMENTS DESCRIBED.—The payments de25 scribed in this subsection are as follows:
171

•S 2357

1 (1) Payments to academic health centers in the

2 State under subtitle B of title III.

3 (2) Payments to individuals and entities in the

4 State for health research activities under section 301

5 and title IV of the Public Health Service Act.

6 (3) Payments to hospitals in the State under

7 part 4 of subtitle E of title III (relating to payments

8 to hospitals serving vulnerable populations).

9 SEC. 1414. REVIEW OF FEDERAL DETERMINATIONS.

10 Any State affected by a determination by the Sec11 retary under this subpart may appeal such determination

12 in accordance with section 5531.

13 SEC. 1415. FEDERAL SUPPORT FOR STATE IMPLEMENTA14 TION.

15 (a) PLANNING GRANTS.—

16 (1) IN GENERAL.—Not later than 90 days after

17 the date of enactment of this Act, the Secretary

18 shall, to the extent amounts are appropriated, make

19 available to each State a planning grant to assist the

20 State in the development of a health care system

21 necessary to enable the State to become a participat22 ing State under this title.

23 (2) FORMULA.—The Secretary shall establish a

24 formula for the distribution of funds made available

25 under this subsection.
172

•S 2357

1 (3) AUTHORIZATION OF APPROPRIATIONS.—

2 There are authorized to be appropriated

3 $50,000,000 for each of the fiscal years 1995 and

4 1996 for grants under this subsection.

5 (b) GRANTS FOR START-UP SUPPORT.—

6 (1) IN GENERAL.—The Secretary shall, to the

7 extent amounts are appropriated, make available to

8 States, upon their becoming participating States,

9 grants to assist in the establishment of purchasing

10 cooperatives.

11 (2) FORMULA.—The Secretary shall establish a

12 formula for the distribution of funds made available

13 under this subsection.

14 (3) STATE MATCHING FUNDS REQUIRED.—

15 Funds are payable to a State under this subsection

16 only if the State provides assurances, satisfactory to

17 the Secretary, that amounts of State funds (at least

18 equal to the amount made available under this sub19 section) will be expended for the purposes described

20 in paragraph (1).

21 (4) AUTHORIZATION OF APPROPRIATIONS.—

22 There are authorized to be appropriated

23 $313,000,000 for fiscal year 1996, $625,000,000 for

24 fiscal year 1997, and $313,000,000 for fiscal year

25 1998, for grants under this subsection.
173

•S 2357

1 Subpart C—Responsibilities in Absence of State

2 Systems

3 SEC. 1421. APPLICATION OF SUBPART.

4 (a) INITIAL APPLICATION.—This subpart shall apply

5 with respect to a State as of January 1, 1997, unless—

6 (1) the State submits a plan for a State system

7 under section 1411(a)(1) by July 1, 1996, and

8 (2) the Secretary determines under section

9 1411 that such system meets the requirements of

10 subtitle F.

11 (b) TERMINATION OF APPROVAL OF SYSTEM OF PAR12 TICIPATING STATE.—In the case of a participating State

13 for which the Secretary terminates approval of the State

14 system under section 1412(b)(2), this subpart shall apply

15 with respect to the State as of such date as is appropriate

16 to assure the continuity of coverage for the standard bene17 fit package for eligible individuals in the State.

18 SEC. 1422. FEDERAL ASSUMPTION OF RESPONSIBILITIES IN

19 NON-PARTICIPATING STATES.

20 Upon determining that this subpart will apply to a

21 State for a calendar year, the Secretary shall take such

22 steps as are necessary to ensure that the standard benefit

23 package is provided to eligible individuals in the State dur24 ing the year, including the establishment of community25 rating areas within such State as appropriate.
174

•S 2357

1 SEC. 1423. IMPOSITION OF SURCHARGE ON PREMIUMS

2 UNDER FEDERALLY-OPERATED SYSTEM.

3 If this subpart applies to a State for a calendar year,

4 the premiums charged by community-rated health plans

5 in the State shall be equal to premiums that would other6 wise be charged, increased by 15 percent. Such 15 percent

7 increase shall be used to reimburse the Secretary for any

8 administrative or other expenses incurred as a result of

9 establishing and operating the system in that State.

10 SEC. 1424. RETURN TO STATE OPERATION.

11 (a) APPLICATION PROCESS.—After the establishment

12 and operation of a system by the Secretary in a State

13 under section 1422, the State may at any time apply to

14 the Secretary for the approval of a State system in accord15 ance with the procedures described in section 1411.

16 (b) TIMING.—If the Secretary approves the system

17 of a State for which the Secretary has operated a system

18 under this subpart during a year, the Secretary shall ter19 minate the operation of the system, and the State shall

20 establish and operate its approved system, as of January

21 1 of the first year beginning after the Secretary approves

22 the State system. The termination of the Secretary’s sys23 tem and the operation of the State’s system shall be con24 ducted in a manner that assures the continuous coverage

25 of eligible individuals in the State under community-rated

26 health plans.
175

•S 2357

1 Subpart D—Establishment of Class Factors for

2 Charging Premiums

3 SEC. 1431. PREMIUM CLASS AND AGE CLASS FACTORS.

4 (a) IN GENERAL.—For purposes of this title and title

5 X, the Secretary shall establish premium class and age

6 class factors in accordance with section 1113(c).

7 (b) CONDITIONS.—In establishing such factors, the

8 factor for the class of individual enrollment shall be 1 and

9 the factor for the couple-only class of family enrollment

10 shall be 2.

11 Subpart E—Risk Adjustment and Reinsurance

12 Methodology for Payment of Plans

13 SEC. 1435. DEVELOPMENT OF A RISK ADJUSTMENT AND RE14 INSURANCE METHODOLOGY.

15 (a) ESTABLISHMENT.—The Secretary shall develop a

16 risk adjustment and reinsurance methodology in accord17 ance with section 1504.

18 (b) RESEARCH AND DEMONSTRATION.—The Sec19 retary shall conduct and support research and demonstra20 tion projects to develop and improve, on a continuing

21 basis, the risk adjustment and reinsurance methodology

22 under this subpart.

23 (c) TECHNICAL ASSISTANCE.—The Secretary shall

24 provide technical assistance to States in implementing the

25 methodology developed under this subpart.
176

•S 2357

1 Subpart F—Responsibilities for Financial

2 Requirements

3 SEC. 1441. CAPITAL STANDARDS FOR COMMUNITY-RATED

4 PLANS.

5 (a) IN GENERAL.—The Secretary shall establish, in

6 consultation with the States, minimum capital require7 ments for carriers, for purposes of section 1118.

8 (b) $500,000 MINIMUM.—Subject to subsection (c),

9 under such requirements there shall be not less than

10 $500,000 of capital maintained for each carrier.

11 (c) ADDITIONAL CAPITAL REQUIREMENTS.—The

12 Secretary shall establish standards that provide for addi13 tional capital for purposes of this section. The amount of

14 such additional capital required shall reflect factors likely

15 to affect the financial stability of a carrier, including the

16 following:

17 (1) Projected plan enrollment and number of

18 providers participating in plans of the carrier.

19 (2) Market share and strength of competition.

20 (3) Extent and nature of risk-sharing with par21 ticipating providers and the financial stability of

22 risk-sharing providers.

23 (4) Prior performance of the carrier, risk his24 tory, and liquidity of assets.

25 (d) COMMUNITY- AND PROVIDER-BASED PLANS.—
177

•S 2357

1 (1) IN GENERAL.—States shall consider alter2 native financial instruments and methods for

3 community- and provider-based plans (as defined in

4 paragraph (2)) to meet the capital and solvency

5 standards developed in accordance with this section.

6 Provisions made for such plans shall ensure the fis7 cal integrity and financial solvency of such plans.

8 (2) ELIGIBLE PLANS.—Plans eligible for special

9 consideration by States must be offered by public or

10 not-for-profit entities that are owned, or in which a

11 majority share of the plan’s investment is held by—

12 (A) health care providers who practice in

13 the plan;

14 (B) individuals who live in the area, or

15 not-for-profit organizations located in the area

16 serviced by the plan;

17 (C) a combination of individuals and orga18 nizations described in subparagraphs (A) and

19 (B); or

20 (D) organizations located outside the serv21 ice area which provide for control over local op22 erations by individuals described in subpara23 graphs (A) or (B).

24 (e) DEVELOPMENT OF STANDARDS BY NAIC.—The

25 Secretary may request the National Association of Insur-
178

•S 2357

1 ance Commissioners to develop model standards for the

2 additional capital requirements described in subsection (c)

3 and to present such standards to the Secretary not later

4 than July 1, 1995. The Secretary may accept such stand5 ards as the standards to be applied under subsection (c)

6 or modify the standards in any appropriate manner.

7 SEC. 1442. STANDARD FOR GUARANTY FUNDS.

8 (a) IN GENERAL.—In consultation with the States,

9 the Secretary shall establish standards for guaranty funds

10 established by States for community-rated health plans.

11 (b) GUARANTY FUND STANDARDS.—The standards

12 established under subsection (a) for a guaranty fund shall

13 include the following:

14 (1) Each fund must have a method to generate

15 sufficient resources to pay health providers and oth16 ers in the case of a failure of a health plan in order

17 to meet obligations with respect to—

18 (A) services rendered by the health plan

19 for the standard benefit package, including any

20 supplemental coverage for cost sharing provided

21 by the health plan, and

22 (B) services rendered prior to health plan

23 insolvency and services to patients after the in24 solvency but prior to their enrollment in other

25 health plans.
179

•S 2357

1 (2) Each fund shall be liable for all claims

2 against the plan by health care providers with re3 spect to their provision of items and services covered

4 under the standard benefit package to enrollees of

5 the failed plan. Such claims, in full, shall take prior6 ity over all other claims. The fund is liable, to the

7 extent and in the manner provided in accordance

8 with rules established by the Secretary, for other

9 claims, including other claims of such providers and

10 the claims of contractors, employees, governments,

11 or any other claimants.

12 (3) The fund stands as a creditor for any pay13 ments owed the plan to the extent of the payments

14 made by the fund for obligations of the plan.

15 (4) The fund has authority to borrow against

16 future assessments in order to meet the obligations

17 of failed plans participating in the fund.

18 Subpart G—Open Enrollment

19 SEC. 1445. PERIODS OF AUTHORIZED CHANGES IN ENROLL20 MENT.

21 The Secretary shall specify periods of enrollment in

22 accordance with section 1112(c).

23 SEC. 1446. DISTRIBUTION OF COMPARATIVE INFORMATION.

24 The Secretary shall specify a period of time prior to

25 open enrollment during which States must provide for the
180

•S 2357

1 distribution to community-rated individuals enrollment

2 materials and comparative information on health plans

3 and purchasing cooperatives.

4 PART 2—ESSENTIAL COMMUNITY PROVIDERS

5 SEC. 1461. CERTIFICATION.

6 For purposes of this Act, the Secretary shall certify

7 as an ‘‘essential community provider’’ any health care pro8 vider or organization that—

9 (1) is within any of the categories of providers

10 and organizations specified in section 1462(a), or

11 (2) meets the standards for certification under

12 section 1463(a).

13 SEC. 1462. CATEGORIES OF PROVIDERS AUTOMATICALLY

14 CERTIFIED.

15 (a) IN GENERAL.—The categories of providers and

16 organizations, including subrecipients, specified in this

17 subsection are as follows:

18 (1) CATEGORY 1 ENTITIES.—The following enti19 ties shall be considered category 1 entities:

20 (A) Covered entities as defined in section

21 340B(a)(4) of the Public Health Service Act

22 (42 U.S.C. 256b(a)(4)), except that subsections

23 (a)(4)(L)(iii) and (a)(7) of such section shall

24 not apply.
181

•S 2357

1 (B) School health services centers under

2 title III.

3 (C) Public or nonprofit hospitals—

4 (i) that meet the criteria for public

5 hospitals which are eligible entities under

6 section 340B of the Public Health Service

7 Act in any cost reporting period in the 3-

8 year period prior to the date of enactment

9 of this Act, except that subsection

10 (a)(4)(L)(iii) of such section shall not

11 apply; or

12 (ii) meeting alternative criteria devel13 oped by the Secretary after the date of en14 actment of this Act which are comparable

15 to the criteria utilized in determining eligi16 bility under such section 340B;

17 (D) Public and private, nonprofit mental

18 health and substance abuse providers receiving

19 funds under title V or XIX of the Public Health

20 Service Act.

21 (E) Runaway homeless youth centers or

22 transitional living programs for homeless youth

23 providing health services under the Runaway

24 Homeless Youth Act of 1974 (42 U.S.C. 5701

25 et seq.).
182

•S 2357

1 (F) Public or nonprofit maternal and child

2 health providers that receive funding under title

3 V of the Social Security Act.

4 (G) Rural health clinics as defined under

5 section 1861(aa)(2) of the Social Security Act.

6 (H) Programs of the Indian Health Service

7 (as defined in section 8302(3)).

8 (2) CATEGORY 2 ENTITIES.—The following enti9 ties shall be considered category 2 entities:

10 (A) Medicare dependent small rural hos11 pitals under section 1886(d)(8)(iii) of the Social

12 Security Act.

13 (B) Children’s hospitals meeting com14 parable criteria determined appropriate by the

15 Secretary.

16 (b) STUDY OF FEDERALLY CERTIFIED RURAL

17 HEALTH CLINICS.—The Secretary shall conduct an eval18 uation of the Rural Health Clinics program as defined in

19 section 1861(aa)(2) of the Social Security Act to examine

20 the causes of the growth in the program and the charac21 teristics of providers certified as rural health clinics and

22 the characteristics of the population served by rural health

23 clinics to ensure that the program meets the needs of rural

24 underserved communities. The Secretary shall report the

25 findings of such evaluation, together with any rec-
183

•S 2357

1 ommended changes in the rural health clinics program, to

2 the Congress not later than January 1, 1996.

3 SEC. 1463. STANDARDS FOR ADDITIONAL PROVIDERS.

4 (a) STANDARDS.—The Secretary shall publish stand5 ards for the certification of additional categories of health

6 care providers and organizations as essential community

7 providers, including the categories described in subsection

8 (b). Such a health care provider or organization shall not

9 be certified unless the Secretary determines, under such

10 standards, that health plans operating in the area served

11 by the applicant would not otherwise be able to assure ade12 quate access to items and services included in the standard

13 benefit package if such a provider was not so certified.

14 (b) CATEGORIES TO BE INCLUDED.—The categories

15 described in this subsection are as follows:

16 (1) CERTAIN HEALTH PROFESSIONALS.—A

17 health professional who—

18 (A) for at least 20 hours per week—

19 (i) is located in an area (or areas)

20 designated as a health professional short21 age area (under section 332 of the Public

22 Health Service Act) or serves a population

23 (or populations) designated as a medically

24 underserved population (under section 330

25 of the Public Health Service Act); or
184

•S 2357

1 (ii)(I) is located or provides services in

2 a neighborhood or community whose resi3 dents are at risk of underservice; and

4 (II) is available to patients at such lo5 cation on evenings and weekends; and

6 (B) if the health professional is a physi7 cian—

8 (i) is licensed to practice in the juris9 diction; and

10 (ii) is either—

11 (I) granted privileges to practice

12 at one or more hospitals; or

13 (II) has a consultation and refer14 ral arrangement with one or more

15 physicians who are granted privileges

16 to practice at one or more hospitals.

17 (2) INSTITUTIONAL PROVIDERS.—Public and

18 private nonprofit hospitals and other public and non19 profit institutional health care providers, including

20 family planning clinics, located in health professional

21 shortage areas (as defined under section 332 of the

22 Public Health Service Act) or receiving funding

23 under subtitle E of title III of this Act).

24 (3) OTHER PROVIDERS.—
185

•S 2357

1 (A) IN GENERAL.—Other public and pri2 vate nonprofit agencies and organizations

3 that—

4 (i) are located in such an area or pro5 viding health services to such a population,

6 and

7 (ii) provide health care and services

8 essential to residents of such an area or

9 such populations.

10 (B) NONPROFIT HOSPITALS.—Nonprofit

11 hospitals with a minimum of 200 beds, located

12 in urban areas where—

13 (i) the cumulative total of its services

14 provided to individuals who are entitled to

15 benefits under title XVIII of the Social Se16 curity Act or under a State plan under

17 title XIX of such Act equals a minimum of

18 65 percent; and

19 (ii) a minimum of 20 percent of its

20 services are provided to individuals eligible

21 for assistance under such title XIX.

22 SEC. 1464. CERTIFICATION PROCESS; REVIEW; TERMI23 NATION OF CERTIFICATIONS.

24 (a) CERTIFICATION PROCESS.—
186

•S 2357

1 (1) PUBLICATION OF PROCEDURES.—The Sec2 retary shall publish, not later than 6 months after

3 the date of the enactment of this Act, the procedures

4 to be used by health care professionals, providers,

5 agencies, and organizations seeking certification

6 under this subpart, including the form and manner

7 in which an application for such certification is to be

8 made.

9 (2) TIMELY DETERMINATION.—The Secretary

10 shall make a determination upon such an application

11 not later than 60 days (or 15 days in the case of

12 a certification for an entity described in section

13 1462) after the date the complete application has

14 been submitted. The determination on an application

15 for certification of an entity described in section

16 1462 shall only involve the verification that the en17 tity is an entity described in such section.

18 (b) REVIEW OF CERTIFICATIONS.—The Secretary

19 shall periodically review whether professionals, providers,

20 agencies, and organizations certified under this subpart

21 continue to meet the requirements for such certification.

22 (c) TERMINATION OR DENIAL OF CERTIFICATION.—

23 (1) PRELIMINARY FINDING.—If the Secretary

24 preliminarily finds that an entity seeking certifi25 cation under this section does not meet the require-
187

•S 2357

1 ments for such certification or such an entity cer2 tified under this subpart fails to continue to meet

3 the requirements for such certification, the Secretary

4 shall notify the entity of such preliminary finding

5 and permit the entity an opportunity, under subtitle

6 C of title V, to rebut such findings.

7 (2) FINAL DETERMINATION.—If, after such op8 portunity, the Secretary continues to find that such

9 an entity continues to fail to meet such require10 ments, the Secretary shall terminate the certification

11 and shall notify the entity and the State of such ter12 mination and the effective date of the termination.

13 SEC. 1465. NOTIFICATION OF PARTICIPATING STATES.

14 (a) IN GENERAL.—Not less often than annually the

15 Secretary shall notify each participating State of essential

16 community providers that have been certified under this

17 subpart.

18 (b) CONTENTS.—Such notice shall include sufficient

19 information to permit each State to notify health plans

20 of the identity of each entity certified as an essential com21 munity provider, including—

22 (1) the location of the provider within each

23 plan’s service area,

24 (2) the health services furnished by the pro25 vider, and
188

•S 2357

1 (3) other information necessary for health plans

2 to carry out this subpart.

3 SEC. 1466. HEALTH PLAN REQUIREMENT.

4 (a) IN GENERAL.—

5 (1) CATEGORY 1 ENTITIES.—With respect to

6 each essential community provider described in sec7 tion 1462(a)(1) (other than a provider of school

8 health services) that makes an election under sub9 section (d), that serves the health plan service area

10 of such health plan, and that requests participation

11 under this section, a health plan shall either—

12 (A) enter into a written provider participa13 tion agreement (described in subsection (b))

14 with such providers, or

15 (B) enter into a written agreement under

16 which the plan shall make payments to such

17 provider in accordance with subsection (c).

18 (2) CATEGORY 2 ENTITIES.—

19 (A) IN GENERAL.—With respect to at least

20 one essential community provider described in

21 subparagraph (A) and at least one essential

22 community provider described in subparagraph

23 (B) of section 1462(a)(2), that makes an elec24 tion under subsection (d), that serves the health

25 plan service area of such health plan, and that
189

•S 2357

1 requests participation under this section, a

2 health plan shall either—

3 (i) enter into a written provider par4 ticipation agreement (described in sub5 section (b)) with such providers, or

6 (ii) enter into a written agreement

7 under which the plan shall make payments

8 to such provider in accordance with sub9 section (c).

10 (B) EXCEPTION.—A State, as part of the

11 State plan under section 1501(a), may submit

12 to the Secretary for approval a request that the

13 Secretary permit the State to—

14 (i) require health plans operating in

15 certain community rating areas in the

16 State to contract with more than one es17 sential community provider of each type

18 referred to in subparagraph (A), based on

19 geographic proximity, cultural and lan20 guage needs, capacity to meet the needs of

21 enrollees, or other factors determined rel22 evant by the State; and

23 (ii) establish additional types of essen24 tial community providers under section
190

•S 2357

1 1462(a)(2) that a health plan must con2 tract with under subparagraph (A).

3 (C) DISCRETION OF SECRETARY.—With

4 respect to a State request under subparagraph

5 (B), the Secretary shall—

6 (i) approve such request; or

7 (ii) require the designation of such ad8 ditional essential community providers in

9 the State as the Secretary determines nec10 essary.

11 (b) PARTICIPATION AGREEMENT.—A participation

12 agreement between a health plan and an electing essential

13 community provider under this subsection shall provide

14 that the health plan agrees to treat the provider in accord15 ance with terms and conditions the same as those that

16 are applicable to other providers participating in the

17 health plan with respect to each of the following:

18 (1) The scope of services for which payment is

19 made by the plan to the provider.

20 (2) The rate of payment for covered care and

21 services.

22 (3) The availability of financial incentives to

23 participating providers.

24 (4) Limitations on financial risk provided to

25 other participating providers.
191

•S 2357

1 (5) Assignment of enrollees to participating

2 providers.

3 (6) Access by the provider’s patients to provid4 ers in medical specialties or subspecialties participat5 ing in the plan.

6 (c) PAYMENTS FOR PROVIDERS WITHOUT PARTICI7 PATION AGREEMENTS.—

8 (1) IN GENERAL.—Payment in accordance with

9 this subsection is payment based, as elected by the

10 electing essential community provider, either—

11 (A) on the fee schedule developed by the

12 State; or

13 (B) on payment methodologies and rates

14 used under the applicable Medicare payment

15 methodology and rates (or the most closely ap16 plicable methodology under such program as

17 the Secretary specifies in regulations).

18 (2) SPECIAL RULE FOR FEDERALLY QUALIFIED

19 HEALTH CENTERS.—With respect to each federally

20 qualified health center (as such term is defined in

21 section 1861(aa) of the Social Security Act) that is

22 an essential community provider, a health plan shall

23 make payments based on the reasonable cost rates

24 applicable under section 1833(a)(3) of the Social Se-
192

•S 2357

1 curity Act, except that the federally qualified health

2 center may accept other payment amounts.

3 (3) NO APPLICATION OF GATE-KEEPER LIMITA4 TIONS.—Payment in accordance with this subsection

5 may be subject to utilization review, but may not be

6 subject to otherwise applicable gatekeeper require7 ments under the plan.

8 (d) ELECTION.—

9 (1) IN GENERAL.—In this part, the term ‘‘elect10 ing essential community provider’’ means, with re11 spect to a health plan, an essential community pro12 vider certified under this subpart that elects under

13 this subpart to apply to the health plan.

14 (2) FORM OF ELECTION.—An election under

15 this subsection shall be made in a form and manner

16 specified by the Secretary, and shall include notice

17 to the health plan involved. Such an election may be

18 made annually with respect to a health plan, except

19 that the plan and provider may agree to make such

20 an election on a more frequent basis.

21 (e) SPECIAL RULE FOR PROVIDERS OF SCHOOL

22 HEALTH SERVICES.—A health plan shall pay, to each pro23 vider of school health services located in the plan’s service

24 area, an amount determined by the Secretary for such

25 services furnished to enrollees of the plan.
193

•S 2357

1 SEC. 1467. RECOMMENDATION ON CONTINUATION OF RE2 QUIREMENT.

3 (a) STUDIES.—In order to prepare recommendations

4 under subsection (b), the Secretary shall conduct studies

5 regarding essential community providers, including studies

6 that assess—

7 (1) the definition of essential community pro8 vider,

9 (2) the sufficiency of the funding levels for pro10 viders, including the special rule for federally quali11 fied health centers under section 1466(c)(2), for

12 both covered and uncovered benefits under this Act,

13 (3) the effects of contracting requirements re14 lating to such providers on such providers, health

15 plans, and enrollees,

16 (4) the impact of the payment rules for such

17 providers, and

18 (5) the impact of national health reform on

19 such providers.

20 (b) RECOMMENDATIONS TO AND CONSIDERATION BY

21 CONGRESS.—

22 (1) IN GENERAL.—Not later than 5 years after

23 the date of enactment of this Act, the Secretary

24 shall submit to Congress, specific recommendations

25 concerning whether, and to what extent, section

26 1466 should continue to apply to some or all essen-
194

•S 2357

1 tial community providers. Such recommendations

2 may include a description of the particular types of

3 such providers and circumstances under which such

4 section should continue to apply.

5 (2) JOINT RESOLUTION AND CONSIDERATION

6 BY CONGRESS.—

7 (A) IN GENERAL.—The recommendations

8 under paragraph (1) shall be implemented un9 less a joint resolution (described in subpara10 graph (B)) disapproving such recommendations

11 is enacted in accordance with the provisions of

12 subparagraph (C), before the end of the 45-day

13 period beginning on the date on which such rec14 ommendations were submitted. For purposes of

15 applying the preceding sentence and subpara16 graphs (B) and (C), the days on which either

17 House of Congress is not in session because of

18 an adjournment of more than three days to a

19 day certain shall be excluded in the computa20 tion of a period.

21 (B) JOINT RESOLUTION OF DIS22 APPROVAL.—A joint resolution described in this

23 subparagraph means only a joint resolution

24 which is introduced within the 10-day period

25 beginning on the date on which the Secretary
195

•S 2357

1 submits recommendations under paragraph (1)

2 and—

3 (i) which does not have a preamble;

4 (ii) the matter after the resolving

5 clause of which is as follows: ‘‘That Con6 gress disapproves the recommendations of

7 the Secretary of Health and Human Serv8 ices concerning the extension of certain es9 sential community provider provisions, as

10 submitted by the Secretary on

11 lllllll.’’, the blank space being

12 filled in with the appropriate date; and

13 (iii) the title of which is as follows:

14 ‘‘Joint resolution disapproving rec15 ommendations of the Secretary of Health

16 and Human Services concerning the exten17 sion of certain essential community pro18 vider provisions, as submitted by the Sec19 retary on lllllll.’’, the blank

20 space being filled in with the appropriate

21 date.

22 (C) PROCEDURES FOR CONSIDERATION OF

23 RESOLUTION OF DISAPPROVAL.—Subject to

24 subparagraph (D), the provisions of section

25 2908 (other than subsection (a)) of the Defense
196

•S 2357

1 Base Closure and Realignment Act of 1990

2 shall apply to the consideration of a joint reso3 lution described in subparagraph (B) in the

4 same manner as such provisions apply to a joint

5 resolution described in section 2908(a) of such

6 Act.

7 (D) SPECIAL RULES.—For purposes of ap8 plying subparagraph (C) with respect to such

9 provisions—

10 (i) any reference to the Committee on

11 Armed Services of the House of Represent12 atives shall be deemed a reference to an

13 appropriate Committee of the House of

14 Representatives (specified by the Speaker

15 of the House of Representatives at the

16 time of submission of recommendations

17 under paragraph (1)) and any reference to

18 the Committee on Armed Services of the

19 Senate shall be deemed a reference to an

20 appropriate Committee of the Senate

21 (specified by the Majority Leader of the

22 Senate at the time of submission of rec23 ommendations under paragraph (1)); and

24 (ii) any reference to the date on which

25 the President transmits a report shall be
197

•S 2357

1 deemed a reference to the date on which

2 the Secretary submits a recommendation

3 under paragraph (1).

4 SEC. 1468. DEFINITIONS.

5 As used in subpart:

6 (1) CHILDREN’S HOSPITAL.—The term ‘‘chil7 dren’s hospital’’ means those hospitals whose inpa8 tients are certified by the Secretary or the State to

9 be predominantly under the age of 18.

10 (2) HEALTH PROFESSIONAL.—The term

11 ‘‘health professional’’ means a physician, nurse,

12 nurse practitioner, certified nurse midwife, physician

13 assistant, psychologist, dentist, pharmacist, chiro14 practor, clinical social worker, and other health care

15 professional recognized by the Secretary.

16 (3) SUBRECIPIENT.—The term ‘‘subrecipient’’

17 means, with respect to a recipient of a grant under

18 a particular authority, an entity that—

19 (A) is receiving funding from such a grant

20 under a contract with the principal recipient of

21 such a grant, and

22 (B) meets the requirements established to

23 be a recipient of such a grant.
198

•S 2357

1 PART 3—SPECIFIC RESPONSIBILITIES OF

2 SECRETARY OF LABOR.

3 SEC. 1481. RESPONSIBILITIES OF SECRETARY OF LABOR.

4 (a) IN GENERAL.—The Secretary of Labor is respon5 sible—

6 (1) under subtitle D, for the enforcement of re7 quirements applicable to employers (including re8 quirements relating to payment of premiums under

9 title X if applicable) and the administration of large

10 employer purchasing groups;

11 (2) for the temporary assumption of the oper12 ation of self-insured employer sponsored health plans

13 that are insolvent;

14 (3) for carrying out any other responsibilities

15 assigned to the Secretary under this Act; and

16 (4) for administering title I of the Employee

17 Retirement Income Security Act of 1974 as it re18 lates to group health plans maintained by large em19 ployer purchasing groups.

20 (b) AGREEMENTS WITH STATES.—The Secretary of

21 Labor may enter into agreements with States in order to

22 enforce responsibilities of employers and large employer

23 purchasing groups, and requirements of employer spon24 sored health plans, under subtitle B of title I of the Em25 ployee Retirement Income Security Act of 1974.
199

•S 2357

1 (c) CONSULTATION.—In carrying out activities under

2 this Act with respect to large employer purchasing groups,

3 employer sponsored health plans, and employers, the Sec4 retary of Labor shall consult with the Secretary of Health

5 and Human Services.

6 (d) GUARANTY FUNDS.—

7 (1) IN GENERAL.—The Secretary of Labor shall

8 establish standards for guaranty funds to be estab9 lished by a State with respect to a self-insured plan

10 operating wholly within the State.

11 (2) MULTISTATE PLANS.—The Secretary of

12 Labor shall establish and administer a guaranty

13 fund with respect to multistate self-insured plans.

14 (e) EMPLOYER-RELATED REQUIREMENTS.—

15 (1) IN GENERAL.—The Secretary of Labor, in

16 consultation with the Secretary, shall be responsible

17 for assuring that employers—

18 (A) make payments of any employer pre19 miums (and withhold and make payment of the

20 family share of premiums with respect to quali21 fying employees) and provide discounts to em22 ployees as required under this Act, including

23 auditing of collection activities with respect to

24 such payments,
200

•S 2357

1 (B) submit timely reports as required

2 under this Act, and

3 (C) otherwise comply with requirements

4 imposed on employers under this Act.

5 (2) AUDIT AND SIMILAR AUTHORITIES.—The

6 Secretary of Labor—

7 (A) may carry out such audits (directly or

8 through contract) and such investigations of

9 employers and States and large employer pur10 chasing groups,

11 (B) may exercise such authorities under

12 section 504 of Employee Retirement Income Se13 curity Act of 1974 (in relation to activities

14 under this Act),

15 (C) may provide (through contract or oth16 erwise) for such collection activities (in relation

17 to amounts owed to large employer purchasing

18 groups, and for the benefit of such groups), and

19 (D) may impose such civil penalties in ac20 cordance with this Act,

21 as may be necessary to carry out such Secretary’s

22 responsibilities under this section.

23 (3) AUDITING OF EMPLOYER PAYMENTS.—

24 (A) IN GENERAL.—Each State is respon25 sible for auditing the records of community-
201

•S 2357

1 rated employers to assure that employer pay2 ments (including the payment of amounts with3 held) were made in the appropriate amount as

4 provided under subtitle B of title X.

5 (B) EMPLOYERS WITH EMPLOYEES RESID6 ING IN DIFFERENT COMMUNITY-RATING

7 AREAS.—In the case of a community-rated em8 ployer which has employees who reside in more

9 than one community rating area in more than

10 one State, the Secretary of Labor, in consulta11 tion with the Secretary, shall establish a proc12 ess for the coordination of State auditing activi13 ties among the States involved.

14 (C) APPEAL.—In the case of an audit con15 ducted by a State on an employer under this

16 paragraph, an employer or other State that is

17 aggrieved by the determination in the audit is

18 entitled to review of such audit by the Secretary

19 of Labor in a manner to be provided by such

20 Secretary.

21 (f) AUTHORITY.—The Secretary of Labor is author22 ized to issue such regulations as may be necessary to carry

23 out section 1305 and responsibilities of the Secretary

24 under this Act.
202

•S 2357

1 SEC. 1482. FEDERAL ROLE WITH RESPECT TO MULTISTATE

2 SELF-INSURED HEALTH PLANS.

3 (a) IN GENERAL.—In the case of a multistate self4 insured health plan or a multistate self-insured supple5 mental health benefits plan, the Secretary of Labor shall

6 be responsible for certifying such plans and carrying out

7 activities under this title in the same manner as a partici8 pating State would carry out activities under this title with

9 respect to a standard health plan.

10 (b) SELF-INSURED PLAN STANDARDS.—The Sec11 retary of Labor shall develop and publish standards appli12 cable to self-insured plans offered by large employers. The

13 Secretary shall develop and publish such standards by not

14 later than the date that is 6 months after the date of en15 actment of this Act. Such standards shall be the certified

16 standard health plan standards applicable to self-insured

17 plans under this title.

18 (c) DETERMINATION OF MULTISTATE STATUS.—For

19 purposes of this Act, a self-insured health plan or a self20 insured supplemental health benefits plan shall be consid21 ered a multistate health plan if established or maintained

22 by an experience-rated employer which has a substantial

23 number of employees enrolled in such plan in each of 2

24 or more States (as determined by the Secretary of Labor).
203

•S 2357

1 SEC. 1483. ASSISTANCE WITH EMPLOYER COLLECTIONS.

2 The Secretary of Labor shall provide States with such

3 technical and other assistance as may promote the effi4 cient collection of all amounts owed under this Act by em5 ployers.

6 SEC. 1484. PENALTIES FOR FAILURE OF LARGE EMPLOYER

7 PURCHASING GROUPS TO MEET REQUIRE8 MENTS.

9 If the Secretary of Labor finds that a large employer

10 purchasing group has failed substantially to meet the ap11 plicable requirements of subtitle D, the Secretary shall im12 pose a civil money penalty of not to exceed $10,000 for

13 each such violation.

14 SEC. 1485. APPLICABILITY OF ERISA ENFORCEMENT MECH15 ANISMS FOR ENFORCEMENT OF CERTAIN RE16 QUIREMENTS.

17 The provisions of sections 502 (relating to civil en18 forcement), 504 (relating to investigative authority) and

19 506 (relating to criminal enforcement) of the Employee

20 Retirement Income Security Act of 1974 shall apply to

21 enforcement by the Secretary of Labor of the applicable

22 requirements for large group purchasers in the same man23 ner and to same extent as such provisions apply to en24 forcement of title I of such Act.
204

•S 2357

1 SEC. 1486. WORKPLACE WELLNESS PROGRAM.

2 (a) IN GENERAL.—The Secretary shall develop cer3 tification criteria for workplace wellness programs.

4 (b) APPLICATION OF SECTION.—Any health plan

5 may offer a uniform premium discount, not to exceed 5

6 percent, to employers maintaining certified workplace

7 wellness programs.

8 PART 4—OFFICE OF RURAL HEALTH POLICY

9 SEC. 1491. OFFICE OF RURAL HEALTH POLICY.

10 (a) APPOINTMENT OF ASSISTANT SECRETARY.—

11 (1) IN GENERAL.—Section 711(a) of the Social

12 Security Act (42 U.S.C. 912(a)) is amended—

13 (A) by striking ‘‘by a Director, who shall

14 advise the Secretary’’ and inserting ‘‘by an As15 sistant Secretary for Rural Health (in this sec16 tion referred to as the ‘Assistant Secretary’),

17 who shall report directly to the Secretary’’; and

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

19 sentence: ‘‘The Office shall not be a component

20 of any other office, service, or component of the

21 Department.’’.

22 (2) CONFORMING AMENDMENTS.—(A) Section

23 711(b) of the Social Security Act (42 U.S.C. 912(b))

24 is amended by striking ‘‘the Director’’ and inserting

25 ‘‘the Assistant Secretary’’.
205

•S 2357

1 (B) Section 338J(a) of the Public Health Serv2 ice Act (42 U.S.C. 254r(a)) is amended by striking

3 ‘‘Director of the Office of Rural Health Policy’’ and

4 inserting ‘‘Assistant Secretary for Rural Health’’.

5 (C) Section 464T(b) of the Public Health Serv6 ice Act (42 U.S.C. 285p–2(b)) is amended in the

7 matter preceding paragraph (1) by striking ‘‘Direc8 tor of the Office of Rural Health Policy’’ and insert9 ing ‘‘Assistant Secretary for Rural Health’’.

10 (D) Section 6213 of the Omnibus Budget Rec11 onciliation Act of 1989 (42 U.S.C. 1395x note) is

12 amended in subsection (e)(1) by striking ‘‘Director

13 of the Office of Rural Health Policy’’ and inserting

14 ‘‘Assistant Secretary for Rural Health’’.

15 (E) Section 403 of the Ryan White Comprehen16 sive AIDS Resources Emergency Act of 1990 (42

17 U.S.C. 300ff–11 note) is amended in the matter pre18 ceding paragraph (1) of subsection (a) by striking

19 ‘‘Director of the Office of Rural Health Policy’’ and

20 inserting ‘‘Assistant Secretary for Rural Health’’.

21 (3) AMENDMENT TO THE EXECUTIVE SCHED22 ULE.—Section 5315 of title 5, United States Code,

23 is amended by striking ‘‘Assistant Secretaries of

24 Health and Human Services (5)’’ and inserting ‘‘As-
206

•S 2357

1 sistant Secretaries of Health and Human Services

2 (6)’’.

3 (b) EXPANSION OF DUTIES.—Section 711(a) of the

4 Social Security Act (42 U.S.C. 912(a)) is amended by

5 striking ‘‘and access to (and the quality of) health care

6 in rural areas’’ and inserting ‘‘access to, and quality of,

7 health care in rural areas, and reforms to the health care

8 system and the implications of such reforms for rural

9 areas’’.

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

11 this section shall take effect on January 1, 1996.

12 Subtitle F—Participating State

13 Responsibilities

14 PART 1—GENERAL RESPONSIBILITIES

15 SEC. 1501. STATE PLAN AND CERTIFICATION OF STANDARD

16 HEALTH PLANS AND SUPPLEMENTAL

17 HEALTH BENEFITS PLANS.

18 (a) STATE PLAN.—

19 (1) IN GENERAL.—For purposes of the ap20 proval of a State health care system by the Sec21 retary under section 1411, a State is a ‘‘participat22 ing State’’ if the State meets the applicable require23 ments of this subtitle.

24 (2) SUBMISSION OF PLAN.—In order to be ap25 proved as a participating State under section 1411,
207

•S 2357

1 a State shall submit to the Secretary a State plan

2 (in a form and manner specified by the Secretary)

3 that describes the State health care system that the

4 State is establishing (or has established).

5 (3) DEADLINE.—If a State is not a participat6 ing State with a State health care system in oper7 ation by January 1, 1997, the provisions of subpart

8 C of part 1 of subtitle E (relating to responsibilities

9 in absence of State systems) shall take effect.

10 (4) SUBMISSION OF INFORMATION SUBSEQUENT

11 TO APPROVAL.—A State approved as a participating

12 State under section 1411 shall submit to the Sec13 retary an annual update to the State health care

14 system not later than February 15 of each year fol15 lowing the first year for which the State is a partici16 pating State. The update shall contain—

17 (A) such information as the Secretary may

18 require to determine that the system shall meet

19 the applicable requirements of this Act for the

20 succeeding year; and

21 (B) such information as the Secretary may

22 require to determine that the State operated

23 the system during the previous year in accord24 ance with the Secretary’s approval of the sys25 tem for such previous year.
208

•S 2357

1 (b) HEALTH PLAN ACCREDITATION, CERTIFICATION

2 AND ENFORCEMENT PROGRAM.—

3 (1) ESTABLISHMENT.—The Secretary shall es4 tablish a program for the accreditation, certification

5 and enforcement of health plan standards by States

6 (hereafter referred to in this subsection as the ‘‘ACE

7 program’’). Under such program, the Secretary

8 shall—

9 (A) develop guidelines for the accredita10 tion, certification and enforcement of standards

11 for certified standard health plans;

12 (B) approve State ACE programs as meet13 ing such guidelines; and

14 (C) monitor the compliance of States with

15 such guidelines.

16 (2) PROGRAM ELEMENTS.—The guidelines re17 ferred to in paragraph (1) shall include the following

18 components:

19 (A) CERTIFICATION.—State certification,

20 and recertification not less frequently than once

21 during each 3-year period, of standard health

22 plans determined by the State to be in compli23 ance with the standards established under sub24 title B and with the regulations promulgated by

25 the Secretary concerning such standards.
209

•S 2357

1 (B) DISENROLLMENT DATA.—State review

2 of enrollee disenrollment from each standard

3 health plan to determine whether there is a pat4 tern of disenrollment that does not reflect the

5 distribution of such plans’ reenrolling member6 ship.

7 (C) MONITORING.—State monitoring of

8 the performance of each standard health plan

9 to ensure that such plans continue to meet the

10 criteria for certification.

11 (3) STATE PROGRAMS.—Each participating

12 State shall develop accreditation, certification and

13 enforcement programs in accordance with the guide14 lines established by the Secretary under paragraph

15 (1).

16 (4) USE OF PRIVATE ORGANIZATIONS.—

17 (A) IN GENERAL.—A State may utilize pri18 vate accreditation organizations to review the

19 compliance by standard health plans with spe20 cific standards with which such organizations

21 have demonstrated expertise. A State may use

22 such reviews as the basis for determining plan

23 compliance with such standards. The Secretary

24 shall approve eligible accreditation organiza25 tions and promulgate regulations prohibiting
210

•S 2357

1 conflicts of interest in the use of such bodies by

2 States.

3 (B) LIMITATIONS.—The use of private ac4 creditation organizations by a State under sub5 paragraph (A) shall not relieve such State of its

6 obligations under this subsection. In no case

7 shall a State delegate enforcement authority or

8 enforcement responsibilities to private organiza9 tions.

10 (5) ENFORCEMENT.—A State ACE program

11 shall establish a process for imposing sanctions on

12 standard health plans that fail to comply with the

13 standards established under this title. Such sanc14 tions may include—

15 (A) limiting or prohibiting new member en16 rollment;

17 (B) permitting existing members to

18 disenroll from the health plan without penalty;

19 (C) State operation of a health plan to

20 provide transitional access;

21 (D) the imposition of civil monetary pen22 alties in accordance with this Act;

23 (E) requiring that a plan follow a correc24 tive action plan developed by the State; and
211

•S 2357

1 (F) decertification or denial of

2 recertification, but only after the plan has been

3 provided a reasonable opportunity to comply

4 with such standards.

5 (6) MULTI-STATE PLANS.—The Secretary of

6 Labor, in consultation with the Secretary, shall

7 carry out all certification and enforcement activities

8 described in this subsection with respect to

9 multistate self-insured plans.

10 (c) OTHER STATE DUTIES.—A participating State

11 shall—

12 (1) certify each purchasing cooperative that

13 meets the requirements of part 2 of subtitle D; and

14 (5) administer the State subsidies as provided

15 for in title VI.

16 (d) EFFECTIVE DATE.—Subsection (b) shall apply to

17 standard health plans and supplemental health benefits

18 plans sold, issued, or renewed on or after January 1,

19 1997.

20 SEC. 1502. COMMUNITY RATING AREAS AND HEALTH PLAN

21 SERVICE AREAS.

22 (a) IN GENERAL.—In accordance with this section,

23 each participating State shall, subject to approval by the

24 Secretary, provide for the division of the State into 1 or

25 more community rating areas.
212

•S 2357

1 (b) MULTIPLE AREAS.—With respect to a community

2 rating area—

3 (1) no metropolitan statistical area in a State

4 may be incorporated into more than 1 such area in

5 the State;

6 (2) the number of individuals residing within

7 such an area may not be less than 250,000; and

8 (3) no area incorporated in a community rating

9 area may be incorporated into another such area.

10 (c) BOUNDARIES.—

11 (1) IN GENERAL.—In establishing boundaries

12 for community rating areas, a participating State

13 shall comply with the antidiscrimination require14 ments of section 1602.

15 (2) COORDINATING MULTIPLE COMMUNITY RAT16 ING AREAS.—Nothing in this section shall be con17 strued as preventing a participating State from co18 ordinating the activities of one or more community

19 rating areas in the State.

20 (3) INTERSTATE COMMUNITY RATING AREAS.—

21 Community rating areas with respect to interstate

22 areas shall be established in accordance with rules

23 established by the Secretary.

24 (4) COORDINATION IN MULTI-STATE AREAS.—

25 One or more participating States may coordinate
213

•S 2357

1 their operations in contiguous community rating

2 areas. Such coordination may include, the following

3 activities, adoption of joint operating rules, contract4 ing with standard health plans, enforcement activi5 ties, and establishment of fee schedules for health

6 providers.

7 (d) HEALTH PLAN SERVICE AREAS.—

8 (1) IN GENERAL.—Pursuant to guidelines de9 veloped under paragraph (2), each State shall des10 ignate, by not later than January 1, 19ll, health

11 plan service areas.

12 (2) GUIDELINES.—The State shall designate

13 one or more health plan service areas within each

14 community rating area in the State, that—

15 (A) prevent discrimination in accordance

16 with section 1602; and

17 (B) do not cross community rating area

18 boundaries.

19 SEC. 1503. OPEN ENROLLMENT PERIODS.

20 Each participating State, based on rules and proce21 dures established by the Secretary, shall specify a uniform,

22 annual open enrollment period for each community rating

23 area during which all eligible individuals are permitted the

24 opportunity to change enrollment among the standard

25 health plans offered to such individuals in such area under
214

•S 2357

1 this Act. The initial annual open enrollment period shall

2 be for a period of 90 days.

3 SEC. 1504. RISK ADJUSTMENT PROGRAM.

4 (a) REQUIREMENT FOR IMPLEMENTATION.—In ac5 cordance with rules established by the Secretary, each

6 State shall implement a risk adjustment methodology de7 veloped by the Secretary under subsection (d).

8 (b) STATE RISK ADJUSTMENT ORGANIZATION.—

9 Each State shall establish a State risk adjustment organi10 zation to carry out the adjustments required under the

11 methodology implemented by the State under subsection

12 (a) and make payments in accordance with subsection (c).

13 Such organization shall meet standards established by the

14 Secretary relating to organizational structure, operation,

15 fiduciary responsibilities and financial management.

16 (c) ADJUSTMENTS AND PAYMENTS.—

17 (1) CLASSES OF PURCHASERS.—The Secretary

18 shall specify classes of individual health plan pur19 chasers whose expected expenditures are signifi20 cantly higher than those of employed individuals cov21 ered under community-rated plans.

22 (2) ESTIMATES.—The Secretary shall annually

23 estimate the amount by which the expected expendi24 tures related to specified high-cost community-rated

25 individual health plan purchasers (as specified by
215

•S 2357

1 the Secretary under the methodologies developed

2 under subsection (a)) for the year involved will ex3 ceed the expected average expenditures for other

4 community-rated health plan enrollees. Based on

5 such estimates, the Secretary shall develop a per

6 capita adjustment amount with respect to each com7 munity rating area.

8 (3) PAYMENTS.—

9 (A) IN GENERAL.—The State risk adjust10 ment organization shall, using the methodolo11 gies developed by the Secretary under sub12 section (a), apply the per capita adjustment

13 amount to community-rated and experience14 rated (and multistate plans under subparagraph

15 (C)) health plans offered within each commu16 nity rating area in the State.

17 (B) STANDARD PLANS.—Standard health

18 plans subject to an assessment under subpara19 graph (A) shall make payments to the State

20 risk adjustment organization for the State in

21 which such plans provide coverage.

22 (C) MULTISTATE PLANS.—A multistate

23 community-rated or experience-rated plan that

24 is subject to an assessment under subparagraph

25 (A) shall make payments to a single State risk
216

•S 2357

1 adjustment organization and provide such orga2 nization with information concerning the geo3 graphic distribution of the enrollees in such

4 plan. Such organization shall determine the

5 amount of such payments that are applicable to

6 each community-rating area and distribute such

7 amounts to the appropriate State risk adjust8 ment organization.

9 (D) DISTRIBUTION.—State risk adjust10 ment organizations shall distribute amounts col11 lected under this paragraph to community-rated

12 or experience-rated health plans that are deter13 mined to have expenditures for items and serv14 ices provided to enrolled individuals that are

15 greater than the average expenditures for en16 rollees in standard health plans. The amounts

17 of such distributions shall be based on the

18 methodology applied by the organization in19 volved.

20 (d) DEVELOPMENT OF METHODOLOGIES.—

21 (1) IN GENERAL.—Not later than

22 lllllllll, the Secretary, in consultation

23 with an advisory committee established by the Sec24 retary, shall develop a risk adjustment and reinsur-
217

•S 2357

1 ance methodology for use by States in accordance

2 with this section.

3 (2) METHODOLOGY.—

4 (A) PURPOSES.—The risk adjustment

5 methodology developed under paragraph (1)

6 shall—

7 (i) ensure that assessments imposed

8 on or payments provided to standard

9 health plans reflect the expected relative

10 utilization and expenditures for covered

11 items and services by the enrollees of each

12 plan compared to the average utilization

13 and expenditures for all eligible individ14 uals, and

15 (ii) protect standard health plans that

16 enroll a disproportionate share of eligible

17 individuals with respect to whom expected

18 utilization of health care services (included

19 in the benefit package) and expected

20 health care expenditures for such services

21 are greater than the average level of such

22 utilization and expenditures for eligible in23 dividuals.
218

•S 2357

1 (B) FACTORS TO BE CONSIDERED.—The

2 methodology shall take into account the follow3 ing factors:

4 (i) Demographic characteristics.

5 (ii) Health status, including prior use

6 of health services.

7 (iii) Geographic area of residence.

8 (iv) Socio-economic status.

9 (v) The cost sharing of the plan.

10 (vi) Any other factors determined by

11 the Secretary to be material to the pur12 poses described in subparagraph (A).

13 (3) SPECIAL CONSIDERATION FOR MENTAL ILL14 NESS AND MENTAL RETARDATION.—In developing

15 the methodology under this section, the Secretary

16 shall give consideration to the unique problems of

17 adjusting payments relating to health plans with re18 spect to individuals with mental illness and mental

19 retardation.

20 (4) MANDATORY REINSURANCE.—

21 (A) IN GENERAL.—The methodology devel22 oped under this section shall include a system

23 of mandatory reinsurance as a component of

24 the risk adjustment methodology.
219

•S 2357

1 (B) REINSURANCE SYSTEM.—The Sec2 retary, in developing the methodology for a

3 mandatory reinsurance system under subpara4 graph (A), shall—

5 (i) provide for standard health plans

6 to make payments to state-established re7 insurance programs for the purpose of re8 insuring all or part of the health care ex9 penditures for items and services included

10 in the standard benefit package for classes

11 of high-cost individual health plan pur12 chasers (as specified by the Secretary) or

13 specific high-cost treatments or diagnosis;

14 and

15 (ii) specify the manner of creation,

16 structure, and operation of the system in

17 each State, including—

18 (I) the manner (which may be

19 prospective or retrospective) in which

20 standard health plans make payments

21 to the system, and

22 (II) the type and level of reinsur23 ance coverage provided by the system.

24 (5) COST-SHARING ADJUSTMENT.—The stand25 ards developed by the Secretary under this sub-
220

•S 2357

1 section shall include a cost-sharing adjustment

2 mechanism to adjust for losses among all standard

3 health plans, except multistate self-insured health

4 plans, resulting from the reduced cost-sharing obli5 gations of individuals receiving assistance as is pro6 vided under the program described in subtitle A of

7 title VI.

8 (6) CONFIDENTIALITY OF INFORMATION.—The

9 methodology shall be developed under this section in

10 a manner that is consistent with privacy standards

11 promulgated under title V. In developing such stand12 ards, the Secretary shall take into account any po13 tential need of States for certain individually identi14 fiable health information in order to carry out risk15 adjustment and reinsurance activities under this

16 Act, but only to the minimum extent necessary to

17 carry out such activities and with protections pro18 vided to minimize the identification of the individ19 uals to whom the information relates.

20 SEC. 1505. GUARANTY FUNDS.

21 A State, in accordance with the standards established

22 by the Secretary under section 1442, shall establish a

23 State guaranty fund with respect to community-rated

24 plans offered in such State. The State shall establish a
221

•S 2357

1 separate guaranty fund with respect to self-insured plans

2 operating in the State in accordance with section 1481.

3 SEC. 1506. ENROLLMENT ACTIVITIES.

4 (a) PROVIDER-BASED ENROLLMENT MECHA5 NISMS.—The Secretary shall promulgate rules regarding

6 the establishment by each participating State, in accord7 ance with section 6006, of provider-based enrollment

8 mechanisms for individuals seeking care who are not en9 rolled in a standard health plan. Such rules shall include

10 provisions requiring standard health plans to pay provid11 ers for care delivered to individuals prior to the individ12 ual’s enrollment in the plan and be consistent with section

13 1114.

14 (b) COORDINATION OF ENROLLMENT ACTIVITIES.—

15 Each participating State shall coordinate its activities, in16 cluding plan enrollment and disenrollment activities, with

17 other States in a manner specified by the Secretary that

18 ensures continuous, nonduplicative coverage of commu19 nity-rated and experience-rated individuals in standard

20 health plans and that minimizes administrative procedures

21 and paperwork.

22 SEC. 1507. RURAL AND MEDICALLY UNDERSERVED AREAS.

23 (a) IN GENERAL.—If, in accordance with appropriate

24 rules established by the Secretary, a State determines that

25 there is inadequate access in the provision of health serv-
222

•S 2357

1 ices by standard health plans in any area of a State, the

2 State may authorize—

3 (1) a standard health plan to be the only stand4 ard health plan in the area; or

5 (2) two or more standard health plans to take

6 joint action to develop and implement a program.

7 (b) MEDICALLY UNDERSERVED AREA DEFINED.—

8 For purposes of this subtitle the term ‘‘medically under9 served area’’ means an urban or rural area designated by

10 the Secretary as an area with a shortage of health profes11 sional or of health services or facilities.

12 SEC. 1508. PUBLIC ACCESS SITES.

13 (a) DESIGNATION.—A State shall designate public

14 access sites within each community rating area through

15 which residents of such areas can obtain consumer infor16 mation concerning health plans and purchasing coopera17 tives offered in such areas. Such sites shall be designated

18 in a manner that ensures access to such information by

19 health care consumers.

20 (b) INFORMATION.—A State shall, through the public

21 access sites designated under subsection (a) and using the

22 information provided to the State under sections 1125 and

23 1321(f)(6), prepare and make available information, in a

24 comparative form, concerning standard health plans cer25 tified by the State and purchasing cooperatives operating
223

•S 2357

1 in the State. The State shall provide such materials to

2 employers located within the State.

3 SEC. 1509. REQUIREMENTS RELATING TO POSSESSIONS OF

4 THE UNITED STATES.

5 (a) IN GENERAL.—A possession of the United States

6 shall be a participating State meeting the requirements

7 of this Act only if there is an agreement in effect between

8 the United States and such possession pursuant to

9 which—

10 (1) the laws of such possession impose a part

11 B premium recapture assessment (as defined in sub12 section (b));

13 (2) nothing in any provision of law, including

14 the law of such possession, permits such possession

15 to reduce or remit in any way, directly or indirectly,

16 any liability to such possession by reason of such as17 sessment;

18 (3) any amount received in the Treasury of

19 such possession by reason of such assessment shall

20 be paid (at such time and in such manner as the

21 Secretary of the Treasury shall prescribe) to the

22 Federal Supplementary Medical Insurance Trust

23 Fund;

24 (4) such assessment is coordinated with the as25 sessment imposed by section 59B of the Internal
224

•S 2357

1 Revenue Code of 1986 such that, for any period, an

2 individual would be required to pay (in the aggre3 gate) not more than the applicable amount for such

4 period; and

5 (5) the possession complies with such other re6 quirements as may be prescribed by the Secretary

7 and the Secretary of the Treasury to carry out the

8 purposes of this paragraph, including requirements

9 prescribing the information individuals to whom

10 such assessment may apply shall furnish to the Sec11 retary and the Secretary of the Treasury.

12 (b) QUALIFIED PART B PREMIUM RECAPTURE AS13 SESSMENT.—In subsection (a), the term ‘‘qualified medi14 care part B premium recapture assessment’’ means an as15 sessment imposed and collected by such a possession that

16 is—

17 (1) equivalent to the assessment imposed under

18 section 59B of the Internal Revenue Code of 1986;

19 and

20 (2) imposed on all individuals who are bona fide

21 residents of the possession, to the extent such indi22 viduals have not paid the assessment imposed under

23 such section 59B to the United States by reason of

24 subsection (d)(5) of such section.
225

•S 2357

1 SEC. 1510. RIGHT OF RECOVERY OF CERTAIN TAXES

2 AGAINST PROVIDERS.

3 Each participating State shall provide that issuers

4 and plan sponsors of certified standard health plans shall

5 have the right of recovery against providers described in

6 section 4518 of the Internal Revenue Code of 1986 and

7 shall provide methods of enforcing such right.

8 PART 2—TREATMENT OF STATE LAWS

9 SEC. 1511. PREEMPTION OF CERTAIN STATE LAWS RELAT10 ING TO HEALTH PLANS.

11 (a) LAWS RESTRICTING PLANS OTHER THAN FEE12 FOR-SERVICE PLANS.—Except as may otherwise be pro13 vided in this section, no State law shall apply to any serv14 ices provided under a health plan that is not a fee-for15 service plan (or a fee-for-service component of a plan) if

16 such law has the effect of prohibiting or otherwise restrict17 ing plans from—

18 (1) limiting the number and type of health care

19 providers who participate in the plan;

20 (2) requiring enrollees to obtain health services

21 (other than emergency services) from participating

22 providers or from providers authorized by the plan;

23 (3) requiring enrollees to obtain a referral for

24 treatment by a specialized physician or health insti25 tution;
226

•S 2357

1 (4) establishing different payment rates for par2 ticipating providers and providers outside the plan;

3 (5) creating incentives to encourage the use of

4 participating providers; or

5 (6) requiring the use of single-source suppliers

6 for pharmacy, non-serviced medical equipment, and

7 other health products and services.

8 (b) PREEMPTION OF STATE CORPORATE PRACTICE

9 ACTS.—Any State law related to the corporate practice

10 of medicine and to provider ownership of health plans or

11 other providers shall not apply to arrangements between

12 health plans that are not fee-for-service plans and their

13 participating providers.

14 SEC. 1512. OVERRIDE OF RESTRICTIVE STATE PRACTICE

15 LAWS.

16 (a) OVERRIDE.—

17 (1) IN GENERAL.—No State may, through li18 censure or otherwise, restrict the practice of any

19 class of practitioners beyond that which is justified

20 by the education and training of such practitioners.

21 (2) DEFINITION.—As used in this section, the

22 term ‘‘practitioner’’ means—

23 (A) a nurse practitioner;

24 (B) a certified nurse midwife;

25 (C) a nurse anesthetist;
227

•S 2357

1 (D) a clinical nurse specialist; and

2 (E) a physicians assistant;

3 that has been awarded a master’s degree

4 or postmaster’s certificate following the comple5 tion of an accredited training program that pre6 pares individuals in advanced practitioner spe7 cialties and that is authorized by the State to

8 practice as such a practitioner.

9 (b) REGULATIONS.—The Secretary shall promulgate

10 regulations to implement subsection (a) and shall ensure

11 that appropriate technical assistance is available to States

12 for the purpose of complying with this section.

13 PART 3—STATE FLEXIBILITY

14 Subpart A—Existing State Laws

15 SEC. 1521. CONTINUANCE OF EXISTING FEDERAL LAW

16 WAIVERS.

17 Nothing in this Act shall preempt any feature of a

18 State health care system operating under a waiver granted

19 before the date of the enactment of this Act under titles

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

21 et seq. or 1396 et seq.) or the Employee Retirement In22 come Security Act of 1974 (29 U.S.C. 1001 et seq.).

23 SEC. 1522. HAWAII PREPAID HEALTH CARE ACT.

24 (a) ERISA WAIVER.—
228

•S 2357

1 (1) IN GENERAL.—Section 514(b)(5) of the

2 Employee Retirement Income Security Act of 1974

3 (29 U.S.C. 1144(b)(5)) is amended to read as fol4 lows:

5 ‘‘(5)(A) Except as provided in subparagraphs

6 (B) and (C), subsection (a) shall not apply to the

7 Hawaii Prepaid Health Care Act (Haw. Rev. Stat.

8 §§ 393–1 through 393–51).

9 ‘‘(B) Nothing in subparagraph (A) shall be con10 strued to exempt from subsection (a) any State tax

11 law relating to employee benefits plans.

12 ‘‘(C) If the Secretary of Labor notifies the Gov13 ernor of the State of Hawaii that as the result of

14 an amendment to the Hawaii Prepaid Health Care

15 Act enacted after the date of the enactment of this

16 paragraph—

17 ‘‘(i) the proportion of the population with

18 health care coverage under such Act is less than

19 such proportion on such date, or

20 ‘‘(ii) the level of benefit coverage provided

21 under such Act is less than the actuarial equiv22 alent of such level of coverage on such date,

23 subparagraph (A) shall not apply with respect to the

24 application of such amendment to such Act after the

25 date of such notification.’’.
229

•S 2357

1 (2) EFFECTIVE DATE.—The amendment made

2 by paragraph (1) shall take effect on the date of the

3 enactment of this Act.

4 (b) HSA WAIVER.—

5 (1) IN GENERAL.—The Secretary shall, at the

6 request of the Governor of the State of Hawaii and

7 in accordance with this section, grant a waiver to

8 the State from the requirements of this Act (other

9 than the requirements specified in paragraph (3)).

10 (2) SCOPE OF WAIVER.—The waiver granted

11 under paragraph (1) shall exempt—

12 (A) the State of Hawaii;

13 (B) health plans offered within the State;

14 and

15 (C) health plan participants, including em16 ployers, employees, residents, and health plan

17 sponsors within the State,

18 from requirements otherwise applicable to the State

19 and such plans and participants.

20 (3) REQUIRED COMPLIANCE OF OTHER RE21 QUIREMENTS.—The waiver shall initially be granted

22 under paragraph (1) if the State of Hawaii dem23 onstrates to the Secretary that the State main24 tains—
230

•S 2357

1 (A) a requirement that employers make

2 premium contributions comparable to the re3 quirements of this Act;

4 (B) a comprehensive benefit package (in5 cluding cost sharing) that is comparable with

6 the requirements of subtitle B of this title;

7 (C) a percentage of State population with

8 health care coverage that is not less than the

9 national average;

10 (D) a quality control mechanism and data

11 system that are comparable to the applicable re12 quirements of title V; and

13 (E) health care cost containment consist14 ent with the provisions of this Act.

15 (4) WAIVER PERIOD.—The waiver initially

16 granted under paragraph (1) shall extend for the pe17 riod during which the State of Hawaii continues to

18 comply with the requirements specified in paragraph

19 (3). The Secretary may require the State, every 5

20 years, to demonstrate to the Secretary the State’s

21 continued compliance with such requirements.

22 (5) PROCEDURE IN THE EVENT OF NON-COM23 PLIANCE.—

24 (A) NOTICE.—If, at any time after grant25 ing a waiver under paragraph (1), the Secretary
231

•S 2357

1 finds that the State of Hawaii is not meeting

2 the requirements specified in paragraph (3), the

3 Secretary shall notify the State of the Sec4 retary’s findings.

5 (B) OPPORTUNITY TO CONTEST.—The

6 State may contest the Secretary’s findings

7 under the procedures provided under section

8 5231.

9 (C) OPPORTUNITY FOR CORRECTION.—

10 (i) FINDINGS NOT CONTESTED.—If

11 the State does not contest the Secretary’s

12 findings within the 30-day period begin13 ning on the date of receipt of a notice of

14 such findings, the State shall have—

15 (I) a 90-day period beginning on

16 such date to show a good faith effort

17 to remedy the non-compliance, and

18 (II) an additional 12-month pe19 riod to take such actions as may be

20 required to bring the State into com21 pliance with the requirements speci22 fied in paragraph (3).

23 (ii) CONTESTED FINDINGS.—If the

24 State contests the Secretary’s findings
232

•S 2357

1 within such 30-day period but such find2 ings are upheld, the State shall have—

3 (I) a 90-day period beginning on

4 the date of final adjudication to show

5 a good faith effort to remedy the non6 compliance, and

7 (II) an additional 12-month pe8 riod to take such actions as may be

9 required to bring the State into com10 pliance with the requirements speci11 fied in paragraph (3).

12 (D) TERMINATION.—If the State fails to

13 demonstrate a good faith effort under subpara14 graph (C)(i)(I) or (C)(ii)(I) or to take actions

15 under subparagraph (C)(i)(II) or (C)(ii)(II)

16 within the time period specified, the Secretary

17 may revoke the waiver granted in paragraph

18 (1).

19 (6) COOPERATIVE AGREEMENT WITH THE SEC20 RETARY.—The Secretary shall enter into cooperative

21 agreements with appropriate officials of the State of

22 Hawaii—

23 (A) to develop standards and reporting re24 quirements necessary for the issuance and
233

•S 2357

1 maintenance of the State’s waiver under para2 graph (1); and

3 (B) otherwise to effectuate the provisions

4 of this subsection.

5 (7) ELIGIBILITY FOR FEDERAL FUNDS PRO6 VIDED TO PARTICIPATING STATES.—Nothing in this

7 subsection shall preclude the eligibility of the State

8 of Hawaii to participate in any public health initia9 tive, grant, or financial aid program under this Act

10 (including the medicaid program under title XIX of

11 the Social Security Act), or the sharing of revenue

12 resulting from the amendments made by title VII,

13 designed to implement the purpose of this Act. The

14 Secretary shall work with appropriate officials of the

15 State of Hawaii to develop comparable, alternative

16 standards to govern the State’s entitlement under

17 title XI.

18 SEC. 1523. ALTERNATIVE STATE PROVIDER PAYMENT SYS19 TEMS.

20 Notwithstanding any other provision of law, if a hos21 pital reimbursement system operated by a State meets the

22 requirements of section 1814(b) of the Social Security Act

23 (42 U.S.C. 1395f(b)) and has been approved by the Sec24 retary and in continuous operation since July 1, 1977, the

25 payment rates and methodologies required under the sys-
234

•S 2357

1 tem for services provided in the State shall apply to all

2 purchasers and payers, including those under employee

3 welfare benefit plans authorized under the Employee Re4 tirement Income Security Act of 1974 (29 U.S.C. 1001

5 et seq.), workers’ compensation programs under State law,

6 the Federal Employees’ Compensation Act under chapter

7 81 of title 5, United States Code, and Federal employee

8 health benefit plans under chapter 89 of title 5, United

9 States Code.

10 SEC. 1524. ALTERNATIVE STATE HOSPITAL SERVICES PAY11 MENT SYSTEMS.

12 (a) IN GENERAL.—No State shall be prevented from

13 enforcing—

14 (1) a State system described in subsection (b),

15 or

16 (2) a State system described in subsection (c),

17 by any provision of the Employee Retirement Income Se18 curity Act of 1974 (29 U.S.C. 1001 et seq.) or chapter

19 81 or 89 of title 5, United States Code.

20 (b) REIMBURSEMENT CONTROL SYSTEM.—A State

21 system is described in this subsection if it is a State reim22 bursement control system in operation before the date of

23 the enactment of this Act which—

24 (1) applies to substantially all non-Federal

25 acute care hospitals in the State, and
235

•S 2357

1 (2) regulates substantially all rates of payment

2 (including maximum charges) in the State for inpa3 tient hospital services, except payments made under

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

5 1395 et seq.).

6 (c) HEALTH INSURANCE REFORM SYSTEM.—A State

7 system is described in this subsection if it is a State health

8 insurance reform system in operation before the date of

9 the enactment of this Act which requires any insurer (in10 cluding a health maintenance organization) to comply with

11 requirements governing open enrollment and community

12 rating, including premium adjustments or other health

13 care assessments, for the purpose of risk adjustment.

14 (d) EFFECTIVE DATES.—

15 (1) SUBSECTION (b).—In the case of a State

16 system described in subsection (b), the provisions of

17 this section shall apply before, on, and after the date

18 of the enactment of this Act.

19 (2) SUBSECTION (c).—In the case of a State

20 system described in subsection (c), the provisions of

21 this section shall apply before, on, and after the date

22 of the enactment of this Act, and before the effective

23 date of section 1116 of this Act.
236

•S 2357

1 Subpart B—Requirements for State Single-Payer

2 Systems

3 SEC. 1531. SINGLE-PAYER SYSTEM DESCRIBED.

4 The Secretary shall approve an application of a State

5 to operate a single-payer system if the Secretary finds that

6 the system—

7 (1) meets the requirements of section 1532; and

8 (2)(A) in the case of a system offered through9 out a State, meets the requirements for a Statewide

10 single-payer system under section 1533; or

11 (B) in the case of a system offered in a single

12 community rating area of a State, meets the require13 ments for an area specific single-payer system under

14 section 1534.

15 SEC. 1532. GENERAL REQUIREMENTS FOR SINGLE-PAYER

16 SYSTEMS.

17 Each single-payer system shall meet the following re18 quirements:

19 (1) ESTABLISHMENT BY STATE.—The system is

20 established under State law, and State law provides

21 for mechanisms to enforce the requirements of the

22 system.

23 (2) OPERATION BY STATE.—The system is op24 erated by the State or a designated agency of the

25 State.

26 (3) ENROLLMENT OF INDIVIDUALS.—
237

•S 2357

1 (A) MANDATORY ENROLLMENT OF ALL

2 COMMUNITY-RATED INDIVIDUALS.—The system

3 shall provide for the enrollment of all commu4 nity-rated individuals residing in the State (or,

5 in the case of an area-specific single-payer sys6 tem, in the community rating area) who are not

7 medicare-eligible individuals.

8 (B) OPTIONAL ENROLLMENT OF MEDI9 CARE-ELIGIBLE INDIVIDUALS.—At the option of

10 the State and if the Secretary has approved an

11 application submitted by the State, the system

12 may provide for the enrollment of medicare-eli13 gible individuals residing in the State (or, in the

14 case of an area-specific single-payer system, in

15 the community rating area).

16 (C) OPTIONAL ENROLLMENT OF EXPERI17 ENCE-RATED INDIVIDUALS.—

18 (i) IN GENERAL.—Except as provided

19 in clause (ii), at the option of the State, a

20 single-payer system may provide for the

21 enrollment of experience-rated individuals

22 residing in the State (or, in the case of an

23 area-specific single-payer system, in the

24 community rating area).
238

•S 2357

1 (ii) PARTICIPATION BY CERTAIN

2 MULTISTATE PLANS.—The system shall

3 not require participation by any experi4 ence-rated individual who is enrolled in a

5 certified multistate self-insured standard

6 health plan which is a multiemployer plan

7 described in section 1013(10), or which is

8 sponsored by an experience-rated employer

9 sponsor with at least 5,000 full-time em10 ployees.

11 (D) OPTIONS INCLUDED IN STATE SYSTEM

12 DOCUMENT.—A State may not exercise any of

13 the options described in subparagraphs (B) or

14 (C) for a year unless the State included a de15 scription of the option in the submission of its

16 system document to the Secretary for the year

17 under section 1501(a).

18 (E) EXCLUSION OF CERTAIN INDIVID19 UALS.—A single-payer system may not require

20 the enrollment of veterans, active duty military

21 personnel, and American Indians.

22 (4) DIRECT PAYMENT TO PROVIDERS.—

23 (A) IN GENERAL.—With respect to provid24 ers who furnish items and services included in

25 the standard benefits package established under
239

•S 2357

1 subtitle C to individuals enrolled in the system,

2 the State shall make payments directly, or

3 through fiscal intermediaries, to such providers

4 and assume (subject to subparagraph (B)) all

5 financial risk associated with making such pay6 ments.

7 (B) CAPITATED PAYMENTS PERMITTED.—

8 Nothing in subparagraph (A) shall be construed

9 to prohibit providers furnishing items and serv10 ices under the system from receiving payments

11 on a capitated, at-risk basis based on prospec12 tively determined rates.

13 (5) PROVISION OF STANDARD BENEFITS PACK14 AGE.—

15 (A) IN GENERAL.—The system shall pro16 vide for coverage of the standard benefits pack17 age established under subtitle C, including the

18 cost-sharing provided under the package (sub19 ject to subparagraph (B)), to all individuals en20 rolled in the system.

21 (B) IMPOSITION OF REDUCED COST-SHAR22 ING.—The system may decrease the cost-shar23 ing otherwise provided in the standard benefits

24 package established under subtitle C with re25 spect to any individuals enrolled in the system
240

•S 2357

1 or any class of services included in the package,

2 so long as the system does not increase the

3 cost-sharing otherwise imposed with respect to

4 any other individuals or services.

5 (6) COST CONTAINMENT.—The system shall

6 provide for mechanisms to ensure, in a manner sat7 isfactory to the Secretary, that—

8 (A) the rate of growth in health care

9 spending will not be higher than the target es10 tablished under this Act;

11 (B) the expenditures described in subpara12 graph (A) are computed and effectively mon13 itored;

14 (C) automatic, mandatory, nondiscretion15 ary reductions in payments to health care pro16 viders will be imposed to the extent required to

17 assure that such per capita expenditures do not

18 exceed the applicable target referred to in sub19 paragraph (A); and

20 (D) Federal payments to a single payer

21 State or health care coverage area shall be lim22 ited to the payments that would have been

23 made in the absence of the implementation of

24 the single payer system.
241

•S 2357

1 (7) FEDERAL PAYMENTS.—The system shall

2 provide for mechanisms to ensure, in a manner sat3 isfactory to the Secretary, that Federal payments to

4 a single-payer State or community rating area shall

5 be limited to the payments that would have been

6 made in the absence of the implementation of the

7 single-payer system.

8 (8) REQUIREMENTS GENERALLY APPLICABLE

9 TO STANDARD HEALTH PLANS.—The system shall

10 meet the requirements applicable to a standard

11 health plan, except that—

12 (A) the system does not have the authority

13 provided to standard health plans under section

14 1111(b)(3) (relating to permissible limitations

15 on the enrollment of community-rated eligible

16 individuals on the basis of limits on the plan’s

17 capacity); and

18 (B) the system is not required to meet the

19 requirements of sections 1116 (relating to rat20 ing limitations for community-rated market),

21 1123(a) (relating to plan solvency), and section

22 1125 (relating to restrictions on the marketing

23 of plan materials).
242

•S 2357

1 SEC. 1533. SPECIAL RULES FOR STATES OPERATING STATE2 WIDE SINGLE-PAYER SYSTEM.

3 (a) IN GENERAL.—In the case of a State operating

4 a Statewide single-payer system—

5 (1) the State shall operate the system through6 out the State; and

7 (2) except as provided in subsection (b), the

8 State shall meet the requirements for participating

9 States under part 1.

10 (b) EXCEPTIONS TO CERTAIN REQUIREMENTS FOR

11 PARTICIPATING STATES.—In the case of a State operating

12 a Statewide single-payer system, the State is not required

13 to meet the following requirements otherwise applicable to

14 participating States under part 1:

15 (1) ESTABLISHMENT OF COMMUNITY RATING

16 AND SERVICE AREAS.—The requirements of sections

17 1502(a) (relating to the establishment of community

18 rating areas) and 1502(b) (relating to the designa19 tion of health plan service areas).

20 (2) OTHER REFERENCES INAPPLICABLE.—Any

21 requirement which the Secretary determines is not

22 appropriate to apply to a State single-payer system.

23 (c) FINANCING.—

24 (1) IN GENERAL.—A State operating a State25 wide single-payer system shall provide for the financ26 ing of the system using, at least in part, a payroll-
243

•S 2357

1 based financing system that requires employers to

2 pay at least the amount that the employers would be

3 required to pay if the employers were subject to the

4 requirements of title X (determined without regard

5 to any effective date).

6 (2) USE OF FINANCING METHODS.—Such a

7 State may use, consistent with paragraph (1), any

8 other method of financing.

9 (d) SINGLE-PAYER STATE DEFINED.—In this title,

10 the term ‘‘single-payer State’’ means a State with a State11 wide single-payer system in effect that has been approved

12 by the Secretary in accordance with this part.

13 SEC. 1534. SPECIAL RULES FOR COMMUNITY RATING AREA14 SPECIFIC SINGLE-PAYER SYSTEMS.

15 (a) IN GENERAL.—In the case of a State operating

16 a community rating area specific single-payer system, ex17 cept as provided in subsection (b), the State shall meet

18 the requirements for participating States under part 1.

19 (b) EXCEPTIONS TO CERTAIN REQUIREMENTS FOR

20 PARTICIPATING STATES.—

21 (1) ESTABLISHMENT OF SERVICE AREAS.—The

22 requirement of section 1502(b) (relating to the des23 ignation of health plan service areas).

24 (2) OTHER REFERENCES INAPPLICABLE.—Any

25 requirement which the Secretary determines is not
244

•S 2357

1 appropriate to apply to a community rating area

2 specific single-payer system.

3 Subpart C—Early Implementation of Comprehensive

4 State Programs

5 SEC. 1541. EARLY IMPLEMENTATION OF COMPREHENSIVE

6 STATE PROGRAMS

7 (a) APPLICATION.—

8 (1) IN GENERAL.—In accordance with this sec9 tion, each State desiring to implement the reform

10 standards established in this Act before the applica11 ble effective date for such standards, may submit an

12 application to the Secretary of Health and Human

13 Services and the Secretary of Labor to request ap14 proval of a State comprehensive health care reform

15 program established under State law which meets

16 the requirements specified in subsection (b).

17 (2) ESTABLISHMENT OF CRITERIA.—The Sec18 retaries shall establish not later than January 1,

19 1995, criteria for—

20 (A) the approval of such applications, and

21 (B) the continuing review of such State

22 programs consistent with the provisions of sub23 part B of part 1.

24 (3) EXPEDITED PROCEDURE.—The Secretaries

25 shall establish an expedited procedure for the consid-
245

•S 2357

1 eration and disposition of applications under this

2 subsection. The procedure established by the Sec3 retaries shall provide that such consideration and

4 disposition be completed within 90 days, and that if

5 the application is approved, multistate employers be

6 notified of such approval.

7 (b) REQUIREMENTS SPECIFIED.—The State program

8 shall be consistent with the reform standards established

9 in this Act and the interim and final (if any) regulations

10 promulgated by the Secretaries, including—

11 (1) a standardized benefits package meeting the

12 requirements established under subtitle C, or in the

13 event such requirements have not been fully promul14 gated on the date of the application, the require15 ments for a qualified health maintenance organiza16 tion (as defined in section 1310(d) of the Public

17 Health Service Act (42 U.S.C. 300e-9(d));

18 (2) insurance reforms and rating requirements

19 as specified under part 2 of subtitle B;

20 (3) standards for health plans as specified

21 under part 3 of subtitle B;

22 (4) the recognition of, and standards for, pur23 chasing cooperatives, as specified in part 2 of sub24 title D;
246

•S 2357

1 (5) compliance with the data collection and pri2 vacy procedures established under subtitle B of title

3 V;

4 (6) uniform administrative procedures as speci5 fied in section 1126;

6 (7) the imposition of employer and individual

7 responsibilities as specified in part 1 of subtitle D

8 and title X (determined without regard to any effec9 tive date);

10 (8) the establishment of the subsidy program

11 under this Act; and

12 (9) health care cost containment under this

13 Act.

14 (c) QUALIFICATION FOR FEDERAL FUNDS.—For

15 purposes of this Act, a State with an approved State pro16 gram under this section shall be considered a participating

17 State and shall maintain such status if such State meets

18 the requirements of this Act as such provisions become

19 effective.

20 (d) EMPLOYER CERTIFICATION PROCESS.—In the

21 case of any multistate self-insured health plan, certifi22 cation by the plan to the Secretary of Labor that such

23 plan is in compliance with the applicable Federal stand24 ards described in subsection (b) shall satisfy compliance

25 with any State program approved under this section.
247

•S 2357

1 (e) FUNDING.—The Secretary of Health and Human

2 Services shall pay over to each State with an approved

3 application under this section for each calendar quarter

4 ending before 1997 an amount equal to the estimated de5 crease in Federal expenditures (net of any estimated de6 crease in Federal revenues) for such quarter with respect

7 to such State resulting from the implementation of the

8 State comprehensive health care reform program.

9 Subtitle G—Miscellaneous

10 Provisions

11 SEC. 1601. PROVISION OF ITEMS OR SERVICES CONTRARY

12 TO RELIGIOUS BELIEF OR MORAL CONVIC13 TION.

14 A health professional or a health facility may not be

15 required to provide an item or service in the standard ben16 efit package if the professional or facility objects to doing

17 so on the basis of a religious belief or moral conviction.

18 SEC. 1602. ANTIDISCRIMINATION.

19 (a) IN GENERAL.—The Secretary of Health and

20 Human Services, and any State, health plan, purchasing

21 cooperative, employer, health program or activity receiving

22 Federal financial assistance, or other entity subject to this

23 Act, shall not directly or through contractual arrange24 ments—
248

•S 2357

1 (1) deny or limit access to or the availability of

2 health care services, or otherwise discriminate in

3 connection with the provision of health care services;

4 or

5 (2) limit, segregate, or classify an individual in

6 any way which would deprive or tend to deprive such

7 individual of health care services, or otherwise ad8 versely affect his or her access to health care serv9 ices;

10 on the basis of race, national origin, sex, religion, lan11 guage, income, age, sexual orientation, disability, health

12 status, or anticipated need for health services.

13 (b) APPLICATION OF SECTION TO SPECIFIC AC14 TIONS.—This section shall apply to, but is not limited to,

15 the following actions:

16 (1) The establishing of boundaries for commu17 nity rating areas under section 1502, the enrollment

18 of individuals in a health care plan or the marketing

19 of a health care plan, and the selection of providers

20 or the setting of the terms or conditions under which

21 providers participate in a health care plan or pro22 vider network.

23 (2) The determination of the scope of services

24 provided by a health care plan, and the providing of
249

•S 2357

1 such services and determining of the site or location

2 of health care facilities.

3 (c) REGULATIONS.—Not later than 1 year after the

4 date of the enactment of this Act, the Secretary of Health

5 and Human Services shall issue regulations to carry out

6 this section.

7 (d) EFFECT ON OTHER LAWS. Nothing in this Act

8 shall be construed to limit the scope of, or the availability

9 of relief under, any other Federal or State law prohibiting

10 discrimination or providing relief therefore.

11 TITLE II—NEW BENEFITS

12 Subtitle A—Coverage of Outpatient

13 Prescription Drugs in Medicare

14 SEC. 2000. REFERENCES IN SUBTITLE.

15 (a) AMENDMENTS TO SOCIAL SECURITY ACT.—Ex16 cept as otherwise specifically provided, whenever in this

17 subtitle an amendment is expressed in terms of an amend18 ment to or repeal of a section or other provision, the ref19 erence shall be considered to be made to that section or

20 other provision of the Social Security Act.

21 (b) REFERENCES TO OBRA.—In this title, the terms

22 ‘‘OBRA–1986’’, ‘‘OBRA–1987’’, ‘‘OBRA–1989’’,

23 ‘‘OBRA–1990’’, and ‘‘OBRA–1993’’ refer to the Omnibus

24 Budget Reconciliation Act of 1986 (Public Law 99–509),

25 the Omnibus Budget Reconciliation Act of 1987 (Public
250

•S 2357

1 Law 100–203), the Omnibus Budget Reconciliation Act

2 of 1989 (Public Law 101–239), the Omnibus Budget Rec3 onciliation Act of 1990 (Public Law 101–508), and the

4 Omnibus Budget Reconciliation Act of 1993 (Public Law

5 103–66), respectively.

6 PART 1—COVERAGE OF OUTPATIENT

7 PRESCRIPTION DRUGS

8 SEC. 2001. COVERAGE OF OUTPATIENT PRESCRIPTION

9 DRUGS.

10 (a) COVERED OUTPATIENT DRUGS AS MEDICAL AND

11 OTHER HEALTH SERVICES.—Section 1861(s)(2)(J) (42

12 U.S.C. 1395x(s)(2)(J)) is amended to read as follows:

13 ‘‘(J) covered outpatient drugs;’’.

14 (b) DEFINITION OF COVERED OUTPATIENT DRUG.—

15 Section 1861(t) (42 U.S.C. 1395x(t)) is amended—

16 (1) in the heading, by adding at the end the fol17 lowing: ‘‘; Covered Outpatient Drugs’’;

18 (2) in paragraph (1)—

19 (A) by striking ‘‘paragraph (2)’’ and in20 serting ‘‘the succeeding paragraphs of this sub21 section’’, and

22 (B) by striking the period at the end and

23 inserting ‘‘, but only if used for a medically ac24 cepted indication.’’; and
251

•S 2357

1 (3) by striking paragraph (2) and inserting the

2 following:

3 ‘‘(2) Except as otherwise provided in paragraph (3),

4 the term ‘covered outpatient drug’ means any of the fol5 lowing products used for a medically accepted indication:

6 ‘‘(A) A drug which may be dispensed only upon

7 prescription and—

8 ‘‘(i) which is approved for safety and effec9 tiveness as a prescription drug under section

10 505 or 507 of the Federal Food, Drug, and

11 Cosmetic Act or which is approved under sec12 tion 505(j) of such Act;

13 ‘‘(ii)(I) which was commercially used or

14 sold in the United States before the date of the

15 enactment of the Drug Amendments of 1962 or

16 which is identical, similar, or related (within the

17 meaning of section 310.6(b)(1) of title 21 of the

18 Code of Federal Regulations) to such a drug,

19 and (II) which has not been the subject of a

20 final determination by the Secretary that it is

21 a ‘new drug’ (within the meaning of section

22 201(p) of the Federal Food, Drug, and Cos23 metic Act) or an action brought by the Sec24 retary under section 301, 302(a), or 304(a) of
252

•S 2357

1 such Act to enforce section 502(f) or 505(a) of

2 such Act; or

3 ‘‘(iii)(I) which is described in section

4 107(c)(3) of the Drug Amendments of 1962

5 and for which the Secretary has determined

6 there is a compelling justification for its medi7 cal need, or is identical, similar, or related

8 (within the meaning of section 310.6(b)(1) of

9 title 21 of the Code of Federal Regulations) to

10 such a drug, and (II) for which the Secretary

11 has not issued a notice of an opportunity for a

12 hearing under section 505(e) of the Federal

13 Food, Drug, and Cosmetic Act on a proposed

14 order of the Secretary to withdraw approval of

15 an application for such drug under such section

16 because the Secretary has determined that the

17 drug is less than effective for all conditions of

18 use prescribed, recommended, or suggested in

19 its labeling.

20 ‘‘(B) A biological product which—

21 ‘‘(i) may only be dispensed upon prescrip22 tion,

23 ‘‘(ii) is licensed under section 351 of the

24 Public Health Service Act, and
253

•S 2357

1 ‘‘(iii) is produced at an establishment li2 censed under such section to produce such

3 product.

4 ‘‘(C) Insulin certified under section 506 of the

5 Federal Food, Drug, and Cosmetic Act.

6 ‘‘(D) Enteral nutrients (but only if provided as

7 a covered home infusion drug).

8 ‘‘(3) The term ‘covered outpatient drug’ does not in9 clude any product—

10 ‘‘(A) which is administered through infusion in

11 a setting described in paragraph (5)(A)(ii) unless

12 the product is a covered home infusion drug;

13 ‘‘(B) when furnished as part of, or as incident

14 to, any other item or service for which payment may

15 be made under this title (other than physicians’

16 services or services which would be physicians’ serv17 ices if furnished by a physician); or

18 ‘‘(C) which is listed under paragraph (2) of sec19 tion 1927(d) (other than subparagraph (I) or (J) of

20 such paragraph) as a drug which may be excluded

21 from coverage under a State plan under title XIX

22 and which the Secretary elects to exclude from cov23 erage under part B.

24 ‘‘(4) For purposes of this subsection, the term ‘medi25 cally accepted indication’, with respect to the use of an
254

•S 2357

1 outpatient drug, includes any use which has been approved

2 by the Food and Drug Administration for the drug, and

3 includes another use of the drug if—

4 ‘‘(A) the drug has been approved by the Food

5 and Drug Administration; and

6 ‘‘(B)(i) such use is supported by one or more

7 citations which are included (or approved for inclu8 sion) in one or more of the following compendia: the

9 American Hospital Formulary Service-Drug Infor10 mation, the American Medical Association Drug

11 Evaluations, the United States Pharmacopoeia-Drug

12 Information, and other authoritative compendia as

13 identified by the Secretary, unless the Secretary has

14 determined that the use is not medically appropriate

15 or the use is identified as not indicated in one or

16 more such compendia, or

17 ‘‘(ii) the carrier involved determines, based

18 upon guidance provided by the Secretary to carriers

19 for determining accepted uses of drugs, that such

20 use is medically accepted based on supportive clinical

21 evidence in peer reviewed medical literature appear22 ing in publications which have been identified for

23 purposes of this clause by the Secretary.
255

•S 2357

1 The Secretary may revise the list of compendia in sub2 paragraph (B)(i) designated as appropriate for identifying

3 medically accepted indications for drugs.

4 ‘‘(5)(A) For purposes of this subsection, the term

5 ‘covered home infusion drug’ means a covered outpatient

6 drug dispensed to an individual that—

7 ‘‘(i) is administered intravenously,

8 subcutaneously, or epidurally, using an access device

9 that is inserted into the body and an infusion device

10 to control the rate of flow of the drug (or through

11 other means of administration determined by the

12 Secretary);

13 ‘‘(ii) is administered—

14 ‘‘(I) in the individual’s home,

15 ‘‘(II) in an institution used as the individ16 ual’s home, but only if the drug is administered

17 during an inpatient day for which payment is

18 not made to the institution under part A for in19 patient or extended care services furnished to

20 the individual, or

21 ‘‘(III) in a facility other than the individ22 ual’s home if the administration of the drug at

23 the facility is determined by the Secretary to be

24 cost-effective (in accordance with such criteria

25 as the Secretary may establish); and
256

•S 2357

1 ‘‘(iii) with respect to a drug furnished in a

2 home setting—

3 ‘‘(I) is an antibiotic drug and the Sec4 retary has not determined, for the specific drug

5 or the indication to which the drug is applied,

6 that the drug cannot generally be administered

7 safely and effectively in such a setting, or

8 ‘‘(II) is not an antibiotic drug and the Sec9 retary has determined, for the specific drug or

10 the indication to which the drug is applied, that

11 the drug can generally be administered safely

12 and effectively in such a setting.

13 ‘‘(B) Not later than January 1, 1999, (and periodi14 cally thereafter), the Secretary shall publish a list of the

15 drugs, and indications for such drugs, that are covered

16 home infusion drugs, with respect to which home infusion

17 drug therapy may be provided under this title.’’.

18 (c) CONFORMING AMENDMENTS REPEALING SEPA19 RATE COVERAGE OF CERTAIN DRUGS AND PRODUCTS.—

20 (1) Effective January 1, 1999, section 1861(s)(2) (42

21 U.S.C. 1395x(s)(2)) is amended—

22 (A) in subparagraph (A), by striking ‘‘(includ23 ing drugs’’ and all that follows through ‘‘self-admin24 istered)’’;

25 (B) by striking subparagraphs (G) and (I);
257

•S 2357

1 (C) by adding ‘‘and’’ at the end of subpara2 graph (M); and

3 (D) by striking subparagraphs (O), (P), and

4 (Q).

5 (2) Effective January 1, 1999, section 1861 (42

6 U.S.C. 1395x) is amended by striking the subsection (jj)

7 added by section 4156(a)(2) of OBRA–1990.

8 (3) Effective January 1, 1999, section 1881(b) (42

9 U.S.C. 1395rr(b)) is amended—

10 (A) in the first sentence of paragraph (1)—

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

12 (B)’’, and

13 (ii) by striking ‘‘, and (C)’’ and all that

14 follows and inserting a period; and

15 (B) in paragraph (11)—

16 (i) by striking ‘‘(11)(A)’’ and inserting

17 ‘‘(11)’’, and

18 (ii) by striking subparagraphs (B) and (C).

19 SEC. 2002. PAYMENT RULES AND RELATED REQUIREMENTS

20 FOR COVERED OUTPATIENT DRUGS.

21 (a) IN GENERAL.—Section 1834 (42 U.S.C. 1395m)

22 is amended by inserting after subsection (c) the following

23 new subsection:

24 ‘‘(d) PAYMENT FOR AND CERTAIN REQUIREMENTS

25 CONCERNING COVERED OUTPATIENT DRUGS.—
258

•S 2357

1 ‘‘(1) DEDUCTIBLE.—

2 ‘‘(A) IN GENERAL.—Payment shall be

3 made under paragraph (2) only for expenses in4 curred by an individual for a covered outpatient

5 drug during a calendar year after the individual

6 has incurred expenses in the year for such

7 drugs (during a period in which the individual

8 is entitled to benefits under this part) equal to

9 the deductible amount for that year.

10 ‘‘(B) DEDUCTIBLE AMOUNT.—

11 ‘‘(i) For purposes of subparagraph

12 (A), the deductible amount is—

13 ‘‘(I) for 1999, an amount equal

14 to the amount determined under

15 clause (ii)(I);

16 ‘‘(II) for 2000, the amount

17 (rounded to the nearest dollar) that

18 the Secretary estimates will ensure

19 that the percentage of individuals cov20 ered under this part (other than indi21 viduals enrolled with an eligible orga22 nization under section 1876, an orga23 nization described in section

24 1833(a)(1)(A), or a medicare drug

25 benefit plan under section 1851) dur-
259

•S 2357

1 ing the year who will incur expenses

2 for covered outpatient drugs equal to

3 or greater than such amount will be

4 the same as the percentage for the

5 previous year;

6 ‘‘(III) for 2001, an amount equal

7 to the amount determined under

8 clause (ii)(II); and

9 ‘‘(IV) for any succeeding year,

10 the amount (rounded to the nearest

11 dollar) that the Secretary estimates

12 will ensure that the percentage of in13 dividuals covered under this part

14 (other than individuals enrolled with

15 an eligible organization under section

16 1876, an organization described in

17 section 1833(a)(1)(A), or a medicare

18 drug benefit plan under section 1851)

19 during the year who will incur ex20 penses for covered outpatient drugs

21 equal to or greater than such amount

22 will be the same as the percentage for

23 the previous year.

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

25 amount determined under this clause is—
260

•S 2357

1 ‘‘(I) in 1999, an amount deter2 mined by the Secretary such that the

3 amount so determined will result in

4 projected incurred spending and ad5 ministrative costs (net of projected re6 bates under section 1851 and any

7 portion of the part B premium attrib8 utable to the covered outpatient drug

9 benefit) for providing payment under

10 this title for covered outpatient drugs

11 that would be equal to a spending tar12 get equal to $13,500,000,000; and

13 ‘‘(II) in 2001, an amount deter14 mined by the Secretary (based on ac15 tual experience) that the Secretary es16 timates will ensure that the percent17 age of individuals covered under this

18 part (other than individuals enrolled

19 with an eligible organization under

20 section 1876, an organization de21 scribed in section 1833(a)(1)(A), or a

22 medicare drug benefit plan under sec23 tion 1851) during the year who will

24 incur expenses for covered outpatient

25 drugs equal to or greater than such
261

•S 2357

1 amount will be the same as the per2 centage that would have incurred such

3 expenses had actual experience in

4 such incurred spending and adminis5 trative costs (described in subclause

6 (I)) for 1999 been equal to the spend7 ing target for 1999 (described in

8 subclause (I)).

9 ‘‘(iii) The Secretary shall promulgate

10 the deductible amount for 1999 and each

11 succeeding year not later than October 1

12 of the previous year.

13 ‘‘(2) PAYMENT AMOUNT.—

14 ‘‘(A) IN GENERAL.—Subject to the deduct15 ible established under paragraph (1), the

16 amount payable under this part for a covered

17 outpatient drug furnished to an individual dur18 ing a calendar year shall be equal to—

19 ‘‘(i) 80 percent of the payment basis

20 described in paragraph (3), in the case of

21 an individual who has not incurred ex22 penses for covered outpatient drugs during

23 the year (including the deductible imposed

24 under paragraph (1)) in excess of the out-
262

•S 2357

1 of-pocket limit for the year under subpara2 graph (B); and

3 ‘‘(ii) 100 percent of the payment basis

4 described in paragraph (3), in the case of

5 any other individual.

6 ‘‘(B) OUT-OF-POCKET LIMIT DE7 SCRIBED.—

8 ‘‘(i) For purposes of subparagraph

9 (A), the out-of-pocket limit for a year is

10 equal to—

11 ‘‘(I) for 1999, $1275; and

12 ‘‘(II) for any succeeding year, the

13 amount (rounded to the nearest dol14 lar) that the Secretary estimates will

15 ensure that the percentage of the av16 erage number of individuals covered

17 under this part (other than individ18 uals enrolled with an eligible organiza19 tion under section 1876 or an organi20 zation described in section

21 1833(a)(1)(A)) during the year who

22 will incur expenses for covered out23 patient drugs equal to or greater than

24 such amount will be the same as the

25 percentage for the previous year.
263

•S 2357

1 ‘‘(ii) The Secretary shall promulgate

2 the out-of-pocket limit for 1999 and each

3 succeeding year not later than October 1

4 of the previous year.

5 ‘‘(3) PAYMENT BASIS.—For purposes of para6 graph (2), the payment basis is the lesser of—

7 ‘‘(A) the actual charge for a covered out8 patient drug, or

9 ‘‘(B) the applicable payment limit estab10 lished under paragraph (4).

11 ‘‘(4) PAYMENT LIMITS.—

12 ‘‘(A) PAYMENT LIMIT FOR SINGLE SOURCE

13 DRUGS AND MULTIPLE SOURCE DRUGS WITH

14 RESTRICTIVE PRESCRIPTIONS.—In the case of a

15 covered outpatient drug that is a multiple

16 source drug which has a restrictive prescription,

17 or that is single source drug, the payment limit

18 for a payment calculation period is equal to the

19 amount of the administrative allowance (estab20 lished under paragraph (5)) plus the product of

21 the number of dosage units dispensed and the

22 per unit estimated acquisition cost for the drug

23 product (determined under subparagraph (C))

24 for the period.
264

•S 2357

1 ‘‘(B) PAYMENT LIMIT FOR MULTIPLE

2 SOURCE DRUGS WITHOUT RESTRICTIVE PRE3 SCRIPTIONS.—In the case of a drug that is a

4 multiple source drug which does not have a re5 strictive prescription, the payment limit for a

6 payment calculation period is equal to the

7 amount of the administrative allowance (estab8 lished under paragraph (5)) plus the product of

9 the number of dosage units dispensed and the

10 unweighted median of the unit estimated acqui11 sition cost (determined under subparagraph

12 (C)) for the drug products for the period.

13 ‘‘(C) DETERMINATION OF UNIT PRICE.—

14 ‘‘(i) IN GENERAL.—The Secretary

15 shall determine, for the dispensing or pro16 viding of a covered outpatient drug prod17 uct in the payment calculation period, the

18 estimated acquisition cost for the drug

19 product. With respect to any covered out20 patient drug product, the estimated acqui21 sition cost, may not exceed 93 percent of

22 the published average wholesale price for

23 the drug, as determined one month prior

24 to the beginning of the payment calcula25 tion period.
265

•S 2357

1 ‘‘(ii) COMPLIANCE WITH REQUEST

2 FOR INFORMATION.—If a wholesaler or di3 rect seller of a covered outpatient drug re4 fuses, after being requested by the Sec5 retary, to provide price information re6 quested to carry out clause (i), or delib7 erately provides information that is false,

8 the Secretary may impose a civil money

9 penalty of not to exceed $10,000 for each

10 such refusal or provision of false informa11 tion. The provisions of section 1128A

12 (other than subsections (a) and (b)) shall

13 apply to civil money penalties under the

14 previous sentence in the same manner as

15 they apply to a penalty or proceeding

16 under section 1128A(a). Information gath17 ered pursuant to clause (i) shall not be dis18 closed except as the Secretary determines

19 to be necessary to carry out the purposes

20 of this part and to permit the Comptroller

21 General and the Director of the Congres22 sional Budget Office to review the informa23 tion provided.

24 ‘‘(5) ADMINISTRATIVE ALLOWANCE FOR PUR25 POSES OF PAYMENT LIMIT.—
266

•S 2357

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

2 subparagraphs (B) and (C), the administrative

3 allowance established under this paragraph is—

4 ‘‘(i) for 1999, an amount equal to $5;

5 and

6 ‘‘(ii) for each succeeding year, the

7 amount for the previous year, adjusted by

8 the percentage change in the consumer

9 price index for all urban consumers (U.S.

10 city average) for the 12-month period end11 ing with June of that previous year.

12 ‘‘(B) NO DISPENSING FEE FOR CERTAIN

13 DRUGS AND PRODUCTS.—No administrative al14 lowance may be provided under this paragraph

15 with respect to any of the following covered out16 patient drugs:

17 ‘‘(i) Erythropoietin provided to dialy18 sis patients.

19 ‘‘(ii) Drugs and biologicals provided

20 as an incident to a physician’s service or to

21 a service which would be a physician’s

22 service if furnished by a physician.

23 ‘‘(iii) Covered home infusion drugs.

24 ‘‘(6) MAIL ORDER PHARMACY OPTION.—
267

•S 2357

1 ‘‘(A) ESTABLISHMENT OF MAIL ORDER OP2 TION.—The Secretary may establish a competi3 tive bidding process to award contracts to mail

4 order pharmacies for the provision of covered

5 outpatient drugs that are maintenance drugs to

6 individuals who opt to receive such drugs

7 through the mail order pharmacies. The pay8 ment amount for a covered outpatient drug

9 under this section to a mail order pharmacy

10 under such a contract shall be equal to the

11 amount bid by such plan under this subpara12 graph instead of the payment limit determined

13 in accordance with paragraph (4).

14 ‘‘(B) SHARING OF SAVINGS.—To the ex15 tent that payment is made under this section

16 for maintenance drugs that are provided

17 through a mail order pharmacy pursuant to

18 subparagraph (A), an individual that opts to re19 ceive such drugs from such pharmacy shall re20 ceive from the Secretary a rebate or a contribu21 tion toward the individual’s cost sharing in an

22 amount equal to 25 percent of the excess of the

23 payment limit determined in accordance with

24 paragraph (4) over the amount charged by the

25 mail order pharmacy for such drug.
268

•S 2357

1 ‘‘(7) ASSURING APPROPRIATE PRESCRIBING

2 AND DISPENSING PRACTICES.—

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

4 develop a program to—

5 ‘‘(i) provide on-line prospective review

6 of prescriptions on a 24-hour basis (in ac7 cordance with subparagraph (B)) and ret8 rospective review of claims;

9 ‘‘(ii) establish standards for counsel10 ing individuals to whom covered outpatient

11 drugs are prescribed; and

12 ‘‘(iii) identify (and to educate physi13 cians, patients, and pharmacists concern14 ing)—

15 ‘‘(I) instances or patterns of un16 necessary or inappropriate prescribing

17 or dispensing practices for covered

18 outpatient drugs,

19 ‘‘(II) instances or patterns of

20 substandard care with respect to such

21 drugs,

22 ‘‘(III) potential adverse reactions,

23 and

24 ‘‘(IV) appropriate use of generic

25 products.
269

•S 2357

1 ‘‘(B) PROSPECTIVE REVIEW.—

2 ‘‘(i) IN GENERAL.—The program

3 under this paragraph shall provide for on4 line prospective review of each covered out5 patient drug prescribed for a patient be6 fore the prescription is filled or the drug is

7 furnished, including screening for potential

8 drug therapy problems due to therapeutic

9 duplication, drug-to-drug interactions, and

10 incorrect drug dosage or duration of drug

11 treatment.

12 ‘‘(ii) DISCUSSION OF APPROPRIATE

13 USE.—In conducting prospective review

14 under this subparagraph, any individual or

15 entity that dispenses a covered outpatient

16 drug shall offer to discuss with the patient

17 to whom the drug is furnished or the pa18 tient’s caregiver (in person if practicable,

19 or through access to a toll-free telephone

20 service) information regarding the appro21 priate use of the drug, potential inter22 actions between the drug and other drugs

23 dispensed to the individual, and such other

24 matters as the Secretary may require.
270

•S 2357

1 ‘‘(iii) ADDITIONAL DUTIES.—In carry2 ing out this subparagraph, the Secretary

3 shall—

4 ‘‘(I) develop public domain soft5 ware which could be used by carriers

6 and pharmacies to provide the on-line

7 prospective review; and

8 ‘‘(II) study the feasibility and de9 sirability of requiring patient diag10 nosis codes on prescriptions and to

11 the extent that the Secretary finds

12 such a requirement to be feasible and

13 desirable, to implement such a re14 quirement to be effective on and after

15 January 1, 2000.

16 ‘‘(C) PRIOR AUTHORIZATION.—

17 ‘‘(i) DEVELOPMENT OF LIST OF MIS18 USED DRUGS.—The Secretary shall develop

19 (and periodically) update a list of covered

20 outpatient drugs which the Secretary has

21 determined, based on data collected, may

22 be subject to misuse or inappropriate use.

23 The Secretary shall provide a means for

24 manufacturers to appeal an initial decision

25 to include a drug on the list.
271

•S 2357

1 ‘‘(ii) PRIOR AUTHORIZATION FOR

2 DRUGS ON LIST.—The Secretary shall es3 tablish a process under which (subject to

4 clause (iii)) the Secretary may require ad5 vance approval for any covered outpatient

6 drug included on the list developed under

7 clause (i).

8 ‘‘(iii) RESTRICTIONS ON DENIAL OF

9 APPROVAL.—The Secretary may not deny

10 the approval of a drug under the process

11 established under clause (ii) before its dis12 pensing unless the process—

13 ‘‘(I) provides responses by tele14 phone or other telecommunication de15 vice within 24 hours of a request for

16 prior authorization; and

17 ‘‘(II) provides for the dispensing

18 of at least a 72-hour supply of a cov19 ered outpatient prescription drug in

20 emergency situations (as defined by

21 the Secretary).

22 ‘‘(iv) EXPANSION TO OTHER

23 DRUGS.—If the rate of growth of payments

24 under this part for covered outpatient

25 drugs exceeds the average rate of growth
272

•S 2357

1 for parts A and B expenditures and the

2 Secretary finds such action to be feasible

3 and desirable, the Secretary may require

4 advance approval under this subparagraph

5 for the dispensing of a covered outpatient

6 drug in cases where a more cost-effective

7 therapeutically or generically equivalent

8 drug is available.

9 ‘‘(D) DRUG USE REVIEW.—As part of the

10 program established under subparagraph (A),

11 the Secretary shall provide for a drug use re12 view program to provide for the ongoing peri13 odic examination of claims data and other

14 records on covered outpatient drugs furnished

15 to patients under this title in order to identify

16 patterns of fraud, abuse, gross overuse, or inap17 propriate or medically unnecessary care among

18 physicians, pharmacists, and patients.

19 ‘‘(E) ADOPTION OF MEDICAID PRO20 GRAMS.—To the extent considered appropriate

21 by the Secretary, the program developed under

22 this paragraph with respect to drugs furnished

23 in a State may include elements applicable to

24 the furnishing of covered outpatient drugs
273

•S 2357

1 under the State medicaid program under sec2 tion 1927.

3 ‘‘(8) BILLING REQUIREMENTS.—

4 ‘‘(A) MANDATORY ASSIGNMENT.—(i) Pay5 ment under this part for a covered outpatient

6 drug may only be made on an assignment-relat7 ed basis.

8 ‘‘(ii) Except for deductible, coinsurance, or

9 copayment amounts applicable under this part,

10 no person may bill or collect any amount from

11 an individual enrolled under this part or other

12 person for a covered outpatient drug for which

13 payment may be made under this part, and no

14 such individual or person is liable for payment

15 of any amounts billed in violation of this clause.

16 If a person knowingly and willfully bills or col17 lects an amount in violation of the previous sen18 tence, the Secretary may apply sanctions

19 against such person in accordance with section

20 1842(j)(2). Paragraph (4) of section 1842(j)

21 shall apply in this clause in the same manner

22 as such paragraph applies to such section.

23 ‘‘(B) USE OF ELECTRONIC SYSTEM.—The

24 Secretary shall establish, by not later than Jan25 uary 1, 1998, a point-of-sale electronic system
274

•S 2357

1 for use by carriers and pharmacies in the sub2 mission of information respecting covered out3 patient drugs dispensed to medicare bene4 ficiaries under this part. Such system shall be

5 consistent with the standards established by the

6 National Council of Prescription Drug Pro7 grams.

8 ‘‘(9) REQUIRING PHARMACY SUPPLIER NUM9 BERS.—

10 ‘‘(A) IN GENERAL.—Payment may not be

11 made under this part with respect to a covered

12 outpatient drug dispensed by a pharmacy unless

13 the entity has obtained a supplier number from

14 the Secretary.

15 ‘‘(B) STANDARDS FOR ISSUING SUPPLIER

16 NUMBERS.—The Secretary may not issue a sup17 plier number to an entity for purposes of sub18 paragraph (A) unless the entity demonstrates to

19 the Secretary that it will maintain patient

20 records (in accordance with such standards as

21 the Secretary may impose) and meet the other

22 applicable requirements of this subsection and

23 section 1848(g).

24 ‘‘(10) STUDY ON PHARMACEUTICAL CARE SERV25 ICES.—The Secretary shall conduct a study to de-
275

•S 2357

1 velop, in consultation with actively practicing phar2 macists, a payment methodology (to be in addition

3 to the administrative allowance established under

4 paragraph (5)) which is based upon and reflects the

5 reasonable charges for varying levels of pharmacist

6 services, including patient consultations provided to

7 individuals under this section. The Secretary shall

8 submit a report, including such recommendations as

9 the Secretary determines to be appropriate, to Con10 gress on the methodology developed under this para11 graph not later than September 30, 1998.

12 ‘‘(11) DEFINITIONS.—In this subsection:

13 ‘‘(A) MULTIPLE AND SINGLE SOURCE

14 DRUGS.—The terms ‘multiple source drug’ and

15 ‘single source drug’ have the meanings given

16 those terms under section 1927(k)(7), except

17 that the reference in such section to a ‘covered

18 outpatient drug’ shall be considered a reference

19 to a covered outpatient drug under this part.

20 ‘‘(B) RESTRICTIVE PRESCRIPTION.—A

21 drug has a ‘restrictive prescription’ only if—

22 ‘‘(i) in the case of a written prescrip23 tion, the prescription for the drug indi24 cates, in the handwriting of the physician

25 or other person prescribing the drug and
276

•S 2357

1 with an appropriate phrase (such as ‘brand

2 medically necessary’) recognized by the

3 Secretary, that a particular drug product

4 must be dispensed, or

5 ‘‘(ii) in the case of a prescription is6 sued by telephone—

7 ‘‘(I) the physician or other per8 son prescribing the drug (through use

9 of such an appropriate phrase) states

10 that a particular drug product must

11 be dispensed, and

12 ‘‘(II) the physician or other per13 son submits to the pharmacy involved,

14 within 30 days after the date of the

15 telephone prescription, a written con16 firmation which is in the handwriting

17 of the physician or other person pre18 scribing the drug and which indicates

19 with such appropriate phrase that the

20 particular drug product was required

21 to have been dispensed.

22 ‘‘(C) PAYMENT CALCULATION PERIOD.—

23 The term ‘payment calculation period’ means a

24 calendar year.’’.
277

•S 2357

1 (b) REQUIRING PHARMACIES TO SUBMIT CLAIMS.—

2 Section 1848(g)(4) (42 U.S.C. 1395w–4(g)(4)) is amend3 ed—

4 (1) in the heading—

5 (A) by striking ‘‘PHYSICIAN’’, and

6 (B) by inserting ‘‘BY PHYSICIANS AND

7 SUPPLIERS’’ after ‘‘CLAIMS’’;

8 (2) in the matter in subparagraph (A) preced9 ing clause (i)—

10 (A) by striking ‘‘For services furnished on

11 or after September 1, 1990, within 1 year’’ and

12 inserting ‘‘Within 1 year (or 90 days in the

13 case of covered outpatient drugs)’’,

14 (B) by striking ‘‘a service’’ and inserting

15 ‘‘an item or service’’, and

16 (C) by inserting ‘‘or of providing a covered

17 outpatient drug,’’ after ‘‘basis,’’; and

18 (3) in subparagraph (A)(i), by inserting ‘‘item

19 or’’ before ‘‘service’’.

20 (c) SPECIAL RULES FOR CARRIERS.—

21 (1) USE OF REGIONAL CARRIERS.—Section

22 1842(b)(2) (42 U.S.C. 1395u(b)(2)) is amended by

23 adding at the end the following:

24 ‘‘(D) With respect to activities related to covered out25 patient drugs, the Secretary may enter into contracts with
278

•S 2357

1 carriers under this section to perform the activities on a

2 regional basis.’’.

3 (2) ADDITIONAL FUNCTIONS.—Section

4 1842(b)(3) (42 U.S.C. 1395u(b)(3)) is amended—

5 (A) by striking ‘‘and’’ at the end of sub6 paragraph (H);

7 (B) by adding ‘‘and’’ at the end of sub8 paragraph (L);

9 (C) by redesignating subparagraph (L) as

10 subparagraph (I); and

11 (D) by inserting after subparagraph (I) (as

12 so redesignated) the following new subpara13 graphs:

14 ‘‘(J) if it makes determinations or payments

15 with respect to covered outpatient drugs, will—

16 ‘‘(i) receive information transmitted under

17 the electronic system established under section

18 1834(d)(8)(B), and

19 ‘‘(ii) respond to requests by pharmacies

20 (and individuals entitled to benefits under this

21 part) as to whether or not such an individual

22 has met the prescription drug deductible estab23 lished under section 1834(d)(1)(A) for a year;

24 and
279

•S 2357

1 ‘‘(K) will enter into such contracts with organi2 zations described in subsection (f)(3) as the Sec3 retary determines may be necessary to implement

4 and operate (and for related functions with respect

5 to) the electronic system established under section

6 1834(d)(8)(B) for covered outpatient drugs under

7 this part;’’.

8 (3) PAYMENT ON OTHER THAN A COST

9 BASIS.—Section 1842(c)(1)(A) (42 U.S.C.

10 1395u(c)(1)(A)) is amended—

11 (A) by inserting ‘‘(i)’’ after ‘‘(c)(1)(A)’’,

12 (B) in the first sentence, by inserting ‘‘,

13 except as otherwise provided in clause (ii),’’

14 after ‘‘under this part, and’’, and

15 (C) by adding at the end the following:

16 ‘‘(ii) To the extent that a contract under this section

17 provides for activities related to covered outpatient drugs,

18 the Secretary may provide for payment for those activities

19 based on any method of payment determined by the Sec20 retary to be appropriate.’’.

21 (4) BATCH PROMPT PROCESSING OF CLAIMS.—

22 Section 1842(c) (42 U.S.C. 1395u(c)) is amended—

23 (A) in paragraphs (2)(A) and (3)(A), by

24 striking ‘‘Each’’ and inserting ‘‘Except as pro25 vided in paragraph (4), each’’;
280

•S 2357

1 (B) by adding at the end the following new

2 paragraph:

3 ‘‘(4)(A) Each contract under this section which pro4 vides for the disbursement of funds, as described in sub5 section (a)(1)(B), with respect to claims for payment for

6 covered outpatient drugs shall provide for a payment cycle

7 under which each carrier will, on a monthly basis, make

8 a payment with respect to all claims which were received

9 and approved for payment in the period since the most

10 recent date on which such a payment was made with re11 spect to the participating pharmacy or individual submit12 ting the claim.

13 ‘‘(B) If payment is not issued, mailed, or otherwise

14 transmitted within 5 days of when such a payment is re15 quired to be made under subparagraph (A), interest shall

16 be paid at the rate used for purposes of section 3902(a)

17 of title 31, United States Code (relating to interest pen18 alties for failure to make prompt payments) for the period

19 beginning on the day after such 5-day period and ending

20 on the date on which payment is made.’’.

21 (5) USE OF OTHER ENTITIES FOR COVERED

22 OUTPATIENT DRUGS.—Section 1842(f) (42 U.S.C.

23 1395u(f)) is amended—

24 (A) by striking ‘‘and’’ at the end of para25 graph (1),
281

•S 2357

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

2 paragraph (2) and inserting ‘‘; and’’, and

3 (C) by adding at the end the following:

4 ‘‘(3) with respect to activities related to covered

5 outpatient drugs, any other private entity which the

6 Secretary determines is qualified to conduct such ac7 tivities.’’.

8 (6) DESIGNATED CARRIERS TO PROCESS

9 CLAIMS OF RAILROAD RETIREES.—Section 1842(g)

10 (42 U.S.C. 1395u(g)) is amended by inserting

11 ‘‘(other than functions related to covered outpatient

12 drugs)’’ after ‘‘functions’’.

13 (e) CONFORMING AMENDMENTS.—

14 (1)(A) Section 1833(a)(1) (42 U.S.C.

15 1395l(a)(1)) is amended—

16 (i) by striking ‘‘and’’ at the end of clause

17 (O), and

18 (ii) by inserting before the semicolon at the

19 end the following: ‘‘, and (Q) with respect to

20 covered outpatient drugs, the amounts paid

21 shall be as prescribed by section 1834(d)’’.

22 (B) Section 1833(a)(2) (42 U.S.C. 1395l(a)(2))

23 is amended in the matter preceding subparagraph

24 (A) by inserting ‘‘, except for covered outpatient

25 drugs,’’ after ‘‘and (I) of such section’’.
282

•S 2357

1 (2) Section 1833(b)(2) (42 U.S.C. 1395l(b)(2))

2 is amended by inserting ‘‘or with respect to covered

3 outpatient drugs’’ before the comma.

4 (3) The first sentence of section 1842(h)(2) (42

5 U.S.C. 1395u(h)(2)) is amended by inserting

6 ‘‘(other than a carrier described in subsection

7 (f)(3))’’ after ‘‘Each carrier’’.

8 (4) The first sentence of section 1866(a)(2)(A)

9 (42 U.S.C. 1395cc(a)(2)(A)) is amended—

10 (A) in clause (i), by inserting ‘‘section

11 1834(d),’’ after ‘‘section 1833(b),’’, and

12 (B) in clause (ii), by inserting ‘‘, other

13 than for covered outpatient drugs,’’ after ‘‘pro14 vider)’’.

15 SEC. 2003. MEDICARE REBATES FOR COVERED OUT16 PATIENT DRUGS.

17 (a) IN GENERAL.—Part B of title XVIII is amended

18 by adding at the end the following new section:

19 ‘‘REBATES FOR COVERED OUTPATIENT DRUGS

20 ‘‘Sec. 1850. (a) REQUIREMENT FOR REBATE AGREE21 MENT.—In order for payment to be available under this

22 part for covered outpatient drugs of a manufacturer dis23 pensed or provided on or after January 1, 1999, the man24 ufacturer must have entered into and have in effect a re25 bate agreement with the Secretary meeting the require-
283

•S 2357

1 ments of subsection (b), and an agreement to give equal

2 access to discounts in accordance with subsection (e).

3 ‘‘(b) TERMS, IMPLEMENTATION, AND ENFORCEMENT

4 OF REBATE AGREEMENT.—

5 ‘‘(1) PERIODIC REBATES.—

6 ‘‘(A) IN GENERAL.—A rebate agreement

7 under this section shall require the manufac8 turer to pay to the Secretary for each calendar

9 quarter, not later than 30 days after the date

10 of receipt of the information described in para11 graph (2) for such quarter, a rebate in an

12 amount determined under subsection (c) for all

13 covered outpatient drugs of the manufacturer

14 described in subparagraph (B).

15 ‘‘(B) DRUGS INCLUDED IN QUARTERLY

16 REBATE CALCULATION.—Drugs subject to re17 bate with respect to a calendar quarter are

18 drugs which are dispensed or provided during

19 such quarter to individuals (other than individ20 uals enrolled with an entity with a contract

21 under section 1876 or a medicare drug benefit

22 plan with a contract under section 1851) eligi23 ble for benefits under this part, as reported to

24 the Secretary.
284

•S 2357

1 ‘‘(2) INFORMATION FURNISHED TO MANUFAC2 TURERS.—

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

4 report to each manufacturer, not later than 60

5 days after the end of each calendar quarter, in6 formation on the total number, for each covered

7 outpatient drug, of units of each dosage form,

8 strength, and package size dispensed or pro9 vided under the plan during the quarter, on the

10 basis of the data reported to the Secretary de11 scribed in paragraph (1)(B).

12 ‘‘(B) AUDIT.—The Comptroller General

13 may audit the records of the Secretary to the

14 extent necessary to determine the accuracy of

15 reports by the Secretary pursuant to subpara16 graph (A). Adjustments to rebates shall be

17 made to the extent determined necessary by the

18 audit to reflect actual units of drugs dispensed.

19 ‘‘(3) PROVISION OF PRICE INFORMATION BY

20 MANUFACTURER.—

21 ‘‘(A) QUARTERLY PRICING INFORMA22 TION.—Each manufacturer with an agreement

23 in effect under this section shall report to the

24 Secretary, not later than 30 days after the last

25 day of each calendar quarter, on the average
285

•S 2357

1 manufacturer retail price and the average man2 ufacturer non-retail price for each dosage form

3 and strength of each covered outpatient drug

4 for the quarter.

5 ‘‘(B) BASE QUARTER PRICES.—Each man6 ufacturer of a covered outpatient drug with an

7 agreement under this section shall report to the

8 Secretary, by not later than 30 days after the

9 effective date of such agreement (or, if later, 30

10 days after the end of the base quarter), the av11 erage manufacturer retail price, for such base

12 quarter, for each dosage form and strength of

13 each such covered drug.

14 ‘‘(C) VERIFICATION OF AVERAGE MANU15 FACTURER PRICE.—The Secretary may inspect

16 the records of manufacturers, and survey whole17 salers, pharmacies, and institutional purchasers

18 of drugs, as necessary to verify prices reported

19 under subparagraph (A).

20 ‘‘(D) PENALTIES.—

21 ‘‘(i) CIVIL MONEY PENALTIES.—The

22 Secretary may impose a civil money pen23 alty on a manufacturer with an agreement

24 under this section—
286

•S 2357

1 ‘‘(I) for failure to provide infor2 mation required under subparagraph

3 (A) on a timely basis, in an amount

4 up to $10,000 per day of delay;

5 ‘‘(II) for refusal to provide infor6 mation about charges or prices re7 quested by the Secretary for purposes

8 of verification pursuant to subpara9 graph (C), in an amount up to

10 $100,000; and

11 ‘‘(III) for provision, pursuant to

12 subparagraph (A) or (B), of informa13 tion that the manufacturer knows or

14 should know is false, in an amount up

15 to $100,000 per item of information.

16 Such civil money penalties are in addition

17 to any other penalties prescribed by law.

18 The provisions of section 1128A (other

19 than subsections (a) (with respect to

20 amounts of penalties or additional assess21 ments) and (b)) shall apply to a civil

22 money penalty under this subparagraph in

23 the same manner as such provisions apply

24 to a penalty or proceeding under section

25 1128A(a).
287

•S 2357

1 ‘‘(ii) TERMINATION OF AGREE2 MENT.—If a manufacturer with an agree3 ment under this section has not provided

4 information required under subparagraph

5 (A) or (B) within 90 days of the deadline

6 imposed, the Secretary may suspend the

7 agreement with respect to covered out8 patient drugs dispensed after the end of

9 such 90-day period and until the date such

10 information is reported (but in no case

11 shall a suspension be for less than 30

12 days).

13 ‘‘(4) LENGTH OF AGREEMENT.—

14 ‘‘(A) IN GENERAL.—A rebate agreement

15 shall be effective for an initial period of not less

16 than one year and shall be automatically re17 newed for a period of not less than one year un18 less terminated under subparagraph (B).

19 ‘‘(B) TERMINATION.—

20 ‘‘(i) BY THE SECRETARY.—The Sec21 retary may provide for termination of a re22 bate agreement for violation of the require23 ments of the agreement or other good

24 cause shown. Such termination shall not be

25 effective earlier than 60 days after the
288

•S 2357

1 date of notice of such termination. The

2 Secretary shall afford a manufacturer an

3 opportunity for a hearing concerning such

4 termination, but such hearing shall not

5 delay the effective date of the termination.

6 ‘‘(ii) BY A MANUFACTURER.—A man7 ufacturer may terminate a rebate agree8 ment under this section for any reason.

9 Any such termination shall not be effective

10 until the calendar quarter beginning at

11 least 60 days after the date the manufac12 turer provides notice to the Secretary.

13 ‘‘(iii) EFFECTIVE DATE OF TERMI14 NATION.—Any termination under this sub15 paragraph shall not affect rebates due

16 under the agreement before the effective

17 date of its termination.

18 ‘‘(iv) NOTICE TO PHARMACIES.—In

19 the case of a termination under this sub20 paragraph, the Secretary shall notify phar21 macies and physician organizations not less

22 than 30 days before the effective date of

23 such termination.

24 ‘‘(c) AMOUNT OF REBATE.—
289

•S 2357

1 ‘‘(1) BASE REBATE.—Each manufacturer shall

2 remit a basic rebate to the Secretary for each cal3 endar quarter in an amount, with respect to each

4 dosage form and strength of a covered outpatient

5 drug, equal to the product of—

6 ‘‘(A) the total number of units subject to

7 rebate for such quarter, as described in sub8 section (b)(1)(B); and

9 ‘‘(B)(i) in the case of a single-source drug

10 or innovator-multiple source drug, 15 percent of

11 the average manufacturer retail price, or

12 ‘‘(ii) in the case of a noninnovator-multiple

13 source drug furnished over-the-counter, insulin

14 or an enteral nutrient, 6 percent (or the appli15 cable percent if the Secretary implements the

16 sliding scale developed in accordance with para17 graph (4)) of the average manufacturer retail

18 price.

19 ‘‘(2) ADDITIONAL REBATE.—Each manufac20 turer shall remit to the Secretary, for each calendar

21 quarter, an additional rebate for each dosage form

22 and strength of a single-source or innovator-mul23 tiple-source drug, in an amount equal to—
290

•S 2357

1 ‘‘(A) the total number of units subject to

2 rebate for such quarter, as described in sub3 section (b)(1)(B), multiplied by

4 ‘‘(B) the amount, if any, by which the av5 erage manufacturer retail price for such drugs

6 of the manufacturer exceeds the average manu7 facturer retail price for the base quarter, in8 creased by the percentage increase in the

9 Consumer Price Index for all urban consumers

10 (U.S. average) from the end of such base quar11 ter to the month before the beginning of such

12 calendar quarter.

13 ‘‘(3) DEPOSIT OF REBATES.—The Secretary

14 shall deposit rebates under this section in the Fed15 eral Supplementary Medical Insurance Trust Fund

16 established under section 1841.

17 ‘‘(4) APPLICABLE PERCENT.—

18 ‘‘(A) NONINNOVATOR MULTIPLE SOURCE

19 DRUG.—

20 ‘‘(i) IN GENERAL.—For purposes of

21 this subparagraph, the Secretary may de22 velop and implement a sliding scale to de23 termine the applicable percent for rebates

24 based on the relationship between the aver25 age manufacturer retail price of the
291

•S 2357

1 noninnovator-multiple source drug fur2 nished over-the-counter and the average

3 manufacturer retail price of the equivalent

4 innovator drug (except as provided in sub5 paragraph (B)) .

6 ‘‘(ii) SLIDING SCALE DESCRIBED.—

7 The sliding scale developed by the Sec8 retary under clause (i) shall—

9 ‘‘(I) require that the applicable

10 percent be not less than 2 percent and

11 not be greater than 15 percent; and

12 ‘‘(II) ensure that the total level

13 of rebates collected under such a slid14 ing scale would be equivalent to a flat

15 6 percent rebate on such drugs.

16 ‘‘(B) ENTERAL NUTRIENTS AND INSU17 LIN.—For purposes of this subparagraph, the

18 applicable percent for enteral nutrients and in19 sulin under the sliding scale would be equal to

20 6 percent.

21 ‘‘(d) CONFIDENTIALITY OF INFORMATION.—Notwith22 standing any other provision of law, information disclosed

23 by a manufacturer under this section is confidential and

24 shall not be disclosed by the Secretary (or a carrier), ex25 cept—
292

•S 2357

1 ‘‘(A) as the Secretary determines to be nec2 essary to carry out this section,

3 ‘‘(B) to permit the Comptroller General to re4 view the information provided, and

5 ‘‘(C) to permit the Director of the Congres6 sional Budget Office to review the information pro7 vided.

8 ‘‘(e) DEFINITIONS.—For purposes of this section—

9 ‘‘(1) AVERAGE MANUFACTURER RETAIL

10 PRICE.—The term ‘average manufacturer retail

11 price’ means, with respect to a covered outpatient

12 drug of a manufacturer for a calendar quarter, the

13 average price (inclusive of discounts for cash pay14 ment, prompt payment, volume purchases, and re15 bates (other than rebates under this section), but ex16 clusive of nominal prices) paid to the manufacturer

17 for the drug in the United States for drugs distrib18 uted to the retail pharmacy class of trade.

19 ‘‘(2) AVERAGE MANUFACTURER NON-RETAIL

20 PRICE.—The term ‘average manufacturer non-retail

21 price’ means, with respect to a covered outpatient

22 drug of a manufacturer for a calendar quarter, the

23 weighted average price (inclusive of discounts for

24 cash payment, prompt payment, volume purchases,

25 and rebates (other than rebates under this section),
293

•S 2357

1 but exclusive of nominal prices) paid to the manu2 facturer for the drug in the United States by hos3 pitals and other institutional purchasers that pur4 chase drugs for institutional use and not for resale.

5 ‘‘(3) BASE QUARTER.—The term ‘base quarter’

6 means, with respect to a covered outpatient drug of

7 a manufacturer, the calendar quarter beginning

8 April 1, 1993, or (if later) the first full calendar

9 quarter during which the drug was marketed in the

10 United States.

11 ‘‘(4) DRUG.—The terms ‘innovator multiple

12 source drug’, ‘noninnovator multiple source drug’,

13 and ‘single source drug’ have the meanings given

14 those terms under section 1927(k)(7), except that

15 the reference in such section to a ‘covered outpatient

16 drug’ shall be considered a reference to a covered

17 outpatient drug under this part.

18 ‘‘(5) MANUFACTURER.—The term ‘manufac19 turer’ means, with respect to a covered outpatient

20 drug—

21 ‘‘(A) the entity whose National Drug Code

22 number (as issued pursuant to section 510(e) of

23 the Federal Food, Drug, and Cosmetic Act) ap24 pears on the labeling of the drug; or
294

•S 2357

1 ‘‘(B) if the number described in subpara2 graph (A) does not appear on the labeling of

3 the drug, the person named as the applicant in

4 a human drug application (in the case of a new

5 drug) or the product license application (in the

6 case of a biological product) for such drug ap7 proved by the Food and Drug Administration.’’.

8 (b) EXCLUSIONS FROM COVERAGE.—Section

9 1862(a) (42 U.S.C. 1395y(a)) is amended—

10 (1) by striking ‘‘and’’ at the end of paragraph

11 (15),

12 (2) by striking the period at the end of para13 graph (16) and inserting ‘‘; or’’, and

14 (3) by inserting after paragraph (16) the fol15 lowing new paragraph:

16 ‘‘(17) consisting of a covered outpatient drug

17 (as described in section 1861(t)) furnished during a

18 year for which the drug’s manufacturer does not

19 have in effect a rebate agreement with the Secretary

20 that meets the requirements of section 1850 for the

21 year.’’.

22 SEC. 2004. PRESCRIPTION DRUG PAYMENT REVIEW COM23 MISSION.

24 Part B of title XVIII is amended by inserting after

25 section 1846 the following new section:
295

•S 2357

1 ‘‘PRESCRIPTION DRUG PAYMENT REVIEW COMMISSION

2 ‘‘SEC. 1847. (a)(1) The Director of the Congressional

3 Office of Technology Assessment (in this section referred

4 to as the ‘Director’ and the ‘Office’, respectively) shall

5 provide for the appointment of a Prescription Drug Pay6 ment Review Commission (in this section referred to as

7 the ‘Commission’), to be composed of individuals with ex8 pertise in the provision and financing of covered out9 patient drugs appointed by the Director (without regard

10 to the provisions of title 5, United States Code, governing

11 appointments in the competitive service).

12 ‘‘(2) The Commission shall consist of 11 individuals.

13 Members of the Commission shall first be appointed by

14 no later than January 1, 1996, for a term of 3 years, ex15 cept that the Director may provide initially for such short16 er terms as will insure that (on a continuing basis) the

17 terms of no more than 4 members expire in any one year.

18 ‘‘(3) The membership of the Commission shall in19 clude recognized experts in the fields of health care eco20 nomics, medicine, pharmacology, pharmacy, and prescrip21 tion drug reimbursement, as well as at least one individual

22 who is a medicare beneficiary, one individual representing

23 a research-based pharmaceutical company, and one indi24 vidual representing a biotechnology company.
296

•S 2357

1 ‘‘(b)(1) The Commission shall submit to Congress an

2 annual report no later than May 1 of each year, beginning

3 with 1997—

4 ‘‘(A) concerning the implementation and

5 the operation of the coverage of covered out6 patient drugs under this part, including rec7 ommendations to Congress on changes to the

8 program to improve access to prescription

9 drugs, the quality of prescription drug care, and

10 program efficiencies;

11 ‘‘(B) reviewing the process of contracting

12 with medicare drug benefits plans under section

13 1851;

14 ‘‘(C) concerning the fiscal soundness of the

15 furnishing of covered outpatient drugs under

16 this part;

17 ‘‘(D) concerning the appropriateness, fair18 ness and effectiveness of the rebate structure

19 under section 1850; and

20 ‘‘(E) concerning the advisability of develop21 ing a review process to exempt small manufac22 turers of single source or innovator multiple

23 source drugs from rebates under section 1850

24 based on the manufacturer’s sales and the his25 toric pricing of the manufacturer’s products.
297

•S 2357

1 ‘‘(c) Section 1845(c)(1) shall apply to the Commis2 sion in the same manner as it applies to the Physician

3 Payment Review Commission.

4 ‘‘(d) There are authorized to be appropriated such

5 sums as may be necessary to carry out the provisions of

6 this section. Such sums shall be payable from the Federal

7 Supplementary Medical Insurance Trust Fund.’’.

8 SEC. 2005. COVERAGE OF HOME INFUSION DRUG THERAPY

9 SERVICES.

10 (a) IN GENERAL.—Section 1832(a)(2)(A) (42 U.S.C.

11 1395k(a)(2)(A)) is amended by inserting ‘‘and home infu12 sion drug therapy services’’ before the semicolon.

13 (b) HOME INFUSION DRUG THERAPY SERVICES DE14 FINED.—Section 1861 (42 U.S.C. 1395x) is amended—

15 (1) by redesignating the subsection (jj) inserted

16 by section 4156(a)(2) of the Omnibus Budget Rec17 onciliation Act of 1990 as subsection (kk); and

18 (2) by inserting after such subsection the fol19 lowing new subsection:

20 ‘‘Home Infusion Drug Therapy Services

21 ‘‘(ll)(1) The term ‘home infusion drug therapy serv22 ices’ means the items and services described in paragraph

23 (2) furnished to an individual who is under the care of

24 a physician—
298

•S 2357

1 ‘‘(A) in a setting described in subsection

2 (t)(5)(A)(ii),

3 ‘‘(B) by a qualified home infusion drug therapy

4 provider (as defined in paragraph (3)) or by others

5 under arrangements with them made by that pro6 vider, and

7 ‘‘(C) under a plan established and periodically

8 reviewed by a physician.

9 ‘‘(2) The items and services described in this para10 graph are such nursing, pharmacy, and related services

11 (including medical supplies, intravenous fluids, delivery,

12 and equipment) as are necessary to conduct safely and ef13 fectively a drug regimen through use of a covered home

14 infusion drug (as defined in subsection (t)(5)), but do not

15 include such covered home infusion drugs.

16 ‘‘(3) The term ‘qualified home infusion drug therapy

17 provider’ means any entity that the Secretary determines

18 meets the following requirements (or, in the case of a

19 home health agency or an entity with respect to which the

20 only items and services described in paragraph (2) fur21 nished by the entity are enteral nutrition therapy services,

22 meets any of the following requirements which the Sec23 retary considers appropriate):

24 ‘‘(A) The entity is capable of providing nursing

25 or pharmacy services and providing or arranging for
299

•S 2357

1 the other items and services described in paragraph

2 (2) and covered home infusion drugs.

3 ‘‘(B) The entity maintains clinical records on

4 all patients.

5 ‘‘(C) The entity adheres to written protocols

6 and policies with respect to the provision of items

7 and services.

8 ‘‘(D) The entity makes services available (as

9 needed) seven days a week on a 24-hour basis.

10 ‘‘(E) The entity coordinates all services with

11 the patient’s physician.

12 ‘‘(F) The entity conducts a quality assessment

13 and assurance program, including drug regimen re14 view and coordination of patient care.

15 ‘‘(G) The entity assures that only trained per16 sonnel provide covered home infusion drugs (and any

17 other service for which training is required to pro18 vide the service safely).

19 ‘‘(H) The entity assumes responsibility for the

20 quality of services provided by others under arrange21 ments with the entity.

22 ‘‘(I) In the case of an entity in any State in

23 which State or applicable local law provides for the

24 licensing of entities of this nature, the entity (i) is

25 licensed pursuant to such law, or (ii) is approved, by
300

•S 2357

1 the agency of such State or locality responsible for

2 licensing entities of this nature, as meeting the

3 standards established for such licensing.

4 ‘‘(J) The entity meets such other requirements

5 as the Secretary may determine are necessary to as6 sure the safe and effective provision of home infu7 sion drug therapy services and the efficient adminis8 tration of the home infusion drug therapy benefit.’’.

9 (c) PAYMENT.—

10 (1) IN GENERAL.—Section 1833 (42 U.S.C.

11 1395l) is amended—

12 (A) in subsection (a)(2)(B), by striking ‘‘or

13 (E)’’ and inserting ‘‘(E), or (F)’’,

14 (B) in subsection (a)(2)(D), by striking

15 ‘‘and’’ at the end,

16 (C) in subsection (a)(2)(E), by striking the

17 semicolon and inserting ‘‘; and’’,

18 (D) by inserting after subsection (a)(2)(E)

19 the following new subparagraph:

20 ‘‘(F) with respect to home infusion drug

21 therapy services, the amounts described in sec22 tion 1834(j);’’, and

23 (E) in the first sentence of subsection (b),

24 by striking ‘‘services, (3)’’ and inserting ‘‘serv-
301

•S 2357

1 ices and home infusion drug therapy services,

2 (3)’’.

3 (2) AMOUNT DESCRIBED.—Section 1834 is

4 amended by adding at the end the following new

5 subsection:

6 ‘‘(j) HOME INFUSION DRUG THERAPY SERVICES.—

7 ‘‘(1) IN GENERAL.—With respect to home infu8 sion drug therapy services, payment under this part

9 shall be made in an amount equal to the lesser of

10 the actual charges for such services or the fee sched11 ule established under paragraph (2).

12 ‘‘(2) ESTABLISHMENT OF FEE SCHEDULE.—

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

14 establish by regulation before the beginning of

15 1999 and each succeeding year a fee schedule

16 for home infusion drug therapy services for

17 which payment is made under this part. A fee

18 schedule established under this subsection shall

19 be on a per diem basis.

20 ‘‘(B) ADJUSTMENT FOR SERVICES FUR21 NISHED BY INSTITUTIONS.—The fee schedule

22 established by the Secretary under subpara23 graph (A) shall provide for adjustments in the

24 case of home infusion drug therapy services for

25 which payment is made under this part that are
302

•S 2357

1 furnished by a provider of services to avoid du2 plicative payments under this title for the serv3 ice costs associated with such services.’’.

4 (d) CERTIFICATION.—Section 1835(a)(2) (42 U.S.C.

5 1395n(a)(2)) is amended—

6 (1) by striking ‘‘and’’ at the end of subpara7 graph (E),

8 (2) by striking the period at the end of sub9 paragraph (F) and inserting ‘‘; and’’, and

10 (3) by inserting after subparagraph (F) the fol11 lowing:

12 ‘‘(G) in the case of home infusion drug

13 therapy services, (i) such services are or were

14 required because the individual needed such

15 services for the administration of a covered

16 home infusion drug, (ii) a plan for furnishing

17 such services has been established and is re18 viewed periodically by a physician, and (iii)

19 such services are or were furnished while the in20 dividual is or was under the care of a physi21 cian.’’.

22 (e) CERTIFICATION OF HOME INFUSION DRUG

23 THERAPY PROVIDERS; INTERMEDIATE SANCTIONS FOR

24 NONCOMPLIANCE.—
303

•S 2357

1 (1) TREATMENT AS PROVIDER OF SERVICES.—

2 Section 1861(u) (42 U.S.C. 1395x(u)) is amended

3 by inserting ‘‘home infusion drug therapy provider,’’

4 after ‘‘hospice program,’’.

5 (2) CONSULTATION WITH STATE AGENCIES AND

6 OTHER ORGANIZATIONS.—Section 1863 (42 U.S.C.

7 1395z) is amended by striking ‘‘and (dd)(2)’’ and

8 inserting ‘‘(dd)(2), and (ll)(3)’’.

9 (3) USE OF STATE AGENCIES IN DETERMINING

10 COMPLIANCE.—Section 1864(a) (42 U.S.C.

11 1395aa(a)) is amended—

12 (A) in the first sentence, by striking ‘‘an

13 agency is a hospice program’’ and inserting ‘‘an

14 agency or entity is a hospice program or a

15 home infusion drug therapy provider,’’; and

16 (B) in the second sentence—

17 (i) by striking ‘‘institution or agency’’

18 and inserting ‘‘institution, agency, or en19 tity’’, and

20 (ii) by striking ‘‘or hospice program’’

21 and inserting ‘‘hospice program, or home

22 infusion drug therapy provider’’.

23 (4) APPLICATION OF INTERMEDIATE SANC24 TIONS.—Section 1846 (42 U.S.C. 1395w–2) is

25 amended—
304

•S 2357

1 (A) in the heading, by adding ‘‘AND FOR

2 QUALIFIED HOME INFUSION DRUG THERAPY

3 PROVIDERS’’ at the end,

4 (B) in subsection (a), by inserting ‘‘or that

5 a qualified home infusion drug therapy provider

6 that is certified for participation under this title

7 no longer substantially meets the requirements

8 of section 1861(ll)(3)’’ after ‘‘under this part’’,

9 and

10 (C) in subsection (b)(2)(A)(iv), by insert11 ing ‘‘or home infusion drug therapy services’’

12 after ‘‘clinical diagnostic laboratory tests’’.

13 (f) USE OF REGIONAL INTERMEDIARIES IN ADMINIS14 TRATION OF BENEFIT.—Section 1816 (42 U.S.C. 1395h)

15 is amended by adding at the end the following new sub16 section:

17 ‘‘(k) With respect to carrying out functions relating

18 to payment for home infusion drug therapy services and

19 covered home infusion drugs, the Secretary may enter into

20 contracts with agencies or organizations under this section

21 to perform such functions on a regional basis.’’.

22 (g) CONFORMING AMENDMENTS.—(1) Section

23 1834(h)(4)(B) (42 U.S.C. 1395m(h)(4)(B)) is amended

24 by striking ‘‘, except that’’ and all that follows through

25 ‘‘equipment’’.
305

•S 2357

1 (2) Section 1861(n) (42 U.S.C. 1395x(n)) is amend2 ed by adding at the end the following: ‘‘Such term does

3 not include any home infusion drug therapy services de4 scribed in section 1861(ll) or any covered outpatient drug

5 used as a supply related to the furnishing of an item of

6 durable medical equipment.’’.

7 (3) Section 1861(s)(8) (42 U.S.C. 1395x(s)(8)) is

8 amended by inserting after ‘‘dental’’ the following: ‘‘de9 vices or enteral and parenteral nutrients, supplies, and

10 equipment’’.

11 (h) EFFECTIVE DATE.—The amendments made by

12 this section shall apply to items and services furnished on

13 or after January 1, 1999.

14 SEC. 2006. MEDICARE DRUG BENEFIT PLANS.

15 (a) IN GENERAL.—Part B of title XVIII of the Social

16 Security Act (42 U.S.C. 1395 et seq.), as amended by sec17 tion 2003, is further amended by adding at the end the

18 following new section:

19 ‘‘SEC. 1851. MEDICARE DRUG BENEFIT PLANS.

20 ‘‘(a) IN GENERAL.—

21 ‘‘(1) GENERAL PERMISSION TO CONTRACT.—

22 The Secretary may enter into contracts with medi23 care drug benefit plans in a State for the provision

24 of covered outpatient drugs (as defined in section

25 1861(t)(2)) (except as provided in subsection
306

•S 2357

1 (i)(3)(G)) to individuals entitled to benefits under

2 part A and enrolled under part B if the plan meets

3 the requirements of this section with respect to indi4 viduals enrolled under this section.

5 ‘‘(2) ENTITIES ELIGIBLE TO ENTER INTO A

6 CONTRACT.—The Secretary may enter into a con7 tract under this section with a medicare drug benefit

8 plan that is—

9 ‘‘(A) a certified standard health plan but

10 only if such plan has not entered into a con11 tract with the Secretary under section 1876;

12 ‘‘(B) a network of chain and independent

13 pharmacy providers;

14 ‘‘(C) a pharmacy benefit management com15 pany; or

16 ‘‘(D) any other entity that the Secretary

17 determines is appropriate.

18 ‘‘(3) AVAILABILITY OF PLANS.—

19 ‘‘(A) IN GENERAL.—Every individual enti20 tled to benefits under part A and enrolled under

21 part B shall be eligible to enroll under this sec22 tion with any medicare drug benefit plan with

23 a contract under this section which serves the

24 State in which the individual resides.
307

•S 2357

1 ‘‘(B) ENROLLMENT BY AN INDIVIDUAL.—

2 In accordance with the enrollment periods es3 tablished under subsection (e)(1), an individual

4 may enroll under this section with a medicare

5 drug benefit plan with a contract under this

6 section only through a third party designated

7 by the Secretary in regulations and the individ8 ual may only terminate enrollment in accord9 ance with subsection (e)(2).

10 ‘‘(C) INFORMATION DISTRIBUTED BY THE

11 SECRETARY.—

12 ‘‘(i) IN GENERAL.—The Secretary

13 shall develop and distribute comparative

14 materials to individuals eligible to enroll

15 under this section regarding all medicare

16 drug benefit plans with contracts under

17 this section, the availability of payment for

18 covered outpatient drugs under section

19 1834(d), and the availability of covered

20 outpatient drugs to enrollees of entities

21 with contracts under section 1876. The

22 Secretary shall include in such comparative

23 materials that each medicare drug benefit

24 plan with a contract under this section is

25 authorized by law to terminate or refuse to
308

•S 2357

1 renew the contract, and that termination

2 or nonrenewal of the contract may result

3 in termination of the enrollments of indi4 viduals enrolled with the plan under this

5 section.

6 ‘‘(ii) PROVISION OF INFORMATION BY

7 THE PLAN.—Each medicare drug benefit

8 plan with a contract under this section

9 shall collect and provide such standard in10 formation as the Secretary shall prescribe

11 by regulation as necessary to evaluate the

12 performance and quality of such plan, in13 cluding enrollee satisfaction, and to com14 pare such performance and quality with

15 competing plans.

16 ‘‘(4) PAYMENTS.—

17 ‘‘(A) PAYMENTS IN LIEU OF NORMAL PAY18 MENTS.—Payments under a contract to a medi19 care drug benefit plan under this section shall

20 be instead of the amounts which (in the absence

21 of the contract) would be otherwise payable,

22 pursuant to section 1834, for covered out23 patient drugs furnished by or through the plan

24 to individuals enrolled with the plan under this

25 section.
309

•S 2357

1 ‘‘(B) SOURCE OF PAYMENT.—The payment

2 to a medicare drug benefit plan under this sec3 tion for individuals enrolled under this section

4 with the plan and entitled to benefits under

5 part A and enrolled under part B shall be made

6 from the Federal Supplementary Medical Insur7 ance Trust Fund.

8 ‘‘(5) DEFINITIONS.—

9 ‘‘(A) SERVICE AREA.—The term ‘health

10 plan service area’ means a health plan service

11 area designated by the State under section

12 1502(d) of the Health Security Act.

13 ‘‘(B) CERTIFIED STANDARD HEALTH

14 PLAN.—The term ‘certified standard health

15 plan’ has the meaning given such term in sec16 tion 1011(2) of the Health Security Act.

17 ‘‘(b) PAYMENT RULES UNDER CONTRACTS.—

18 ‘‘(1) IN GENERAL.—

19 ‘‘(A) PAYMENTS.—With respect to any cal20 endar year, each medicare drug benefit plan

21 with a contract under this section shall receive

22 a payment under this title with respect to each

23 individual enrolled with the plan for each month

24 such individual is enrolled equal to the applica25 ble monthly percentage of the lesser of—
310

•S 2357

1 ‘‘(i) 95 percent of the fee for service

2 component determined under paragraph

3 (2)(B)(i) adjusted by the rate factor deter4 mined under subparagraph (C) for the

5 class of such individual; or

6 ‘‘(ii) the medicare drug benefit plan

7 component determined under paragraph

8 (2)(B)(ii) for the plan’s service area ad9 justed by the rate factor determined under

10 subparagraph (C) for the class of such in11 dividual.

12 ‘‘(B) APPLICABLE MONTHLY PERCENT13 AGE.—For purposes of subparagraph (A), the

14 Secretary shall annually set the applicable

15 monthly percentage for each month of the cal16 endar year. Such percentage for a month shall

17 be equal to the Secretary’s estimate of the pro18 portion of the total covered outpatient drug

19 benefit incurred in such month under section

20 1834 to the total covered outpatient drug bene21 fit incurred for such year under section 1834.

22 ‘‘(C) DETERMINATION OF CLASSES OF IN23 DIVIDUALS AND RATE FACTORS FOR SUCH

24 CLASSES.—
311

•S 2357

1 ‘‘(i) DETERMINATION OF CLASSES.—

2 For purposes of this section, the Secretary

3 shall define appropriate classes of individ4 uals based on such factors as the Secretary

5 determines to be appropriate.

6 ‘‘(ii) RATE FACTORS.—The Secretary

7 shall annually determine the rate factors

8 for each class of individuals defined in

9 clause (i) reflecting the differences in the

10 average per capita spending for providing

11 covered outpatient drug coverage under

12 part B among individuals in such classes.

13 ‘‘(2) DETERMINATION OF PAYMENT RATE.—

14 ‘‘(A) DETERMINATION BY SECRETARY.—

15 The Secretary shall annually determine under

16 subparagraph (B), and shall announce (in a

17 manner intended to provide notice to interested

18 parties) not later than October 1 before the cal19 endar year concerned, the payment for each

20 service area.

21 ‘‘(B) FORMULAS FOR DETERMINING PAY22 MENT AMOUNTS.—

23 ‘‘(i) FEE-FOR-SERVICE COMPO24 NENT.—The amount determined under

25 this clause is the projected average annual
312

•S 2357

1 per capita drug fee-for-service costs (as de2 fined in subparagraph (D)) for covered

3 outpatient drugs for the service area for

4 individuals not enrolled in medicare drug

5 benefit plans with contracts under this sec6 tion or entities with contracts under sec7 tion 1876, adjusted by the factor described

8 in clause (ii)(I).

9 ‘‘(ii) MEDICARE DRUG BENEFIT PLAN

10 COMPONENT.—The medicare drug benefit

11 plan component determined under this

12 clause is the sum of the following amounts

13 determined with respect to each medicare

14 drug benefit plan—

15 ‘‘(I) the amount of the uniform

16 annual premium submitted by the

17 plan to the Secretary under subpara18 graph (C), adjusted by a factor deter19 mined by the Secretary to normalize

20 the difference in the distribution of in21 dividuals projected to be enrolled in

22 the plan among the various classes of

23 individuals defined by the Secretary to

24 the national distribution of all individ-
313

•S 2357

1 uals in the program under this title

2 among such classes; multiplied by

3 ‘‘(II) a fraction (expressed as a

4 percentage), the numerator of which

5 is the number of all individuals en6 rolled in the plan (as projected by the

7 plan using either historical experience

8 or some other methodology developed

9 by the Secretary), and the denomina10 tor of which is the number of all indi11 viduals enrolled in all medicare drug

12 benefit plans in the service area.

13 ‘‘(C) UNIFORM ANNUAL PREMIUMS; PRE14 MIUM FOR ADDITIONAL SERVICES.—

15 ‘‘(i) IN GENERAL.—Each medicare

16 drug benefit plan shall, not later than Au17 gust 1 of each year, submit to the Sec18 retary a bid for the next calendar year for

19 each service area with respect to which the

20 plan proposes to serve under a contract

21 under this section. A bid with respect to a

22 service area shall include the following:

23 ‘‘(I) UNIFORM ANNUAL PRE24 MIUM.—A statement of the uniform

25 annual premium amount that the plan
314

•S 2357

1 intends to charge for individuals en2 rolled under this section with the

3 plan.

4 ‘‘(II) PREMIUM FOR SUPPLE5 MENTAL PLAN.—A statement of the

6 fixed monthly premium amount that

7 the plan intends to charge for each

8 supplemental plan offering additional

9 cost-sharing benefits.

10 ‘‘(ii) NOTICE BEFORE BID SUBMIS11 SIONS.—At least 45 days before the date

12 for submitting bids under clause (i) for a

13 year, the Secretary shall provide for notice

14 to medicare drug benefit plans of—

15 ‘‘(I) proposed changes to be

16 made in the methodology or benefit

17 coverage assumptions from the meth18 odology and assumptions used in the

19 previous calendar year and shall pro20 vide such plans an opportunity to

21 comment on such proposed changes;

22 ‘‘(II) the applicable monthly per23 centage for each month of the cal24 endar year as determined by the Sec25 retary under paragraph (1)(B); and
315

•S 2357

1 ‘‘(III) the rate factors for such

2 calendar year determined under para3 graph (1)(C).

4 ‘‘(D) PROJECTED AVERAGE ANNUAL PER

5 CAPITA FEE-FOR-SERVICE COSTS.—

6 ‘‘(i) IN GENERAL.—For purposes of

7 subparagraph (B), the term ‘projected av8 erage annual per capita drug fee-for-serv9 ice costs’ means, with respect to a service

10 area, the annual amount that the Sec11 retary estimates in advance would be pay12 able in any contract year for providing

13 payment for covered outpatient drugs for

14 individuals enrolled under part B (includ15 ing administrative costs incurred by orga16 nizations described in section 1842), if the

17 services were to be furnished by other than

18 a medicare drug benefit plan with a con19 tract under this section or by an entities

20 with a contract under section 1876.

21 ‘‘(ii) BASIS FOR ESTIMATES.—The es22 timate made by the Secretary under clause

23 (i) shall be made on the basis of actual ex24 perience of the service area or, if the Sec25 retary determines that the data in that
316

•S 2357

1 service area are inadequate to make an ac2 curate estimate, the Secretary may use the

3 actual experience of a similar area, with

4 appropriate adjustments to assure actuar5 ial equivalence, including adjustments the

6 Secretary may determine appropriate to

7 adjust for demographics, health status,

8 and the presence of specific medical condi9 tions. For the first 2 years that contracts

10 are entered into under this section, the

11 Secretary shall base such estimates on the

12 best available data.

13 ‘‘(3) PAYMENT RULES.—

14 ‘‘(A) AMOUNT OF PREMIUM.—

15 ‘‘(i) STANDARD PACKAGE.—Each

16 medicare drug benefit plan with a contract

17 under this section must provide to individ18 uals enrolled with the plan under this sec19 tion, for each month of the duration of

20 such enrollment during each contract pe21 riod, the coverage described in subsection

22 (d) for the lesser of—

23 ‘‘(I) the applicable monthly per24 centage of the uniform annual pre-
317

•S 2357

1 mium amount submitted under para2 graph (2)(C)(i)(I); or

3 ‘‘(II) the applicable monthly per4 centage of the amount described in

5 subsection (b)(1)(A).

6 ‘‘(ii) SUPPLEMENTAL PLAN.—

7 ‘‘(I) IN GENERAL.—Each medi8 care drug benefit plan with a contract

9 under this section must provide to in10 dividuals enrolled with the plan under

11 this section, for the duration of such

12 enrollment during each contract pe13 riod, a fixed monthly premium for the

14 supplemental plan described in para15 graph (2)(C)(i)(II) equal to the pre16 mium amount determined by the plan

17 under such paragraph. An individual

18 that elects to enroll in the supple19 mental plan shall be responsible for

20 paying to the plan the fixed monthly

21 premium amount described in the pre22 ceding sentence.

23 ‘‘(II) PAYMENT GREATER THAN

24 FIXED MONTHLY PREMIUM.—If, with

25 respect to any individual enrolled in a
318

•S 2357

1 medicare drug benefit plan with a

2 contract under this section, the

3 amount paid to the plan under sub4 section (b)(1)(A) exceeds the applica5 ble monthly percentage of the uniform

6 annual premium amount submitted

7 under paragraph (2)(C)(i)(I), the plan

8 shall apply such excess to a premium

9 for any supplemental policy described

10 in paragraph (2)(C)(ii) that the indi11 vidual may elect. If the individual

12 does not elect such a policy, the medi13 care drug benefit plan shall pay such

14 excess to the Secretary for deposit in

15 the Federal Supplementary Medical

16 Insurance Trust Fund.

17 ‘‘(B) MONTHLY PAYMENTS.—

18 ‘‘(i) IN GENERAL.—The Secretary

19 shall make monthly payments in advance

20 and in accordance with the rate deter21 mined under paragraph (1)(A) to each

22 medicare drug benefit plan with a contract

23 under this section for each individual en24 rolled with the plan under this section.
319

•S 2357

1 ‘‘(ii) ADJUSTMENTS.—The amount of

2 payment under this subparagraph may be

3 retroactively adjusted to take into account

4 any difference between the actual number

5 of individuals enrolled in the plan under

6 this section and the number of such indi7 viduals estimated to be so enrolled in de8 termining the amount of the advance pay9 ment.

10 ‘‘(iii) PAYMENT TO PLAN ONLY.—If

11 an individual is enrolled under this section

12 with a medicare drug benefit plan with a

13 contract under this section, only the plan

14 shall be entitled to receive payments from

15 the Secretary under this title for covered

16 outpatient drugs furnished to the individ17 ual.

18 ‘‘(d) COVERAGE OF BENEFITS.—

19 ‘‘(1) DRUGS PROVIDED.—A medicare drug ben20 efit plan with a contract under this section must

21 provide to individuals enrolled in the plan under this

22 section covered outpatient drugs (as defined in sec23 tion 1861(t)(2)), except as provided in subsection

24 (i)(3)(G).
320

•S 2357

1 ‘‘(2) PROVISION OF MEDICALLY NECESSARY

2 CARE.—Each medicare drug benefit plan with a con3 tract under this section must—

4 ‘‘(A) make the covered outpatient drugs

5 described in paragraph (1)—

6 ‘‘(i) available and accessible to en7 rolled individuals within the State with

8 reasonable promptness and in a manner

9 which assures continuity, and

10 ‘‘(ii) when medically necessary, avail11 able and accessible twenty-four hours a

12 day and seven days a week, and

13 ‘‘(B) provide for reimbursement with re14 spect to drugs which are described in subpara15 graph (A) and which are provided to such an

16 individual other than through the plan, if—

17 ‘‘(i) the drugs were medically nec18 essary and immediately required because of

19 an unforeseen illness, injury, or condition,

20 and

21 ‘‘(ii) it was not reasonable given the

22 circumstances to obtain the drugs through

23 the plan.

24 ‘‘(3) COST-SHARING.—Each medicare drug ben25 efit plan with a contract under this section must
321

•S 2357

1 provide to individuals enrolled under this section

2 with respect to the drugs described in paragraph

3 (1), cost-sharing requirements that are the same as

4 the cost-sharing requirements for covered outpatient

5 drug under section 1834, except that the deductible

6 for a medicare drug benefit plan shall be reduced by

7 an amount determined by the Secretary such that

8 the cost-sharing of the plan is equal to 95 percent

9 of the actuarial value of the cost sharing require10 ments under section 1834.

11 ‘‘(4) COST-SHARING FOR SUPPLEMENTAL

12 PLANS.—A supplemental plan may not have cost13 sharing that applies differential cost-sharing based

14 on the therapeutic class of drug prescribed or other

15 cost-sharing structures that the Secretary deter16 mines would be likely to discourage enrollment by in17 dividuals with medical conditions that require exten18 sive use of prescription drugs.

19 ‘‘(5) ACTUARIAL EQUIVALENCE OF STANDARD

20 PLAN AND SUPPLEMENTAL PLAN.—The premium

21 charged to an individual enrolled under this section

22 for a supplemental policy that eliminates or reduces

23 the cost-sharing requirement imposed on such indi24 vidual and the actuarial value of any remaining cost25 sharing requirement under the plan shall not exceed
322

•S 2357

1 95 percent of the actuarial value of the cost-sharing

2 requirements under section 1834.

3 ‘‘(e) ENROLLMENT.—

4 ‘‘(1) ENROLLMENT PERIODS.—Each medicare

5 drug benefit plan with a contract under this section

6 must have a uniform open enrollment period (which

7 shall be the period specified by the Secretary under

8 section 1876(c)(3)(A)(i)), for the enrollment of indi9 viduals under this section, of at least 30 days dura10 tion every year. The plan must also have additional

11 enrollment periods in accordance with the enrollment

12 periods required under clauses (ii), (iii), and (iv) of

13 section 1876(c)(3)(A).

14 ‘‘(2) TERMINATION.—An individual may only

15 terminate an individual’s enrollment with a medicare

16 drug benefit plan during an open enrollment period

17 described in paragraph (1).

18 ‘‘(3) NONDISCRIMINATION.—The medicare drug

19 benefit plan must provide assurances to the Sec20 retary that it will not discriminate against any indi21 vidual because of the individual’s health status, re22 quirements for covered outpatient drugs, claims ex23 perience, medical history, or other factors that are

24 generally related to the need for covered outpatient
323

•S 2357

1 drugs and that it will notify each individual of such

2 fact at the time of the individual’s enrollment.

3 ‘‘(4) NOTICE OF RIGHTS, ETC.—Each medicare

4 drug benefit plan with a contract under this section

5 shall provide each enrollee, at the time of enrollment

6 and not less frequently than annually thereafter, an

7 explanation of the enrollee’s rights under this sec8 tion, including an explanation of—

9 ‘‘(A) the enrollee’s rights to benefits from

10 the plan,

11 ‘‘(B) the restrictions on payments under

12 this title for covered outpatient drugs furnished

13 other than by or through the plan,

14 ‘‘(C) out-of-plan coverage provided by the

15 plan, and

16 ‘‘(D) appeal rights of enrollees.

17 ‘‘(f) MEMBERSHIP REQUIREMENTS.—

18 ‘‘(1) NON-MEDICARE REQUIREMENT.—

19 ‘‘(A) IN GENERAL.—Each entity with a

20 contract under this section shall provide at that

21 at least 1/2 of the individuals who are provided

22 with drug coverage by the entity are individuals

23 who are not enrolled in a medicare drug benefit

24 plan under this section.
324

•S 2357

1 ‘‘(B) SUSPENSION OF ENROLLMENT.—If

2 the Secretary determines that a medicare drug

3 benefit plan with a contract under this section

4 has failed to comply with the requirements of

5 this subsection, the Secretary may provide for

6 the suspension of enrollment of individuals

7 under this section or of payment to the plan

8 under this section for individuals newly enrolled

9 with the plan, after the date the Secretary noti10 fies the plan of such noncompliance.

11 ‘‘(2) 5000 INDIVIDUALS.—Each medicare drug

12 benefit plan with a contract under this section shall

13 provide covered outpatient drug coverage to at least

14 5000 individuals, except that the Secretary may

15 enter into such a contract with a medicare drug ben16 efit plan that has fewer enrollees if the plan pri17 marily serves members residing outside of urbanized

18 areas.

19 ‘‘(g) PAYMENT RULES FOR PLANS.—

20 ‘‘(1) SUBROGATION RIGHTS.—Notwithstanding

21 any other provision of law, the medicare drug benefit

22 plan may, (in the case of the provision of covered

23 outpatient drugs to an individual enrolled under this

24 section for a drug for which the member is entitled

25 to benefits under a workmen’s compensation law or
325

•S 2357

1 plan of the United States or a State, under an auto2 mobile or liability insurance policy or plan, including

3 a self-insured plan, under no fault insurance, or

4 under a primary plan (as defined in section

5 1862(b)(2)(A)) charge or authorize the provider of

6 such services to charge, in accordance with the

7 charges allowed under such law or policy—

8 ‘‘(A) the insurance carrier, employer, or

9 other entity which under such law, plan, or pol10 icy is to pay for the provision of such services,

11 or

12 ‘‘(B) such enrollee to the extent that the

13 enrollee has been paid under such law, plan, or

14 policy for such services.

15 ‘‘(2) PROMPT PAYMENT REQUIREMENT.—

16 ‘‘(A) IN GENERAL.—A contract under this

17 section shall require the medicare drug benefit

18 plan to provide prompt payment (consistent

19 with the provisions of section 1842(c)(4)) of

20 claims submitted for covered outpatient drugs

21 furnished to individuals pursuant to such con22 tract, if the drugs are not furnished under a

23 contract between the plan and the provider or

24 supplier.
326

•S 2357

1 ‘‘(B) FAILURE.—In the case of a plan

2 which the Secretary determines, after notice

3 and opportunity for a hearing, has failed to

4 make payments of amounts in compliance with

5 subparagraph (A), the Secretary may provide

6 for direct payment of the amounts owed to pro7 viders and suppliers for such covered services

8 furnished to individuals enrolled under this sec9 tion under the contract. If the Secretary pro10 vides for such direct payments, the Secretary

11 shall provide for an appropriate reduction in

12 the amount of payments otherwise made to the

13 plan under this section to reflect the amount of

14 the Secretary’s payments (and costs incurred by

15 the Secretary in making such payments).

16 ‘‘(h) DURATION, TERMINATION, EFFECTIVE DATE,

17 AND TERMS OF CONTRACT; POWERS AND DUTIES OF

18 SECRETARY.—

19 ‘‘(1) DURATION AND TERMINATION.—

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

21 subparagraph (B), each contract under this sec22 tion shall be for a term of at least one year, as

23 determined by the Secretary, and may be made

24 automatically renewable from term to term in

25 the absence of notice by either party of inten-
327

•S 2357

1 tion to terminate at the end of the current

2 term.

3 ‘‘(B) EXCEPTION.—The Secretary may

4 terminate a contract at any time (after such

5 reasonable notice and opportunity for hearing

6 to the medicare drug benefit plan involved as

7 the Secretary may provide in regulations), if the

8 Secretary finds that the plan—

9 ‘‘(i) has failed substantially to carry

10 out the contract,

11 ‘‘(ii) is carrying out the contract in a

12 manner inconsistent with the efficient and

13 effective administration of this section, or

14 ‘‘(iii) no longer substantially complies

15 with the requirements of this section.

16 ‘‘(2) EFFECTIVE DATE.—The effective date of

17 any contract executed pursuant to this section shall

18 be specified in the contract.

19 ‘‘(3) TERMS.—Each contract under this sec20 tion—

21 ‘‘(A) shall provide that the Secretary, or

22 any person or organization designated by the

23 Secretary—

24 ‘‘(i) shall have the right to inspect or

25 otherwise evaluate—
328

•S 2357

1 ‘‘(I) the quality, appropriateness,

2 and timeliness of drugs provided

3 under the contract, and

4 ‘‘(II) the facilities of the organi5 zation when there is reasonable evi6 dence of some need for such inspec7 tion, and

8 ‘‘(ii) shall have the right to audit and

9 inspect any books and records of the medi10 care drug benefit plan that pertain—

11 ‘‘(I) to the ability of the plan to

12 bear the risk of potential financial

13 losses, or

14 ‘‘(II) to drugs provided or deter15 minations of amounts payable under

16 the contract;

17 ‘‘(B) shall require the plan with a contract

18 to provide (and pay for) written notice in ad19 vance of the contract’s termination, as well as

20 a description of alternatives for obtaining bene21 fits under this title, to each individual enrolled

22 under this section with the plan;

23 ‘‘(C)(i) shall require the plan to comply

24 with subsections (a) and (c) of section 1318 of

25 the Public Health Service Act (relating to dis-
329

•S 2357

1 closure of certain financial information) and

2 with the requirement of section 1301(c)(8) of

3 such Act (relating to liability arrangements to

4 protect members);

5 ‘‘(ii) shall require the plan to provide and

6 supply information determined appropriate by

7 the Secretary in the manner determined appro8 priate by the Secretary; and

9 ‘‘(iii) shall require the plan to notify the

10 Secretary of loans and other special financial

11 arrangements which are made between the plan

12 and subcontractors, affiliates, and related par13 ties; and

14 ‘‘(D) shall contain such other terms and

15 conditions not inconsistent with this section (in16 cluding requiring the organization to provide

17 the Secretary with such information) as the

18 Secretary may find necessary and appropriate.

19 ‘‘(4) PERIOD OF DISQUALIFICATION.—The Sec20 retary may not enter into a contract with a medicare

21 drug benefit plan if a previous contract with that

22 plan under this section was terminated at the re23 quest of the plan within the preceding 5-year period

24 or if the plan submits a bid under subsection

25 (b)(2)(C) and does not enter into a contract, except
330

•S 2357

1 in circumstances which warrant special consider2 ation, as determined by the Secretary.

3 ‘‘(5) DISREGARD OF CERTAIN INCONSISTENT

4 LAWS, ETC.—The authority vested in the Secretary

5 by this section may be performed without regard to

6 such provisions of law or regulations relating to the

7 making, performance, amendment, or modification of

8 contracts of the United States as the Secretary may

9 determine to be inconsistent with the furtherance of

10 the purpose of this title.

11 ‘‘(6) FINDINGS OF FAILURE.—

12 ‘‘(A) IN GENERAL.—If the Secretary deter13 mines that medicare drug benefit plan with a

14 contract under this section—

15 ‘‘(i) fails substantially to provide

16 medically necessary covered outpatient

17 drugs that are required (under law or

18 under the contract) to be provided to an

19 individual covered under the contract, if

20 the failure has adversely affected (or has

21 substantial likelihood of adversely affect22 ing) the individual;

23 ‘‘(ii) imposes premiums on individuals

24 enrolled under this section in excess of the

25 premiums permitted;
331

•S 2357

1 ‘‘(iii) acts to expel or to refuse to re2 enroll an individual in violation of the pro3 visions of this section;

4 ‘‘(iv) engages in any practice that

5 would reasonably be expected to have the

6 effect of denying or discouraging enroll7 ment (except as permitted by this section)

8 by eligible individuals with the plan whose

9 medical condition or history indicates a

10 need for substantial future covered out11 patient drugs;

12 ‘‘(v) misrepresents or falsifies infor13 mation that is furnished—

14 ‘‘(I) to the Secretary under this

15 section, or

16 ‘‘(II) to an individual or to any

17 other entity under this section;

18 ‘‘(vi) employs or contracts with any

19 individual or entity that is excluded from

20 participation under this title under section

21 1128 or 1128A for the provision of health

22 care, utilization review, medical social

23 work, or administrative services or employs

24 or contracts with any entity for the provi25 sion (directly or indirectly) through such
332

•S 2357

1 an excluded individual or entity of such

2 services;

3 the Secretary may provide, in addition to any

4 other remedies authorized by law, for any of the

5 remedies described in subparagraph (B).

6 ‘‘(B) REMEDIES.—The remedies described

7 in this subparagraph are—

8 ‘‘(i) civil money penalties of not more

9 than $25,000 for each determination under

10 subparagraph (A) or, with respect to a de11 termination under clause (iv) or (v)(I) of

12 such subparagraph, of not more than

13 $100,000 for each such determination,

14 plus, with respect to a determination under

15 subparagraph (A)(ii), double the excess

16 amount charged in violation of such sub17 paragraph (and the excess amount charged

18 shall be deducted from the penalty and re19 turned to the individual concerned), and

20 plus, with respect to a determination under

21 subparagraph (A)(iv), $15,000 for each in22 dividual not enrolled as a result of the

23 practice involved,

24 ‘‘(ii) suspension of enrollment of indi25 viduals under this section after the date
333

•S 2357

1 the Secretary notifies the plan of a deter2 mination under subparagraph (A) and

3 until the Secretary is satisfied that the

4 basis for such determination has been cor5 rected and is not likely to recur, or

6 ‘‘(iii) suspension of payment to the

7 plan under this section for individuals en8 rolled after the date the Secretary notifies

9 the plan of a determination under subpara10 graph (A) and until the Secretary is satis11 fied that the basis for such determination

12 has been corrected and is not likely to

13 recur.

14 The provisions of section 1128A (other than

15 subsections (a) and (b)) shall apply to a civil

16 money penalty under clause (i) in the same

17 manner as they apply to a civil money penalty

18 or proceeding under section 1128A(a).

19 ‘‘(i) OTHER GENERAL REQUIREMENTS ON PLANS.—

20 ‘‘(1) GRIEVANCE PROCEDURES.—Each medi21 care drug benefit plan with a contract under this

22 section must provide meaningful procedures for

23 hearing and resolving grievances between the plan

24 (including any entity or individual through which the
334

•S 2357

1 plan provides health care services) and individuals

2 enrolled with the plan under this section.

3 ‘‘(2) APPEALS.—An individual enrolled with a

4 medicare drug benefit plan under this section who is

5 dissatisfied by reason of the individual’s failure to

6 receive any covered outpatient drug to which the in7 dividual believes the individual is entitled and at no

8 greater charge than the individual believes the indi9 vidual is required to pay is entitled, if the amount

10 in controversy is $100 or more, to a hearing before

11 the Secretary to the same extent as is provided in

12 section 205(b), and in any such hearing the Sec13 retary shall make the plan a party. If the amount

14 in controversy is $1,000 or more, the individual or

15 plan shall, upon notifying the other party, be enti16 tled to judicial review of the Secretary’s final deci17 sion as provided in section 205(g), and both the in18 dividual and the plan shall be entitled to be parties

19 to that judicial review.

20 ‘‘(3) ADDITIONAL REQUIREMENTS.—Not later

21 then January 1, 1998, the Secretary shall establish

22 standards for additional requirements for medicare

23 drug benefit plans with contracts under this section,

24 that to the extent possible are consistent with the

25 standards relating to eligible organizations that have
335

•S 2357

1 entered into risk contracts under section 1876, and

2 which provide that a medicare drug benefit plan—

3 ‘‘(A) must demonstrate financial solvency;

4 ‘‘(B) must demonstrate the ability to pro5 vide benefits to all potential enrollees through6 out the State served by the plan;

7 ‘‘(C) must not engage in marketing or

8 other practices designed to discourage or limit

9 the issuance of a medicare outpatient drug cov10 erage plan to any potential enrollee on the basis

11 of health status, claims experience, medical his12 tory, or other factors that are generally related

13 to utilization of covered outpatient drugs;

14 ‘‘(D) must inform individuals eligible to

15 enroll with the plan about the plan only in ac16 cordance with procedures and conditions deter17 mined by the Secretary and may not distribute

18 promotional or informational material unless—

19 ‘‘(i) at least 45 days before its dis20 tribution, the plan has submitted the mate21 rial to the Secretary for review,

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

23 all individuals eligible to enroll in the plan

24 in the State served by the plan, and
336

•S 2357

1 ‘‘(iii) the Secretary has not dis2 approved the distribution of the material

3 due to a determination that in the Sec4 retary’s discretion, the material is materi5 ally inaccurate or misleading or otherwise

6 makes a material misrepresentation;

7 ‘‘(E) must provide convenient access to

8 pharmacies for individuals in each zip code re9 gion of the State taking into account the special

10 needs of individuals who are enrolled in part B;

11 ‘‘(F) in addition to the access described in

12 subparagraph (E), may provide enrollees with a

13 mail-order pharmacy option;

14 ‘‘(G) may establish a formulary system (to

15 be maintained throughout the 1-year contract

16 period) which ensures that—

17 ‘‘(i) the formulary shall cover at least

18 one covered outpatient drug in each thera19 peutic class of drugs representing a unique

20 mechanism of action (as defined by the

21 Secretary); and

22 ‘‘(ii) that any covered outpatient drug

23 excluded by the formulary is subject to a

24 prior authorization process in which the

25 plan may not deny approval of any drug
337

•S 2357

1 unless the plan complies with the process

2 described in section 1834(d)(7)(C)(iii);

3 ‘‘(H) must disclose any special relation4 ships or arrangements with drug manufactur5 ers, including ownership arrangements, dis6 tribution arrangements, or alliances;

7 ‘‘(I) must have standards to assure the ap8 propriate use of outpatient prescription medica9 tions, including a program of prospective and

10 retrospective drug use review, consistent with

11 standards under the drug use review program

12 developed by the Secretary under section

13 1834(d)(7), including for any mail order serv14 ices operated or used by the plan; and

15 ‘‘(J) is able to process claims for out16 patient prescription drugs under the program

17 through an on-line real time point of sale sys18 tem, and has developed a process for processing

19 out-of-area claims.’’.

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

21 this section shall be effective with respect to contracts en22 tered into on or after January 1, 1999.
338

•S 2357

1 SEC. 2007. PAYMENT FOR COVERED OUTPATIENT DRUG

2 BENEFIT UNDER MEDICARE CONTRACTS

3 WITH HMOS AND CMPS.

4 (a) IN GENERAL.—In providing for payments for the

5 covered outpatient drug benefit, as added by section 2001,

6 to entities with risk contracts under section 1876 of the

7 Social Security Act, the Secretary of Health and Human

8 Services may base such payment on classes of enrollees

9 or geographic factors that are different than the classes

10 or geographic factors otherwise utilized for determining

11 payment under such section.

12 (b) EFFECTIVE DATE.—This section shall apply to

13 contracts entered into on or after January 1, 1999.

14 SEC. 2008. MAINTENANCE OF EFFORT.

15 (a) MAINTENANCE OF EFFORT WITH RESPECT TO

16 PRESCRIPTION DRUGS.—Section 1862(b)(1) (42 U.S.C.

17 1395y(b)(1)) is amended by adding at the end the follow18 ing new subparagraph:

19 ‘‘(F) PRESCRIPTION DRUGS.—

20 ‘‘(i) IN GENERAL.—A group health

21 plan may not take into account that an in22 dividual (or the individual’s spouse) who is

23 covered under the plan by virtue of the in24 dividual’s current retirement status with

25 an employer may be eligible to receive cov26 ered outpatient drug coverage under part
339

•S 2357

1 B, except that this subparagraph shall not

2 prohibit a plan from taking into account

3 that an individual is eligible to receive cov4 ered outpatient drug coverage under part

5 B on or after January 1, 2002. To the ex6 tent that the group health plan furnishes

7 prescription drugs pursuant to a collec8 tively bargained agreement, this subpara9 graph shall prohibit a plan from taking

10 into account that an individual is eligible

11 to receive covered outpatient drug coverage

12 under part B for the greater of the period

13 of the agreement or until January 1, 2002.

14 ‘‘(ii) CURRENT RETIREMENT STA15 TUS.—An individual has ‘current retire16 ment status’ with an employer if the indi17 vidual no longer has current employment

18 status due to the individual’s retirement

19 from such employment status.’’.

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

21 subsection (a) shall apply to group health plans offering

22 prescription drug coverage on or after January 1, 1994.
340

•S 2357

1 Subtitle B—Home and Community2 Based Services

3 PART 1—HOME AND COMMUNITY-BASED

4 SERVICES FOR INDIVIDUALS WITH DISABILITIES

5 SEC. 2101. STATE PROGRAMS FOR HOME AND COMMUNITY6 BASED SERVICES FOR INDIVIDUALS WITH

7 DISABILITIES.

8 (a) IN GENERAL.—Each State that has a plan for

9 home and community-based services for individuals with

10 disabilities submitted to and approved by the Secretary

11 under section 2102(b) is entitled to payment in accordance

12 with section 2108.

13 (b) ENTITLEMENT TO SERVICES.—Nothing in this

14 subtitle shall be construed to create a right to services for

15 individuals or a requirement that a State with an approved

16 plan expend the entire amount of funds to which it is enti17 tled under this subtitle.

18 (c) DESIGNATION OF AGENCY.—Not later than 6

19 months after the date of enactment of this subtitle, the

20 Secretary shall designate an agency responsible for pro21 gram administration under this subtitle.

22 SEC. 2102. STATE PLANS.

23 (a) PLAN REQUIREMENTS.—In order to be approved

24 under subsection (b), a State plan for home and commu-
341

•S 2357

1 nity-based services for individuals with disabilities must

2 meet the following requirements:

3 (1) STATE MAINTENANCE OF EFFORT.—

4 (A) IN GENERAL.—A State plan under this

5 subtitle shall provide that the State will, during

6 any fiscal year that the State is furnishing serv7 ices under this subtitle, make expenditures of

8 State funds in an amount equal to the State

9 maintenance of effort amount for the year de10 termined under subparagraph (B) for furnish11 ing the services described in subparagraph (C)

12 under the State plan under this subtitle and the

13 State plan under title XIX of the Social Secu14 rity Act.

15 (B) STATE MAINTENANCE OF EFFORT

16 AMOUNT.—

17 (i) IN GENERAL.—The maintenance of

18 effort amount for a State for a fiscal year

19 is an amount equal to—

20 (I) for fiscal year 1998, the base

21 amount for the State (as determined

22 under clause (ii)) updated through the

23 midpoint of fiscal year 1998 by the

24 estimated percentage change in the

25 consumer price index during the pe-
342

•S 2357

1 riod beginning on October 1, 1994

2 and ending at that midpoint; and

3 (II) for succeeding fiscal years,

4 an amount equal to the amount deter5 mined under this clause for the pre6 vious fiscal year updated through the

7 midpoint of the year by the estimated

8 percentage change in the consumer

9 price index during the 12-month pe10 riod ending at that midpoint, with ap11 propriate adjustments to reflect pre12 vious underestimations or overesti13 mations under this clause in the pro14 jected percentage change in the

15 consumer price index.

16 (ii) STATE BASE AMOUNT.—The base

17 amount for a State is an amount equal to

18 the total expenditures from State funds

19 made under the State plan under title XIX

20 of the Social Security Act during fiscal

21 year 1994 with respect to medical assist22 ance consisting of the services described in

23 subparagraph (C).
343

•S 2357

1 (C) MEDICAID SERVICES DESCRIBED.—

2 The services described in this subparagraph are

3 the following:

4 (i) Personal care services (as de5 scribed in section 1905(a)(24) of the Social

6 Security Act).

7 (ii) Home or community-based serv8 ices furnished under a waiver granted

9 under subsection (c), (d), or (e) of section

10 1915 of such Act.

11 (iii) Home and community care fur12 nished to functionally disabled elderly indi13 viduals under section 1929 of such Act.

14 (iv) Community supported living ar15 rangements services under section 1930 of

16 such Act.

17 (2) ELIGIBILITY.—

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

19 subparagraph (B), within the amounts provided

20 by the State and under section 2108 for such

21 plan, the plan shall provide that services under

22 the plan will be available to individuals with dis23 abilities (as defined in section 2103(a)) in the

24 State.
344

•S 2357

1 (C) INITIAL SCREENING.—The plan shall

2 provide a process for the initial screening of an

3 individual who appears to have some reasonable

4 likelihood of being an individual with disabil5 ities. Any such process shall require the provi6 sion of assistance to individuals who wish to

7 apply but whose disability limits their ability to

8 apply. The initial screening and the determina9 tion of disability (as defined under section

10 2103(b)(1)) shall be conducted by a public

11 agency.

12 (D) RESTRICTIONS.—The plan may not

13 limit the eligibility of individuals with disabil14 ities based on—

15 (i) income,

16 (ii) age,

17 (iii) residential setting (other than an

18 institutional setting), or

19 (iv) other grounds specified by the

20 Secretary.

21 (E) CONTINUATION OF SERVICES.—The

22 plan must provide assurances that, in the case

23 of an individual receiving medical assistance for

24 home and community-based services under the

25 State medicaid plan under title XIX of the So-
345

•S 2357

1 cial Security Act as of the date a State’s plan

2 is approved under this subtitle, the State will

3 continue to make available (either under this

4 plan, under the State medicaid plan, or other5 wise) to such individual an appropriate level of

6 assistance for home and community-based serv7 ices, taking into account the level of assistance

8 provided as of such date and the individual’s

9 need for home and community-based services.

10 (3) SERVICES.—

11 (A) NEEDS ASSESSMENT.—Not later than

12 the end of the second year of implementation,

13 the plan or its amendments shall include the re14 sults of a statewide assessment of the needs of

15 individuals with disabilities in a format required

16 by the Secretary. The needs assessment shall

17 include demographic data concerning the num18 ber of individuals within each category of dis19 ability described in this subtitle, and the serv20 ices available to meet the needs of such individ21 uals.

22 (B) SPECIFICATION.—Consistent with sec23 tion 2104, the plan shall specify—

24 (i) the services made available under

25 the plan,
346

•S 2357

1 (ii) the extent and manner in which

2 such services are allocated and made avail3 able to individuals with disabilities, and

4 (iii) the manner in which services

5 under the plan are coordinated with each

6 other and with health and long-term care

7 services available outside the plan for indi8 viduals with disabilities.

9 (C) TAKING INTO ACCOUNT INFORMAL

10 CARE.—A State plan may take into account, in

11 determining the amount and array of services

12 made available to covered individuals with dis13 abilities, the availability of informal care.

14 (D) ALLOCATION.—The State plan—

15 (i) shall specify how services under

16 the plan will be allocated among covered

17 individuals with disabilities,

18 (ii) shall attempt to meet the needs of

19 individuals with a variety of disabilities

20 within the limits of available funding,

21 (iii) shall include services that assist

22 all categories of individuals with disabil23 ities, regardless of their age or the nature

24 of their disabling conditions,
347

•S 2357

1 (iv) shall demonstrate that services

2 are allocated equitably, in accordance with

3 the needs assessment required under sub4 paragraph (A), and

5 (v) shall ensure that—

6 (I) the proportion of the popu7 lation of low-income individuals with

8 disabilities in the State that rep9 resents individuals with disabilities

10 who are provided home and commu11 nity-based services either under the

12 plan, under the State medicaid plan,

13 or under both, is not less than,

14 (II) the proportion of the popu15 lation of the State that represents in16 dividuals who are low-income individ17 uals.

18 (E) LIMITATION ON LICENSURE OR CER19 TIFICATION.—The State may not subject

20 consumer-directed providers of personal assist21 ance services to licensure, certification, or other

22 requirements which the Secretary finds not to

23 be necessary for the health and safety of indi24 viduals with disabilities.
348

•S 2357

1 (F) CONSUMER CHOICE.—To the extent

2 feasible, the State shall follow the choice of an

3 individual with disabilities (or that individual’s

4 designated representative who may be a family

5 member) regarding which covered services to re6 ceive and the providers who will provide such

7 services.

8 (4) COST SHARING.—The plan shall impose cost

9 sharing with respect to covered services in accord10 ance with section 2105.

11 (5) TYPES OF PROVIDERS AND REQUIREMENTS

12 FOR PARTICIPATION.—The plan shall specify—

13 (A) the types of service providers eligible

14 to participate in the program under the plan,

15 which shall include consumer-directed providers

16 of personal assistance services, except that the

17 plan—

18 (i) may not limit benefits to services

19 provided by registered nurses or licensed

20 practical nurses; and

21 (ii) may not limit benefits to services

22 provided by agencies or providers certified

23 under title XVIII; and

24 (B) any requirements for participation ap25 plicable to each type of service provider.
349

•S 2357

1 (6) PROVIDER REIMBURSEMENT.—

2 (A) PAYMENT METHODS.—The plan shall

3 specify the payment methods to be used to re4 imburse providers for services furnished under

5 the plan. Such methods may include retrospec6 tive reimbursement on a fee-for-service basis,

7 prepayment on a capitation basis, payment by

8 cash or vouchers to individuals with disabilities,

9 or any combination of these methods. In the

10 case of payment to consumer-directed providers

11 of personal assistance services, including pay12 ment through the use of cash or vouchers, the

13 plan shall specify how the plan will assure com14 pliance with applicable employment tax and

15 health care coverage provisions.

16 (B) PAYMENT RATES.—The plan shall

17 specify the methods and criteria to be used to

18 set payment rates for—

19 (i) agency administered services fur20 nished under the plan; and

21 (ii) consumer-directed personal assist22 ance services furnished under the plan, in23 cluding cash payments or vouchers to indi24 viduals with disabilities, except that such

25 payments shall be adequate to cover
350

•S 2357

1 amounts required under applicable employ2 ment tax and health care coverage provi3 sions.

4 (C) PLAN PAYMENT AS PAYMENT IN

5 FULL.—The plan shall restrict payment under

6 the plan for covered services to those providers

7 that agree to accept the payment under the

8 plan (at the rates established pursuant to sub9 paragraph (B)) and any cost sharing permitted

10 or provided for under section 2105 as payment

11 in full for services furnished under the plan.

12 (7) QUALITY ASSURANCE AND SAFEGUARDS.—

13 The State plan shall provide for quality assurance

14 and safeguards for applicants and beneficiaries in

15 accordance with section 2106.

16 (8) ADVISORY GROUP.—The State plan shall—

17 (A) assure the establishment and mainte18 nance of an advisory group under section

19 2107(b), and

20 (B) include the documentation prepared by

21 the group under section 2107(b)(4).

22 (9) ADMINISTRATION AND ACCESS.—

23 (A) STATE AGENCY.—The plan shall des24 ignate a State agency or agencies to administer

25 (or to supervise the administration of) the plan.
351

•S 2357

1 (B) COORDINATION.—The plan shall speci2 fy how it will—

3 (i) coordinate services provided under

4 the plan, including eligibility prescreening,

5 service coordination, and referrals for indi6 viduals with disabilities who are ineligible

7 for services under this subtitle with the

8 State medicaid plan under title XIX of the

9 Social Security Act, titles V and XX of

10 such Act, programs under the Older Amer11 icans Act of 1965, programs under the De12 velopmental Disabilities Assistance and

13 Bill of Rights Act, the Individuals with

14 Disabilities Education Act, and any other

15 Federal or State programs that provide

16 services or assistance targeted to individ17 uals with disabilities; and

18 (ii) coordinate with health plans.

19 (C) ADMINISTRATIVE EXPENDITURES.—

20 Effective beginning with fiscal year 2004, the

21 plan shall contain assurances that not more

22 than 10 percent of expenditures under the plan

23 for all quarters in any fiscal year shall be for

24 administrative costs.
352

•S 2357

1 (10) REPORTS AND INFORMATION TO SEC2 RETARY; AUDITS.—The plan shall provide that the

3 State will furnish to the Secretary—

4 (A) such reports, and will cooperate with

5 such audits, as the Secretary determines are

6 needed concerning the State’s administration of

7 its plan under this subtitle, including the proc8 essing of claims under the plan, and

9 (B) such data and information as the Sec10 retary may require in a uniform format as spec11 ified by the Secretary.

12 (11) USE OF STATE FUNDS FOR MATCHING.—

13 The plan shall provide assurances that Federal

14 funds will not be used to provide for the State share

15 of expenditures under this subtitle.

16 (12) HEALTH CARE WORKER REDEPLOY17 MENT.—The plan shall provide for the following:

18 (A) Before initiating the process of imple19 menting the State program under such plan,

20 negotiations will be commenced with labor

21 unions representing the employees of the af22 fected hospitals or other facilities.

23 (B) Negotiations under subparagraph (A)

24 will address the following:
353

•S 2357

1 (i) The impact of the implementation

2 of the program upon the workforce.

3 (ii) Methods to redeploy workers to

4 positions in the proposed system, in the

5 case of workers affected by the program.

6 (C) The plan will provide evidence that

7 there has been compliance with subparagraphs

8 (A) and (B), including a description of the re9 sults of the negotiations.

10 (13) TERMINOLOGY.—The plan shall adhere to

11 uniform definitions of terms, as specified by the Sec12 retary.

13 (b) APPROVAL OF PLANS.—The Secretary shall ap14 prove a plan submitted by a State if the Secretary deter15 mines that the plan—

16 (1) was developed by the State after a public

17 comment period of not less than 30 days, and

18 (2) meets the requirements of subsection (a).

19 The approval of such a plan shall take effect as of the

20 first day of the first fiscal year beginning after the date

21 of such approval (except that any approval made before

22 January 1, 1998, shall be effective as of January 1, 1998).

23 In order to budget funds allotted under this subtitle, the

24 Secretary shall establish a deadline for the submission of

25 such a plan before the beginning of a fiscal year as a con-
354

•S 2357

1 dition of its approval effective with that fiscal year. Any

2 significant changes to the State plan shall be submitted

3 to the Secretary in the form of plan amendments and shall

4 be subject to approval by the Secretary.

5 (c) MONITORING.—The Secretary shall annually

6 monitor the compliance of State plans with the require7 ments of this subtitle according to specified performance

8 standards. In accordance with section 2108(e), States that

9 fail to comply with such requirements may be subject to

10 a reduction in the Federal matching rates available to the

11 State under section 2108(a) or the withholding of Federal

12 funds for services or administration until such time as

13 compliance is achieved.

14 (d) TECHNICAL ASSISTANCE.—The Secretary shall

15 ensure the availability of ongoing technical assistance to

16 States under this section. Such assistance shall include

17 serving as a clearinghouse for information regarding suc18 cessful practices in providing long-term care services.

19 (e) REGULATIONS.—The Secretary shall issue such

20 regulations as may be appropriate to carry out this sub21 title on a timely basis.

22 SEC. 2103. INDIVIDUALS WITH DISABILITIES DEFINED.

23 (a) IN GENERAL.—For purposes of this subtitle, the

24 term ‘individual with disabilities’ means any individual
355

•S 2357

1 within one or more of the following categories of individ2 uals:

3 (1) INDIVIDUALS REQUIRING HELP WITH AC4 TIVITIES OF DAILY LIVING.—An individual of any

5 age who—

6 (A) requires hands-on or standby assist7 ance, supervision, or cueing (as defined in regu8 lations) to perform three or more activities of

9 daily living (as defined in subsection (d)), and

10 (B) is expected to require such assistance,

11 supervision, or cueing over a period of at least

12 90 days.

13 (2) INDIVIDUALS WITH SEVERE COGNITIVE OR

14 MENTAL IMPAIRMENT.—An individual of any age—

15 (A) whose score, on a standard mental sta16 tus protocol (or protocols) appropriate for

17 measuring the individual’s particular condition

18 specified by the Secretary, indicates either se19 vere cognitive impairment or severe mental im20 pairment, or both;

21 (B) who—

22 (i) requires hands-on or standby as23 sistance, supervision, or cueing with one or

24 more activities of daily living;
356

•S 2357

1 (ii) requires hands-on or standby as2 sistance, supervision, or cueing with at

3 least such instrumental activity (or activi4 ties) of daily living related to cognitive or

5 mental impairment as the Secretary speci6 fies; or

7 (iii) displays symptoms of one or more

8 serious behavioral problems (that is on a

9 list of such problems specified by the Sec10 retary) which create a need for supervision

11 to prevent harm to self or others; and

12 (C) who is expected to meet the require13 ments of subparagraphs (A) and (B) over a pe14 riod of at least 90 days.

15 Not later than 2 years after the date of enactment

16 of this subtitle, the Secretary shall make rec17 ommendations regarding the most appropriate dura18 tion of disability under this paragraph.

19 (3) INDIVIDUALS WITH SEVERE OR PROFOUND

20 MENTAL RETARDATION.—An individual of any age

21 who has severe or profound mental retardation (as

22 determined according to a protocol specified by the

23 Secretary).

24 (4) YOUNG CHILDREN WITH SEVERE DISABIL25 ITIES.—An individual under 6 years of age who—
357

•S 2357

1 (A) has a severe disability or chronic medi2 cal condition that limits functioning in a man3 ner that is comparable in severity to the stand4 ards established under paragraphs (1), (2), or

5 (3), and

6 (B) is expected to have such a disability or

7 condition and require such services over a pe8 riod of at least 90 days.

9 (b) DETERMINATION.—

10 (1) IN GENERAL.—In formulating eligibility cri11 teria under subsection (a), the Secretary shall estab12 lish criteria for assessing the functional level of dis13 ability among all categories of individuals with dis14 abilities that are comparable in severity, regardless

15 of the age or the nature of the disabling condition

16 of the individual. The determination of whether an

17 individual is an individual with disabilities shall be

18 made by a public or nonprofit agency that is speci19 fied under the State plan and that is not a provider

20 of home and community-based services under this

21 subtitle and by using a uniform protocol consisting

22 of an initial screening and a determination of dis23 ability specified by the Secretary. A State may not

24 impose cost sharing with respect to a determination

25 of disability. A State may collect additional informa-
358

•S 2357

1 tion, at the time of obtaining information to make

2 such determination, in order to provide for the as3 sessment and plan described in section 2104(b) or

4 for other purposes.

5 (2) PERIODIC REASSESSMENT.—The determina6 tion that an individual is an individual with disabil7 ities shall be considered to be effective under the

8 State plan for a period of not more than 6 months

9 (or for such longer period in such cases as a signifi10 cant change in an individual’s condition that may af11 fect such determination is unlikely). A reassessment

12 shall be made if there is a significant change in an

13 individual’s condition that may affect such deter14 mination.

15 (c) ELIGIBILITY CRITERIA.—The Secretary shall re16 assess the validity of the eligibility criteria described in

17 subsection (a) as new knowledge regarding the assess18 ments of functional disabilities becomes available. The

19 Secretary shall report to the Committees on Finance and

20 Labor and Human Resources of the Senate and the Com21 mittees on Ways and Means and Energy and Commerce

22 of the House of Representatives on its findings under the

23 preceding sentence as determined appropriate by the Sec24 retary.
359

•S 2357

1 (d) ACTIVITY OF DAILY LIVING DEFINED.—For pur2 poses of this subtitle, the term ‘activity of daily living’

3 means any of the following: eating, toileting, dressing,

4 bathing, and transferring.

5 SEC. 2104. HOME AND COMMUNITY-BASED SERVICES COV6 ERED UNDER STATE PLAN.

7 (a) SPECIFICATION.—

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

9 provisions of this section, the State plan under this

10 subtitle shall specify—

11 (A) the home and community-based serv12 ices available under the plan to individuals with

13 disabilities (or to such categories of such indi14 viduals), and

15 (B) any limits with respect to such serv16 ices.

17 (2) FLEXIBILITY IN MEETING INDIVIDUAL

18 NEEDS.—Subject to subsection (e)(2), such services

19 may be delivered in an individual’s home, a range of

20 community residential arrangements, or outside the

21 home.

22 (b) REQUIREMENT FOR NEEDS ASSESSMENT AND

23 PLAN OF CARE.—

24 (1) IN GENERAL.—The State plan shall provide

25 for home and community-based services to an indi-
360

•S 2357

1 vidual with disabilities only if the following require2 ments are met:

3 (A) COMPREHENSIVE ASSESSMENT.—A

4 comprehensive assessment of an individual’s

5 need for home and community-based services

6 (regardless of whether all need services are

7 available under the plan) shall be made in ac8 cordance with a uniform, comprehensive assess9 ment tool that shall be used by a State under

10 this paragraph with the approval of the Sec11 retary. The Secretary shall provide guidance to

12 the States with regard to the appropriate quali13 fications for individuals who conduct com14 prehensive assessments.

15 (B) INDIVIDUALIZED PLAN OF CARE.—An

16 individualized plan of care based on the assess17 ment made under subparagraph (A) shall be de18 veloped. A plan of care under this subparagraph

19 shall—

20 (i) specify which services included

21 under the individual plan will be provided

22 under the State plan under this subtitle;

23 (ii) identify (to the extent possible)

24 how the individual will be provided any
361

•S 2357

1 services specified under the plan of care

2 and not provided under the State plan;

3 (iii) specify how the provision of serv4 ices to the individual under the plan will be

5 coordinated with the provision of other

6 health care services to the individual; and

7 (iv) be reviewed and updated every 6

8 months (or more frequently if there is a

9 change in the individual’s condition).

10 The State shall make reasonable efforts to iden11 tify and arrange for services described in clause

12 (ii). Nothing in this subsection shall be con13 strued as requiring a State (under the State

14 plan or otherwise) to provide all the services

15 specified in such a plan.

16 (C) INVOLVEMENT OF INDIVIDUALS.—The

17 individualized plan of care under subparagraph

18 (B) for an individual with disabilities shall—

19 (i) be developed by qualified individ20 uals (specified under the State plan);

21 (ii) be developed and implemented in

22 close consultation with the individual (or

23 the individual’s designated representative);

24 and
362

•S 2357

1 (iii) be approved by the individual (or

2 the individual’s designated representative).

3 (c) REQUIREMENT FOR CARE MANAGEMENT.—

4 (1) IN GENERAL.—The State shall make avail5 able to each category of individuals with disabilities

6 care management services that at a minimum in7 clude—

8 (A) arrangements for the provision of such

9 services, and

10 (B) monitoring of the delivery of services.

11 (2) CARE MANAGEMENT SERVICES.—

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

13 subparagraph (B), the care management serv14 ices described in paragraph (1) shall be pro15 vided by a public or private entity that is not

16 providing home and community-based services

17 under this subtitle.

18 (B) EXCEPTION.—A person who provides

19 home and community-based services under this

20 subtitle may provide care management services

21 if—

22 (i) the State determines that there is

23 an insufficient pool of entities willing to

24 provide such services in an area due to a

25 low population of individuals eligible for
363

•S 2357

1 home and community-based services under

2 this subtitle residing in such area; and

3 (ii) the State plan specifies procedures

4 that the State will implement in order to

5 avoid conflicts of interest.

6 (d) MANDATORY COVERAGE OF PERSONAL ASSIST7 ANCE SERVICES.—The State plan shall include, in the

8 array of services made available to each category of indi9 viduals with disabilities, both agency-administered and

10 consumer-directed personal assistance services (as defined

11 in subsection (h)).

12 (e) ADDITIONAL SERVICES.—

13 (1) TYPES OF SERVICES.—Subject to subsection

14 (f), services available under a State plan under this

15 subtitle may include any (or all) of the following:

16 (A) Homemaker and chore assistance.

17 (B) Home modifications.

18 (C) Respite services.

19 (D) Assistive devices, as defined in the

20 Technology Related Assistance for Individuals

21 with Disabilities Act.

22 (E) Adult day services.

23 (F) Habilitation and rehabilitation.

24 (G) Supported employment.

25 (H) Home health services.
364

•S 2357

1 (I) Transportation.

2 (J) Any other care or assistive services

3 specified by the State and approved by the Sec4 retary that will help individuals with disabilities

5 to remain in their homes and communities.

6 (2) CRITERIA FOR SELECTION OF SERVICES.—

7 The State electing services under paragraph (1)

8 shall specify in the State plan—

9 (A) the methods and standards used to se10 lect the types, and the amount, duration, and

11 scope, of services to be covered under the plan

12 and to be available to each category of individ13 uals with disabilities, and

14 (B) how the types, and the amount, dura15 tion, and scope, of services specified, within the

16 limits of available funding, provide substantial

17 assistance in living independently to individuals

18 within each of the categories of individuals with

19 disabilities.

20 (f) EXCLUSIONS AND LIMITATIONS.—A State plan

21 may not provide for coverage of—

22 (1) room and board,

23 (2) services furnished in a hospital, nursing fa24 cility, intermediate care facility for the mentally re-
365

•S 2357

1 tarded, or other institutional setting specified by the

2 Secretary, or

3 (3) items and services to the extent coverage is

4 provided for the individual under a health plan or

5 the medicare program.

6 (g) PAYMENT FOR SERVICES.—In order to pay for

7 covered services, a State plan may provide for the use of—

8 (1) vouchers,

9 (2) cash payments directly to individuals with

10 disabilities,

11 (3) capitation payments to health plans, and

12 (4) payment to providers.

13 (h) PERSONAL ASSISTANCE SERVICES.—

14 (1) IN GENERAL.—For purposes of this sub15 title, the term ‘‘personal assistance services’’ means

16 those services specified under the State plan as per17 sonal assistance services and shall include at least

18 hands-on and standby assistance, supervision, and

19 cueing with activities of daily living, whether agency20 administered or consumer-directed (as defined in

21 paragraph (2)).

22 (2) CONSUMER-DIRECTED.—For purposes of

23 this subtitle:

24 (A) IN GENERAL.—The term ‘‘consumer25 directed’’ means, with reference to personal as-
366

•S 2357

1 sistance services or the provider of such serv2 ices, services that are provided by an individual

3 who is selected and managed (and, at the op4 tion of the service recipient, trained) by the in5 dividual receiving the services.

6 (B) STATE RESPONSIBILITIES.—A State

7 plan shall ensure that where services are pro8 vided in a consumer-directed manner, the State

9 shall create or contract with an entity, other

10 than the consumer or the individual provider,

11 to—

12 (i) inform both recipients and provid13 ers of rights and responsibilities under all

14 applicable Federal labor and tax law; and

15 (ii) assume responsibility for providing

16 effective billing, payments for services, tax

17 withholding, unemployment insurance, and

18 workers’ compensation coverage, and act

19 as the employer of the home care provider.

20 (C) RIGHT OF CONSUMERS.—Notwith21 standing the State responsibilities described in

22 subparagraph (B), service recipients, and,

23 where appropriate, their designated representa24 tive, shall retain the right to independently se25 lect, hire, terminate, and direct (including man-
367

•S 2357

1 age, train, schedule, and verify services pro2 vided) the work of a home care provider.

3 (3) AGENCY ADMINISTERED.—For purposes of

4 this subtitle, the term ‘agency-administered’ means,

5 with respect to such services, services that are not

6 consumer-directed.

7 SEC. 2105. COST SHARING.

8 (a) NO COST SHARING FOR POOREST.—

9 (1) IN GENERAL.—The State plan may not im10 pose any cost sharing for individuals with income (as

11 determined under subsection (d)) less than 150 per12 cent of the official poverty level (referred to in para13 graph (2)) applicable to a family of the size involved.

14 (2) OFFICIAL POVERTY LEVEL.—The term ‘ap15 plicable poverty level’ means, for a family for a year,

16 the official poverty line (as defined by the Office of

17 Management and Budget, and revised annually in

18 accordance with section 673(2) of the Omnibus

19 Budget Reconciliation Act of 1981) applicable to a

20 family of the size involved.

21 (b) SLIDING SCALE FOR REMAINDER.—

22 (1) REQUIRED COINSURANCE.—The State plan

23 shall impose cost sharing in the form of coinsurance

24 (based on the amount paid under the State plan for

25 a service)—
368

•S 2357

1 (A) at a rate of 10 percent for individuals

2 with disabilities with income not less than 150

3 percent, and less than 175 percent, of such offi4 cial poverty line (as so applied);

5 (B) at a rate of 15 percent for such indi6 viduals with income not less than 175 percent,

7 and less than 225 percent, of such official pov8 erty line (as so applied);

9 (C) at a rate of 25 percent for such indi10 viduals with income not less than 225 percent,

11 and less than 275 percent, of such official pov12 erty line (as so applied);

13 (D) at a rate of 30 percent for such indi14 viduals with income not less than 275 percent,

15 and less than 325 percent, of such official pov16 erty line (as so applied);

17 (E) at a rate of 35 percent for such indi18 viduals with income not less than 325 percent,

19 and less than 400 percent, of such official pov20 erty line (as so applied); and

21 (F) at a rate of 40 percent for such indi22 viduals with income equal to at least 400 per23 cent of such official poverty line (as so applied).
369

•S 2357

1 (2) REQUIRED ANNUAL DEDUCTIBLE.—The

2 State plan shall impose cost sharing in the form of

3 an annual deductible—

4 (A) of $100 for individuals with disabilities

5 with income not less than 150 percent, and less

6 than 175 percent, of such official poverty line

7 (as so applied);

8 (B) of $200 for such individuals with in9 come not less than 175 percent, and less than

10 225 percent, of such official poverty line (as so

11 applied);

12 (C) of $300 for such individuals with in13 come not less than 225 percent, and less than

14 275 percent, of such official poverty line (as so

15 applied);

16 (D) of $400 for such individuals with in17 come not less than 275 percent, and less than

18 325 percent, of such official poverty line (as so

19 applied);

20 (E) of $500 for such individuals with in21 come not less than 325 percent, and less than

22 400 percent, of such official poverty line (as so

23 applied); and
370

•S 2357

1 (F) of $600 for such individuals with in2 come equal to at least 400 percent of such offi3 cial poverty line (as so applied).

4 (c) RECOMMENDATION OF THE SECRETARY.—The

5 Secretary shall make recommendations to the States as

6 to how to reduce cost-sharing for individuals with extraor7 dinary out-of-pocket costs for whom the cost-sharing pro8 visions of this section could jeopardize their ability to take

9 advantage of the services offered under this subtitle. The

10 Secretary shall establish a methodology for reducing the

11 cost-sharing burden for individuals with exceptionally high

12 out-of-pocket costs under this subtitle.

13 (d) DETERMINATION OF INCOME FOR PURPOSES OF

14 COST SHARING.—The State plan shall specify the process

15 to be used to determine the income of an individual with

16 disabilities for purposes of this section. Such standards

17 shall include a uniform Federal definition of income and

18 any allowable deductions from income.

19 SEC. 2106. QUALITY ASSURANCE AND SAFEGUARDS.

20 (a) QUALITY ASSURANCE.—

21 (1) IN GENERAL.—The State plan shall specify

22 how the State will ensure and monitor the quality of

23 services, including—

24 (A) safeguarding the health and safety of

25 individuals with disabilities,
371

•S 2357

1 (B) setting the minimum standards for

2 agency providers and how such standards will

3 be enforced,

4 (C) setting the minimum competency re5 quirements for agency provider employees who

6 provide direct services under this subtitle and

7 how the competency of such employees will be

8 enforced,

9 (D) obtaining meaningful consumer input,

10 including consumer surveys that measure the

11 extent to which participants receive the services

12 described in the plan of care and participant

13 satisfaction with such services,

14 (E) establishing a process to receive, inves15 tigate, and resolve allegations of neglect and/or

16 abuse,

17 (F) establishing optional training programs

18 for individuals with disabilities in the use and

19 direction of consumer directed providers of per20 sonal assistance services,

21 (G) establishing an appeals procedure for

22 eligibility denials and a grievance procedure for

23 disagreements with the terms of an individual24 ized plan of care,
372

•S 2357

1 (H) providing for participation in quality

2 assurance activities, and

3 (I) specifying the role of the long-term care

4 ombudsman (under the Older Americans Act of

5 1965) and the Protection and Advocacy Agency

6 (under the Developmental Disabilities Assist7 ance and Bill of Rights Act) in assuring quality

8 of services and protecting the rights of individ9 uals with disabilities.

10 (2) ISSUANCE OF REGULATIONS.—Not later

11 than 1 year after the date of enactment of this sub12 title, the Secretary shall issue regulations imple13 menting the quality provisions of this subsection.

14 (b) FEDERAL STANDARDS.—The State plan shall ad15 here to Federal quality standards in the following areas:

16 (1) Case review of a specified sample of client

17 records.

18 (2) The mandatory reporting of abuse, neglect,

19 or exploitation.

20 (3) The development of a registry of provider

21 agencies or home care workers and consumer di22 rected providers of personal assistance services

23 against whom any complaints have been sustained,

24 which shall be available to the public.
373

•S 2357

1 (4) Sanctions to be imposed on States or pro2 viders, including disqualification from the program,

3 if minimum standards are not met.

4 (5) Surveys of client satisfaction.

5 (6) State optional training programs for infor6 mal caregivers.

7 (c) CLIENT ADVOCACY.—

8 (1) IN GENERAL.—The State plan shall provide

9 that the State will expend the amount allocated

10 under section 2109(b)(2) for client advocacy activi11 ties. The State may use such funds to augment the

12 budgets of the long-term care ombudsman (under

13 the Older Americans Act of 1965) and the Protec14 tion and Advocacy Agency (under the Developmental

15 Disabilities Assistance and Bill of Rights Act) or

16 may establish a separate and independent client ad17 vocacy office in accordance with paragraph (2) to

18 administer a new program designed to advocate for

19 client rights.

20 (2) CLIENT ADVOCACY OFFICE.—

21 (A) IN GENERAL.—A client advocacy office

22 established under this paragraph shall—

23 (i) identify, investigate, and resolve

24 complaints that—
374

•S 2357

1 (I) are made by, or on behalf of,

2 clients; and

3 (II) relate to action, inaction, or

4 decisions, that may adversely affect

5 the health, safety, welfare, or rights of

6 the clients (including the welfare and

7 rights of the clients with respect to

8 the appointment and activities of

9 guardians and representative payees),

10 of—

11 (aa) providers, or represent12 atives of providers, of long-term

13 care services;

14 (bb) public agencies; or

15 (cc) health and social service

16 agencies;

17 (ii) provide services to assist the cli18 ents in protecting the health, safety, wel19 fare, and rights of the clients;

20 (iii) inform the clients about means of

21 obtaining services provided by providers or

22 agencies described in clause (i)(II) or serv23 ices described in clause (ii);

24 (iv) ensure that the clients have regu25 lar and timely access to the services pro-
375

•S 2357

1 vided through the office and that the cli2 ents and complainants receive timely re3 sponses from representatives of the office

4 to complaints; and

5 (v) represent the interests of the cli6 ents before governmental agencies and

7 seek administrative, legal, and other rem8 edies to protect the health, safety, welfare,

9 and rights of the clients with regard to the

10 provisions of this subtitle.

11 (B) CONTRACTS AND ARRANGEMENTS.—

12 (i) IN GENERAL.—Except as provided

13 in clause (ii), the State agency may estab14 lish and operate the office, and carry out

15 the program, directly, or by contract or

16 other arrangement with any public agency

17 or nonprofit private organization.

18 (C) LICENSING AND CERTIFICATION ORGA19 NIZATIONS; ASSOCIATIONS.—The State agency

20 may not enter into the contract or other ar21 rangement described in clause (i) with an agen22 cy or organization that is responsible for licens23 ing, certifying, or providing long-term care serv24 ices in the State.

25 (d) SAFEGUARDS.—
376

•S 2357

1 (1) CONFIDENTIALITY.—The State plan shall

2 provide safeguards which restrict the use or disclo3 sure of information concerning applicants and bene4 ficiaries to purposes directly connected with the ad5 ministration of the plan.

6 (2) SAFEGUARDS AGAINST ABUSE.—The State

7 plans shall provide safeguards against physical, emo8 tional, or financial abuse or exploitation (specifically

9 including appropriate safeguards in cases where pay10 ment for program benefits is made by cash pay11 ments or vouchers given directly to individuals with

12 disabilities). All providers of services shall be re13 quired to register with the State agency.

14 (3) REGULATIONS.—Not later than January 1,

15 1998, the Secretary shall promulgate regulations

16 with respect to the requirements on States under

17 this subsection.

18 (e) SPECIFIED RIGHTS.—The State plan shall pro19 vide that in furnishing home and community-based serv20 ices under the plan the following individual rights are pro21 tected:

22 (1) The right to be fully informed in advance,

23 orally and in writing, of the care to be provided, to

24 be fully informed in advance of any changes in care

25 to be provided, and (except with respect to an indi-
377

•S 2357

1 vidual determined incompetent) to participate in

2 planning care or changes in care.

3 (2) The right to—

4 (A) voice grievances with respect to serv5 ices that are (or fail to be) furnished without

6 discrimination or reprisal for voicing grievances,

7 (B) be told how to complain to State and

8 local authorities, and

9 (C) prompt resolution of any grievances or

10 complaints.

11 (3) The right to confidentiality of personal and

12 clinical records and the right to have access to such

13 records.

14 (4) The right to privacy and to have one’s prop15 erty treated with respect.

16 (5) The right to refuse all or part of any care

17 and to be informed of the likely consequences of

18 such refusal.

19 (6) The right to education or training for one20 self and for members of one’s family or household on

21 the management of care.

22 (7) The right to be free from physical or mental

23 abuse, corporal punishment, and any physical or

24 chemical restraints imposed for purposes of dis-
378

•S 2357

1 cipline or convenience and not included in an indi2 vidual’s plan of care.

3 (8) The right to be fully informed orally and in

4 writing of the individual’s rights.

5 (9) The right to a free choice of providers.

6 (10) The right to direct provider activities when

7 an individual is competent and willing to direct such

8 activities.

9 SEC. 2107. ADVISORY GROUPS.

10 (a) FEDERAL ADVISORY GROUP.—

11 (1) ESTABLISHMENT.—The Secretary shall es12 tablish an advisory group, to advise the Secretary

13 and States on all aspects of the program under this

14 subtitle.

15 (2) COMPOSITION.—The group shall be com16 posed of individuals with disabilities and their rep17 resentatives, providers, Federal and State officials,

18 and local community implementing agencies. A ma19 jority of its members shall be individuals with dis20 abilities and their representatives.

21 (b) STATE ADVISORY GROUPS.—

22 (1) IN GENERAL.—Each State plan shall pro23 vide for the establishment and maintenance of an

24 advisory group to advise the State on all aspects of

25 the State plan under this subtitle.
379

•S 2357

1 (2) COMPOSITION.—Members of each advisory

2 group shall be appointed by the Governor (or other

3 chief executive officer of the State) and shall include

4 individuals with disabilities and their representa5 tives, providers, State officials, and local community

6 implementing agencies. A majority of its members

7 shall be individuals with disabilities and their rep8 resentatives. The members of the advisory group

9 shall be selected from the those nominated as de10 scribed in paragraph (3).

11 (3) SELECTION OF MEMBERS.—Each State

12 shall establish a process whereby all residents of the

13 State, including individuals with disabilities and

14 their representatives, shall be given the opportunity

15 to nominate members to the advisory group.

16 (4) PARTICULAR CONCERNS.—Each advisory

17 group shall—

18 (A) before the State plan is developed, ad19 vise the State on guiding principles and values,

20 policy directions, and specific components of the

21 plan,

22 (B) meet regularly with State officials in23 volved in developing the plan, during the devel24 opment phase, to review and comment on all as25 pects of the plan,
380

•S 2357

1 (C) participate in the public hearings to

2 help assure that public comments are addressed

3 to the extent practicable,

4 (D) report to the Governor and make

5 available to the public any differences between

6 the group’s recommendations and the plan,

7 (E) report to the Governor and make avail8 able to the public specifically the degree to

9 which the plan is consumer-directed, and

10 (F) meet regularly with officials of the des11 ignated State agency (or agencies) to provide

12 advice on all aspects of implementation and

13 evaluation of the plan.

14 SEC. 2108. PAYMENTS TO STATES.

15 (a) IN GENERAL.—Subject to section 2102(a)(9)(C)

16 (relating to limitation on payment for administrative

17 costs), the Secretary, in accordance with the Cash Man18 agement Improvement Act, shall authorize payment to

19 each State with a plan approved under this subtitle, for

20 each quarter (beginning on or after January 1, 1998),

21 from its allotment under section 2109(b), an amount equal

22 to—

23 (1)(A) if the amount demonstrated by State

24 claims to have been expended during the year for

25 home and community-based services under the plan
381

•S 2357

1 for individuals with disabilities does not exceed 20

2 percent of the amount allotted to the State under

3 section 2109(b), 100 percent of the amount dem4 onstrated by State claims to have been expended

5 during the quarter for such services for such individ6 uals; or

7 (B) for the amount demonstrated by State

8 claims to have been expended during the year for

9 home and community-based services under the plan

10 for individuals with disabilities that exceeds 20 per11 cent of the amount allotted to the State under sec12 tion 2109(b), the Federal home and community13 based services matching percentage (as defined in

14 subsection (b)) of such amount; plus

15 (2) an amount equal to 90 percent of the

16 amount demonstrated by the State to have been ex17 pended during the quarter for quality assurance ac18 tivities under the plan; plus

19 (3) an amount equal to 90 percent of amount

20 expended during the quarter under the plan for ac21 tivities (including preliminary screening) relating to

22 determination of eligibility and performance of needs

23 assessment; plus

24 (4) an amount equal to 90 percent (or, begin25 ning with quarters in fiscal year 2004, 75 percent)
382

•S 2357

1 of the amount expended during the quarter for the

2 design, development, and installation of mechanical

3 claims processing systems and for information re4 trieval; plus

5 (5) an amount equal to 50 percent of the re6 mainder of the amounts expended during the quar7 ter as found necessary by the Secretary for the prop8 er and efficient administration of the State plan.

9 (b) FEDERAL HOME AND COMMUNITY-BASED SERV10 ICES MATCHING PERCENTAGE.—In subsection (a), the

11 term ‘Federal home and community-based services match12 ing percentage’ means, with respect to a State, the State’s

13 Federal medical assistance percentage (as defined in sec14 tion 1905(b) of the Social Security Act) increased by 15

15 percentage points, except that the Federal home and com16 munity-based services matching percentage shall in no

17 case be more than 95 percent.

18 (c) PAYMENTS ON ESTIMATES WITH RETROSPECTIVE

19 ADJUSTMENTS.—The method of computing and making

20 payments under this section shall be as follows:

21 (1) The Secretary shall, prior to the beginning

22 of each quarter, estimate the amount to be paid to

23 the State under subsection (a) for such quarter,

24 based on a report filed by the State containing its

25 estimate of the total sum to be expended in such
383

•S 2357

1 quarter, and such other information as the Secretary

2 may find necessary.

3 (2) From the allotment available therefore, the

4 Secretary shall provide for payment of the amount

5 so estimated, reduced or increased, as the case may

6 be, by any sum (not previously adjusted under this

7 section) by which the Secretary finds that the esti8 mate of the amount to be paid the State for any

9 prior period under this section was greater or less

10 than the amount which should have been paid.

11 (d) APPLICATION OF RULES REGARDING LIMITA12 TIONS ON PROVIDER-RELATED DONATIONS AND HEALTH

13 CARE RELATED TAXES.—The provisions of section

14 1903(w) of the Social Security Act shall apply to pay15 ments to States under this section in the same manner

16 as they apply to payments to States under section 1903(a)

17 of such Act.

18 (e) FAILURE TO COMPLY WITH STATE PLAN.—If a

19 State furnishing home and community-based services

20 under this subtitle fails to comply with the State plan ap21 proved under this subtitle, the Secretary may either re22 duce the Federal matching rates available to the State

23 under subsection (a) or withhold an amount of funds de24 termined appropriate by the Secretary from any payment

25 to the State under this section.
384

•S 2357

1 SEC. 2109. APPROPRIATIONS; ALLOTMENTS TO STATES.

2 (a) APPROPRIATIONS.—

3 (1) FISCAL YEARS 1998 THROUGH 2004.—Sub4 ject to paragraph (5)(C), for purposes of this sub5 title, the appropriation authorized under this subtitle

6 for each of fiscal years 1998 through 2004 is the

7 following:

8 (A) For fiscal year 1998, $1,800,000,000.

9 (B) For fiscal year 1999, $2,900,000,000.

10 (C) For fiscal year 2000, $3,600,000,000.

11 (D) For fiscal year 2001, $5,000,000,000.

12 (E) For fiscal year 2002, $7,900,000,000.

13 (F) For fiscal year 2003,

14 $11,400,000,000.

15 (G) For fiscal year 2004,

16 $15,400,000,000.

17 (2) SUBSEQUENT FISCAL YEARS.—For pur18 poses of this subtitle, the appropriation authorized

19 for State plans under this subtitle for each fiscal

20 year after fiscal year 2004 is the appropriation au21 thorized under this subsection for the preceding fis22 cal year multiplied by—

23 (A) a factor (described in paragraph (3))

24 reflecting the change in the consumer price

25 index for the fiscal year, and
385

•S 2357

1 (B) a factor (described in paragraph (4))

2 reflecting the change in the number of individ3 uals with disabilities for the fiscal year.

4 (3) CPI INCREASE FACTOR.—For purposes of

5 paragraph (2)(A), the factor described in this para6 graph for a fiscal year is the ratio of—

7 (A) the annual average index of the

8 consumer price index for the preceding fiscal

9 year, to—

10 (B) such index, as so measured, for the

11 second preceding fiscal year.

12 (4) DISABLED POPULATION FACTOR.—For pur13 poses of paragraph (2)(B), the factor described in

14 this paragraph for a fiscal year is 100 percent plus

15 (or minus) the percentage increase (or decrease)

16 change in the disabled population of the United

17 States (as determined for purposes of the most re18 cent update under subsection (b)(3)(D)).

19 (5) ADDITIONAL FUNDS DUE TO MEDICAID

20 OFFSETS.—

21 (A) IN GENERAL.—Each participating

22 State must provide the Secretary with informa23 tion concerning offsets and reductions in the

24 medicaid program resulting from home and

25 community-based services provided disabled in-
386

•S 2357

1 dividuals under this subtitle, that would have

2 been paid for such individuals under the State

3 medicaid plan but for the provision of similar

4 services under the program under this subtitle.

5 At the time a State first submits its plan under

6 this subtitle and before each subsequent fiscal

7 year (through fiscal year 2004), the State also

8 must provide the Secretary with such budgetary

9 information (for each fiscal year through fiscal

10 year 2004), as the Secretary determines to be

11 necessary to carry out this paragraph.

12 (B) REPORTS.—Each State with a pro13 gram under this subtitle shall submit such re14 ports to the Secretary as the Secretary may re15 quire in order to monitor compliance with sub16 paragraph (A). The Secretary shall specify the

17 format of such reports and establish uniform

18 data reporting elements.

19 (C) ADJUSTMENTS TO APPROPRIATION.—

20 (i) IN GENERAL.—For each fiscal year

21 (beginning with fiscal year 1998 and end22 ing with fiscal year 2004) and based on a

23 review of information submitted under sub24 paragraph (A), the Secretary shall deter25 mine the amount by which the appropria-
387

•S 2357

1 tion authorized under subsection (a) will

2 increase. The amount of such increase for

3 a fiscal year shall be limited to the reduc4 tion in Federal expenditures of medical as5 sistance (as determined by Secretary) that

6 would have been made under part A of

7 title XIX for home and community based

8 services for disabled individuals but for the

9 provision of similar services under the pro10 gram under this subtitle.

11 (ii) ANNUAL PUBLICATION.—The Sec12 retary shall publish before the beginning of

13 such fiscal year, the revised appropriation

14 authorized under this subsection for such

15 fiscal year.

16 (D) CONSTRUCTION.—Nothing in this sub17 section shall be construed as requiring States to

18 determine eligibility for medical assistance

19 under the State medicaid plan on behalf of indi20 viduals receiving assistance under this subtitle.

21 (b) ALLOTMENTS TO STATES.—

22 (1) IN GENERAL.—The Secretary shall allot the

23 amounts available under the appropriation author24 ized for the fiscal year (specified in subsection (a))

25 to the States with plans approved under this subtitle
388

•S 2357

1 in accordance with an allocation formula developed

2 by the Secretary which takes into account—

3 (A) the percentage of the total number of

4 individuals with disabilities in all States that re5 side in a particular State;

6 (B) the per capita costs of furnishing home

7 and community-based services to individuals

8 with disabilities in the State; and

9 (C) the percentage of all individuals with

10 incomes at or below 150 percent of the official

11 poverty line (as described in section 2105(a)(2))

12 in all States that reside in a particular State.

13 (2) ALLOCATION FOR CLIENT ADVOCACY AC14 TIVITIES.—Each State with a plan approved under

15 this subtitle shall allocate one-half of one percent of

16 the State’s total allotment under paragraph (1) for

17 client advocacy activities as described in section

18 2106(c).

19 (3) NO DUPLICATE PAYMENT.—No payment

20 may be made to a State under this section for any

21 services provided to an individual to the extent that

22 the State received payment for such services under

23 section 1903(a) of the Social Security Act.

24 (4) REALLOCATIONS.—Any amounts allotted to

25 States under this subsection for a year that are not
389

•S 2357

1 expended in such year shall remain available for

2 State programs under this subtitle and may be re3 allocated to States as the Secretary determines ap4 propriate.

5 (c) STATE ENTITLEMENT.—This subtitle constitutes

6 budget authority in advance of appropriations Acts, and

7 represents the obligation of the Federal Government to

8 provide for the payment to States of amounts described

9 in subsection (a).

10 SEC. 2110. FEDERAL EVALUATIONS.

11 (a) IN GENERAL.—Not later than December 31,

12 2003, December 31, 2006, and each December 31 there13 after, the Secretary shall provide to Congress analytical

14 reports that evaluate—

15 (1) the extent to which individuals with low in16 comes and disabilities are equitably served;

17 (2) the adequacy and equity of service plans to

18 individuals with similar levels of disability across

19 States;

20 (3) the comparability of program participation

21 across States, described by level and type of disabil22 ity; and

23 (4) the ability of service providers to sufficiently

24 meet the demand for services.
390

•S 2357

1 (b) GERIATRIC ASSESSMENTS.—Not later than 18

2 months after the date of enactment of this part, the Sec3 retary shall report to Congress concerning the feasibility

4 of providing reimbursement under health plans and other

5 payers of health services for full geriatric assessment,

6 when recommended by a physician.

7 PART 2—GRANTS RELATING TO THE DEVELOP8 MENT OF HOSPITAL LINKAGE PROGRAMS

9 SEC. 2111. INFORMATION AND TECHNICAL ASSISTANCE

10 GRANTS RELATING TO DEVELOPMENT OF

11 HOSPITAL LINKAGE PROGRAMS.

12 (a) FINDINGS.—Congress finds that—

13 (1) demonstration programs and projects have

14 been developed to offer care management to hos15 pitalized individuals awaiting discharge who are in

16 need of long-term health care services that meet in17 dividual needs and preferences in home and commu18 nity-based settings as an alternative to long-term

19 nursing home care or institutional placement; and

20 (2) there is a need to disseminate information

21 and technical assistance to hospitals and State and

22 local community organizations regarding such pro23 grams and projects and to provide incentive grants

24 to State and local public and private agencies, in25 cluding area agencies on aging, to establish and ex-
391

•S 2357

1 pand programs that offer care management to indi2 viduals awaiting discharge from acute care hospitals

3 who are in need of long-term care so that services

4 to meet individual needs and preferences can be ar5 ranged in home and community-based settings as an

6 alternative to long-term placement in nursing homes

7 or other institutional settings.

8 (b) DISSEMINATION OF INFORMATION, TECHNICAL

9 ASSISTANCE, AND INCENTIVE GRANTS TO ASSIST IN THE

10 DEVELOPMENT OF HOSPITAL LINKAGE PROGRAMS.—

11 Part C of title III of the Public Health Service Act (42

12 U.S.C. 248 et seq.) is amended by adding at the end there13 of the following new section:

14 ‘‘SEC. 327B. DISSEMINATION OF INFORMATION, TECHNICAL

15 ASSISTANCE AND INCENTIVE GRANTS TO AS16 SIST IN THE DEVELOPMENT OF HOSPITAL

17 LINKAGE PROGRAMS.

18 ‘‘(a) DISSEMINATION OF INFORMATION.—The Sec19 retary shall compile, evaluate, publish and disseminate to

20 appropriate State and local officials and to private organi21 zations and agencies that provide services to individuals

22 in need of long-term health care services, such information

23 and materials as may assist such entities in replicating

24 successful programs that are aimed at offering care man25 agement to hospitalized individuals who are in need of
392

•S 2357

1 long-term care so that services to meet individual needs

2 and preferences can be arranged in home and community3 based settings as an alternative to long-term nursing home

4 placement. The Secretary may provide technical assistance

5 to entities seeking to replicate such programs.

6 ‘‘(b) INCENTIVE GRANTS TO ASSIST IN THE DEVEL7 OPMENT OF HOSPITAL LINKAGE PROGRAMS.—The Sec8 retary shall establish a program under which incentive

9 grants may be awarded to assist private and public agen10 cies, including area agencies on aging, and organizations

11 in developing and expanding programs and projects that

12 facilitate the discharge of individuals in hospitals or other

13 acute care facilities who are in need of long-term care serv14 ices and placement of such individuals into home and com15 munity-based settings.

16 ‘‘(c) ADMINISTRATIVE PROVISIONS.—

17 ‘‘(1) ELIGIBLE ENTITIES.—To be eligible to re18 ceive a grant under subsection (b) an entity shall

19 be—

20 ‘‘(A)(i) a State agency as defined in sec21 tion 102(43) of the Older Americans Act of

22 1965; or

23 ‘‘(ii) a State agency responsible for admin24 istering home and community care programs

25 under title XIX of the Social Security Act; or
393

•S 2357

1 ‘‘(B) if no State agency described in sub2 paragraph (A) applies with respect to a particu3 lar State, a public or nonprofit private entity.

4 ‘‘(2) APPLICATIONS.—To be eligible to receive

5 an incentive grant under subsection (b), an entity

6 shall prepare and submit to the Secretary an appli7 cation at such time, in such manner and containing

8 such information as the Secretary may require, in9 cluding—

10 ‘‘(A) an assessment of the need within the

11 community to be served for the establishment

12 or expansion of a program to facilitate the dis13 charge of individuals in need of long-term care

14 who are in hospitals or other acute care facili15 ties into home and community-care programs

16 that provide individually planned, flexible serv17 ices that reflect individual choice or preference

18 rather than nursing home or institutional set19 tings;

20 ‘‘(B) a plan for establishing or expanding

21 a program for identifying individuals in hospital

22 or acute care facilities who are in need of indi23 vidualized long-term care provided in home and

24 community-based settings rather than nursing

25 homes or other institutional settings and under-
394

•S 2357

1 taking the planning and management of indi2 vidualized care plans to facilitate discharge into

3 such settings;

4 ‘‘(C) assurances that nongovernmental

5 case management agencies funded under grants

6 awarded under this section are not direct pro7 viders of home and community-based services;

8 ‘‘(D) satisfactory assurances that adequate

9 home and community-based long term care

10 services are available, or will be made available,

11 within the community to be served so that indi12 viduals being discharged from hospitals or acute

13 care facilities under the proposed program can

14 be served in such home and community-based

15 settings, with flexible, individualized care which

16 reflects individual choice and preference;

17 ‘‘(E) a description of the manner in which

18 the program to be administered with amounts

19 received under the grant will be continued after

20 the termination of the grant for which such ap21 plication is submitted; and

22 ‘‘(F) a description of any waivers or ap23 provals necessary to expand the number of indi24 viduals served in federally funded home and

25 community-based long term care programs in
395

•S 2357

1 order to provide satisfactory assurances that

2 adequate home and community-based long term

3 care services are available in the community to

4 be served.

5 ‘‘(3) AWARDING OF GRANTS.—

6 ‘‘(A) PREFERENCES.—In awarding grants

7 under subsection (b), the Secretary shall give

8 preference to entities submitting applications

9 that—

10 ‘‘(i) demonstrate an ability to coordi11 nate activities funded using amounts re12 ceived under the grant with programs pro13 viding individualized home and community14 based case management and services to in15 dividuals in need of long term care with

16 hospital discharge planning programs; and

17 ‘‘(ii) demonstrate that adequate home

18 and community-based long term care man19 agement and services are available, or will

20 be made available to individuals being

21 served under the program funded with

22 amounts received under subsection (b).

23 ‘‘(B) DISTRIBUTION.—In awarding grants

24 under subsection (b), the Secretary shall ensure

25 that such grants—
396

•S 2357

1 ‘‘(i) are equitably distributed on a ge2 ographic basis;

3 ‘‘(ii) include projects operating in

4 urban areas and projects operating in rural

5 areas; and

6 ‘‘(iii) are awarded for the expansion of

7 existing hospital linkage programs as well

8 as the establishment of new programs.

9 ‘‘(C) EXPEDITED CONSIDERATION.—The

10 Secretary shall provide for the expedited consid11 eration of any waiver application that is nec12 essary under title XIX of the Social Security

13 Act to enable an applicant for a grant under

14 subsection (b) to satisfy the assurance required

15 under paragraph (1)(D).

16 ‘‘(4) USE OF GRANTS.—An entity that receives

17 amounts under a grant under subsection (b) may

18 use such amounts for planning, development and

19 evaluation services and to provide reimbursements

20 for the costs of one or more case mangers to be lo21 cated in or assigned to selected hospitals who

22 would—

23 ‘‘(A) identify patients in need of individ24 ualized care in home and community-based

25 long-term care;
397

•S 2357

1 ‘‘(B) assess and develop care plans in co2 operation with the hospital discharge planning

3 staff; and

4 ‘‘(C) arrange for the provision of commu5 nity care either immediately upon discharge

6 from the hospital or after any short term nurs7 ing-home stay that is needed for recuperation

8 or rehabilitation;

9 ‘‘(5) DIRECT SERVICES SUBJECT TO REIM10 BURSEMENTS.—None of the amounts provided

11 under a grant under this section may be used to

12 provide direct services, other than case management,

13 for which reimbursements are otherwise available

14 under title XVIII or XIX of the Social Security Act.

15 ‘‘(6) LIMITATIONS.—

16 ‘‘(A) TERM.—Grants awarded under this

17 section shall be for terms of less than 3 years.

18 ‘‘(B) AMOUNT.—Grants awarded to an en19 tity under this section shall not exceed

20 $300,000 per year. The Secretary may waive

21 the limitation under this subparagraph where

22 an applicant demonstrates that the number of

23 hospitals or individuals to be served under the

24 grant justifies such increased amounts.
398

•S 2357

1 ‘‘(C) SUPPLANTING OF FUNDS.—Amounts

2 awarded under a grant under this section may

3 not be used to supplant existing State funds

4 that are provided to support hospital link pro5 grams.

6 ‘‘(d) EVALUATION AND REPORTS.—

7 ‘‘(1) BY GRANTEES.—An entity that receives a

8 grant under this section shall evaluate the effective9 ness of the services provided under the grant in fa10 cilitating the placement of individuals being dis11 charged from hospitals or acute care facilities into

12 home and community-based long term care settings

13 rather than nursing homes. Such entity shall pre14 pare and submit to the Secretary a report containing

15 such information and data concerning the activities

16 funded under the grant as the Secretary determines

17 appropriate.

18 ‘‘(2) BY SECRETARY.—Not later than the end

19 of the third fiscal year for which funds are appro20 priated under subsection (e), the Secretary shall pre21 pare and submit to the appropriate committees of

22 Congress, a report concerning the results of the eval23 uations and reports conducted and prepared under

24 paragraph (1).
399

•S 2357

1 ‘‘(e) AUTHORIZATION OF APPROPRIATIONS.—There

2 are authorized to be appropriated to carry out this section,

3 $5,000,000 for each of the fiscal years 1994 through

4 1996.’’.

5 Subtitle C—Long-Term Care Insur6 ance Improvement and Account7 ability

8 SEC. 2200. SHORT TITLE.

9 This subtitle may be cited as the ‘‘Long-Term Care

10 Insurance Improvement and Accountability Act’’.

11 PART 1—PROMULGATION OF STANDARDS AND

12 MODEL BENEFITS

13 SEC. 2201. STANDARDS.

14 (a) APPLICATION OF STANDARDS.—

15 (1) IN GENERAL.—Except as provided in para16 graph (2), the Secretary, in consultation with the

17 NAIC, shall develop and publish specific standards

18 to implement the standards specified in this subtitle.

19 (2) STATE STANDARDS.—Nothing in this sub20 title shall be construed as preventing a participating

21 State from applying standards that provide greater

22 protection to insured individuals under long-term

23 care insurance policies than the standards promul24 gated under this subtitle, except that such State
400

•S 2357

1 standards may not be inconsistent with any of the

2 standards specified in this subtitle.

3 (b) DEADLINE FOR APPLICATION OF STANDARDS.—

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

5 the date specified in this subsection for a State is—

6 (A) the date the State adopts the stand7 ards established under subsection (a)(1); or

8 (B) the date that is 1 year after the first

9 day of the first regular legislative session that

10 begins after the date such standards are first

11 established under subsection (a)(2);

12 whichever is earlier.

13 (2) STATE REQUIRING LEGISLATION.—In the

14 case of a State which the Secretary identifies, in

15 consultation with the NAIC, as—

16 (A) requiring State legislation (other than

17 legislation appropriating funds) in order for the

18 standards established under subsection (a) to be

19 applied; but

20 (B) having a legislature which is not

21 scheduled to meet within 1 year following the

22 beginning of the next regular legislative session

23 in which such legislation may be considered;

24 the date specified in this subsection is the first day

25 of the first calendar quarter beginning after the
401

•S 2357

1 close of the first legislative session of the State legis2 lature that begins on or after January 1, 1995. For

3 purposes of the previous sentence, in the case of a

4 State that has a 2-year legislative session, each year

5 of such session shall be deemed to be a separate reg6 ular session of the State legislature.

7 (c) ITEMS INCLUDED IN STANDARDS.—The stand8 ards promulgated under subsection (a) shall include—

9 (1) minimum Federal standards for long-term

10 care insurance consistent with the provisions of this

11 subtitle;

12 (2) standards for the enhanced protection of

13 consumers with long-term care insurance; and

14 (3) procedures for the modification of the

15 standards established under paragraph (1) in a

16 manner consistent with future laws to expand exist17 ing Federal or State long-term care benefits or es18 tablish a comprehensive Federal or State long-term

19 care benefit program.

20 (d) CONSULTATION.—In establishing standards and

21 models of benefits under this section, the Secretary shall,

22 after consultation with representatives of carriers,

23 consumer groups, and providers of long-term care serv24 ices—
402

•S 2357

1 (1) recommend the appropriate inflationary

2 index to be used with respect to the inflation protec3 tion benefit portion of the standards;

4 (2) recommend the uniform needs assessment

5 mechanism to be used in determining the eligibility

6 of individuals for benefits under a policy;

7 (3) recommend appropriate standards for the

8 regulation of the insurance aspects of supported

9 housing arrangements; and

10 (4) perform such other activities as determined

11 appropriate by the Secretary.

12 PART 2—ESTABLISHMENT AND IMPLEMENTA13 TION OF LONG-TERM CARE INSURANCE POL14 ICY STANDARDS

15 SEC. 2211. IMPLEMENTATION OF POLICY STANDARDS.

16 (a) IN GENERAL.—

17 (1) REGULATORY PROGRAM.—No long-term

18 care policy (as defined in section (2221)) may be is19 sued, sold, or offered for sale as a long-term care in20 surance policy in a State on or after the date speci21 fied in section 2201(b) unless—

22 (A) the Secretary determines that the

23 State has established a regulatory program

24 that—
403

•S 2357

1 (i) provides for the application and

2 enforcement of the standards established

3 under section 2201(a); and

4 (ii) complies with the requirements of

5 subsection (b);

6 by the date specified in section 2201(b), and

7 the policy has been approved by the State com8 missioner or superintendent of insurance under

9 such program; or

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

11 program, or if the State’s regulatory program

12 has been decertified, the policy has been cer13 tified by the Secretary (in accordance with such

14 procedures as the Secretary may establish) as

15 meeting the standards established under section

16 2201(a) by the date specified in section

17 2201(b).

18 For purposes of this subsection, the advertising or

19 soliciting with respect to a policy, directly or indi20 rectly, shall be deemed the offering for sale of the

21 policy.

22 (2) REVIEW OF STATE REGULATORY PRO23 GRAMS.—The Secretary shall review regulatory pro24 grams described in paragraph (1)(A) at least bian25 nually to determine if they continue to provide for
404

•S 2357

1 the application and enforcement of the standards

2 and procedures established under section 2201(a)

3 and (b). If the Secretary determines that a State

4 regulatory program no longer meets such standards

5 and requirements, before making a final determina6 tion, the Secretary shall provide the State an oppor7 tunity to adopt such a plan of correction as would

8 permit the program to continue to meet such stand9 ards and requirements. If the Secretary makes a

10 final determination that the State regulatory pro11 gram, after such an opportunity, fails to meet such

12 standards and requirements, the Secretary shall as13 sume responsibility under paragraph (1)(B) with re14 spect to certifying policies in the State and shall ex15 ercise full authority under section 2201 for carriers,

16 agents, or associations or its subsidiary in the State

17 plans in the State.

18 (b) ADDITIONAL REQUIREMENTS FOR APPROVAL OF

19 STATE REGULATORY PROGRAMS.—For purposes of sub20 section (a)(1)(A)(ii), the requirements of this subsection

21 for a State regulatory program are as follows:

22 (1) ENFORCEMENT.—The enforcement under

23 the program—

24 (A) shall be designed in a manner so as to

25 secure compliance with the standards within 30
405

•S 2357

1 days after the date of a finding of noncompli2 ance with such standards; and

3 (B) shall provide for notice in the annual

4 report required under paragraph (5) to the Sec5 retary of cases where such compliance is not se6 cured within such 30-day period.

7 (2) PROCESS.—The enforcement process under

8 each State regulatory program shall provide for—

9 (A) procedures for individuals and entities

10 to file written, signed complaints respecting al11 leged violations of the standards;

12 (B) responding to such complaints within

13 90 days;

14 (C) the investigation of—

15 (i) those complaints which have a rea16 sonable probability of validity; and

17 (ii) such other alleged violations of the

18 standards as the program finds appro19 priate; and

20 (D) the imposition of appropriate sanctions

21 (which include, in appropriate cases, the imposi22 tion of a civil money penalty as provided for in

23 section 2218) in the case of a carrier, agent, or

24 association or its subsidiary determined to have

25 violated the standards.
406

•S 2357

1 (3) PRIVATE ACTIONS.—An individual may

2 commence a civil action in an appropriate State or

3 United States district court to enforce the provisions

4 of this title and may be awarded appropriate relief

5 and reasonable attorney’s fees.

6 (4) CONSUMER ACCESS TO COMPLIANCE INFOR7 MATION.—

8 (A) IN GENERAL.—A State regulatory pro9 gram shall provide for consumer access to com10 plaints filed with the State commissioner or su11 perintendent of insurance with respect to long12 term care insurance policies.

13 (B) CONFIDENTIALITY.—The access pro14 vided under subparagraph (A) shall be limited

15 to the extent required to protect the confiden16 tiality of the identity of individual policyholders.

17 (5) PROCESS FOR APPROVAL OF PREMIUMS.—

18 (A) IN GENERAL.—Each State regulatory

19 program shall—

20 (i) provide for a process for approving

21 or disapproving proposed premium in22 creases or decreases with respect to long23 term care insurance policies; and

24 (ii) establish a policy for receipt and

25 consideration of public comments before
407

•S 2357

1 approving such a premium increase or de2 crease.

3 (B) CONDITIONS FOR APPROVAL.—No pre4 mium increase shall be approved (or deemed ap5 proved) under subparagraph (A) unless the pro6 posed increase is accompanied by an actuarial

7 memorandum which—

8 (i) includes a description of the as9 sumptions that justify the increase, includ10 ing a financial report on expenditures;

11 (ii) contains such information as may

12 be required under the Standards; and

13 (iii) is made available to the public.

14 (C) APPLICATION.—Except as provided in

15 subparagraph (D), this paragraph shall not

16 apply to a group long-term care insurance pol17 icy issued to a group described in section

18 4(E)(1) of the NAIC Long Term Care Insur19 ance Model Act (effective January 1991), ex20 cept that such group policy shall, pursuant to

21 guidelines developed by the NAIC, provide no22 tice to policyholders and certificate holders of

23 any premium change under such group policy.

24 (D) EXCEPTION.—Subparagraph (C) shall

25 not apply to—
408

•S 2357

1 (i) group conversion policies;

2 (ii) the group continuation feature of

3 a group policy if the insurer separately

4 rates employee and continuation coverages;

5 and

6 (iii) group policies where the function

7 of the employer is limited solely to collect8 ing premiums (through payroll deductions

9 or dues checkoff) and remitting them to

10 the insurer.

11 (E) CONSTRUCTION.—Nothing in this

12 paragraph shall be construed as preventing the

13 Secretary, in consultation with the NAIC, from

14 promulgating standards, or a State from enact15 ing and enforcing laws, with respect to pre16 mium rates or loss ratios for all, including

17 group, long-term care insurance policies.

18 (6) ANNUAL REPORTS.—Each State regulatory

19 program shall provide for annual reports to be sub20 mitted to the Secretary on the implementation and

21 enforcement of the standards in the State, including

22 information concerning violations in excess of 30

23 days.

24 (7) ACCESS TO OTHER INFORMATION.—The

25 State regulatory program shall provide for consumer
409

•S 2357

1 access to actuarial memoranda, including financial

2 information, provided under paragraph (4).

3 (8) DEFAULT.—In the case of a State without

4 a regulatory program approved under subsection (a),

5 the Secretary shall provide for the enforcement ac6 tivities described in subsection (c).

7 (c) SECRETARIAL ENFORCEMENT AUTHORITY.—

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

9 authority under this section in the case of a State

10 that does not have a regulatory program approved

11 under this section.

12 (2) COMPLAINTS AND INVESTIGATIONS.—The

13 Secretary shall establish procedures—

14 (A) for individuals and entities to file writ15 ten, signed complaints respecting alleged viola16 tions of the requirements of this subtitle;

17 (B) for responding on a timely basis to

18 such complaints; and

19 (C) for the investigation of—

20 (i) those complaints that have a rea21 sonable probability of validity; and

22 (ii) such other alleged violations of the

23 requirements of this subtitle as the Sec24 retary determines to be appropriate.
410

•S 2357

1 In conducting investigations under this subsection,

2 agents of the Secretary shall have reasonable access

3 necessary to enable such agents to examine evidence

4 of any carrier, agent, or association or its subsidiary

5 being investigated.

6 (3) HEARINGS.—

7 (A) IN GENERAL.—Prior to imposing an

8 order described in paragraph (4) against a car9 rier, agent, or association or its subsidiary

10 under this section for a violation of the require11 ments of this subtitle, the Secretary shall pro12 vide the carrier, agent, association or subsidiary

13 with notice and, upon request made within a

14 reasonable time (of not less than 30 days, as

15 established by the Secretary by regulation) of

16 the date of the notice, a hearing respecting the

17 violation.

18 (B) CONDUCT OF HEARING.—Any hearing

19 requested under subparagraph (A) shall be con20 ducted before an administrative law judge. If no

21 hearing is so requested, the Secretary’s imposi22 tion of the order shall constitute a final and

23 unappealable order.

24 (C) AUTHORITY IN HEARINGS.—In con25 ducting hearings under this paragraph—
411

•S 2357

1 (i) agents of the Secretary and admin2 istrative law judges shall have reasonable

3 access necessary to enable such agents and

4 judges to examine evidence of any carrier,

5 agent, or association or its subsidiary

6 being investigated; and

7 (ii) administrative law judges, may, if

8 necessary, compel by subpoena the attend9 ance of witnesses and the production of

10 evidence at any designated place or hear11 ing.

12 In case of contumacy or refusal to obey a sub13 poena lawfully issued under this subparagraph

14 and upon application of the Secretary, an ap15 propriate district court of the United States

16 may issue an order requiring compliance with

17 such subpoena and any failure to obey such

18 order may be punished by such court as a con19 tempt thereof.

20 (D) ISSUANCE OF ORDERS.—If an admin21 istrative law judge determines in a hearing

22 under this paragraph, upon the preponderance

23 of the evidence received, that a carrier, agent,

24 or association or its subsidiary named in the

25 complaint has violated the requirements of this
412

•S 2357

1 subtitle, the administrative law judge shall state

2 the findings of fact and issue and cause to be

3 served on such carrier, agent, association, or

4 subsidiary an order described in paragraph (4).

5 (4) CEASE AND DESIST ORDER WITH CIVIL

6 MONEY PENALTY.—

7 (A) IN GENERAL.—Subject to the provi8 sions of subparagraphs (B) through (F), an

9 order under this paragraph—

10 (i) shall require the agent, association

11 or its subsidiary, or a carrier—

12 (I) to cease and desist from such

13 violations; and

14 (II) to pay a civil penalty in an

15 amount not to exceed $15,000 in the

16 case of each agent, and not to exceed

17 $25,000 for each association or its

18 subsidiary or a carrier for each such

19 violation; and

20 (ii) may require the agent, association

21 or its subsidiary, or a carrier to take such

22 other remedial action as is appropriate.

23 (B) CORRECTIONS WITHIN 30 DAYS.—No

24 order shall be imposed under this paragraph by

25 reason of any violation if the carrier, agent, or
413

•S 2357

1 association or its subsidiary establishes to the

2 satisfaction of the Secretary that—

3 (i) such violation was due to reason4 able cause and was not intentional and was

5 not due to willful neglect; and

6 (ii) such violation is corrected within

7 the 30-day period beginning on the earliest

8 date the carrier, agent, association, or sub9 sidiary knew, or exercising reasonable dili10 gence could have known, that such a viola11 tion was occurring.

12 (C) WAIVER BY SECRETARY.—In the case

13 of a violation under this subtitle that is due to

14 reasonable cause and not to willful neglect, the

15 Secretary may waive part or all of the civil

16 money penalty imposed under subparagraph

17 (A)(i)(II) to the extent that payment of such

18 penalty would be grossly excessive relative to

19 the violation involved and to the need for deter20 rence of violations.

21 (D) ADMINISTRATIVE APPELLATE RE22 VIEW.—The decision and order of an adminis23 trative law judge under this paragraph shall be24 come the final agency decision and order of the

25 Secretary unless, within 30 days, the Secretary
414

•S 2357

1 modifies or vacates the decision and order, in

2 which case the decision and order of the Sec3 retary shall become a final order under this

4 paragraph.

5 (E) JUDICIAL REVIEW.—A carrier, agent,

6 or association or its subsidiary or any other in7 dividual adversely affected by a final order is8 sued under this paragraph may, within 45 days

9 after the date the final order is issued, file a pe10 tition in the Court of Appeals for the appro11 priate circuit for review of the order.

12 (F) ENFORCEMENT OF ORDERS.—If a car13 rier, agent, or association or its subsidiary fails

14 to comply with a final order issued under this

15 paragraph against the carrier, agent, associa16 tion or subsidiary after opportunity for judicial

17 review under subparagraph (E), the Secretary

18 shall file a suit to seek compliance with the

19 order in any appropriate district court of the

20 United States. In any such suit, the validity

21 and appropriateness of the final order shall not

22 be subject to review.

23 SEC. 2212. REGULATION OF SALES PRACTICES.

24 (a) DUTY OF GOOD FAITH AND FAIR DEALING.—
415

•S 2357

1 (1) IN GENERAL.—Each agent (as defined in

2 section 2233) or association that is selling or offer3 ing for sale a long-term care insurance policy has

4 the duty of good faith and fair dealing to the pur5 chaser or potential purchaser of such a policy.

6 (2) POLICY REPLACEMENT FORM.—With re7 spect to any individual who elects to replace or effect

8 a change in a long-term care insurance policy, the

9 individual that is selling such policy shall ensure

10 that such individual completes a policy replacement

11 form developed by the Secretary, in consultation

12 with the NAIC. A copy of such form shall be pro13 vided to such individual and additional copies shall

14 be delivered by the selling individual to the old policy

15 issuer and the new issuer and kept on file for inspec16 tion by the State regulatory agency.

17 (3) PROHIBITED PRACTICES.—An agent or as18 sociation is considered to have violated paragraph

19 (1) if the agent or association engages in any of the

20 following practices:

21 (A) TWISTING.—Knowingly making any

22 misleading representation (including the inac23 curate completion of medical histories) or in24 complete or fraudulent comparison of any long25 term care insurance policy or insurers for the
416

•S 2357

1 purpose of inducing, or tending to induce, any

2 individual to retain or effect a change with re3 spect to a long-term care insurance policy.

4 (B) HIGH PRESSURE TACTICS.—Employ5 ing any method of marketing having the effect

6 of, or intending to, induce the purchase of long7 term care insurance policy through force, fright,

8 threat or undue pressure, whether explicit or

9 implicit.

10 (C) COLD LEAD ADVERTISING.—Making

11 use directly or indirectly of any method of mar12 keting which fails to disclose in a conspicuous

13 manner that a purpose of the method of mar14 keting is solicitation of insurance and that con15 tact will be made by an insurance agent or in16 surance company.

17 (D) OTHERS.—Engaging in such other

18 practices determined inappropriate under guide19 lines issued by the Secretary, in consultation

20 with the NAIC.

21 (b) FINANCIAL NEEDS STANDARDS.—The Secretary,

22 in consultation with the NAIC, shall develop recommended

23 minimum financial needs standards (including both in24 come and asset criteria) for the purpose of advising indi25 viduals as to the costs and amounts of insurance needed
417

•S 2357

1 when considering the purchase of a long-term care insur2 ance policy.

3 (c) PROHIBITION OF SALE OR ISSUANCE TO MEDIC4 AID BENEFICIARIES.—An agent, an association, or a car5 rier may not knowingly sell or issue a long-term care in6 surance policy to an individual who is eligible for medical

7 assistance under title XIX of the Social Security Act.

8 (d) PROHIBITION OF SALE OR ISSUANCE OF DUPLI9 CATE SERVICE BENEFIT POLICIES.—An agent, associa10 tion or its subsidiary, or a carrier may not sell or issue

11 a service-benefit long-term care insurance policy to an in12 dividual—

13 (1) knowing that the policy provides for cov14 erage that duplicates coverage already provided in

15 another service-benefit long-term care insurance pol16 icy held by such individual (unless the policy is in17 tended to replace such other policy); or

18 (2) for the benefit of an individual unless the

19 individual (or a representative of the individual) pro20 vides a written statement to the effect that the cov21 erage—

22 (A) does not duplicate other coverage in ef23 fect under a service-benefit long-term care in24 surance policy; or
418

•S 2357

1 (B) will replace another service-benefit

2 long-term care insurance policy.

3 In this subsection, the term ‘‘service-benefit long-term

4 care insurance policy’’ means a long-term care insurance

5 policy which provides for benefits based on the type and

6 amount of services furnished.

7 (e) PROHIBITION BASED ON ELIGIBILITY FOR

8 OTHER BENEFITS.—A carrier may not sell or issue a

9 long-term care insurance policy that reduces, limits, or co10 ordinates the benefits provided under the policy on the

11 basis that the policyholder has or is eligible for other long12 term care insurance coverage or benefits.

13 (f) PROVISION OF OUTLINE OF COVERAGE.—No

14 agent, association or its subsidiary, or carrier may sell or

15 offer for sale a long-term care insurance policy without

16 providing to every individual purchaser or potential pur17 chaser (or representative) an outline of coverage that com18 plies with the standards established under section

19 2201(a).

20 (g) PENALTIES.—Any agent who sells, offers for sale,

21 or issues a long-term care insurance policy in violation of

22 this section may be imprisoned not more than 5 years,

23 or fined in accordance with title 18, United States Code,

24 and, in addition, is subject to a civil money penalty of not

25 to exceed $15,000 for each such violation. Any association
419

•S 2357

1 or its subsidiary or carrier that sells, offers for sale, or

2 issues a long-term care insurance policy in violation of this

3 section may be fined in accordance with title 18, United

4 States Code, and in addition, is subject to a civil money

5 penalty of not to exceed $25,000 for each violation. Noth6 ing in this subsection shall be construed as preempting

7 or otherwise limiting the penalties that may be imposed

8 by a State for conduct that violates this section.

9 (h) AGENT TRAINING AND CERTIFICATION REQUIRE10 MENTS.—The Secretary, in consultation with the NAIC,

11 shall establish requirements for long-term care insurance

12 agent training and certification that—

13 (1) specify requirements for training insurance

14 agents who desire to sell or offer for sale long-term

15 care insurance policies; and

16 (2) specify procedures for certifying and

17 recertifying agents who have completed such train18 ing and who are qualified to sell or offer for sale

19 long-term care insurance policies.

20 SEC. 2213. ADDITIONAL RESPONSIBILITIES FOR CARRIERS.

21 (a) REFUND OF PREMIUMS.—If an application for a

22 long-term care insurance policy (or for a certificate under

23 a group long-term care insurance policy) is denied or an

24 applicant returns a policy or certificate within 30 days of

25 the date of its issuance pursuant to subsection 2217, the
420

•S 2357

1 carrier shall, not later than 30 days after the date of the

2 denial or return, refund directly to the applicant, or in

3 the case of an employer to whomever remits the premium,

4 any premiums paid with respect to such a policy (or cer5 tificate). Any such refund shall not be made by delivery

6 by the carrier.

7 (b) MAILING OF POLICY.—If an application for a

8 long-term care insurance policy (or for a certificate under

9 a group long-term care insurance policy) is approved, the

10 carrier shall provide each individual applicant the policy

11 (or certificate) of insurance and outline of coverage not

12 later than 30 days after the date of the approval.

13 (c) INFORMATION ON DENIALS OF CLAIMS.—If a

14 claim under a long-term care insurance policy is denied,

15 the carrier shall, within 15 days of the date of a written

16 request by the policyholder or certificate holder (or rep17 resentative)—

18 (1) provide a written explanation of the reasons

19 for the denial;

20 (2) make available all medical and patient

21 records directly relating to such denial; and

22 (3) provide a written explanation of the manner

23 in which to appeal the denial.

24 Except as provided in subsection (e) of section 2215, no

25 claim under such a policy may be denied on the basis of
421

•S 2357

1 a failure to disclose a condition at the time of issuance

2 of the policy if the application for the policy failed to re3 quest information respecting the condition.

4 (d) REPORTING OF INFORMATION.—A carrier that is5 sues one or more long-term care insurance policies shall

6 periodically (not less often than annually) report, in a

7 form and in a manner determined by the Secretary, in

8 consultation with the NAIC, to the Commissioner, super9 intendent or director of insurance of each State in which

10 the policy is delivered, and shall make available to the Sec11 retary, upon request, information in a form and manner

12 determined by the Secretary, in consultation with the

13 NAIC, concerning—

14 (1) the long-term care insurance policies of the

15 carrier that are in force;

16 (2) the most recent premiums for such policies

17 and the premiums imposed for such policies since

18 their initial issuance;

19 (3) the lapse rate, replacement rate, and rescis20 sion rates by policy;

21 (4) the names of that 10 percent of its agents

22 that—

23 (A) have the greatest lapse and replace24 ment rate; and
422

•S 2357

1 (B) have produced at least $50,000 of

2 long-term care insurance sales in the previous

3 year; and

4 (5) the claims denied (expressed as a number

5 and as a percentage of claims submitted) by policy.

6 Information required under this subsection shall be re7 ported in a format specified in the standards established

8 under section 2201(a). For purposes of paragraph (3),

9 there shall be included (but reported separately) data con10 cerning lapses due to the death of the policyholder. For

11 purposes of paragraph (4), there shall not be included as

12 a claim any claim that is denied solely because of the fail13 ure to meet a deductible, waiting period, or exclusionary

14 period.

15 (e) STANDARDS ON COMPENSATION FOR SALE OF

16 POLICIES.—

17 (1) IN GENERAL.—Until the Secretary, in con18 sultation with the NAIC, promulgates mandatory

19 standards concerning compensation for the sale of

20 long-term care policies, a carrier that issues one or

21 more long-term care insurance policies may provide

22 a commission or other compensation to an agent or

23 other representative for the sale of such a policy only

24 if the first year commission or other first year com25 pensation to be paid does not exceed—
423

•S 2357

1 (A) 200 percent of the commission or

2 other compensation paid for selling or servicing

3 the policy in the second year, or

4 (B) 50 percent of the premium paid on the

5 first year policy.

6 (2) SUBSEQUENT YEARS.—The commission or

7 other compensation provided for the sale of long8 term care policies to an individual during each of the

9 years during the 5-year period subsequent to the

10 first year of the policy shall be the same as that pro11 vided in the second subsequent year.

12 (3) LIMITATION.—No carrier shall provide com13 pensation to its agents for the sale of a long-term

14 care policy which replaces an existing policy, and no

15 agent shall receive compensation for such sale great16 er than the renewal compensation payable by the re17 placing carrier on renewal policies.

18 (4) COMPENSATION DEFINED.—As used in this

19 subsection, the term ‘‘compensation’’ includes pecu20 niary or nonpecuniary remuneration of any kind re21 lating to the sale or renewal of the policy, including,

22 but not limited to, deferred compensation, bonuses,

23 gifts, prizes, awards, and finders fees.
424

•S 2357

1 SEC. 2214. RENEWABILITY STANDARDS FOR ISSUANCE, AND

2 BASIS FOR CANCELLATION OF POLICIES.

3 (a) IN GENERAL.—No long-term care insurance pol4 icy may be canceled or nonrenewed for any reason other

5 than nonpayment of premium, material misrepresentation,

6 or fraud.

7 (b) CONTINUATION AND CONVERSION RIGHTS FOR

8 GROUP POLICIES.—

9 (1) IN GENERAL.—Each group long-term care

10 insurance policy shall provide covered individuals

11 with a basis for continuation or conversion in ac12 cordance with this subsection.

13 (2) BASIS FOR CONTINUATION.—For purposes

14 of paragraph (1), a policy provides a basis for con15 tinuation of coverage if the policy maintains cov16 erage under the existing group policy when such cov17 erage would otherwise terminate and which is sub18 ject only to the continued timely payment of pre19 miums when due. A group policy which restricts pro20 vision of benefits and services to, or contains incen21 tives to use certain providers or facility, may provide

22 continuation benefits which are substantially equiva23 lent to the benefits of the existing group policy.

24 (3) BASIS FOR CONVERSION.—For purposes of

25 paragraph (1), a policy provides a basis for conver-
425

•S 2357

1 sion of coverage if the policy entitles each individ2 ual—

3 (A) whose coverage under the group policy

4 would otherwise be terminated for any reason;

5 and

6 (B) who has been continuously insured

7 under the policy (or group policy which was re8 placed) for at least 6 months before the date of

9 the termination;

10 to issuance of a policy providing benefits not less

11 than, substantially equivalent to, or in excess of,

12 those of the policy being terminated, without evi13 dence of insurability.

14 (4) TREATMENT OF SUBSTANTIAL EQUIVA15 LENCE.—In determining under this subsection

16 whether benefits are substantially equivalent, consid17 eration should be given to the difference between

18 managed care and non-managed care plans.

19 (5) GROUP REPLACEMENT OF POLICIES.—If a

20 group long-term care insurance policy is replaced by

21 another long-term care insurance policy purchased

22 by the same policyholder, the succeeding issuer shall

23 offer coverage to all individuals covered under the

24 old group policy on its date of termination. Coverage

25 under the new group policy shall not result in any
426

•S 2357

1 exclusion for preexisting conditions that would have

2 been covered under the group policy being replaced.

3 (c) STANDARDS FOR ISSUANCE.—

4 (1) IN GENERAL.—

5 (A) GUARANTEE.—An agent, association

6 or carrier that sells or issues long-term care in7 surance policies shall guarantee that such poli8 cies shall be sold or issued to an individual, or

9 eligible individual in the case of a group plan,

10 if such individual meets the minimum medical

11 underwriting requirements of such policy.

12 (B) PREMIUM FOR CONVERTED POLICY.—

13 If a group policy from which conversion is made

14 is a replacement for a previous group policy,

15 the premium for the converted policy shall be

16 calculated on the basis of the insured’s age at

17 the inception of coverage under the group policy

18 from which conversion is made. Where the

19 group policy from which conversion is made re20 placed previous group coverage, the premium

21 for the converted policy shall be calculated on

22 the basis of the insured’s age at inception of

23 coverage under the group policy replaced.

24 (2) UPGRADE FOR CURRENT POLICIES.—The

25 Secretary, in consultation with the NAIC, shall es-
427

•S 2357

1 tablish standards, including those providing guid2 ance on medical underwriting and age rating, with

3 respect to the access of individuals to policies offer4 ing upgraded benefits.

5 (3) RATE STABILIZATION.—The Secretary, in

6 consultation with the NAIC, shall establish stand7 ards for premium rate stabilization.

8 (d) EFFECT OF INCAPACITATION.—

9 (1) IN GENERAL.—

10 (A) PROHIBITION.—Except as provided in

11 paragraph (2), a long-term care insurance pol12 icy in effect as of the effective date of the

13 standards established under section 2201(a)

14 may not be canceled for nonpayment if the pol15 icy holder is determined by a long-term care

16 provider, physician, or other health care pro17 vider (independent of the issuer of the policy),

18 to be cognitively or mentally incapacitated so as

19 to not make payments in a timely manner.

20 (B) REINSTATEMENT.—A long-term care

21 policy shall include a provision that provides for

22 the reinstatement of such coverage, in the event

23 of lapse, if the insurer is provided with proof of

24 cognitive or mental incapacitation. Such rein25 statement option shall remain available for a
428

•S 2357

1 period of not less than 5 months after termi2 nation and shall allow for the collection of past

3 due premium.

4 (2) PERMITTED CANCELLATION.—A long-term

5 care insurance policy may be canceled under para6 graph (1) for nonpayment if—

7 (A) the period of such nonpayment is in

8 excess of 30 days; and

9 (B) notice of intent to cancel is provided to

10 the policyholder or designated representative of

11 the policy holder not less than 30 days prior to

12 such cancellation, except that notice may not be

13 provided until the expiration of 30 days after a

14 premium is due and unpaid.

15 Notice under this paragraph shall be deemed to have

16 been given as of 5 days after the mailing date.

17 SEC. 2215. BENEFIT STANDARDS.

18 (a) USE OF STANDARD DEFINITIONS AND TERMI19 NOLOGY, UNIFORM FORMAT, AND STANDARD BENE20 FITS.—Pursuant to standards established under section

21 2201(a), each long-term care insurance policy shall, with

22 respect to services, providers or facilities—

23 (1) use uniform language and definitions, ex24 cept that such language and definitions may take

25 into account the differences between States with re-
429

•S 2357

1 spect to definitions and terminology used for long2 term care services and providers; and

3 (2) use a uniform format for presenting the

4 outline of coverage under such a policy;

5 as prescribed under guidelines issued by the Secretary, in

6 consultation with the NAIC, and periodically updated.

7 (b) DISCLOSURE.—

8 (1) OUTLINE OF COVERAGE.—

9 (A) REQUIREMENT.—Each carrier that

10 sells or offers for sale a long-term care insur11 ance policy shall provide an outline of coverage

12 to each individual policyholder under such pol13 icy that meets the applicable standards estab14 lished pursuant to section 2201(a), complies

15 with the requirements of subparagraph (B), and

16 is in a uniform format as prescribed in guide17 lines issued by the Secretary, in consultation

18 with the NAIC, and periodically updated.

19 (B) CONTENTS.—The outline of coverage

20 for each long-term care policy shall substan21 tially and accurately reflect the contents of the

22 policy or the master policy and shall include at

23 least the following:

24 (i) A description of the benefits and

25 coverage under the policy.
430

•S 2357

1 (ii) A statement of the exclusions, re2 ductions, and limitations contained in the

3 policy.

4 (iii) A statement of the terms under

5 which the policy (or certificate) may be

6 continued in force or discontinued, the

7 terms for continuation or conversion, and

8 any reservation in the policy of a right to

9 change premiums.

10 (iv) Consumer protection information,

11 including the manner in which to file a

12 claim and to register complaints.

13 (v) A statement, in bold face type on

14 the face of the document in language that

15 is understandable to an average individual,

16 that the outline of coverage is a summary

17 only and not a contract of insurance, and

18 that the policy (or master policy) contains

19 the contractual provisions that govern.

20 (vi) A description of the terms, speci21 fied in section 2217, under which a policy

22 or certificate may be returned and pre23 mium refunded.

24 (vii) Information on—
431

•S 2357

1 (I) national average costs for

2 nursing facility and home health care

3 and information (in graph form) on

4 the relationship of the value of the

5 benefits provided under the policy to

6 such national average costs and State

7 average costs; and

8 (II) other public and private

9 long-term care insurance products and

10 long-term care programs where made

11 available by the Federal Government

12 or by a State government.

13 (viii) A statement of the percentage

14 limit on annual premium increases that is

15 provided under the policy pursuant to this

16 section.

17 (2) CERTIFICATES.—A certificate issued pursu18 ant to a group long-term care insurance policy shall

19 include—

20 (A) a description of the principal benefits

21 and coverage provided in the policy;

22 (B) a statement of the principal exclusions,

23 reductions, and limitations contained in the pol24 icy; and
432

•S 2357

1 (C) a statement that the group master pol2 icy determines governing contractual provisions.

3 (3) LONG-TERM CARE AS PART OF LIFE INSUR4 ANCE.—In the case of a long-term care insurance

5 policy issued as a part of, or a rider on, a life insur6 ance policy, at the time of policy delivery there shall

7 be provided a policy summary that includes—

8 (A) an explanation of how the long-term

9 care benefits interact with other components of

10 the policy (including deductions from death

11 benefits);

12 (B) an illustration of the amount of bene13 fits, the length of benefits, and the guaranteed

14 lifetime benefits (if any) for each covered indi15 vidual; and

16 (C) any exclusions, reductions, and limita17 tions on benefits of long-term care.

18 (4) ADDITIONAL INFORMATION.—The Sec19 retary, in consultation with the NAIC shall develop

20 recommendations with respect to informing consum21 ers of the long-term economic viability of carriers is22 suing long-term care insurance policies.

23 (c) LIMITING CONDITIONS ON BENEFITS; MINIMUM

24 BENEFITS.—
433

•S 2357

1 (1) IN GENERAL.—A long-term care insurance

2 policy may not condition or limit eligibility—

3 (A) for benefits for a type of services to

4 the need for or receipt of any other services;

5 (B) for any benefit on the medical neces6 sity for such benefit;

7 (C) for benefits furnished by licensed or

8 certified providers in compliance with conditions

9 which are in addition to those required for li10 censure or certification under State law, or if

11 no State licensure or certification laws exists,

12 developed by the Secretary, in consultation with

13 the NAIC; or

14 (D) for residential care (if covered under

15 the policy) only—

16 (i) to care provided in facilities which

17 provide a higher level of care; or

18 (ii) to care provided in facilities which

19 provide for 24-hour or other nursing care

20 not required in order to be licensed by the

21 State.

22 (2) HOME HEALTH CARE OR COMMUNITY23 BASED SERVICES.—If a long-term care insurance

24 policy provides benefits for the payment of specified
434

•S 2357

1 home health care or community-based services, the

2 policy—

3 (A) may not limit such benefits to services

4 provided by registered nurses or licensed prac5 tical nurses;

6 (B) may not require benefits for such serv7 ices to be provided by a nurse or therapist that

8 can be provided by a home health aide or a

9 home care worker who is licensed or certified

10 under State licensure or certification laws, or if

11 no such laws exist, who is in compliance with

12 qualifications developed by the Secretary, in

13 consultation with the NAIC;

14 (C) may not limit such benefits to services

15 provided by agencies or providers certified

16 under title XVIII of the Social Security Act;

17 and

18 (D) shall provide, at a minimum—

19 (i) benefits for personal care services

20 (including home health aide and home care

21 worker services as defined by the Sec22 retary, in consultation with the NAIC),

23 home health services, adult day care, and

24 respite care in an individual’s home or in

25 another setting in the community; or
435

•S 2357

1 (ii) any of such benefits on a respite

2 care basis.

3 (3) NURSING FACILITY SERVICES.—If a long4 term care policy provides benefits for the payment of

5 specified nursing facility services, the policy shall

6 provide such benefits with respect to all nursing fa7 cilities in the State. Except as provided by the Sec8 retary, in consultation with the NAIC, under uni9 form language and definitions established under sec10 tion 2215(a)(1)), the term ‘nursing facilities’ has the

11 meaning given such term by section 1919(a) of the

12 Social Security Act.

13 (4) PER DIEM POLICIES.—

14 (A) DEFINITION.—For purposes of this

15 subtitle, the term ‘‘per diem long-term care in16 surance policy’’ means a long-term care insur17 ance policy (or certificate under a group long18 term care insurance policy) that provides for

19 benefit payments on a periodic basis due to cog20 nitive impairment or loss of functional capacity

21 without regard to the expenses incurred or serv22 ices rendered during the period to which the

23 payments relate.

24 (B) LIMITATION.—No per diem long-term

25 care insurance policy (or certificate) may condi-
436

•S 2357

1 tion, limit or otherwise exclude benefit pay2 ments based on the receipt of any type services

3 from any type providers of long-term care serv4 ice providers.

5 (d) PROHIBITION OF DISCRIMINATION.—A long-term

6 care insurance policy may not, with respect to benefits

7 under the policy, treat an individual with Alzheimer’s dis8 ease, with any related progressive degenerative dementia

9 of an organic origin, with any organic or inorganic mental

10 illness, or with mental retardation or any other cognitive

11 or mental impairment, differently from an individual hav12 ing a functional impairment for which such benefits may

13 be made available.

14 (e) LIMITATION ON USE OF PREEXISTING CONDI15 TION LIMITS.—

16 (1) INITIAL ISSUANCE.—

17 (A) IN GENERAL.—Subject to subpara18 graph (B), a long-term care insurance policy

19 may not exclude or condition benefits based on

20 a medical condition for which the policyholder

21 received treatment or was otherwise diagnosed

22 before the issuance of the policy.

23 (B) 6-MONTH LIMIT.—A long-term care

24 policy or certificate issued under this subtitle

25 may impose a limitation or exclusion of benefits
437

•S 2357

1 relating to treatment of a condition based on

2 the fact that the condition preexisted the effec3 tive date of the policy or certificate with respect

4 to an individual if—

5 (i) a condition that was diagnosed or

6 treated during the 6-month period ending

7 on the day before the first date of coverage

8 under the policy or certificate; and

9 (ii) the limitation or exclusion extends

10 for a period not more than 6 months after

11 the date of coverage under the policy or

12 certificate.

13 (2) REPLACEMENT POLICIES.—If a long-term

14 care insurance policy replaces another long-term

15 care insurance policy, the issuer of the replacing pol16 icy shall waive any time periods applicable to pre17 existing conditions, waiting periods, elimination peri18 ods, and probationary periods in the new policy for

19 similar benefits to the extent such time was spent

20 under the original policy.

21 (f) ELIGIBILITY FOR BENEFITS.—

22 (1) LONG-TERM CARE POLICIES.—Each long23 term care insurance policy shall—

24 (A) describe the level of benefits available

25 under the policy; and
438

•S 2357

1 (B) specify in clear, understandable terms,

2 the level (or levels) of physical, cognitive, or

3 mental impairment required in order to receive

4 benefits under the policy.

5 (2) FUNCTIONAL ASSESSMENT.—In order to

6 submit a claim under any long-term care insurance

7 policy, each claimant shall have a professional func8 tional assessment of his or her functional or cog9 nitive abilities. Such initial assessment shall be con10 ducted by an individual or entity, meeting the quali11 fications established by the Secretary, in consulta12 tion with the NAIC, to assure the professional com13 petence and credibility of such individual or entity

14 and that such individual meets any applicable State

15 licensure and certification requirements. The individ16 ual or entity conducting such assessment may not

17 control, or be controlled by, the issuer of the policy.

18 (3) CLAIMS REVIEW.—Except as provided in

19 paragraph (4), each long-term care insurance policy

20 shall be subject to final claims review by the carrier

21 pursuant to the terms of the long-term care insur22 ance policy.

23 (4) APPEALS PROCESS.—

24 (A) IN GENERAL.—Each long-term care in25 surance policy shall provide for a timely and
439

•S 2357

1 independent appeals process, meeting standards

2 established by the Secretary, in consultation

3 with the NAIC, for individuals who dispute the

4 results of the claims review conducted under

5 paragraph (3) or the policyholder’s functional

6 assessment conducted under paragraph (2).

7 (B) INDEPENDENT ASSESSMENT.—An ap8 peals process under this paragraph shall in9 clude, at the request of the claimant, an inde10 pendent assessment of the claimant’s functional

11 or cognitive abilities.

12 (C) CONDUCT.—An independent assess13 ment under subparagraph (B) shall be con14 ducted by an individual or entity meeting the

15 qualifications established by the Secretary, in

16 consultation with the NAIC, to assure the pro17 fessional competence and credibility of such in18 dividual or entity and any applicable State li19 censure and certification requirements and may

20 not be conducted—

21 (i) by an individual who has a direct

22 or indirect significant or controlling inter23 est in, or direct affiliation or relationship

24 with, the issuer of the policy;
440

•S 2357

1 (ii) by an entity that provides services

2 to the policyholder or certificate holder for

3 which benefits are available under the

4 long-term care insurance policy; or

5 (iii) by an individual or entity in con6 trol of, or controlled by, the issuer of the

7 policy.

8 (5) STANDARD ASSESSMENTS.—Not later than

9 2 years after the date of enactment of this subtitle,

10 the advisory committee established under section

11 2201(d) shall recommend uniform needs assessment

12 mechanisms for the determination of eligibility for

13 benefits under such assessments.

14 (6) CONTROL DEFINED.—For purposes of para15 graphs (2) and (4), the term ‘‘control’’ means the

16 direct or indirect possession of the power to direct

17 the management and policies of a person. Control is

18 presumed to exist, if any person directly or indi19 rectly, owns, controls, holds with the power to vote,

20 or holds proxies representing at least 10 percent of

21 the voting securities of another person.

22 (g) INFLATION PROTECTION.—

23 (1) OPTION TO PURCHASE.—A carrier may not

24 offer a long-term care insurance policy unless the

25 carrier also offers to the proposed policyholder, in-
441

•S 2357

1 cluding each group policyholder, the option to pur2 chase a long-term care insurance policy that pro3 vides for increases in benefit levels, with benefit

4 maximums or reasonable durations that are mean5 ingful, to account for reasonably anticipated in6 creases in the costs of long-term care services cov7 ered by the policy. A carrier may not offer to a pol8 icyholder an inflation protection feature that is less

9 favorable to the policyholder than one of the follow10 ing:

11 (A) With respect to policies that provide

12 for automatic periodic increases in benefits, the

13 policy provides for an annual increase in bene14 fits in a manner so that such increases are

15 computed annually at a rate of not less than 5

16 percent.

17 (B) With respect to policies that provide

18 for periodic opportunities to elect an increase in

19 benefits, the policy guarantees that the insured

20 individual will have the right to periodically in21 crease the benefit levels under the policy with22 out providing evidence of insurability or health

23 status so long as the option for the previous pe24 riod was not declined. The amount of any such
442

•S 2357

1 additional benefit may not be less than the dif2 ference between—

3 (i) the existing policy benefit; and

4 (ii) such existing benefit compounded

5 annually at a rate of at least 5 percent for

6 the period beginning on the date on which

7 the existing benefit is purchased and ex8 tending until the year in which the offer of

9 increase is made.

10 (C) With respect to service benefit policies,

11 the policy covers a specified percentage of the

12 actual or reasonable charges and does not in13 clude a maximum specified indemnity amount

14 or limit.

15 (2) EXCEPTION.—The requirements of para16 graph (1) shall not apply to life insurance policies or

17 riders containing accelerated long-term care benefits.

18 (3) REQUIRED INFORMATION.—Carriers shall

19 include the following information in or together with

20 the outline of coverage provided under this subtitle:

21 (A) A comparison (shown as a graph) of

22 the benefit levels of a policy that increases ben23 efits over the policy period with a policy that

24 does not increase benefits. Such comparison
443

•S 2357

1 shall show benefit levels over not less than a

2 20-year period.

3 (B) Any expected premium increases or

4 additional premiums required to pay for any

5 automatic or optional benefit increases, whether

6 the individual who purchases the policy obtains

7 the inflation protection initially or whether such

8 individual delays purchasing such protection

9 until a future time.

10 (4) CONTINUATION OF PROTECTION.—Benefit

11 increases under a policy described in paragraph (1)

12 shall continue without regard to an insured’s age,

13 claim status or claim history, or the length of time

14 the individual has been insured under the policy.

15 (5) CONSTANT PREMIUM.—A policy described

16 in paragraph (1) that provides for automatic benefit

17 increases shall include an offer of a premium that

18 the carrier expects to remain constant. Such offer

19 shall disclose in a conspicuous manner that the pre20 mium may change in the future unless the premium

21 is guaranteed to remain constant.

22 (6) REJECTION.—Inflation protection under

23 this subsection shall be included in a long-term care

24 insurance policy unless a carrier obtains a written
444

•S 2357

1 rejection of such protection signed by the policy2 holder.

3 SEC. 2216. NONFORFEITURE.

4 (a) IN GENERAL.—Each long-term care insurance

5 policy (or certificate) shall provide that if the policy lapses

6 after the policy has been in effect for a minimum period

7 (specified under the standards under section 2201(a)), the

8 policy will provide, without payment of any additional pre9 miums, nonforfeiture benefits as determined appropriate

10 by the Secretary, in consultation with the NAIC.

11 (b) ESTABLISHMENT OF STANDARDS.—The stand12 ards under section 2201(a) shall provide that the percent13 age or amount of benefits under subsection (a) shall in14 crease based upon the policyholder’s equity in the policy.

15 SEC. 2217. LIMIT OF PERIOD OF CONTESTABILITY AND

16 RIGHT TO RETURN.

17 (a) CONTESTABILITY.—A carrier may not cancel or

18 renew a long-term care insurance policy or deny a claim

19 under the policy based on fraud or intentional misrepre20 sentation relating to the issuance of the policy unless no21 tice of such fraud or misrepresentation is provided within

22 a time period to be determined by the Secretary, in con23 sultation with the NAIC.

24 (b) RIGHT TO RETURN.—Each applicant for a long25 term care insurance policy shall have the right to return
445

•S 2357

1 the policy (or certificates) within 30 days of the date of

2 its delivery (and to have the premium refunded) if, after

3 examination of the policy or certificate, the applicant is

4 not satisfied for any reason.

5 SEC. 2218. CIVIL MONEY PENALTY.

6 (a) CARRIER.—Any carrier, association or its subsidi7 ary that sells or offers for sale a long-term care insurance

8 policy and that—

9 (1) fails to make a refund in accordance with

10 section 2213(a);

11 (2) fails to transmit a policy in accordance with

12 section 2213(b);

13 (3) fails to provide, make available, or report

14 information in accordance with subsections (c) or (d)

15 of section 2213;

16 (4) provides a commission or compensation in

17 violation of section 2213(e);

18 (5) fails to provide an outline of coverage in

19 violation of section 2215(b)(1); or

20 (6) issues a policy without obtaining certain in21 formation in violation of section 2215(f);

22 is subject to a civil money penalty of not to exceed $25,000

23 for each such violation.

24 (b) AGENTS.—Any agent that sells or offers for sale

25 a long-term care insurance policy and that—
446

•S 2357

1 (1) fails to make a refund in accordance with

2 section 2213(a);

3 (2) fails to transmit a policy in accordance with

4 section 2213(b);

5 (3) fails to provide, make available, or report

6 information in accordance with subsections (c) or (d)

7 of section 2213;

8 (4) fails to provide an outline of coverage in

9 violation of section 2215(b)(1); or

10 (5) issues a policy without obtaining certain in11 formation in violation of section 2215(f);

12 is subject to a civil money penalty of not to exceed $15,000

13 for each such violation.

14 (c) EFFECT ON STATE LAW.—Nothing in this section

15 shall be construed as preempting or otherwise limiting the

16 penalties that may be imposed by a State for the types

17 of conduct described in this section.

18 PART 3—LONG-TERM CARE INSURANCE

19 POLICIES, DEFINITION AND ENDORSEMENTS

20 SEC. 2221. LONG-TERM CARE INSURANCE POLICY DEFINED.

21 (a) IN GENERAL.—As used in this section, the term

22 ‘‘long-term care insurance policy’’ means any insurance

23 policy, rider or certificate advertised, marketed, offered or

24 designed to provide coverage for not less than 12 consecu25 tive months for each covered individual on an expense in-
447

•S 2357

1 curred, indemnity prepaid or other basis, for one or more

2 necessary diagnostic, preventive, therapeutic, rehabilita3 tive, maintenance or personal care services, provided in a

4 setting other than an acute care unit of a hospital. Such

5 term includes—

6 (1) group and individual annuities and life in7 surance policies, riders or certificates that provide

8 directly, or that supplement long-term care insur9 ance; and

10 (2) a policy, rider or certificates that provides

11 for payment of benefits based on cognitive impair12 ment or the loss of functional capacity.

13 (b) ISSUANCE.—Long-term care insurance policies

14 may be issued by—

15 (1) carriers;

16 (2) fraternal benefit societies;

17 (3) nonprofit health, hospital, and medical serv18 ice corporations;

19 (4) prepaid health plans;

20 (5) health maintenance organizations; or

21 (6) any similar organization to the extent they

22 are otherwise authorized to issue life or health insur23 ance.

24 (c) POLICIES EXCLUDED.—The term ‘‘long-term care

25 insurance policy’’ shall not include any insurance policy,
448

•S 2357

1 rider or certificate that is offered primarily to provide

2 basic Medicare supplement coverage, basic hospital ex3 pense coverage, basic medical-surgical expense coverage,

4 hospital confinement indemnity coverage, major medical

5 expense coverage, disability income or related asset-protec6 tion coverage, accident only coverage, specified disease or

7 specified accident coverage, or limited benefit health cov8 erage. With respect to life insurance, such term shall not

9 include life insurance policies, riders or certificates—

10 (1) that accelerate the death benefit specifically

11 for one or more of the qualifying events of terminal

12 illness, medical conditions requiring extraordinary

13 medical intervention, or permanent institutional con14 finement,

15 (2) that provide the option of a lump-sum pay16 ment for those benefits, or

17 (3) with respect to which neither the benefits

18 nor the eligibility for the benefits is conditioned

19 upon the receipt of long-term care.

20 (d) APPLICATIONS.—Notwithstanding any other pro21 vision of this subtitle, this subtitle shall apply to any prod22 uct advertised, marketed or offered as a long-term insur23 ance policy, rider or certificate.
449

•S 2357

1 SEC. 2222. CODE OF CONDUCT WITH RESPECT TO EN2 DORSEMENTS.

3 Not later than 1 year after the date of enactment

4 of this subtitle, the Secretary, in consultation with the

5 NAIC, shall issue guidelines that shall apply to organiza6 tions and associations (other than employers and labor or7 ganizations that do not accept compensation) that provide

8 endorsements of long-term care insurance policies, or that

9 permit such policies to be offered for sale through the or10 ganization or association. Such guidelines shall include at

11 minimum the following:

12 (1) In endorsing or selling long-term care insur13 ance policies, the primary responsibility of an orga14 nization or association shall be to educate their

15 members concerning such policies and assist such

16 members in making informed decisions. Such organi17 zations and associations may not function primarily

18 as sales agents for insurance companies.

19 (2) Organizations and associations shall provide

20 objective information regarding long-term care insur21 ance policies sold or endorsed by such organizations

22 and associations to ensure that members of such or23 ganizations and associations have a balanced and

24 complete understanding of both the strengths and

25 weaknesses of the policies that are being endorsed or

26 sold.
450

•S 2357

1 (3) Organizations and associations selling or

2 endorsing long-term care insurance policies shall dis3 close in marketing literature provided to their mem4 bers concerning such policies the manner in which

5 such policies and the insurance company issuing

6 such policies were selected. If the organization or as7 sociation and the insurance company have interlock8 ing directorates, the organization or association shall

9 disclose such fact to their members.

10 (4) Organizations and associations selling or

11 endorsing long-term care insurance policies shall dis12 close in marketing literature provided to their mem13 bers concerning such policies the nature and amount

14 of the compensation arrangements (including all

15 fees, commissions, administrative fees and other

16 forms of financial support that the organization or

17 association receives) from the endorsement or sale of

18 the policy to its members.

19 (5) The Boards of Directors of organizations

20 and associations selling or endorsing long-term care

21 insurance policies, if such organizations and associa22 tions have a Board of Directors, shall review and ap23 prove such insurance policies, the compensation ar24 rangements and the marketing materials used to

25 promote sales of such policies.
451

•S 2357

1 Subtitle D—Life Care

2 SEC. 2301. SHORT TITLE.

3 This title may be cited as the ‘‘Life Care Act’’.

4 SEC. 2302. LIFE CARE: PUBLIC INSURANCE PROGRAM FOR

5 NURSING HOME CARE.

6 The Public Health Service Act is amended by adding

7 at the end thereof the following new title:

8 ‘‘TITLE XXVII—LIFE CARE: PUB9 LIC INSURANCE PROGRAM

10 FOR NURSING HOME CARE

11 ‘‘SEC. 2701. ESTABLISHMENT OF VOLUNTARY LONG-TERM

12 CARE INSURANCE PROGRAM.

13 ‘‘The Secretary shall establish a voluntary insurance

14 program for individuals 35 years of age and over to cover

15 the nursing home stays of such individuals. The Secretary

16 shall establish a process for enrollment in the Life Care

17 program.

18 ‘‘SEC. 2702. BENEFITS.

19 ‘‘(a) IN GENERAL.—

20 ‘‘(1) ELIGIBILITY FOR COVERAGE.—Subject to

21 subsection (c), an individual who meets the eligibility

22 criteria prescribed in section 2703 shall be eligible

23 under the program established under this title for

24 coverage for necessary services described in sub25 section (b) (in the amounts described in subsection
452

•S 2357

1 (c)) that are provided to the individual by a nursing

2 facility while the individual is an inpatient of the fa3 cility.

4 ‘‘(2) NONFORFEITURE.—The Secretary shall

5 establish standards to ensure the nonforfeiture of

6 benefits for which premiums have been paid.

7 ‘‘(b) TYPES.—Coverage may be provided under this

8 title for—

9 ‘‘(1) nursing care provided by or under the su10 pervision of a registered professional nurse;

11 ‘‘(2) physical, occupational, or speech therapy

12 furnished by a facility or by others under arrange13 ments with a facility;

14 ‘‘(3) medical social work services;

15 ‘‘(4) drug, biological, supply, appliance, and

16 equipment for use in the facility, that is ordinarily

17 furnished by the facility for the care and treatment

18 of an inpatient;

19 ‘‘(5) such other services necessary to the func20 tioning of a patient, including personal care and as21 sistance with activities of daily living, as are gen22 erally provided by a nursing home facility; and

23 ‘‘(6) with respect to the initial 6 months of cov24 ered residence in a nursing facility, such room and
453

•S 2357

1 board costs as are not covered by beneficiary

2 copayment.

3 ‘‘(c) COVERAGE AMOUNT.—

4 ‘‘(1) IN GENERAL.—The amount of coverage

5 provided with respect to an eligible individual for the

6 services described in subsection (b) shall, based on

7 an election made by the individual, not exceed

8 $30,000, $60,000, or $90,000 over the lifetime of

9 the eligible individual. Such amounts shall be ad10 justed by the Secretary to reflect increases in the

11 Consumer Price Index.

12 ‘‘(2) ASSET PROTECTION.—An eligible individ13 ual shall be entitled to the asset protection provided

14 under section 2708.

15 ‘‘(d) PAYMENT.—Amounts provided under this title

16 with respect to an eligible individual for the services de17 scribed in subsection (b) shall be paid from the general

18 fund of the Treasury of the United States.

19 ‘‘(e) RESIDENTIAL CARE FACILITIES.—The Sec20 retary shall consider the feasibility of making payments

21 under this title for services delivered in residential care

22 facilities. Not later than 2 years after the date of enact23 ment of this Act, the Secretary shall report its findings

24 to the Congress with respect to the feasibility of making

25 such payments.
454

•S 2357

1 ‘‘SEC. 2703. ELIGIBILITY.

2 ‘‘(a) IN GENERAL.—An individual shall be eligible for

3 benefits under this title if—

4 ‘‘(1) the individual—

5 ‘‘(A) is a legal resident of the United

6 States and has elected coverage under sub7 section (c); and

8 ‘‘(B) has been determined by a Screening

9 Agency through a screening process (conducted

10 in accordance with section 2707)—

11 ‘‘(i)(I) to require hands-on or standby

12 assistance, supervision, or cueing (as de13 fined in regulations) to perform three or

14 more activities of daily living; or

15 ‘‘(II) to require hands-on or standby

16 assistance, supervision, or cueing with at

17 least such instrumental activity (or activi18 ties) of daily living related to cognitive or

19 mental impairment as the Secretary speci20 fies; or

21 ‘‘(III) to display symptoms of one or

22 more serious behavioral problems (that is

23 on a list of such problems specified by the

24 Secretary) which create a need for super25 vision to prevent harm to self or others; or
455

•S 2357

1 ‘‘(IV) has achieved a score, on a

2 standard mental status protocol (or proto3 cols) appropriate for measuring the indi4 vidual’s particular condition specified by

5 the Secretary, that indicates either severe

6 cognitive impairment or severe mental im7 pairment, or both; and

8 ‘‘(ii) to require such assistance, super9 vision, or cueing over a period of at least

10 90 days; and

11 ‘‘(2)(A) the individual has filed an application

12 for such benefits, and is in need of, benefits covered

13 under this title; or

14 ‘‘(B) the legal guardian of the individual has

15 filed an application on behalf of an individual who

16 is in need of benefits covered under this title; or

17 ‘‘(C) the representative of an individual who is

18 cognitively impaired and who is in need of benefits

19 covered under this title has filed an application on

20 behalf of the individual.

21 ‘‘(b) CURRENT INDIVIDUALS.—An individual who is

22 in a hospital or nursing home on the date of the enroll23 ment of the individual in the program established under

24 this title shall be ineligible for coverage under this section
456

•S 2357

1 until the individual’s first spell of illness beginning after

2 such date.

3 ‘‘(c) ELECTION OF COVERAGE.—

4 ‘‘(1) IN GENERAL.—Subject to this subsection,

5 an individual shall have the option to purchase cov6 erage under this title when the individual is 35 years

7 of age, 45 years of age, 55 years of age, or 65 years

8 of age.

9 ‘‘(2) INITIAL YEAR.—During the 1-year period

10 beginning on the date on which final regulations

11 that implement this title are issued, an individual

12 who is 35 years of age or older shall be eligible to

13 purchase insurance under this title, except that such

14 an individual shall not be eligible to purchase such

15 insurance—

16 ‘‘(A) while confined to a hospital or nurs17 ing home;

18 ‘‘(B) within the 6-month period after the

19 individual’s confinement in a nursing home; or

20 ‘‘(C) within the 90-day period after the in21 dividual’s confinement in a hospital.

22 Individuals described in the matter preceding sub23 paragraph (A) shall become eligible to receive bene24 fits under this title on the expiration of the 3-year
457

•S 2357

1 period beginning on the date such individuals pur2 chase insurance under this title.

3 ‘‘(3) EXTENSION BEYOND INITIAL YEAR.—If an

4 individual is confined to a nursing home or hospital

5 during a period that extends beyond the first year

6 after the effective date of this title, an individual

7 shall be eligible to enroll in the program established

8 by this title during the 60-day period beginning after

9 the individual’s spell of illness.

10 ‘‘(4) SUBSEQUENT YEARS.—During years sub11 sequent to the 1-year period referred to in para12 graph (2), an individual shall be eligible to purchase

13 insurance under this title within 6 months of the

14 35th, 45th, 55th or 65th birthday of the individual.

15 ‘‘(5) ACTIVATION OF BENEFITS.—To receive

16 coverage under the insurance program established by

17 this title, an individual shall have purchased such

18 coverage not later than 1 month prior to admission

19 to a nursing facility, unless the reason for the need

20 of services is a result of an accident or stroke subse21 quent to the date that such individual enrolled for

22 coverage under this title.

23 ‘‘(d) PUBLIC EDUCATION.—In the 12 months preced24 ing the initial enrollment period, the Secretary shall, either

25 directly or through grants and contracts, conduct a public
458

•S 2357

1 service and education campaign designed to inform poten2 tially eligible individuals as to the nature of the benefits

3 and the limited enrollment period. In conducting such

4 campaigns the Secretary shall make information available

5 to individuals through the open enrollment process for ob6 taining health care benefits under this Act.

7 ‘‘SEC. 2704. PREMIUM RATES.

8 ‘‘(a) IN GENERAL.—The Secretary shall determine

9 one premium rate for individuals electing to purchase cov10 erage under this title at age 35 (or between the ages of

11 35 and 44 during the initial enrollment period), a separate

12 rate for those individuals who elect coverage at age 45

13 (or between the ages of 45 and 54 during the initial enroll14 ment period), a separate rate for those individuals who

15 elect such coverage at age 55 (or between that ages of

16 55 and 64 during the initial enrollment period), and a sep17 arate rate for those individuals who elect such coverage

18 at age 65 (or at age 65 and over during the initial enroll19 ment period). During the initial enrollment period, the

20 Secretary shall establish actuarily fair, age-rated pre21 miums for persons age 65 and over.

22 ‘‘(b) REVISION.—The Secretary shall revise premium

23 rates annually to increase such rates to reflect the amount

24 of the increase in the cost of living adjustment with re25 spect to benefits under title II of the Social Security Act.
459

•S 2357

1 ‘‘(c) RATES.—In developing premium rates under the

2 program established under this title, the Secretary shall

3 establish rates that are expected to cover 100 percent of

4 the reimbursement amount provided under this title for

5 nursing home stays for those individuals enrolled in the

6 program.

7 ‘‘(d) WAIVER.—An individual electing to purchase

8 coverage under this title shall not be required to pay pre9 miums during any period in which such individual is re10 ceiving benefits under this title.

11 ‘‘(e) PAYMENT.—Premiums shall be paid under this

12 section into the general fund of the Treasury of the United

13 States.

14 ‘‘SEC. 2705. QUALIFIED SERVICE PROVIDERS.

15 ‘‘(a) IN GENERAL.—To be considered as a covered

16 nursing home service under this title, such service must

17 have been provided by a qualified service provider.

18 ‘‘(b) TYPES.—A provider shall be considered a quali19 fied service provider under this title if the provider is a

20 nursing facility that is certified by the State and meets

21 the requirements of this title and any other standards es22 tablished by the Secretary by regulation for the safe and

23 efficient provision of services covered under this title.
460

•S 2357

1 ‘‘SEC. 2706. REIMBURSEMENT.

2 ‘‘(a) AMOUNT.—Monthly reimbursement for nursing

3 facility services under this title shall equal 65 percent (or

4 during the initial 6 months of coverage, 80 percent) of

5 the amount the Secretary determines to be reasonable and

6 appropriate to cover the cost of care provided under this

7 title.

8 ‘‘(b) PROSPECTIVE PAYMENT.—To the extent fea9 sible, the Secretary shall establish a prospective payment

10 mechanism for payment for nursing home services under

11 this title that takes into account the expected resource uti12 lization of individual patients based on their degree of dis13 ability, the methodology recommended for reimbursement

14 of skilled nursing facilities under title XVIII of the Social

15 Security Act, and other factors determining service re16 quirements.

17 ‘‘(c) ROOM AND BOARD PAYMENT.—An individual

18 receiving benefits under this program shall be responsible

19 for the payment of an amount for room and board that

20 is equal to—

21 ‘‘(1) with respect to the initial 6 months of resi22 dence in a nursing facility, 20 percent of the average

23 per diem rate paid by the Secretary to nursing facili24 ties receiving reimbursement under this title; and

25 ‘‘(2) with respect to subsequent periods of resi26 dence, 35 percent of the average per diem rate paid
461

•S 2357

1 by the Secretary to nursing facilities receiving reim2 bursement under this title. Payments under sub3 section (a) and (c) shall be considered payment in

4 full for services received under this section.

5 ‘‘(d) PRIORITY PAYERS.—Notwithstanding any other

6 provision of this title, reimbursement for nursing facility

7 services provided under this title to an individual shall,

8 to the extent available, be made under the Medicare pro9 gram, under Department of Veterans Affairs’ programs,

10 or under private insurance policies prior to reimbursement

11 under this title.

12 ‘‘SEC. 2707. LONG-TERM CARE SCREENING AGENCY.

13 ‘‘(a) ESTABLISHMENT.—The Secretary shall contract

14 with entities to act as Long-Term Care Screening Agen15 cies (hereafter referred to in this title as the ‘Screening

16 Agency’) for each designated area of a State. It shall be

17 the responsibility of such agency to assess the eligibility

18 of individuals residing in the geographic jurisdiction of the

19 Agency, for services provided under this title according to

20 the requirements of this title and regulations prescribed

21 by the Secretary. In entering into such contracts, the Sec22 retary shall give preference to State governmental entities

23 and private nonprofit agencies.

24 ‘‘(b) ELIGIBILITY.—The Screening Agency shall de25 termine the eligibility of an individual under this title
462

•S 2357

1 based on the results of a preliminary telephone interview

2 or written questionnaire (completed by the applicant, by

3 the caregiver of the applicant, or by the legal guardian

4 or representative of the applicant) that shall be validated

5 through the use of a screening tool administered in person

6 to each applicant determined eligible through initial tele7 phone or written questionnaire interviews not later than

8 15 days from the date on which such individual initially

9 applied for services under this title.

10 ‘‘(c) QUESTIONNAIRES AND SCREENING TOOLS.—

11 ‘‘(1) IN GENERAL.—The Secretary shall estab12 lish a telephone or written questionnaire and a

13 screening tool to be used by the Screening Agency

14 to determine the eligibility of an individual for serv15 ices under this title consistent with requirements of

16 this title and the standards established by the Sec17 retary by regulation.

18 ‘‘(2) QUESTIONNAIRES.—The questionnaire

19 shall include questions about the functional impair20 ment and mental status of an individual and other

21 criteria that the Secretary shall prescribe by regula22 tion.

23 ‘‘(3) SCREENING TOOLS.—The screening tool

24 should measure functional impairment caused by

25 physical or cognitive conditions as well as informa-
463

•S 2357

1 tion concerning cognition disability, behavioral prob2 lems (such as wandering or abusive and aggressive

3 behavior), and any other criteria that the Secretary

4 shall prescribe by regulation. The screening tool

5 shall be administered in person.

6 ‘‘(d) NOTIFICATION.—Not later than 15 days after

7 the date on which an individual initially applied for serv8 ices under this title (by telephone or written question9 naire), the Screening Agency shall notify such individual

10 that such individual is not eligible for benefits, or that

11 such individuals must schedule an in-person screening to

12 determine final eligibility for benefits under this title. The

13 Screening Agency shall notify such individual of its final

14 decision not later than 2 working days after the in-person

15 screening.

16 ‘‘(e) IN-PERSON SCREENING.—An individual (or the

17 legal guardian or representative of such individual) whose

18 application for benefits under this title is denied on the

19 basis of information provided through a telephone or writ20 ten questionnaire, shall be notified of such individual’s

21 right to an in-person screening by a nurse or appropriate

22 health care professionals.

23 ‘‘(f) APPEALS.—The Secretary shall establish a

24 mechanism for hearings and appeals in cases in which in-
464

•S 2357

1 dividuals contest the eligibility findings of the Screening

2 Agency.

3 ‘‘(g) PAYMENT.—

4 ‘‘(1) PAYMENT FOR SCREENING.—The Screen5 ing Agency may require payment from individuals

6 only in accordance with standards established by the

7 Secretary.

8 ‘‘(2) NO PAYMENT FOR POOREST.—The Screen9 ing Agency may not require payment for individuals

10 with incomes of less than 150 percent of the official

11 poverty line.

12 ‘‘SEC. 2708. ASSET PROTECTION.

13 ‘‘Notwithstanding any other provision of law, the as14 sets an eligible individual may retain and be determined

15 eligible for nursing facility benefits, including payments of

16 room and board under this title, under State Medicaid

17 programs (in accordance with section 1902(a)(10)) shall

18 be increased by the amount of coverage ($30,000,

19 $60,000, or $90,000) elected under section 2702.

20 ‘‘SEC. 2709. RELATION TO PRIVATE INSURANCE.

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

22 (b), an insurer may not offer a long-term care insurance

23 policy to an individual who has purchased coverage under

24 this title if the coverage under such policy duplicates the

25 coverage provided under this title.
465

•S 2357

1 ‘‘(b) DEVELOPMENT OF STANDARD PACKAGES.—The

2 Secretary shall develop standard long-term care insurance

3 benefits packages that insurers may offer to insured indi4 viduals under this title. Such packages shall provide cov5 erage for benefits that compliment, but do not duplicate,

6 those covered under this title.

7 ‘‘SEC. 2710. DEFINITIONS.

8 ‘‘As used in this title:

9 ‘‘(1) NURSING FACILITY.—The term ‘nursing

10 facility’ means—

11 ‘‘(A) a skilled nursing facility (as defined

12 in section 1819(a) of the Social Security Act);

13 or

14 ‘‘(B) a facility that is a nursing facility (as

15 defined in section 1919(a) of such Act) which

16 meets the requirements of section

17 1819(b)(4)(C) of such Act (relating to nursing

18 care).

19 ‘‘(2) SPELL OF ILLNESS.—The term ‘spell of

20 illness’ means a period of consecutive days beginning

21 with the first day on which an individual is fur22 nished services as an inpatient in a hospital or nurs23 ing facility and ending with the close of the first 6

24 consecutive months thereafter during which the indi25 vidual is no longer an inpatient of a nursing facility,
466

•S 2357

1 or 90 days after the individual is no longer an inpa2 tient in a hospital.

3 ‘‘SEC. 2711. REPORTS.

4 ‘‘(a) IN GENERAL.—Prior to the promulgation of reg5 ulations implementing this title, the Secretary shall report

6 to Congress on—

7 ‘‘(1) the actuarially-sound premium rates to be

8 used in the implementation of this Act, including

9 whether the premiums will cover 100 percent of the

10 benefits paid out, and whether Federal funds will be

11 required to support the payment of benefits;

12 ‘‘(2) an assessment of the impact of such pre13 mium rates on the affordability of coverage under

14 this Act;

15 ‘‘(3) a projected enrollment of individuals by

16 age category; and

17 ‘‘(4) an estimate of current and projected en18 rollment of individuals, by age category in coverage

19 under private long-term care insurance.

20 ‘‘(b) LIFE CARE REPORT.—Not later than 2 years

21 after the promulgation of regulations implementing this

22 title, the Secretary shall report to Congress on the follow23 ing aspects of the Life Care Act:

24 ‘‘(1) The current and projected premium rates.
467

•S 2357

1 ‘‘(2) The current and projected enrollment of

2 individuals, by age category and an estimate of cur3 rent and projected enrollment of individuals by age

4 category in private long-term care insurance.

5 ‘‘(3) The projected use of benefits and the im6 pact of use on premium rates.

7 ‘‘(4) An assessment of the impact of projected

8 premium rates on the affordability of coverage under

9 this Act.

10 ‘‘(c) RECOMMENDATIONS.—The Secretary shall make

11 recommendations to Congress regarding necessary revi12 sions to the Life Care Act as a result of the findings pro13 vided in the reports submitted under this section.’’.

14 Subtitle E—Study and Report

15 SEC. 2401. STUDY OF ISSUES RELATED TO END OF LIFE

16 CARE.

17 (a) STUDY.—

18 (1) IN GENERAL.—Within 6 months after the

19 date of the enactment of this Act, the Secretary

20 shall enter into an agreement with the Institute of

21 Medicine of the National Academy of Sciences (or

22 with another nonprofit, nongovernmental organiza23 tion or consortium of institutions if the Institute de24 clines to perform the study) to investigate and re25 port on issues relating to appropriate care at the
468

•S 2357

1 end of life, including how to determine the appro2 priateness of curative or life-prolonging or palliative

3 services for gravely or terminally ill or injured per4 sons of all ages.

5 (2) SPECIFIC ISSUES.—The study described in

6 paragraph (1) shall specifically include an examina7 tion of the following issues:

8 (A) The epidemiology of dying.

9 (B) The feasibility and utility of clinical

10 practice guidelines for appropriate care.

11 (C) Conditions that promote or impede ap12 propriate care (such as professional training

13 and beliefs, financing and organization of serv14 ices, patient and public knowledge and atti15 tudes).

16 (D) Priorities for research on the issues

17 described in the preceding subparagraphs.

18 (E) Concerns of health care practitioners

19 and providers, medical educators, the general

20 public, and those responsible for public and pri21 vate decisions about the organization, financing,

22 and quality of health care in the United States.

23 (b) REPORT.—The Institute of Medicine (or the orga24 nization conducting the study under this section) shall

25 submit to the Secretary and the Congress a report on the
469

•S 2357

1 study described in subsection (a) within 27 months after

2 the date of the enactment of this Act.

3 (c) AUTHORIZATION OF APPROPRIATIONS.—There

4 are authorized to be appropriated such sums as are nec5 essary to carry out the purposes of this section.

6 TITLE III—HEALTH

7 PROFESSIONS WORKFORCE

8 Subtitle A—Workforce Priorities

9 Under Federal Payments

10 SEC. 3000. DEFINITIONS.

11 For purposes of this subtitle:

12 (1) The term ‘‘academic year’’ has the meaning

13 given such term in section 3011(b)(3)(A).

14 (2) The term ‘‘allocation period’’ has the mean15 ing given such term in section 3015(d).

16 (3) The term ‘‘annual number of specialty posi17 tions’’ has the meaning given such term in section

18 3013(g)(1).

19 (4) The term ‘‘approved physician training pro20 gram’’ has the meaning given such term in section

21 3011(b)(1).

22 (5) The term ‘‘consumer price index’’ has the

23 meaning given such term in section 3033(e)(1).

24 (6) The term ‘‘designation period’’ has the

25 meaning given such term in section 3013(g)(2).
470

•S 2357

1 (7) The term ‘‘funding agreement’’ has the

2 meaning given such term in section 3011(b)(3)(B).

3 (8) The term ‘‘general health care inflation fac4 tor’’ has the meaning given such term in section

5 3033(e)(4).

6 (9) The term ‘‘medical school’’ has the meaning

7 given such term in section 3001(e)(2).

8 (10) The term ‘‘medical specialty’’ has the

9 meaning given such term in section 3011(b)(3)(C).

10 (11) The term ‘‘National Council’’ has the

11 meaning given such term in section 3001(e)(3).

12 (12) The term ‘‘primary health care’’ has the

13 meaning given such term in section 3013(g)(3).

14 (13) The term ‘‘qualified applicant’’ has the

15 meaning given such term in section 3011(b)(2), in

16 the case of subpart B; and has the meaning given

17 such term in section 3031(c), in the case of subpart

18 C.

19 (14) The term ‘‘specialty position’’ has the

20 meaning given such term in section 3013(g)(4).

21 (15) The term ‘‘training participant’’ has the

22 meaning given such term in section 3013(g)(5).
471

•S 2357

1 PART 1—INSTITUTIONAL COSTS OF GRADUATE

2 MEDICAL EDUCATION; WORKFORCE PRIORITIES

3 Subpart A—National Council Regarding Workforce

4 Priorities

5 SEC. 3001. NATIONAL COUNCIL ON GRADUATE MEDICAL

6 EDUCATION.

7 (a) IN GENERAL.—There is established within the

8 Department of Health and Human Services a council to

9 be known as the National Council on Graduate Medical

10 Education.

11 (b) DUTIES.—The Secretary shall carry out subpart

12 B acting through the National Council.

13 (c) COMPOSITION.—

14 (1) IN GENERAL.—The membership of the Na15 tional Council shall include between 12 and 16 indi16 viduals who are appointed to the Council from

17 among individuals who are not officers or employees

18 of the United States. Such individuals shall be ap19 pointed by the Secretary, and shall include individ20 uals from each of the following categories in the fol21 lowing proportions:

22 (A) One-quarter composed of consumers of

23 health care services, at least one of whom re24 sides in a rural area.

25 (B) One-quarter composed of primary

26 health care physicians who are faculty members
472

•S 2357

1 of medical schools (including officials of medical

2 schools and executives of teaching hospitals)

3 and primary health care physicians who are

4 practicing and are not faculty members of med5 ical schools, at least one of whom resides in a

6 rural area.

7 (C) One-quarter composed of non-primary

8 health care specialty physicians who are faculty

9 members of medical schools, non-primary health

10 care specialty physicians who are not faculty

11 members of medical schools, officials of medical

12 schools, and executive officers of teaching hos13 pitals.

14 (D) One-quarter composed of officers and

15 employees of health plans, and officers or mem16 bers of purchasing cooperatives.

17 (2) EX OFFICIO MEMBERS; OTHER FEDERAL

18 OFFICERS OR EMPLOYEES.—The membership of the

19 National Council shall include individuals designated

20 by the Secretary to serve as members of the Council

21 from among Federal officers or employees who are

22 appointed by the President, or by the Secretary or

23 other Federal officers who are appointed by the

24 President with the advice and consent of the Senate.
473

•S 2357

1 (d) CHAIR.—The Secretary shall, from among mem2 bers of the National Council appointed under subsection

3 (c)(1), designate an individual to serve as the Chair of

4 the Council.

5 (e) DEFINITIONS.—For purposes of this subtitle:

6 (1) The term ‘‘academic health center’’ means

7 an entity defined in section 3051(c)(1).

8 (2) The term ‘‘medical school’’ means a school

9 of medicine (as defined in section 799 of the Public

10 Health Service Act) or a school of osteopathic medi11 cine (as defined in such section).

12 (3) The term ‘‘National Council’’ means the

13 council established in subsection (a).

14 (f) CONFORMING AMENDMENT REPEALING THE

15 COUNCIL ON GRADUATE MEDICAL EDUCATION

16 (COGME).—Effective on the date of the first meeting of

17 the National Council, section 30 of the Health Professions

18 Education Extension Amendments of 1992 (Public Law

19 102-408) is repealed.

20 Subpart B—Authorized Positions in Specialty

21 Training

22 SEC. 3011. COOPERATION REGARDING APPROVED PHYSI23 CIAN TRAINING PROGRAMS.

24 (a) IN GENERAL.—With respect to an approved phy25 sician training program in a medical specialty, a funding
474

•S 2357

1 agreement with a qualified applicant for payments under

2 section 3031 and section 3051 for a calendar year is that

3 the qualified applicant will ensure that the number of indi4 viduals enrolled in the program in the subsequent aca5 demic year is in accordance with this subpart.

6 (b) DEFINITIONS.—

7 (1) APPROVED PROGRAM.—For purposes of this

8 subtitle:

9 (A) The term ‘‘approved physician training

10 program’’, with respect to the medical specialty

11 involved, means a residency or other post12 graduate program that trains physicians and

13 meets the following conditions:

14 (i) Participation in the program may

15 be counted toward certification in the med16 ical specialty as determined under the ap17 plicable standards of the American Board

18 of Medical Specialties or the Council on

19 Postdoctoral Training of the American Os20 teopathic Association.

21 (ii) The program is accredited by the

22 Accreditation Council on Graduate Medical

23 Education, or approved by the Council on

24 Postdoctoral Training of the American Os25 teopathic Association.
475

•S 2357

1 (B) The term ‘‘approved physician training

2 program’’ includes any postgraduate program

3 described in subparagraph (A) that provides

4 health services in an ambulatory setting, with5 out regard to whether the program provides in6 patient hospital services.

7 (C) The term ‘‘approved physician training

8 program’’ includes any postgraduate program

9 described in subparagraph (A), whether oper10 ated by academic health centers, teaching hos11 pitals, group practices, ambulatory care provid12 ers, prepaid health plans, or other entities.

13 (D) The term ‘‘approved physician training

14 program’’ includes any postgraduate program

15 described in subparagraph (A) that provides fel16 lowship training in family medicine, general in17 ternal medicine or general pediatrics, and pro18 vides training for a faculty position in family

19 medicine, general medicine or general pediat20 rics.

21 (2) QUALIFIED APPLICANT; SUBPART DEFINI22 TION.—For purposes of this subpart, the term

23 ‘‘qualified applicant’’, with respect to an academic

24 year, means an entity that trains individuals in an

25 approved physician program that receives payments
476

•S 2357

1 under subpart C for the calendar year in which the

2 academic year begins.

3 (3) OTHER DEFINITIONS.—For purposes of this

4 subtitle:

5 (A)(i) Except as provided in clause (iii),

6 the term ‘‘academic year’’ means the 1-year pe7 riod beginning on July 1. The academic year

8 beginning July 1, 1993, is academic year 1993–

9 1994.

10 (ii) With respect to the funding agreement

11 described in subsection (a), the term ‘‘subse12 quent academic year’’ means the academic year

13 beginning July 1 of the calendar year for which

14 payments are to be made under the agreement.

15 (iii) For purposes of determining the aca16 demic year in which a training participant en17 ters an approved physician training program,

18 the academic year is the 1-year period begin19 ning on or after June 1.

20 (B) The term ‘‘funding agreement’’, with

21 respect to payments under section 3031 and

22 3051 to a qualified applicant, means that the

23 Secretary may make the payments only if the

24 qualified applicant signs the agreement in25 volved.
477

•S 2357

1 (C) The term ‘‘medical specialty’’ includes

2 all medical, surgical, and other physician spe3 cialties and subspecialties.

4 SEC. 3012. ANNUAL AUTHORIZATION OF TOTAL NUMBER OF

5 GRADUATE MEDICAL EDUCATION POSITIONS.

6 With respect to the numbers designated by the Coun7 cil for individuals entering eligible programs for an aca8 demic year pursuant to section 3011, the Council shall en9 sure that the aggregate number of individuals first enter10 ing any such program for the year does not exceed the

11 following number (expressed as a percentage), as applica12 ble to the academic year involved:

13 (1) For academic year 1998–1999, 134 percent

14 of the number of individuals who graduated from

15 medical schools in the United States in academic

16 year 1997–1998.

17 (2) For academic year 1999–2000, 126 percent

18 of such number.

19 (3) For academic year 2000–2001, 118 percent

20 of such number.

21 (4) For academic year 2001–2002 and each

22 subsequent academic year, 110 percent of such num23 ber, except as provided in section 3014.
478

•S 2357

1 SEC. 3013. ANNUAL AUTHORIZATION OF NUMBER OF SPE2 CIALTY POSITIONS; REQUIREMENTS REGARD3 ING PRIMARY HEALTH CARE.

4 (a) ANNUAL AUTHORIZATION OF NUMBER OF POSI5 TIONS.—In the case of each medical specialty, the Na6 tional Council shall, pursuant to section 3011, designate

7 for academic year 1998–1999 and each subsequent aca8 demic year the number of individuals nationwide who are

9 authorized to be enrolled in eligible programs in each med10 ical specialty for the academic year involved.

11 (b) PRIMARY HEALTH CARE.—

12 (1) REQUIREMENT ACROSS SPECIALITIES.—In

13 carrying out subsection (a) for an academic year, the

14 National Council shall ensure that, of the class of

15 training participants entering all eligible programs

16 for their first year of graduate medical education for

17 academic year 1998–1999 or any subsequent aca18 demic year, the percentage of such class that com19 pletes eligible programs in primary health care and

20 does not subsequently enter a non-primary health

21 care training program, is not less than the following,

22 as applicable to the academic year involved:

23 (A) For academic year 1998–1999, 39 per24 cent.

25 (B) For academic year 1999–2000, 44 per26 cent.
479

•S 2357

1 (C) For academic year 2000–2001, 49 per2 cent.

3 (D) For academic year 2001–2002 and

4 each subsequent academic year, 55 percent, ex5 cept as provided in section 3014.

6 (2) RULE OF CONSTRUCTION.—The require7 ment of paragraph (1) regarding a percentage ap8 plies in the aggregate to training participants enter9 ing eligible programs for the academic year involved,

10 and not individually to any eligible program.

11 (c) DESIGNATIONS REGARDING 3-YEAR PERIODS.—

12 (1) DESIGNATION PERIODS.—For each medical

13 specialty, the National Council shall make the an14 nual designations under subsection (a) for periods of

15 3 academic years.

16 (2) INITIAL PERIOD.—The first designation pe17 riod established by the National Council after the

18 date of the enactment of this Act shall be the aca19 demic years 1998–1999 through 2000–2001.

20 (d) CERTAIN CONSIDERATIONS IN DESIGNATING AN21 NUAL NUMBERS.—

22 (1) IN GENERAL.—Factors considered by the

23 National Council in designating the annual number

24 of specialty positions for an academic year for a

25 medical specialty shall include the extent to which
480

•S 2357

1 there is a need for additional practitioners in the

2 speciality, as indicated by the following:

3 (A) The characteristics of diseases, dis4 orders, or health conditions treated, including—

5 (i) the incidence and prevalence (in

6 the general population and in various other

7 populations) of the diseases, disorders, or

8 other health conditions with which the spe9 cialty is concerned;

10 (ii) the intensity of care required for

11 each of these diseases, disorders, or health

12 conditions;

13 (iii) the relevant training received and

14 experience attained by primary health care

15 and specialist physicians in caring for each

16 of these diseases, disorders, or health con17 ditions; and

18 (iv) should sufficient data become

19 available, the extent to which individuals

20 with certain diseases, disorders, or health

21 conditions have better health outcomes

22 when treated by non-primary health care

23 physicians than by primary health care

24 physicians.
481

•S 2357

1 (B) The number of physicians who will be

2 practicing in the specialty in the academic year.

3 (C) The number of physicians who will be

4 practicing in the specialty at the end of the 5-

5 year period beginning on the first day of the

6 academic year.

7 (D) Whether, after examining medical spe8 cialty requirements, the National Council deter9 mines that specialty is a medical shortage spe10 cialty (as defined by the National Council).

11 (2) RECOMMENDATIONS OF PRIVATE ORGANIZA12 TIONS.—In designating the annual number of spe13 cialty positions for an academic year for a medical

14 specialty, the National Council shall consider the

15 recommendations of organizations representing phy16 sicians in the specialty, organizations representing

17 academic medicine, and the recommendations of or18 ganizations representing consumers of the services of

19 such physicians.

20 (e) VOLUNTARY COMPLIANCE.—

21 (1) ESTABLISHMENT OF THE POSITIONS FOR

22 FIRST DESIGNATION PERIOD.—Not later than June

23 1, 1996, the National Council shall establish the

24 number of positions in each medical specialty that

25 will be allocated under subsection (a) for the aca-
482

•S 2357

1 demic years 1998–1999, 1999–2000, and 2000–

2 2001.

3 (2) VOLUNTARY COMPLIANCE.—A medical spe4 cialty shall not be subject to the mandatory alloca5 tion system described in section 3015 if—

6 (A) by June 1, 1997, each eligible ap7 proved physician training program has submit8 ted to the National Council a proposal for first

9 year positions in approved physician training

10 programs in that particular medical specialty

11 for the academic years 1998–99, 1999–2000,

12 and 2000–2001 and the total proposed number

13 of all such positions for the specialty does not

14 exceed the number of positions established for

15 such specialty under paragraph (1) for each

16 such academic year; and

17 (B) in subsequent academic years, the

18 total proposed number of first year positions in

19 approved physician training programs in that

20 particular medical specialty does not exceed the

21 number of individuals nationwide who are au22 thorized to be enrolled in approved medical

23 training programs for such medical specialty for

24 such year pursuant to subsection (a).
483

•S 2357

1 (3) LOSS OF COMPLIANCE.—The National

2 Council may, at any time, determine that a specialty

3 is not in compliance with the number of positions es4 tablished by the Council under paragraph (1) or

5 subsection (a) and initiate, with respect to that spe6 cialty, the system of mandatory allocations described

7 in section 3015.

8 (f) STUDY.—Not later than January 1, 2005, the

9 Secretary shall arrange for the completion, by the Insti10 tute of Medicine or other similar entity, of an independent

11 study concerning the effect of medical workforce regula12 tion and planning in general and in particular geographic

13 areas. The results of such study together with rec14 ommendations concerning the appropriateness of modify15 ing or eliminating workforce regulations shall be compiled

16 in a report and transmitted by the Secretary to the Presi17 dent and the Congress.

18 (g) DEFINITIONS.—For purposes of this subtitle:

19 (1) The term ‘‘annual number of specialty posi20 tions’’, with respect to a medical specialty, means

21 the number designated by the National Council

22 under subsection (a) for eligible programs for the

23 academic year involved.

24 (2) The term ‘‘designation period’’ means a 3-

25 year period under subsection (c)(1) for which des-
484

•S 2357

1 ignations under subsection (a) are made by the Na2 tional Council.

3 (3) The term ‘‘primary health care’’ means the

4 following medical specialties: Family medicine, gen5 eral internal medicine, general pediatrics, geriatric

6 medicine, and obstetrics and gynecology. Only those

7 participants in programs with a significant primary

8 care training emphasis will be considered to have

9 completed an eligible program in primary care for

10 the purposes of subsection (b)(1). Determination of

11 the meaning of a ‘‘significant primary care training

12 emphasis’’ will be made by the National Council.

13 (4) The term ‘‘specialty position’’ means a posi14 tion as a training participant.

15 (5) The term ‘‘training participant’’ means an

16 individual who is enrolled in an approved physician

17 training program.

18 SEC. 3014. NATIONAL COUNCIL RECOMMENDATION OF

19 NUMBER OF GRADUATE MEDICAL EDU20 CATION POSITIONS.

21 (a) IN GENERAL.—

22 (1) RECOMMENDATIONS.—Beginning with aca23 demic year 2001-2002 and each subsequent aca24 demic year, the National Council may after consider-
485

•S 2357

1 ing the factors described in paragraph (2) annually

2 recommend to the Secretary a change in—

3 (A) the aggregate number of all training

4 participants entering the first year of graduate

5 medical education training in approved physi6 cian training programs nationwide determined

7 under section 3012(4); and

8 (B) in accordance with subsection (b), the

9 distribution of positions among medical special10 ties determined under section 3013(a) and

11 3013(b)(1)(D).

12 (2) FACTORS FOR CONSIDERATION.—In devel13 oping a recommendation under paragraph (1), the

14 Secretary shall consider the impact on rural, inner

15 city, and public hospitals of reducing numbers of in16 dividuals authorized to enter approved physician

17 training programs and the appropriate supply of

18 physicians in the aggregate and in particular medi19 cal specialties.

20 (b) LIMITATIONS ON RECOMMENDED PERCENT FOR

21 PRIMARY CARE FOR ACADEMIC YEAR 2001–2002.—For

22 the academic year 2001–2002, the number that the Na23 tional Council may recommend under subsection (a)(1)(B)

24 may not be more than 5 percentage points less or 5 per-
486

•S 2357

1 centage points more than the number described in section

2 3013(b)(1)(D).

3 (c) CONSIDERATION AND IMPLEMENTATION BY THE

4 SECRETARY.—The Secretary shall in the Secretary’s dis5 cretion implement the recommendations by the National

6 Council under subsection (a) in accordance with sections

7 3012 and 3013(b)(1). The Secretary may not modify such

8 recommendations.

9 SEC. 3015. ALLOCATIONS AMONG SPECIALITIES AND PRO10 GRAMS.

11 (a) IN GENERAL.—Subject to the provisions of sec12 tions 3012 and 3013, for each academic year, the National

13 Council shall for each medical specialty make allocations

14 among eligible programs of the annual number of specialty

15 positions that the Council has designated for such year.

16 The preceding sentence is subject to subsection (b)(3).

17 (b) ALLOCATIONS REGARDING 3-YEAR PERIOD.—

18 (1) IN GENERAL.—For each medical specialty,

19 the National Council shall make the annual alloca20 tions under subsection (a) for periods of 3 academic

21 years.

22 (2) ADVANCE NOTICE TO PROGRAMS.—With re23 spect to the first academic year of an allocation pe24 riod established by the National Council, the Na25 tional Council shall, not later than July 1 of the pre-
487

•S 2357

1 ceding academic year, notify each eligible program of

2 the allocations made for the program for each of the

3 academic years of the period.

4 (3) INITIAL PERIOD.—The first allocation pe5 riod established by the National Council after the

6 date of the enactment of this Act shall be the aca7 demic years 1998–1999 through 2000–2001.

8 (c) CERTAIN CONSIDERATIONS.—

9 (1) GEOGRAPHIC AREAS.—In making alloca10 tions under subsection (a) for eligible programs of

11 the various geographic areas, the National Council

12 shall include among the factors considered the—

13 (A) distribution of approved physician

14 training programs with respect to population

15 and community need; and

16 (B) historical distribution of approved phy17 sician training programs among the geographic

18 areas.

19 (2) QUALITY OF PROGRAMS.—In making alloca20 tions under subsection (a) for eligible programs, the

21 National Council shall consider the quality of such

22 programs.

23 (3) UNDERREPRESENTATION OF MINORITY

24 GROUPS AND WOMEN.—In making an allocation

25 under subsection (a) for an eligible program, the
488

•S 2357

1 National Council shall include among the factors

2 considered the following:

3 (A) The extent to which the population of

4 training participants in the program includes

5 training participants who are members of racial

6 or ethnic minority groups and women.

7 (B) With respect to a racial or ethnic

8 group or women represented among the train9 ing participants, the extent to which the group

10 is underrepresented in the field of medicine

11 generally and in the various medical specialities.

12 (4) UNDERSERVED RURAL AND INNER-CITY

13 COMMUNITIES.—In making allocations under sub14 section (a) for eligible programs, the National Coun15 cil shall consider the extent to which the population

16 of training participants in the program includes

17 training participants who have resided in rural or

18 inner-city communities for a substantial period, as

19 defined by the Council and the proportion of past

20 participants in the program who are practicing in

21 rural or inner-city communities.

22 (5) RECOMMENDATIONS OF PRIVATE ORGANIZA23 TIONS.—In making allocations under subsection (a)

24 for eligible programs, the National Council shall con25 sider the recommendations of organizations rep-
489

•S 2357

1 resenting physicians in the medical specialties, the

2 recommendations of organizations representing aca3 demic medicine and the recommendations of organi4 zations representing consumers of the services of

5 such physicians.

6 (d) DEFINITIONS.—For purposes of this subtitle, the

7 term ‘‘allocation period’’ means a 3-year period under sub8 section (b)(1) for which allocations under subsection (a)

9 are made by the National Council.

10 Subpart C—Costs of Graduate Medical Education

11 CHAPTER 1—OPERATION OF APPROVED

12 PHYSICIAN TRAINING PROGRAMS

13 SEC. 3031. FEDERAL FORMULA PAYMENTS TO QUALIFIED

14 ENTITIES FOR THE COSTS OF THE OPER15 ATION OF APPROVED PHYSICIAN TRAINING

16 PROGRAMS.

17 (a) IN GENERAL.—In the case of a qualified entity

18 that in accordance with section 3032 submits to the Sec19 retary an application for calendar year 1997 or any subse20 quent calendar year, the Secretary shall make payments

21 for such year to the qualified entity for the purpose speci22 fied in subsection (b). The Secretary shall make the pay23 ments in an amount determined in accordance with section

24 3033 and 3034, and may administer the payments as a

25 contract, grant, or cooperative agreement.
490

•S 2357

1 (b) PAYMENTS FOR OPERATION OF APPROVED PHY2 SICIAN TRAINING PROGRAMS.—The purpose of payments

3 under subsection (a) is to assist a qualified applicant with

4 the costs of operation of an approved physician training

5 program. A funding agreement for such payments is that

6 the qualified applicant involved will expend the payments

7 only for such purpose or for such other related purposes

8 as the Secretary may authorize.

9 (c) QUALIFIED APPLICANT; SUBPART DEFINITION.—

10 (1) IN GENERAL.—For purposes of this sub11 part, the term ‘‘qualified applicant’’, with respect to

12 the calendar year involved, means an entity—

13 (A) that trains individuals in approved

14 physician training programs; and

15 (B) that submits to the Secretary an appli16 cation for such year in accordance with section

17 3032.

18 (2) ENTITIES INCLUDED.—The term ‘‘qualified

19 applicant’’ may include an approved physician train20 ing program, teaching hospital, medical school,

21 group practice, an entity representing two or more

22 parties engaged in a formal association, a commu23 nity health center or another entity operating an ap24 proved physician training program.
491

•S 2357

1 (d) TREATMENT OF PODIATRIC AND DENTAL RESI2 DENCY PROGRAMS.—Except as provided in section 3034,

3 for the purposes of this subpart, an approved physician

4 training program includes training programs approved by

5 the Commission on Dental Accreditation or the Council

6 of Podiatric Medical Education of the American Podiatric

7 Medical Association. This subsection shall not apply for

8 purposes of subpart B.

9 SEC. 3032. APPLICATION FOR PAYMENTS.

10 (a) IN GENERAL.—

11 (1) IN GENERAL.—For purposes of section

12 3031(a), an application for payments under such

13 section for a calendar year is in accordance with this

14 section if—

15 (A) the eligible entity involved submits the

16 application not later than the date specified by

17 the Secretary;

18 (B) the application demonstrates that the

19 condition described in subsection (b) is met

20 with respect to the program;

21 (C) the application contains each funding

22 agreement described in this part and the appli23 cation provides such assurances of compliance

24 with the agreements as the Secretary may re25 quire; and
492

•S 2357

1 (D) the application is in such form, is

2 made in such manner, and contains such agree3 ments, assurances, and information as the Sec4 retary determines to be necessary to carry out

5 this part.

6 (2) CERTAIN ENTITIES.—If an applicant under

7 paragraph (1) is an entity representing two or more

8 parties—

9 (A) the application shall contain a written

10 agreement, signed by all participants, in which

11 all of the participants agree as to the manner

12 in which the payments will be allocated; and

13 (B) the applicant shall agree to submit ad14 ditional documentation, if requested by the Na15 tional Council, that demonstrates that the

16 funds are distributed in the manner agreed

17 upon by all participants.

18 (b) CERTAIN CONDITIONS.—An eligible entity meets

19 the condition described in this subsection for receiving

20 payments under section 3031 for a calendar year if—

21 (1) the entity agrees to use such funds only to

22 support an approved physician training program;

23 (2) with respect to—

24 (A) a specialty for which programs have

25 received allocations under section 3015, the en-
493

•S 2357

1 tity agrees that funds will be used only to sup2 port approved training programs for which the

3 number of specialists in training is consistent

4 with the allotment under section 3015; and

5 (B) a specialty for which a voluntary pro6 gram has received allocations under section

7 3013(e), the entity agrees that funds will only

8 be used to support approved training programs

9 for which the number of specialists in training

10 is consistent with the allocations under section

11 3015(e); and

12 (3) the entity notifies each residency training

13 program director of each approved physician train14 ing program operated by the entity of the amount of

15 payments received by the entity under this section

16 and sections 3051 and 3055 that is attributable to

17 the number of training participants in the program.

18 (c) RESIDENCY TRAINING PROGRAM DIRECTOR.—

19 For purposes of this section, the term ‘‘residency training

20 program director’’ means an individual specified in the ap21 plication of the entity as the official with primary adminis22 trative responsibility for an approved physician training

23 program.
494

•S 2357

1 SEC. 3033. AVAILABILITY OF FUNDS FOR PAYMENTS; AN2 NUAL AMOUNT OF PAYMENTS.

3 (a) GRADUATE MEDICAL EDUCATION ACCOUNT.—

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

5 and except as provided in section 3034, the following

6 amounts shall be available for a calendar year for

7 making payments under sections 3031 and 3055

8 from the Graduate Medical Education Account es9 tablished under section 9551(a)(2)(A) of the Inter10 nal Revenue Code of 1986:

11 (A) In the case of calendar year 1997,

12 $3,200,000,000.

13 (B) In the case of calendar year 1998,

14 $3,550,000,000.

15 (C) In the case of calendar year 1999,

16 $5,800,000,000.

17 (D) In the case of each of calendar years

18 2000 and 2001, $5,800,000,000.

19 (E) In the case of each subsequent cal20 endar year, the amount specified in subpara21 graph (C) increased by the product of such

22 amount and the general health care inflation

23 factor for such year (as defined in subsection

24 (e)).

25 (2) TRANSITIONAL PROVISION.—
495

•S 2357

1 (A) IN GENERAL.—With respect to making

2 payments under sections 3031 and 3055 for

3 calendar year 1997 or 1998, the Secretary shall

4 first make payments under section 3031 to eli5 gible programs described in subparagraph (B)

6 in the amount determined for the programs

7 under subsection (b) for such year, and then,

8 from such amounts as remain available under

9 paragraph (1) for such year, shall make pay10 ments under section 3031 to other eligible pro11 grams and shall make payments under section

12 3055.

13 (B) PARTICIPATING STATE.—An eligible

14 program described in this subparagraph is such

15 a program that is operated in a State that is

16 a participating State under title I.

17 (b) AMOUNT OF PAYMENTS FOR INDIVIDUAL ELIGI18 BLE ENTITIES.—

19 (1) IN GENERAL.—Except as provided in sec20 tion 3034, payment amounts with respect to any

21 physician training program under this section shall

22 be equal to the product of the number of full time

23 equivalent training participants in the program, and

24 the per resident amount for the training program.

25 (2) PER RESIDENT AMOUNT.—
496

•S 2357

1 (A) IN GENERAL.—Except as provided

2 under subparagraph (B), the per resident

3 amount for a training program shall be equal

4 to—

5 (i) with respect to—

6 (I) the first calendar year during

7 which the program receives payment

8 under subsection (a), 90 percent;

9 (II) the second calendar year

10 during which the program receives

11 payment under subsection (a), 80 per12 cent;

13 (III) the third calendar year dur14 ing which the program receives pay15 ment under subsection (a), 70 per16 cent;

17 (IV) the fourth calendar year

18 during which the program receives

19 payment under subsection (a), 60 per20 cent; and

21 (V) the fifth and subsequent cal22 endar year during which the program

23 receives payment under subsection

24 (a), 50 percent;
497

•S 2357

1 of the approved FTE resident amount that

2 would have been determined under section

3 1886(h)(2)(D) of the Social Security Act

4 (42 U.S.C. 1395ww(h)(2)(D)) for the hos5 pital operating such approved physician

6 training program for a cost reporting pe7 riod beginning in such calendar year if the

8 amendments made by section 4306 of the

9 Health Security Act had not been made;

10 and

11 (ii) with respect to—

12 (I) the first calendar year during

13 which the program receives payment

14 under subsection (a), 10 percent;

15 (II) the second calendar year

16 during which the program receives

17 payment under subsection (a), 20 per18 cent;

19 (III) the third calendar year dur20 ing which the program receives pay21 ment under subsection (a), 30 per22 cent;

23 (IV) the fourth calendar year

24 during which the program receives
498

•S 2357

1 payment under subsection (a), 40 per2 cent; and

3 (V) the fifth and subsequent cal4 endar years during which the program

5 receives payment under subsection

6 (a), 50 percent;

7 of the geographically adjusted national av8 erage per resident amount.

9 (B) MINIMUM PER RESIDENT AMOUNT.—

10 Notwithstanding the provisions of subparagraph

11 (A), the per resident amount for a training pro12 gram shall not be less than 75 percent of the

13 geographically adjusted national average per

14 resident amount determined in accordance with

15 subparagraph (A)(ii).

16 (C) NO HISTORIC PAYMENT BASIS.—For

17 purposes of subparagraph (A)(i), the Secretary

18 shall determine the appropriate per resident

19 amount applicable to an entity that—

20 (i) has an approved physician training

21 program that sponsored or is affiliated

22 with more than one hospital that had a per

23 resident amount determined under section

24 1886(h) of the Social Security Act which
499

•S 2357

1 reflects the average per resident amounts

2 under such section for such hospitals; or

3 (ii) is an institution that did not have

4 a per resident amount determined under

5 such section for cost reporting periods be6 ginning before 1996 which reflects the na7 tional average per resident amount.

8 (3) ADJUSTMENT FACTOR.—Payments under

9 this section shall be subject to an adjustment factor,

10 as determined by the Secretary, so that total pay11 ments in any year will not exceed the amounts speci12 fied in subsection (a) and as provided in subsection

13 (d).

14 (4) ADDITIONAL PROVISIONS REGARDING NA15 TIONAL AVERAGE COST.—

16 (A) DETERMINATION OF NATIONAL AVER17 AGE COST.—The Secretary shall in accordance

18 with clause (ii) of subsection (b)(2)(A) deter19 mine, for academic year 1992–1993, an amount

20 equal to the geographically adjusted national

21 average per resident amount described in such

22 clause with respect to training a participant in

23 an approved physician training program. The

24 national average applicable under such clause

25 for a calendar year for such programs is, sub-
500

•S 2357

1 ject to subparagraph (B), the amount deter2 mined under the preceding sentence increased

3 by the amount necessary to offset the effects of

4 inflation occurring since academic year 1992–

5 1993, as determined through use of the

6 consumer price index.

7 (B) GEOGRAPHIC ADJUSTMENT.—The na8 tional average determined under subparagraph

9 (A) and applicable to a calendar year shall, in

10 the case of the eligible entity involved, be ad11 justed by a factor to reflect regional differences

12 in the applicable wage and wage-related costs.

13 (5) FUNDING LEVEL AND ALLOCATION METH14 OD.—Not later than January 1, 1998, the Secretary

15 shall complete a study to determine the effect and

16 appropriateness of the funding level and allocation

17 method described in subsection (a) and paragraphs

18 (1), (2), (3), and (4) of this subsection on the oper19 ation of training programs and on national

20 workforce goals and shall compile the findings and

21 recommendations derived from such study in a re22 port to be submitted to the President and the Con23 gress.

24 (c) DETERMINATION OF FULL-TIME-EQUIVALENT

25 TRAINING PARTICIPANTS.—
501

•S 2357

1 (1) RULES.—The Secretary shall establish rules

2 consistent with this subsection for the computation

3 of the number of full-time-equivalent training par4 ticipants in approved physician training programs

5 under subsection (b)(1).

6 (2) ADJUSTMENT FOR PART-YEAR OR PART7 TIME TRAINING PARTICIPANTS.—Such rules shall

8 take into account individuals who serve as training

9 participants for only a portion of a period in an ap10 proved physician training program or simultaneously

11 with more than one such program.

12 (3) WEIGHTING FACTORS FOR CERTAIN TRAIN13 ING PARTICIPANTS.—

14 (A) IN GENERAL.—Subject to paragraph

15 (4), such rules shall provide, in calculating the

16 number of full-time-equivalent training partici17 pants in an approved physician training pro18 gram—

19 (i) for a training participant who is in

20 the participant’s initial training period, the

21 weighting factor is 1.00,

22 (ii) except as provided in clause (iii),

23 for a training participant who is not in the

24 participant’s initial training period, the

25 weighting factor is 0.75, and
502

•S 2357

1 (iii) in an academic year in which the

2 total number of training participant posi3 tions in all approved physician training

4 programs does not exceed—

5 (I) 134 percent of United States

6 medical school graduates in academic

7 year 1997–1998, the weighting factor

8 for a training participant who is not

9 in the training participant’s initial

10 training period is 0.70;

11 (II) 126 percent of United States

12 medical school graduates in academic

13 year 1997–1998, the weighting factor

14 for such a participant is 0.90;

15 (III) 118 percent of United

16 States medical school graduates in

17 1997–1998, the weighting factor for

18 such a participant is 0.95 percent;

19 and

20 (IV) 110 percent of United

21 States medical school graduates in

22 academic year 1997–1998, the

23 weighting factor for such a partici24 pant, the weighting factor is 1.0.
503

•S 2357

1 (B) STUDY.—Not later than January 1,

2 1998, the Secretary shall complete a study to

3 determine the effect that applying weighting

4 factors in calculating the number of full-time5 equivalent training participants would have on

6 supporting national workforce goals.

7 (4) INTERNATIONAL MEDICAL GRADUATES RE8 QUIRED TO PASS FMGEMS EXAMINATION.—Such

9 rules shall provide that, in the case of an individual

10 who is an international medical graduate, the indi11 vidual shall not be counted as a training participant

12 unless—

13 (A) the individual has passed the

14 FMGEMS examination or the U.S. Medical Li15 censing Examination, or

16 (B) the individual has previously received

17 certification from, or has previously passed the

18 examination of, the Educational Commission for

19 Foreign Medical Graduates.

20 (5) COUNTING TIME SPENT IN OUTPATIENT

21 SETTINGS.—Such rules shall provide that only time

22 spent in activities relating to patient care shall be

23 counted and that all the time so spent by a training

24 participant under an approved physician training

25 program shall be counted towards the determination
504

•S 2357

1 of full-time equivalency, without regard to the set2 ting in which the activities are performed.

3 (d) LIMITATION.—Subject to subsection (a), if the

4 amount available from the Graduate Medical Education

5 Account established under section 9551(a)(2)(A) of the

6 Internal Revenue Code of 1986 for a calendar year is in7 sufficient for providing each eligible entity with the

8 amount of payments determined under subsection (b) for

9 the entity for such year, the Secretary shall make such

10 pro rata reductions in the amounts so determined as may

11 be necessary to ensure that the total of payments made

12 under section 3031 for such year equals the amount speci13 fied under section 3033(a).

14 (e) DEFINITIONS.—For purposes of this subtitle:

15 (1) CONSUMER PRICE INDEX.—The term

16 ‘‘consumer price index’’ means the Consumer Price

17 Index for All Urban Consumers (U.S. city average).

18 (2) INTERNATIONAL MEDICAL GRADUATE.—The

19 term ‘‘international medical graduate’’ means a

20 training participant who is a graduate of a school of

21 medicine, school of osteopathy, school of dentistry,

22 or school of podiatry that is not—

23 (A) a school of medicine accredited by the

24 Liaison Committee on Medical Education of the

25 American Medical Association and the Associa-
505

•S 2357

1 tion of American Medical Colleges (or approved

2 by such Committee as meeting the standards

3 necessary for such accreditation),

4 (B) a school of osteopathic medicine ac5 credited by the American Osteopathic Associa6 tion, or approved by such Association as meet7 ing the standards necessary for such accredita8 tion,

9 (C) a school of dentistry which is accred10 ited by the Commission on Dental Accredita11 tion, or

12 (D) a school of podiatric medicine which is

13 accredited by the Council of Podiatric Medical

14 Education of the American Podiatric Medical

15 Association.

16 (3) FMGEMS EXAMINATION.—The term

17 ‘‘FMGEMS examination’’ means parts I and II of

18 the Foreign Medical Graduate Examination in the

19 Medical Sciences or any successor examination rec20 ognized by the Secretary for this purpose.

21 (4) GENERAL HEALTH CARE INFLATION FAC22 TOR.—(A) The term ‘‘general health care inflation

23 factor’’, with respect to a year, means the percent24 age increase in the consumer price index for the year

25 plus the following:
506

•S 2357

1 (i) For 1997, 1.0 percentage points.

2 (ii) For 1998, 0.5 percentage points.

3 (iii) For 1999 and for 2000, 0 percentage

4 points.

5 (B) YEARS AFTER 2000.—

6 (i) RECOMMENDATION TO CONGRESS.—In

7 1999, the Secretary shall submit to Congress

8 recommendations, after consultation with the

9 Federal Reserve Board, on what the general

10 health care inflation factor should be for years

11 beginning with 2001.

12 (ii) FAILURE OF CONGRESS TO ACT.—If

13 the Congress fails to enact a law specifying the

14 general health care inflation factor for a year

15 after 2000, the Secretary, in January of the

16 year before the year involved, shall compute

17 such factor for the year involved. Such factor

18 shall be the product of the factors described in

19 subparagraph (C) for that fiscal year, minus 1.

20 (iii) STUDY BY FEDERAL RESERVE

21 BOARD.—Not later than January 1, 1999, the

22 Federal Reserve Board shall conduct a study,

23 and report to the Secretary, concerning what

24 the general health care inflation factor should

25 be for years beginning with 2001. Such study
507

•S 2357

1 shall consider whether continued indexing with

2 respect to such factor is advisable and whether

3 the consumer price index should be used (in

4 whole or in part, modified or unmodified) with

5 respect to premium caps for future years. The

6 recommendations of the Federal Reserve Board

7 under such study shall be considered in the rec8 ommendations submitted under clause (i).

9 (C) FACTORS.—The factors described in this

10 subparagraph for a year are the following:

11 (i) CPI.—1 plus the percentage change in

12 the CPI for the year, determined based upon

13 the percentage change in the average of the

14 CPI for the 12-month period ending with Au15 gust 31 of the previous fiscal year over such av16 erage for the preceding 12-month period.

17 (ii) REAL GDP PER CAPITA.—1 plus the

18 average annual percentage change in the real,

19 per capita gross domestic product of the United

20 States during the 3-year period ending in the

21 preceding calendar year, determined by the Sec22 retary based on data supplied by the Depart23 ment of Commerce.
508

•S 2357

1 (5) INITIAL TRAINING PERIOD.—The term ‘‘ini2 tial training period’’ means the period of time re3 quired for board eligibility, except that—

4 (A) except as provided in subparagraph

5 (B), in no case shall the initial period of partici6 pation exceed an aggregate period of formal

7 training of more than 5 years for any individ8 ual, and

9 (B) a period, of not more than 2 years,

10 during which an individual is in a—

11 (i) residency or fellowship program in

12 geriatric medicine, preventive medicine, or

13 adolescent medicine, or

14 (ii) a fellowship program in family

15 medicine, general internal medicine or gen16 eral pediatrics, which provides training for

17 a faculty position in family medicine, gen18 eral internal medicine or general pediat19 rics,

20 shall be treated as part of the initial training

21 participation period, but shall not be counted

22 against any limitation on the initial training pe23 riod.

24 The initial training period shall be determined, with

25 respect to a training participant, as of the time the
509

•S 2357

1 training participant enters any approved physician

2 training program.

3 (6) PERIOD OF TIME REQUIRED FOR BOARD

4 ELIGIBILITY.—

5 (A) GENERAL RULE.—Subject to subpara6 graphs (B) and (C), the term ‘‘period of time

7 required for board eligibility’’ means, for a

8 training participant, the minimum number of

9 years of formal training necessary to satisfy the

10 requirements for initial board eligibility in the

11 particular specialty for which the training par12 ticipant is training.

13 (B) APPLICATION OF 1985–1986 DIREC14 TORY.—Except as provided in subparagraph

15 (C), the period of time required for board eligi16 bility shall be such period specified in the

17 1985–1986 Directory of Residency Training

18 Programs published by the Accreditation Coun19 cil on Graduate Medical Education or a more

20 current version of such Directory or the equiva21 lent directory regarding postdoctoral training

22 for osteopathic physician training programs.

23 (C) CHANGES IN PERIOD OF TIME RE24 QUIRED FOR BOARD ELIGIBILITY.—If the Ac25 creditation Council on Graduate Medical Edu-
510

•S 2357

1 cation, in its Directory of Residency Training

2 Programs or the equivalent directory regarding

3 postdoctoral training for osteopathic physician

4 training programs—

5 (i) increases the minimum number of

6 years of formal training necessary to sat7 isfy the requirements for a specialty, above

8 the period specified in its 1985–1986 Di9 rectory, the Secretary may increase the pe10 riod of time required for board eligibility

11 for that specialty, but not to exceed the pe12 riod of time required for board eligibility

13 specified in that later Directory, or

14 (ii) decreases the minimum number of

15 years of formal training necessary to sat16 isfy the requirements for a specialty, below

17 the period specified in its 1985–1986 Di18 rectory, the Secretary may decrease the pe19 riod of time required for board eligibility

20 for that specialty, but not below the period

21 of time required for board eligibility speci22 fied in that later Directory.
511

•S 2357

1 SEC. 3034. PAYMENTS FOR DENTAL AND PODIATRIC POSI2 TIONS.

3 (a) IN GENERAL.—Except as provided in subsections

4 (b) and (c), the provisions of this chapter shall apply with

5 respect to dental and podiatric medicine training pro6 grams.

7 (b) LIMITATION.—Subject to the amount made avail8 able under section 3033(a), the aggregate amount avail9 able for making payments to all approved physician train10 ing programs in dentistry and podiatric medicine may not

11 exceed $200,000,000 in any calendar year.

12 (c) PAYMENT METHODOLOGY.—The Secretary shall

13 determine the amount to be paid to approved dental and

14 podiatric training programs on the basis of a methodology

15 to be developed by the Secretary that is equivalent to the

16 methodology described in section 3033(b)(5).

17 CHAPTER 2—ACADEMIC HEALTH CEN18 TERS AND OTHER ELIGIBLE INSTITU19 TIONS

20 SEC. 3051. FEDERAL FORMULA PAYMENTS TO ACADEMIC

21 HEALTH CENTERS AND OTHER ELIGIBLE IN22 STITUTIONS.

23 (a) IN GENERAL.—In the case of an eligible institu24 tion that in accordance with section 3052 submits to the

25 Secretary a written request for calendar year 1997 or any

26 subsequent calendar year, the Secretary shall make pay-
512

•S 2357

1 ments for such year to the eligible institution for the pur2 pose specified in subsection (b). The Secretary shall make

3 the payments in an amount determined in accordance with

4 section 3053, and may administer the payments as a con5 tract, grant, or cooperative agreement.

6 (b) PAYMENTS FOR COSTS INCURRED BY ELIGIBLE

7 INSTITUTIONS.—

8 (1) COSTS ATTRIBUTABLE TO ACADEMIC NA9 TURE OF INSTITUTIONS.—With respect to an eligible

10 institution that is a qualified academic health center

11 or a qualified teaching hospital, the purpose of pay12 ments under subsection (a) is to assist such institu13 tions with costs that are not routinely incurred by

14 other entities in providing health services, but are

15 incurred by such institutions in providing health

16 services by virtue of the academic nature of such in17 stitutions. Such costs include—

18 (A) with respect to productivity in the pro19 vision of health services, costs resulting from

20 the reduced rate of productivity of faculty due

21 to teaching responsibilities;

22 (B) the uncompensated costs of clinical re23 search; and

24 (C) exceptional costs associated with the

25 treatment of health conditions with respect to
513

•S 2357

1 which an eligible institution has specialized ex2 pertise (including treatment of rare diseases,

3 treatment of unusually severe conditions, and

4 providing other specialized health care).

5 (2) HIGH INTENSITY NONTEACHING RURAL

6 HOSPITAL.—With respect to an eligible institution

7 that is a high intensity nonteaching rural hospital,

8 the purpose of payments under subsection (a) is to

9 assist the institution with the costs of treating a

10 substantial number of severely ill patients.

11 (c) DEFINITIONS.—

12 (1) ACADEMIC HEALTH CENTER.—For purposes

13 of this subtitle, the term ‘‘academic health center’’

14 means an entity that operates a teaching hospital

15 that sponsors or is affiliated with an approved physi16 cian training program.

17 (2) ELIGIBLE INSTITUTION.—For purposes of

18 this subtitle, the term ‘‘eligible institution’’, with re19 spect to a calendar year, means a qualified academic

20 health center, qualified teaching hospital, or high in21 tensity nonteaching rural hospital that submits to

22 the Secretary a written request in accordance with

23 section 3052.

24 (3) HIGH INTENSITY NONTEACHING RURAL

25 HOSPITAL.—For purposes of this subtitle, the term
514

•S 2357

1 ‘‘high intensity nonteaching rural hospital’’ means a

2 nonteaching hospital located in a rural area as de3 fined in section 1886(d)(2)(D) of the Social Security

4 Act (42 U.S.C. 1395ww(d)(2)(D)) that the Sec5 retary determines has a case-mix index (defined as

6 the average weight of all cases in the hospital for all

7 diagnosis-related groups as determined in accord8 ance with section 1886(d)(4) of such Act (42 U.S.C.

9 1395ww(d)(4)) of greater than 120 percent of the

10 national average case-mix index for all rural hos11 pitals.

12 (4) QUALIFIED CENTER OR HOSPITAL.—For

13 purposes of this subtitle:

14 (A) The term ‘‘qualified academic health

15 center’’ means an academic health center that

16 operates a teaching hospital.

17 (B) The term ‘‘qualified teaching hospital’’

18 means any teaching hospital other than a teach19 ing hospital that is operated by an academic

20 health center.

21 (5) TEACHING HOSPITAL.—For purposes of this

22 subtitle, the term ‘‘teaching hospital’’ means a hos23 pital that sponsors or is affiliated with an approved

24 physician training program (as defined in section

25 3011(b) or section 3031(d)).
515

•S 2357

1 SEC. 3052. REQUEST FOR PAYMENTS.

2 (a) IN GENERAL.—For purposes of section 3051, a

3 written request for payments under such section is in ac4 cordance with this section if—

5 (1) the eligible institution involved submits the

6 request not later than the date specified by the Sec7 retary;

8 (2) the request is accompanied by each funding

9 agreement described in this part; and

10 (3) the request is in such form, is made in such

11 manner, and contains such agreements, assurances,

12 and information as the Secretary determines to be

13 necessary to carry out this part.

14 (b) CONTINUED STATUS AS ELIGIBLE INSTITU15 TION.—A funding agreement for payments under section

16 3051 is that the eligible institution involved will maintain

17 status as such an eligible institution. For purposes of this

18 subtitle, the term ‘‘funding agreement’’, with respect to

19 payments under section 3051 to such an eligible institu20 tion, means that the Secretary may make the payments

21 only if the eligible institution makes the agreement in22 volved.

23 (c) COMPLIANCE WITH SPECIALTY ALLOCATIONS.—

24 A funding agreement for payments under section 3051 is

25 that an eligible institution that operates or is affiliated

26 with an approved physician training program shall receive
516

•S 2357

1 such payments only if the number of specialists in such

2 a program is consistent with the allotment under section

3 3015 or 3013(e).

4 SEC. 3053. AVAILABILITY OF FUNDS FOR PAYMENTS; AN5 NUAL AMOUNT OF PAYMENTS.

6 (a) ANNUAL ACADEMIC HEALTH CENTER AC7 COUNT.—

8 (1) AVAILABILITY OF FUNDS FROM ACCOUNT.—

9 Except as provided in paragraph (2), the following

10 amounts shall be available for a calendar year for

11 making payments under section 3051 from the Aca12 demic Health Center Account established under sec13 tion 9551(a)(2)(B) of the Internal Revenue Code of

14 1986 is the following, as applicable to the calendar

15 year:

16 (A) In the case of calendar year 1997,

17 $6,280,000,000.

18 (B) In the case of calendar year 1997,

19 $7,250,000,000.

20 (C) In the case of calendar year 1997,

21 $8,220,000,000.

22 (D) In the case of calendar year 2000,

23 $9,400,000,000.

24 (E) In the case of calendar year 2001,

25 $10,640,000,000.
517

•S 2357

1 (F) In the case of each subsequent cal2 endar year, the amount specified in subpara3 graph (E) increased by the product of such

4 amount and the general health care inflation

5 factor (as defined in subsection (d)).

6 (2) SPECIAL ALLOTMENTS.—Of the amounts

7 available for a calendar year for making payments

8 under subsection (a) pursuant to paragraph (1)—

9 (A) such amounts as are necessary shall be

10 reserved to make payments to eligible institu11 tions that are high intensity nonteaching rural

12 hospitals; and

13 (B) the remainder of the amounts available

14 for making payments under subsection (a),

15 shall be expended for making payments under

16 section 3051 to other eligible institutions.

17 (b) AMOUNT OF PAYMENTS FOR INDIVIDUAL ELIGI18 BLE INSTITUTIONS.—

19 (1) QUALIFIED ACADEMIC HEALTH CENTERS

20 AND QUALIFIED TEACHING HOSPITALS.—The

21 amount of payments required in section 3051 to be

22 made to a qualified academic health center or a

23 qualified teaching hospital for a calendar year is an

24 amount equal to the product of—
518

•S 2357

1 (A) the amount available for making such

2 payments for the calendar year from the Aca3 demic Health Center Account established under

4 section 9551(a)(2)(B) of the Internal Revenue

5 Code of 1986; and

6 (B) the percentage constituted by the ratio

7 of—

8 (i) the product of—

9 (I) the sum, for all discharges of

10 individuals, of the amounts otherwise

11 paid on behalf of such individuals;

12 and

13 (II) an adjustment factor equal

14 to (e raised to the power (.405 × r)

15 –1), where ‘‘r’’ is the ratio of the

16 qualified academic health center’s or

17 the qualified teaching hospital’s full18 time equivalent training participants

19 to beds and ‘‘e’’ is the natural log of

20 one; and

21 (ii) the sum of the respective amounts

22 determined under clause (i) for qualified

23 academic health centers and qualified

24 teaching hospitals.
519

•S 2357

1 (2) HIGH INTENSITY NONTEACHING RURAL

2 HOSPITAL.—Subject to the annual amount reserved

3 for high intensity nonteaching rural hospitals under

4 subsection (a)(2)(A) for a calendar year, the amount

5 required under section 3051 to be made to a high

6 intensity nonteaching rural hospital is an amount

7 equal to 5 percent of the inpatient costs of patient

8 care for all patients of the hospital.

9 (3) ADJUSTMENT FACTOR.—Payments under

10 this section shall be subject to an adjustment factor,

11 as determined by the Secretary, so that total pay12 ments in any year will not exceed the amounts speci13 fied in 3053(a).

14 (c) REPORT REGARDING MODIFICATIONS IN FOR15 MULA.—Not later than July 1, 2000, the Secretary shall

16 submit to the Congress a report containing any rec17 ommendations of the Secretary for the modification of the

18 program of formula payments described in this chapter.

19 In preparing such report the Secretary shall consider—

20 (1) the costs described in section 3051(b) in21 curred by academic health centers;

22 (2) the adequacy of the formula payments es23 tablished in this chapter to cover such costs, taking

24 into account any additional revenues to cover such
520

•S 2357

1 costs paid by other payers, including private health

2 plans;

3 (3) the impact of the current payment meth4 odology on training in the ambulatory setting of na5 tional workforce goals, and its effect on the edu6 cation and training of primary care physicians;

7 (4) the importance to the maintenance of a

8 quality national health care system of academic

9 health centers in providing for the training of health

10 professionals, in conducting clinical research, and in

11 providing innovative, technically advanced care; and

12 (5) the overall impact of the reformed health

13 care system on the ability of academic health centers

14 to perform such functions.

15 (d) GENERAL HEALTH CARE INFLATION FACTOR.—

16 For purposes of this subtitle, the term ‘‘general health

17 care inflation factor’’, with respect to a year, has the

18 meaning given such term in section 3033(e)(4) for such

19 year.

20 Subpart D—Transitional Provisions

21 SEC. 3055. TRANSITIONAL PAYMENTS TO INSTITUTIONS.

22 (a) PAYMENTS REGARDING EFFECTS OF SUBPART B

23 ALLOCATIONS.—For each of the calendar years specified

24 in subsection (b)(2), in the case of an eligible entity that

25 submits to the Secretary an application for such year in
521

•S 2357

1 accordance with subsection (d), the Secretary shall make

2 payments for the year to the entity for the purpose speci3 fied in subsection (c). The Secretary shall make the pay4 ments in an amount determined in accordance with sub5 section (e), and may administer the payments as a con6 tract, grant, or cooperative agreement.

7 (b) ELIGIBLE ENTITIES LOSING SPECIALTY POSI8 TIONS; RELEVANT YEARS REGARDING PAYMENTS.—

9 (1) ELIGIBLE ENTITIES LOSING SPECIALTY PO10 SITIONS.—The Secretary may make payments under

11 subsection (a) to an eligible entity only if, with re12 spect to the calendar year involved, the entity meets

13 the following conditions:

14 (A) During the year preceding the initi15 ation of transitional payments, the entity—

16 (i) received payments under section

17 1886(h) of the Social Security Act (42

18 U.S.C. 1395ww(h)) for residents in one or

19 more approved programs, or

20 (ii) sponsored or was affiliated with

21 one or more approved physician training

22 programs that received payments under

23 section 3031.

24 (B) The aggregate number of full-time25 equivalent training participant positions in such
522

•S 2357

1 programs have been reduced below the aggre2 gate number of full-time-equivalent training

3 participant positions for the academic year

4 1993–1994.

5 (C) The aggregate number of full-time6 equivalent training participant positions in such

7 programs spend in patient care activities at the

8 hospital have been reduced below the aggregate

9 number of full-time-equivalent training partici10 pant positions for the academic year 1993–

11 1994, as a result of allocations under subpart

12 B, or as a result of voluntary changes under

13 section 3013(e) prior to January 1, 2002.

14 (2) RELEVANT YEARS.—Except as provided in

15 subsection (e)(3), the Secretary may make payments

16 under subsection (a) to an eligible entity only for the

17 first four calendar years after the initial calendar

18 year for which the entity meets the conditions de19 scribed in paragraph (1).

20 (3) ELIGIBLE ENTITY.—For purposes of this

21 section, the term ‘‘eligible entity’’ means a qualified

22 academic health center or teaching hospital entity

23 that submits to the Secretary an application in ac24 cordance with subsection (d).
523

•S 2357

1 (c) PURPOSE OF PAYMENTS.—The purpose of pay2 ments under subsection (a) is to assist an eligible entity

3 with the costs of operation. A funding agreement for such

4 payments is that the entity involved will expend the pay5 ments only for such purpose.

6 (d) APPLICATION FOR PAYMENTS.—For purposes of

7 subsection (a), an application for payments under such

8 subsection is in accordance with this subsection if—

9 (1) the eligible entity involved submits the ap10 plication not later than the date specified by the

11 Secretary;

12 (2) the application demonstrates that the entity

13 meets the conditions described in subsection (b)(1)

14 and that the entity has cooperated with the approved

15 physician training programs of the entity in meeting

16 the condition described in section 3032(b);

17 (3) the application contains each funding agree18 ment described in this subpart and the application

19 provides such assurances of compliance with the

20 agreements as the Secretary may require; and

21 (4) the application is in such form, is made in

22 such manner, and contains such agreements, assur23 ances, and information as the Secretary determines

24 to be necessary to carry out this subpart.

25 (e) AMOUNT OF PAYMENTS.—
524

•S 2357

1 (1) IN GENERAL.—Subject to the amounts

2 available from the Graduate Medical Education Ac3 count established under section 9551(a)(2)(A) of the

4 Internal Revenue Code of 1986 in the calendar year

5 involved, the amount of payments required in sub6 section (a) to be made to an eligible entity for such

7 year is the product of the amount determined under

8 paragraph (2) and the applicable percentage speci9 fied in paragraph (3).

10 (2) NUMBER OF SPECIALTY POSITIONS LOST.—

11 For purposes of paragraph (1), the amount deter12 mined under this paragraph for an eligible entity for

13 the calendar year involved is the product of—

14 (A) an amount equal to the aggregate

15 number of full-time equivalent specialty posi16 tions lost; and

17 (B) the amount that would be received

18 under section 3033 for each speciality position

19 lost.

20 (3) APPLICABLE PERCENTAGE.—

21 (A) IN GENERAL.—Except as provided

22 under subparagraph (B), for purposes of para23 graph (1), the applicable percentage for a cal24 endar year is the following, as applicable to

25 such year:
525

•S 2357

1 (i) For the first calendar year after

2 calendar year 1996 for which the eligible

3 entity involved meets the conditions de4 scribed in subsection (b)(1), 100 percent.

5 (ii) For the second such year, 75 per6 cent.

7 (iii) For the third such year, 50 per8 cent.

9 (iv) For the fourth such year, 25 per10 cent.

11 (B) EXCEPTIONS.—

12 (i) URBAN OR RURAL UNDERSERVED

13 COMMUNITIES.—If the Secretary deter14 mines that access to health care in a rural

15 or urban underserved community would be

16 impaired by the annual reductions of the

17 applicable percentage described in subpara18 graph (A), the Secretary may eliminate

19 such annual reduction or adjust such per20 centage (at the discretion of the Secretary)

21 to eligible institutions in such a commu22 nity.

23 (ii) VOLUNTARY COMPLIANCE POSI24 TIONS.—For the number of positions de25 termined in paragraph (4)(A) that result
526

•S 2357

1 from voluntary reductions in the number of

2 specialty positions under section 3013(e),

3 the applicable percentage for a calendar

4 year is the following as applicable to such

5 year:

6 (I) For the first 2 calendar years

7 after calendar year 1997 for which

8 the eligible entity involved meets the

9 conditions described in subsection

10 (b)(1), 100 percent.

11 (II) For the third such year, 75

12 percent.

13 (III) For the fourth such year,

14 50 percent.

15 (IV) For the fifth such year, 25

16 percent.

17 (4) DETERMINATION OF SPECIALTY POSITIONS

18 LOST.—

19 (A) For purposes of this paragraph, the

20 aggregate number of specialty positions lost,

21 with respect to a calendar year, is the difference

22 between—

23 (i) the aggregate number of specialty

24 positions described in subparagraph (B)

25 that are estimated for the eligible entity in-
527

•S 2357

1 volved for the academic year beginning in

2 such calendar year; and

3 (ii) the aggregate number of such spe4 cialty positions at the entity for academic

5 year 1993–1994.

6 (B) For purposes of subparagraph (A), the

7 specialty positions described in this subpara8 graph are specialty positions in the medical spe9 cialities with respect to which payments under

10 section 3031 are made to the approved physi11 cian training programs of the eligible entities

12 involved.

13 (C) The total number of physicians lost for

14 all eligible entities may not exceed the number

15 by which the aggregate number of specialty po16 sitions with respect to which payments are

17 made under section 3031 for the academic year

18 beginning in such calendar year is below the

19 number of full-time-equivalent positions for the

20 academic year 1993–1994.

21 SEC. 3056. WAIVER OF FOREIGN COUNTRY RESIDENCE RE22 QUIREMENT WITH RESPECT TO INTER23 NATIONAL MEDICAL GRADUATES.

24 (a) WAIVER.—Section 212(e) of the Immigration and

25 Nationality Act (8 U.S.C. 1182(e)) is amended—
528

•S 2357

1 (1) in the first proviso by inserting ‘‘(or, in the

2 case of an alien described in clause (iii), pursuant to

3 the request of an interested State agency)’’ after

4 ‘‘interested United States Government agency’’; and

5 (2) by inserting after ‘‘public interest’’ the fol6 lowing: ‘‘except that in the case of a waiver re7 quested by an interested State agency the waiver

8 shall be subject to the requirements of section

9 214(k)’’.

10 (b) RESTRICTIONS ON WAIVER.—Section 214 of that

11 Act (8 U.S.C. 1184) is amended by adding at the end the

12 following:

13 ‘‘(k)(1) In the case of a request by an interested

14 State agency for a waiver of the two-year foreign residence

15 requirement under section 212(e) with respect to an alien

16 described in clause (iii) of that section, the Attorney Gen17 eral shall not grant such waiver unless—

18 ‘‘(A) in the case of an alien who is otherwise

19 contractually obligated to return to a foreign country

20 the Director of such country furnishes a statement

21 in writing that it has no objection to such waiver;

22 ‘‘(B) the alien demonstrates a bona fide offer of

23 full-time employment at a health facility and begins

24 employment at such facility within 90 days of arrival

25 and agrees to continue to work in accordance with
529

•S 2357

1 paragraph (2) at the health care facility in which the

2 alien is employed for a total of not less than 3 years

3 (unless the Attorney General determines that ex4 tenuating circumstances such as the closure of the

5 facility or hardship to the alien would justify a lesser

6 period of time);

7 ‘‘(C) the alien agrees to practice medicine in ac8 cordance with paragraph (2) for a total of not less

9 than 3 years only in the geographic area or areas

10 which are designated by the Secretary of Health and

11 Human Services as having a shortage of health care

12 professionals; and

13 ‘‘(D) the grant of such waiver would not cause

14 the number of waivers allotted for that State for

15 that fiscal year to exceed twenty.

16 ‘‘(2) Whenever an interested State agency requests

17 the waiver of the two-year residence requirement under

18 section 212(e) with respect to an alien described in clause

19 (iii) of that section, the Attorney General shall adjust the

20 status of the alien to that of an alien described in section

21 101(a)(15)(H)(b).

22 ‘‘(3) If an alien whose status was adjusted under

23 paragraph (2) demonstrates that the alien has worked for

24 a period of 10 years in a health professional shortage area,

25 then the Attorney General may approve a petition filed
530

•S 2357

1 on the alien’s behalf by the health care facility in which

2 the alien is employed seeking adjustment of the alien’s sta3 tus to that of a special immigrant described in section

4 101(a)(27)(L).

5 ‘‘(4) Notwithstanding any other provision of this sub6 section, the two-year foreign residence requirement under

7 section 212(e) shall apply with respect to an alien de8 scribed in clause (iii) of that section, who has not other9 wise been accorded status under section 101(a)(27)(L), if

10 at any time the alien practices medicine in an area other

11 than an area described in paragraph (1)(C).’’.

12 (c) SPECIAL IMMIGRANT STATUS.—Section

13 101(a)(27) of the Immigration and Nationality Act is

14 amended by adding at the end the following new subpara15 graph:

16 ‘‘(L) immigrants whose status have been

17 adjusted from that of an alien described in

18 paragraph (15)(H)(b) pursuant to section

19 214(k)(2), except that not more than 500 immi20 grants may be admitted in any fiscal year

21 under this subparagraph.’’.

22 (d) GROUNDS FOR DEPORTATION.—Section 241(a)

23 of the Immigration and Nationality Act (8 U.S.C.

24 1251(a)) is amended by adding at the end the following

25 new subparagraph:
531

•S 2357

1 ‘‘(I) FAILURE TO MAINTAIN EMPLOYMENT

2 AS A HEALTH CARE PROFESSIONAL.—Any alien

3 described in section 212(e)(iii) who fails to

4 maintain employment in accordance with sub5 paragraphs (B) and (C) of section 212(k)(1).’’.

6 (e) EFFECTIVE DATE.—The amendments made by

7 this section shall apply to aliens admitted to the United

8 States under section 101(a)(15)(J) of the Immigration

9 and Nationality Act, or acquiring such status after admis10 sion to the United States, before, on, or after the date

11 of enactment of this Act and before June 1, 2005.

12 PART 2—HEALTH PROFESSIONS SCHOOLS

13 PAYMENTS

14 Subpart A—Payments to Medical Schools

15 SEC. 3061. FEDERAL PAYMENTS TO MEDICAL SCHOOLS.

16 (a) ENTITLEMENT.—Each eligible medical school

17 that in accordance with section 3062 submits to the Sec18 retary an application for academic year 1997, or any sub19 sequent academic year, shall be entitled to payments for

20 such year for the purpose specified in subsection (b). The

21 Secretary shall make such payments in an amount deter22 mined in accordance with section 3063, and shall admin23 ister the payments as a grant. The preceding sentence

24 constitutes budget authority in advance of appropriations

25 Acts and represents the obligation of the Federal Govern-
532

•S 2357

1 ment to provide funding for such payments in the

2 amounts, and for the years specified in this subpart.

3 (b) PAYMENTS TO MEDICAL SCHOOLS.—The purpose

4 specified in this subsection is to assist an eligible medical

5 school with the direct costs of academic programs includ6 ing the education of medical students (especially in pri7 mary health care and ambulatory training), graduate stu8 dents in biomedical sciences, and otherwise unfunded fac9 ulty research. Payments under this section shall supple10 ment and not supplant existing resources for this purpose.

11 A funding agreement for such payments is that the medi12 cal school involved will expend the payments received pur13 suant to section 3063(b) as follows:

14 (1) 50 percent shall be expended for primary

15 health care education (including prevention), and

16 peer reviewed primary care research in departments

17 and divisions of primary care, including family medi18 cine departments, and divisions of general internal

19 medicine, geriatric medicine, and general pediatrics,

20 or in medical schools in which primary care activities

21 are primarily performed by other organizational

22 units of the medical school, such other units. The

23 medical school will distribute such amounts among

24 the departments, divisions, or other units of primary

25 care so that the distribution of such amounts bears
533

•S 2357

1 a reasonable relationship to the amount of ambula2 tory primary care education of medical students in

3 such departments and divisions and the national

4 workforce goals and shall specify such information

5 and the distribution of funds in the application

6 under section 3062.

7 (2) 25 percent shall be expended for other am8 bulatory training.

9 (3) 25 percent shall be expended for the sup10 port of peer-reviewed faculty research in biomedicine

11 and health services.

12 (c) PER CAPITA PAYMENTS BY MEDICAL SCHOOLS

13 FOR OFF-SCHOOL EDUCATION.—A funding agreement for

14 payments under subsection (a) for an eligible medical

15 school for an academic year is that if, for the academic

16 year, one or more students is enrolled (or accepted for en17 rollment) in the medical school on the contingency of suc18 cessfully completing for the academic year a substantial

19 number of hours in medical education through an edu20 cational institution that does not operate a medical school,

21 and if the medical school provides credit toward a doctor22 ate in medicine for the hours successfully completed at

23 such other institution, then the medical school will pay to

24 the other institution for such academic year an amount

25 equal to the product of—
534

•S 2357

1 (1) the product of—

2 (A) the number of such students attending

3 the other institution for such academic year;

4 and

5 (B) the percentage of the academic year

6 spent at the other institution; and

7 (2) the quotient of—

8 (A) the amount of payments made to the

9 medical school under subsection (a) for the aca10 demic year; over

11 (B) the number of students in the eligible

12 medical school in the academic year (including

13 students described in this subsection).

14 (d) ELIGIBLE MEDICAL SCHOOL; SUBPART DEFINI15 TION.—For purposes of this subpart, the term ‘‘eligible

16 medical school’’ with respect to the academic year in17 volved, means an approved medical school that submits to

18 the Secretary an application for such year in accordance

19 with section 3062.

20 SEC. 3062. APPLICATION FOR PAYMENTS.

21 For purposes of section 3061(a), an application for

22 payments under such section for an academic year is in

23 accordance with this section if—
535

•S 2357

1 (1) the dean (or appropriate presiding official)

2 of the eligible medical school submits the application

3 not later than the date specified by the Secretary;

4 (2) the application contains each funding agree5 ment described in this subpart and provides such as6 surances of compliance with the agreements as the

7 Secretary may require; and

8 (3) the application is in such form, is made in

9 such manner, and contains such agreements, assur10 ances, and information as the Secretary determines

11 to be necessary to carry out this part.

12 SEC. 3063. AUTHORIZATION OF APPROPRIATIONS; ANNUAL

13 AMOUNT OF PAYMENTS.

14 (a) AUTHORIZATION OF APPROPRIATIONS.—

15 (1) IN GENERAL.—The appropriation author16 ized for each each of the following academic years

17 for making payments pursuant to section 3061(a)

18 shall not be less than or in excess of the following:

19 (A) In the case of academic year 1997,

20 $200,000,000.

21 (B) In the case of academic year 1998,

22 $300,000,000.

23 (C) In the case of academic year 1998,

24 $400,000,000.
536

•S 2357

1 (D) In the case of academic year 2000,

2 $500,000,000.

3 (E) In the case of academic year 2001,

4 $600,000,000.

5 (F) In the case of each subsequent aca6 demic year, the amount specified in subpara7 graph (F) increased by the product of such

8 amount and the general health care inflation

9 factor (as defined in subsection (d)).

10 (b) AMOUNT OF PAYMENTS FOR INDIVIDUAL ELIGI11 BLE PROGRAMS.—Subject to the annual amount available

12 for making payments pursuant to subsection (a) for an

13 academic year, the amount of the payment required under

14 section 3041 to be made to an eligible medical school for

15 the academic year is an amount equal to the sum of—

(1) the product of 1 16 ⁄2 of the amount available

17 for the academic year pursuant to subsection (a)

18 and the proportion of students (as determined by the

19 Secretary) at the eligible medical school in academic

20 year 1993–1994 compared to all students enrolled in

21 eligible medical schools nationwide in academic year

22 1993–1994;

(2) the product of 1 23 ⁄4 of the amount available

24 for the academic year pursuant to subsection (a)

25 and the proportion of peer-reviewed research con-
537

•S 2357

1 ducted by the faculty at the eligible medical school

2 (including health services research) compared to all

3 such research conducted by the faculty at all eligible

4 medical schools nationwide; and

(3) the product of 1 5 ⁄4 of the amount available

6 for the academic year pursuant to subsection (a)

7 and the proportion of the eligible medical school’s

8 number of graduates in primary care specialties

9 from the class graduating 6 years prior to such aca10 demic year who complete eligible programs in pri11 mary health care and do not subsequently enter a

12 nonprimary health care training program compared

13 to such number of graduates of all eligible medical

14 schools nationwide in such year.

15 The Secretary shall establish a method for measuring fac16 ulty research contributions.

17 (c) STUDIES.—

18 (1) FUNDING LEVEL AND ALLOCATION METH19 OD.—Not later than January 1, 1998, the Secretary

20 shall arrange for an independent study and report to

21 be completed, by the Institute of Medicine or other

22 similar entity, concerning the amount of and alloca23 tion method for medical school funding, and the im24 pact of the payments under this part on national

25 workforce goals, including the education and train-
538

•S 2357

1 ing of primary care physicians. Such report shall be

2 submitted to the President and the Congress and

3 shall include findings and recommendations as to the

4 appropriateness of modifying funding levels or allo5 cations.

6 (2) IMPACT OF HEALTH CARE REFORM ON

7 MEDICAL EDUCATION.—Not later than January 1,

8 2000, the Secretary shall arrange for an independ9 ent study and report to be completed, by the Insti10 tute of Medicine or other similar entity, concerning

11 the impact of health reform on undergraduate medi12 cal education. Such report shall be submitted to the

13 President and the Congress and shall include appro14 priate findings and recommendations.

15 (d) GENERAL HEALTH CARE INFLATION FACTOR.—

16 As used in this subtitle, the term ‘‘general health care in17 flation factor’’ with respect to a year, has the meaning

18 given such term in section 3033(e)(4) for such year.

19 Subpart B—Payments to Nursing Programs

20 SEC. 3071. FEDERAL PAYMENTS TO GRADUATE NURSE

21 TRAINING PROGRAMS.

22 (a) FEDERAL PAYMENTS TO GRADUATE NURSE

23 TRAINING PROGRAMS.—

24 (1) ENTITLEMENT.—Each eligible graduate

25 nurse training program that in accordance with
539

•S 2357

1 paragraph (2) submits to the Secretary an applica2 tion for calendar year 1997 or any subsequent cal3 endar year shall be entitled to payments for such

4 year to the program for the purpose specified in

5 paragraph (3). The Secretary shall make such pay6 ments in an amount determined in accordance with

7 subsection (b), and shall administer the payments as

8 a grant. The preceding sentence constitutes budget

9 authority in advance of appropriations Acts and rep10 resents the obligation of the Federal Government to

11 provide funding for such payments in the amounts,

12 and for the years specified in this subpart.

13 (2) APPLICATION FOR PAYMENTS.—For pur14 poses of paragraph (1), an application for payments

15 for a calendar year is in accordance with this para16 graph if—

17 (A) the eligible graduate nurse training

18 program involved submits the application not

19 later than the date specified by the Secretary;

20 (B) the application provides such assur21 ances as the Secretary may require that the

22 program will expend payments only for the pur23 pose described in paragraph (3);

24 (C) the application contains each funding

25 agreement described in this subpart and the ap-
540

•S 2357

1 plication provides such assurances of compli2 ance with the agreements as the Secretary may

3 require;

4 (D) the application contains an assurance

5 that the graduate nurse training program shall

6 annually submit a report on the costs of clinical

7 training of nurses in such manner as the Sec8 retary may require; and

9 (E) the application is in such form, is

10 made in such manner, and contains such agree11 ments, assurances, and information as the Sec12 retary determines to be necessary to carry out

13 this part.

14 (3) PAYMENTS FOR OPERATION OF GRADUATE

15 NURSE TRAINING PROGRAMS.—The purpose of pay16 ments under paragraph (1) is to assist an eligible

17 graduate nurse training program with the costs of

18 the clinical portions of training programs and sup19 porting full-time enrollees in such training pro20 grams.

21 (b) AUTHORIZATION OF APPROPRIATIONS; ANNUAL

22 AMOUNT OF PAYMENTS.—

23 (1) IN GENERAL.—The appropriation author24 ized for each of the following calendar years for
541

•S 2357

1 making payments pursuant to subsection (a)(1) shall

2 not be less than or in excess of the following:

3 (A) In the case of calendar year 1997,

4 $200,000,000.

5 (B) In the case of each subsequent cal6 endar year, the amount specified in subpara7 graph (A) increased by the product of such

8 amount and the general health care inflation

9 factor as defined in subsection (c).

10 (2) AMOUNT OF PAYMENTS FOR INDIVIDUAL

11 ELIGIBLE PROGRAMS.—Subject to the annual

12 amount available under paragraph (1) for a calendar

13 year, the amount of payments required under sub14 section (a) to be made to an eligible graduate nurse

15 training program that submits to the Secretary an

16 application for such year in accordance with sub17 section (a)(2) is an amount equal to the product

18 of—

19 (A) the number of full-time enrollees in the

20 program; and

21 (B) the estimated national average per

22 full-time enrollee cost of each graduate nurse

23 training program described in subsection (c)(1)

24 for the calendar year (as determined by the

25 Secretary), adjusted by a factor to reflect re-
542

•S 2357

1 gional differences in the applicable wage and

2 wage related costs.

3 (3) LIMITATION.—If the annual amount avail4 able under paragraph (1) for a calendar year is in5 sufficient for providing each eligible graduate nurse

6 training program that submits to the Secretary an

7 application for such year in accordance with sub8 section (a)(2) with the amount of payments deter9 mined under paragraph (2) for the program for such

10 year, the Secretary shall make such pro rata reduc11 tions in the amounts so determined as may be nec12 essary to ensure that the total of payments made

13 under subsection (a) for such year equals the total

14 of such amount.

15 (c) DEFINITIONS.—For purposes of this part:

16 (1) ELIGIBLE GRADUATE NURSE TRAINING

17 PROGRAM.—The term ‘‘eligible graduate nurse train18 ing program’’ means programs in advanced practice

19 nurse education that are programs for education as

20 nurse practitioners, programs for education as nurse

21 midwives, programs for education as nurse anes22 thetists, and programs for training clinical nurse

23 specialists that are—

24 (A) designated by the Secretary as eligible

25 graduate nurse training programs;
543

•S 2357

1 (B) accredited programs that award a

2 master degree or a post-nurse master certificate

3 and provide training preparing an individual for

4 practice as an advanced practice nurse; and

5 (C) existing programs funded in 1994

6 under section 822 or 831 of the Public Health

7 Service Act that do not award a master degree

8 may also be designated eligible programs.

9 (2) PROGRAMS FOR EDUCATION AS NURSE

10 PRACTITIONERS.—The term ‘‘programs for edu11 cation as nurse practitioners’’ means programs

12 meeting the conditions to be programs for which

13 awards of grants and contracts may be made under

14 section 822 of the Public Health Service Act for

15 education as a nurse practitioners.

16 (3) PROGRAMS FOR EDUCATION AS NURSE MID17 WIVES.—The term ‘‘programs for education as nurse

18 midwives’’ means programs meeting the conditions

19 to be programs for which awards of grants and con20 tracts may be made under section 822 of the Public

21 Health Service Act for education as nurse midwives.

22 (4) PROGRAMS FOR TRAINING CLINICAL NURSE

23 SPECIALISTS.—The term ‘‘programs for training

24 clinical nurse specialists’’ means programs in ad25 vanced practice nurse education meeting the condi-
544

•S 2357

1 tions to be programs for which awards of grants and

2 contracts may be made under section 821 of the

3 Public Health Service Act.

4 (5) FULL-TIME ENROLLEE.—The term ‘‘full5 time enrollee’’ means an individual who is enrolled

6 in an advanced nurse training program and qualifies

7 as a full-time student at the institution operating

8 such program.

9 (6) GENERAL HEALTH CARE INFLATION FAC10 TOR.—The term ‘‘general health care inflation fac11 tor’’, with respect to a year, has the meaning given

12 such term in section 3033(e)(4)for such year.

13 SEC. 3072. NATIONAL COUNCIL ON GRADUATE NURSE

14 TRAINING.

15 (a) IN GENERAL.—There is established within the

16 Department of Health and Human Services a council to

17 be known as the National Council on Graduate Nurse

18 Training.

19 (b) DUTIES.—The National Council on Graduate

20 Nurse Training shall—

21 (1) collect and analyze data on trends of supply

22 and demand for advanced practice nurses;

23 (2) analyze and consider the supply of advanced

24 practice nurses in the context of changes in the over25 all supply of health professionals;
545

•S 2357

1 (3) recommend priorities for support of grad2 uate nurse training by type of programs described in

3 section 3071(c);

4 (4) report to Congress annually and include in

5 its report the number of students who graduated the

6 previous year from funded programs; and

7 (5) consider and recommend appropriate stand8 ards for assessing the quality of advanced practice

9 nursing clinical training programs.

10 (c) COMPOSITION.—

11 (1) IN GENERAL.—The membership of the Na12 tional Council on Graduate Nurse Training shall in13 clude individuals who are appointed to the Council

14 from among individuals who are not officers or em15 ployees of the United States. Such individuals shall

16 be appointed by the Secretary, and shall include—

17 (A) a nurse practitioner, a nurse-midwife,

18 a nurse anesthetist, and a clinical nurse special19 ist; and

20 (B) an official of a school of nursing, an

21 official of a teaching hospital or other health

22 services entity, and other experts in health care

23 financing, delivery, and professions training.

24 (2) EX OFFICIO MEMBERS; OTHER FEDERAL

25 OFFICERS OR EMPLOYEES.—The membership of the
546

•S 2357

1 National Council on Graduate Nurse Training shall

2 include individuals designated by the Secretary, the

3 Secretary of Veterans Affairs, and the Secretary of

4 the Department of Defense to serve as members of

5 the Council from among Federal officers or employ6 ees who are appointed by the President, by the Sec7 retary, the Secretary of Veterans Affairs, the Sec8 retary of Defense, or other Federal officers who are

9 appointed by the President with the advice and con10 sent of the Senate.

11 (d) CHAIR.—The Secretary shall, from among mem12 bers of the National Council on Graduate Nurse Training

13 appointed under subsection (c)(1), designate an individual

14 to serve as the Chair of the Council.

15 Subpart C—Payments to Dental Schools

16 SEC. 3073. DENTAL SCHOOLS.

17 (a) FEDERAL PAYMENTS TO DENTAL SCHOOLS.—

18 (1) ENTITLEMENT.—Each eligible school of

19 dentistry that in accordance with paragraph (2) sub20 mits to the Secretary an application for calendar

21 year 1997 or any subsequent calendar year shall be

22 entitled to payments for such year to the program

23 for the purpose specified in paragraph (3). The Sec24 retary shall make such payments in an amount de25 termined in accordance with subsection (b), and
547

•S 2357

1 shall administer the payments as a grant. The pre2 ceding sentence constitutes budget authority in ad3 vance of appropriations Acts and represents the obli4 gation of the Federal Government to provide funding

5 for such payments in the amounts, and for the years

6 specified in this subpart.

7 (2) APPLICATION FOR PAYMENTS.—For pur8 poses of paragraph (1), an application for payments

9 for a calendar year is in accordance with this para10 graph if—

11 (A) the dean (or appropriate presiding offi12 cial of the eligible school of dentistry involved)

13 submits the application not later than the date

14 specified by the Secretary;

15 (B) the application provides such assur16 ances as the Secretary may require that the

17 program will expend payments only for the pur18 pose described in paragraph (3);

19 (C) the application contains each funding

20 agreement described in this subpart and the ap21 plication provides such assurances of compli22 ance with the agreements as the Secretary may

23 require; and

24 (D) the application is in such form, is

25 made in such manner, and contains such agree-
548

•S 2357

1 ments, assurances, and information as the Sec2 retary determines to be necessary to carry out

3 this subpart.

4 (3) PURPOSE.—With respect to an eligible

5 school of dentistry, the purpose of payments under

6 paragraph (1) is to assist such school with the costs

7 of training dentists, including unreimbursed oral

8 health care costs. A funding agreement for such pay9 ments is that the school of dentistry involved will ex10 pend the payments only for direct expenses deter11 mined as allowable by the Secretary.

12 (4) SCHOOL OF DENTISTRY.—For purposes of

13 this subtitle, the term ‘‘eligible school of dentistry’’

14 means an accredited public or nonprofit private

15 school in a State that provides training leading to a

16 degree of doctor of dentistry or an equivalent degree,

17 and any advanced training relating to such training.

18 (b) AUTHORIZATION OF APPROPRIATIONS; ANNUAL

19 AMOUNT OF PAYMENTS.—

20 (1) IN GENERAL.—The appropriation author21 ized for each of the following calendar years for

22 making payments pursuant to subsection (a)(1) shall

23 not be less than or in excess of the following:

24 (A) In the case of each of calendar years

25 1997, 1998, 1999 and 2000, $50,000,000.
549

•S 2357

1 (B) In the case of each subsequent cal2 endar year, the amount specified in subpara3 graph (A) increased by the product of such

4 amount and the general health care inflation

5 factor as defined in subsection (c).

6 (2) AMOUNT OF PAYMENTS FOR INDIVIDUAL

7 ELIGIBLE PROGRAMS.—Subject to the annual

8 amount available under paragraph (1) for a calendar

9 year, the amount of payments required under sub10 section (a) to be made to an eligible school of den11 tistry that submits to the Secretary an application

12 for such year in accordance with subsection (a)(2) is

13 an amount equal to the sum of—

14 (A) 75 percent of the amount available

15 pursuant to paragraph (1) multiplied by the

16 ratio of the number of full-time equivalent

17 training participants in the school of dentistry

18 (determined in accordance with a method to be

19 developed by the Secretary) to the national

20 number of full-time equivalent training partici21 pants in all schools of dentistry (as determined

22 by the Secretary) in the academic year 1993–

23 1994; and

24 (B) 25 percent of the amount available

25 pursuant to paragraph (1) multiplied by the
550

•S 2357

1 ratio of the unreimbursed oral health care costs

2 of the school of dentistry to the national unre3 imbursed oral health care costs of all schools of

4 dentistry (as determined by the Secretary).

5 (c) ELIGIBLE SCHOOL OF DENTISTRY.—For pur6 poses of this subpart, the term ‘‘eligible school of den7 tistry’’ with respect to a calendar year involved, means a

8 school of dentistry that submits to the Secretary an appli9 cation for such year in accordance with subsection (a)(2).

10 Subpart D—Payments to Schools of Public Health

11 SEC. 3074. SCHOOLS OF PUBLIC HEALTH.

12 (a) FEDERAL PAYMENTS TO SCHOOLS OF PUBLIC

13 HEALTH.—

14 (1) ENTITLEMENT.—Each eligible school of

15 public health that in accordance with paragraph (2)

16 submits to the Secretary an application for calendar

17 year 1997 or any subsequent calendar year shall be

18 entitled to payments for such year to the program

19 for the purpose specified in paragraph (3). The Sec20 retary shall make such payments in an amount de21 termined in accordance with subsection (b), and

22 shall administer the payments as a grant. The pre23 ceding sentence constitutes budget authority in ad24 vance of appropriations Acts and represents the obli25 gation of the Federal Government to provide funding
551

•S 2357

1 for such payments in the amounts, and for the years

2 specified in this subpart.

3 (2) APPLICATION FOR PAYMENTS.—For pur4 poses of paragraph (1), an application for payments

5 for a calendar year is in accordance with this para6 graph if—

7 (A) the dean (or appropriate presiding offi8 cial of the eligible school of public health in9 volved submits the application not later than

10 the date specified by the Secretary;

11 (B) the application provides such assur12 ances as the Secretary may require that the

13 program will expend payments only for the pur14 pose described in paragraph (3);

15 (C) the application contains each funding

16 agreement described in this subpart and the ap17 plication provides such assurances of compli18 ance with the agreements as the Secretary may

19 require; and

20 (D) the application is in such form, is

21 made in such manner, and contains such agree22 ments, assurances, and information as the Sec23 retary determines to be necessary to carry out

24 this subpart.
552

•S 2357

1 (3) PURPOSE.—With respect to an eligible

2 school of public health, the purpose of payments

3 under this paragraph is to assist such school with

4 the costs of training public health professionals in

5 disease prevention and health promotion, the man6 agement of health services, health care policy and

7 health care organization, public health practice, out8 comes and quality of care, and epidemiologic and

9 biostatistical research. A funding agreement for such

10 payments is that the school of public health involved

11 will expend the payments only for direct expenses

12 determined as allowable by the Secretary.

13 (4) SCHOOL OF PUBLIC HEALTH.—For pur14 poses of this subpart, the term ‘‘school of public

15 health’’ means an accredited public or non-profit pri16 vate school in a State that—

17 (A) is located within a university accred18 ited by one of the recognized regional accredit19 ing bodies;

20 (B) has as its central concept the preven21 tion of disease and the promotion of health

22 through research, education and professional

23 practice;

24 (C) offers the Master of Public Health de25 gree;
553

•S 2357

1 (D) provides, with sufficient faculty and

2 other resources, education at the master degree

3 level with an emphasis in at least each of the

4 following areas:

5 (i) Behavioral sciences.

6 (ii) Biostatistics.

7 (iii) Environmental and health

8 sciences.

9 (iv) Epidemiology.

10 (v) Health services administration;

11 and

12 (E) offers graduate education at the doc13 toral degree level in at least 1 of the 5 areas

14 described in subparagraph (D).

15 (b) AUTHORIZATION OF APPROPRIATIONS; ANNUAL

16 AMOUNT OF PAYMENTS.—

17 (1) IN GENERAL.—The appropriation author18 ized for each of the following calendar years for

19 making payments pursuant to subsection (a)(1) shall

20 not be less than or in excess of the following:

21 (A) In the case of each of calendar years

22 1997, 1998, 1999 and 2000, $25,000,000.

23 (B) In the case of each subsequent cal24 endar year, the amount specified in subpara25 graph (A) increased by the product of such
554

•S 2357

1 amount and the general health care inflation

2 factor.

3 (2) PAYMENTS TO SCHOOLS OF PUBLIC

4 HEALTH.—

5 (A) IN GENERAL.—The amount required

6 under subsection (a) to be made to an eligible

7 school of public health is an amount equal to

8 the product of—

9 (i) the amount available for making

10 such payments for the calendar year pur11 suant to paragraph (1); and

12 (ii) the percentage constituted by the

13 ratio of the number of full-time students

14 enrolled in degree programs in such

15 schools and the number of full-time equiva16 lents of part-time students enrolled in de17 gree programs in such school (determined

18 in accordance with subparagraph (B)) to

19 the national number of all such students in

20 all schools of public health in the academic

21 year beginning in the previous fiscal year.

22 (B) FULL-TIME EQUIVALENCE.—For the

23 purposes of this paragraph, the number of full24 time equivalents of part-time students for a
555

•S 2357

1 school of public health for any school year is a

2 number equal to—

3 (i) the total number of credit hours of

4 instructions in such year for which study

5 leading to a graduate degree in public

6 health or an equivalent degree, divided by

7 (ii) the number of credit hours of in8 structions which a student pursuing a full9 time course of study leading to a graduate

10 degree in public health or equivalent de11 gree.

12 (C) NEW SCHOOL.—In the case of a new

13 school of public health which applies for a grant

14 under this section in the fiscal year preceding

15 the fiscal year in which it will admit its first

16 class, the enrollment for purposes of subpara17 graph (A)(ii) shall be the number of full-time

18 students which the Secretary determines, on the

19 basis of assurances provided by the school, will

20 be enrolled in the school, in the fiscal year after

21 the fiscal year in which the grant is made.

22 (c) ELIGIBLE SCHOOL OF PUBLIC HEALTH.—The

23 term ‘‘eligible school of public health’’ with respect to the

24 calendar year involved, means a school of public health
556

•S 2357

1 that submits to the Secretary for such year in accordance

2 with subsection (a)(2).

3 PART 3—RELATED PROGRAMS

4 Subpart A—Workforce Development

5 SEC. 3081. PROGRAMS OF THE SECRETARY OF HEALTH AND

6 HUMAN SERVICES.

7 (a) IN GENERAL.—

8 (1) FUNDING.—For purposes of carrying out

9 the programs described in this section, there is au10 thorized to be appropriated $100,000,000 for each

11 of the fiscal years 1995 and 1996, and

12 $150,000,000 for each of the fiscal years 1997

13 through 2000 (in addition to amounts that may oth14 erwise be authorized to be appropriated for carrying

15 out the programs).

16 (2) ADMINISTRATION.—The programs described

17 in this section and carried out with amounts made

18 available under subsection (a) shall be carried out by

19 the Secretary of Health and Human Services.

20 (b) PRIMARY CARE PHYSICIAN AND PHYSICIAN AS21 SISTANT TRAINING.—For purposes of subsection (a), the

22 programs described in this section include programs to

23 support projects to train additional numbers of primary

24 care physicians and physician assistants, including

25 projects to enhance community-based generalist training
557

•S 2357

1 for medical students, residents, and practicing physicians;

2 to retrain mid-career physicians previously certified in a

3 nonprimary care medical specialty; to expand the supply

4 of physicians with special training to serve in rural and

5 inner-city medically underserved areas; to support expan6 sion of service-linked educational networks that train a

7 range of primary care providers in community settings;

8 to provide for training in managed care, cost-effective

9 practice management, and continuous quality improve10 ment; to provide interdisciplinary training for medical stu11 dents, residents or practicing physicians, and dental stu12 dents, residents, and dental hygienists, to deliver primary

13 care to individuals with mental, physical, and developmen14 tal disabilities, including mental retardation, particularly

15 those who are more than 18 years of age; and to develop

16 additional information on primary care workforce issues

17 as required to meet future needs in health care.

18 (c) TRAINING OF UNDERREPRESENTED RACIAL AND

19 ETHNIC MINORITIES AND DISADVANTAGED PERSONS.—

20 For purposes of subsection (a), the programs described

21 in this section include a program to support projects to

22 increase the number of racial and ethnic underrepresented

23 minority and disadvantaged persons in medicine, osteop24 athy, dentistry, advanced practice nursing, public health,

25 psychology, and other health professions, including
558

•S 2357

1 projects to provide continuing financial assistance for such

2 persons entering health professions training programs; for

3 financial assistance for facility renovation or construction;

4 to increase support for recruitment and retention of such

5 persons in the health professions; to maintain efforts to

6 foster interest in health careers among such persons at

7 the preprofessional level; and to increase the number of

8 racial and ethnic minority health professions faculty at

9 programs that have a significant number of

10 underrepresented racial and ethnic minorities.

11 (d) EXPANDING RURAL HEALTH CAREER OPPORTU12 NITIES AND RETENTION EFFORTS.—

13 (1) IN GENERAL.—For purposes of subsection

14 (a), the programs described in this section include

15 programs to support projects to increase the number

16 of individuals living in rural, underserved commu17 nities who enter the fields of medicine, osteopathy,

18 dentistry, advanced practice nursing, public health,

19 psychology, and other health professions, and to en20 courage the retention of such health care profes21 sionals in rural, underserved communities.

22 (2) RURAL HEALTH CAREER TRAINING.—

23 Projects to increase the number of individuals re24 cruited from rural, underserved areas include

25 projects—
559

•S 2357

1 (A) to provide continuing financial assist2 ance for such persons entering health profes3 sions education and training programs;

4 (B) to increase efforts to foster interest in

5 health careers among such persons at the

6 preprofessional level;

7 (C) to foster the development of training

8 curricula appropriate to rural health care set9 tings; and

10 (D) to increase support for recruitment of

11 such persons in the health professions.

12 (3) RETENTION OF RURAL HEALTH CARE PRO13 VIDERS.—Projects to encourage the retention of in14 dividuals providing health care in rural, underserved

15 areas include projects—

16 (A) to establish State and regional locum

17 tenans programs in rural health care settings so

18 that substitute health care providers are avail19 able when permanent staff is absent from the

20 health care setting;

21 (B) to implement programs to foster inter22 disciplinary team approaches to rural health

23 training and practice; and

24 (C) to develop state-of-the-art network

25 telecommunications and telemedicine systems to
560

•S 2357

1 link rural health professionals to other health

2 care providers and academic health care cen3 ters.

4 (e) NURSE TRAINING.—For purposes of subsection

5 (a), the programs described in this section include a pro6 gram to support projects to support midlevel provider

7 training and address priority nursing workforce needs, in8 cluding projects to train additional nurse practitioners and

9 nurse midwives; to support baccalaureate-level nurse

10 training programs providing preparation for careers in

11 teaching, community health service, and specialized clini12 cal care; to train additional nurse clinicians and nurse an13 esthetists; to support interdisciplinary school-based com14 munity nursing programs; and to promote research on

15 nursing workforce issues.

16 (f) INAPPROPRIATE PRACTICE BARRIERS; FULL UTI17 LIZATION OF SKILLS.—For purposes of subsection (a), the

18 programs described in this section include a program—

19 (1) to develop and encourage the adoption of

20 model professional practice statutes for advanced

21 practice nurses and physician assistants, and to oth22 erwise support efforts to remove inappropriate bar23 riers to practice by such nurses and such physician

24 assistants; and
561

•S 2357

1 (2) to promote the full utilization of the profes2 sional education and clinical skills of advanced prac3 tice nurses and physician assistants.

4 (g) ADVISORY BOARD ON HEALTH CARE

5 WORKFORCE DEVELOPMENT.—

6 (1) IN GENERAL.—The Secretary shall establish

7 an Advisory Board known as the National Advisory

8 Board on Health Care Workforce Development to

9 advise, consult with, and make recommendations to

10 the Secretary and to the Secretary of Labor on mat11 ters relating to—

12 (A) health care worker supply and its ade13 quacy to assure proper health care delivery sys14 tem staffing in both rural and urban areas; and

15 (B) the impact of this Act, and of related

16 changes in law regarding health care, on health

17 care workers and the needs of such workers, in18 cluding needs regarding education, training,

19 and other career development matters and the

20 relationship of health care workers to health

21 care professionals.

22 (2) COMPOSITION.—The Board established

23 under paragraph (1) shall be composed of the follow24 ing members with expertise in health care workforce
562

•S 2357

1 issues appointed by the Secretary in consultation

2 with the Secretary of Labor:

3 (A) Five representatives of labor organiza4 tions representing health care workers.

5 (B) Five representatives of health care de6 livery institutions.

7 (C) Two representatives from health care

8 education organizations.

9 (D) Two representatives from consumer

10 organizations.

11 (3) ASSISTANCE.—The Secretary shall provide

12 the Board with such administrative assistance as

13 may be necessary for the Board to carry out this

14 subsection.

15 (h) OTHER PROGRAMS.—For purposes of subsection

16 (a), the programs described in this section include a pro17 gram to train health professionals and administrators in

18 managed care, cost-effective practice management, contin19 uous quality improvement practices, and provision of cul20 turally sensitive care.

21 (i) RELATIONSHIP TO EXISTING PROGRAMS.—This

22 section may be carried out through programs established

23 in title VII or VIII of the Public Health Service Act, as

24 appropriate and as consistent with the purposes of such

25 programs.
563

•S 2357

1 (j) MENTAL RETARDATION AND OTHER DEVEL2 OPMENTAL DISABILITIES.—Title VII of the Public Health

3 Service Act is amended by inserting after section 778, the

4 following new section:

5 ‘‘SEC. 779. MENTAL RETARDATION AND OTHER DEVEL6 OPMENTAL DISABILITIES.

7 ‘‘(a) IN GENERAL.—The Secretary may make grants

8 and enter into contracts with university affiliated pro9 grams, schools of medicine, and schools of dentistry to as10 sist in meeting the costs of such programs or schools to—

11 ‘‘(1) improve the interdisciplinary training of

12 primary care physicians and dentists in the health

13 care services needs of individuals with mental, phys14 ical, and developmental disabilities, including mental

15 retardation, particularly those who are more than 18

16 years of age;

17 ‘‘(2) develop, evaluate, and disseminate curric18 ula relating to the health care service needs of indi19 viduals with mental, physical, and developmental dis20 abilities, including mental retardation, particularly

21 those individuals who are more than 18 years of age;

22 ‘‘(3) support the training and retraining of fac23 ulty to provide such instruction; and

24 ‘‘(4) support continuing education of health

25 professionals who provide health care services and
564

•S 2357

1 support to individuals with mental, physical, and de2 velopmental disabilities, including mental retarda3 tion, particularly those who are more than 18 years

4 of age.

5 ‘‘(b) AUTHORIZATION OF APPROPRIATIONS.—For

6 purposes of carrying out this section, there are authorized

7 to be appropriated, $10,000,000 for each of the fiscal

8 years 1995 through 2000.’’.

9 SEC. 3082. PROGRAMS OF THE SECRETARY OF LABOR.

10 (a) IN GENERAL.—

11 (1) FUNDING.—For purposes of carrying out

12 the programs described in this section, and for car13 rying out section 3083, there is authorized to be ap14 propriated $200,000,000 for fiscal year 1995 and

15 each subsequent fiscal year (in addition to amounts

16 that may otherwise be authorized to be appropriated

17 for carrying out the programs).

18 (2) ADMINISTRATION.—The programs described

19 in this section and carried out with amounts made

20 available under subsection (a) shall be carried out by

21 the Secretary of Labor (in this section referred to as

22 the ‘‘Secretary’’).

23 (b) RETRAINING PROGRAMS; ADVANCED CAREER

24 POSITIONS; WORKFORCE ADJUSTMENT PROGRAMS.—
565

•S 2357

1 (1) IN GENERAL.—For purposes of subsection

2 (a), the programs described in this section are the

3 following:

4 (A) A program for skills upgrading and oc5 cupational retraining (including retraining

6 health care workers for more advanced positions

7 as technicians, nurses, and physician assist8 ants), and for quality and workforce improve9 ment.

10 (B) A demonstration program to assist

11 workers in health care institutions in obtaining

12 advanced career positions.

13 (C) A program to develop and operate

14 health care industry worker job banks in local

15 employment services agencies or one-stop career

16 centers, subject to the following:

17 (i) Such job banks shall be available

18 to all health care providers in the commu19 nity involved.

20 (ii) Such job banks shall begin oper21 ation not later than 90 days after the date

22 of the enactment of this Act.

23 (iii)(I) With respect to each affected

24 community, the local employment service

25 agency or one-stop career center serving
566

•S 2357

1 such community shall be allocated not less

2 than one counselor whose responsibility it

3 shall be to develop and operate health and

4 insurance industry worker job banks.

5 Where the impact of health care industry

6 restructuring in the affected community is

7 such that the functions required under this

8 clause cannot be adequately provided by

9 one counselor, additional counselors shall

10 be allocated to carry out such functions.

11 (II) Such counselor shall solicit job

12 openings from local health care industry

13 employers, maintain frequent contacts with

14 these and other employers, and monitor

15 and update all job listings appropriate for

16 displaced health care workers seeking em17 ployment.

18 (III) The local employment service

19 agency or one-stop career center shall pro20 vide directly, or facilitate the provision of,

21 labor exchange services to displaced health

22 care industry workers, including assess23 ment, counseling, testing, job-search assist24 ance, job referral and placement, and re-
567

•S 2357

1 ferral to training and educational pro2 grams, where appropriate.

3 (IV) The Secretary of Labor shall de4 velop performance goals for the effective

5 performance of such job banks with respect

6 to the number and quality of jobs listed,

7 the degree of participation by employers in

8 the affected community, and success in

9 placement of job bank users in jobs listed,

10 taking into account specific geographic,

11 economic and labor market characteristics

12 of the community served.

13 (D) A program to provide for joint labor14 management decision-making in the health care

15 sector on workplace matters related to the re16 structuring of the health care delivery system

17 provided for in this Act.

18 (E) A program to collect data regarding

19 the adequacy of the supply of health care work20 ers by occupation and sector of the health in21 dustry in light of existing and projected demand

22 for such workers.

23 (F)(i) A program to encourage the adop24 tion and utilization of high performance, high

25 quality health care delivery systems, including
568

•S 2357

1 employee participation committees and em2 ployee team systems that will contribute to

3 more effective health care by increasing the role

4 and the area of independent decisionmaking of

5 health care workers.

6 (ii) For purposes of this subparagraph, the

7 term ‘‘employee participation committees’’

8 means committees of workers independently se9 lected by and from a facility’s nonmanagerial

10 workforce, or selected by unions where collective

11 bargaining agreements are in effect, and which

12 operate independently without employer inter13 ference and consult with management on issues

14 of efficiency, productivity, and quality of care,

15 except that an employee participation commit16 tee established under and operating in conform17 ity with this subparagraph shall not be consid18 ered a labor organization within the meaning of

19 section 2(5) of the National Labor Relations

20 Act or a representative within the meaning of

21 section 1, sixth, of the Railway Labor Act.

22 (2) USE OF FUNDS.—Amounts made available

23 under subsection (a) for carrying out this section

24 may be expended for program support, faculty devel25 opment, trainee support, workforce analysis, and dis-
569

•S 2357

1 semination of information, as necessary to produce

2 required performance outcomes.

3 (c) CERTAIN REQUIREMENTS FOR PROGRAMS.—In

4 carrying out the programs described in subsection (b), the

5 Secretary shall, with respect to the organizations and em6 ployment positions involved, provide for the following:

7 (1) Explicit, clearly defined skill requirements

8 developed for all the positions and projections of the

9 number of openings for each position.

10 (2) Opportunities for internal career movement.

11 (3) Opportunities to work while training or

12 completing an educational program.

13 (4) Evaluation and dissemination.

14 (5) Training opportunities in several forms, as

15 appropriate.

16 (d) ADMINISTRATIVE REQUIREMENTS.—In carrying

17 out the programs described in subsection (b), the Sec18 retary shall, with respect to the organizations and employ19 ment positions involved, provide for the following:

20 (1) Joint labor-management implementation

21 and administration.

22 (2) Discussion with employees as to training

23 needs for career advancement.

24 (3) Commitment to a policy of internal hirings

25 and promotion.
570

•S 2357

1 (4) Provision of support services.

2 (5) Consultations with employers and with or3 ganized labor.

4 SEC. 3083. REQUIREMENT FOR CERTAIN PROGRAMS RE5 GARDING REDEPLOYMENT OF HEALTH CARE

6 WORKERS.

7 (a) STATE PROGRAMS FOR HOME AND COMMUNITY8 BASED SERVICES FOR INDIVIDUALS WITH DISABIL9 ITIES.—With respect to the plan required in section

10 2102(a) (for State programs for home and community11 based services for individuals with disabilities under part

12 1 of subtitle B of title II), the plan shall, in addition to

13 requirements under such part, provide for the following:

14 (1) Before initiating the process of implement15 ing the State program under such plan, negotiations

16 will be commenced with labor unions representing

17 the employees of the affected hospitals or other fa18 cilities.

19 (2) Negotiations under paragraph (1) will ad20 dress the following:

21 (A) The impact of the implementation of

22 the program upon the workforce.

23 (B) Methods to redeploy workers to posi24 tions in the proposed system, in the case of

25 workers affected by the program.
571

•S 2357

1 (3) The plan will provide evidence that there

2 has been compliance with paragraphs (1) and (2),

3 including a description of the results of the negotia4 tions.

5 (b) PLAN FOR INTEGRATION OF MENTAL HEALTH

6 SYSTEMS.—With respect to the plan required in section

7 3511(a) (relating to the integration of the mental health

8 and substance abuse services of a State and its political

9 subdivisions with the mental health and substance abuse

10 services included in the comprehensive benefit package

11 under title I), the plan shall, in addition to requirements

12 under such section, provide for the following:

13 (1) Before initiating the process of implement14 ing the integration of such services, negotiations will

15 be commenced with labor unions representing the

16 employees of the affected hospitals or other facilities.

17 (2) Negotiations under paragraph (1) will ad18 dress the following:

19 (A) The impact of the proposed changes

20 upon the workforce.

21 (B) Methods to redeploy workers to posi22 tions in the proposed system, in the case of

23 workers affected by the proposed changes.

24 (3) The plan will provide evidence that there

25 has been compliance with paragraphs (1) and (2),
572

•S 2357

1 including a description of the results of the negotia2 tions.

3 Subpart B—Transitional Provisions for Workforce

4 Stability

5 SEC. 3091. APPLICATION.

6 (a) LIMITATION TO TRANSITION PERIOD.—The pro7 visions of this subpart are intended to minimize, to the

8 extent possible, disruptions in established employment re9 lationships during the period of transition to a restruc10 tured health care delivery system, and shall terminate De11 cember 31, 2000.

12 (b) HEALTH CARE ENTITIES COVERED BY SUB13 PART.—The provisions of this subpart, including ref14 erences to displacing employers, hiring employers, succes15 sors and contractors, apply only to health care entities

16 that employ more than 25 individuals.

17 SEC. 3092. DEFINITIONS.

18 (a) HEALTH CARE ENTITY.—As used in this sub19 part, the term ‘‘health care entity’’ includes individuals,

20 sole proprietorships, partnerships, associations, business

21 trusts, corporations, governmental institutions, and public

22 agencies (including state governments and political sub23 divisions thereof) that—

24 (1) provide health care services under title I

25 (including nonmandatory health care services under
573

•S 2357

1 title I) or under the amendments made or programs

2 referred to in titles IV and VIII; or

3 (2) provide necessary related services, including

4 administrative, food service, janitorial or mainte5 nance services, to an entity that provides health care

6 services (as described in subparagraph (1));

7 except that an entity that solely manufactures or provides

8 goods or equipment to a health care entity shall not be

9 considered a health care entity.

10 (b) AFFILIATED ENTERPRISE.—As used in this sub11 part, the term ‘‘affiliated enterprise’’ means a health care

12 entity that, together with the displacing employer, is con13 sidered a single employer as defined under 414 of the In14 ternal Revenue Code of 1986.

15 (c) PREFERENCE ELIGIBLE EMPLOYEE.—As used in

16 this subpart, the term ‘‘preference eligible employee’’

17 means an employee who—

18 (1) has been employed for in excess of 1 year

19 by a health care entity; and

20 (2) has been displaced by or has received notice

21 of an impending displacement by such entity.

22 (d) DISPLACEMENT.—As used in this subpart, the

23 term ‘‘displacement’’ includes a lay off, termination, sig24 nificant cutback in paid work hours, or other loss of em25 ployment, except that a discharge for just cause shall not
574

•S 2357

1 constitute a displacement within the meaning of this para2 graph.

3 SEC. 3093. OBLIGATIONS OF DISPLACING EMPLOYER AND

4 AFFILIATED ENTERPRISES IN EVENT OF DIS5 PLACEMENT.

6 (a) NOTICE.—A health care entity which displaces a

7 preference eligible employee shall provide such employee

8 with—

9 (1) written notice, no later than the date of dis10 placement, of employment rights under this subpart,

11 including employment rights with respect to affili12 ated enterprises of the displacing employer; and

13 (2) notice of any existing or subsequent vacan14 cies with the displacing employer or an affiliated en15 terprise, which notice may be given by posting of

16 such vacancies wherever notices to applicants for

17 employment are customarily posted, by listing such

18 vacancies with the local employment services agency,

19 or in such other manner as the Secretary of Labor,

20 by regulation, may hereafter specify.

21 Any such vacancy shall remain open for applications by

22 preference eligible employees for not less than 14 calendar

23 days from the date on which the initial notice is provided.

24 (b) HIRING PREFERENCE.—
575

•S 2357

1 (1) IN GENERAL.—A qualified preference eligi2 ble employee who applies during the notice period

3 described in subsection (a)(2) for a vacant position

4 with the displacing employer or an affiliated enter5 prise, which position is in the employee’s occupa6 tional specialty and is located in the same State or

7 Standard Metropolitan Statistical Area in which the

8 employee was employed prior to the displacement,

9 shall be given the right to accept or decline the posi10 tion before the employer may offer the position to a

11 nonpreference eligible employee.

12 (2) MULTIPLE APPLICATIONS.—When consider13 ing applications from more than one qualified pref14 erence eligible employee, the hiring health care en15 tity shall have discretion as to which of such employ16 ees will be offered the position.

17 (3) EMPLOYMENT QUALIFICATIONS.—Nothing

18 in this subsection shall be construed to prohibit the

19 hiring health care entity from establishing reason20 able employment qualifications for a vacancy to

21 which this subpart applies, except that employees

22 who performed essentially the same work prior to

23 their displacement shall be deemed presumptively

24 qualified for comparable positions.
576

•S 2357

1 (c) TERMINATION OF PREFERENCE ELIGIBILITY.—

2 A displaced employee’s preference eligibility shall termi3 nate—

4 (1) at such time as the displaced employee ob5 tains substantially equivalent employment with the

6 displacing employer; or

7 (2) if the employee does not obtain such em8 ployment—

9 (A) with respect to health care entities

10 other than the displacing employer, 2 years

11 after the date of the displacement; or

12 (B) with respect to the displacing em13 ployer, upon the termination of this subpart

14 pursuant to section 3081(a).

15 SEC. 3094. EMPLOYMENT WITH SUCCESSORS.

16 A health care entity that succeeds another health care

17 entity through merger, consolidation, acquisition, contract,

18 or other similar manner shall provide employees of the

19 previous health care entity who would otherwise be dis20 placed the right to continued employment in the job posi21 tions held by such employees prior thereto, unless the em22 ployer can establish that such positions no longer exist.
577

•S 2357

1 SEC. 3095. COLLECTIVE BARGAINING OBLIGATIONS DUR2 ING TRANSITION PERIOD.

3 (a) CONTINUATION OF PREVIOUSLY RECOGNIZED

4 BARGAINING REPRESENTATIVES AND AGREEMENTS.—If

5 a majority of the employees in an appropriate bargaining

6 unit consists of employees who were previously covered by

7 a bargaining agreement or represented by an exclusive

8 representative with respect to terms and conditions of em9 ployment, and there has not been a substantial change in

10 the operations performed by the employees in that unit,

11 the employer shall recognize such representative as the ex12 clusive representative for the unit and shall assume the

13 bargaining agreement, except that where application of

14 this subsection would result in the recognition of more

15 than one bargaining representative for a single unit, the

16 question concerning which representative shall be recog17 nized as the exclusive representative for the unit shall be

18 resolved in accordance with applicable Federal or State

19 law.

20 (b) JOINT EMPLOYER STATUS.—If employees of a

21 contractor are assigned on a regular basis to perform work

22 on the premises of a contracting entity and the tasks per23 formed by these employees are functionally integrated with

24 the operations of the contracting entity on whose premises

25 such employees work, both the contractor and the con26 tracting entity shall be considered joint employers of the
578

•S 2357

1 employees with respect to work performed on those prem2 ises for purposes of determining compliance with labor re3 lations laws. Employees of such joint employers may not

4 be excluded from a bargaining unit within either entity

5 on the basis of such joint employer status.

6 SEC. 3096. GENERAL PROVISIONS.

7 (a) REGULATIONS.—Not later than 120 days after

8 the date of enactment of this Act, the Secretary shall pro9 mulgate regulations to implement the requirements of sec10 tion 3093.

11 (b) OTHER LAWS.—The standards and requirements

12 of this subpart shall not preempt or excuse noncompliance

13 with any other applicable Federal or State law, regulation

14 or municipal ordinance that establishes additional notice

15 and preference standards or requirements concerning em16 ployee dislocation, employee representation, or collective

17 bargaining.

18 (c) RULES OF CONSTRUCTION.—Nothing in this sub19 part shall be construed—

20 (1) to excuse or otherwise limit the obligation

21 of an employer to comply with any collective bar22 gaining agreement or any employment benefit plan

23 that provides rights to employees in addition to

24 those provided under this subpart; or
579

•S 2357

1 (2) to require an employer to recognize or bar2 gain with a labor organization in violation of State

3 law.

4 (d) ENFORCEMENT.—Unless otherwise specifically

5 provided in this subpart, the enforcement provisions of

6 section 107 of the Family and Medical Leave Act of 1993

7 (29 U.S.C. 2617) shall apply with respect to the enforce8 ment of the individual rights, including notice require9 ments, provided under section 3093. The collective bar10 gaining and contractual rights provided under sections

11 3094 and 3095 shall be enforced through administrative

12 and judicial procedures otherwise provided under Federal

13 or State law with respect to such rights.

14 Subtitle B—Academic Health

15 Centers

16 SEC. 3131. DISCRETIONARY GRANTS REGARDING ACCESS

17 TO CENTERS.

18 (a) RURAL INFORMATION AND REFERRAL SYS19 TEMS.—The Secretary may make grants to eligible centers

20 for the establishment and operation of information and re21 ferral systems to provide the services of such centers to

22 rural health plans.

23 (b) OTHER PURPOSES REGARDING URBAN AND

24 RURAL AREAS.—The Secretary may make grants to

25 community- and provider-based health plans under section
580

•S 2357

1 1651(d) to carry out activities (other than activities car2 ried out under subsection (a)) for the purpose of providing

3 the services of eligible centers to residents of rural or

4 urban communities who otherwise would not have ade5 quate access to such services.

6 (c) AUTHORIZATION OF APPROPRIATIONS.—For the

7 purpose of carrying out this section, there are authorized

8 to be appropriate, $3,000,000 for fiscal year 1995,

9 $4,000,000 for fiscal year 1996, and $5,000,000 for each

10 of the fiscal years 1997 through 2000.

11 Subtitle C—Health Research

12 Initiatives

13 PART 1—PROGRAMS FOR CERTAIN AGENCIES

14 SEC. 3201. BIOMEDICAL, BEHAVIORAL AND HEALTH SERV15 ICES RESEARCH.

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

17 (1) Nearly 4 of 5 peer reviewed research

18 projects deemed worthy of funding by the National

19 Institutes of Health are not funded, and 9 of 10

20 peer reviewed research projects deemed worthy of

21 funding by the Agency for Health Care Policy and

22 Research are not funded.

23 (2) Less than 2 percent of the nearly one tril24 lion dollars our Nation spends on health care is de-
581

•S 2357

1 voted to health research, while the defense industry

2 spends 15 percent of its budget on research.

3 (3) Public opinion surveys have shown that

4 Americans want more Federal resources put into

5 health research and support by having a portion of

6 their health insurance premiums set aside for this

7 purpose.

8 (4) Ample evidence exists to demonstrate that

9 health research has improved the quality of health

10 care in the United States. Advances such as the de11 velopment of vaccines, the cure of many childhood

12 cancers, drugs that effectively treat a host of dis13 eases and disorders, a process to protect our Na14 tion’s blood supply from the HIV virus, progress

15 against cardiovasculor disease including heart attack

16 and stroke, and new strategies for the early detec17 tion and treatment of diseases such as colon, breast,

18 and prostate cancer clearly demonstrates the bene19 fits of health research.

20 (5) Among the most effective methods to con21 trol health care costs are the prevention of inten22 tional and unintentional injury and the prevention

23 and cure of disease and disability, thus, health re24 search which holds the promise of prevention of in25 tentional and unintentional injury and cure and pre-
582

•S 2357

1 vention of disease and disability is a critical compo2 nent of any comprehensive health care reform plan.

3 (6) The state of our Nation’s research facilities

4 at the National Institutes of Health and at univer5 sities is deteriorating significantly. Renovation and

6 repair of these facilities are badly needed to main7 tain and improve the quality of research.

8 (7) Because the Omnibus Budget Reconciliation

9 Act of 1993 freezes discretionary spending for the

10 next 5 years, the Nation’s investment in health re11 search through the National Institutes of Health

12 and the Agency for Health Care Policy and Re13 search is likely to decline in real terms unless correc14 tive legislative action is taken.

15 (8) A health research fund is needed to main16 tain our Nation’s commitment to health research

17 and to increase the percentage of approved projects

18 which receive funding at the National Institutes of

19 Health and the Agency for Health Care Policy and

20 Research to at least 33 percent.

21 (9) Private sector investment in research and

22 development has been responsible for the vast major23 ity of new developments in pharmaceuticals, medical

24 devices, biotechnology and other health care innova25 tions. Over 90 percent of the most prescribed drugs
583

•S 2357

1 in the United States were discovered by the re2 search-based pharmaceutical industry.

3 (10) United States industry is the preeminent

4 world leader in the research, development and deliv5 ery of innovative therapies that improve the quality

6 of care for people throughout the world.

7 (11) Global health care budgets may constrict

8 private sector investment in research and develop9 ment. Further, they may be inconsistent with the

10 goal of developing promising new cost effective treat11 ment therapies.

12 (b) AVAILABILITY OF FUNDS.—

13 (1) IN GENERAL.—With respect to each cal14 endar year, the Secretary shall pay, from funds in

15 the Treasury not otherwise appropriated, for activi16 ties under this section, an amount equal to 0.25 per17 cent in 1996 and subsequent years, of all private

18 premiums required to be paid in accordance with the

19 Act.

20 (2) DEFINITION.—For purposes of this sub21 section, the term ‘‘private health premiums’’ means

22 all premium related payments made by employers,

23 individuals, and families for coverage under this Act.

24 (3) MAINTENANCE OF EFFORT.—No amounts

25 made available under this subsection shall replace or
584

•S 2357

1 reduce the amount of appropriations for the Na2 tional Institutes of Health or the Agency for Health

3 Care Policy and Research.

4 (c) PURPOSES FOR EXPENDITURES.—Part A of title

5 IV of the Public Health Service Act (42 U.S.C. 281 et

6 seq.) is amended by adding at the end thereof the follow7 ing new section:

8 ‘‘SEC. 404F. EXPENDITURES FOR BIOMEDICAL AND BEHAV9 IORAL RESEARCH.

10 ‘‘(a) IN GENERAL.—With respect to 80 percent of the

11 amounts made available under section 3201 of the Health

12 Security Act in a fiscal year, the Secretary shall distrib13 ute—

14 ‘‘(1) 2 percent of such amounts during any fis15 cal year to the Office of the Director of the National

16 Institutes of Health to be allocated at the Director’s

17 discretion for the following activities:

18 ‘‘(A) for carrying out the responsibilities of

19 the Office of the Director, in including the Of20 fice of Research on Women’s Health and the

21 Office of Research on Minority Health, the Of22 fice of Alternative Medicine and the Office of

23 Rare Diseases Research; and
585

•S 2357

1 ‘‘(B) for construction and acquisition of

2 equipment for or facilities of or used by the Na3 tional Institutes of Health;

4 ‘‘(2) 2 percent of such amounts for transfer to

5 the National Center for Research Resources to carry

6 out section 1502 of the National Institutes of

7 Health Revitalization Act of 1993 concerning Bio8 medical and Behavioral Research Facilities;

9 ‘‘(3) 1 percent of such amounts during any fis10 cal year for carrying out section 301 and part D of

11 title IV with respect to health information commu12 nications; and

13 ‘‘(4) the remainder of such amounts during any

14 fiscal year to member institutes of the National In15 stitutes of Health and Centers in the same propor16 tion to the total amount received under this section,

17 as the amount of annual appropriations under ap18 propriations Acts for each member institute and

19 Centers for the fiscal year bears to the total amount

20 of appropriations under appropriations Acts for all

21 member institutes and Centers of the National Insti22 tutes of Health for the fiscal year.

23 ‘‘(b) PLANS OF ALLOCATION.—The amounts trans24 ferred under subsection (a) shall be allocated by the Direc25 tor of NIH or the various directors of the institutes and
586

•S 2357

1 centers, as the case may be, pursuant to allocation plans

2 developed by the various advisory councils to such direc3 tors, after consultation with such directors.’’.

4 SEC. 3202. HEALTH SERVICES RESEARCH.

5 (a) IN GENERAL.—The Secretary shall distribute the

6 remainder of the amounts made available under section

7 3201 in a fiscal year (not to exceed 20 percent of the total

8 of amounts available in a fiscal year under such section),

9 to the Agency for Health Care Policy and Research for

10 policy-initiated and investigator-initiated research.

11 (b) RESEARCH ON HEALTH CARE REFORM.—Section

12 902 of the Public Health Service Act (42 U.S.C. 299a),

13 as amended by section 2(b) of Public Law 102–410 (106

14 Stat. 2094), is amended by adding at the end the following

15 subsection:

16 ‘‘(f) RESEARCH ON HEALTH CARE REFORM.—

17 ‘‘(1) IN GENERAL.—In carrying out section

18 901(b), the Administrator shall conduct and support

19 research on the reform of the health care system of

20 the United States, as directed by the Secretary.

21 ‘‘(2) PRIORITIES.—In carrying out paragraph

22 (1), the Administrator shall give priority to the fol23 lowing:

24 ‘‘(A) Conducting and supporting research

25 on the appropriateness and effectiveness of al-
587

•S 2357

1 ternative clinical strategies (including commu2 nity-based programs and preventive services),

3 the quality and outcomes of care, and adminis4 trative simplification.

5 ‘‘(B) Conducting and supporting research

6 on the appropriateness and effectiveness of al7 ternative community-based and clinical strate8 gies including integrating preventive services

9 into primary care, the effectiveness of preven10 tive counseling and health education, and the

11 efficacy and cost-effectiveness of clinical preven12 tive services.

13 ‘‘(C) Conducting and supporting research

14 on consumer choice and information resources;

15 on the role of shared decision making in en16 hancing patient and provider therapeutic op17 tions; the effects of health care reform on

18 health delivery systems; methods for risk ad19 justment; factors influencing access to health

20 care for vulnerable populations, including chil21 dren, persons with low-income, persons with

22 disabilities, or individuals with chronic or com23 plex health conditions, and primary care.

24 ‘‘(D) The development of clinical practice

25 guidelines consistent with section 913, the dis-
588

•S 2357

1 semination of such guidelines consistent with

2 section 903, and the assessment of the effec3 tiveness of such guidelines.’’.

4 SEC. 3203. AHCPR GUIDELINES AND STANDARDS.

5 (a) TRAINEESHIP PROGRAM.—Section 902(c) of the

6 Public Health Service Act (42 U.S.C. 299a(c)) is amend7 ed—

8 (1) by redesignating the matter following the

9 subsection heading as paragraph (1) and realigning

10 the margin of such so as to align with the margin

11 of section 903(a)(1);

12 (2) by inserting before ‘‘The Administrator’’ the

13 following: ‘‘IN GENERAL.—’’; and

14 (3) by adding at the end thereof the following

15 new paragraph:

16 ‘‘(2) TRAINEESHIP PROGRAM.—The Adminis17 trator shall establish a traineeship program for not

18 to exceed 25 investigators, to enable such investiga19 tors to carry out research at the Agency that would

20 benefit the mission of the Agency and further the

21 educational needs of such investigators. Such inves22 tigator positions shall not be counted against any

23 Federal employment ceilings affecting the Agency.’’.
589

•S 2357

1 (b) PRINTING SERVICES.—Section 902 of such Act

2 (42 U.S.C. 299a) is amended by adding at the end thereof

3 the following new subsection:

4 ‘‘(f) AUTHORITY TO CONTRACT FOR PRINTING SERV5 ICES.—The Administrator may publish or arrange for the

6 publication of research findings and practice guidelines,

7 without regard to section 501 of title 44, United States

8 Code.’’.

9 (c) PANELS.—Section 913(a) of the Public Health

10 Service Act (42 U.S.C. 299b–2(a)) is amended by adding

11 at the end thereof the following new flush sentence:

12 ‘‘Panels convened for the purpose of carrying out para13 graphs (1) and (2) shall not be considered advisory com14 mittees within the meaning of section 3(2) of the Federal

15 Advisory Committee Act (5 U.S.C. App. 3(2)), and prior

16 to publication by the Administrator, clinical practice

17 guidelines, performance measures, and review criteria as

18 described in section 912(a) are not subject to the require19 ments of section 552 of title 5, United States Code.’’.

20 (d) ARRANGEMENTS.—Section 913 of such Act (42

21 U.S.C. 299b–2) is amended by adding at the end thereof

22 the following new subsection:

23 ‘‘(d) ARRANGEMENTS.—

24 ‘‘(1) IN GENERAL.—Upon the request of a pub25 lic or private entity, the Administrator may collect,
590

•S 2357

1 tabulate, and analyze statistics, perform technology

2 assessments, carry out health services and outcomes

3 and effectiveness research, and facilitate the develop4 ment of clinical practice guidelines under arrange5 ments with such entities under which such entities

6 compensate the Administrator for the costs of the

7 services provided.

8 ‘‘(2) AMOUNTS AND PERSONNEL.—Amounts

9 collected from payments under this subsection shall

10 be available to the Administrator for obligation until

11 expended, and personnel used to provide such serv12 ices shall not be counted against any Federal em13 ployment ceilings affecting the Agency.’’.

14 (e) TECHNICAL AMENDMENT.—Section 913(c) of

15 such Act (42 U.S.C. 299b–2(c)) is amended by moving

16 the first sentence so as appear after the subsection head17 ing.

18 PART 2—FUNDING FOR PROGRAM

19 SEC. 3211. AUTHORIZATIONS OF APPROPRIATIONS.

20 (a) RELATION TO OTHER FUNDS.—Amounts made

21 available under this subtitle are in addition to any other

22 authorizations of appropriations that are available to carry

23 out section 3202 and the amendments made by such sec24 tion.
591

•S 2357

1 (b) TRIGGER AND RELEASE OF MONIES.—No ex2 penditure shall be made pursuant to section 3201(b) dur3 ing any fiscal year in which the annual amount appro4 priated for the National Institutes of Health and the

5 Agency for Health Care Policy and Research is less than

6 the amount so appropriated for the prior fiscal year. With

7 respect to amounts available for expenditure pursuant to

8 section 3201(b) which, as a result of the application of

9 this subsection remain unexpended, such amounts shall be

10 obligated by the Secretary of Health and Human Services

11 under the public health initiative under subtitle H.

12 PART 3—MEDICAL TECHNOLOGY IMPACT STUDY

13 SEC. 3221. MEDICAL TECHNOLOGY IMPACT STUDY.

14 (a) ASSESSMENT OF THE STANDARD IMPACT OF

15 MEDICAL TECHNOLOGIES.—

16 (1) IN GENERAL.—The Secretary, acting

17 through the Administrator of the Agency for Health

18 Care Policy and Research (hereafter referred to in

19 this section as the ‘‘Administrator’’), shall undertake

20 an interdisciplinary study (to be known as the ‘‘Med21 ical Technology Impact Study’’) to assess the overall

22 economic costs, economic benefits, and effect on pa23 tient outcomes of medical technologies used in treat24 ing each of a list of target diseases and conditions.

25 The Secretary shall submit the report of the Admin-
592

•S 2357

1 istrator to Congress (in accordance with subsection

2 (c)) concerning the results of the study and may

3 provide any recommendations determined to be nec4 essary to ensure the availability, access, and appro5 priate use of medical technologies to improve the

6 quality of health care in the United States.

7 (2) PURPOSE.—The purpose of the study under

8 paragraph (1) is to assess the impact of old, new,

9 and emerging medical technologies on health care

10 costs, social costs, and patient outcomes, and to

11 identify the factors, including government and pri12 vate payor reimbursement policies, that impede or

13 encourage innovation that improves patient out14 comes. Congress intends that the study complement

15 the technology assessment, outcomes research, and

16 guideline development activities authorized under

17 title IX of the Public Health Service Act by provid18 ing a comprehensive context for understanding the

19 economic and social factors related to the develop20 ment and use of medical technologies.

21 (3) DEFINITIONS.—As used in this section:

22 (A) ECONOMIC BENEFITS.—The term

23 ‘‘economic benefits’’ may include, based on

24 available data—
593

•S 2357

1 (i) reductions in the economic costs of

2 disease;

3 (ii) increases in employment attrib4 utable to the medical technology industry;

5 (iii) increases in Federal and State

6 tax revenues attributable to the medical

7 technology industry and its employees;

8 (iv) improvements in the balance of

9 trade deficit attributable to the medical

10 technology industry; and

11 (v) other benefits that are determined

12 by the Advisory Committee established

13 under subsection (b) to be relevant to as14 sessing the impact of medical technology.

15 (B) ECONOMIC COSTS.—The term ‘eco16 nomic costs’ may include, based on available

17 data—

18 (i) the financial costs to the health

19 care system of diagnosing and treating dis20 ease, including the costs of nontreatment

21 and palliative care;

22 (ii) the financial costs to employers

23 resulting from worker illness, including the

24 costs of productivity losses and worker ab25 senteeism;
594

•S 2357

1 (iii) the financial costs to families re2 sulting from illness of a family member, in3 cluding costs associated with loss of in4 come, hiring of caretakers, and long term

5 and hospice care;

6 (iv) the financial costs to government

7 of illness, including reductions in income

8 tax revenues attributable to worker illness

9 and worker related injuries and increases

10 in transfer payments, including unemploy11 ment, disability, welfare, and survivor ben12 efit payments, made to individuals and

13 families on account of illness; and

14 (v) other costs that are determined by

15 the Advisory Committee established under

16 subsection (b) to be relevant to assessing

17 the impact of medical technology.

18 (C) MEDICAL TECHNOLOGIES.—The term

19 ‘medical technologies’ includes drugs, biologics

20 (including vaccines), medical devices, drug de21 livery systems, and surgical services and other

22 procedures for preventing, diagnosing, and

23 treating diseases or health conditions.

24 (D) MEDICAL TECHNOLOGY INDUSTRY.—

25 The term ‘medical technology industry’ includes
595

•S 2357

1 the biotechnology, pharmaceutical, and medical

2 device industries, and such other industries that

3 invent, develop, or market medical technologies.

4 (E) PATIENT OUTCOMES.—The term ‘pa5 tient outcomes’ may include—

6 (i) changes in clinical outcomes, in7 cluding stabilization of patients with pro8 gressive disease or health conditions, re9 sulting from the use of safe and effective

10 medical technology in prevention, diag11 nosis, or treatment;

12 (ii) changes in mortality, morbidity,

13 and health service use, including stabiliza14 tion of patients with progressive diseases;

15 (iii) changes in quality of life, includ16 ing ability to perform activities of daily liv17 ing, ability to return to work, relief from

18 discomfort or pain, alleviation of fatigue,

19 and improved mental functioning and well20 being; and

21 (iv) other outcomes that are deter22 mined by the Advisory Committee to be

23 relevant to assessing the impact of medical

24 technology.

25 (b) ADVISORY COMMITTEE.—
596

•S 2357

1 (1) IN GENERAL.—The Administrator shall es2 tablish an Advisory Committee to assist the Agency

3 for Health Care Policy and Research in preparing

4 the reports required under subsection (c). Except as

5 provided in paragraph (3), no member of the Advi6 sory Committee shall be an employee of the Federal

7 Government.

8 (2) MEMBERSHIP.—The Advisory Committee

9 shall be balanced in its representation of interested

10 parties and shall be composed of at least two indi11 viduals appointed by the President of the Institute

12 of Medicine and two individuals from each of the fol13 lowing categories to be appointed by the Adminis14 trator:

15 (A) Experts in medical technology assess16 ment.

17 (B) Experts in objective measures of im18 proved patient outcomes, such as clinical out19 comes, mortality, morbidity, and health service

20 use.

21 (C) Experts in subjective measures of im22 proved patient outcomes, such as quality of life.

23 (D) Experts in quantifying the economic

24 costs of disease to the health care system, in25 cluding public and private payers.
597

•S 2357

1 (E) Experts in quantifying the economic

2 impact of the medical technology industry.

3 (F) Experts in health statistics and epide4 miology.

5 (G) Physicians and other health care pro6 viders.

7 (H) Officers or employees of health plans

8 and other health care payers.

9 (I) Experts in the ethical implications of

10 health care.

11 (J) Experts in private sector financial mar12 ket investment in the medical technology indus13 try.

14 (K) Consumers and members of patient

15 advocacy groups.

16 (L) Health professional organizations.

17 (M) Officers or employees of biotechnology

18 companies.

19 (N) Officers or employees of medical device

20 companies.

21 (O) Officers or employees of pharma22 ceutical companies.

23 (3) EX OFFICIO.—The following individuals or

24 their designees shall serve as ex officio members of

25 the Advisory Committee:
598

•S 2357

1 (A) The Director of the National Institutes

2 of Health.

3 (B) The Commissioner of Food and Drugs.

4 (C) The Director of the Centers for Dis5 ease Control and Prevention.

6 (D) The Administrator of the Health Care

7 Financing Administration.

8 (E) The Under Secretary of Commerce for

9 Technology.

10 (F) The Director of the Congressional Of11 fice of Technology Assessment.

12 (c) INTERDISCIPLINARY STUDY AND REPORT.—

13 (1) IN GENERAL.—The Administrator, in con14 sultation with the Advisory Committee established

15 under subsection (b), shall determine which diseases

16 or conditions should be studied in the Medical Tech17 nology Impact Study under subsection (a). In carry18 ing out the medical technology assessment required

19 under this subsection, the Administrator shall con20 sider various factors, including those outlined in sec21 tion 904(b)(2) of the Public Health Service Act and

22 government and private payor reimbursement poli23 cies that impede or encourage innovation that im24 proves patient outcomes. The diseases or conditions
599

•S 2357

1 studied in such Study shall be those considered to

2 be high priority according to the following criteria:

3 (A) Aggregate economic costs to the Unit4 ed States.

5 (B) Overall importance to public heath.

6 (C) Potential for improvements in patient

7 outcomes.

8 (D) Significant changes expected in man9 agement of the condition.

10 (E) Other criteria identified by the Advi11 sory Committee.

12 (2) DESIGN.—The Administrator, in consulta13 tion with the Advisory Committee established under

14 subsection (b), and the Institute of Medicine pursu15 ant to paragraph (3), shall develop a design, based

16 on the list of target diseases and conditions, for un17 dertaking the Medical Technology Impact Study

18 under subsection (a).

19 (3) CONTRACT.—The Secretary shall request

20 the Institute of Medicine of the National Academy

21 of Sciences to enter into a contract to review the de22 sign of the Medical Technology Impact Study under

23 subsection (a) and report to the Administrator con24 cerning any recommendations for revising such de-
600

•S 2357

1 sign, in the interest of assuring that it reflects the

2 best available scientific methodologies.

3 (4) PUBLICATION.—The Administrator shall

4 publish the study design under this section and list

5 of target diseases and conditions, the recommenda6 tions of the Institute of Medicine, and the response

7 of the Administrator to such recommendations in

8 the Federal Register for a 60-day period for public

9 comment. Any such comments shall be considered by

10 the Administrator in completing the proposed study

11 design for submission to the Secretary.

12 (5) DESIGN REPORT.—The Secretary shall re13 port to Congress concerning the proposed design of

14 the Medical Technology Impact Study, together with

15 recommendations for appropriations necessary to

16 carry out the Study.

17 (6) GRANTS AND CONTRACTS.—Beginning in

18 the first fiscal year for which Congress appropriates

19 funds under subsection (d), and ending on Septem20 ber 30 of that year, the Administrator shall enter

21 into grants and contracts with appropriate entities

22 to conduct any investigations and analyses that may

23 be required to carry out the design of the Medical

24 Technology Impact Study under subsection (a).
601

•S 2357

1 (7) REPORT ON FINDINGS.—The Administrator,

2 in consultation with the Advisory Committee estab3 lished under subsection (b), shall develop a draft

4 comprehensive report concerning the findings of the

5 Medical Technology Impact Study under subsection

6 (a), shall make copies of the draft report available

7 to the public, and shall publish a notice in the Fed8 eral Register providing for a 60-day period of public

9 comment. Any such comments shall be considered by

10 the Administrator in completing and submitting the

11 final report to the Secretary.

12 (8) FINAL REPORT.—Not later than 3 years

13 after the date of enactment of this section, the Sec14 retary shall submit the report of the Administrator

15 under this section to Congress, and may include any

16 recommendations determined necessary to assure the

17 availability, access and appropriate use of medical

18 technologies to improve the quality of health care in

19 the United States.

20 (d) AUTHORIZATION OF APPROPRIATIONS.—There

21 are authorized to be appropriated such sums as may be

22 necessary to carry out this section.
602

•S 2357

1 Subtitle D—Core Functions of Pub2 lic Health Programs; National

3 Initiatives Regarding Preven4 tive Health

5 PART 1—FUNDING

6 SEC. 3301. AUTHORIZATIONS OF APPROPRIATIONS.

7 (a) CORE FUNCTIONS OF PUBLIC HEALTH PRO8 GRAMS.—For the purpose of carrying out part 2, there

9 are authorized to be appropriated $123,000,000 for fiscal

10 year 1995, $184,500,000 for fiscal year 1996,

11 $266,500,000 for fiscal year 1997, $348,500,000 for fis12 cal year 1998, $410,000,000 for fiscal year 1999,

13 $512,500,000 for fiscal year 2000, and $2,000,000 for

14 each of the fiscal years 2001 through 2004.

15 (b) NATIONAL INITIATIVES REGARDING HEALTH

16 PROMOTION AND DISEASE PREVENTION.—For the pur17 pose of carrying out part 3, there are authorized to be

18 appropriated $102,500,000 for each of the fiscal years

19 1996 through 1998, $123,000,000 for each of the fiscal

20 years 1999 and 2000, and $2,000,000 for each of the fis21 cal years 2001 through 2004.

22 (c) RELATION TO OTHER FUNDS.—The authoriza23 tions of appropriations established in subsections (a) and

24 (b) are in addition to any other authorizations of appro-
603

•S 2357

1 priations that are available for the purposes described in

2 such subsections.

3 PART 2—CORE FUNCTIONS OF PUBLIC HEALTH

4 PROGRAMS

5 SEC. 3311. PURPOSES.

6 Subject to the subsequent provisions of this subtitle,

7 the purposes of this part are to strengthen the capacity

8 of State and local public health agencies to carry out the

9 following functions:

10 (1) To monitor and protect the health of com11 munities against communicable diseases and expo12 sure to toxic environmental pollutants, occupational

13 hazards, harmful products, and poor quality health

14 care.

15 (2) To identify and control outbreaks of infec16 tious disease and patterns of chronic disease and in17 jury.

18 (3) To inform and educate health care consum19 ers and providers about their roles in preventing in20 jury, preventing and controlling disease and the ap21 propriate use of medical services.

22 (4) To develop and test new prevention and

23 public health control interventions.

24 (5) To integrate and coordinate the prevention

25 programs and services of standard health plans,
604

•S 2357

1 community-based providers, local health depart2 ments, State health departments, purchasing co3 operatives, and other sectors of State and local gov4 ernment that affect health, including education,

5 labor, transportation, welfare, criminal justice, envi6 ronment, agriculture, and housing.

7 (6) To conduct research on the effectiveness

8 and cost-effectiveness of public health programs.

9 SEC. 3312. GRANTS TO STATES FOR CORE FUNCTIONS OF

10 PUBLIC HEALTH.

11 (a) IN GENERAL.—The Secretary shall make grants

12 to States that submit applications as prescribed in section

13 3313 in an amount which bears the same ratio to the

14 available amounts for that fiscal year as the amounts pro15 vided by the Secretary under the provisions of law listed

16 in section 1902(2) of the Public Health Service Act to the

17 State for fiscal year 1981 bear to the total amount appro18 priated for such provisions of law for fiscal year 1981.

19 (b) CORE FUNCTIONS OF PUBLIC HEALTH PRO20 GRAMS.—For purposes of subsection (a), the functions de21 scribed in this subsection are, subject to subsection (c),

22 as follows:

23 (1)(A) Data collection, activities related to pop24 ulation health (including the population of individ25 uals ineligible for the comprehensive benefit pack-
605

•S 2357

1 age) measurement and outcomes monitoring, includ2 ing the acquisition and installation of hardware and

3 software, personnel training and technical assistance

4 to operate and support automated and integrated in5 formation systems, the regular collection and analy6 sis of public health data, vital statistics, and per7 sonal health services data and analysis for planning

8 and needs assessment purposes of data collected

9 from health plans through the information system

10 under title V of this Act.

11 (B) Data measures under this paragraph must

12 include an ethnic identifier on all forms. To the ex13 tent feasible, ethnic identifiers should be classified

14 by ethnic sub-group populations. Access to data

15 must be ensured for research organizations and data

16 clearinghouses. Population health measurement and

17 outcome monitoring should focus on health status

18 differentials between racial, and ethnic groups, by

19 subpopulation, and gender differences.

20 (2) Activities to protect the environment and to

21 assure the safety of housing, workplaces, food and

22 water, including the following activities:

23 (A) Monitoring and improving the overall

24 public health quality and safety of communities.
606

•S 2357

1 (B) Assessing exposure to high lead levels

2 and water contamination.

3 (C) Providing support for poison control

4 centers.

5 (D) Monitoring sewage and solid waste dis6 posal, radiation exposure, radon exposure, and

7 noise levels.

8 (E) Abatement of lead-related hazards.

9 (F) Assuring recreation, home and worker

10 safety.

11 (G) Public information and education pro12 grams that help to reduce intentional and unin13 tentional injuries, including training parents

14 and children on use of safety devices.

15 (H) Enforcing public health safety and

16 sanitary codes.

17 (I) Other activities relating to promoting

18 the public health of communities.

19 (3) Investigation and control of adverse health

20 conditions, including improvements in emergency

21 treatment preparedness, injury prevention, coopera22 tive activities to reduce violence levels in homes and

23 communities, activities to control the outbreak of

24 disease, exposure related conditions and other

25 threats to the health status of individuals.
607

•S 2357

1 (4) Public information and education programs

2 to reduce risks to health such as use of tobacco, al3 cohol and other drugs, sexual activities that increase

4 the risk to HIV transmission and sexually transmit5 ted diseases, domestic violence, poor diet, physical

6 inactivity, and low childhood immunization levels.

7 (5) Accountability and quality assurance activi8 ties, including monitoring the quality of personal

9 health services furnished by health plans and provid10 ers of medical and health services in a manner con11 sistent with the overall quality of care monitoring

12 activities undertaken under title V, and monitoring

13 communities’ overall access to health services.

14 (6) Provision of public health laboratory serv15 ices to complement private clinical laboratory serv16 ices and that screen for diseases and conditions such

17 as metabolic diseases in newborns, provide toxicology

18 assessments of blood lead levels and other environ19 mental toxins, diagnose sexually transmitted dis20 eases, tuberculosis and other diseases requiring part21 ner notification, test for infectious and food-borne

22 diseases, and monitor the safety of water and food

23 supplies.

24 (7) Training and education to assure provision

25 of care by all health professionals, with special em-
608

•S 2357

1 phasis placed on the training of public health profes2 sions including epidemiologists, biostatisticians,

3 health educators, public health administrators,

4 sanitarians and laboratory technicians.

5 (8) Leadership, policy development and admin6 istration activities, including needs assessment, the

7 setting of public health standards, the development

8 of community public health policies, and the develop9 ment of community public health coalitions.

10 (9) Establishment of programs that encourage

11 partnerships among local law enforcement and com12 munity groups for the purpose of developing commu13 nity response teams to assist victims of domestic vio14 lence.

15 (c) RESTRICTIONS ON USE OF GRANT.—

16 (1) IN GENERAL.—A funding agreement for a

17 grant under subsection (a) for a State is that the

18 grant will not be expended—

19 (A) to provide inpatient services;

20 (B) to make cash payments to intended re21 cipients of health services;

22 (C) to purchase or improve land, purchase,

23 construct, or permanently improve (other than

24 minor remodeling) any building or other facil25 ity, or purchase major medical equipment;
609

•S 2357

1 (D) to satisfy any requirement for the ex2 penditure of non-Federal funds as a condition

3 for the receipt of Federal funds; or

4 (E) to provide financial assistance to any

5 entity other than a public or nonprofit private

6 entity.

7 (2) LIMITATION ON ADMINISTRATIVE EX8 PENSES.—A funding agreement for a grant under

9 subsection (a) is that the State involved will not ex10 pend more than 10 percent of the grant for adminis11 trative expenses with respect to the grant.

12 (d) MAINTENANCE OF EFFORT.—A funding agree13 ment for a grant under subsection (a) is that the State

14 involved will maintain expenditures of non-Federal

15 amounts for core health functions at a level that is not

16 less than the level of such expenditures maintained by the

17 State for the fiscal year preceding the first fiscal year for

18 which the State receives such a grant.

19 SEC. 3313. SUBMISSION OF INFORMATION.

20 The Secretary may make a grant under section 3312

21 only if the State involved submits to the Secretary the fol22 lowing information:

23 (1) A description of existing deficiencies in the

24 State’s public health system (at the State level and
610

•S 2357

1 the local level), using standards of sufficiency devel2 oped by the Secretary.

3 (2) A description of health status measures to

4 be improved within the State (at the State level and

5 the local level) through expanded public health func6 tions.

7 (3) Measurable outcomes and process objectives

8 for improving health status and core health func9 tions for which the grant is to be expended.

10 (4) Information regarding each such function,

11 which—

12 (A) identifies the amount of State and

13 local funding expended on each such function

14 for the fiscal year preceding the fiscal year for

15 which the grant is sought; and

16 (B) provides a detailed description of how

17 additional Federal funding will improve each

18 such function by both the State and local public

19 health agencies.

20 (5) A description of the core health functions to

21 be carried out at the local level, and a specification

22 for each such function of—

23 (A) the communities in which the function

24 will be carried out; and
611

•S 2357

1 (B) the amount of the grant to be ex2 pended for the function in each community so

3 specified.

4 SEC. 3314. REPORTS.

5 A funding agreement for a grant under section 3312

6 is that the States involved will, not later than the date

7 specified by the Secretary, submit to the Secretary a re8 port describing—

9 (1) the purposes for which the grant was ex10 pended; and

11 (2) describing the extent of progress made by

12 the State in achieving measurable outcomes and

13 process objectives described in section 3313(3).

14 SEC. 3315. APPLICATION FOR GRANT.

15 The Secretary may make a grant under section 3312

16 only if an application for the grant is submitted to the

17 Secretary, the application contains each agreement de18 scribed in this part, the application contains the informa19 tion required in section 3314, and the application is in

20 such form, is made in such manner, and contains such

21 agreements, assurances, and information as the Secretary

22 determines to be necessary to carry out this part.

23 SEC. 3316. ALLOCATIONS FOR CERTAIN ACTIVITIES.

24 Of the amounts made available under section 3301

25 for a fiscal year for carrying out this part, the Secretary
612

•S 2357

1 may reserve not more than 5 percent for carrying out the

2 following activities:

3 (1) Technical assistance with respect to plan4 ning, development, and operation of core health

5 functions carried out under section 3312, including

6 provision of biostatistical and epidemiological exper7 tise and provision of laboratory expertise.

8 (2) Development and operation of a national in9 formation network among State and local health

10 agencies.

11 (3) Program monitoring and evaluation of core

12 health functions carried out under section 3312.

13 (4) Development of a unified electronic report14 ing mechanism to improve the efficiency of adminis15 trative management requirements regarding the pro16 vision of Federal grants to State public health agen17 cies.

18 SEC. 3317. DEFINITIONS.

19 For purposes of this part:

20 (1) The term ‘‘funding agreement’’, with re21 spect to a grant under section 3312 to a State,

22 means that the Secretary may make the grant only

23 if the State makes the agreement involved.
613

•S 2357

1 (2) The term ‘‘core health functions’’, with re2 spect to a State, means the functions described in

3 section 3312(b).

4 SEC. 3318. SINGLE APPLICATION AND UNIFORM REPORT5 ING SYSTEMS FOR CORE FUNCTIONS OF PUB6 LIC HEALTH AND PUBLIC HEALTH CATEGOR7 ICAL GRANT PROGRAMS ADMINISTERED BY

8 THE CENTERS FOR DISEASE CONTROL AND

9 PREVENTION.

10 (a) SINGLE APPLICATION.—

11 (1) IN GENERAL.—The Secretary, acting

12 through the Director of the Centers for Disease

13 Control and Prevention, shall establish a single con14 solidated application to enable States to apply for

15 the Core Functions of Public Health Grants Pro16 gram and any or all of the Public Health Service

17 Act categorical programs described in subsection (b).

18 (2) REQUIREMENTS.—The application devel19 oped under paragraph (1) shall—

20 (A) be designed so that information col21 lected will be consistent with the requirements

22 of this part including subsection (b);

23 (B) be designed and implemented not later

24 than 1 year after the date of enactment of this

25 Act; and
614

•S 2357

1 (C) be developed with resources made

2 available under section 3316 (not resources

3 made available for the programs described in

4 subsection (b)).

5 (3) STATE PUBLIC HEALTH OFFICERS.—In de6 veloping the single consolidated application form to

7 be used under this subsection the Secretary shall

8 consult with Federal, State and local public health

9 agencies.’’.

10 (4) ELIGIBILITY.—States and local govern11 ments that have grants, contracts or cooperative

12 agreements in effect with the Centers for Disease

13 Control and Prevention on the date of enactment of

14 this Act shall be eligible to use a single application

15 under this section to apply for any or all of the Pub16 lic Health Service Act categorical programs de17 scribed in subsection (b).

18 (b) ELIGIBLE PUBLIC HEALTH SERVICE ACT PRO19 GRAMS.—Eligible Public Health Service Act categorical

20 programs described in this subsection are the following:

21 (1) The Preventive Health and Health Services

22 Block Grant under section 1903 of the Public

23 Health Service Act.
615

•S 2357

1 (2) The Childhood Lead Poisoning Prevention

2 Program under section 317A of the Public Health

3 Service Act.

4 (3) The Sexually Transmitted Diseases Pro5 gram under section 318 of the Public Health Service

6 Act.

7 (4) The Prevention of Sexually Transmitted

8 Diseases-Related Infertility Program under section

9 318A of the Public Health Service Act.

10 (5) The Breast and Cervical Cancer Early De11 tection Program under sections 1501 through 1509

12 of the Public Health Service Act.

13 (6) The National Program of Cancer Registries

14 under section 399H of the Public Health Service

15 Act.

16 (7) The Injury Control and Prevention Pro17 gram under sections 391 through 394 of the Public

18 Health Service Act.

19 (8) The preventive health for prostate cancer

20 program under section 317D of the Public Health

21 Service Act.

22 (9) The birth defects data program under sec23 tion 317C of the Public Health Service Act.

24 (10) Programs under subtitle D of this title.
616

•S 2357

1 (11) Other relevant programs as determined ap2 propriate by the Secretary.

3 (c) ALLOCATION OF FUNDS.—In awarding grants to

4 States and local governments under a single application

5 under this section, the Secretary shall delineate to each

6 grantee the amounts to be dedicated to each of the pro7 grams described in subsection (b) and ensure that funding

8 allotments for each of such programs are consistent with

9 the requirements of Federal law.

10 (d) UNIFORM CORE FUNCTIONS OF PUBLIC HEALTH

11 REPORTING SYSTEM.—

12 (1) DEVELOPMENT.—The Secretary, acting

13 through the Director of the Office of Disease Pre14 vention and Health Promotion and the Director of

15 the Centers for Disease Control and Prevention, in

16 consultation with other relevant Federal and State

17 health agencies with data collection responsibilities,

18 shall develop and implement a Uniform Core Public

19 Health Functions Reporting System to collect pro20 gram and fiscal data concerning the programs de21 scribed in subsection (b).

22 (2) REQUIREMENTS.—The system developed

23 under paragraph (1) shall—

24 (A) use outcomes consistent with the goals

25 of Healthy People 2000;
617

•S 2357

1 (B) be designed so that information col2 lected will be consistent with the requirements

3 of this part including subsection (b);

4 (C) be designed and implemented not later

5 than 2 years after the date of enactment of this

6 Act; and

7 (D) be developed with resources made

8 available under section 3316 of this Act (not re9 sources made available for the programs de10 scribed in subsection (b)).

11 (3) STATE PUBLIC HEALTH OFFICERS.—In de12 veloping the data set to be used under Uniform Core

13 Public Health Functions Reporting System the Sec14 retary shall consult with Federal, State and local

15 public health agencies.

16 (e) STUDY.—

17 (1) IN GENERAL.—Within a reasonable period

18 of time after the date of enactment of this Act, the

19 Secretary shall request that the Institute of Medi20 cine conduct a study concerning—

21 (A) the effects of consolidating any or all

22 of the grant programs administered by the Cen23 ters for Disease Control and Prevention and de24 scribed in subsection (b) into a Core Functions

25 of Public Health Block Grant Program;
618

•S 2357

1 (B) the development of alternative methods

2 for implementing a block grant program or cat3 egorical grant program; and

4 (C) alternative formulas for allocating

5 State grants that incorporate measures of

6 health status, population and degree of poverty.

7 In particular, the impact of program consolidation

8 on the targeted recipients, including women and vul9 nerable populations, shall be addressed in the study.

10 If the Institute of Medicine declines to do the study,

11 the Secretary shall make grants to or enter into con12 tracts with a public or nonprofit private entity with

13 relevant expertise for the conduct of such a study.

14 (2) REPORT.—Not later than 1 year after the

15 date of the receipt of the contract under paragraph

16 (1), the contract recipient shall prepare and submit

17 to the Secretary, the Energy and Commerce Com18 mittee of the House of Representatives, and the

19 Committee on Labor and Human Resources of the

20 Senate a report that contains the results of the

21 study conducted under paragraph (1).

22 (3) ISSUANCE OF PLAN.—Not later than 1 year

23 after the date on which the report under paragraph

24 (2) is received by the Secretary and the committees

25 referred to in such paragraph, the Secretary shall
619

•S 2357

1 issue a plan in response to the report. Such a plan

2 shall include the identification of relevant changes in

3 authorizing language.

4 PART 3—NATIONAL INITIATIVES REGARDING

5 HEALTH PROMOTION AND DISEASE PREVENTION

6 Subpart A—General Grants

7 SEC. 3331. GRANTS FOR NATIONAL PREVENTION INITIA8 TIVES.

9 (a) IN GENERAL.—The Secretary may make grants

10 to entities described in subsection (b) for the purpose of

11 carrying out projects to develop and implement innovative

12 community-based strategies to provide for health pro13 motion and disease prevention activities for which there

14 is a significant need, as identified under section 1701 of

15 the Public Health Service Act.

16 (b) ELIGIBLE ENTITIES.—The entities referred to in

17 subsection (a) are agencies of State or local government,

18 private nonprofit organizations (including research institu19 tions), and coalitions that link two or more of these

20 groups.

21 (c) CERTAIN ACTIVITIES.—The Secretary shall en22 sure that projects carried out under subsection (a)—

23 (1) reflect approaches that take into account

24 the special needs and concerns of the affected popu25 lations;
620

•S 2357

1 (2) are targeted to the most needy and vulner2 able population groups and geographic areas of the

3 Nation;

4 (3) examine links between various high priority

5 preventable health problems and the potential com6 munity-based remedial actions; and

7 (4) establish or strengthen the links between

8 the activities of agencies engaged in public health

9 activities with those of purchasing cooperatives,

10 health care providers, and other entities involved in

11 the personal health care delivery system described in

12 title I.

13 SEC. 3332. PRIORITIES.

14 (a) ESTABLISHMENT.—

15 (1) ANNUAL STATEMENT.—The Secretary shall

16 for each fiscal year develop a statement of proposed

17 priorities for grants under section 3331 for the fiscal

18 year.

19 (2) ALLOCATIONS AMONG PRIORITIES.—With

20 respect to the amounts available under section

21 3301(b) for the fiscal year for carrying out this part,

22 each statement under paragraph (1) for a fiscal year

23 shall include a specification of the percentage of the

24 amount to be devoted to projects addressing each of

25 the proposed priorities established in the statement.
621

•S 2357

1 (3) PROCESS FOR ESTABLISHING PRIORITIES.—

2 (A) PREFERENCE.—In establishing prior3 ities for grants under this part, preference shall

4 be given to projects that—

5 (i) reduce the prevalence of chronic

6 diseases including cardiovascular disease,

7 stroke, diabetes, and cancer;

8 (ii) prevent violence against women by

9 training providers and other health care

10 professionals to identify victims of domes11 tic violence, to provide appropriate exam12 ination and treatment, and to refer the vic13 tims for appropriate social and legal serv14 ices; and

15 (iii) establish community health advi16 sor programs described in subparagraph

17 (B).

18 (B) COMMUNITY HEALTH ADVISOR PRO19 GRAMS.—For purposes of subparagraph

20 (A)(iii), the term ‘‘community health advisor

21 program’’ means a program that performs the

22 following functions:

23 (i) Provides outreach services to in24 form the community of the availability of

25 program services.
622

•S 2357

1 (ii) Collaborate efforts with health

2 care providers and related entities to facili3 tate the provision of health services and

4 health related social services.

5 (iii) Provide public education on

6 health promotion and disease prevention

7 and efforts to facilitate the use of available

8 health services and health-related social

9 services.

10 (iv) Provide health-related counseling.

11 (v) Make referrals for available health

12 services and health-related social services.

13 (vi) Improve the ability of individuals

14 to use health services and health-related

15 social services under Federal, State, and

16 local programs, through assisting individ17 uals in establishing eligibility under the

18 programs.

19 (vii) Establish a community health ad20 visor training program.

21 (viii) Provide services in the language

22 and cultural context most appropriate for

23 the individuals served by the program.

24 (ix) Provide compensation for the

25 services of, and opportunities for training
623

•S 2357

1 and employment of, community health ad2 visors.

3 (x) Such other services as the Sec4 retary determines to be appropriate, which

5 may include transportation and translation

6 services.

7 (C) PUBLICATION OF STATEMENT.—Not

8 later than January 1 of each fiscal year, the

9 Secretary shall publish a statement under para10 graph (1) in the Federal Register. A period of

11 60 days shall be allowed for the submission of

12 public comments and suggestions concerning

13 the proposed priorities. After analyzing and

14 considering comments on the proposed prior15 ities, the Secretary shall publish in the Federal

16 Register final priorities (and associated reserva17 tions of funds) for approval of projects for the

18 following fiscal year.

19 (D) DEFINITION OF COMMUNITY HEALTH

20 ADVISOR.—For purposes of subparagraph (B),

21 the term ‘‘community health advisor’’ means an

22 individual—

23 (i) who has demonstrated the capacity

24 to carry out one or more of the authorized

25 program services;
624

•S 2357

1 (ii) who, for not less than 1 year, has

2 been a resident of the community in which

3 the community health advisor program in4 volved is to be operated; and

5 (iii) is a member of a socioeconomic

6 group to be served by the program.

7 (b) APPLICABILITY TO MAKING OF GRANTS.—

8 (1) IN GENERAL.—The Secretary may make

9 grants under section 3331 for projects that the Sec10 retary determines—

11 (A) are consistent with the applicable final

12 statement of priorities and otherwise meets the

13 objectives described in subsection (a); and

14 (B) will assist in meeting a health need or

15 concern of a population within a defined health

16 care coverage area or other service area.

17 (2) SPECIAL CONSIDERATION FOR CERTAIN

18 PROJECTS.—In making grants under section 3331,

19 the Secretary shall give special consideration to ap20 plicants that will carry out projects that, in addition

21 to being consistent with the applicable published pri22 orities under subsection (a) and otherwise meeting

23 the requirements of this part, have the potential for

24 replication in other communities.
625

•S 2357

1 SEC. 3333. SUBMISSION OF INFORMATION.

2 The Secretary may make a grant under section 3331

3 only if the applicant involved submits to the Secretary the

4 following information:

5 (1) A description of the activities to be con6 ducted, and the manner in which the activities are

7 expected to contribute to meeting one or more of the

8 priority health needs specified under section 3332

9 for the fiscal year for which the grant is initially

10 sought.

11 (2) A description of the total amount of Federal

12 funding requested, the geographic area and popu13 lations to be served, and the evaluation procedures

14 to be followed.

15 (3) Such other information as the Secretary de16 termines to be appropriate.

17 SEC. 3334. APPLICATION FOR GRANT.

18 The Secretary may make a grant under section 3331

19 only if an application for the grant is submitted to the

20 Secretary, the application contains each agreement de21 scribed in this part, the application contains the informa22 tion required in section 3333, and the application is in

23 such form, is made in such manner, and contains such

24 agreements, assurances, and information as the Secretary

25 determines to be necessary to carry out this part.
626

•S 2357

1 Subpart B—Development of Telemedicine in Rural

2 Underserved Areas

3 SEC. 3341. GRANTS FOR DEVELOPMENT OF RURAL

4 TELEMEDICINE.

5 (a) IN GENERAL.—

6 (1) GRANTS AWARDED.—The Secretary, acting

7 through the Office of Rural Health Policy, shall

8 award grants to eligible entities that have applica9 tions approved under subsection (b) for the purpose

10 of expanding access to health care services for indi11 viduals in rural areas through the use of

12 telemedicine. Grants shall be awarded under this

13 section to encourage the initial development of rural

14 telemedicine networks, expand existing networks,

15 link existing networks together, or link such net16 works to existing fiber optic telecommunications sys17 tems.

18 (2) ELIGIBLE ENTITY.—For purposes of this

19 section, the term ‘‘eligible entity’’ means a public or

20 nonprofit entity operating in a nonmetropolitan area

21 (as defined by the Secretary of Commerce) as part

22 of a network of community-based providers that in23 cludes at least three of the following:

24 (A) Community or migrant health centers.

25 (B) Local health departments.

26 (C) Community mental health centers.
627

•S 2357

1 (D) Nonprofit hospitals.

2 (E) Private practice health professionals,

3 including rural health clinics.

4 (F) Other publicly funded health or social

5 services agencies.

6 (b) APPLICATION.—To be eligible to receive a grant

7 under this section an entity shall prepare and submit to

8 the Secretary an application at such time, in such manner

9 and containing such information as the Secretary may re10 quire, including a description of the use to which the entity

11 will apply any amounts received under the grant.

12 (c) PREFERENCE.—The Secretary shall, in awarding

13 grants under this section, give preference to applicants

14 that—

15 (1) are health care providers in rural health

16 care networks or providers that propose to form

17 such networks, and the majority of the providers in

18 such a network are located in a medically under19 served or health professional shortage areas;

20 (2) can demonstrate broad geographic coverage

21 in the rural areas of the State, or States in which

22 the applicant is located;

23 (3) propose to use Federal funds to develop

24 plans for, or to establish, telemedicine systems that
628

•S 2357

1 will link rural hospitals and rural health care provid2 ers to other hospitals and health care providers;

3 (4) will use the amounts provided under the

4 grant for a range of health care applications such as

5 teleradiology, telepathology, interactive video con6 sultation and remote educational services, and to

7 promote greater efficiency in the use of health care

8 resources; and

9 (5) propose to use local matching funds to fi10 nance projects.

11 (d) USE OF AMOUNTS.—Amounts received under a

12 grant awarded under this section shall be utilized for the

13 development of telemedicine networks involving two or

14 more providers. Such amounts may be used to cover the

15 costs associated with the development of telemedicine net16 works and the acquisition or construction of telecommuni17 cations facilities and equipment including—

18 (1) the development and acquisition through

19 lease or purchase of computer hardware and soft20 ware, audio and visual equipment, computer network

21 equipment, telecommunications transmission facili22 ties, telecommunications terminal equipments, inter23 active video equipment, data terminal equipment,

24 and other facilities and equipment that would fur25 ther the purposes of this section;
629

•S 2357

1 (2) the provision of technical assistance and in2 struction for the development and use of such pro3 gramming equipment or facilities;

4 (3) the development and acquisition of instruc5 tional programming;

6 (4) demonstration projects for teaching or

7 training medical students, residents, and other

8 health professions students in rural training sites

9 about the application of telemedicine;

10 (5) transmission costs, maintenance of equip11 ment, and compensation of specialists and referring

12 practitioners;

13 (6) demonstration projects to use telemedicine

14 to facilitate collaboration between physicians and

15 nonphysician primary care practitioners such as phy16 sician assistants, nurse practitioners, and certified

17 nurse-midwives; or

18 (7) such other uses that are consistent with

19 achieving the purposes of this section as approved by

20 the Secretary.

21 (e) PROHIBITED USES.—Amounts received under a

22 grant awarded under this section may not be used for any

23 of the following:
630

•S 2357

1 (1) Expenditures to purchase or lease equip2 ment to the extent the expenditures would exceed

3 more than 60 percent of the total grant funds.

4 (2) Expenditures for indirect costs (as deter5 mined by the Secretary) to the extent the expendi6 tures would exceed more than 10 percent of the total

7 grant funds.

8 SEC. 3342. REPORT AND EVALUATION OF TELEMEDICINE.

9 Not later than the date that is 3 years after the date

10 on which the first grant is awarded under section 3341,

11 the Secretary, in consultation with the Administrator of

12 the Rural Electrification Administration, the Secretary of

13 Veterans Affairs, and other agencies and departments that

14 have responsibilities for overseeing telemedicine projects,

15 shall prepare and submit to the appropriate committees

16 of Congress a report that evaluates telemedicine in the

17 United States. Such report shall contain an evaluation

18 of—

19 (1) whether telemedicine expands access to

20 health care services;

21 (2) the cost effectiveness of telemedicine serv22 ices; and

23 (3) the quality of telemedicine services deliv24 ered.
631

•S 2357

1 SEC. 3343. REGULATIONS ON REIMBURSEMENT OF

2 TELEMEDICINE.

3 Not later than July 1, 1996, the Secretary, in con4 sultation with the Director of the Office of Rural Health

5 and the Administrator of the Health Care Financing Ad6 ministration, shall issue regulations concerning reimburse7 ment for telemedicine services provided under title XVIII

8 of the Social Security Act.

9 SEC. 3344. AUTHORIZATION OF APPROPRIATIONS.

10 There are authorized to be appropriated such sums

11 as may be necessary to carry out this subpart.

12 SEC. 3345. DEFINITIONS.

13 As used in this part:

14 (1) COMPUTER NETWORKS.—The term ‘‘com15 puter networks’’ means computer hardware and soft16 ware, terminals, signal conversion equipment includ17 ing both modulators and demodulators, or related

18 devices, used to communicate with other computers

19 to process and exchange date through a tele20 communication network in which signals are gen21 erated, modified, or prepared for transmission, or re22 ceived, via telecommunications terminal equipment

23 and telecommunications transmission facilities.

24 (2) DATA TERMINAL EQUIPMENT.—The term

25 ‘‘data terminal equipment’’ means equipment that

26 converts user information into data signals for
632

•S 2357

1 transmission, or reconverts the received data signals

2 into user information, and is normally found on the

3 terminal of a circuit and on the premises of the end

4 user.

5 (3) FIBER OPTIC CABLE.—The term ‘‘fiber

6 optic cable’’ means a bundle of optical transmission

7 elements or waveguides usually consisting of a fiber

8 core and fiber cladding that can guide a lightwave

9 and that are incorporated into an assembly of mate10 rials that provide tensile strength and external pro11 tection.

12 (4) INTERACTIVE VIDEO EQUIPMENT.—The

13 term ‘‘interactive video equipment’’ means equip14 ment used to produce and prepare for transmission

15 audio and visual signals from at least two distant lo16 cations in order that individuals at such locations

17 can verbally and visually communicate with each

18 other, and such equipment includes monitors, other

19 display devices, cameras or other recording devices,

20 audio pick-up devices, and other related equipment.

21 (5) RURAL HEALTH CARE NETWORK.—The

22 term ‘‘rural health care network’’ means a group of

23 rural hospitals or other rural care health care pro24 viders (including clinics, physicians and non-physi25 cians primary care providers) that have entered into
633

•S 2357

1 a formal relationship with each other or with

2 nonrural hospitals and health care providers for the

3 purpose of strengthening the delivery of health care

4 services in rural areas or specifically to improve

5 their patients’ access to telemedicine services. At

6 least 75 percent of hospitals and other health care

7 providers participating in the network shall be lo8 cated in rural areas.

9 (6) TELECOMMUNICATION TRANSMISSION FA10 CILITIES.—The term ‘‘telecommunications trans11 mission facilities’’ means those facilities that trans12 mit, receive, or carry data between the telecommuni13 cations terminal equipment at each end of a tele14 communications circuit or path. Such facilities in15 clude microwave antennae, relay stations and towers,

16 other telecommunications antennae, fiber-optic ca17 bles and repeaters, coaxial cables, communication

18 satellite ground station complexes, copper cable elec19 tronic equipment associated with telecommunications

20 transmissions, and similar items as defined by the

21 Secretary.

22 (7) TELECOMMUNICATION TERMINAL EQUIP23 MENT.—The term ‘‘telecommunications terminal

24 equipment’’ means the assembly of telecommuni25 cations equipment at the end of a circuit, normally
634

•S 2357

1 located on the premises of the end user, that inter2 faces with telecommunications transmission facili3 ties, and that is used to modify, convert, encode, or

4 otherwise prepare signals to be transmitted via such

5 telecommunications facilities, or that is used to mod6 ify, reconvert or carry signals received from such fa7 cilities, the purpose of which is to accomplish the

8 goal for which the circuit was established.

9 Subtitle E—Health Services for

10 Medically Underserved Popu11 lations

12 PART 1—INITIATIVES FOR ACCESS TO HEALTH

13 CARE

14 Subpart A—Authorization of Appropriations

15 SEC. 3411. AUTHORIZATIONS OF APPROPRIATIONS.

16 (a) IMPROVING ACCESS TO HEALTH SERVICES.—

17 (1) SUBPART B.—

18 (A) Except as provided in subparagraph

19 (B), for the purpose of carrying out subpart B,

20 there are authorized to be appropriated

21 $105,000,000 for fiscal year 1995,

22 $245,000,000 for fiscal year 1996,

23 $385,000,000 for fiscal year 1997,

24 $315,000,000 for fiscal year 1998,
635

•S 2357

1 $245,000,000 for fiscal year 1999, and

2 $105,000,000 for fiscal year 2000.

3 (B) With respect to awards to federally

4 qualified health centers (as defined in section

5 1861(aa)(4) of the Social Security Act) and

6 rural health clinics under subpart B, there are

7 authorized to be appropriated $45,000,000 for

8 fiscal year 1995, $105,000,000 for fiscal year

9 1996, $165,000,000 for fiscal year 1997,

10 $135,000,000 for fiscal year 1998,

11 $105,000,000 for fiscal year 1999, and

12 $45,000,000 for fiscal year 2000.

13 (2) SUBPART C.—

14 (A) For the purpose of providing loans

15 under subpart C, there are authorized to be ap16 propriated such sums as may be necessary to

17 support a loan level of $200,000,000 for each

18 of the fiscal years 1995 through 2000.

19 (B) For the purpose of making grants

20 under subpart C, there are authorized to be ap21 propriated $35,000,000 for each of the fiscal

22 year 1995 through 2000.

23 (b) RELATION TO OTHER FUNDS.—The authoriza24 tions of appropriations established in subsection (a) are

25 in addition to any other authorizations of appropriations
636

•S 2357

1 that are available for the purpose described in such sub2 section.

3 (c) ELIGIBLE ENTITIES.—For purposes of this part,

4 the term ‘‘eligible entities’’ means—

5 (1) covered entities as defined in section

6 340B(a)(4) of the Public Health Service Act (42

7 U.S.C. 256b(a)(4)), except that subsection

8 (a)(4)(L)(iii) and (a)(7) of such section shall not

9 apply;

10 (2) school health service sites under title III of

11 this Act;

12 (3) nonprofit hospitals meeting the criteria for

13 public hospitals which are eligible entities under sec14 tion 340B of the Public Health Service Act, except

15 that subsection (a)(4)(L)(iii) of such section shall

16 not apply, and children’s hospitals meeting com17 parable criteria as determined appropriate by the

18 Secretary;

19 (4) public and private, nonprofit community

20 mental health centers and substance abuse treat21 ment providers receiving funds from the Substance

22 Abuse and Mental Health Services Administration;

23 (5) runaway homeless youth centers or transi24 tional living programs for homeless youth for the

25 provision of health services under the Runaway
637

•S 2357

1 Homeless Youth Act of 1974 (42 U.S.C. 5701 et

2 seq.);

3 (6) rural referral centers under section

4 1886(d)(5)(C) of the Social Security Act, except

5 that such eligibility is restricted to the receipt of

6 grants under section 3441; and

7 (7) public or nonprofit entities in

8 nonmetropolitan areas (as defined by the Depart9 ment of Commerce) in a consortium of community10 based providers that includes at least three of the

11 following:

12 (A) community or migrant health centers;

13 (B) local health departments;

14 (C) community mental health centers;

15 (D) nonprofit hospitals;

16 (E) private practice health professionals,

17 including rural health clinics; or

18 (F) other publicly funded health or social

19 services agencies;

20 except that such eligibility is restricted to the receipt

21 of grants or contracts under section 3421(a).

22 (d) PRIORITY.—In making awards from amounts ap23 propriated under subsection (a)(1)(B) and section 3462,

24 the Secretary shall give the highest priority to providing

25 adequate assistance to federally qualified health centers
638

•S 2357

1 in order to ensure the provision of comprehensive primary

2 health care services, other covered services and benefits,

3 and enabling services to medically underserved populations

4 that were served by such centers prior to the date of enact5 ment of this Act, except that such federally qualified

6 health centers must continue to meet the requirements for

7 designation under section 1861(aa)(4) of the Social Secu8 rity Act.

9 (e) EQUITABLE DISTRIBUTION.—The Secretary

10 shall, in awarding grants, entering into contracts, and

11 making loans under this part, assure an equitable distribu12 tion of funds between rural and urban areas.

13 Subpart B—Development of Community Health

14 Groups and Health Care Sites and Services

15 SEC. 3421. GRANTS AND CONTRACTS FOR DEVELOPMENT

16 OF PLANS AND NETWORKS AND THE EXPAN17 SION AND DEVELOPMENT OF HEALTH CARE

18 SITES AND SERVICES.

19 (a) AUTHORITY.—

20 (1) IN GENERAL.—The Secretary may make

21 grants to and enter into contracts with eligible enti22 ties described in section 3411(c) for—

23 (A) the development of community health

24 groups whose principal purpose is to provide

25 the comprehensive benefit package under title I
639

•S 2357

1 in one or more health professional shortage

2 areas or to provide such items and services to

3 a significant number of individuals who are

4 members of a medically underserved population;

5 and

6 (B) the expansion of existing health deliv7 ery sites and services and the development of

8 new health delivery sites and services.

9 (2) CONSIDERATION BY SECRETARY.—In

10 awarding grants or contracts under paragraph (1),

11 the Secretary shall give consideration to—

12 (A) the geographic proximity of the grant

13 applicants and recipients;

14 (B) cultural and language differences ex15 isting within the communities to be served

16 under the grants or contracts; and

17 (C) the capacity needs of the communities

18 to be served.

19 (b) SERVICE AREA.—In making an award under sub20 section (a), the Secretary shall designate the geographic

21 area with respect to which the community health group

22 involved is to provide health services.

23 (c) PRIORITY.—In making awards under subsection

24 (a)(1), the Secretary shall give priority to proposals in

25 which a greater number of eligible entities and other
640

•S 2357

1 health care providers, especially providers in community2 and provider-based health plans under section 1651(d),

3 are participants in the community health group, except in

4 areas such as rural areas, where providers are severely

5 limited in number.

6 (d) LIMITATION ON AWARDS.—The Secretary may

7 not make awards under subsection (a)(1) for more than

8 5 years to the same community health group.

9 (e) DEFINITIONS.—For purposes of this subpart:

10 (1) The term ‘‘community health group’’

11 means—

12 (A) a community health network that—

13 (i) is a public or nonprofit private

14 consortium of health care providers that

15 principally provides some of the items and

16 services of the standard benefit package to

17 medically underserved populations, and

18 residents of health professional shortage

19 areas;

20 (ii) has an agreement with one or

21 more health plans; and

22 (iii) has a written agreement govern23 ing the participation of health care provid24 ers in the consortium to which each par25 ticipating provider is a party; or
641

•S 2357

1 (B) a community health plan that—

2 (i) is a public or nonprofit private en3 tity that principally provides all of the

4 items and services of the standard benefit

5 package to medically underserved popu6 lations, and residents of health professional

7 shortage areas;

8 (ii) is a participant in one or more

9 health alliances; and

10 (iii) has a written agreement govern11 ing the participation of health care provid12 ers in the consortium to which each par13 ticipating provider is a party.

14 (2) The term ‘‘health professional shortage

15 areas’’ means health professional shortage areas des16 ignated under section 332 of the Public Health Serv17 ice Act.

18 (3) The term ‘‘medically underserved popu19 lation’’ means a medically underserved population

20 designated under section 330(b)(3) of the Public

21 Health Service Act, populations residing in health

22 professional shortage areas under section 332 of the

23 Public Health Service Act, and populations eligible

24 for premium subsidies and cost sharing reductions

25 based on income under title I.
642

•S 2357

1 SEC. 3422. CERTAIN USES OF AWARDS.

2 (a) IN GENERAL.—Amounts awarded under section

3 3421 may be expended for—

4 (1) the development of a community health

5 group, including entering into contracts between the

6 recipient of the award and health care providers who

7 are to participate in the group;

8 (2) the expansion, development and on-going

9 operation of health delivery sites and services; and

10 (3) activities under paragraphs (1) and (2)

11 which include—

12 (A) the recruitment, compensation, and

13 training of health professionals and administra14 tive staff;

15 (B) the purchase and upgrading of equip16 ment, supplies, and information systems includ17 ing telemedicine systems; and

18 (C) the establishment of reserves required

19 for furnishing services on a prepaid or capitated

20 basis, except that eligible entities may use non21 cash mechanisms (including bonds, letters of

22 credit and federally guaranteed reinsurance

23 pools) for establishing and maintaining finan24 cial reserves.

25 (b) LOANS AND GRANTS.—The Secretary may ex26 pend, in any fiscal year, not to exceed 10 percent of the
643

•S 2357

1 amounts appropriated to carry out this subpart to make

2 loans and grants to eligible entities to support the types

3 of activities described in section 3441, subject to the re4 quirements of subpart C, except that, with respect to

5 amounts available for non-federally qualified health center

6 activities, such funds may be used to convert facilities

7 from providers of acute care service to providers of pri8 mary, emergency or long-term care.

9 SEC. 3423. APPLICATION.

10 The Secretary may not make an award to an entity

11 under section 3421 until such entity submits and applica12 tion to the Secretary, in such form and containing such

13 assurances and information as the Secretary determines

14 appropriate, including—

15 (1) an assessment of the need that the medi16 cally underserved population or populations proposed

17 to be served by the applicant have for health services

18 and for enabling services (as defined in section

19 3461);

20 (2) a description of how the applicant will de21 sign the proposed community health plan or practice

22 network (including the service sites involved) for

23 such populations based on the assessment of need;
644

•S 2357

1 (3) a description of efforts to secure financial

2 and professional assistance and support for the

3 project; and

4 (4) evidence of significant community involve5 ment in the initiation, development and ongoing op6 eration of the project.

7 SEC. 3424. PURPOSES AND CONDITIONS.

8 Grants shall be made under this subpart for the pur9 poses and subject to all of the conditions under which eli10 gible entities otherwise receive funding to provide health

11 services to medically underserved populations under the

12 Public Health Service Act. The Secretary shall prescribe

13 comparable purposes and conditions for eligible entities

14 not receiving funding under the Public Health Service Act.

15 Subpart C—Capital Cost of Development of

16 Community Health Groups and Other Purposes

17 SEC. 3441. DIRECT LOANS AND GRANTS.

18 (a) IN GENERAL.—The Secretary shall make grants

19 and loans to—

20 (1) eligible entities (as defined in section

21 3412(c));

22 (2) hospitals designated by the Secretary as es23 sential access community hospitals under section

24 1820(i)(1) of the Social Security Act; or
645

•S 2357

1 (3) rural primary care hospitals under section

2 1820(i)(2) of such Act;

3 for the capital costs of developing community health

4 groups (as defined in section 3421(e)) and expanding ex5 isting health delivery sites or developing new health deliv6 ery sites.

7 (b) USE OF ASSISTANCE.—

8 (1) IN GENERAL.—The capital costs for which

9 grants and loans made pursuant to subsection (a)

10 may be expended are, subject to paragraphs (2) and

11 (3), the following:

12 (A) The acquisition, modernization, expan13 sion or construction of facilities, or the conver14 sion of unneeded hospital facilities to facilities

15 that will assure or enhance the provision and

16 accessibility of health care and enabling services

17 to medically underserved populations.

18 (B) The purchase of major equipment, in19 cluding equipment necessary for the support of

20 external and internal information systems.

21 (C) The establishment of reserves required

22 for furnishing services on a prepaid or capitated

23 basis.
646

•S 2357

1 (D) Such other capital costs as the Sec2 retary may determine are necessary to achieve

3 the objectives of this section.

4 (2) PRIORITIES REGARDING USE OF FUNDS.—

5 In providing grants and loans under subsection (a)

6 for an entity, the Secretary shall give priority to au7 thorizing the use of amounts for projects for the

8 renovation and modernization of medical facilities

9 necessary to prevent or eliminate safety hazards in10 cluding asbestos removal, avoid noncompliance with

11 licensure or accreditation standards, or projects to

12 replace obsolete facilities.

13 (3) LIMITATION.—The Secretary may authorize

14 the use of grants and loans under subsection (a) for

15 the construction of new buildings only if the Sec16 retary determines that appropriate facilities are not

17 available through acquiring, modernizing, expanding

18 or converting existing buildings, or that construction

19 new buildings will cost less.

20 (c) AMOUNT OF ASSISTANCE.—

21 (1) IN GENERAL.—The principal amount of

22 loans under subsection (a) may cover up to 90 per23 cent of the costs involved.

24 (2) GRANTS.—Grants under this subsection

25 may not exceed 75 percent of the costs involved.
647

•S 2357

1 (d) INTEREST SUBSIDIES.—Amounts provided under

2 this section may be used to provide interest subsidies for

3 loans provided under this section where such subsidies are

4 necessary to make a project financial feasible.

5 SEC. 3442. CERTAIN REQUIREMENTS.

6 (a) IN GENERAL.—The Secretary may approve a loan

7 under section 3441 only if—

8 (1) the Secretary is reasonably satisfied that

9 the applicant for the project for which the loan

10 would be made will be able to make payments of

11 principal and interest thereon when due; and

12 (2) the applicant provides the Secretary with

13 reasonable assurances that there will be available to

14 it such additional funds as may be necessary to com15 plete the project or undertaking with respect to

16 which such loan is requested.

17 (b) TERMS AND CONDITIONS.—Any loan made under

18 section 3441 shall, subject to the Federal Credit Reform

19 Act of 1990, meet such terms and conditions (including

20 provisions for recovery in case of default) as the Secretary,

21 in consultation with the Secretary of the Treasury, deter22 mines to be necessary to carry out the purposes of such

23 section while adequately protecting the financial interests

24 of the United States. Terms and conditions for such loans

25 shall include provisions regarding the following:
648

•S 2357

1 (1) Security.

2 (2) Maturity date.

3 (3) Amount and frequency of installments.

4 (4) Rate of interest, which shall be at a rate

5 comparable to the rate of interest prevailing on the

6 date the loan is made.

7 SEC. 3443. DEFAULTS; RIGHT OF RECOVERY.

8 (a) DEFAULTS.—

9 (1) IN GENERAL.—The Secretary may take

10 such action as may be necessary to prevent a default

11 on loans under section 3441, including the waiver of

12 regulatory conditions, deferral of loan payments, re13 negotiation of loans, and the expenditure of funds

14 for technical and consultative assistance, for the

15 temporary payment of the interest and principal on

16 such a loan, and for other purposes.

17 (2) FORECLOSURE.—The Secretary may take

18 such action, consistent with State law respecting

19 foreclosure procedures, as the Secretary deems ap20 propriate to protect the interest of the United States

21 in the event of a default on a loan made pursuant

22 to section 3441, including selling real property

23 pledged as security for such a loan and for a reason24 able period of time taking possession of, holding,
649

•S 2357

1 and using real property pledged as security for such

2 a loan.

3 (3) WAIVERS.—The Secretary may, for good

4 cause, but with due regard to the financial interests

5 of the United States, waive any right of recovery

6 which the Secretary has by reasons of the failure of

7 a borrower to make payments of principal of and in8 terest on a loan made pursuant to section 3441, ex9 cept that if such loan is sold and guaranteed, any

10 such waiver shall have no effect upon the Secretary’s

11 guarantee of timely payment of principal and inter12 est.

13 (b) TWENTY-YEAR OBLIGATION; RIGHT OF RECOV14 ERY; SUBORDINATION; WAIVERS.—

15 (1) IN GENERAL.—With respect to an eligible

16 entity for which a grant or loan was made under

17 section 3441, the Secretary may award the grant or

18 loan only if the applicant involved agrees that the

19 applicant will be liable to the United States for the

20 amount of the grant or loan, together with an

21 amount representing interest, if at any time during

22 the 20-year period beginning on the date of comple23 tion of the activities involved, the entity—

24 (A) ceases to be an eligible entity utilized

25 by a community health group, or by another
650

•S 2357

1 public or nonprofit private entity that provides

2 health services in one or more health profes3 sional shortage areas or that provides such

4 services to a significant number of individuals

5 who are members of a medically underserved

6 population; or

7 (B) is sold or transferred to any entity

8 other than an entity that is—

9 (i) a community health group or other

10 entity described in subparagraph (A); and

11 (ii) approved by the Secretary as a

12 purchaser or transferee regarding the facil13 ity.

14 (2) SUBORDINATION; WAIVERS.—With respect

15 to essential community providers, the Secretary may

16 subordinate or waive the right of recovery under

17 paragraph (1), and any other Federal interest that

18 may be derived by virtue of a grant or loan under

19 section 3441, if the Secretary determines that subor20 dination or waiver will further the objectives of this

21 part.

22 SEC. 3444. PROVISIONS REGARDING CONSTRUCTION OR EX23 PANSION OF FACILITIES.

24 (a) SUBMISSION OF INFORMATION.—In the case of

25 a project for construction, conversion, expansion or mod-
651

•S 2357

1 ernization of a facility, the Secretary may provide loans

2 under section 3441 only if the applicant submits to the

3 Secretary the following:

4 (1) A description of the site.

5 (2) Plans and specifications which meet require6 ments prescribed by the Secretary.

7 (3) Information reasonably demonstrating that

8 title to such site is vested in one or more of the enti9 ties filing the application (unless the agreement de10 scribed in subsection (b)(1) is made).

11 (4) A specification of the type of assistance

12 being requested under section 3441.

13 (b) AGREEMENTS.—In the case of a project for con14 struction, conversion, expansion or modernization of a fa15 cility, the Secretary may provide loans under section 3441

16 only if the applicant makes the following agreements:

17 (1) Title to such site will be vested in one or

18 more of the entities filing the application (unless the

19 assurance described in subsection (a)(3) has been

20 submitted under such subsection).

21 (2) Adequate financial support will be available

22 for completion of the project and for its maintenance

23 and operation when completed.

24 (3) All laborers and mechanics employed by

25 contractors or subcontractors in the performance of
652

•S 2357

1 work on a project will be paid wages at rates not

2 less than those prevailing on similar construction in

3 the locality as determined by the Secretary of Labor

4 in accordance with the Act of March 3, 1931 (40

5 U.S.C. 276a et seq.; commonly known as the Davis6 Bacon Act), and the Secretary of Labor shall have

7 with respect to such labor standards the authority

8 and functions set forth in Reorganization Plan

9 Numbered 14 of 1950 (15 FR 3176; 5 U.S.C. Ap10 pendix) and section 276c of title 40.

11 (4) The facility will be made available to all

12 persons seeking service regardless of their ability to

13 pay.

14 SEC. 3445. APPLICATION FOR ASSISTANCE.

15 The Secretary may provide loans under section 3441

16 only if an application for such assistance is submitted to

17 the Secretary, the application contains each agreement de18 scribed in this subpart, the application contains the infor19 mation required in section 3444(a), and the application

20 is in such form, is made in such manner, and contains

21 such agreements, assurances, and information as the Sec22 retary determines to be necessary to carry out this sub23 part.
653

•S 2357

1 SEC. 3446. ADMINISTRATION OF PROGRAMS.

2 This subpart, and any other program of the Secretary

3 that provides loans, shall be carried out by a centralized

4 loan unit established within the Department of Health and

5 Human Services.

6 Subpart D—Enabling and Supplemental Services

7 SEC. 3461. GRANTS AND CONTRACTS FOR ENABLING AND

8 SUPPLEMENTAL SERVICES.

9 (a) AUTHORITY.—

10 (1) IN GENERAL.—The Secretary may make

11 grants to and enter into contracts with eligible enti12 ties to assist such entities in providing the services

13 described in subsections (b) and (c) for the purpose

14 of increasing the capacity of individuals to utilize the

15 items and services included in the comprehensive

16 benefits package under title I, and to provide access

17 to essential supplemental services that are not fully

18 reimbursable under title I prior to January 2001.

19 (2) CONSIDERATION BY SECRETARY.—In

20 awarding grants or contracts under paragraph (1),

21 the Secretary shall give consideration to—

22 (A) the geographic proximity of the grant

23 applicants and recipients;

24 (B) cultural and language differences ex25 isting within the communities to be served

26 under the grants or contracts; and
654

•S 2357

1 (C) the capacity needs of the communities

2 to be served.

3 (b) ENABLING SERVICES.—Enabling services shall

4 include transportation, community and patient outreach,

5 patient and family education, translation services, case

6 management, home visiting, and such other services as the

7 Secretary determines to be appropriate in carrying out the

8 purpose described in such subsection.

9 (c) SUPPLEMENTAL SERVICES.—Supplemental serv10 ices shall include items or services described in section

11 1106 or section 1118 of this Act that would otherwise be

12 excluded from coverage prior to January 1, 2001.

13 (d) CERTAIN REQUIREMENTS REGARDING PROJECT

14 AREA.—The Secretary may make an award of a grant or

15 contract under subsection (a) only if the applicant in16 volved—

17 (1) submits to the Secretary—

18 (A) information demonstrating that the

19 medically underserved populations in the com20 munity to be served under the award have a

21 need for enabling services; and

22 (B) a proposed budget for providing such

23 services;

24 (2) the applicant for the award agrees that the

25 medically underserved residents of the community
655

•S 2357

1 will be consulted with respect to the design and im2 plementation of the project carried out with the

3 award;

4 (3) agrees that the services will not be denied

5 because the individual is unable to pay for such serv6 ices; and

7 (4) agrees that the applicant will utilize existing

8 resources to the maximum extent practicable.

9 (e) APPLICATION FOR AWARDS OF ASSISTANCE.—

10 The Secretary may make an award of a grant or contract

11 under subsection (a) only if an application for the award

12 is submitted to the Secretary, the application contains

13 each agreement described in this subpart, and the applica14 tion is in such form, is made in such manner, and contains

15 such agreements, assurances, and information as the Sec16 retary determines to be necessary to carry out this sub17 part.

18 SEC. 3462. AUTHORIZATIONS OF APPROPRIATIONS.

19 (a) ENABLING SERVICES.—For the purpose of carry20 ing out section 3461(b), there are authorized to be appro21 priated $17,200,000 for fiscal year 1996, $68,900,000 for

22 each of the fiscal years 1997 through 1999, $68,900,000

23 for fiscal year 2000, and $2,000,000 for each of the fiscal

24 years 2001 through 2004.
656

•S 2357

1 (b) SUPPLEMENTAL SERVICES.—For the purpose of

2 carrying out section 3461(c), there are authorized to be

3 appropriated $82,000,000 for fiscal year 1996,

4 $123,000,000 for each of the fiscal years 1997 through

5 1999, $205,000,000 for fiscal year 2000, and $2,000,000

6 for each of the fiscal years 2001 through 2004.

7 (c) FEDERALLY QUALIFIED HEALTH CENTERS AND

8 RURAL HEALTH CLINICS.—With respect to federally

9 qualified health centers (as defined in section 1861(aa)(4)

10 of the Social Security Act) and rural health clinics—

11 (1) for the purpose of carrying out section

12 3461(b), there are authorized to be appropriated

13 $40,000,000 for fiscal year 1996, $161,000,000 for

14 each of the fiscal years 1997 through 1999,

15 $201,000,000 for fiscal year 2000, and $2,000,000

16 for each of the fiscal years 2001 through 2004; and

17 (2) for the purpose of carrying out section

18 3461(c), there are authorized to be appropriated

19 $24,600,000 for fiscal year 1996, $36,900,000 for

20 each of the fiscal years 1997 through 1999,

21 $61,500,000 for fiscal year 2000, and $2,000,000

22 for each of the fiscal years 2001 through 2004; and

23 (d) RELATION TO OTHER FUNDS.—The authoriza24 tions of appropriations established in subsection (a) are

25 in addition to any other authorizations of appropriations
657

•S 2357

1 that are available for the purpose described in such sub2 section.

3 PART 2—NATIONAL HEALTH SERVICE CORPS

4 SEC. 3471. AUTHORIZATIONS OF APPROPRIATIONS.

5 (a) ADDITIONAL FUNDING; GENERAL CORPS PRO6 GRAM; ALLOCATIONS REGARDING NURSES.—For the pur7 pose of carrying out subpart II of part D of title III of

8 the Public Health Service Act, and for the purpose of car9 rying out section 3472, there are authorized to be appro10 priated $123,000,000 for each of the fiscal years 1996

11 and 1997, and $201,000,000 for each of the fiscal years

12 1998 through 2000, and $2,000,000 for each of the fiscal

13 years 2001 through 2004.

14 (b) RELATION TO OTHER FUNDS.—The authoriza15 tions of appropriations established in subsection (a) are

16 in addition to any other authorizations of appropriations

17 that are available for the purpose described in such sub18 section.

19 SEC. 3472. ALLOCATION FOR PARTICIPATION OF NURSES

20 IN SCHOLARSHIP AND LOAN REPAYMENT

21 PROGRAMS.

22 Of the amounts appropriated under section 3471, the

23 Secretary shall reserve such amounts as may be necessary

24 to ensure that, of the aggregate number of individuals who

25 are participants in the Scholarship Program under section
658

•S 2357

1 338A of the Public Health Service Act, or in the Loan

2 Repayment Program under section 338B of such Act, the

3 total number who are being educated as nurse practition4 ers, nurse midwives, or nurse anesthetists or are serving

5 as nurse practitioners, nurse midwives, or nurse anes6 thetists, respectively, is increased to 20 percent.

7 SEC. 3473. ALLOCATION FOR PARTICIPATION OF PSYCHIA8 TRISTS, PSYCHOLOGISTS, AND CLINICAL SO9 CIAL WORKERS IN SCHOLARSHIP AND LOAN

10 REPAYMENT PROGRAMS.

11 Of the amounts appropriate under section 3471, the

12 Secretary shall reserve such amounts as may be necessary

13 to ensure that of the aggregate number of individuals who

14 are participants in the scholarship program under section

15 338A of the Public Health Service Act, the number who

16 are being educated as psychiatrists, psychologists, and

17 clinical social workers or are serving as psychiatrists, psy18 chologists, and clinical social workers, respectively, is in19 creased to 15 percent.

20 PART 3—PAYMENTS TO HOSPITALS SERVING

21 VULNERABLE POPULATIONS

22 SEC. 3481. PAYMENTS TO HOSPITALS.

23 (a) ENTITLEMENT STATUS.—The Secretary shall

24 make payments in accordance with this part to eligible
659

•S 2357

1 hospitals described in section 3482. The preceding sen2 tence—

3 (1) is an entitlement in the Secretary on behalf

4 of such eligible hospitals (but is not an entitlement

5 in the State in which any such hospital is located or

6 in any individual receiving services from any such

7 hospital); and

8 (2) constitutes budget authority in advance of

9 appropriations Acts and represents the obligation of

10 the Federal Government to provide funding for such

11 payments in the amounts, and for the fiscal years,

12 specified in subsection (b).

13 (b) APPROPRIATIONS.—

14 (1) IN GENERAL.—For purposes of subsection

15 (a)(2), the amounts and fiscal years specified in this

16 subsection are (in the aggregate for all eligible hos17 pitals) $1,300,000,000 for the fiscal year in which

18 the general effective date occurs and for each subse19 quent fiscal year.

20 (2) SPECIAL RULE FOR YEARS BEFORE GEN21 ERAL EFFECTIVE DATE.—

22 (A) IN GENERAL.—For each of the fiscal

23 years 1996 and 1997, the amount specified in

24 this subsection for purposes of subsection (a)(2)

25 shall be equal to the aggregate DSH percentage
660

•S 2357

1 of the amount otherwise determined under

2 paragraph (1).

3 (B) AGGREGATE DSH PERCENTAGE DE4 FINED.—In subparagraph (A), the ‘‘aggregate

5 DSH percentage’’ for a year is the amount (ex6 pressed as a percentage) equal to—

7 (i) the total amount of payment made

8 by the Secretary under section 1903(a) of

9 the Social Security Act during the base

10 year with respect to payment adjustments

11 made under section 1923(c) of such Act

12 for hospitals in the States in which eligible

13 hospitals for the year are located; divided

14 by

15 (ii) the total amount of payment made

16 by the Secretary under section 1903(a) of

17 such Act during the base year with respect

18 to payment adjustments made under sec19 tion 1923(c) of such Act for hospitals in

20 all States.

21 (c) PAYMENTS MADE ON QUARTERLY BASIS.—Pay22 ments to an eligible hospital under this section for a year

23 shall be made on a quarterly basis during the year.
661

•S 2357

1 SEC. 3482. IDENTIFICATION OF ELIGIBLE HOSPITALS.

2 (a) STATE IDENTIFICATION.—In accordance with the

3 criteria described in subsection (b) and such procedures

4 as the Secretary may require, each State shall identify the

5 hospitals in the State that meet such criteria and provide

6 the Secretary with a list of such hospitals.

7 (b) CRITERIA FOR ELIGIBILITY.—A hospital meets

8 the criteria described in this subsection if the hospital’s

9 low-income utilization rate for the base year under section

10 1923(b)(3) of the Social Security Act (as such section is

11 in effect on the day before the date of the enactment of

12 this Act) is not less than 25 percent.

13 SEC. 3483. AMOUNT OF PAYMENTS.

14 (a) DISTRIBUTION OF ALLOCATION FOR LOW-IN15 COME ASSISTANCE.—

16 (1) ALLOCATION FROM TOTAL AMOUNT.—Of

17 the total amount available for payments under this

18 section in a year, 66.66 percent shall be allocated to

19 hospitals for low-income assistance in accordance

20 with this subsection.

21 (2) DETERMINATION OF HOSPITAL PAYMENT

22 AMOUNT.—The amount of payment to an eligible

23 hospital from the allocation made under paragraph

24 (1) during a year shall be the equal to the hospital’s

25 low-income percentage of the allocation for the year.
662

•S 2357

1 (b) DISTRIBUTION OF ALLOCATION FOR ASSISTANCE

2 FOR UNCOVERED SERVICES.—

3 (1) ALLOCATION FROM TOTAL AMOUNT; DETER4 MINATION OF STATE-SPECIFIC PORTION OF ALLOCA5 TION.—Of the total amount available for payments

6 under this section in a year, 33.33 percent shall be

7 allocated to hospitals for assistance in furnishing

8 hospital services that are not covered services under

9 title I (in accordance with regulations of the Sec10 retary) or in furnishing hospital services to individ11 uals, including those residing in Southwestern bor12 der States, who are not eligible individuals under

13 title I, in accordance with this subsection. The

14 amount available for payments to eligible hospitals

15 in a State shall be equal to an amount determined

16 in accordance with a methodology specified by the

17 Secretary that shall take into consideration the vol18 ume of such services provided by hospital in the

19 State as compared to the volume of such services

20 provided by all eligible hospitals.

21 (2) DETERMINATION OF HOSPITAL PAYMENT

22 AMOUNT.—The amount of payment to an eligible

23 hospital in a State from the amount available for

24 payments to eligible hospitals in the State under

25 paragraph (1) during a year shall be the equal to
663

•S 2357

1 the hospital’s low-income percentage of such amount

2 for the year.

3 (c) LOW-INCOME PERCENTAGE DEFINED.—

4 (1) IN GENERAL.—In this subsection, an eligi5 ble hospital’s ‘‘low-income percentage’’ for a year is

6 equal to the amount (expressed as a percentage) of

7 the total low-income days for all eligible hospitals for

8 the year that are attributable to the hospital.

9 (2) LOW-INCOME DAYS DESCRIBED.—For pur10 poses of paragraph (1), an eligible hospital’s low-in11 come days for a year shall be equal to the product

12 of—

13 (A) the total number of inpatient days for

14 the hospital for the year (as reported to the

15 Secretary by the State in which the hospital is

16 located, in accordance with a reporting schedule

17 and procedures established by the Secretary);

18 and

19 (B) the hospital’s low-income utilization

20 rate for the base year under section 1923(b)(3)

21 of the Social Security Act (as such section is in

22 effect on the day before the date of the enact23 ment of this Act).
664

•S 2357

1 SEC. 3484. BASE YEAR.

2 In this part, the ‘‘base year’’ is, with respect to a

3 State and hospitals in a State, the year immediately prior

4 to the year in which the general effective date occurs.

5 Subtitle F—Mental Health;

6 Substance Abuse

7 PART 1—AUTHORITIES REGARDING

8 PARTICIPATING STATES

9 SEC. 3510. INTEGRATION OF MENTAL HEALTH AND SUB10 STANCE ABUSE SYSTEMS.

11 (a) IN GENERAL.—As a condition of being a partici12 pating State under title I, each State shall, not later than

13 January 1, 2001, achieve the integration of the mental

14 illness and substance abuse services of the State and its

15 political subdivisions with the mental illness and substance

16 abuse services offered by health plans pursuant to title I

17 of this Act. A State may petition the Secretary for a waiv18 er of the requirement of this subsection under the cir19 cumstances described in section 3511(b)(7).

20 (b) CERTIFICATION OF READINESS.—

21 (1) PETITION.—A State may petition the Sec22 retary to integrate the mental illness and substance

23 abuse services of the State and its political subdivi24 sions with the mental illness and substance abuse

25 services offered by health plans pursuant to title I

26 of this Act prior to January 1, 2001.
665

•S 2357

1 (2) STATE READINESS TO INTEGRATE.—Upon

2 receiving such a petition, the Secretary shall, based

3 on the reports submitted pursuant to subsections (b)

4 and (c) of section 3511 and the criteria promulgated

5 pursuant to paragraph (3), ascertain the State’s

6 readiness to integrate its mental illness and sub7 stance abuse services with the mental illness and

8 substance abuse services offered by health plans pur9 suant to title I of this Act and certify whether the

10 State is prepared to conduct such an integration.

11 (3) CRITERIA.—The certification by the Sec12 retary of a State’s readiness to integrate under

13 paragraph (2) shall be based on objective criteria

14 promulgated by the Secretary after consultation with

15 the States.

16 (c) APPLICATION OF PROVISIONS.—Upon the issu17 ance of a certification of readiness by the Secretary for

18 a State, the limits set forth in subsections (d)(2)(B) and

19 (e)(2)(A) of section 1106 shall not apply to the provision

20 of mental illness and substance abuse services in the State.

21 SEC. 3511. REPORT ON INTEGRATION OF MENTAL HEALTH

22 SYSTEMS.

23 (a) IN GENERAL.—As a condition of being a partici24 pating State under title I, each State shall, not later than

25 October 1, 1998, submit to the Secretary a report contain-
666

•S 2357

1 ing the information described in subsection (b) on (includ2 ing a plan for) the measures to be implemented by the

3 State to achieve the integration of the mental illness and

4 substance abuse services of the State and its political sub5 divisions with the mental illness and substance abuse serv6 ices that are included in the comprehensive benefit pack7 age under title I. The plan required in the preceding sen8 tence shall meet the conditions described in section

9 3083(b). In addition, each State shall submit to the Sec10 retary a report containing the information described in

11 subsection (c) for each year in which the State participates

12 under title I up to and including the year 2001 or the

13 date on which an unlimited benefit for mental illness and

14 substance abuse services is provided, whichever occurs

15 later.

16 (b) REQUIRED CONTENTS OF INTEGRATION RE17 PORT.—With respect to the provision of items and services

18 relating to mental illness and substance abuse, the report

19 of a State under subsection (a) shall, at a minimum, con20 tain the following information:

21 (1) Information on the number of individuals

22 served by or through mental illness and substance

23 abuse programs administered by State and local

24 agencies and the proportion who are eligible persons

25 under title I.
667

•S 2357

1 (2) Information on the extent to which each

2 health provider furnishing mental illness and sub3 stance abuse services under a State program partici4 pates or will participate in one or more regional or

5 corporate alliance health plans, and, in the case of

6 providers that do not so participate, the reasons for

7 the lack of participation.

8 (3) With respect to the two years preceding the

9 year in which the State becomes a participating

10 State under title I—

11 (A) the amount of funds expended by the

12 State and its political subdivisions for each of

13 such years for items and services that are in14 cluded in the comprehensive benefit package

15 under such title;

16 (B) the amount of funds expended for

17 medically necessary and appropriate items and

18 services not included in such benefit package,

19 including medical care, other health care, and

20 supportive services related to the provision of

21 health care.

22 (4) An estimate of the amount that the State

23 will expend to furnish items and services not in24 cluded in such package once the expansion of cov-
668

•S 2357

1 erage for mental illness and substance abuse services

2 is implemented in the year 2001.

3 (5) A description of how the State will assure

4 that all individuals served by mental illness and sub5 stance abuse programs funded by the State will be

6 enrolled in a health plan and how mental illness and

7 substance abuse services not covered under the bene8 fit package will continue to be furnished to such en9 rollees.

10 (6) A description of the conditions under which

11 the integration of mental illness and substance abuse

12 providers into regional and corporate alliances can

13 be achieved, and an identification of changes in par14 ticipation and certification requirements that are

15 needed to achieve the integration of such programs

16 and providers into health plans.

17 (7) If the integration of mental illness and sub18 stance abuse programs operated by the State into

19 one or more health plans is not medically appro20 priate or feasible for one or more groups of individ21 uals treated under State programs, a description of

22 the reasons that integration is not feasible or appro23 priate and a plan for assuring the coordination for

24 such individuals of the care and services covered

25 under the comprehensive benefit package with the
669

•S 2357

1 additional items and services furnished by such pro2 grams.

3 (8) A description of the manner in which the

4 resources that the State and its political subdivisions

5 currently spend on mental health and substance

6 abuse services will be used to facilitate integration.

7 (c) REQUIRED CONTENTS OF TRANSITION RE8 PORT.—With respect to the a report required under this

9 subsection, the report shall, at a minimum, contain the

10 following information:

11 (1) The amount of funds expended for sub12 stance abuse and mental health services by the

13 source of revenue, including, Federal block grant

14 funds, under title XIX of the Public Health Service

15 Act, Federal categorical grant funds, State and local

16 revenues and health plan payments.

17 (2) The amount of funds expended for support18 ive services to individuals enrolled in substance

19 abuse and mental health treatment programs, in20 cluding transportation, child care, educational and

21 vocational training and coordination with other pub22 lic systems such as the social service, child welfare

23 and juvenile and criminal justice systems, by source

24 of revenue.
670

•S 2357

1 (3) The amount of funds expended on medically

2 necessary and appropriate items and services not

3 covered or reimbursed in the comprehensive benefit

4 package by source of revenue.

5 (4) The amount of funds expended by the State

6 on substance abuse and mental illness services for

7 individuals who are not eligible to receive the com8 prehensive benefit package pursuant to this Act, and

9 the source of revenue for such services.

10 (d) GENERAL PROVISIONS.—Reports under sub11 sections (b) and (c) shall be provided at the time and in

12 the manner prescribed by the Secretary. The Secretary

13 shall also determine what, if any, reports shall be submit14 ted in years following the implementation of an unlimited

15 benefit for mental illness and substance abuse services.

16 (e) REPORTING REQUIREMENT.—Each State shall

17 report annually to the Secretary on the incidence and

18 prevalence of mental illness and substance abuse disorders

19 in the prison population, changes in such incidence and

20 prevalence in the prison population, and potential causa21 tive factors with respect to such changes, including an es22 timate of the extent to which the denial of treatment, or

23 the provision of inadequate treatment, to individuals with

24 mental illness and substance abuse disorders is contribut25 ing to the criminal activity of such individuals.
671

•S 2357

1 PART 2—ASSISTANCE FOR STATE MANAGED MEN2 TAL HEALTH AND SUBSTANCE ABUSE PRO3 GRAMS

4 SEC. 3531. AVAILABILITY OF ASSISTANCE.

5 (a) IN GENERAL.—The Secretary shall make grants

6 to States for the development and operation of comprehen7 sive managed mental health and substance abuse pro8 grams that are integrated with the health delivery system

9 established under this Act. Such programs shall—

10 (1) promote the development of integrated de11 livery systems for the management of the mental

12 health and substance abuse services provided under

13 the comprehensive benefits package;

14 (2) give priority to providing services to low-in15 come adults with serious mental illness or substance

16 abuse disorders and children with serious emotional

17 disturbance or substance abuse disorders and pro18 vide for the phase-in of such services for all eligible

19 persons within 5 years;

20 (3) ensure that individuals participating in the

21 program have access to all medically necessary men22 tal health and substance abuse services;

23 (4) promote the linkage of mental health and

24 substance abuse services with primary and preven25 tive health care services; and
672

•S 2357

1 (5) meet such other requirements as the Sec2 retary may impose.

3 (b) EXCEPTION.—Nothing in this part shall be con4 strued as preventing States that have separate administra5 tive entities for mental health and for substance abuse

6 services from establishing separate comprehensive man7 aged care programs for such services and receiving assist8 ance under this part for either or both programs.

9 SEC. 3532. PLAN REQUIREMENTS.

10 In order to receive a grant under this part, a State

11 must have a plan for a comprehensive managed mental

12 health and substance abuse program which is approved

13 by the Secretary. Such plan shall—

14 (1) describe the management, access, and refer15 ral structure that the State will use to promote and

16 achieve integration of mental health and substance

17 abuse services with the health delivery system estab18 lished under this Act for eligible individuals in the

19 State;

20 (2) describe how the State will ensure that pro21 viders of specialized services will meet appropriate

22 standards and provide assurances that the State has

23 complied with section 1504 as it affects mental

24 health and substance abuse services;
673

•S 2357

1 (3) describe payment, utilization review, and

2 other mechanisms that the State will use to encour3 age appropriate service delivery and management of

4 costs;

5 (4) describe uniform patient placement criteria

6 that the State will use to ensure placement in appro7 priate substance abuse treatment programs;

8 (5) describe the processes the State will use to

9 ensure that individuals will continue to have access

10 to treatment through referrals from nonhealth public

11 entities, such the juvenile or criminal justice sys12 tems, or social service systems;

13 (6) specify the methods the State will use to en14 sure that individuals receiving services under the

15 program have access to all medically necessary and

16 appropriate mental health and substance abuse serv17 ices;

18 (7) define terms that will be used by the State

19 in determining the eligibility of individuals for serv20 ices under the program;

21 (8) describe how health plans will use services

22 under the comprehensive managed mental health

23 and substance abuse programs established under

24 this part;
674

•S 2357

1 (9) describe the role of local government in fi2 nancing and managing the integrated mental illness

3 and substance abuse treatment system;

4 (10) describe the sources of funding, including

5 Medicaid and the block grants authorized by title

6 XIX of the Public Health Service Act, that will be

7 used by the State, other than the grant received

8 under this part, to operate the program, and provide

9 the status of any request for a Medicaid waiver

10 made by the State to the Secretary;

11 (11) describe how the State provided for broad12 based public input in the development of the plan,

13 and the mechanism that will be used for ongoing

14 public comment on and review of amendments to the

15 plan; and

16 (12) describe grievance procedures that will be

17 available for individuals dissatisfied with their health

18 plan’s participation in the comprehensive managed

19 mental health and substance abuse program, and

20 mechanisms that will be available to review the per21 formance of health plans and fee-for-service arrange22 ments to ensure against under treatment.

23 SEC. 3533. ADDITIONAL FEDERAL RESPONSIBILITIES.

24 The Secretary shall, upon the submission of a State’s

25 plan under section 3532, ensure the timely consideration
675

•S 2357

1 of any Medicaid waiver requests submitted by the State,

2 affirm that section 1504 has been implemented, and en3 sure the timely implementation of section 1641(b)(5).

4 SEC. 3534. AUTHORIZATION OF APPROPRIATIONS.

5 There are authorized to be appropriated for grants

6 under this part, $82,000,000 for each of the fiscal years

7 1995 through 2000, and $2,000,000 for each of the fiscal

8 years 2001 through 2004.

9 Subtitle G—Comprehensive School

10 Health Education; School-Relat11 ed Health Services

12 PART 1—HEALTHY STUDENTS-HEALTHY

13 SCHOOLS GRANTS FOR SCHOOL HEALTH

14 EDUCATION

15 SEC. 3601. PURPOSES.

16 It is the purpose of this part—

17 (1) to support the development and implemen18 tation of comprehensive age appropriate health edu19 cation programs in public schools for children and

20 youth kindergarten through grade 12; and

21 (2) to increase access to preventive and primary

22 health care services for children and youth through

23 school-based or school-linked health service sites in

24 accordance with locally determined needs.
676

•S 2357

1 SEC. 3602. HEALTHY STUDENTS-HEALTHY SCHOOLS

2 GRANTS.

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

4 with the Secretary of Education, shall award grants to

5 State educational agencies in eligible States to integrate

6 comprehensive school health education in schools within

7 the State, with priority given within States to those com8 munities in greatest need as defined by section 3683(a).

9 (b) ELIGIBLE USES OF FUNDS.—Funds made avail10 able under this section shall be used—

11 (1) to implement comprehensive school health

12 education programs, as defined in subsection (f)(1)

13 through grants to local educational agencies;

14 (2) to provide staff development and technical

15 assistance to local educational agencies, schools,

16 local health agencies, and other community organiza17 tions involved in providing comprehensive school

18 health education programs;

19 (3) to evaluate and report to the Secretary on

20 the progress made towards attaining the goals and

21 objectives described under subsection (c)(1)(A); and

22 (4) to conduct such other activities to achieve

23 the objectives of this subpart as the Secretary may

24 require.

25 (c) APPLICATION.—An application for a grant under

26 subsection (a), shall be jointly developed by the State edu-
677

•S 2357

1 cational agency and the State health agencies of the State

2 involved, and shall contain—

3 (1) a State plan for comprehensive school

4 health education programs, that outlines—

5 (A) the goals and objectives of the State

6 for school health education programs, and the

7 manner in which the State will allocate funds to

8 local educational agencies in order to achieve

9 these goals and objectives;

10 (B) the manner in which the State will co11 ordinate programs under this part with other

12 Federal, State and local health education pro13 grams and resources, and school health serv14 ices;

15 (C) the manner in which comprehensive

16 school health education programs will be coordi17 nated with other Federal, State and local edu18 cation programs (such as programs under titles

19 I, II, and IV of the Elementary and Secondary

20 Education Act of 1965), with the school im21 provement plan of the State, if any, under title

22 III of the Goals 2000: Educate America Act,

23 and with any similar programs;

24 (D) the manner in which the State shall

25 work with State and local educational agencies
678

•S 2357

1 and with State and local health agencies to re2 duce barriers to implementing school health

3 education programs;

4 (E) the manner in which the State will

5 monitor the implementation of such programs

6 by local educational agencies and establish out7 come criteria by which to evaluate their effec8 tiveness in achieving progress towards the goals

9 and objectives described in subparagraph (A);

10 (F) the manner in which the State will

11 provide staff development and technical assist12 ance to local educational agencies, and build ca13 pacity for professional development of health

14 educators; and

15 (G) the manner in which such school

16 health education programs will be, to the extent

17 practicable, culturally competent and linguis18 tically appropriate and responsive to the diverse

19 needs of the students served;

20 (2) a description of the respective roles of the

21 State educational agency, local educational agencies,

22 the State health agency and local health agencies in

23 developing and implementing the State’s school

24 health education plan and resulting programs;
679

•S 2357

1 (3) a description of the input of the local com2 munity (including students and parents) in the de3 velopment and operation of comprehensive school

4 health education programs;

5 (4) an assurance that communities identified in

6 section 3683(a) receive priority as locations for com7 prehensive school health education programs for all

8 grades to the extent that a State does not implement

9 a statewide program; and

10 (5) an assurance that grants to local edu11 cational agencies under subsection (b)(1) are contin12 gent upon submission by such agencies of a plan

13 consistent with the requirements for the State plan

14 as required under this subsection.

15 (d) WAIVERS OF STATUTORY AND REGULATORY RE16 QUIREMENTS.—

17 (1) WAIVERS.— Except as provided in para18 graph (4), upon the request of an entity and under

19 a relevant program described in paragraph (2), the

20 Secretary of Health and Human Services and the

21 Secretary of Education may grant to the entity a

22 waiver of any requirement of such program regard23 ing the use of funds, or of the regulations issued for

24 the program by the Secretary involved, if the follow25 ing conditions are met with respect to such program:
680

•S 2357

1 (A) The Secretary involved determines that

2 the requirements of such program impede the

3 ability of the State educational agency to

4 achieve more effectively the purposes described

5 in section 3601.

6 (B) The Secretary involved determines

7 that, with respect to the use of funds under

8 such program, the requested use of the funds

9 by the entity would be consistent with the pur10 poses described in section 3601.

11 (C) The State educational agency provides

12 all interested local educational agencies in the

13 State with notice and an opportunity to com14 ment on the proposal and makes these com15 ments available to the Secretary.

16 (2) RELEVANT PROGRAMS.—For purposes of

17 paragraph (1), the programs described in this sub18 paragraph are the following:

19 (A) In the case of programs administered

20 by the Secretary of Health and Human Serv21 ices, the following:

22 (i) The program known as the Preven23 tion, Treatment, and Rehabilitation Model

24 Projects for High Risk Youth, carried out
681

•S 2357

1 under section 517 of the Public Health

2 Service Act.

3 (ii) The program known as the State

4 and Local Comprehensive School Health

5 Programs to Prevent Important Health

6 Problems and Improve Educational Out7 comes, carried out under such Act.

8 (B) In the case of programs administered

9 by the Secretary of Education, any program

10 carried out under part B of the Drug-Free

11 Schools and Communities Act of 1986, except

12 that a component of such comprehensive school

13 health education must be consistent with the

14 statutory intent and purposes of such Act.

15 (3) WAIVER PERIOD.—A waiver under this

16 paragraph shall be for a period not to exceed 3

17 years, unless the Secretary involved determines

18 that—

19 (A) the waiver has been effective in ena20 bling the State to carry out the activities for

21 which it was requested and has contributed to

22 improved performance of comprehensive health

23 education programs; and

24 (B) such extension is in the public interest;
682

•S 2357

1 (4) WAIVERS NOT AUTHORIZED.—The Sec2 retary involved under paragraph (1), may not waive,

3 under this section, any statutory or regulatory re4 quirements relating to—

5 (A) comparability of services;

6 (B) maintenance of effort;

7 (C) parental participation and involvement;

8 (D) the distribution of funds to States or

9 to local educational agencies or other recipients

10 of funds under the programs described in para11 graph (2);

12 (E) maintenance of records;

13 (F) applicable civil rights requirements; or

14 (G) the requirements of sections 438 and

15 439 of the General Education Provisions Act.

16 (5) TERMINATION OF WAIVER.—The Secretary

17 involved under paragraph (1) shall terminate a waiv18 er under this subsection if the Secretary determines

19 that the performance of the State affected by the

20 waiver has been inadequate to justify a continuation

21 of the waiver or if it is no longer necessary to

22 achieve its original purpose.

23 (e) DEFINITIONS.—As used in this section:

24 (1) COMPREHENSIVE SCHOOL HEALTH EDU25 CATION.—The term ‘‘comprehensive school health
683

•S 2357

1 education’’ means a planned, sequential program of

2 health education that addresses the physical, emo3 tional and social dimensions of student health in

4 kindergarten through grade 12. Such program

5 shall—

6 (A) be designed to assist students in devel7 oping the knowledge and behavioral skills need8 ed to make positive health choices and maintain

9 and improve their health, prevent disease and

10 injuries, and reduce risk behaviors which ad11 versely impact health;

12 (B) be comprehensive and include a variety

13 of components addressing personal health, com14 munity and environmental health, injury pre15 vention and safety, nutritional health, the ef16 fects of substance use and abuse, consumer

17 health regarding the benefits and appropriate

18 use of medical services including immunizations

19 and other clinical preventive services, and other

20 components deemed appropriate by the local

21 educational agencies;

22 (C) be designed to be linguistically and cul23 turally competent and responsive to the needs

24 of the students served; and
684

•S 2357

1 (D) address locally relevant priorities as

2 determined by parents, students, teachers, and

3 school administrators and health officials.

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

5 State’’ means a State with a memorandum of under6 standing or a written cooperative agreement entered

7 into by the agencies responsible for health and edu8 cation concerning the planning and implementation

9 of comprehensive school health education programs.

10 Among these States a priority shall be given to

11 qualified States as defined in section 3682(c).

12 (3) STATE EDUCATIONAL AGENCY.—The term

13 ‘‘State educational agency’’ means the officer or

14 agency primarily responsible for the State super15 vision of public elementary and secondary schools.

16 (4) LOCAL EDUCATIONAL AGENCY.—The term

17 ‘‘local educational agency’’ means a public board of

18 education or other public authority legally con19 stituted within a State for either administrative con20 trol or direction of, or to perform a service function

21 for, public elementary or secondary schools in a city,

22 county, township, school district, or other political

23 subdivision of a State, or such combination of school

24 districts or counties as are recognized in a State as

25 an administrative agency for its public elementary or
685

•S 2357

1 secondary schools. Such term includes any other

2 public institution or agency having administrative

3 control and direction of a public elementary or sec4 ondary school.

5 (f) AUTHORIZED FUNDING.—For the purpose of car6 rying out this section, out of the funds available under

7 section 3695(b)(2), there are made available, not to exceed

8 $15,000,000 for fiscal year 1995, $20,000,000 for fiscal

9 year 1996, $25,000,000 for fiscal year 1997, $30,000,000

10 for fiscal year 1998, $40,000,000 for fiscal year 1999, and

11 $50,000,000 for fiscal year 2000.

12 SEC. 3603. HEALTHY STUDENTS-HEALTHY SCHOOLS INTER13 AGENCY TASK FORCE.

14 (a) ESTABLISHMENT.—Not later than 120 days after

15 the date of enactment of this Act, the Secretary shall es16 tablish a Healthy Students-Healthy Schools Interagency

17 Task Force to be composed of representatives of the Office

18 of Disease Prevention and Health Promotion, the National

19 Institutes of Health, the Centers for Disease Control and

20 Prevention, the Health Resources and Services Adminis21 tration, the Office of School Health Education within the

22 Department of Education, and other Federal agencies and

23 departments which have responsibility for components of

24 school health and education.
686

•S 2357

1 (b) CO-CHAIRPERSONS.—The Assistant Secretary for

2 Health and the Assistant Secretary for Elementary and

3 Secondary Education shall serve as co-chairpersons of the

4 task force established under subsection (a).

5 (c) FUNCTIONS AND ACTIVITIES.—The task force es6 tablished under subsection (a) shall—

7 (1) review and coordinate all Federal efforts in

8 school health education and health services;

9 (2) provide scientific and technical advice con10 cerning the development and implementation of

11 model comprehensive school health education pro12 grams and curricula;

13 (3) develop model student learning objectives

14 and assessment instruments that shall be made

15 available to all States;

16 (4) develop a uniform grant application form (a

17 form that serves as the principal document contain18 ing the core information concerning a particular en19 tity) and procedures that may be used with respect

20 to all school health education-related programs (in21 cluding supplementary information procedures to be

22 implemented when an entity that has already sub23 mitted an application form is applying for additional

24 assistance) that require the submission of an appli25 cation; and
687

•S 2357

1 (5) recommend to the Secretary, for inclusion

2 in the biennial report required by section 3604(2),

3 methods for effectively linking school health edu4 cation and health services research findings at the

5 Federal level with implementation at the State and

6 local levels.

7 (d) CONSOLIDATION OF INITIATIVES.—Not later

8 than 12 months after the date of enactment of this Act,

9 the task force established under subsection (a) shall pre10 pare and submit to the Congress a report containing the

11 recommendations of the task force for the consolidation

12 of Federal school health education initiatives.

13 SEC. 3604. DUTIES OF THE SECRETARY.

14 The Secretary shall—

15 (1) establish and maintain a national clearing16 house, using advanced technologies to the maximum

17 extent practicable, and mechanisms for the diverse

18 dissemination of school health education material,

19 including written, audio-visual, and electronically

20 conveyed information to educators, schools, health

21 care providers, and other individuals, organizations,

22 and governmental entities;

23 (2) submit a biennial report to the Committee

24 on Labor and Human Resources of the Senate and

25 the appropriate committees of the House of Rep-
688

•S 2357

1 resentatives on the implementation and contribution

2 of comprehensive school health education programs

3 funded under this part toward achieving relevant

4 National Healthy People 2000 objectives established

5 by the Secretary; and

6 (3) encourage coordination among Federal

7 agencies, State and local governments, educators,

8 school health providers, community-based organiza9 tions, and private sector entities to support develop10 ment of comprehensive school health education pro11 grams and school health services.

12 PART 5—SCHOOL-RELATED HEALTH SERVICES

13 Subpart A—Development and Operation

14 SEC. 3681. AUTHORIZATION OF APPROPRIATIONS.

15 (a) FUNDING FOR SCHOOL-RELATED HEALTH SERV16 ICES.—For the purpose of carrying out this subpart, there

17 are authorized to be appropriated $82,000,000 for fiscal

18 year 1995, $164,000,000 for fiscal year 1996,

19 $266,500,000 for fiscal year 1997, and $369,000,000 for

20 fiscal year 1998, $471,500,000 for fiscal year 1999,

21 $574,000,000 for fiscal year 2000, and $2,000,000 for

22 each of the fiscal years 2001 through 2004.

23 (b) FUNDING FOR PLANNING AND DEVELOPMENT

24 GRANTS.—Of amounts made available under this section,
689

•S 2357

1 not to exceed $10,000,000 for each of fiscal years 1995

2 and 1996 may be utilized to carry out section 3684.

3 SEC. 3682. ELIGIBILITY FOR GRANTS.

4 (a) IN GENERAL.—

5 (1) PLANNING AND DEVELOPMENT GRANTS.—

6 Entities eligible to apply for and receive grants

7 under section 3684 are—

8 (A) State health agencies that apply on be9 half of local community partnerships; or

10 (B) local community partnerships in States

11 in which health agencies have not successfully

12 applied.

13 (2) OPERATIONAL GRANTS.—Entities eligible to

14 apply for and receive grants under section 3685

15 are—

16 (A) a qualified State as designated under

17 subsection (c) that apply on behalf of local com18 munity partnerships; or

19 (B) local community partnerships in States

20 that are not designated under subparagraph

21 (A).

22 (b) LOCAL COMMUNITY PARTNERSHIPS.—

23 (1) IN GENERAL.—A local community partner24 ship under subsection (a)(1)(B) and (a)(2)(B) is an

25 entity that, at a minimum includes—
690

•S 2357

1 (A) a local health care provider, which may

2 be a local public health department, with expe3 rience in delivering services to children and

4 youth or medically underserved populations;

5 (B) local educational agency on behalf of

6 one or more public schools; and

7 (C) one community based organization lo8 cated in the community to be served that has

9 a history of providing services to at-risk chil10 dren and youth.

11 (2) RURAL COMMUNITIES.—In rural commu12 nities, local partnerships should seek to include, to

13 the fullest extent practicable, providers and commu14 nity based organizations with experience in serving

15 the target population.

16 (3) PARENT AND COMMUNITY PARTICIPA17 TION.—An applicant described in subsection (a)

18 shall, to the maximum extent feasible, involve broad19 based community participation (including parents of

20 the youth to be served).

21 (c) QUALIFIED STATE.—A qualified State under sub22 section (a)(2)(A) is a State that, at a minimum—

23 (1) demonstrates an organizational commitment

24 (including a strategic plan) to providing a broad
691

•S 2357

1 range of health, health education and support serv2 ices to at-risk youth; and

3 (2) has a memorandum of understanding or co4 operative agreement jointly entered into by the State

5 agencies responsible for health and education re6 garding the planned delivery of health and support

7 services in school-based or school-linked centers.

8 SEC. 3683. PREFERENCES.

9 In making grants under sections 3684 and 3685, the

10 Secretary shall give priority to applicants whose-commu11 nities to be served show the most substantial level of need

12 for health services among children and youth.

13 SEC. 3684. PLANNING AND DEVELOPMENT GRANTS.

14 (a) IN GENERAL.—The Secretary may make grants

15 during fiscal years 1995 and 1996 to entities eligible

16 under section 3862 to develop school-based or school17 linked health service sites.

18 (b) USE OF FUNDS.—Amounts provided under a

19 grant under this section may be used for the following:

20 (1) Planning for the provision of school health

21 services, including—

22 (A) an assessment of the need for health

23 services among youth in the communities to be

24 served;
692

•S 2357

1 (B) the health services to be provided and

2 how new services will be integrated with exist3 ing services;

4 (C) assessing and planning for the mod5 ernization and expansion of existing facilities

6 and equipment to accommodate such services;

7 and

8 (D) an affiliation with relevant health

9 plans.

10 (2) recruitment and training of staff for the ad11 ministration and delivery of school health services;

12 (3) the establishment of local community part13 nerships as described in section 3682 (b);

14 (4) in the case of States, the development of

15 memorandums of understanding or cooperative

16 agreements for the coordinated delivery of health

17 and support services through school health service

18 sites; and

19 (5) other activities necessary to assume oper20 ational status.

21 (c) APPLICATION FOR GRANTS.—To be eligible to re22 ceive a grant under this section an entity described in sec23 tion 3682 (a) shall submit an application in a form and

24 manner prescribed by the Secretary.
693

•S 2357

1 (d) NUMBER OF GRANTS.—Not more than one plan2 ning grant may be made to a single applicant. A planning

3 grant may not exceed 2 years in duration.

4 (e) AMOUNT AVAILABLE FOR DEVELOPMENT

5 GRANT.—The Secretary may award not to exceed—

6 (1) $150,000 to entities under section

7 3682(a)(1)(A) and to localities planning for a city8 wide or countywide school health services delivery

9 system; and

10 (2) $50,000 to entities under section

11 3682(a)(1)(B).

12 SEC. 3685. GRANTS FOR OPERATION OF SCHOOL HEALTH

13 SERVICES.

14 (a) IN GENERAL.—The Secretary may make grants

15 to eligible entities described in section 3682(a)(2) that

16 submit applications consistent with the requirements of

17 this section, to pay the cost of operating school-based or

18 school-linked health service sites.

19 (b) USE OF GRANT.—Amounts provided under a

20 grant under this section may be used for the following—

21 (1) health services, including diagnosis and

22 treatment of simple illnesses and minor injuries;

23 (2) preventive health services, including health

24 screenings follow-up health care, mental health, and

25 preventive health education;
694

•S 2357

1 (3) enabling services, as defined in section

2 3461(b), and other necessary support services;

3 (4) training, recruitment, and compensation of

4 health professionals and other staff necessary for the

5 administration and delivery of school health services;

6 and

7 (5) referral services, including the linkage of in8 dividuals to health plans, and community-based

9 health and social service providers.

10 (c) APPLICATION FOR GRANT.—To be eligible to re11 ceive a grant under this section an entity described in sec12 tion 3682(a)(2) shall submit an application in a form and

13 manner prescribed by the Secretary. In order to receive

14 a grant under this section, an applicant must include in

15 the application the following information—

16 (1) a description of the services to be furnished

17 by the applicant;

18 (2) the amounts and sources of funding that

19 the applicant will expend, including estimates of the

20 amount of payments the applicant will receive from

21 health plans and other sources;

22 (3) a description of local community partner23 ships, including parent and community participation;

24 (4) a description of the linkages with other

25 health and social service providers; and
695

•S 2357

1 (5) such other information as the Secretary de2 termines to be appropriate.

3 (d) ASSURANCES.—In order to receive a grant under

4 this section, an applicant must meet the following condi5 tions—

6 (1) school health service sites will, directly or

7 indirectly, provide a broad range of health services,

8 in accordance with the determinations of the local

9 community partnership, that may include—

10 (A) diagnosis and treatment of simple ill11 nesses and minor injuries;

12 (B) preventive health services, including

13 health screenings and follow-up health care,

14 mental health and preventive health education;

15 (C) enabling services, as defined in section

16 3461(b);

17 (D) referrals (including referrals regarding

18 mental health and substance abuse) with follow19 up to ensure that needed services are received;

20 (2) the applicant provides services rec21 ommended by the health provider, in consultation

22 with the local community partnership, and with the

23 approval of the local education agency;

24 (3) the applicant provides the services under

25 this subsection to adolescents, and other school age
696

•S 2357

1 children and their families as deemed appropriate by

2 the local partnership;

3 (4) the applicant maintains agreements with

4 community-based health care providers with a his5 tory of providing services to such populations for the

6 provision of health care services not otherwise pro7 vided directly or during the hours when school

8 health services are unavailable;

9 (5) the applicant establishes an affiliation with

10 relevant health plans and will establish reimburse11 ment procedures and will make every reasonable ef12 fort to collect appropriate reimbursement for serv13 ices provided; and

14 (6) the applicant agrees to supplement and not

15 supplant the level of State or local funds under the

16 direct control of the applying State or participating

17 local education or health authority expended for

18 school health services as defined by this Act;

19 (7) services funded under this Act will be co20 ordinated with existing school health services pro21 vided at a participating school; and

22 (8) for applicants in rural areas, the assurances

23 required under paragraph (4) shall be fulfilled to the

24 maximum extent possible.
697

•S 2357

1 (e) STATE LAWS.—Notwithstanding any other provi2 sion in this part, no school based health clinic may provide

3 services, to any minor, when to do so is a violation of State

4 laws or regulations pertaining to informed consent for

5 medical services to minors.

6 (f) LIMITATION ON ADMINISTRATIVE FUNDS.—In

7 the case of a State applying on behalf of local educational

8 partnerships, the applicant may retain not more than 5

9 percent of grants awarded under this subpart for adminis10 trative costs.

11 (g) DURATION OF GRANT.—A grant under this sec12 tion shall be for a period determined appropriate by the

13 Secretary.

14 (h) AMOUNT OF GRANT.—The annual amount of a

15 grant awarded under this section shall not be more than

16 $200,000 per school-based or school-linked health service

17 site.

18 (i) FEDERAL SHARE.—

19 (1) IN GENERAL.—Subject to paragraph (3), a

20 grant for services awarded under this section may

21 not exceed—

22 (A) 90 percent of the non-reimbursed cost

23 of the activities to be funded under the program

24 for the first 2 fiscal years for which the pro25 gram receives assistance under this section; and
698

•S 2357

1 (B) 75 percent of the non-reimbursed cost

2 of such activities for subsequent years for which

3 the program receives assistance under this sec4 tion.

5 The remainder of such costs shall be made available

6 as provided in paragraph (2).

7 (2) FORM OF NON-FEDERAL SHARE.—The non8 Federal share required by paragraph (1) may be in

9 cash or in-kind, fairly evaluated, including facilities,

10 equipment, personnel, or services, but may not in11 clude amounts provided by the Federal Government.

12 In-kind contributions may include space within a

13 school facilities, school personnel, program use of

14 school transportation systems, outposted health per15 sonnel, and extension of health provider medical li16 ability insurance.

17 (3) WAIVER.—The Secretary may waive the re18 quirements of paragraph (1) for any year in accord19 ance with criteria established by regulation. Such

20 criteria shall include a documented need for the

21 services provided under this section and an inability

22 of the grantee to meet the requirements of para23 graph (1) despite a good faith effort.

24 (j) TRAINING AND TECHNICAL ASSISTANCE.—Enti25 ties that receive assistance under this section may use not
699

•S 2357

1 to exceed 10 percent of the amount of such assistance to

2 provide staff training and to secure necessary technical as3 sistance. To the maximum extent feasible, technical assist4 ance should be sought through local community-based en5 tities. The limitation contained in this subsection shall

6 apply to individuals employed to assist in obtaining funds

7 under this part. Staff training should include the training

8 of teachers and other school personnel necessary to ensure

9 appropriate referral and utilization of services, and appro10 priate linkages between class-room activities and services

11 offered.

12 (k) REPORT AND MONITORING.—The Secretary will

13 submit to the Committee on Labor and Human Resources

14 in the Senate and the Committee on Energy and Com15 merce in the House of Representatives a biennial report

16 on the activities funded under this Act, consistent with

17 the ongoing monitoring activities of the Department. Such

18 reports are intended to advise the relevant Committees of

19 the availability and utilization of services, and other rel20 evant information about program activities.

21 Subpart B—Capital Costs of Developing Projects

22 SEC. 3691. FUNDING.

23 Amounts available to the Secretary under section

24 3412 for the purpose of carrying out subparts B and C

25 of part 2 of subtitle E are, in addition to such purpose,
700

•S 2357

1 available to the Secretary for the purpose of carrying out

2 this subpart.

3 Subtitle H—Public Health Service

4 Initiative

5 SEC. 3695. PUBLIC HEALTH SERVICE INITIATIVE.

6 (a) IN GENERAL.—Subject to subsection (c), the Sec7 retary of Health and Human Services shall pay, from

8 funds in the Treasury not otherwise appropriated, individ9 uals and entities that are eligible to receive assistance pur10 suant to the provisions referred to in paragraphs (1)

11 through (13) of subsection (b), to the extent of the

12 amounts specified under subsection (b).

13 (b) AMOUNTS SPECIFIED.—The amounts specified in

14 subsection (a) with respect to a fiscal year shall be—

15 (1) with respect to the core functions of public

16 health programs authorized under part 2 of subtitle

17 D of title III, $123,000,000 for fiscal year 1995,

18 $184,500,000 for fiscal year 1996, $266,500,000 for

19 fiscal year 1997, $348,500,000 for fiscal year 1998,

20 $410,000,000 for fiscal year 1999, $512,500,000 for

21 fiscal year 2000, and $2,000,000 for each of the fis22 cal years 2001 through 2004;

23 (2) with respect to the national initiatives re24 garding health promotion and disease prevention

25 under part 3 of subtitle D of title III, $102,500,000
701

•S 2357

1 for each of the fiscal years 1996 through 1998,

2 $123,000,000 for each of the fiscal years 1999 and

3 2000, and $2,000,000 for each of the fiscal years

4 2001 through 2004;

5 (3) with respect to occupational injury and ill6 ness prevention under section 3903, $92,250,000 for

7 each of the fiscal years 1995 through 2000, and

8 $2,000,000 for each of the fiscal years 2001 through

9 2004;

10 (4) with respect to activities for the develop11 ment of plans and networks under subpart B of part

12 2 of subtitle E of title III—

13 (A) $43,050,000 for fiscal year 1995,

14 $100,450,000 for fiscal year 1996,

15 $157,850,000 for fiscal year 1997,

16 $129,150,000 for fiscal year 1998,

17 $100,450,000 for fiscal year 1999, $43,050,000

18 for fiscal year 2000, and $2,000,000 for each

19 of the fiscal years 2001 through 2004; and

20 (B) with respect to awards to federally

21 qualified health centers (as defined in section

22 1861(aa)(4) of the Social Security Act) and

23 rural health clinics under such subpart,

24 $79,950,000 for fiscal year 1995, $186,550,000

25 for fiscal year 1996, $293,150,000 for fiscal
702

•S 2357

1 year 1997, $239,850,000 for fiscal year 1998,

2 $186,550,000 for fiscal year 1999, $79,950,000

3 for fiscal year 2000, and $2,000,000 for each

4 of the fiscal years 2001 through 2004;

5 (5) with respect to capital costs under subpart

6 C of part 2 of subtitle E of title III, $41,000,000

7 for each of the fiscal years 1995 through 2000, and

8 $2,000,000 for each of the fiscal years 2001 through

9 2004;

10 (6) with respect to enabling services under sub11 part D of part 2 of subtitle E of title III—

12 (A) $17,200,000 for fiscal year 1996,

13 $68,900,000 for each of the fiscal years 1997

14 through 1999, $68,900,000 for fiscal year

15 2000, and $2,000,000 for each of the fiscal

16 years 2001 through 2004; and

17 (B) with respect to awards to federally

18 qualified health centers (as defined in section

19 1861(aa)(4) of the Social Security Act) and

20 rural health clinics under such subpart,

21 $40,000,000 for fiscal year 1996, $161,000,000

22 for each of the fiscal years 1997 through 1999,

23 $201,000,000 for fiscal year 2000, and

24 $2,000,000 for each of the fiscal years 2001

25 through 2004;
703

•S 2357

1 (7) with respect to supplemental services under

2 subpart D of part 1 of subtitle E of title III—

3 (A) $24,600,000 for fiscal year 1996,

4 $36,900,000 for each of the fiscal years 1997

5 through 1999, $61,500,000 for fiscal year

6 2000, and $2,000,000 for each of the fiscal

7 years 2001 through 2004; and

8 (B) with respect to awards to federally

9 qualified health centers (as defined in section

10 1861(aa)(4) of the Social Security Act) and

11 rural health clinics under such subpart,

12 $57,400,000 for fiscal year 1996, $86,100,000

13 for each of the fiscal years 1997 through 1999,

14 and $143,500,000 for fiscal year 2000 and

15 $2,000,000 for each of the fiscal years 2001

16 through 2004;

17 (8) with respect to the National Health Service

18 Corps program referred to under section 3471,

19 $123,000,000 for each of the fiscal years 1996 and

20 1997, and $201,000,000 for each of the fiscal years

21 1998 through 2000, and $2,000,000 for each of the

22 fiscal years 2001 through 2004;

23 (9) with respect to school-related health service

24 programs under subpart A of part 5 of subtitle G

25 of title III, $82,000,000 for fiscal year 1995,
704

•S 2357

1 $164,000,000 for fiscal year 1996, $266,500,000 for

2 fiscal year 1997, and $369,000,000 for fiscal year

3 1998, $471,500,000 for fiscal year 1999,

4 $574,000,000 for fiscal year 2000, and $2,000,000

5 for each of the fiscal years 2001 through 2004;

6 (10) with respect to the development and oper7 ation of comprehensive managed mental health and

8 substance abuse programs under section 3534,

9 $82,000,000 for each of the fiscal years 1995

10 through 2000, and $2,000,000 for each of the fiscal

11 years 2001 through 2004;

12 (11) with respect to programs of the Secretary

13 of Health and Human Services under section 3081,

14 $82,000,000 for each of the fiscal years 1995 and

15 1996, $123,000,000 for each of the fiscal years

16 1997 through 2000 and $2,000,000 for each of the

17 fiscal years 2001 through 2004;

18 (12) with respect to programs of the Secretary

19 of Labor under section 3082, $164,000,000 for each

20 of the fiscal years 1995 through 2000 and

21 $2,000,000 for each of the fiscal years 2001 through

22 2004; and

23 (13) with respect to programs of the Indian

24 Health Service under subtitle D of title VIII,

25 $164,000,000 for each of the fiscal years 1995
705

•S 2357

1 through 2000 and $2,000,000 for each of the fiscal

2 years 2001 through 2004.

3 (c) AUTHORITY TO TRANSFER FUNDS.—The Com4 mittee on Appropriations of the House of Representatives

5 and the Committee on Appropriations of the Senate, act6 ing through appropriations Acts, may transfer the

7 amounts specified under subsection (b) in each fiscal year

8 among the programs referred to in such subsection.

9 (d) REPORT.—The Secretary shall review the effec10 tiveness of the programs included in the Public Health Ini11 tiative. Not later than October 1, 1998, the Secretary shall

12 prepare and submit to Congress a report concerning such

13 review. Such report shall include recommendations con14 cerning whether Congress should increase the program

15 funding levels described in subsection (b) in fiscal years

16 2001 through 2004 to a level equal to that of prior fiscal

17 years.

18 Subtitle I—Additional Provisions

19 Regarding Public Health

20 SEC. 3901. CURRICULUM DEVELOPMENT AND IMPLEMEN21 TATION REGARDING DOMESTIC VIOLENCE

22 AND WOMEN’S HEALTH.

23 (a) IN GENERAL.—The Secretary shall make grants

24 to eligible entities for the purpose of implementing and

25 developing for trainees a curriculum that includes training
706

•S 2357

1 in identification, treatment and referral of victims of do2 mestic violence and women’s health needs.

3 (b) ELIGIBLE ENTITIES.—For purposes of sub4 section (a), eligible entities are any school of medicine,

5 school of osteopathic medicine, school of public health,

6 graduate program in mental health practice, school of

7 nursing as defined in section 853 of the Public Health

8 Service Act, a program to train physician assistants, a

9 program for training allied health professionals, and a

10 program for training of family medicine physicians, gen11 eral internists, general pediatricians, geriatricians, and ob12 stetrician/gynecologists.

13 (c) CURRICULUM.—A curriculum developed under

14 this section shall include—

15 (1) identification of victims of domestic violence

16 and maintaining complete medical records that in17 clude documentation of the examination, treatment

18 provided, and referral made and recording the loca19 tion and nature of the victim’s injuries;

20 (2) examining and treating such victims within

21 the scope of the health professional’s discipline,

22 training, and practice, including at a minimum pro23 viding medical advice regarding the dynamics and

24 nature of domestic violence;
707

•S 2357

1 (3) referring the victims to public and nonprofit

2 entities that provide support services for such vic3 tims;

4 (4) training in the identification and diagnosis

5 of diseases afflicting women and other medical dis6 orders as they affect women;

7 (5) training in the treatment of such diseases

8 and disorders with emphasis on the unique needs of

9 women; and

10 (6) research into the causes of such diseases

11 and disorders, including determination of appro12 priate means of prevention.

13 (d) ALLOCATION OF APPROPRIATIONS.—Of the

14 amounts made available under section 3301(b) for a fiscal

15 year, the Secretary shall reserve not to exceed

16 $20,000,000 for a fiscal year for carrying out this section.

17 SEC. 3902. COMMUNITY SCHOLARSHIP PROGRAMS.

18 Section 338L of the Public Health Service Act (42

19 U.S.C. 254t) is amended—

20 (1) in the section heading, by striking ‘‘DEM21 ONSTRATION’’;

22 (2) in subsection (a)—

23 (A) by striking ‘‘for the purpose of carry24 ing out demonstration programs’’; and
708

•S 2357

1 (B) by striking ‘‘health manpower shortage

2 areas’’ and inserting ‘‘Federally-designated

3 health professional shortage areas’’;

4 (3) in subsection (c)—

5 (A) by striking ‘‘health manpower shortage

6 areas’’ and inserting ‘‘Federally-designated

7 health professional shortage areas’’ in the mat8 ter preceding paragraph (1); and

9 (B) by striking ‘‘in the health manpower

10 shortage areas in which the community organi11 zations are located,’’ and inserting ‘‘in a Feder12 ally-designated health professional shortage

13 area that is served by the community organiza14 tion awarding the scholarship,’’ in paragraph

15 (2);

16 (4) in subsection (e)(1)—

17 (A) by striking ‘‘health manpower shortage

18 area’’ and inserting ‘‘a Federally-designated

19 health professional shortage area’’; and

20 (B) by striking ‘‘in which the community’’

21 and all that follows through ‘‘located’’;

22 (5) in subsection (k)(2), by striking ‘‘internal

23 medicine’’ and all that follows through the end

24 thereof and inserting ‘‘general internal medicine,

25 general pediatrics, obstetrics and gynecology, den-
709

•S 2357

1 tistry, or mental health, that are provided by physi2 cians or other health professionals.’’; and

3 (6) in subsection (l)(1), by striking

4 ‘‘$5,000,000’’ and all that follows through ‘‘1993’’

5 and inserting ‘‘$1,000,000 for fiscal year 1994, and

6 such sums as may be necessary for each fiscal year

7 thereafter’’.

8 Subtitle J—Occupational Safety

9 and Health

10 SEC. 3903. OCCUPATIONAL INJURY AND ILLNESS PREVEN11 TION.

12 (a) IN GENERAL.—The Secretary of Health and

13 Human Services and the Secretary of Labor shall work

14 together to develop and implement a comprehensive pro15 gram to expand and coordinate initiatives to prevent occu16 pational injuries and illnesses.

17 (b) SECRETARY OF LABOR.—The Secretary of Labor

18 after consultation with the Secretary of Health and

19 Human Services shall directly or by grants or contracts—

20 (1) provide for training and education programs

21 for employees and employers in the recognition and

22 control of workplace hazards and methods and meas23 ures to prevent occupational injuries and illnesses;

24 (2) develop model educational materials for

25 training and educating employees and employers on
710

•S 2357

1 the recognition and control of workplace hazards, in2 cluding a core curriculum for general safety and

3 health training and materials related to specific safe4 ty and health hazards; and

5 (3) provide programs and services for technical

6 assistance to employers and employees on the rec7 ognition and control of workplace safety and health

8 hazards including programs for onsite consultation.

9 Technical assistance and consultative services under para10 graph (3) shall be provided in a manner that is separate

11 from the enforcement programs conducted by the Sec12 retary of Labor.

13 (c) SECRETARY OF HEALTH AND HUMAN SERV14 ICES.—The Secretary of Health and Human Services after

15 consultation with the Secretary of Labor shall directly or

16 by grants or contracts—

17 (1) provide education programs for training oc18 cupational safety and health professionals including

19 professionals in the fields of occupational medicine,

20 occupational health nursing, industrial hygiene, safe21 ty engineering, toxicology and epidemiology;

22 (2) provide education programs for other health

23 professionals and health care providers and the pub24 lic to improve the recognition, treatment and preven25 tion of occupationally related injuries and illnesses;
711

•S 2357

1 (3) conduct surveillance programs to identify

2 patterns and to determine the prevalence of occupa3 tional illnesses, injuries and deaths related to expo4 sure to particular safety and health hazards;

5 (4) conduct investigations and evaluations to

6 determine if workplace exposures to toxic chemicals,

7 harmful physical agents or potentially hazardous

8 conditions pose a risk to exposed employees; and

9 (5) conduct research, demonstrations and ex10 periments relating to occupational safety and health

11 to identify the causes of and major factors contribut12 ing to occupational illnesses and injuries.

13 (d) NATIONAL ADVISORY BOARD.—

14 (1) ESTABLISHMENT.—There is established a

15 National Advisory Board for Occupational Injury

16 and Illness Prevention to provide oversight, advice

17 and direction on the occupational injury and illness

18 prevention programs and initiatives conducted by the

19 Secretary of Labor and Secretary of Health and

20 Human Services.

21 (2) COMPOSITION.—The Board shall be com22 posed of 10 members appointed by the Secretary of

23 Labor, 5 of whom are to be designated by the Sec24 retary of Health and Human Services. Such mem25 bers shall be composed of representatives of employ-
712

•S 2357

1 ers, employees, and occupational safety and health

2 professionals.

3 (e) DIRECTOR OF NIOSH.—The responsibilities of

4 the Secretary of Health and Human Services established

5 under this section shall be carried out by the Director of

6 the National Institute for Occupational Safety and Health.

7 (f) AUTHORIZATION OF APPROPRIATIONS.—For the

8 purposes of carrying out this section there are authorized

9 to be appropriated $92,250,000 for each of the fiscal years

10 1995 through 2000, and $2,000,000 for each of the fiscal

11 years 2001 through 2004.

12 Subtitle K—Full Funding for WIC

13 SEC. 3905. FULL FUNDING FOR WIC.

14 Section 17 of the Child Nutrition Act of 1966 (42

15 U.S.C. 1786) is amended—

16 (1) in the second sentence of subsection (a)—

17 (A) by striking ‘‘authorized’’ and inserting

18 ‘‘established’’; and

19 (B) by striking ‘‘, up to the authorization

20 levels set forth in subsection (g) of this sec21 tion,’’ and inserting ‘‘, up to the levels made

22 available under this section,’’;

23 (2) in subsection (c)—

24 (A) in the first sentence of paragraph (1),

25 by striking ‘‘may’’ and inserting ‘‘shall’’;
713

•S 2357

1 (B) in paragraph (2), by striking ‘‘appro2 priated’’ and inserting ‘‘made available’’;

3 (3) in subsection (g)—

4 (A) by striking paragraph (1) and insert5 ing the following new paragraph:

6 ‘‘(1)(A) There are authorized to be —

7 ‘‘(i) appropriated to carry out this section such

8 amounts as are necessary for each of fiscal years

9 1995 through 2000; and

10 ‘‘(ii) made available such amounts as are nec11 essary for the Secretary of the Treasury to fulfill the

12 requirements of subparagraph (B).

13 ‘‘(B)(i) Out of any money in the Treasury not other14 wise appropriated, the Secretary of the Treasury shall pro15 vide to the Secretary of Agriculture, on January 1 of each

16 fiscal year, to carry out this subsection—

17 ‘‘(I) $444,000,000 for fiscal year 1996;

18 ‘‘(II) $696,000,000 for fiscal year 1997;

19 ‘‘(III) $775,000,000 for fiscal year 1998;

20 ‘‘(IV) $924,000,000 for fiscal year 1999; and

21 ‘‘(V) $1,077,000,000 for fiscal year 2000.

22 ‘‘(ii) The Secretary of Agriculture shall be entitled

23 to receive the funds and shall accept the funds.

24 ‘‘(C) In lieu of obligating the funds made available

25 under subparagraph (B) to carry out this subsection, if
714

•S 2357

1 the amount appropriated (in addition to the amount ap2 propriated under subparagraph (B)(i)) to carry out this

3 subsection for—

4 ‘‘(i) fiscal year 1996 is less than

5 $3,470,000,000, the amount referred to in subpara6 graph (B)(i)(I) shall be obligated by the Secretary,

7 during the period beginning December 31, 1995,

8 and ending June 30, 1996, to increase the special

9 assistance factor prescribed under section 11(a) of

10 the National School Lunch Act (42 U.S.C.

11 1759a(a)) for free lunches served under the school

12 lunch program (as established under section 4 of

13 such Act (42 U.S.C. 1753));

14 ‘‘(ii) fiscal year 1997 is less than

15 $3,470,000,000, the amount referred to in subpara16 graph (B)(i)(II) shall be obligated by the Secretary,

17 during the period beginning December 31, 1996,

18 and ending June 30, 1997, to increase the special

19 assistance factor prescribed under section 11(a) of

20 such Act for free lunches served under the school

21 lunch program (as established under section 4 of

22 such Act);

23 ‘‘(iii) fiscal year 1998 is less than

24 $3,470,000,000, the amount referred to in subpara25 graph (B)(i)(III) shall be obligated by the Secretary,
715

•S 2357

1 during the period beginning December 31, 1997,

2 and ending June 30, 1998, to increase the special

3 assistance factor prescribed under section 11(a) of

4 such Act for free lunches served under the school

5 lunch program (as established under section 4 of

6 such Act);

7 ‘‘(iv) fiscal year 1999 is less than

8 $3,470,000,000, the amount referred to in subpara9 graph (B)(i)(IV) shall be obligated by the Secretary,

10 during the period beginning December 31, 1998,

11 and ending June 30, 1999, to increase the special

12 assistance factor prescribed under section 11(a) of

13 such Act for free lunches served under the school

14 lunch program (as established under section 4 of

15 such Act); and

16 ‘‘(v) fiscal year 2000 is less than

17 $3,470,000,000, the amount referred to in subpara18 graph (B)(i)(V) shall be obligated by the Secretary,

19 during the period beginning December 31, 1999,

20 and ending June 30, 2000, to increase the special

21 assistance factor prescribed under section 11(a) of

22 such Act for free lunches served under the school

23 lunch program (as established under section 4 of

24 such Act).
716

•S 2357

1 ‘‘(D) Any increase in the special assistance factor

2 prescribed under section 11(a) of such Act as a result of

3 subparagraph (C) shall not affect any annual adjustment

4 in the factor under section 11(a)(3) of such Act.

5 ‘‘(E) Notwithstanding any other provision of law, no

6 additional amounts shall be made available under this

7 paragraph for any fiscal year after fiscal year 2000.’’;

8 (B) in the first sentence of paragraph (4),

9 by striking ‘‘appropriated’’ and inserting ‘‘made

10 available’’; and

11 (C) in paragraph (5), by striking ‘‘appro12 priated’’ and inserting ‘‘made available’’;

13 (4) in subsection (h)—

14 (A) in paragraph (1)—

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

16 ‘‘appropriated’’ both places it appears and

17 inserting ‘‘made available’’; and

18 (ii) in subparagraph (C), by striking

19 ‘‘appropriated’’ both places it appears and

20 inserting ‘‘made available’’; and

21 (B) in the first sentence of paragraph

22 (2)(A), by striking ‘‘1990, 1991, 1992, 1993

23 and 1994’’ and inserting ‘‘1990 through 2000’’;

24 and
717

•S 2357

1 (5) in subsection (l), by striking ‘‘funds appro2 priated’’ and inserting ‘‘funds made available’’.

3 Subtitle L—Border Health

4 Improvement

5 SEC. 3908. BORDER HEALTH COMMISSION.

6 (a) ESTABLISHMENT.—The President is authorized

7 and encouraged to conclude an agreement with Mexico to

8 establish a binational commission to be known as the Unit9 ed States-Mexico Border Health Commission.

10 (b) DUTIES.—It should be the duty of the Commis11 sion—

12 (1) to conduct a comprehensive needs assess13 ment in the United States-Mexico Border Area for

14 the purposes of identifying, evaluating, preventing,

15 and resolving health problems and potential health

16 problems that affect the general population of the

17 area;

18 (2) to develop and implement a comprehensive

19 plan for carrying out the actions recommended by

20 the needs assessment through—

21 (A) assisting in the coordination of public

22 and private efforts to prevent potential health

23 problems and resolve existing health problems,

24 (B) assisting in the coordination of public

25 and private efforts to educate the population, in
718

•S 2357

1 a culturally competent manner, concerning such

2 potential and existing health problems; and

3 (C) developing and implementing culturally

4 competent programs to prevent and resolve

5 such health problems and to educate the popu6 lation, in a culturally competent manner, con7 cerning such health problems where a new pro8 gram is necessary to meet a need that is not

9 being met through other public or private ef10 forts; and

11 (3) to formulate recommendations to the Gov12 ernments of the United States and Mexico concern13 ing a fair and reasonable method by which the gov14 ernment of one country could reimburse a public or

15 private person in the other country for the cost of

16 a health care service that such person furnishes to

17 a citizen or resident alien of the first country who

18 is unable, through insurance or otherwise, to pay for

19 the service.

20 (c) OTHER AUTHORIZED FUNCTIONS.—In addition

21 to the duties described in subsection (b), the Commission

22 should be authorized to perform the following functions

23 as the Commission determines to be appropriate—

24 (1) to conduct or support investigations, re25 search, or studies designed to identify, study, and
719

•S 2357

1 monitor, on an on-going basis, health problems that

2 affect the general population in the United States3 Mexico Border Area;

4 (2) to conduct or support a binational, public5 private effort to establish a comprehensive and co6 ordinated system, which uses advanced technologies

7 to the maximum extent possible, for gathering

8 health-related data and monitoring health problems

9 in the United States-Mexico Border Area; and

10 (3) to provide financial, technical, or adminis11 trative assistance to public or private persons who

12 act to prevent or resolve such problems or who edu13 cate the population concerning such health problems.

14 (d) MEMBERSHIP.—

15 (1) NUMBER AND APPOINTMENT OF UNITED

16 STATES SECTION.—The United States section of the

17 Commission should be composed of 13 members.

18 The section should consist of the following members:

19 (A) The Secretary of Health and Human

20 Services or the Secretary’s delegate.

21 (B) The commissioners of health or chief

22 health officer from the States of Texas, New

23 Mexico, Arizona, and California or such com24 missioners’ delegates.
720

•S 2357

1 (C) Two individuals residing in United

2 States-Mexico Border Area in each of the

3 States of Texas, New Mexico, Arizona, and

4 California who are nominated by the chief exec5 utive officer of the respective States and ap6 pointed by the President from among individ7 uals—

8 (i) who have a demonstrated interest

9 or expertise in health issues of the United

10 States-Mexico Border Area; and

11 (ii) whose name appears on a list of

12 6 nominees submitted to the President by

13 the chief executive officer of the State

14 where the nominees resides.

15 (2) COMMISSIONER.—The Commissioner of the

16 United States section of the Commission should be

17 the Secretary of Health and Human Services or

18 such individual’s delegate to the Commission. The

19 Commissioner should be the leader of the section.

20 (3) COMPENSATION.—Members of the United

21 States section of the Commission who are not em22 ployees of the United States—

23 (A) shall each receive compensation at a

24 rate of not to exceed the daily equivalent of the

25 annual rate of basic pay payable for positions
721

•S 2357

1 at GS–15 of the General Schedule under sec2 tion 5332 of title 5, United States Code, for

3 each day such member is engaged in the actual

4 performance of the duties of the Commission;

5 and

6 (B) shall be allowed travel expenses, in7 cluding per diem in lieu of subsistence at rates

8 authorized for employees of agencies under sub9 chapter I of chapter 57 of title 5, United States

10 Code, while away from their homes or regular

11 places of business in the performance of serv12 ices of the Commission.

13 (e) REGIONAL OFFICES.—The Commission should

14 designate or establish one border health office in each of

15 the States of Texas, New Mexico, Arizona, and California.

16 Such office should be located within the United States17 Mexico Border Area, and should be coordinated with—

18 (1) State border health offices; and

19 (2) local nonprofit organizations designated by

20 the State’s governor and directly involved in border

21 health issues.

22 If feasible to avoid duplicative efforts, the Commission of23 fices should be located in existing State or local nonprofit

24 offices. The Commission should provide adequate com25 pensation for cooperative efforts and resources.
722

•S 2357

1 (f) REPORTS.—Not later than February 1 of each

2 year that occurs more than 1 year after the date of the

3 establishment of the Commission, the Commission should

4 submit an annual report to both the United States Gov5 ernment and the Government of Mexico regarding all ac6 tivities of the Commission during the preceding calendar

7 year.

8 (g) DEFINITIONS.—As used in this section:

9 (1) COMMISSION.—The term ‘‘Commission’’

10 means the United States-Mexico Border Health

11 Commission.

12 (2) HEALTH PROBLEM.—The term ‘‘health

13 problem’’ means a disease or medical ailment or an

14 environmental condition that poses the risk of dis15 ease or medical ailment. Such term includes dis16 eases, ailments, or risks of disease or ailment caused

17 by or related to environmental factors, control of

18 animals and rabies, control of insect and rodent vec19 tors, disposal of solid and hazardous waste, and con20 trol and monitoring of air quality.

21 (3) RESIDENT ALIEN.—The term ‘‘resident

22 alien’’, when used in reference to a country, means

23 an alien lawfully admitted for permanent residence

24 to the United States or otherwise permanently resid-
723

•S 2357

1 ing in the United States under color of law (includ2 ing residence as an asylee, refugee, or parolee).

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

4 the Secretary of Health and Human Services.

5 (5) UNITED STATES-MEXICO BORDER AREA.—

6 The term ‘‘United States-Mexico Border Area’’

7 means the area located in the United States and

8 Mexico within 100 kilometers of the border between

9 the United States and Mexico.

10 TITLE IV—MEDICARE AND

11 MEDICAID

12 SEC. 4000. REFERENCES IN TITLE.

13 (a) AMENDMENTS TO SOCIAL SECURITY ACT.—Ex14 cept as otherwise specifically provided, whenever in this

15 title an amendment is expressed in terms of an amend16 ment to or repeal of a section or other provision, the ref17 erence shall be considered to be made to that section or

18 other provision of the Social Security Act.

19 (b) REFERENCES TO OBRA.—In this title, the terms

20 ‘‘OBRA–1986’’, ‘‘OBRA–1987’’, ‘‘OBRA–1989’’,

21 ‘‘OBRA–1990’’, and ‘‘OBRA–1993’’ refer to the Omnibus

22 Budget Reconciliation Act of 1986 (Public Law 99–509),

23 the Omnibus Budget Reconciliation Act of 1987 (Public

24 Law 100–203), the Omnibus Budget Reconciliation Act

25 of 1989 (Public Law 101–239), the Omnibus Budget Rec-
724

•S 2357

1 onciliation Act of 1990 (Public Law 101–508), and the

2 Omnibus Budget Reconciliation Act of 1993 (Public Law

3 103–66), respectively.

4 Subtitle A—Medicare

5 PART 1—INTEGRATION OF MEDICARE

6 BENEFICIARIES

7 SEC. 4001. INDIVIDUAL ELECTION TO REMAIN IN CERTAIN

8 HEALTH PLANS.

9 (a) IN GENERAL.—Section 1876 (42 U.S.C.

10 1395mm) is amended by adding at the end the following

11 new subsection:

12 ‘‘(k)(1) Notwithstanding any other provision of this

13 section, each eligible organization with a risk-sharing con14 tract (or which is eligible to enter into such a contract,

15 as determined by the Secretary) that is the sponsor of a

16 standard health plan under subtitle B of title I of the

17 Health Security Act shall provide each individual who

18 meets the requirements of paragraph (2) with the oppor19 tunity to elect (by submitting an application at such time

20 and in such manner as specified by the Secretary) to con21 tinue enrollment in such plan (for the same benefits as

22 other individuals enrolled in the plan) and to have pay23 ments made by the Secretary to the plan on the individ24 ual’s behalf in accordance with paragraph (3). The pre25 mium imposed with respect to such an individual by the
725

•S 2357

1 plan shall be in an amount (determined in accordance with

2 rules of the Secretary and notwithstanding other provi3 sions of such Act) which reflects the difference between

4 the premium otherwise established (adjusted by a factor

5 to reflect the actuarial difference between medicare bene6 ficiaries and other plan enrollees) and the amount payable

7 under paragraph (3).

8 ‘‘(2) An individual meets the requirements of this

9 paragraph if the individual is—

10 ‘‘(A) enrolled in the health plan of an eligible

11 organization in a month in which the individual is

12 either not entitled to benefits under part A, or is an

13 employee (as defined in the Health Security Act) or

14 the spouse or dependent of an employee,

15 ‘‘(B) entitled to benefits under part A and en16 rolled under part B in the succeeding month,

17 ‘‘(C) a community-rated individual under the

18 Health Security Act in that succeeding month, and

19 ‘‘(D) not an experience-rated employee (as de20 fined in the Health Security Act) or the spouse or

21 dependent of an experience-rated employee in that

22 succeeding month.

23 ‘‘(3) The Secretary shall make a payment to an eligi24 ble organization on behalf of each individual enrolled with

25 the organization for whom an election is in effect under
726

•S 2357

1 this subsection in an amount determined by the rate speci2 fied by subsection (a)(1)(C) (notwithstanding the second

3 sentence of paragraph (1)). Such payment shall be made

4 from the Federal Hospital Insurance Trust Fund and the

5 Federal Supplementary Medical Insurance Trust Fund as

6 provided under subsection (a)(5) (other than as provided

7 under subparagraph (B) of that paragraph).

8 ‘‘(4) The period for which payment may be made

9 under paragraph (3)—

10 ‘‘(A) begins with the first month for which the

11 individual meets the requirements of paragraph (2)

12 (or a later month, in the case of a late application,

13 as may be specified by the Secretary); and

14 ‘‘(B) ends with the earliest of—

15 ‘‘(i) the month following the month—

16 ‘‘(I) in which the individual notifies

17 the Secretary that the individual no longer

18 wishes to be enrolled in the health plan of

19 the eligible organization and to have pay20 ment made on the individual’s behalf under

21 this subsection; and

22 ‘‘(II) which is a month specified by

23 the Secretary as a uniform open enroll24 ment period under subsection (c)(3)(A)(i),

25 or
727

•S 2357

1 ‘‘(ii) the month in which the individual

2 ceases to meet the requirements of paragraph

3 (2).

4 ‘‘(5) Notwithstanding any other provision of this title,

5 payments to an eligible organization under this subsection

6 on behalf of an individual shall be the sole payments made

7 with respect to items and services furnished to the individ8 ual during the period for which the individual’s election

9 under this subsection is in effect.’’.

10 (b) CONFORMING AMENDMENT.—Section 1838(b)

11 (42 U.S.C. 1395q(b)) is amended by inserting after ‘‘sec12 tion 1843(e)’’ the following: ‘‘, 1876(c)(3)(B) or

13 1876(k)(4)(B)’’.

14 SEC. 4002. ENROLLMENT AND TERMINATION OF ENROLL15 MENT.

16 (a) UNIFORM OPEN ENROLLMENT PERIODS.—

17 (1) FOR CAPITATED PLANS.—The first sentence

18 of section 1876(c)(3)(A)(i) (42 U.S.C.

19 1395mm(c)(3)(A)(i)) is amended by inserting

20 ‘‘(which may be specified by the Secretary)’’ after

21 ‘‘open enrollment period’’.

22 (2) FOR MEDIGAP PLANS.—Section 1882(s) (42

23 U.S.C. 1395ss(s)) is amended—
728

•S 2357

1 (A) in paragraph (3), by striking ‘‘para2 graphs (1) and (2)’’ and inserting ‘‘paragraph

3 (1), (2), or (3)’’,

4 (B) by redesignating paragraph (3) as

5 paragraph (4), and

6 (C) by inserting after paragraph (2) the

7 following new paragraph:

8 ‘‘(3) Each issuer of a medicare supplemental policy

9 shall have an open enrollment period (which shall be the

10 period specified by the Secretary under section

11 1876(c)(3)(A)(i)), of at least 30 days duration every year,

12 during which the issuer may not deny or condition the is13 suance or effectiveness of a medicare supplemental policy,

14 or discriminate in the pricing of the policy, because of age,

15 health status, claims experience, receipt of health care, or

16 medical condition. The policy may not provide any time

17 period applicable to pre-existing conditions, waiting peri18 ods, elimination periods, and probationary periods (except

19 as provided by paragraph (2)(B)). The Secretary may re20 quire enrollment through a third party designated under

21 section 1876(c)(3)(B).’’.

22 (b) ENROLLMENTS FOR NEW MEDICARE BENE23 FICIARIES AND THOSE WHO MOVE.—Section

24 1876(c)(3)(A) (42 U.S.C. 1395mm(c)(3)(A)) is amend25 ed—
729

•S 2357

1 (1) in clause (i), by striking ‘‘clause (ii)’’ and

2 inserting ‘‘clauses (ii) through (iv)’’, and

3 (2) by adding at the end the following:

4 ‘‘(iii) Each eligible organization shall have an open

5 enrollment period for each individual eligible to enroll

6 under subsection (d) during any enrollment period speci7 fied by section 1837 that applies to that individual. Enroll8 ment under this clause shall be effective as specified by

9 section 1838.

10 ‘‘(iv) Each eligible organization shall have an open

11 enrollment period for each individual eligible to enroll

12 under subsection (d) who has previously resided outside

13 the geographic area which the organization serves. The en14 rollment period shall begin with the beginning of the

15 month that precedes the month in which the individual

16 becomes a resident of that geographic area and shall end

17 at the end of the following month. Enrollment under this

18 clause shall be effective as of the first of the month follow19 ing the month in which the individual enrolls.’’.

20 (c) ENROLLMENT THROUGH THIRD PARTY; UNI21 FORM TERMINATION OF ENROLLMENT.—The first sen22 tence of section 1876(c)(3)(B) (42 U.S.C.

23 1395mm(c)(3)(B)) is amended—

24 (1) by inserting ‘‘(including enrollment through

25 a third party)’’ after ‘‘regulations’’, and
730

•S 2357

1 (2) by striking everything after ‘‘with the eligi2 ble organization’’ and inserting ‘‘during an annual

3 period as prescribed by the Secretary, and as speci4 fied by the Secretary in the case of financial insol5 vency of the organization, if the individual moves

6 from the geographic area served by the organization,

7 or in other special circumstances that the Secretary

8 may prescribe.’’.

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

10 the previous subsections apply to enrollments and termi11 nations of enrollments occurring after 1995 (but only after

12 the Secretary of Health and Human Services has pre13 scribed the relevant annual period), except that the

14 amendments made by subsection (a)(2) apply to enroll15 ments for a medicare supplemental policy made after

16 1995.

17 PART 2—PROVISIONS RELATING TO PART A

18 SEC. 4101. INPATIENT HOSPITAL SERVICES UPDATE FOR

19 PPS HOSPITALS.

20 Section 1886(b)(3)(B)(i) (42 U.S.C.

21 1395ww(b)(3)(B)(i)) is amended—

22 (1) by amending subclause (XII) to read as fol23 lows:
731

•S 2357

1 ‘‘(XII) for fiscal years 1997 through 2000, the

2 market basket percentage minus 2.0 percentage

3 points for hospitals in all areas, and’’; and

4 (2) in subclause (XIII), by striking ‘‘1998’’ and

5 inserting ‘‘2001’’.

6 SEC. 4102. REDUCTION IN PAYMENTS FOR CAPITAL-RELAT7 ED COSTS FOR INPATIENT HOSPITAL SERV8 ICES.

9 (a) PPS HOSPITALS.—

10 (1) REDUCTION IN BASE PAYMENT RATES FOR

11 PPS HOSPITALS.—Section 1886(g)(1)(A) (42 U.S.C.

12 1395ww(g)(1)(A)) is amended by adding at the end

13 the following new sentence: ‘‘In addition to the re14 duction described in the preceding sentence, for dis15 charges occurring after September 30, 1995, the

16 Secretary shall reduce by 7.31 percent the

17 unadjusted standard Federal capital payment rate

18 (as described in 42 CFR 412.308(c), as in effect on

19 the date of the enactment of the Health Security

20 Act) and shall reduce by 10.41 percent the

21 unadjusted hospital-specific rate (as described in 42

22 CFR 412.328(e)(1), as in effect on the date of the

23 enactment of the Health Security Act).’’.

24 (2) REDUCTION IN UPDATE.—Section

25 1886(g)(1) (42 U.S.C. 1395ww(g)(1)) is amended—
732

•S 2357

1 (A) in subparagraph (B)(i)—

2 (i) by striking ‘‘and (II)’’ and insert3 ing ‘‘(II)’’, and

4 (ii) by striking the semicolon at the

5 end and inserting the following: ‘‘, and

6 (III) an annual update factor established

7 for the prospective payment rates applica8 ble to discharges in a fiscal year which

9 (subject to reduction under subparagraph

10 (C)) will be based upon such factor as the

11 Secretary determines appropriate to take

12 into account amounts necessary for the ef13 ficient and effective delivery of medically

14 appropriate and necessary care of high

15 quality;’’;

16 (B) by redesignating subparagraph (C) as

17 subparagraph (D); and

18 (C) by inserting after subparagraph (B)

19 the following new subparagraph:

20 ‘‘(C)(i) With respect to payments attributable

21 to portions of cost reporting periods or discharges

22 occurring during each of the fiscal years 1996

23 through 2003, the Secretary shall include a reduc24 tion in the annual update factor established under

25 subparagraph (B)(i)(III) for discharges in the year
733

•S 2357

1 equal to the applicable update reduction described in

2 clause (ii) to adjust for excessive increases in capital

3 costs per discharge for fiscal years prior to fiscal

4 year 1992 (but in no event may such reduction re5 sult in an annual update factor less than zero).

6 ‘‘(ii) In clause (i), the term ‘applicable update

7 reduction’ means, with respect to the update factor

8 for a fiscal year—

9 ‘‘(I) 4.9 percentage points; or

10 ‘‘(II) if the annual update factor for the

11 previous fiscal year was less than the applicable

12 update reduction for the previous year, the sum

13 of 4.9 percentage points and the difference be14 tween the annual update factor for the previous

15 year and the applicable update reduction for the

16 previous year.’’.

17 (b) PPS-EXEMPT HOSPITALS.—Section 1861(v)(1)

18 (42 U.S.C. 1395x(v)(1)) is further amended by adding at

19 the end the following new subparagraph:

20 ‘‘(T) Such regulations shall provide that, in determin21 ing the amount of the payments that may be made under

22 this title with respect to the capital-related costs of inpa23 tient hospital services furnished by a hospital that is not

24 a subsection (d) hospital (as defined in section

25 1886(d)(1)(B)) or a subsection (d) Puerto Rico hospital
734

•S 2357

1 (as defined in section 1886(d)(9)(A)), the Secretary shall

2 reduce the amounts of such payments otherwise estab3 lished under this title by 15 percent for payments attrib4 utable to portions of cost reporting periods occurring dur5 ing each of the fiscal years 1996 through 2003.’’.

6 SEC. 4103. REDUCTIONS IN DISPROPORTIONATE SHARE

7 PAYMENTS.

8 (a) IN GENERAL.—Section 1886(d)(5)(F) (42 U.S.C.

9 1395ww(d)(5)(F)) is amended—

10 (1) in clause (ii), by striking ‘‘The amount’’

11 and inserting ‘‘Subject to clause (ix), the amount’’;

12 (2) in clause (vi), by striking ‘‘In’’ and insert13 ing ‘‘Subject to clause (x), in’’; and

14 (3) by adding at the end the following new

15 clauses:

16 ‘‘(ix) Notwithstanding any other provision of this

17 subparagraph, the Secretary shall reduce the amount of

18 any additional payment made to a hospital under this sub19 paragraph by an amount equal to the sum of—

20 ‘‘(I) for discharges occurring on or after the

21 date on which the State in which such hospital is lo22 cated becomes a participating State (as such term is

23 defined in title I of the Health Security Act), 33

24 percent of such additional payment.’’.
735

•S 2357

1 SEC. 4104. EXTENSION OF FREEZE ON UPDATES TO ROU2 TINE SERVICE COST LIMITS FOR SKILLED

3 NURSING FACILITIES.

4 (a) PAYMENTS BASED ON COST LIMITS.—Section

5 1888(a) (42 U.S.C. 1395yy(a)) is amended by striking

6 ‘‘112 percent’’ each place it appears and inserting ‘‘100

7 percent (adjusted by such amount as the Secretary deter8 mines to be necessary to preserve the savings resulting

9 from the enactment of section 13503(a)(1) of the Omni10 bus Budget Reconciliation Act of 1993)’’.

11 (b) ADJUSTMENTS TO LIMITS.—Section 1888(c) (42

12 U.S.C. 1395yy(c)) is amended by inserting the following

13 sentence at the end: ‘‘The effect of the amendment made

14 by section 4104(a) of the Health Security Act shall not

15 be considered by the Secretary in making adjustments

16 pursuant to this subsection.’’

17 (c) PAYMENTS DETERMINED ON PROSPECTIVE

18 BASIS.—Section 1888(d)(2)(B) (42 U.S.C.

19 1395yy(d)(2)(B)) is amended by striking ‘‘105 percent’’

20 and inserting ‘‘100 percent (adjusted by such amount as

21 the Secretary determines to be necessary to preserve the

22 savings resulting from the enactment of section 13503(b)

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

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

25 subsections (a), (b), and (c) shall apply to cost reporting

26 periods beginning on or after October 1, 1995.
736

•S 2357

1 SEC. 4105. MEDICARE-DEPENDENT, SMALL RURAL HOS2 PITALS.

3 (a) CLARIFICATION OF ADDITIONAL PAYMENT.—

4 Section 1886(d)(5)(G)(ii)(I) (42 U.S.C.

5 1395ww(d)(5)(G)(ii)(I)) is amended by striking ‘‘the first

6 3 12-month cost reporting periods that begin’’ and insert7 ing ‘‘the 36-month period beginning with the first day of

8 the cost reporting period that begins’’.

9 (b) SPECIAL TREATMENT EXTENDED.—Section

10 1886(d)(5)(G) (42 U.S.C. 1395ww(d)(5)(G)) is amend11 ed—

12 (1) in clause (i), by striking ‘‘October 1, 1994’’

13 and inserting ‘‘October 1, 1999’’; and

14 (2) in clause (ii)(II), by striking ‘‘October 1,

15 1994’’ and inserting ‘‘October 1, 1999’’.

16 (c) EXTENSION OF TARGET AMOUNT.—Section

17 1886(b)(3)(D) (42 U.S.C. 1395ww(b)(3)(D)) is amend18 ed—

19 (1) in the matter preceding clause (i), by strik20 ing ‘‘March 31, 1993’’ and inserting ‘‘September 30,

21 1999’’; and

22 (2) by amending clause (iii) to read as follows:

23 ‘‘(iii) with respect to discharges occurring in fis24 cal years 1994 through 1999, the target amount for

25 the cost reporting period beginning in the previous
737

•S 2357

1 fiscal year increased by the applicable percentage in2 crease under subparagraph (B)(iv).’’.

3 SEC. 4106. PROVISIONS RELATING TO RURAL HEALTH

4 TRANSITION GRANT PROGRAM.

5 (a) ELIGIBILITY OF RURAL PRIMARY CARE HOS6 PITALS FOR GRANTS.—

7 (1) IN GENERAL.—Section 4005(e)(2) of the

8 Omnibus Budget Reconciliation Act of 1987 is

9 amended in the matter preceding subparagraph (A)

10 by inserting ‘‘any rural primary care hospital as de11 fined in section 1861(mm)(1), or’’ after ‘‘means’’.

12 (2) EFFECTIVE DATE.—The amendment made

13 by paragraph (1) shall apply to grants made on or

14 after October 1, 1993.

15 (b) EXTENSION OF AUTHORIZATION OF APPROPRIA16 TIONS.—Section 4005(e)(9) of Omnibus Budget Reconcili17 ation Act of 1987 is amended—

18 (1) by striking ‘‘1989 and’’ and inserting

19 ‘‘1989,’’; and

20 (2) by striking ‘‘1992’’ and inserting ‘‘1992

21 and $30,000,000 for each of the fiscal years 1993

22 through 1999’’.

23 (c) FREQUENCY OF REQUIRED REPORTS.—Section

24 4008(e)(8)(B) of the Omnibus Budget Reconciliation Act
738

•S 2357

1 of 1987 is amended by striking ‘‘every 6 months’’ and in2 serting ‘‘every 12 months’’.

3 SEC. 4107. PAYMENTS FOR SOLE COMMUNITY HOSPITALS

4 WITH TEACHING PROGRAMS AND

5 MULTIHOSPITAL CAMPUSES.

6 (a) IN GENERAL.—Section 1886(d)(5)(D) (42 U.S.C.

7 1395ww(d)(5)(D)) is amended by adding at the end the

8 following new clause:

9 ‘‘(vi) The Secretary shall determine payment under

10 clause (i) for a sole-community hospital that is a part of

11 a multi-campus hospital by making the determination

12 under such clause for each facility of the multi-campus

13 hospital if any facility of the hospital would have a value

14 of ‘r’ greater than 0, as ‘r’ is defined in subparagraph

15 (B)(ii). In making a determination for each such facility,

16 the Secretary shall determine the DRG-specific rate appli17 cable to the facility based on its location in accordance

18 with paragraph (3)(D).’’.

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

20 subsection (a) shall apply to discharges occurring on or

21 after October 1, 1993, from multi-campus hospitals that

22 merged facilities on or after October 1, 1987.
739

•S 2357

1 SEC. 4108. MORATORIUM ON DESIGNATION OF NEW LONG2 TERM HOSPITALS.

3 Notwithstanding clause (iv) of section 1886(d)(1)(B)

4 of the Social Security Act (42 U.S.C. 1395ww(d)(1)(B)),

5 a hospital which has an average inpatient length of stay

6 (as determined by the Secretary of Health and Human

7 Services) of greater than 25 days shall not be treated as

8 a hospital described in such clause for purposes of such

9 title unless such hospital was treated as a hospital de10 scribed in such clause for purposes of such title as of the

11 date of the enactment of this Act.

12 SEC. 4109. REVISED PAYMENT METHODOLOGY FOR REHA13 BILITATION AND LONG-TERM CARE HOS14 PITALS.

15 (a) REHABILITATION HOSPITALS AND DISTINCT

16 PART UNITS.—

17 (1) DEFINITION.—Section 1886(d)(1)(B) (42

18 U.S.C. 1395ww(d)(1)(B)) is amended by adding at

19 the end the following new sentence: ‘‘In defining a

20 rehabilitation hospital and a rehabilitation unit of a

21 hospital which is a distinct part of a hospital, the

22 Secretary shall take into account the impact of new

23 technologies, survival rates, and changes in the prac24 tice of rehabilitation medicine.’’.
740

•S 2357

1 (2) TARGET AMOUNT CALCULATION FOR REHA2 BILITATION HOSPITALS AND DISTINCT PART

3 UNITS.—

4 (A) IN GENERAL.—Section 1886(b)(3) (42

5 U.S.C. 1395ww(b)(3)) is amended—

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

7 ‘‘(D), and (E)’’ and inserting ‘‘(D), (E),

8 and (F)’’;

9 (ii) in subparagraph (B)(ii), by strik10 ing ‘‘and (E)’’ and inserting ‘‘(E), and

11 (F)’’; and

12 (iii) by adding at the end the follow13 ing new subparagraph:

14 ‘‘(F)(i) Subject to clause (ii), for cost re15 porting periods beginning on or after October 1,

16 1994, in the case of a hospital described in sub17 section (d)(1)(B)(ii) or a rehabilitation unit de18 scribed in such subparagraph, the term ‘target

19 amount’ means—

20 ‘‘(I) with respect to the first 12-

21 month cost reporting period in which this

22 subparagraph is applied to the hospital or

23 unit—

24 ‘‘(aa) the allowable operating

25 costs of inpatient hospital services (as
741

•S 2357

1 defined in subsection (a)(4)) recog2 nized under this title for the hospital

3 or unit for the 12-month cost report4 ing period (in this subparagraph re5 ferred to as the ‘base cost reporting

6 period’) preceding the first cost re7 porting period for which this subpara8 graph was in effect with respect to

9 such hospital, increased (in a

10 compounded manner), by

11 ‘‘(bb) the applicable percentage

12 increases applied to such hospital or

13 unit under this paragraph for cost re14 porting periods after the base cost re15 porting period and up to and includ16 ing such first 12-month cost reporting

17 period, or

18 ‘‘(II) with respect to a later cost re19 porting period, the target amount for the

20 preceding 12-month cost reporting period,

21 increased by the applicable percentage in22 crease under subparagraph (B).

23 There shall be substituted for the allowable av24 erage costs of inpatient hospital services deter25 mined under subclause (I)(aa), the average of
742

•S 2357

1 the allowable average costs of inpatient hospital

2 services (as so defined) recognized under this

3 title for the hospital or unit for cost reporting

4 periods beginning during fiscal years 1990 and

5 1991 (if any).

6 ‘‘(ii)(I) Notwithstanding the provisions of

7 clause (i), in the case of a hospital or unit to

8 which the last sentence of clause (i) applies, the

9 hospital or unit’s target amount under such

10 clause for a cost reporting period shall be—

11 ‘‘(aa) not less than 70 percent of the

12 national weighted average of all target

13 amounts calculated under such clause for

14 all hospitals and units described in such

15 clause (as determined by the Secretary),

16 and

17 ‘‘(bb) not less than the allowable oper18 ating costs of inpatient hospital services

19 (as defined in subsection (a)(4) for such

20 hospital or unit in the base cost reporting

21 period (including any payments made to

22 such hospital or unit pursuant to para23 graph (1)(A)), multiplied by the applicable

24 percentage increase for such cost reporting

25 period under subparagraph (B).
743

•S 2357

1 ‘‘(II) Notwithstanding the provisions of

2 clause (i), in the case of a hospital or unit that

3 is not described in subclause (I), the hospital or

4 unit’s target amount under such clause for a

5 cost reporting period shall be—

6 ‘‘(aa) not less than the amount de7 scribed in subclause (I)(aa), and

8 ‘‘(bb) not greater than 110 percent of

9 the national weighted average of all target

10 amounts calculated under clause (i) for all

11 hospitals and units described in such

12 clause (as determined by the Secretary).’’.

13 (B) EFFECTIVE DATE.—The amendments

14 made by subparagraph (A) shall apply with re15 spect to cost reporting periods beginning on or

16 after October 1, 1994.

17 (3) DEVELOPMENT OF NATIONAL PROSPECTIVE

18 RATES FOR REHABILITATION HOSPITALS AND DIS19 TINCT PART UNITS.—

20 (A) DEVELOPMENT OF PROPOSAL.—The

21 Secretary of Health and Human Services (here22 after in this section referred to as the ‘‘Sec23 retary’’) shall develop a proposal to replace the

24 current system under which rehabilitation hos25 pitals and rehabilitation units of a hospital
744

•S 2357

1 which are a distinct part of a hospital (as de2 scribed in section 1886(d)(1)(B) of the Social

3 Security Act (42 U.S.C. 1395ww(d)(1)(B))) re4 ceive payment for the operating and capital-re5 lated costs of inpatient hospital services under

6 part A of title XVIII of such Act with a pro7 spective payment system. In developing any

8 proposal under this paragraph to replace the

9 current system with a prospective payment sys10 tem, the Secretary shall develop a system that

11 provides for—

12 (i) a payment on a per-discharge

13 basis, and

14 (ii) an appropriate weighting of such

15 payment amount as it relates to the classi16 fication of the discharge.

17 (B) REPORTS.—Not later than October 1,

18 1996, the Secretary shall submit the proposal

19 developed under subparagraph (A) to the Con20 gress.

21 (b) ASSIGNMENT OF NEW BASE YEAR FOR CER22 TIFIED LONG-STAY HOSPITALS THAT ALSO SERVE A SIG23 NIFICANT PROPORTION OF LOW-INCOME PATIENTS.—

24 (1) REBASING FOR LONG-TERM HOSPITALS.—
745

•S 2357

1 (A) IN GENERAL.—Section 1886(b)(3) (42

2 U.S.C. 1395ww(b)(3)), as amended by sub3 section (a), is further amended—

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

5 ‘‘(E), and (F)’’ and inserting ‘‘(E), (F),

6 and (G)’’;

7 (ii) in subparagraph (B)(ii), by strik8 ing ‘‘(E), and (F)’’ and inserting ‘‘(E),

9 (F), and (G)’’; and

10 (iii) by inserting after subparagraph

11 (F) the following new subparagraph:

12 ‘‘(G)(i) For cost reporting periods begin13 ning on or after October 1, 1994, in the case

14 of a hospital described in subsection

15 (d)(1)(B)(iv) that—

16 ‘‘(I) has not received the additional

17 payment amount described in paragraph

18 (1)(A) for at least the preceding 2 consecu19 tive 12-month cost reporting periods; and

20 ‘‘(II) for which the sum of the

21 amounts described in subclauses (I) and

22 (II) of subsection (d)(5)(F)(vi) during the

23 period described in clause (I) exceeds 25

24 percent,
746

•S 2357

1 the term ‘target amount’ has the meaning given

2 such term by clause (ii).

3 ‘‘(ii) In the case of a hospital described in

4 clause (i), the term ‘target amount’ means—

5 ‘‘(I) with respect to the first 12-

6 month cost reporting period in which this

7 subparagraph is applied to the hospital—

8 ‘‘(aa) the average allowable oper9 ating costs of inpatient hospital serv10 ices (as defined in subsection (a)(4))

11 recognized under this title for the hos12 pital during cost reporting periods of

13 the hospital beginning during fiscal

14 years 1990 and 1991 for such hos15 pital (in this subparagraph referred to

16 as the ‘base cost reporting period’),

17 increased (in a compounded manner),

18 by

19 ‘‘(bb) the applicable percentage

20 increases applied to such hospital or

21 under this paragraph for cost report22 ing periods after the base cost report23 ing period and up to and including

24 such first 12-month cost reporting pe25 riods, or
747

•S 2357

1 ‘‘(II) with respect to a subsequent 12-

2 month cost reporting period, the target

3 amount for the preceding 12-month cost

4 reporting period, increased by the applica5 ble percentage increase under subpara6 graph (B).

7 ‘‘(iii) Notwithstanding clause (ii)(II), if,

8 after 2 consecutive 12-month cost reporting pe9 riods, a hospital continues to be described in

10 subclauses (I) and (II) of clause (i), there shall

11 be substituted for the base cost reporting period

12 described in clause (ii)(I)(aa) the most recent

13 preceding 2 12-month cost reporting periods of

14 the hospital for which data is available (as de15 termined by the Secretary), but only if such

16 substituting results in an increase in the target

17 amount for the hospital. The substitution under

18 the preceding sentence may not occur more

19 often than every 2 years.

20 ‘‘(iv) Effective October 1, 1994, the Sec21 retary shall take into account the enactment of

22 this subparagraph in making available to the

23 hospital the payments described in section

24 1815(e)(2), and, shall increase such payments

25 as if the target amount of the hospital had been
748

•S 2357

1 established pursuant to this subparagraph as of

2 such date.’’.

3 (2) EFFECTIVE DATE.—The amendments made

4 by this subsection shall be effective with respect to

5 cost reporting periods beginning on or after October

6 1, 1994.

7 SEC. 4110. TERMINATION OF INDIRECT MEDICAL EDU8 CATION PAYMENTS.

9 (a) IN GENERAL.—Section 1886(d)(5)(B) (42 U.S.C.

10 1395ww(d)(5)(B)) is amended in the matter preceding

11 clause (i) by striking ‘‘The Secretary’’ and inserting ‘‘For

12 discharges occurring before January 1, 1997, the Sec13 retary’’.

14 (b) ADJUSTMENT TO STANDARDIZED AMOUNTS.—

15 Section 1886(d)(2)(C)(i) (42 U.S.C. 1395ww(d)(2)(C)(i))

16 is amended by striking ‘‘excluding’’ and inserting ‘‘for dis17 charges occurring before January 1, 1997, excluding’’.

18 SEC. 4111. LIMITED SERVICE HOSPITAL PROGRAM.

19 (a) LIMITED SERVICE HOSPITAL PROGRAM.—Sec20 tion 1820 (42 U.S.C. 13951–4) is amended to read as fol21 lows:

22 ‘‘LIMITED SERVICE HOSPITAL PROGRAM

23 ‘‘SEC. 1820. (a) PURPOSE.—The purpose of this sec24 tion is to—

25 ‘‘(1) make available alternative hospital models

26 to small rural or isolated rural communities in which
749

•S 2357

1 facilities are relieved of the burden of selected regu2 latory requirements by limiting the scope of inpa3 tient acute services required to be offered;

4 ‘‘(2) alter medicare reimbursement policy to

5 support the financial viability of alternative facilities

6 by limiting the financial risk faced by such small

7 hospitals through the use of reasonable cost reim8 bursement; and

9 ‘‘(3) promote linkages between facilities des10 ignated by the State under this section and broader

11 programs supporting the development of and transi12 tion to integrated provider networks.

13 ‘‘(b) IN GENERAL.—Any State that submits an appli14 cation in accordance with subsection (c) may establish a

15 limited service hospital program described in subsection

16 (d).

17 ‘‘(c) APPLICATION.—A State may establish a limited

18 service hospital program described in subsection (d) if the

19 State submits to the Secretary at such time and in such

20 form as the Secretary may require an application contain21 ing—

22 ‘‘(1) assurances that the State—

23 ‘‘(A) has developed, or is in the process of

24 developing, a State rural health care plan

25 that—
750

•S 2357

1 ‘‘(i) in the case of a State applying to

2 establish a rural primary care hospital pro3 gram (described in subsection (d)(1)(A)),

4 provides for the creation of one or more

5 rural health networks (as defined in sub6 section (e)) in the State,

7 ‘‘(ii) promotes regionalization of rural

8 health services in the State, and

9 ‘‘(iii) improves access to hospital and

10 other health services for rural residents of

11 the State;

12 ‘‘(B) has developed the rural health care

13 plan described in subparagraph (A) in consulta14 tion with the hospital association of the State,

15 rural hospitals located in the State, and the

16 State Office of Rural Health (or, in the case of

17 a State in the process of developing such plan,

18 that assures the Secretary that it will consult

19 with its State hospital association, rural hos20 pitals located in the State, and the State Office

21 of Rural Health in developing such plan); and

22 ‘‘(2) assurances that the State has designated

23 (consistent with the rural health care plan described

24 in paragraph (1)(A)), or is in the process of des25 ignating, rural nonprofit or public hospitals or facili-
751

•S 2357

1 ties located in the State as rural primary care hos2 pitals facilities or medical assistance facilities; and

3 ‘‘(3) such other information and assurances as

4 the Secretary may require.

5 ‘‘(d) LIMITED SERVICE HOSPITAL PROGRAM DE6 SCRIBED.—

7 ‘‘(1) IN GENERAL.—A State that has submitted

8 an application in accordance with subsection (c),

9 may establish a limited service hospital program that

10 includes—

11 ‘‘(A) a rural primary care hospital pro12 gram under which—

13 ‘‘(i) at least one facility in the State

14 shall be designated as a rural primary care

15 hospital in accordance with paragraph (2),

16 and

17 ‘‘(ii) the State shall develop at least

18 one rural health network (as defined in

19 subsection (e)) in the State;

20 ‘‘(B) a medical assistance facility program

21 under which at least one facility in the State

22 shall be designated as a medical assistance fa23 cility in accordance with paragraph (2); or

24 ‘‘(C) both.
752

•S 2357

1 ‘‘(2) STATE DESIGNATION OF FACILITIES.—A

2 State may designate one or more facilities as a rural

3 primary care hospital or medical assistance facility

4 in accordance with subparagraph (A) or (B).

5 ‘‘(A) CRITERIA FOR DESIGNATION AS

6 RURAL PRIMARY CARE HOSPITAL.—A State

7 may designate a facility as a rural primary care

8 hospital only if the facility—

9 ‘‘(i) is located in a rural area (as de10 fined in section 1886(d)(2)(D)), or is lo11 cated in a county whose geographic area is

12 substantially larger than the average geo13 graphic area for urban counties in the

14 United States and whose hospital service

15 area is characteristic of service areas of

16 hospitals located in rural areas;

17 ‘‘(ii) at the time such facility applies

18 to the State for designation as a rural pri19 mary care hospital, is a hospital (or, in the

20 case of a facility that closed during the 12-

21 month period that ends on the date the fa22 cility applies for such designation, at the

23 time the facility closed), with a participa24 tion agreement in effect under section

25 1866(a);
753

•S 2357

1 ‘‘(iii) has in effect an agreement to

2 participate with other hospitals and facili3 ties in a rural health network;

4 ‘‘(iv) provides 24-hour emergency

5 services to ill or injured persons prior to

6 admission to the facility or prior to their

7 transportation to a full-service hospital;

8 ‘‘(v) provides not more than 15 inpa9 tient beds (meeting such conditions as the

10 Secretary may establish) for providing

11 acute inpatient care;

12 ‘‘(vi) provides inpatient care for a pe13 riod not to exceed an average length of 96

14 hours (unless a longer period is required

15 because transfer to a hospital is precluded

16 because of inclement weather or other

17 emergency conditions);

18 ‘‘(vii) meets such staffing require19 ments as would apply under section

20 1861(e), to a hospital located in a rural

21 area, except that—

22 ‘‘(I) the facility need not meet

23 hospital standards relating to the

24 number of hours during a day, or

25 days during a week, in which the fa-
754

•S 2357

1 cility must be open and fully staffed,

2 except insofar as the facility is re3 quired to provide emergency care on a

4 24-hour basis under clause (v) and

5 must have nursing services available

6 on a 24-hour basis, but need not oth7 erwise staff the facility except when

8 an inpatient is present,

9 ‘‘(II) the facility may provide any

10 services otherwise required to be pro11 vided by a full-time, onsite dietician,

12 pharmacist, laboratory technician,

13 medical technologist, and radiological

14 technologist on a part-time, offsite

15 basis under arrangements as defined

16 in section 1861(w)(1), and

17 ‘‘(III) the inpatient care de18 scribed in clause (vii) may be provided

19 by a physician’s assistant, nurse prac20 titioner, or clinical nurse specialist

21 subject to the oversight of a physician

22 who need not be present in the facil23 ity, and

24 ‘‘(viii) meets the requirements of sub25 paragraphs (C) through (I) of paragraph
755

•S 2357

1 (2) of section 1861(aa), and of clauses (ii)

2 and (iv) of the second sentence of that

3 paragraph, except that in determining

4 whether a facility meets the requirements

5 of this subparagraph, subparagraphs (E)

6 and (F) of that paragraph shall be applied

7 as if any reference to ‘physician’ is a ref8 erence to a physician as defined in section

9 1861(r)(1).

10 ‘‘(B) CRITERIA FOR DESIGNATION AS MED11 ICAL ASSISTANCE FACILITY.—A State may des12 ignate a facility as a medical assistance facility

13 only if the facility—

14 ‘‘(i) is located in a county (or equiva15 lent unit of local government)—

16 ‘‘(I) with fewer than 6 residents

17 per square mile; or

18 ‘‘(II) in a rural area (as defined

19 in section 1886(d)(2)(D)) that is lo20 cated more than a 35–mile or 45–

21 minute drive from a hospital, a rural

22 primary care hospital, or another fa23 cility described in this subsection;
756

•S 2357

1 ‘‘(ii) at the time such facility applies

2 to the State for designation as a medical

3 assistance facility—

4 ‘‘(I) is a hospital (or in the case

5 of a facility that closed during the 12-

6 month period that ends on the date

7 the facility applies for such designa8 tion, at the time the facility closed),

9 with a participation agreement in ef10 fect under section 1866(a); or

11 ‘‘(II) is licensed in accordance

12 with applicable State and local laws

13 and regulations;

14 ‘‘(iii) meets the requirements of

15 clauses (iv), (vi), and (vii) of subparagraph

16 (A); and

17 ‘‘(iv) meets the requirements of sub18 paragraph (I) of paragraph (2) of section

19 1861(aa).

20 ‘‘(e) RURAL HEALTH NETWORK DEFINED.—For

21 purposes of this section, the term ‘rural health network’

22 means, with respect to a State, an organization—

23 ‘‘(1) consisting of—
757

•S 2357

1 ‘‘(A) at least 1 facility that the State has

2 designated or plans to designate as a rural pri3 mary care hospital, and

4 ‘‘(B) at least 1 hospital that furnishes

5 services that a rural primary care hospital can6 not furnish, and

7 ‘‘(2) the members of which have entered into

8 agreements regarding—

9 ‘‘(A) patient referral and transfer,

10 ‘‘(B) the development and use of commu11 nications systems, including (where feasible) te12 lemetry systems and systems for electronic

13 sharing of patient data,

14 ‘‘(C) the provision of emergency and non15 emergency transportation among the members,

16 and

17 ‘‘(D) credentialing and quality assurance.

18 ‘‘(f) CERTIFICATION BY THE SECRETARY.—The Sec19 retary shall certify a facility as a rural primary care hos20 pital or medical assistance facility (as the case may be)

21 if the facility—

22 ‘‘(1) is located in a State that has established

23 a limited service hospital program in accordance

24 with subsection (d);
758

•S 2357

1 ‘‘(2) is designated as a rural primary care hos2 pital or medical assistance facility by the State in

3 which it is located; and

4 ‘‘(3) meets such other criteria as the Secretary

5 may require.

6 ‘‘(g) PERMITTING MAINTENANCE OF SWING BEDS.—

7 Nothing in this section shall be construed to prohibit a

8 State from designating or the Secretary from certifying

9 a facility as a rural primary care hospital or medical as10 sistance facility solely because, at the time the facility ap11 plies to the State for designation as a rural primary care

12 hospital or medical assistance facility, there is in effect

13 an agreement between the facility and the Secretary under

14 section 1883 under which the facility’s inpatient hospital

15 facilities are used for the furnishing of extended care serv16 ices, except that the number of beds used for the furnish17 ing of such services may not exceed the total number of

18 licensed inpatient beds at the time the facility applies to

19 the State for such designation (minus the number of inpa20 tient beds used for providing inpatient care in a rural pri21 mary care facility pursuant to subsection (d)(2)(A)(vi)).

22 The Secretary may establish additional conditions of par23 ticipation for rural primary care hospitals with a substan24 tial number of such beds. For purposes of the first sen25 tence, the number of beds of the facility used for the fur-
759

•S 2357

1 nishing of extended care services shall not include any

2 beds of a unit of the facility that is licensed as a distinct3 part skilled nursing facility at the time the facility applies

4 to the State for designation as a rural primary care hos5 pital or medical assistance facility.

6 ‘‘(h) GRANTS.—

7 ‘‘(1) LIMITED SERVICE HOSPITAL PROGRAM.—

8 The Secretary may award grants to States that have

9 submitted applications in accordance with subsection

10 (c) for—

11 ‘‘(A) engaging in activities relating to plan12 ning and implementing a rural health care plan;

13 ‘‘(B) in the case of a rural primary care

14 hospital program described in subsection

15 (d)(1)(A), engaging in activities relating to

16 planning and implementing rural health net17 works; and

18 ‘‘(C) designation of facilities as rural pri19 mary care hospitals or medical assistance facili20 ties.

21 ‘‘(2) RURAL EMERGENCY MEDICAL SERVICES.—

22 ‘‘(A) IN GENERAL.—The Secretary may

23 award grants to States that have submitted ap24 plications in accordance with subparagraph (B)

25 for the establishment or expansion of a pro-
760

•S 2357

1 gram for the provision of rural emergency medi2 cal services.

3 ‘‘(B) APPLICATION.—An application is in

4 accordance with this subparagraph if the State

5 submits to the Secretary at such time and in

6 such form as the Secretary may require an ap7 plication containing the assurances described in

8 subparagraphs (A)(ii), (A)(iii), and (B) of sub9 section (c)(1) and paragraph (3) of such sub10 section.

11 ‘‘(i) STUDY ON CLINICALLY BASED ALTERNATIVE TO

12 96-HOUR RULE.—The Secretary shall conduct a study on

13 the feasibility of admitting patients to rural primary care

14 hospitals and medical assistance facilities on a limited

15 DRG basis instead of using the 96-hour average length

16 of stay criteria described in subsection (d)(2)(A)(vii).

17 ‘‘(j) WAIVER OF CONFLICTING PART A PROVI18 SIONS.—The Secretary is authorized to waive such provi19 sions of this part and part C as are necessary to conduct

20 the program established under this section.

21 ‘‘(k) AUTHORIZATION OF APPROPRIATIONS.—There

22 are authorized to be appropriated from the Federal Hos23 pital Insurance Trust Fund—

24 ‘‘(1) for making grants under subsection (h)(1)

25 to States that have established a rural primary care
761

•S 2357

1 hospital program in the State under subsection

2 (d)(1)(A), $15,000,000 for each of fiscal years 1993

3 through 1995; and

4 ‘‘(2) for making grants to all States under sub5 section (h), $25,000,000 in each of the fiscal years

6 1996 through 1999.’’.

7 (b) PART A AMENDMENTS RELATING TO RURAL PRI8 MARY CARE HOSPITALS AND MEDICAL ASSISTANCE FA9 CILITIES.—

10 (1) DEFINITIONS.—Section 1861 (42 U.S.C.

11 1395x) is amended by adding at the end the follow12 ing new subsection:

13 ‘‘MEDICAL ASSISTANCE FACILITY; MEDICAL ASSISTANCE

14 FACILITY SERVICES

15 ‘‘(oo)(1) The term ‘medical assistance facility’ means

16 a facility certified by the Secretary as a medical assistance

17 facility under section 1820(f).

18 ‘‘(2) The term ‘medical assistance facility services’

19 means items and services, furnished to an inpatient for

20 a medical assistance facility by such facility, that would

21 be inpatient hospital services if furnished to an inpatient

22 of a hospital by a hospital.’’.

23 (2) COVERAGE AND PAYMENT.—(A)(i) Section

24 1812(a)(1) (42 U.S.C. 1395d(a)(1)) is amended by

25 striking ‘‘inpatient hospital services’’ the first place

26 it appears and inserting ‘‘, inpatient hospital serv-
762

•S 2357

1 ices and inpatient medical assistance facility serv2 ices’’; and

3 (ii) by striking ‘‘inpatient hospital services’’ the

4 second place it appears and inserting ‘‘such serv5 ices’’.

6 (B) Section 1814 (42 U.S.C. 1395f) is amend7 ed—

8 (i) in subsection (b), by striking ‘‘inpatient

9 rural primary care hospital services,’’ and in10 serting ‘‘inpatient rural primary care hospital

11 services, other than a medical assistance facility

12 providing inpatient medical assistance facility

13 services,’’; and

14 (ii) by amending subsection (l) to read as

15 follows:

16 ‘‘(l) PAYMENT FOR INPATIENT RURAL PRIMARY

17 CARE SERVICES AND INPATIENT MEDICAL ASSISTANCE

18 FACILITY SERVICES.—The amount of payment under this

19 part for inpatient rural primary care services and inpa20 tient medical assistance facility services is the reasonable

21 costs of the rural primary care hospital or medical assist22 ance facility in providing such services.’’.

23 (3) TREATMENT OF MEDICAL ASSISTANCE FA24 CILITIES AS PROVIDERS OF SERVICES.—(A) Section

25 1861(u) (42 U.S.C. 1395x(u)) is amended by insert-
763

•S 2357

1 ing ‘‘medical assistance facility,’’after ‘‘rural primary

2 care hospital,’’.

3 (B) The first sentence of section 1864(a) (42

4 U.S.C. 1395aa(a)) is amended by inserting ‘‘a medi5 cal assistance facility, as defined in section

6 1861(oo)(1),’’ after ‘‘1861(mm)(1),’’.

7 (C) The third sentence of section 1865(a) of

8 such Act (42 U.S.C. 1395bb(a)) is amended by

9 striking ‘‘or 1861(mm)(1)’’ and inserting

10 ‘‘1861(mm)(1), or 1861(oo)(1),’’.

11 (4) CONFORMING AMENDMENTS.—(A) Section

12 1128A(b)(1) (42 U.S.C. 1320a–7a(b)(1)) is amend13 ed—

14 (i) by striking ‘‘or a rural primary care

15 hospital’’ the first place it appears and insert16 ing ‘‘, a rural primary care hospital, or a medi17 cal assistance facility’’; and

18 (ii) by striking ‘‘or a rural primary care

19 hospital’’ the second place it appears and in20 serting ‘‘, the rural primary care hospital, or

21 the medical assistance facility’’.

22 (B) Section 1128B(c) (42 U.S.C. 1320a–7b(c))

23 is amended by inserting ‘‘medical assistance facil24 ity,’’ after ‘‘rural primary care hospital,’’.
764

•S 2357

1 (C) Section 1134 (42 U.S.C. 1320b–4) is

2 amended by striking ‘‘or rural primary care hos3 pitals’’ each place it appears and inserting ‘‘, rural

4 primary care hospitals, or medical assistance facili5 ties’’.

6 (D) Section 1138(a)(1) (42 U.S.C. 1320b–

7 8(a)(1)) is amended—

8 (i) in the matter preceding subparagraph

9 (A), by striking ‘‘or rural primary care hos10 pital’’ and inserting ‘‘, rural primary care hos11 pital, or medical assistance facility’’, and

12 (ii) in the matter preceding clause (i) of

13 subparagraph (A), by striking ‘‘or rural pri14 mary care hospital’’ and inserting ‘‘, rural pri15 mary care hospital, or medical assistance facil16 ity’’.

17 (E) Section 1164(e) (42 U.S.C. 1320c–13(e)) is

18 amended by inserting ‘‘medical assistance facilities,’’

19 after ‘‘rural primary care hospitals,’’.

20 (F) Section 1816(c)(2)(C) (42 U.S.C.

21 1395h(c)(2)(C)) is amended by inserting ‘‘medical

22 assistance facility,’’ after ‘‘rural primary care hos23 pital,’’.

24 (G) Section 1833 (42 U.S.C. 1395l) is amend25 ed—
765

•S 2357

1 (i) in subsection (h)(5)(A)(iii)—

2 (I) by striking ‘‘or rural primary care

3 hospital’’ and inserting ‘‘rural primary

4 care hospital, or medical assistance facil5 ity’’; and

6 (II) by striking ‘‘to the hospital’’ and

7 inserting ‘‘to the hospital or the facility’’;

8 (ii) in subsection (i)(1)(A), by inserting

9 ‘‘medical assistance facility,’’ after ‘‘rural pri10 mary care hospital,’’;

11 (iii) in subsection (i)(3)(A), by striking ‘‘or

12 rural primary care hospital services’’ and in13 serting ‘‘rural primary care hospital services, or

14 medical assistance facility services’’;

15 (iv) in subsection (l)(5)(A), by inserting

16 ‘‘medical assistance facility,’’ after ‘‘rural pri17 mary care hospital,’’ each place it appears; and

18 (v) in subsection (l)(5)(C), by striking ‘‘or

19 rural primary care hospital’’ each place it ap20 pears and inserting ‘‘, rural primary care hos21 pital, or medical assistance facility’’.

22 (H) Section 1835(c) (42 U.S.C. 1395n(c)) is

23 amended by adding at the end the following: ‘‘A

24 medical assistance facility shall be considered a hos25 pital for purposes of this subsection.’’.
766

•S 2357

1 (I) Section 1842(b)(6)(A)(ii) (42 U.S.C.

2 1395u(b)(6)(A)(ii)) is amended by inserting ‘‘medi3 cal assistance facility,’’ after ‘‘rural primary care

4 hospital,’’.

5 (J) Section 1861 (42 U.S.C. 1395x) is amend6 ed—

7 (i) in the last sentence of subsection (e), by

8 striking ‘‘1861(mm)(1))’’ and inserting

9 ‘‘1861(mm)(1)) or a medical assistance facility

10 (as defined in section 1861(oo)(1)).’’,

11 (ii) in subsection (w)(1) by inserting ‘‘med12 ical assistance facility,’’ after ‘‘rural primary

13 care hospital,’’, and

14 (iii) in subsection (w)(2), by striking ‘‘or

15 rural primary care hospital’’ each place it ap16 pears and inserting ‘‘, rural primary care hos17 pital, or medical assistance facility’’.

18 (K) Section 1862(a)(14) (42 U.S.C.

19 1395y(a)(14)) is amended by striking ‘‘or rural pri20 mary care hospital’’ each place it appears and in21 serting ‘‘, rural primary care hospital, or medical as22 sistance facility’’.

23 (L) Section 1866(a)(1) (42 U.S.C

24 1395cc(a)(1)) is amended—
767

•S 2357

1 (i) in subparagraph (F)(ii), by inserting

2 ‘‘medical assistance facilities,’’ after ‘‘rural pri3 mary care hospitals,’’;

4 (ii) in subparagraph (H)—

5 (I) in the matter preceding clause (i),

6 by inserting ‘‘and in the case of medical

7 assistance facilities which provide inpatient

8 medical assistance facility services’’ after

9 ‘‘rural primary care hospital services’’; and

10 (II) in clauses (i) and (ii), by striking

11 ‘‘hospital’’ each place it appears and in12 serting ‘‘hospital or facility’’;

13 (iii) in subparagraph (I)—

14 (I) in the matter preceding clause (i),

15 by striking ‘‘or rural primary care hos16 pital’’ and inserting ‘‘, a rural primary

17 care hospital, or a medical assistance facil18 ity’’; and

19 (II) in clause (ii), by striking ‘‘the

20 hospital’’ and inserting ‘‘the hospital or the

21 facility’’; and

22 (iv) in subparagraph (N)—

23 (I) in the matter preceding clause (i),

24 by striking ‘‘and rural primary hospitals’’
768

•S 2357

1 and inserting ‘‘, rural primary care hos2 pitals, and medical assistance facilities’’;

3 (II) in clause (i), by striking ‘‘or rural

4 primary care hospital,’’ and inserting ‘‘,

5 rural primary care hospital, or medical as6 sistance facility,’’; and

7 (III) in clause (ii), by striking ‘‘hos8 pital’’ and inserting ‘‘hospital or facility’’.

9 (M) Section 1866(a)(3) (42 U.S.C

10 1395cc(a)(3)) is amended—

11 (i) by striking ‘‘rural primary care hos12 pital,’’ each place it appears in subparagraphs

13 (A) and (B) and inserting ‘‘rural primary care

14 hospital, medical assistance facility,’’, and

15 (ii) in subparagraph (C)(ii)(II), by striking

16 ‘‘rural primary care hospitals,’’ each place it

17 appears and inserting ‘‘rural primary care hos18 pitals, medical assistance facilities’’.

19 (N) Section 1867(e)(5) (42 U.S.C.

20 1395dd(e)(5)) is amended by striking

21 ‘‘1861(mm)(1))’’ and inserting ‘‘1861(mm)(1)) or a

22 medical assistance facility (as defined in section

23 1861(oo)(1)).’’.
769

•S 2357

1 (c) PART B AMENDMENTS RELATING TO RURAL PRI2 MARY CARE HOSPITALS AND MEDICAL ASSISTANCE FA3 CILITIES.—

4 (1) COVERAGE.—(A) Section 1861(oo) (42

5 U.S.C. 1395x(oo)) as added by subsection (b)(1), is

6 amended by adding at the end the following new

7 paragraph:

8 ‘‘(3) The term ‘outpatient medical assistance facility

9 services’ means medical and other health services fur10 nished by a medical assistance facility on an outpatient

11 basis.’’.

12 (B) Section 1832(a)(2) (42 U.S.C.

13 1395k(a)(2)) is amended—

14 (i) in subparagraph (I), by striking ‘‘and’’

15 at the end;

16 (ii) in subparagraph (J), by striking the

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

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

19 subparagraph:

20 ‘‘(K) outpatient medical assistance facility

21 services (as defined in section 1861(oo)(3)).’’.

22 (2) PAYMENT.—(A) Section 1833(a) (42 U.S.C.

23 1395l(a)) is amended—
770

•S 2357

1 (i) in paragraph (2), in the matter preced2 ing subparagraph (A), by striking ‘‘and (I)’’

3 and inserting ‘‘(I), and (K)’’;

4 (ii) in paragraph (6), by striking ‘‘and’’ at

5 the end;

6 (iii) in paragraph (7), by striking the pe7 riod at the end and inserting ‘‘; and’’; and

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

9 paragraph:

10 ‘‘(8) in the case of outpatient medical assist11 ance facility services, the amounts described in sec12 tion 1834(g).’’.

13 (B) Section 1834(g) (42 U.S.C. 1395m(g)) is

14 amended—

15 (i) in the subsection heading by inserting

16 ‘‘AND OUTPATIENT MEDICAL ASSISTANCE FA17 CILITY SERVICES’’ after ‘‘SERVICES’’;

18 (ii) in paragraph (1), by striking ‘‘provided

19 during a year before 1993 in a rural primary

20 care hospital under this part shall be deter21 mined by one of the following methods as elect22 ed by the rural primary care hospital’’ and in23 serting ‘‘in a rural primary care hospital or

24 medical assistance facility under this part shall

25 be determined by one of the following methods
771

•S 2357

1 as elected by the rural primary care hospital or

2 medical assistance facility’’;

3 (iii) in paragraph (1)(A)(ii), by striking

4 ‘‘outpatient rural primary care hospital serv5 ices’’ each place it appears and inserting ‘‘out6 patient rural primary care hospital services or

7 outpatient medical assistance facility services’’;

8 and

9 (iv) in paragraph (1)(B), by striking ‘‘hos10 pital’’ and inserting ‘‘hospital or facility’’.

11 (d) PAYMENT CONTINUED TO DESIGNATED

12 EACHS.—

13 (1) TERMINATION OF EACH DESIGNATION.—

14 Section 1820(i)(1)(A) (42 U.S.C. 1395l(4)(i)(1)(A))

15 is amended by inserting at the end the following new

16 flush sentence:

17 ‘‘The Secretary shall not designate any hospital as

18 an essential access community hospital on or after

19 July 1, 1994.’’.

20 (2) PERMITTING PAYMENT TO PRIOR DES21 IGNATED EACHS.—Section 1886(d)(5)(D) (42

22 U.S.C. 1395ww(d)(5)(D)) is amended—

23 (A) in clause (iii)(III), by inserting ‘‘as

24 such section was in effect as of July 1, 1994’’

25 before the period at the end; and
772

•S 2357

1 (B) in clause (v), by inserting ‘‘as such

2 section was in effect as of July 1, 1994’’ after

3 ‘‘1820(i)(1).’’

4 (3) EFFECTIVE DATE.—The amendments made

5 by this subsection shall take effect on July 1, 1994.

6 (e) TECHNICAL AMENDMENT RELATING TO PART A

7 DEDUCTIBLE, COINSURANCE AND SPELL OF ILLNESS.—

8 (1) Section 1812(a)(1) (42 U.S.C. 1395d(a)(1)), as

9 amended by subsection (b)(2)(A), is amended—

10 (A) by striking ‘‘inpatient medical assistance fa11 cility services’’ and inserting ‘‘inpatient medical as12 sistance facility services, inpatient rural primary

13 care hospital services, or inpatient medical assist14 ance facility services’’; and

15 (B) by striking ‘‘and inpatient rural primary

16 care hospital services’’.

17 (2) Sections 1813(a) and 1813(b)(3)(A) (42 U.S.C.

18 1395e(a), 1395e(b)(3)(A)) are each amended by striking

19 ‘‘inpatient hospital services’’ each place it appears and in20 serting ‘‘inpatient hospital services, inpatient rural pri21 mary care hospital services, or inpatient medical assist22 ance facility services,’’.

23 (3) Section 1813(b)(3)(B) (42 U.S.C.

24 1395e(b)(3)(B)) is amended by striking ‘‘inpatient hos25 pital services’’ and inserting ‘‘inpatient hospital services,
773

•S 2357

1 inpatient rural primary care hospital services, inpatient

2 medical assistance facility services,’’.

3 (4) Section 1861(a) (42 U.S.C. 1395x(a)) is amend4 ed—

5 (A) in paragraph (1), by striking ‘‘inpatient

6 hospital services’’ and inserting ‘‘inpatient hospital

7 services, inpatient rural primary care hospital serv8 ices, inpatient medical assistance facility services,’’;

9 and

10 (B) in paragraph (2), by striking ‘‘hospital’’

11 and inserting ‘‘hospital, rural primary care hospital,

12 or medical assistance facility’’.

13 (f) REPEAL OF DEVELOPMENT OF PPS SYSTEM FOR

14 INPATIENT RURAL PRIMARY CARE HOSPITAL SERV15 ICES.—

16 (1) IN GENERAL.—Section 1814(l) (42 U.S.C.

17 1395f(l)) is amended by striking paragraph (2).

18 (2) CONFORMING AMENDMENTS.—Section

19 1814(l)(1) (42 U.S.C. 1395F(l)(1)) is amended—

20 (A) by striking ‘‘(l)(1)’’ and inserting

21 ‘‘(l)’’;

22 (B) by redesignating subparagraphs (A)

23 and (B) as paragraphs (1) and (2), respectively;
774

•S 2357

1 (C) in paragraph (2), as redesignated, by

2 striking ‘‘paragraph’’ and inserting ‘‘sub3 section’’; and

4 (D) in the last sentence, by striking ‘‘para5 graph’’ and inserting ‘‘subsection’’.

6 (g) REPEAL OF DEVELOPMENT AND IMPLEMENTA7 TION OF ALL INCLUSIVE PPS SYSTEM FOR OUTPATIENT

8 RURAL PRIMARY CARE SERVICES.—

9 (1) IN GENERAL.—Section 1834(g) (42 U.S.C.

10 1395m(g)), as amended by subsection (c)(2)(B), is

11 amended by striking paragraph (2).

12 (2) CONFORMING AMENDMENTS.—Section

13 1834(g)(1) (42 U.S.C. 1395m(g)(1)) is amended—

14 (A) by striking ‘‘(1) IN GENERAL.—’’

15 (B) by redesignating subparagraph (A)

16 and clauses (i) and (ii) of such subparagraph as

17 paragraph (1) and subparagraphs (A) and (B)

18 of such paragraph, respectively;

19 (C) by redesignating subparagraph (B) as

20 paragraph (2);

21 (D) in paragraph (1)(A), as redesignated,

22 by striking ‘‘subparagraph (B)’’; and

23 (E) in paragraph (1)(B), as so redesig24 nated, by striking ‘‘subparagraph’’ and insert25 ing ‘‘paragraph’’.
775

•S 2357

1 (h) EFFECTIVE DATE.—Except as otherwise pro2 vided, the amendments made by this section shall apply

3 to services furnished on or after October 1, 1994.

4 SEC. 4112. SUBACUTE CARE STUDY.

5 (a) STUDY.—The Secretary of Health and Human

6 Services (hereafter in this section referred to as the ‘‘Sec7 retary’’) shall—

8 (1) define the level and type of care that should

9 constitute subacute care;

10 (2) determine the appropriateness of furnishing

11 subacute care in different settings by evaluating the

12 quality of care and patient outcomes;

13 (3) determine the cost and effectiveness of pro14 viding subacute care under the medicare program

15 under title XVIII of such Act to individuals who are

16 eligible for benefits under part A of such title;

17 (4) determine the extent to which hospital DRG

18 prospective payment rates under section 1886(d) of

19 such Act (42 U.S.C. 1395ww(d)) are appropriate for

20 the less restrictive institutional settings that provide

21 subacute care; and

22 (5) study the relationships between institutions

23 and their payment methodologies in order to develop

24 ways in which to maximize the continuity of care for
776

•S 2357

1 each patient episode in which subacute care is fur2 nished.

3 (b) REPORT.—Not later than October 1, 1996, the

4 Secretary shall submit to the Congress a report on the

5 matters studied under subsection (a).

6 PART 3—PROVISIONS RELATING TO PART B

7 SEC. 4201. UPDATES FOR PHYSICIANS’ SERVICES.

8 Section 1848(d)(1) (42 U.S.C. 1395w–4(d)(1)) is

9 amended—

10 (1) in subparagraph (A), by inserting after

11 ‘‘subparagraph (B)’’ the following: ‘‘and, in the case

12 of 1995, specified in subparagraph (C)’’;

13 (2) by redesignating subparagraph (C) as sub14 paragraph (D); and

15 (3) by inserting after subparagraph (B) the fol16 lowing new subparagraph:

17 ‘‘(C) SPECIAL PROVISION FOR 1995.—For

18 purposes of subparagraph (A), the conversion

19 factor specified in this subparagraph for 1995

20 is—

21 ‘‘(i) in the case of physicians’ services

22 included in the category of primary care

23 services (as defined for purposes of sub24 section (j)(1)), the conversion factor estab25 lished under this subsection for 1994 re-
777

•S 2357

1 duced by 1 percent and adjusted by the

2 update established under paragraph (3) for

3 1995; and

4 ‘‘(ii) in the case of any other physi5 cians’ services, the conversion factor estab6 lished under this subsection for 1994 re7 duced by 4.0 percent and adjusted by the

8 update established under paragraph (3) for

9 1995.’’.

10 SEC. 4202. SUBSTITUTION OF REAL GDP TO ADJUST FOR

11 VOLUME AND INTENSITY; REPEAL OF RE12 STRICTION ON MAXIMUM REDUCTION PER13 MITTED IN DEFAULT UPDATE.

14 (a) USE OF REAL GDP TO ADJUST FOR VOLUME

15 AND INTENSITY.—Section 1848(f)(2)(A)(iii) (42 U.S.C.

16 1395w–4(f)(2)(A)(iii)) is amended to read as follows:

17 ‘‘(iii) 1 plus the average per capita

18 growth in the real gross domestic product

19 (divided by 100) for the 5-fiscal-year pe20 riod ending with the previous fiscal year

21 (increased by 1.5 percentage points for the

22 category of services consisting of primary

23 care services), and’’.
778

•S 2357

1 (b) REPEAL OF RESTRICTION ON MAXIMUM REDUC2 TION.—Section 1848(d)(3)(B)(ii) (42 U.S.C. 1395w–

3 4(d)(3)(B)(ii)) is amended—

4 (1) in the heading, by inserting ‘‘IN CERTAIN

5 YEARS’’ after ‘‘ADJUSTMENT’’;

6 (2) in the matter preceding subclause (I), by

7 striking ‘‘for a year’’;

8 (3) in subclause (I), by adding ‘‘and’’ at the

9 end;

10 (4) in subclause (II), by striking ‘‘, and’’ and

11 inserting a period; and

12 (5) by striking subclause (III).

13 (c) REPEAL OF PERFORMANCE STANDARD FAC14 TOR.—

15 (1) IN GENERAL.—Section 1848(f)(2) is

16 amended by striking subparagraph (B) and redesig17 nating subparagraph (C) as subparagraph (B).

18 (2) CONFORMING AMENDMENT.—Section

19 1848(f)(2)(A) is amended in the matter following

20 clause (iv) by striking ‘‘1, multiplied by 100’’ and all

21 that follows through ‘‘subparagraph (B))’’ and in22 serting ‘‘1 and multiplied by 100’’.

23 (d) EFFECTIVE DATE.—

24 (1) VOLUME PERFORMANCE STANDARDS.—The

25 amendments made by subsections (a) and (c) shall
779

•S 2357

1 apply with respect to volume performance standards

2 established beginning with fiscal year 1995.

3 (2) REPEAL OF RESTRICTION ON MAXIMUM RE4 DUCTION.—The amendments made by subsection (b)

5 shall apply to services furnished on or after January

6 1, 1997.

7 SEC. 4203. PAYMENT FOR PHYSICIANS’ SERVICES RELAT8 ING TO INPATIENT STAYS IN CERTAIN HOS9 PITALS.

10 (a) IN GENERAL.—

11 (1) LIMITATIONS DESCRIBED.—Part B of title

12 XVIII (42 U.S.C. 1831 et seq.) is amended by in13 serting after section 1848 the following new section:

14 ‘‘LIMITATIONS ON PAYMENT FOR PHYSICIANS’ SERVICES

15 RELATING TO INPATIENT STAYS IN CERTAIN HOSPITALS

16 ‘‘SEC. 1849. (a) DEFINITIONS.—In this section, the

17 following definitions apply:

18 ‘‘(1) HOSPITAL.—The term ‘hospital’ means a

19 subsection (d) hospital as defined in section

20 1886(d)(1)(B).

21 ‘‘(2) MEDICAL STAFF.—An individual furnish22 ing a physician’s service is considered to be on the

23 medical staff of a hospital—

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

25 for hospitals established by the Joint Commis-
780

•S 2357

1 sion on Accreditation of Health Organiza2 tions)—

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

5 the hospital to provide a framework for the

6 self-governance of medical staff activities;

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

8 regulations, the individual has clinical

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

11 ‘‘(iii) under such clinical privileges,

12 the individual may provide physicians’

13 services independently within the scope of

14 the individual’s clinical privileges, or

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

16 service to a medicare beneficiary in such hos17 pital.

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

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

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

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

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

24 ‘‘(b) SERVICES SUBJECT TO REDUCTION.—
781

•S 2357

1 ‘‘(1) DETERMINATION OF HOSPITAL-SPECIFIC

2 PER ADMISSION RELATIVE VALUE.—Not later than

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

4 Secretary shall determine for each hospital—

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

6 relative value under subsection (c)(2) for the

7 following year; and

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

9 value is projected to exceed the allowable aver10 age per admission relative value applicable to

11 the hospital for the following year under sub12 section (c)(1).

13 ‘‘(2) REDUCTION FOR SERVICES AT HOSPITALS

14 EXCEEDING ALLOWABLE AVERAGE PER ADMISSION

15 RELATIVE VALUE.—If the Secretary determines

16 (under paragraph (1)) that a medical staff’s hos17 pital-specific per admission relative value for a year

18 (beginning with 1998) is projected to exceed the al19 lowable average per admission relative value applica20 ble to the medical staff for the year, the Secretary

21 shall reduce (in accordance with subsection (d)) the

22 amount of payment otherwise determined under this

23 part for each physician’s service furnished during

24 the year to an inpatient of the hospital by an indi-
782

•S 2357

1 vidual who is a member of the hospital’s medical

2 staff.

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

4 HOSPITALS AND CARRIERS.—Not later than October

5 1 of each year (beginning with 1997), the Secretary

6 shall notify the medical executive committee of each

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

8 Commission on the Accreditation of Health Organi9 zations) of the determinations made with respect to

10 the medical staff of such hospital under paragraph

11 (1).

12 ‘‘(c) DETERMINATION OF ALLOWABLE AVERAGE PER

13 ADMISSION RELATIVE VALUE AND HOSPITAL-SPECIFIC

14 PER ADMISSION RELATIVE VALUES.—

15 ‘‘(1) ALLOWABLE AVERAGE PER ADMISSION

16 RELATIVE VALUE.—

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

18 hospital located in an urban area, the allowable

19 average per admission relative value established

20 under this subsection for a year is equal to 125

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

22 the median of 1996 hospital-specific per admis23 sion relative values determined under paragraph

24 (2) for all hospital medical staffs.
783

•S 2357

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

2 hospital located in a rural area, the allowable

3 average per admission relative value established

4 under this subsection for 1998 and each suc5 ceeding year, is equal to 140 percent of the me6 dian of the 1996 hospital-specific per admission

7 relative values determined under paragraph (2)

8 for all hospital medical staffs.

9 ‘‘(2) HOSPITAL-SPECIFIC PER ADMISSION REL10 ATIVE VALUE.—

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

12 per admission relative value projected for a hos13 pital (other than a teaching hospital) for a cal14 endar year shall be equal to the average per ad15 mission relative value (as determined under sec16 tion 1848(c)(2)) for physicians’ services fur17 nished to inpatients of the hospital by the hos18 pital’s medical staff (excluding interns and resi19 dents) during the second year preceding such

20 calendar year, adjusted for variations in case21 mix and disproportionate share status among

22 hospitals (as determined by the Secretary under

23 subparagraph (C)).

24 ‘‘(B) SPECIAL RULE FOR TEACHING HOS25 PITALS.—The hospital-specific per admission
784

•S 2357

1 relative value projected for a teaching hospital

2 in a calendar year shall be equal to the sum

3 of—

4 ‘‘(i) the average per admission relative

5 value (as determined under section

6 1848(c)(2)) for physicians’ services fur7 nished to inpatients of the hospital by the

8 hospital’s medical staff (excluding interns

9 and residents) during the second year pre10 ceding such calendar year adjusted for

11 variations in case-mix, disproportionate

12 share status, and teaching status among

13 hospitals (as determined by the Secretary

14 under subparagraph (C)); and

15 ‘‘(ii) the equivalent per admission rel16 ative value (as determined under section

17 1848(c)(2)) for physicians’ services fur18 nished to inpatients of the hospital by in19 terns and residents of the hospital during

20 the second calendar year preceding such

21 calendar year, adjusted for variations in

22 case-mix, disproportionate share status,

23 and teaching status among hospitals (as

24 determined by the Secretary under sub25 paragraph (C)). The Secretary shall deter-
785

•S 2357

1 mine such equivalent relative value unit

2 per admission for interns and residents

3 based on the best available data for teach4 ing hospitals and may make such adjust5 ment in the aggregate.

6 ‘‘(C) ADJUSTMENT FOR TEACHING AND

7 DISPROPORTIONATE SHARE HOSPITALS.—The

8 Secretary shall adjust the allowable per admis9 sion relative values otherwise determined under

10 this paragraph to take into account the needs

11 of teaching hospitals and hospitals receiving ad12 ditional payments under subparagraphs (F) and

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

14 teaching status or disproportionate share shall

15 not be less than zero.

16 ‘‘(d) AMOUNT OF REDUCTION.—The amount of pay17 ment otherwise made under this part for a physician’s

18 service that is subject to a reduction under subsection (b)

19 during a year shall be reduced by 15 percent, in the case

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

21 of the hospital for which the Secretary determines under

22 subsection (b)(1) that the hospital medical staff’s pro23 jected relative value per admission exceeds the allowable

24 average per admission relative value.
786

•S 2357

1 ‘‘(e) RECONCILIATION OF REDUCTIONS BASED ON

2 HOSPITAL-SPECIFIC RELATIVE VALUE PER ADMISSION

3 WITH ACTUAL RELATIVE VALUES.—

4 ‘‘(1) DETERMINATION OF ACTUAL AVERAGE

5 PER ADMISSION RELATIVE VALUE.—Not later than

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

7 Secretary shall determine the actual average per ad8 mission relative value (as determined pursuant to

9 section 1848(c)(2)) for the physicians’ services fur10 nished by members of a hospital’s medical staff to

11 inpatients of the hospital during the previous year,

12 on the basis of claims for payment for such services

13 that are submitted to the Secretary not later than

14 90 days after the last day of such previous year. The

15 actual average per admission relative value shall be

16 adjusted by the appropriate case-mix, disproportion17 ate share factor, and teaching factor for the hospital

18 medical staff (as determined by the Secretary under

19 subsection (c)(2)(C)).

20 ‘‘(2) RECONCILIATION WITH REDUCTIONS

21 TAKEN.—

22 ‘‘(A) REIMBURSEMENT.—In the case of a

23 hospital for which the payment amounts for

24 physicians’ services furnished by members of

25 the hospital’s medical staff to inpatients of the
787

•S 2357

1 hospital were reduced under this section for a

2 year—

3 ‘‘(i) if the actual average per admis4 sion relative value for such hospital’s medi5 cal staff during the year (as determined by

6 the Secretary under paragraph (1)) did not

7 exceed the allowable average per admission

8 relative value applicable to the hospital’s

9 medical staff under subsection (c)(1) for

10 the year, the Secretary shall reimburse the

11 fiduciary agent for the medical staff by the

12 amount by which payments for such serv13 ices were reduced for the year under sub14 section (d), including interest at an appro15 priate rate determined by the Secretary;

16 and

17 ‘‘(ii) if the actual average per admis18 sion relative value for such hospital’s medi19 cal staff during the year (as determined by

20 the Secretary under paragraph (1)) ex21 ceeded the allowable average per admission

22 relative value applicable to the hospital’s

23 medical staff under subsection (c)(1) for

24 the year, the Secretary shall reimburse the

25 fiduciary agent for the medical staff, as a
788

•S 2357

1 percent of the total amount of payment

2 otherwise determined under this part for

3 physicians’ services furnished during the

4 year to inpatients of the hospital by the

5 hospital’s medical staff (prior to the reduc6 tion under subsection (d)), the difference

7 between 15 percentage points and the ac8 tual number of percentage points that the

9 medical staff exceeded the allowable aver10 age per admission relative value, including

11 interest at any appropriate rate determined

12 by the Secretary.

13 ‘‘(B) NO REIMBURSEMENT.—The Sec14 retary shall not pay the fiduciary agent for the

15 medical staff of a hospital any amounts by

16 which payments for physicians’ services pro17 vided by the medical staff were reduced for a

18 year under this section if the actual average per

19 admission relative value for such hospital’s

20 medical staff during the year (as determined by

21 the Secretary under paragraph (1)) exceeded

22 the allowable average per admission relative

23 value applicable to the hospital’s medical staff

24 under subsection (c)(1) for the year by 15 per25 centage points or more.
789

•S 2357

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 1 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 amounts withheld made by

10 the 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)(A)(ii) for excess reductions

16 in 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 ‘‘(f) CLAIMS TO BE SUBMITTED NOT LATER THAN

23 90 DAYS AFTER END OF YEAR.—Notwithstanding any

24 other provision of law, no payment may be made under

25 this part for any physician’s service furnished by a mem-
790

•S 2357

1 ber of the medical staff of a hospital to an inpatient of

2 the hospital during a year unless the hospital submits a

3 claim to the Secretary for the payment for such service

4 not later than 90 days after the last day of the year.’’.

5 (2) CONFORMING AMENDMENTS.—(A) Section

6 1833(a)(1)(N) (42 U.S.C. 1395l(a)(1)(N)) is

7 amended by inserting ‘‘(subject to reduction under

8 section 1849)’’ after ‘‘1848(a)(1)’’.

9 (B) Section 1848(a)(1)(B) (42 U.S.C. 1395w–

10 4(a)(1)(B)) is amended by striking ‘‘this sub11 section,’’ and inserting ‘‘this subsection and section

12 1849,’’.

13 (b) REQUIRING PHYSICIANS TO IDENTIFY HOSPITAL

14 AT WHICH SERVICE FURNISHED.—Section

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

16 amended by striking ‘‘beneficiary,’’ and inserting ‘‘bene17 ficiary (and, in the case of a service furnished to an inpa18 tient of a hospital, report the hospital identification num19 ber on such claim form),’’.

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

21 this section shall apply to services furnished on or after

22 January 1, 1998.
791

•S 2357

1 SEC. 4204. CHANGES IN UNDERSERVED AREA BONUS PAY2 MENTS.

3 (a) IN GENERAL.—Section 1833(m) (42 U.S.C.

4 1395l(m)) is amended—

5 (1) by inserting ‘‘(1)’’ after ‘‘(m)’’,

6 (2) by inserting ‘‘described in paragraph (2)’’

7 after ‘‘physicians’ services’’,

8 (3) by striking ‘‘10 percent’’ and inserting ‘‘the

9 applicable percent’’,

10 (4) by striking ‘‘service’’ the last place it ap11 pears and inserting ‘‘services’’, and

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

13 paragraph:

14 ‘‘(2)(A) The applicable percent referred to in para15 graph (1) is 20 percent in the case of primary care serv16 ices, as defined in section 1842(i)(4), and 10 percent for

17 services other than primary care services furnished in

18 health professional shortage areas located in rural areas

19 as defined in section 1886(d)(2)(D).

20 ‘‘(B) The Secretary shall reduce payments for all

21 services (other than primary care services) for which pay22 ment may be made under this section by such percentage

23 as the Secretary determines necessary so that, beginning

24 on the date of the enactment of the Health Security Act,

25 the amendments made by section 4204(e) of such Act

26 would not result in expenditures under this section that
792

•S 2357

1 exceed the amount of such expenditures that would have

2 been made if such amendment had not been made.’’.

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

4 paragraph (1) are effective for services furnished on or

5 after January 1, 1995.

6 SEC. 4205. CORRECTION OF MVPS UPWARD BIAS.

7 (a) IN GENERAL.—Section 1848(f)(2)(A)(iv) (42

8 U.S.C. 1395w–4(f)(2)(A)(iv)) is amended by striking ‘‘in9 cluding changes in law and regulations affecting the per10 centage increase described in clause (i)’’ and inserting ‘‘ex11 cluding anticipated responses to such changes’’.

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

13 subsection (a) shall apply with respect to performance

14 standard rates of increase determined for fiscal year 1995

15 and succeeding fiscal years.

16 SEC. 4206. DEMONSTRATION PROJECTS FOR MEDICARE

17 STATE-BASED PERFORMANCE STANDARD

18 RATE OF INCREASE.

19 Section 1848(f) (42 U.S.C. 1395w–4(f)) is amended

20 by adding at the end the following new paragraph:

21 ‘‘(6) STATE-BASED PERFORMANCE STANDARD

22 RATES OF INCREASE DEMONSTRATION PROJECTS.—

23 The Secretary shall establish demonstration projects

24 in not more than 3 States under which a State

25 elects State-based performance standard rates of in-
793

•S 2357

1 crease to substitute for the national performance

2 standard rates of increase established for the year

3 under paragraph (2). The Secretary shall develop

4 criteria for the establishment of such demonstration

5 projects which shall include the requirement of

6 budget-neutrality for payments made under this part

7 with respect to physicians’ services furnished in a

8 State participating in the demonstration project.’’.

9 SEC. 4207. ELIMINATION OF FORMULA-DRIVEN OVERPAY10 MENTS FOR CERTAIN OUTPATIENT HOSPITAL

11 SERVICES.

12 (a) AMBULATORY SURGICAL CENTER PROCE13 DURES.—Section 1833(i)(3)(B)(i)(II) (42 U.S.C.

14 1395l(i)(3)(B)(i)(II)) is amended—

15 (1) by striking ‘‘of 80 percent’’; and

16 (2) by striking the period at the end and insert17 ing the following: ‘‘, less the amount a provider may

18 charge as described in clause (ii) of section

19 1866(a)(2)(A).’’.

20 (b) RADIOLOGY SERVICES AND DIAGNOSTIC PROCE21 DURES.—Section 1833(n)(1)(B)(i)(II) (42 U.S.C.

22 1395l(n)(1)(B)(i)(II)) is amended—

23 (1) by striking ‘‘of 80 percent’’; and

24 (2) by striking the period at the end and insert25 ing the following: ‘‘, less the amount a provider may
794

•S 2357

1 charge as described in clause (ii) of section

2 1866(a)(2)(A).’’.

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

4 this section shall apply to services furnished during por5 tions of cost reporting periods occurring on or after July

6 1, 1994.

7 SEC. 4208. EYE OR EYE AND EAR HOSPITALS.

8 Section 1833(i)(4)(A) (42 U.S.C. 1395l(i)(4)(A)) is

9 amended in the matter following clause (iii) by striking

10 ‘‘January 1, 1995’’ and inserting ‘‘September 30, 1997’’.

11 SEC. 4209. IMPOSITION OF COINSURANCE ON LABORATORY

12 SERVICES.

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

14 section 1833(a) (42 U.S.C. 1395l(a)) are each amended—

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

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

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

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

19 rate’’.

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

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

22 January 1, 1995.
795

•S 2357

1 SEC. 4210. APPLICATION OF COMPETITIVE ACQUISITION

2 PROCESS FOR PART B ITEMS AND SERVICES.

3 (a) GENERAL RULE.—Part B of title XVIII is

4 amended by inserting after section 1846 the following:

5 ‘‘COMPETITION ACQUISITION FOR ITEMS AND SERVICES

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

7 AREAS.—

8 ‘‘(1) IN GENERAL.—The Secretary shall estab9 lish competitive acquisition areas for the purpose of

10 awarding a contract or contracts for the furnishing

11 under this part of the items and services described

12 in subsection (c) on or after January 1, 1995. The

13 Secretary may establish different competitive acqui14 sition areas under this subsection for different class15 es of items and services under this part.

16 ‘‘(2) CRITERIA FOR ESTABLISHMENT.—The

17 competitive acquisition areas established under para18 graph (1) shall—

19 ‘‘(A) initially be, or be within, metropolitan

20 statistical areas; and

21 ‘‘(B) be chosen based on the availability

22 and accessibility of suppliers and the probable

23 savings to be realized by the use of competitive

24 bidding in the furnishing of items and services

25 in the area.

26 ‘‘(b) AWARDING OF CONTRACTS IN AREAS.—
796

•S 2357

1 ‘‘(1) IN GENERAL.—The Secretary shall con2 duct a competition among individuals and entities

3 supplying items and services under this part for

4 each competitive acquisition area established under

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

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

7 The Secretary may not award a contract to any indi8 vidual or entity under the competition conducted

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

10 service under this part unless the Secretary finds

11 that the individual or entity meets quality standards

12 specified by the Secretary for the furnishing of such

13 item or service.

14 ‘‘(3) CONTENTS OF CONTRACT.—A contract en15 tered into with an individual or entity under the

16 competition conducted pursuant to paragraph (1)

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

18 a class)—

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

20 entity shall provide; and

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

22 the Secretary may require.

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

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

25 follows:
797

•S 2357

1 ‘‘(1) Magnetic resonance imaging tests and

2 computerized axial tomography scans, including a

3 physician’s interpretation of the results of such tests

4 and scans.

5 ‘‘(2) Enteral and parenteral nutrients and sup6 plies.’’.

7 (b) ITEMS AND SERVICES TO BE FURNISHED ONLY

8 THROUGH COMPETITIVE ACQUISITION.—Section 1862(a)

9 (42 U.S.C. 1395y(a)) is amended—

10 (1) by striking ‘‘or’’ at the end of paragraph

11 (15);

12 (2) by striking the period at the end of para13 graph (16) and inserting ‘‘; or’’; and

14 (3) by inserting after paragraph (16) the fol15 lowing new paragraph:

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

17 service furnished in a competitive acquisition area

18 (as established by the Secretary under section

19 1847(a)) by an individual or entity other than the

20 supplier with whom the Secretary has entered into

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

22 of such item or service in that area, unless the Sec23 retary finds that such expenses were incurred in a

24 case of urgent need.’’.
798

•S 2357

1 (c) REDUCTION IN PAYMENT AMOUNTS IF COMPETI2 TIVE ACQUISITION FAILS TO ACHIEVE MINIMUM REDUC3 TION IN PAYMENTS.—Notwithstanding any other provi4 sion of title XVIII of the Social Security Act, if the estab5 lishment of competitive acquisition areas under section

6 1847 of such Act (as added by subsection (a)) and the

7 limitation of coverage for items and services under part

8 B of such title to items and services furnished by providers

9 with competitive acquisition contracts under such section

10 during 1996 does not result in a reduction of at least 10

11 percent in the projected payment amount that would have

12 applied to the items or services under part B if the items

13 or services had not been furnished through competitive ac14 quisition under such section in such year, the Secretary

15 shall reduce for such year the payment amount for all such

16 services by such percentage as the Secretary determines

17 necessary to result in such a reduction for such year.

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

19 this section shall apply to items and services furnished

20 under part B of title XVIII of the Social Security Act on

21 or after January 1, 1995.
799

•S 2357

1 SEC. 4211. APPLICATION OF COMPETITIVE ACQUISITION

2 PROCEDURES FOR LABORATORY SERVICES.

3 (a) IN GENERAL.—Section 1847(c), as added by sec4 tion 4210, is amended by inserting after paragraph (2)

5 the following new paragraph:

6 ‘‘(3) Clinical diagnostic laboratory tests.’’.

7 (b) REDUCTION IN FEE SCHEDULE AMOUNTS IF

8 COMPETITIVE ACQUISITION FAILS TO ACHIEVE SAV9 INGS.—Section 1833(h) (42 U.S.C. 1395l(h)) is amended

10 by adding at the end the following new paragraph:

11 ‘‘(7) Notwithstanding any other provision of this sub12 section, if the Secretary applies the authority provided

13 under section 1847 to establish competitive acquisition

14 areas for the furnishing of clinical diagnostic laboratory

15 tests during 1996 and the application of such authority

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

17 the projected payment amount that would have applied to

18 such tests under this section in such year if the tests had

19 not been furnished through competitive acquisition under

20 section 1847, the Secretary shall reduce for such year each

21 payment amount for all such tests otherwise determined

22 under the fee schedules and negotiated rates established

23 under this subsection by such percentage as the Secretary

24 determines necessary to result in such a reduction for such

25 year.’’.
800

•S 2357

1 SEC. 4212. EXPANDED COVERAGE FOR PHYSICIAN ASSIST2 ANTS AND NURSE PRACTITIONERS.

3 (a) COVERAGE IN OUTPATIENT SETTINGS.—Section

4 1861(s)(2)(K) (42 U.S.C. 1395x(s)(2)(K)) is amended—

5 (1) in clause (i)—

6 (A) by striking ‘‘or’’ at the end of

7 subclause (II); and

8 (B) by inserting ‘‘or (IV) in an outpatient

9 setting as defined by the Secretary’’ following

10 ‘‘shortage area,’’; and

11 (2) in clause (ii), by striking ‘‘section 1919(a)’’

12 and inserting ‘‘section 1919(a) or in an outpatient

13 setting as defined by the Secretary’’.

14 (b) PAYMENT BASED ON PHYSICIAN FEE SCHED15 ULE.—

16 (1) Section 1833(a)(1)(O) (42 U.S.C.

17 1395l(a)(1)(O)) is amended—

18 (A) by striking ‘‘section 1861(s)(2)(K)(iii)

19 (relating to nurse practitioner and clinical nurse

20 specialist services provided in a rural area)’’

21 and inserting ‘‘section 1861(s)(2)(K)’’;

22 (B) by striking ‘‘for services furnished on

23 or after January 1, 1992,’’ and inserting ‘‘for

24 services described in section 1861(s)(2)(K)(iii)

25 furnished on or after January 1, 1992, and for

26 services described in clauses (i), (ii), and (iv) of
801

•S 2357

1 section 1861(s)(2)(K) furnished on or after

2 January 1, 1997,’’; and

3 (C) by striking ‘‘subsection (r)(2)’’ and in4 serting ‘‘subsection (r)(2) or subparagraph (A)

5 or (B) of section 1842(b)(12)’’.

6 (2) Section 1842(b)(12)(A) (42 U.S.C.

7 1395u(b)(12)(A)) is amended—

8 (A) by striking ‘‘and’’ at the end of clause

9 (i);

10 (B) in clause (ii)(II), by inserting ‘‘and be11 fore January 1, 1997,’’ after ‘‘January 1,

12 1992,’’;

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

14 clause (ii)(II) and inserting ‘‘; and’’; and

15 (D) by inserting at the end the following

16 clause:

17 ‘‘(iii) in the case of services furnished

18 on or after January 1, 1997—

19 ‘‘(I) in the case of services per20 formed as an assistant at surgery, 65

21 percent of the amount that would oth22 erwise be recognized if performed by a

23 physician who is serving as an assist24 ant at surgery, and
802

•S 2357

1 ‘‘(II) in the case of other serv2 ices, 85 percent of the fee schedule

3 amount provided under section

4 1848.’’.

5 (c) RURAL NURSE PRACTITIONERS AS ASSISTANTS

6 AT SURGERY IN URBAN AREAS.—Section

7 1861(s)(2)(K)(ii) (42 U.S.C. 1395x(s)(2)(K)(ii)), as

8 amended by subsection (a)(2), is further amended by add9 ing ‘‘or services as an assistant at surgery furnished by

10 a nurse practitioner whose primary practice location (as

11 defined by the Secretary) is in a rural area (as defined

12 in section 1886(d)(2)(D)) to an individual who resides in

13 a rural area when the service is furnished to such individ14 ual in an urban area by such practitioner when such prac15 titioner refers such individual to an urban area for the

16 furnishing of services’’ after ‘‘as defined by the Sec17 retary’’.

18 (d) CONFORMING AMENDMENTS.—

19 (1) Section 1861(b)(4) (42 U.S.C. 1395x(b)(4))

20 is amended by striking ‘‘subsection (s)(2)(K)(i)’’ and

21 inserting ‘‘subsection (s)(2)(K)’’.

22 (2) Section 1862(a)(14) (42 U.S.C.

23 1395y(a)(14)), as amended by section4108(b)(4)(K),

24 is amended by striking ‘‘section 1861(s)(2)(K)(i)’’

25 and inserting ‘‘section 1861(s)(2)(K)’’.
803

•S 2357

1 (3) Section 1866(a)(1)(H) (42 U.S.C.

2 1395cc(a)(1)(H)), as amended by section

3 4108(b)(4)(L)(ii), is further amended by striking

4 ‘‘section 1861(s)(2)(K)(i)’’ and inserting ‘‘section

5 1861(s)(2)(K)’’.

6 (e) EFFECTIVE DATE.—The amendments made by

7 this section shall apply to services furnished on or after

8 January 1, 1997.

9 SEC. 4213. ELIMINATION OF BALANCE BILLING.

10 Effective January 1, 1996, notwithstanding any pro11 vision of title XVIII of the Social Security Act (42 U.S.C.

12 1395 et seq.), a nonparticipating physician, or

13 nonparticipating supplier or other person (as such terms

14 are defined in section 1842(i)(2) of such Act (42 U.S.C.

15 1395u(i)(2)) may not receive payment for services or

16 items under such title.

17 SEC. 4214. DEVELOPMENT AND IMPLEMENTATION OF RE18 SOURCE-BASED METHODOLOGY FOR PRAC19 TICE EXPENSES.

20 (a) DEVELOPMENT.—

21 (1) IN GENERAL.—The Secretary of Health and

22 Human Services shall develop a methodology for im23 plementing in 1997 a resource-based system for de24 termining practice expense relative value units for

25 each physician’s service. The methodology utilized
804

•S 2357

1 shall recognize the staff, equipment, and supplies

2 used in the provision of various medical and surgical

3 services in various settings.

4 (2) REPORT.—The Secretary shall transmit a

5 report by January 1, 1996, on the methodology de6 veloped under paragraph (1) to the Committee on

7 Ways and Means and the Committee on Energy and

8 Commerce of the House of Representatives and the

9 Committee on Finance of the Senate. The report

10 shall include a presentation of data utilized in devel11 oping the methodology and an explanation of the

12 methodology.

13 (b) IMPLEMENTATION.—

14 (1) IN GENERAL.—Section 1848(c)(2)(C)(ii)

15 (42 U.S.C. 1395w–4(c)(2)(C)(ii)) is amended—

16 (A) by inserting ‘‘for the service for years

17 before 1997’’ before ‘‘equal to’’,

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

19 subclause (II) and inserting a comma, and

20 (C) by adding after and below subclause

21 (II) the following:

22 ‘‘and for years beginning with 1997 based

23 on the relative practice expense resources

24 involved in furnishing the service.’’.
805

•S 2357

1 (2) CONFORMING AMENDMENT.—Section

2 1848(c)(3)(C)(ii) (42 U.S.C. 1395w–4(c)(3)(C)(ii))

3 is amended by striking ‘‘The practice’’ and inserting

4 ‘‘For years before 1997, the practice’’.

5 (3) APPLICATION OF CERTAIN PROVISIONS.—In

6 implementing the amendment made by paragraph

7 (1)(C), the provisions of clauses (ii)(II) and (iii) of

8 section 1848(c)(2)(B) of the Social Security Act

9 shall apply in the same manner as they apply to ad10 justments under clause (ii)(I) of such section.

11 SEC. 4215. PAYMENTS FOR DURABLE MEDICAL EQUIPMENT.

12 (a) IN GENERAL.—Subparagraph (B) of section

13 1834(a)(14) (42 U.S.C. 1395m(a)(14)) is amended by

14 striking the period at the end and inserting ‘‘, except that

15 such percentage increase shall—

16 ‘‘(i) be reduced by 2 percentage points

17 for each of years 1995 and 1996;

18 ‘‘(ii) be reduced by 1.5 percentage

19 points for 1997;

20 ‘‘(iii) be reduced by 2 percentage

21 points for 1998; and

22 ‘‘(iv) be reduced by 1 percentage

23 points for 1999.’’.
806

•S 2357

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

2 this section shall be effective on the date of the enactment

3 of this Act.

4 SEC. 4216. GENERAL PART B PREMIUM.

5 Section 1839(e) (42 U.S.C. 1395r(e)) is amended—

6 (1) in paragraph (1)(A), by striking ‘‘and prior

7 to January 1999’’; and

8 (2) in paragraph (2), by striking ‘‘prior to Jan9 uary 1998’’.

10 PART 4—PROVISIONS RELATING TO PARTS A

11 AND B

12 SEC. 4301. MEDICARE SECONDARY PAYER CHANGES.

13 (a) EXTENSION OF DATA MATCH.—

14 (1) Section 1862(b)(5)(C) (42 U.S.C.

15 1395y(b)(5)(C)) is amended by striking clause (iii).

16 (2) Section 6103(l)(12) of the Internal Revenue

17 Code of 1986 is amended by striking subparagraph

18 (F).

19 (b) REPEAL OF SUNSET ON APPLICATION TO DIS20 ABLED EMPLOYEES OF EMPLOYERS WITH MORE THAN

21 100 EMPLOYEES.—Section 1862(b)(1)(B)(iii) (42 U.S.C.

22 1395y(b)(1)(B)(iii)) is amended—

23 (1) in the heading, by striking ‘‘SUNSET’’ and

24 inserting ‘‘EFFECTIVE DATE’’; and

25 (2) by striking ‘‘, and before October 1, 1998’’.
807

•S 2357

1 (c) EXTENSION OF PERIOD FOR END STAGE RENAL

2 DISEASE BENEFICIARIES.—Section 1862(b)(1)(C) (42

3 U.S.C. 1395y(b)(1)(C)) is amended in the second sentence

4 by striking ‘‘and on or before October 1, 1998,’’.

5 SEC. 4302. INCREASE IN MEDICARE SECONDARY PAYER

6 COVERAGE FOR END STAGE RENAL DISEASE

7 SERVICES TO 24 MONTHS.

8 (a) IN GENERAL.—Section 1862(b)(1)(C) (42 U.S.C.

9 1395y(b)(1)(C)), as amended by section 4301(c), is

10 amended by striking the last sentence and inserting: ‘‘Ef11 fective for items and services furnished on or after Janu12 ary 1, 1996 (with respect to periods beginning on or after

13 July 1, 1994), this subparagraph shall be applied by sub14 stituting ‘24-month’ for ‘12-month’ each place it ap15 pears.’’.

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

17 subsection (a) shall apply to items and services provided

18 on or after January 1, 1996.

19 SEC. 4303. EXPANSION OF CENTERS OF EXCELLENCE.

20 (a) IN GENERAL.—The Secretary of Health and

21 Human Services shall use a competitive process to con22 tract with centers of excellence for cataract surgery, coro23 nary artery by-pass surgery, and such other services as

24 the Secretary determines to be appropriate. Payment

25 under title XVIII of the Social Security Act will be made
808

•S 2357

1 for services subject to such contracts on the basis of nego2 tiated or all-inclusive rates as follows:

3 (1) The center shall cover services provided in

4 an urban area (as defined in section 1886(d)(2)(D)

5 of the Social Security Act) for years beginning with

6 fiscal year 1995.

7 (2) The amount of payment made by the Sec8 retary to the center under title XVIII of the Social

9 Security Act for services covered under the contract

10 shall be less than the aggregate amount of the pay11 ments that the Secretary would have made to the

12 center for such services had the contract not been in

13 effect.

14 (3) The Secretary shall make payments to the

15 center on such a basis for the following services fur16 nished to individuals entitled to benefits under such

17 title:

18 (A) Facility, professional, and related serv19 ices relating to cataract surgery.

20 (B) Coronary artery bypass surgery and

21 related services.

22 (C) Such other services as the Secretary

23 and the center may agree to cover under the

24 contract.
809

•S 2357

1 (b) REBATE OF PORTION OF SAVINGS.—In the case

2 of any services provided under a contract conducted under

3 subsection (a), the Secretary shall make a payment to

4 each individual to whom such services are furnished (at

5 such time and in such manner as the Secretary may pro6 vide) in an amount equal to 10 percent of the amount by

7 which—

8 (1) the amount of payment that would have

9 been made by the Secretary under title XVIII of the

10 Social Security Act to the center for such services if

11 the services had not been provided under the con12 tract, exceeds

13 (2) the amount of payment made by the Sec14 retary under such title to the center for such serv15 ices.

16 SEC. 4304. REDUCTION IN ROUTINE COST LIMITS FOR

17 HOME HEALTH SERVICES.

18 (a) REDUCTION IN UPDATE TO MAINTAIN FREEZE

19 IN 1996.—Section 1861(v)(1)(L)(i) (42 U.S.C.

20 1395x(v)(1)(L)(i)) is amended—

21 (1) in subclause (II), by striking ‘‘or’’ at the

22 end;

23 (2) in subclause (III), by striking ‘‘112 per24 cent,’’ and inserting ‘‘and before July 1, 1996, 112

25 percent, or’’; and
810

•S 2357

1 (3) by inserting after subclause (III) the follow2 ing new subclause:

3 ‘‘(IV) July 1, 1996, 100 percent (adjusted by

4 such amount as the Secretary determines to be nec5 essary to preserve the savings resulting from the en6 actment of section 13564(a)(1) of the Omnibus

7 Budget Reconciliation Act of 1993),’’.

8 (b) BASING LIMITS IN SUBSEQUENT YEARS ON ME9 DIAN OF COSTS.—

10 (1) IN GENERAL.—Section 1861(v)(1)(L)(i) (42

11 U.S.C. 1395x(v)(1)(L)(i)), as amended by subsection

12 (a), is amended in the matter following subclause

13 (IV) by striking ‘‘the mean’’ and inserting ‘‘the me14 dian’’.

15 (2) ADJUSTMENT TO LIMITS.—Section

16 1861(v)(1)(L)(ii) (42 U.S.C. 1395x(v)(1)(L)(ii)) is

17 amended by adding at the end the following new

18 sentence: ‘‘The effect of the amendments made by

19 656(b) of the Health Security Act shall not be con20 sidered by the Secretary in making adjustments pur21 suant to this clause.’’.

22 (3) EFFECTIVE DATE.—The amendments made

23 by paragraphs (1) and (2) shall apply to cost report24 ing periods beginning on or after July 1, 1997.
811

•S 2357

1 SEC. 4305. IMPOSITION OF 20 PERCENT COINSURANCE ON

2 HOME HEALTH SERVICES UNDER MEDICARE.

3 (a) PART A.—Section 1813(a) (42 U.S.C. 1395e(a))

4 is amended by adding at the end the following new para5 graph:

6 ‘‘(5) The amount payable for a home health service

7 furnished to an individual under this part shall be reduced

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

9 of all the per visit costs for such service furnished under

10 this title determined under section 1861(v)(1)(L) (as de11 termined by the Secretary on a prospective basis for serv12 ices furnished during a calendar year).’’.

13 (b) PART B.—Section 1833(a)(2) (42 U.S.C.

14 1395l(a)(2)), as amended by section 4108(c)(2), is amend15 ed—

16 (1) in subparagraph (A), by striking ‘‘to home

17 health services,’’ and by striking the comma after

18 ‘‘opinion)’’;

19 (2) in subparagraph (E), by striking ‘‘and’’ at

20 the end;

21 (3) in subparagraph (F), by striking the semi22 colon at the end and inserting ‘‘; and’’; and

23 (4) by adding at the end the following new sub24 paragraph:

25 ‘‘(G) with respect to any home health serv26 ice—
812

•S 2357

1 ‘‘(i) the lesser of —

2 ‘‘(I) the reasonable cost of such

3 service, as determined under section

4 1861(v), or

5 ‘‘(II) the customary charges with

6 respect to such service,

7 less the amount a provider may charge as

8 described in clause (ii) of section

9 1866(a)(2)(A), or

10 ‘‘(ii) if such service is furnished by a

11 public provider of services, or by another

12 provider which demonstrates to the satis13 faction of the Secretary that a significant

14 portion of its patients are low-income (and

15 requests that payment be made under this

16 clause), free of charge or at nominal

17 charges to the public, the amount deter18 mined in accordance with section

19 1814(b)(2),

20 less a copayment amount equal to 20 percent of

21 the average of all per visit costs for such service

22 furnished under this title determined under sec23 tion 1861(v)(1)(L) (as determined by the Sec24 retary on a prospective basis for services fur25 nished during a calendar year);’’.
813

•S 2357

1 (c) PROVIDER CHARGES.—Section 1866(a)(2)(A)(i)

2 (42 U.S.C. 1395cc(a)(2)(A)(i)) is amended—

3 (1) by striking ‘‘deduction or coinsurance’’ and

4 inserting ‘‘deduction, coinsurance, or copayment’’;

5 and

6 (2) by striking ‘‘or (a)(4)’’ and inserting

7 ‘‘(a)(4), or (a)(5)’’.

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

9 this section shall apply to services furnished on or after

10 July 1, 1995.

11 SEC. 4306. TERMINATION OF GRADUATE MEDICAL EDU12 CATION PAYMENTS.

13 (a) IN GENERAL.—Section 1886(h) (42 U.S.C.

14 1395ww(h)) is amended by adding at the end the following

15 new paragraph:

16 ‘‘(6) TERMINATION OF PAYMENTS ATTRIB17 UTABLE TO COSTS OF TRAINING PHYSICIANS.—Not18 withstanding any other provision of this section or

19 section 1861(v), no payment may be made under

20 this title for direct graduate medical education costs

21 attributable to an approved medical residency train22 ing program for any cost reporting period (or por23 tion thereof) beginning on or after January 1,

24 1997.’’.
814

•S 2357

1 (b) PROHIBITION AGAINST RECOGNITION OF

2 COSTS.—Section 1861(v)(1) (42 U.S.C. 1395x(v)(1)), as

3 amended by section 4102(b), is amended by adding at the

4 end the following new subparagraph:

5 ‘‘(U) Such regulations shall not include any provision

6 for specific recognition of the costs of graduate medical

7 education for hospitals for any cost reporting period (or

8 portion thereof) beginning on or after January 1, 1997.

9 Nothing in the previous sentence shall be construed to af10 fect in any way payments to hospitals for the costs of any

11 approved educational activities that are not described in

12 such sentence.’’.

13 SEC. 4307. MEDICARE SELECT.

14 (a) AMENDMENTS TO PROVISIONS RELATING TO

15 MEDICARE SELECT POLICIES.—

16 (1) PERMITTING MEDICARE SELECT POLICIES

17 IN ALL STATES.—Subsection (c) of section 4358 of

18 the Omnibus Budget Reconciliation Act of 1990 is

19 hereby repealed.

20 (2) REQUIREMENTS OF MEDICARE SELECT

21 POLICIES.—Section 1882(t)(1) (42 U.S.C.

22 1395ss(t)(1)) is amended to read as follows:

23 ‘‘(1)(A) If a medicare supplemental policy meets the

24 requirements of the 1991 NAIC Model Regulation or 1991
815

•S 2357

1 Federal Regulation and otherwise complies with the re2 quirements of this section except that—

3 ‘‘(i) the benefits under such policy are re4 stricted to items and services furnished by certain

5 entities (or reduced benefits are provided when items

6 or services are furnished by other entities), and

7 ‘‘(ii) in the case of a policy described in sub8 paragraph (C)(i)—

9 ‘‘(I) the benefits under such policy are not

10 one of the groups or packages of benefits de11 scribed in subsection (p)(2)(A),

12 ‘‘(II) except for nominal copayments im13 posed for services covered under part B of this

14 title, such benefits include at least the core

15 group of basic benefits described in subsection

16 (p)(2)(B), and

17 ‘‘(III) an enrollee’s liability under such pol18 icy for physician’s services covered under part

19 B of this title is limited to the nominal

20 copayments described in subclause (II),

21 the policy shall nevertheless be treated as meeting

22 those requirements if the policy meets the require23 ments of subparagraph (B).

24 ‘‘(B) A policy meets the requirements of this sub25 paragraph if—
816

•S 2357

1 ‘‘(i) full benefits are provided for items and

2 services furnished through a network of entities

3 which have entered into contracts or agreements

4 with the issuer of the policy,

5 ‘‘(ii) full benefits are provided for items and

6 services furnished by other entities if the services are

7 medically necessary and immediately required be8 cause of an unforeseen illness, injury, or condition

9 and it is not reasonable given the circumstances to

10 obtain the services through the network,

11 ‘‘(iii) the network offers sufficient access,

12 ‘‘(iv) the issuer of the policy has arrangements

13 for an ongoing quality assurance program for items

14 and services furnished through the network,

15 ‘‘(v)(I) the issuer of the policy provides to each

16 enrollee at the time of enrollment an explanation

17 of—

18 ‘‘(aa) the restrictions on payment under

19 the policy for services furnished other than by

20 or through the network,

21 ‘‘(bb) out of area coverage under the pol22 icy,

23 ‘‘(cc) the policy’s coverage of emergency

24 services and urgently needed care, and
817

•S 2357

1 ‘‘(dd) the availability of a policy through

2 the entity that meets the 1991 Model NAIC

3 Regulation or 1991 Federal Regulation without

4 regard to this subsection and the premium

5 charged for such policy, and

6 ‘‘(II) each enrollee prior to enrollment acknowl7 edges receipt of the explanation provided under

8 subclause (I), and

9 ‘‘(vi) the issuer of the policy makes available to

10 individuals, in addition to the policy described in this

11 subsection, any policy (otherwise offered by the is12 suer to individuals in the State) that meets the 1991

13 Model NAIC Regulation or 1991 Federal Regulation

14 and other requirements of this section without re15 gard to this subsection.

16 ‘‘(C)(i) A policy described in this subparagraph—

17 ‘‘(I) is offered by an eligible organization (as

18 defined in section 1876(b)),

19 ‘‘(II) is not a policy or plan providing benefits

20 pursuant to a contract under section 1876 or an ap21 proved demonstration project described in section

22 603(c) of the Social Security Amendments of 1983,

23 section 2355 of the Deficit Reduction Act of 1984,

24 or section 9412(b) of the Omnibus Budget Reconcili25 ation Act of 1986, and
818

•S 2357

1 ‘‘(III) provides benefits which, when combined

2 with benefits which are available under this title, are

3 substantially similar to benefits under policies of4 fered to individuals who are not entitled to benefits

5 under this title.

6 ‘‘(ii) In making a determination under subclause (III)

7 of clause (i) as to whether certain benefits are substan8 tially similar, there shall not be taken into account, except

9 in the case of preventive services, benefits provided under

10 policies offered to individuals who are not entitled to bene11 fits under this title which are in addition to the benefits

12 covered by this title and which are benefits an entity must

13 provide in order to meet the definition of an eligible orga14 nization under section 1876(b)(1).’’.

15 (b) RENEWABILITY OF MEDICARE SELECT POLI16 CIES.—Section 1882(q)(1) (42 U.S.C. 1395ss(q)(1)) is

17 amended—

18 (1) by striking ‘‘(1) Each’’ and inserting

19 ‘‘(1)(A) Except as provided in subparagraph (B),

20 each’’;

21 (2) by redesignating subparagraphs (A) and

22 (B) as clauses (i) and (ii), respectively; and

23 (3) by adding at the end the following new sub24 paragraph:
819

•S 2357

1 ‘‘(B)(i) In the case of a policy that meets the

2 requirements of subsection (t), an issuer may cancel

3 or nonrenew such policy with respect to an individ4 ual who leaves the service area of such policy; except

5 that, if such individual moves to a geographic area

6 where such issuer, or where an affiliate of such is7 suer, is issuing medicare supplemental policies, such

8 individual must be permitted to enroll in any medi9 care supplemental policy offered by such issuer or

10 affiliate that provides benefits comparable to or less

11 than the benefits provided in the policy being can12 celed or nonrenewed. An individual whose coverage

13 is canceled or nonrenewed under this subparagraph

14 shall, as part of the notice of termination or

15 nonrenewal, be notified of the right to enroll in other

16 medicare supplemental policies offered by the issuer

17 or its affiliates.

18 ‘‘(ii) For purposes of this subparagraph, the

19 term ‘affiliate’ shall have the meaning given such

20 term by the 1991 NAIC Model Regulation.’’.

21 (c) CIVIL PENALTY.—Section 1882(t)(2) (42 U.S.C.

22 1395ss(t)(2)) is amended—

23 (1) by striking ‘‘(2)’’ and inserting ‘‘(2)(A)’’;
820

•S 2357

1 (2) by redesignating subparagraphs (A), (B),

2 (C), and (D) as clauses (i), (ii), (iii), and (iv), re3 spectively;

4 (3) in clause (iv), as redesignated—

5 (A) by striking ‘‘paragraph (1)(E)(i)’’ and

6 inserting ‘‘paragraph (1)(B)(v)(I); and

7 (B) by striking ‘‘paragraph (1)(E)(ii)’’ and

8 inserting ‘‘paragraph (1)(B)(v)(II)’’;

9 (4) by striking ‘‘the previous sentence’’ and in10 serting ‘‘this subparagraph’’; and

11 (5) by adding at the end the following new sub12 paragraph:

13 ‘‘(B) If the Secretary determines that an issuer of

14 a policy approved under paragraph (1) has made a mis15 representation to the Secretary or has provided the Sec16 retary with false information regarding such policy, the

17 issuer is subject to a civil money penalty in an amount

18 not to exceed $100,000 for each such determination. The

19 provisions of section 1128A (other than the first sentence

20 of subsection (a) and other than subsection (b)) shall

21 apply to a civil money penalty under this subparagraph

22 in the same manner as such provisions apply to a penalty

23 or proceeding under section 1128A(a).’’.

24 (d) EFFECTIVE DATES.—
821

•S 2357

1 (1) NAIC STANDARDS.—If, within 9 months

2 after the date of the enactment of this Act, the Na3 tional Association of Insurance Commissioners

4 (hereafter in this subsection referred to as the

5 ‘‘NAIC’’) makes changes in the 1991 NAIC Model

6 Regulation (as defined in section 1882(p)(1)(A) of

7 the Social Security Act) to incorporate the additional

8 requirements imposed by the amendments made by

9 this section, section 1882(g)(2)(A) of such Act shall

10 be applied in each State, effective for policies issued

11 to policyholders on and after the date specified in

12 paragraph (3), as if the reference to the Model Reg13 ulation adopted on June 6, 1979, were a reference

14 to the 1991 NAIC Model Regulation (as so defined)

15 as changed under this paragraph (such changed

16 Regulation referred to in this subsection as the

17 ‘‘1995 NAIC Model Regulation’’).

18 (2) SECRETARY STANDARDS.—If the NAIC

19 does not make changes in the 1991 NAIC Model

20 Regulation (as so defined) within the 9-month period

21 specified in paragraph (1), the Secretary of Health

22 and Human Services (hereafter in this subsection re23 ferred to as the ‘‘Secretary’’) shall promulgate a reg24 ulation and section 1882(g)(2)(A) of the Social Se25 curity Act shall be applied in each State, effective
822

•S 2357

1 for policies issued to policyholders on and after the

2 date specified in paragraph (3), as if the reference

3 to the Model Regulation adopted on June 6, 1979,

4 were a reference to the 1991 NAIC Model Regula5 tion (as so defined) as changed by the Secretary

6 under this paragraph (such changed Regulation re7 ferred to in this subsection as the ‘‘1995 Federal

8 Regulation’’).

9 (3) DATE SPECIFIED.—

10 (A) IN GENERAL.—Subject to subpara11 graph (B), the date specified in this paragraph

12 for a State is the earlier of—

13 (i) the date the State adopts the 1995

14 NAIC Model Regulation or the 1995 Fed15 eral Regulation, or

16 (ii) 1 year after the date the NAIC or

17 the Secretary first adopts such regulations.

18 (B) ADDITIONAL LEGISLATIVE ACTION RE19 QUIRED.—In the case of a State which the Sec20 retary identifies, in consultation with the NAIC,

21 as—

22 (i) requiring State legislation (other

23 than legislation appropriating funds) in

24 order for medicare supplemental policies to
823

•S 2357

1 meet the 1995 NAIC Model Regulation or

2 the 1995 Federal Regulation, but

3 (ii) having a legislature which is not

4 scheduled to meet in 1995 in a legislative

5 session in which such legislation may be

6 considered,

7 the date specified in this paragraph is the first

8 day of the first calendar quarter beginning after

9 the close of the first legislative session of the

10 State legislature that begins on or after Janu11 ary 1, 1996. For purposes of the previous sen12 tence, in the case of a State that has a 2-year

13 legislative session, each year of such session

14 shall be deemed to be a separate regular session

15 of the State legislature.

16 Subtitle B—Medicaid Program

17 PART 1—INTEGRATION OF CERTAIN MEDICAID

18 ELIGIBLES INTO REFORMED HEALTH CARE

19 SYSTEM

20 SEC. 4601. LIMITING COVERAGE UNDER MEDICAID OF

21 ITEMS AND SERVICES COVERED UNDER

22 STANDARD BENEFIT PACKAGE.

23 (a) IN GENERAL.—Title XIX (42 U.S.C. 1396 et

24 seq.) is amended by redesignating section 1931 as section
824

•S 2357

1 1932 and by inserting after section 1930 the following new

2 section:

3 ‘‘TREATMENT OF ITEMS AND SERVICES IN THE

4 STANDARD BENEFIT PACKAGE

5 ‘‘SEC. 1931. (a) ITEMS AND SERVICES COVERED

6 UNDER STANDARD BENEFIT PACKAGE.—Except as pro7 vided in subsection (c), a State plan under this part shall

8 not provide medical assistance consisting of payment for

9 items and services in the standard benefit package de10 scribed in section 1201(a) of the Health Security Act.

11 ‘‘(b) MEDICAL ASSISTANCE NOT AFFECTED.—Sub12 section (a) shall not be construed as—

13 ‘‘(1) affecting the eligibility of any individual

14 for medical assistance consisting of payment for

15 items and services not covered under the standard

16 benefits package;

17 ‘‘(2) affecting the amount, duration, and scope

18 of any medical assistance consisting of payment for

19 the items and services described in paragraph (1); or

20 ‘‘(3) prohibiting payment of medical assistance

21 for items and services covered under the standard

22 benefits package to the extent that the items and

23 services under this part exceed the items and serv24 ices covered under such package with respect to

25 amount, duration, and scope.
825

•S 2357

1 ‘‘(c) EXCEPTIONS.—Subsection (a) shall not affect

2 the provision of medical assistance consisting of payment

3 for items and services in the standard benefits package—

4 ‘‘(1) which are provided to—

5 ‘‘(A) an individual eligible for medical as6 sistance under the State plan who is not a pre7 mium subsidy eligible individual (as defined in

8 6002(a)(2) of the Health Security Act);

9 ‘‘(B) an individual with respect to whom

10 supplemental security income benefits are being

11 paid under title XVI; and

12 ‘‘(C) an individual who is eligible for bene13 fits under part A of title XVIII; or

14 ‘‘(2) which consist of emergency services to cer15 tain aliens under section 1903(v)(2).

16 ‘‘(d) STATE MAINTENANCE OF EFFORT.—

17 ‘‘(1) IN GENERAL.—

18 ‘‘(A) REDUCTION IN QUARTERLY PAY19 MENTS.—For any calendar quarter in an appli20 cable year (as defined in subparagraph (B)),

21 the amount otherwise payable to a State under

22 section 1903 for the quarter shall be reduced by

23 the State maintenance of effort amount for the

24 quarter determined under paragraph (2).
826

•S 2357

1 ‘‘(B) APPLICABLE YEAR.—For purposes of

2 this paragraph, the term ‘applicable year’

3 means 1997 and any succeeding year.

4 ‘‘(2) MAINTENANCE OF EFFORT AMOUNT.—

5 ‘‘(A) IN GENERAL.—The maintenance of

6 effort amount for a State for a calendar quarter

7 in an applicable year shall be equal to 25 per8 cent of the sum of—

9 ‘‘(i) the State’s AFDC eligibles pay10 ment amount for the year determined

11 under paragraph (3); and

12 ‘‘(ii) the State’s non-cash eligibles

13 payment amount for the year determined

14 under paragraph (4).

15 ‘‘(3) STATE AFDC ELIGIBLES PAYMENT

16 AMOUNT.—

17 ‘‘(A) IN GENERAL.—The AFDC eligibles

18 payment amount for a State for a year is an

19 amount equal to the product of—

20 ‘‘(i) the adjusted State per capita

21 amount for the year determined under sub22 paragraph (B); multiplied by

23 ‘‘(ii) the number of AFDC eligible in24 dividuals receiving premium assistance

25 under section 6002 of the Health Security
827

•S 2357

1 Act during the year (as estimated by the

2 Secretary).

3 ‘‘(B) ADJUSTED STATE PER CAPITA

4 AMOUNT.—

5 ‘‘(i) IN GENERAL.—The adjusted

6 State per capita amount for a year is the

7 base State per capita amount determined

8 under clause (ii) updated by the percentage

9 change in per capita health expenditures

10 index (as described in paragraph (5)(B))

11 during the period beginning on October 1,

12 1994, and ending on December 31 of the

13 year preceding the applicable year (as de14 termined by the Secretary).

15 ‘‘(ii) BASE STATE PER CAPITA

16 AMOUNT.—The base per capita amount for

17 a State shall be an amount, as determined

18 by the Secretary, equal to the quotient

19 of—

20 ‘‘(I) the total expenditures from

21 State funds made under the State

22 plan during fiscal year 1994 with re23 spect to medical assistance consisting

24 of items and services of the type in25 cluded in the standard benefit pack-
828

•S 2357

1 age for AFDC eligible individuals; di2 vided by

3 ‘‘(II) the average total number of

4 AFDC eligible individuals who re5 ceived such medical assistance under

6 the State plan in any month during

7 fiscal year 1994.

8 ‘‘(iii) DISPROPORTIONATE SHARE PAY9 MENTS NOT INCLUDED.—In applying

10 clause (ii), payments made under section

11 1923 shall not be counted in the gross

12 amount of payments.

13 ‘‘(C) AFDC ELIGIBLE DEFINED.—For

14 purposes of this paragraph, the term ‘AFDC el15 igible’ means an individual who receives aid or

16 assistance under any plan of the State approved

17 under part A or part E of title IV.

18 ‘‘(4) NON-CASH ELIGIBLES PAYMENT

19 AMOUNT.—

20 ‘‘(A) IN GENERAL.—The non-cash eligibles

21 payment amount for a State for a year is an

22 amount equal to the State’s base payment

23 amount (determined under subparagraph (B))

24 for the applicable year updated by the percent25 age change in the health expenditures index (as
829

•S 2357

1 described in paragraph (5)(A)) and the State

2 population index (as described in paragraph

3 (5)(C)) during the period beginning on October

4 1, 1994, and ending on December 31 of the

5 year preceding the applicable year (as deter6 mined by the Secretary).

7 ‘‘(B) STATE BASE PAYMENT AMOUNT.—

8 ‘‘(i) IN GENERAL.—The base payment

9 amount for a State for an applicable year

10 shall be an amount, as determined by the

11 Secretary, equal to the total expenditures

12 from State funds made under the State

13 plan during fiscal year 1994 with respect

14 to medical assistance consisting of items

15 and services of the type included in the

16 standard benefit package for non-cash eli17 gible individuals who would not have re18 ceived such medical assistance if the provi19 sions of this section and subtitle A of title

20 VI of the Health Security Act had been in

21 effect in fiscal year 1994.

22 ‘‘(ii) DISPROPORTIONATE SHARE PAY23 MENTS INCLUDED.—In applying clause (i),

24 payments made under section 1923 shall
830

•S 2357

1 be counted in the gross amount of pay2 ments.

3 ‘‘(C) NON-CASH ELIGIBLE DEFINED.—For

4 purposes of this paragraph, the term ‘non-cash

5 eligible’ means any individual who received

6 medical assistance under the State plan during

7 fiscal year 1994 other than an AFDC eligible

8 individual or an individual described in sub9 section (b).

10 ‘‘(5) INDEXES.—

11 ‘‘(A) HEALTH EXPENDITURES INDEX.—

12 The Secretary shall establish a health expendi13 tures index which measures the change in na14 tional health expenditures from year to year.

15 ‘‘(B) PER CAPITA HEALTH EXPENDITURES

16 INDEX.—The Secretary shall establish a per

17 capita health expenditures index which meas18 ures the change in national per capita health

19 expenditures from year to year.

20 ‘‘(C) STATE POPULATION INDEX.—The

21 Secretary shall establish a State population

22 index which measures the change in the number

23 of individuals residing in a State from year to

24 year.’’.
831

•S 2357

1 (b) NO FEDERAL FINANCIAL PARTICIPATION.—Sec2 tion 1903(i) (42 U.S.C. 1396b(i)) is amended—

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

4 (14),

5 (2) by striking the period at the end of para6 graph (15) and inserting ‘‘; or’’, and

7 (3) by inserting after paragraph (15) the fol8 lowing new paragraph:

9 ‘‘(16) with respect to items and services covered

10 under the standard benefit package described in sec11 tion 1201(a) of the Health Security Act for individ12 uals to whom section 1931(a) applies.’’.

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

14 this section shall apply with respect to items or services

15 furnished in a State on or after January 1, 1997.

16 PART 2—COORDINATED CARE SERVICES FOR

17 DISABLED MEDICAID ELIGIBLES

18 SEC. 4605. COORDINATED CARE SERVICES FOR DISABLED

19 MEDICAID ELIGIBLES.

20 (a) STATE EXPENDITURES LIMITED TO CERTIFIED

21 HEALTH PLANS.—Section 1903(m) (42 U.S.C. 1396b) is

22 amended by adding at the end the following new para23 graph:

24 ‘‘(7) No payment shall be made under this part

25 to a State with respect to expenditures incurred by
832

•S 2357

1 the State for payment for services provided by an

2 entity with a contract under this subsection unless

3 such entity is a standard health plan (as defined in

4 section 1011(2)(B) of the Health Security Act).’’.

5 (b) MODIFICATION TO 75/25 RULE.—Section

6 1903(m)(2)(A)(ii) (42 U.S.C. 1396b(m)(2)(A)(ii)) is

7 amended by striking ‘‘75 percent’’ and inserting ‘‘50 per8 cent’’.

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

10 this section shall become effective with respect to pay11 ments for calendar quarters beginning on or after January

12 1, 1997.

13 PART 3—PAYMENTS TO HOSPITALS SERVING

14 VULNERABLE POPULATIONS

15 SEC. 4611. REPLACEMENT OF DSH PAYMENT PROVISIONS

16 WITH PROVISIONS RELATING TO PAYMENTS

17 TO HOSPITALS SERVING VULNERABLE POPU18 LATIONS.

19 (a) AMENDMENTS TO PROVISIONS REQUIRING

20 STATES TO MAKE DSH PAYMENT ADJUSTMENTS.—

21 (1) ADJUSTMENTS TO NATIONAL DSH PAYMENT

22 LIMIT.—Section 1923(f)(1)(B) (42 U.S.C. 1396r–

23 4(f)(1)(B)) is amended to read as follows:

24 ‘‘(B) NATIONAL DSH PAYMENT LIMIT.—
833

•S 2357

1 ‘‘(i) IN GENERAL.—Except as pro2 vided in clause (ii), the national DSH pay3 ment limit for a fiscal year is equal to 12

4 percent of the total amount of expenditures

5 under the State plans under this part for

6 medical assistance during the fiscal year.

7 ‘‘(ii) REDUCTION IN LIMIT.—For fis8 cal years ending in a calendar year during

9 which the percentage of individuals covered

10 by insurance, as determined by the Na11 tional Health Care Cost and Coverage

12 Commission established under section

13 10001 of the Health Security Act—

14 ‘‘(I) equals or exceeds 85 percent

15 but is less than 88 percent, ‘10 per16 cent’ shall be substituted for ‘12 per17 cent’ in clause (i);

18 ‘‘(II) equals or exceeds 88 per19 cent but is less than 90 percent, ‘8

20 percent’ shall be substituted for ‘12

21 percent’ in clause (i);

22 ‘‘(III) equals or exceeds 90 per23 cent but is less than 92 percent, ‘6

24 percent’ shall be substituted for ‘12

25 percent’ in clause (i); and
834

•S 2357

1 ‘‘(IV) equals or exceeds 92 per2 cent, ‘4 percent’ shall be substituted

3 for ‘12 percent’ in clause (i).

4 (2) ADJUSTMENTS TO STATE ALLOTMENT LIM5 ITS.—Section 1923(f)(2)(B) (42 U.S.C. 1396r–

6 4(f)(2)(B)) is amended to read as follows:

7 ‘‘(B) EXCEPTIONS.—

8 ‘‘(i) IN GENERAL.—Except as pro9 vided in clause (ii), a State DSH allotment

10 under subparagraph (A) for a fiscal year

11 shall not exceed 12 percent of the total

12 amount of expenditures under the State

13 plan for medical assistance during the fis14 cal year.

15 ‘‘(ii) REDUCTION IN LIMIT.—For fis16 cal years ending in a calendar year during

17 which the percentage of individuals covered

18 by insurance, as determined by the Na19 tional Health Care Cost and Coverage

20 Commission established under section

21 10001 of the Health Security Act—

22 ‘‘(I) equals or exceeds 85 percent

23 but is less than 88 percent, ‘10 per24 cent’ shall be substituted for ‘12 per25 cent’ in clause (i);
835

•S 2357

1 ‘‘(II) equals or exceeds 88 per2 cent but is less than 90 percent, ‘8

3 percent’ shall be substituted for ‘12

4 percent’ in clause (i);

5 ‘‘(III) equals or exceeds 90 per6 cent but is less than 92 percent, ‘6

7 percent’ shall be substituted for ‘12

8 percent’ in clause (i); and

9 ‘‘(IV) equals or exceeds 92 per10 cent, ‘4 percent’ shall be substituted

11 for ‘12 percent’ in clause (i).

12 (3) ELIMINATION OF HIGH DSH STATES AND

13 STATE SUPPLEMENTAL AMOUNTS.—

14 (A) IN GENERAL.—Section 1923(f)(2)(A)

15 (42 U.S.C. 1396r–4(f)(2)(A)) is amended to

16 read as follows:

17 ‘‘(A) IN GENERAL.—Subject to subpara18 graph (B), the State DSH allotment for a fiscal

19 year is equal to the State DSH allotment for

20 the previous fiscal year increased by the State

21 growth factor (as defined in paragraph (3)(B))

22 for the fiscal year.’’.

23 (B) CONFORMING AMENDMENTS.—(i) Sec24 tion 1923(f) (42 U.S.C. 1396r–4(f)) is amended
836

•S 2357

1 by striking paragraph (3) and redesignating

2 paragraph (4) as paragraph (3).

3 (ii) Section 1923(f)(3) (42 U.S.C. 1396r–

4 4(f)(3)), as redesignated by clause (i), is

5 amended by striking subparagraphs (A) and

6 (C) and redesignating subparagraphs (B), (D),

7 and (E) as subparagraphs (A), (B), and (C).

8 (iii) Section 1923(f)(3)(B) (42 U.S.C.

9 1396r–4(f)(3)(B)), as redesignated by clauses

10 (i) and (ii), is amended to read as follows:

11 ‘‘(B) STATE GROWTH AMOUNT.—The term

12 ‘State growth amount’ means, with respect to a

13 State for a fiscal year, the product of the State

14 growth factor and the State DSH payment

15 limit for the previous fiscal year.’’.

16 (iv) Section 1923(f)(1)(A) (42 U.S.C.

17 1396r–4(f)(1)(A) is amended by striking ‘‘(as

18 defined in paragraph (4)(B))’’ and inserting

19 ‘‘(as defined in paragraph (3)(A))’’.

20 (3) TERMINATION OF REQUIREMENT ON

21 STATES TO MAKE DSH PAYMENT ADJUSTMENTS.—

22 Section 1923 (42 U.S.C. 1396r–4) is amended by

23 adding at the end the following new subsection:

24 ‘‘(h) TERMINATION OF REQUIREMENT TO MAKE

25 PAYMENT ADJUSTMENTS.—
837

•S 2357

1 ‘‘(1) IN GENERAL.—Any requirement imposed

2 by this section on a State to increase the rate or

3 amount of payment for inpatient hospital services

4 provided by a hospital which serves a disproportion5 ate number of low income patients with special

6 needs shall terminate in the year described in para7 graph (2).

8 ‘‘(2) YEAR DESCRIBED.—The year described in

9 this paragraph is the first year beginning after the

10 year during which the percentage of individuals cov11 ered by insurance, as determined by the National

12 Health Care Cost and Coverage Commission estab13 lished under section 100001 of the Health Security

14 Act, equals or exceeds 92 percent.’’.

15 (4) NO FEDERAL FINANCIAL PARTICIPATION.—

16 Section 1903(i) (42 U.S.C. 1396b(i)), as amended

17 by section 4601(b), is amended—

18 (A) by striking ‘‘or’’ at the end of para19 graph (15),

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

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

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

23 following new paragraph:

24 ‘‘(17) during or after the year described in sec25 tion 1923(h)(2) with respect to any payment made
838

•S 2357

1 by a State to a hospital which serves a dispropor2 tionate number of low income patients with special

3 needs that is in excess of the payment otherwise re4 quired under this part.’’.

5 (5) EFFECTIVE DATE.—The amendments made

6 by this section shall be effective for calendar quar7 ters beginning on or after January 1, 1997.

8 (b) PAYMENTS TO HOSPITALS SERVING VULNER9 ABLE POPULATIONS.—Title XIX (42 U.S.C. 1396 et seq.)

10 is amended by adding at the end the following new part:

11 ‘‘PART B—PAYMENTS TO HOSPITALS SERVING

12 VULNERABLE POPULATIONS

13 ‘‘SEC. 1951. PAYMENTS TO HOSPITALS.

14 ‘‘(a) ENTITLEMENT STATUS.—The Secretary shall

15 make payments in accordance with this part to eligible

16 hospitals described in section 1952. The preceding sen17 tence constitutes budget authority in advance of appro18 priations Acts and represents the obligation of the Federal

19 Government to provide funding for such payments in the

20 amounts, and for the fiscal years, specified in subsection

21 (b).

22 ‘‘(b) AMOUNT OF ENTITLEMENT.—For purposes of

23 subsection (a), the amounts and fiscal years specified in

24 this subsection are (in the aggregate for all eligible hos25 pitals) $2,500,000,000 for the first applicable fiscal year
839

•S 2357

1 (as defined in section 1954) and for each subsequent fiscal

2 year.

3 ‘‘(c) PAYMENTS MADE ON QUARTERLY BASIS.—Pay4 ments to an eligible hospital under this section for a year

5 shall be made on a quarterly basis during the year.

6 ‘‘SEC. 1952. IDENTIFICATION OF ELIGIBLE HOSPITALS.

7 ‘‘(a) HOSPITALS IN PARTICIPATING STATES.—In

8 order to be an eligible hospital under this part, a hospital

9 must be located in a State that is a participating State

10 under title I of the Health Security Act.

11 ‘‘(b) STATE IDENTIFICATION.—In accordance with

12 the criteria described in subsection (c) and such proce13 dures as the Secretary may require, each State shall iden14 tify the hospitals in the State that meet such criteria and

15 provide the Secretary with a list of such hospitals.

16 ‘‘(c) CRITERIA FOR ELIGIBILITY.—A hospital meets

17 the criteria described in this subsection if the hospital’s

18 low-income utilization rate for the base year under section

19 1923(b)(3) (as such section is in effect on the day before

20 the date of the enactment of this part) is not less than

21 25 percent.

22 ‘‘SEC. 1953. AMOUNT OF PAYMENTS.

23 ‘‘(a) IN GENERAL.—The total amount available for

24 payments under this part in a year shall be allocated to
840

•S 2357

1 hospitals for low-income assistance in accordance with this

2 subsection.

3 ‘‘(b) DETERMINATION OF HOSPITAL PAYMENT

4 AMOUNT.—The amount of payment to an eligible hospital

5 during a year shall be the equal to the hospital’s low-in6 come percentage (as defined in subsection (c)) of the total

7 amount available for payments under this part for the

8 year.

9 ‘‘(c) LOW-INCOME PERCENTAGE DEFINED.—

10 ‘‘(1) IN GENERAL.—For purposes of this sec11 tion, an eligible hospital’s ‘low-income percentage’

12 for a year is equal to the amount (expressed as a

13 percentage) of the total low-income days for all eligi14 ble hospitals for the year that are attributable to the

15 hospital.

16 ‘‘(2) LOW-INCOME DAYS DESCRIBED.—For pur17 poses of paragraph (1), an eligible hospital’s low-in18 come days for a year shall be equal to the product

19 of—

20 ‘‘(A) the total number of inpatient days for

21 the hospital for the year (as reported to the

22 Secretary by the State in which the hospital is

23 located, in accordance with a reporting schedule

24 and procedures established by the Secretary);

25 and
841

•S 2357

1 ‘‘(B) the hospital’s low-income utilization

2 rate for the base year under section 1923(b)(3)

3 (as such section is in effect on the day before

4 the date of the enactment of this part).

5 ‘‘SEC. 1954. DEFINITIONS.

6 ‘‘For purposes of this part:

7 ‘‘(1) BASE YEAR.—The term ‘base year’ means

8 1996.

9 ‘‘(2) FIRST APPLICABLE FISCAL YEAR—The

10 term ‘first applicable fiscal year’ means first fiscal

11 year that begins after the fiscal year ending in the

12 calendar year during which the percentage of indi13 viduals covered by insurance, as determined by the

14 National Health Care Cost and Coverage Commis15 sion established under section 10001 of the Health

16 Security Act, equals or exceeds 92 percent.’’.

17 (c) CONFORMING AMENDMENTS.—(1) Title XIX (42

18 U.S.C. 1396 et seq.) is amended by striking the title and

19 inserting the following:
842

•S 2357

1 ‘‘TITLE XIX—MEDICAL ASSIST2 ANCE PROGRAMS AND PAY3 MENTS TO HOSPITALS SERV4 ING VULNERABLE POPU5 LATIONS’’

6 ‘‘PART A—GRANTS TO STATES FOR MEDICAL

7 ASSISTANCE PROGRAMS’’.

8 (2) Title XIX (42 U.S.C. 1396 et seq.) is amended

9 by striking each reference to ‘‘this title’’ and inserting

10 ‘‘this part’’.

11 PART 4—MEDICAID LONG-TERM CARE

12 PROVISIONS

13 SEC. 4615. INCREASED RESOURCE DISREGARD FOR INDI14 VIDUALS RECEIVING CERTAIN SERVICES.

15 (a) IN GENERAL.—Section 1902(a)(10) (42 U.S.C.

16 1396a(a)(10)) is amended—

17 (1) by striking ‘‘and’’ at the end of subpara18 graph (E);

19 (2) by adding ‘‘and’’ at the end of subpara20 graph (F); and

21 (3) by adding at the end the following new sub22 paragraph:

23 ‘‘(G) provide that, in determining the eligi24 bility of any unmarried individual who has ap25 plied for or is receiving medical assistance con-
843

•S 2357

1 sisting of community-based services furnished

2 under a waiver under subsection (c) or (d) of

3 section 1915, personal care services described in

4 section 1905(a)(24), or home and community

5 care for functionally disabled elderly individuals

6 under section 1929, the first $4,000 of re7 sources may, at the option of the State, be dis8 regarded.’’.

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

10 subsection (a) shall apply to payments for medical assist11 ance for calendar quarters beginning on or after January

12 1, 1995.

13 SEC. 4616. FRAIL ELDERLY DEMONSTRATION PROJECT

14 WAIVERS.

15 (a) EXPANSION OF NUMBER OF WAIVERS.—Section

16 9412(b)(1) of the Omnibus Budget Reconciliation Act of

17 1986 is amended by striking ‘‘15’’ and inserting ‘‘40’’.

18 (b) DEVELOPMENT OF PROTOCOLS AND MODEL

19 CERTIFICATION GUIDELINES.—Section 9412(b) of the

20 Omnibus Budget Reconciliation Act of 1986 is amended

21 by adding at the end the following new paragraphs:

22 ‘‘(5) The Secretary, in consultation with the

23 States and organizations operating projects in ac24 cordance with waivers under this subsection shall de25 velop and publish a waiver protocol that will estab-
844

•S 2357

1 lish minimum standard requirements that an organi2 zation must meet to be eligible for a waiver under

3 this subsection. In developing the protocol under the

4 preceding sentence, the Secretary shall incorporate

5 standards for organizations to deliver integrated

6 acute and long-term care services for the elderly,

7 children, and young adults.

8 ‘‘(6) The Secretary shall develop model guide9 lines that shall be available to States that choose to

10 establish a comprehensive procedure for the licen11 sure and certification of an organization operating a

12 demonstration project under a waiver granted pursu13 ant to this subsection. Such guidelines shall encom14 pass the range of services provided by such an orga15 nization.’’.

16 (c) EVALUATIONS AND REPORTS.—Section 9412(b)

17 of the Omnibus Budget Reconciliation Act of 1986, as

18 amended by subsection (b), is amended by adding at the

19 end the following new paragraph:

20 ‘‘(7)(A) The Secretary shall develop standard

21 evaluation protocols to assess the cost-effectiveness

22 and quality of service provided under—

23 ‘‘(i) demonstration projects operating on

24 the date of the enactment of this paragraph
845

•S 2357

1 under waivers granted pursuant to this sub2 section; and

3 ‘‘(ii) demonstration projects granted waiv4 ers after the date of the enactment of this para5 graph.

6 ‘‘(B) The Secretary shall conduct evaluations of

7 the demonstration projects in accordance with the

8 protocols developed under subparagraph (A) and

9 based on the results of such evaluations, report to

10 the Committee on Finance of the Senate, the Com11 mittee on Ways and Means of the House of Rep12 resentatives, and the Subcommittee on Health and

13 the Environment of the Committee on Energy and

14 Commerce of the House of Representatives by—

15 ‘‘(i) not later than January 1, 1998, with

16 respect to demonstration projects described in

17 subparagraph (A)(i); and

18 ‘‘(ii) not later than January 1, 2003, with

19 respect to demonstration projects described in

20 subparagraph (A)(ii);

21 on the desirability of granting permanent status

22 under titles XVIII and XIX of the Social Security

23 Act to such demonstration projects that the Sec24 retary has determined to be successful.’’.
846

•S 2357

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

2 this section shall take effect on the date of the enactment

3 of this Act.

4 SEC. 4617. ELIMINATION OF REQUIREMENT OF PRIOR IN5 STITUTIONALIZATION WITH RESPECT TO HA6 BILITATION SERVICES FURNISHED UNDER A

7 WAIVER FOR HOME OR COMMUNITY-BASED

8 SERVICES.

9 (a) IN GENERAL.—Section 1915(c)(5) (42 U.S.C.

10 1396n(c)(5)) is amended in the matter preceding subpara11 graph (A) by striking ‘‘, with respect to individuals who

12 receive such services after discharge from a nursing facil13 ity or intermediate care facility for the mentally retarded’’.

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

15 this section shall apply to services furnished on or after

16 January 1, 1995.

17 SEC. 4618. ELIMINATION OF RULE REGARDING AVAILABIL18 ITY OF BEDS IN CERTAIN INSTITUTIONS.

19 (a) IN GENERAL.—The first sentence of section

20 1915(c)(1) (42 U.S.C. 1396n(c)(1)) is amended by insert21 ing the following before the end period: ‘‘(at the option

22 of the State, such determination may be made without re23 gard to the availability of beds in such a hospital, nursing

24 facility, or intermediate care facility for the mentally re25 tarded located in the State)’’.
847

•S 2357

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

2 subsection (a) shall be effective with respect to waivers

3 granted or renewed on or after January 1, 1995.

4 SEC. 4619. PREADMISSION SCREENING FOR MENTALLY RE5 TARDED INDIVIDUALS.

6 (a) IN GENERAL.—Section 1919(b)(3)(F)(ii) (42

7 U.S.C. 1396r(b)(3)(F)(ii)) is amended by striking ‘‘that,

8 because’’ and all that follows through the period at the

9 end and inserting ‘‘that the individual’s primary need is

10 for medical services that are at the level provided by the

11 nursing facility and that the nursing facility has the capa12 bility to provide any specialized services necessary for ha13 bilitation of the individual.’’.

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

15 subsection (a) shall apply to admissions on or after July

16 1, 1995.

17 PART 5—MISCELLANEOUS

18 SEC. 4621. MEDICAID COVERAGE OF ALL CERTIFIED NURSE

19 PRACTITIONER AND CLINICAL NURSE SPE20 CIALIST SERVICES.

21 (a) IN GENERAL.—Paragraph (21) of section

22 1905(a) (42 U.S.C. 1396d(a)) is amended to read as fol23 lows:

24 ‘‘(21) services furnished by all certified nurse

25 practitioners (as defined by the Secretary) or clinical
848

•S 2357

1 nurse specialists (as defined in subsection (t)) which

2 the certified nurse practitioner or clinical nurse spe3 cialist is legally authorized to perform under State

4 law (or the State regulatory mechanism provided by

5 State law), whether or not the certified nurse practi6 tioner or clinical nurse specialist is under the super7 vision of, or associated with, a physician or other

8 health care provider;’’.

9 (b) CLINICAL NURSE SPECIALIST DEFINED.—Sec10 tion 1905 (42 U.S.C. 1396) is amended by adding at the

11 end the following new subsection:

12 ‘‘(t) The term ‘clinical nurse specialist’ means an in13 dividual who—

14 ‘‘(1) is a registered nurse and is licensed to

15 practice nursing in the State in which the clinical

16 nurse specialist services are performed; and

17 ‘‘(2) holds a master’s degree in a defined clini18 cal area of nursing from an accredited educational

19 institution.’’.

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

21 this section shall become effective with respect to pay22 ments for calendar quarters beginning on or after January

23 1, 1995.
849

•S 2357

1 SEC. 4622. RELIEF FROM THIRD PARTY LIABILITY RE2 QUIREMENTS WHEN COST-EFFECTIVE.

3 (a) IN GENERAL.—Section 1902(a)(25)(B) (42

4 U.S.C. 1396a(a)(25)(B)) is amended to read as follows—

5 ‘‘(B) that in any case where such a legal liabil6 ity is found to exist after medical assistance has

7 been made available, the State or local agency will

8 seek reimbursement for such assistance to the extent

9 of such legal liability, unless—

10 ‘‘(i) the amount of reimbursement the

11 State can reasonably expect to recover for medi12 cal assistance furnished to an individual does

13 not exceed the costs of such recovery, or

14 ‘‘(ii) with respect to case management

15 services (as defined in section 1915(g)(2)), the

16 State demonstrates to the satisfaction of the

17 Secretary (using the methods specified by the

18 Secretary under subsection (aa)) that it is not

19 cost-effective in the aggregate to seek such re20 covery with respect to such services furnished to

21 individuals covered under the State plan;’’.

22 (b) METHODS FOR DEMONSTRATION.—Section

23 1902(a) (42 U.S.C. 1396a(a)) is amended by adding at

24 the end the following new subsection:

25 ‘‘(aa) The Secretary shall specify in regulations the

26 methods by which a State may demonstrate that it is not
850

•S 2357

1 cost-effective in the aggregate to seek reimbursement for

2 medical assistance paid for case management services

3 under subsection (a)(25)(B)(ii). The methods specified by

4 the Secretary under the preceding sentence shall include

5 allowing a State to demonstrate that case management

6 services are not generally covered by health insurers in the

7 State.’’.

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

9 this section shall apply to payments for medical assistance

10 for calendar quarters beginning on or after January 1,

11 1995.

12 TITLE V—QUALITY AND

13 CONSUMER PROTECTION

14 Subtitle A—Quality Management

15 and Improvement

16 SEC. 5001. NATIONAL QUALITY COUNCIL.

17 (a) ESTABLISHMENT.—Not later than 1 year after

18 the date of enactment of this Act, the Secretary of Health

19 and Human Services shall establish a council to be known

20 as the National Quality Council to oversee a program of

21 quality management and improvement designed to en22 hance the quality, appropriateness, and effectiveness of

23 health care services and access to such services.

24 (b) APPOINTMENT.—The National Quality Council

25 shall consist of 15 members appointed by the President,
851

•S 2357

1 with the advice and consent of the Senate, who are broadly

2 representative of the population of the United States and

3 shall include the following:

4 (1) Individuals and health care providers distin5 guished in the fields of medicine, public health,

6 health care quality, and related fields of health serv7 ices research. Such members shall constitute at least

8 one-third of the Council’s membership.

9 (2) Individuals representing consumers of

10 health care services. Such members shall constitute

11 at least one-third of the Council’s membership.

12 (3) Other individuals representing purchasers of

13 health care, health plans, States, and nationally rec14 ognized health care accreditation organizations.

15 (c) DUTIES.—The National Quality Council shall—

16 (1) develop national goals and performance

17 measures of quality;

18 (2) develop uniform quality goals and perform19 ance measures for plans;

20 (3) oversee the design and implementation of a

21 program of national surveys of plans and consumers;

22 (4) oversee the design and production of

23 Consumer Report Cards;

24 (5) oversee Quality Improvement Foundations;
852

•S 2357

1 (6) oversee National and State-based Consumer

2 Information and Advocacy Centers; and

3 (7) oversee the evaluation of the impact of the

4 implementation of this Act on the quality of health

5 care services in the United States and the access of

6 consumers to such services.

7 (d) CONSULTATION.—In carrying out these duties,

8 the National Quality Council shall establish a process of

9 consultation with appropriate interested parties.

10 (e) TERMS.—

11 (1) IN GENERAL.—Except as provided in para12 graph (2), members of the Council shall serve for a

13 term of 4 years.

14 (2) STAGGERED ROTATION.—Of the members

15 first appointed to the Council under subsection (b),

16 the President shall appoint members to serve for a

17 term of between 1 and 4 years so that no more than

18 one third of the Council seats are vacated each year.

19 (3) SERVICE BEYOND TERM.—A member of the

20 Council may continue to serve after the expiration of

21 the term of the member until a successor is ap22 pointed.

23 (f) VACANCIES.—If a member of the Council does not

24 serve the full term applicable under subsection (e), the in25 dividual appointed to fill the resulting vacancy shall be ap-
853

•S 2357

1 pointed for the remainder of the term of the predecessor

2 of the individual.

3 (g) CHAIR.—The President shall designate an indi4 vidual to serve as the chair of the Council.

5 (h) MEETINGS.—The Council shall meet not less than

6 once during each 4-month period and shall otherwise meet

7 at the call of the President or the chair.

8 (i) COMPENSATION AND REIMBURSEMENT OF EX9 PENSES.—Members of the Council shall receive compensa10 tion for each day (including travel time) engaged in carry11 ing out the duties of the Council. Such compensation may

12 not be in an amount in excess of the maximum rate of

13 basic pay payable for level IV of the Executive Schedule

14 under section 5315 of title 5, United States Code.

15 (j) CONFLICTS OF INTEREST.—Members of the

16 Council shall disclose upon appointment to the Council or

17 at any subsequent time that it may occur, conflicts of in18 terest.

19 (k) EXECUTIVE DIRECTOR; STAFF.—

20 (1) EXECUTIVE DIRECTOR.—

21 (A) IN GENERAL.—The Council shall,

22 without regard to section 5311(b) of title 5,

23 United States Code, appoint an Executive Di24 rector.
854

•S 2357

1 (B) PAY.—The Executive Director shall be

2 paid at a rate equivalent to a rate for the Sen3 ior Executive Service.

4 (2) STAFF.—

5 (A) IN GENERAL.—Subject to subpara6 graphs (B) and (C), the Executive Director,

7 with the approval of the Council, may appoint

8 and fix the pay of additional personnel.

9 (B) PAY.—The Executive Director may

10 make such appointments without regard to the

11 provisions of title 5, United States Code, gov12 erning appointments in the competitive service,

13 and any personnel so appointed may be paid

14 without regard to the provisions of chapter 51

15 and subchapter III of chapter 53 of such title,

16 relating to classification and General Schedule

17 pay rates, except that an individual so ap18 pointed may not receive pay in excess of 120

19 percent of the annual rate of basic pay payable

20 for GS–15 of the General Schedule.

21 (C) DETAILED PERSONNEL.—Upon re22 quest of the Executive Director, the head of any

23 Federal department or agency may detail any

24 of the personnel of that department or agency
855

•S 2357

1 to the Council to assist the Council in carrying

2 out its duties under this Act.

3 (l) CONTRACT AUTHORITY.—To the extent provided

4 in advance in appropriations Acts, the Council may con5 tract with any person (including an agency of the Federal

6 Government) for studies and analysis as required to exe7 cute its functions. Any employee of the Executive Branch

8 may be detailed to the Council to assist the Council in

9 carrying out its duties.

10 (m) CONSULTATIONS WITH EXPERTS.—The Council

11 may consult with any outside expert individuals or groups

12 that the Council determines appropriate in performing its

13 duties under this section. The Council may establish advi14 sory committees.

15 (n) ACCESS TO INFORMATION.—The Council may se16 cure directly from any department or agency of the United

17 States information necessary to enable it to carry out its

18 functions, to the extent such information is otherwise

19 available to a department or agency of the United States.

20 Upon request of the chair, the head of that department

21 or agency shall furnish that information to the Council.

22 (o) DELEGATION OF AUTHORITY.—Except as other23 wise provided, the Council may delegate any function to

24 such officers and employees as the Council may designate

25 and may authorize such successive redelegations of such
856

•S 2357

1 functions with the Council as the Council deems to be nec2 essary or appropriate. No delegation of functions by the

3 Council shall relieve the Council of responsibility for the

4 administration of such functions.

5 (p) RULEMAKING.—The Council is authorized to es6 tablish such rules as may be necessary to carry out this

7 section.

8 (q) HEALTH CARE PROVIDER.—For purposes of this

9 subtitle, the term ‘‘health care provider’’ means an individ10 ual who, or entity that, provides an item or service to an

11 individual that is covered under the health plan (as de12 fined in section 1111) in which the individual is enrolled.

13 SEC. 5002. NATIONAL GOALS AND PERFORMANCE MEAS14 URES OF QUALITY.

15 (a) IN GENERAL.—The National Quality Council

16 shall develop a set of national quality goals and perform17 ance measures of quality for both the general population

18 and for population subgroups defined by demographic

19 characteristics and health status. The goals and measures

20 shall incorporate goals identified by the Secretary of

21 Health and Human Services for meeting public health ob22 jectives utilizing, but not limited to, goals delineated in

23 Healthy People 2000.

24 (b) SUBJECT OF MEASURES.—National measures of

25 quality performance shall be developed under subsection
857

•S 2357

1 (a) in a manner that provides statistical and other infor2 mation on at least the following subjects:

3 (1) Outcomes of health care services and proce4 dures.

5 (2) Population health status.

6 (3) Health promotion.

7 (4) Prevention of diseases, disorders, disabil8 ities, injuries, and other health conditions.

9 (5) Access to care and appropriateness of care.

10 (6) Consumer satisfaction.

11 SEC. 5003. STANDARDS AND PERFORMANCE MEASURES

12 FOR HEALTH PLANS.

13 (a) DEVELOPMENT.—

14 (1) IN GENERAL.—The National Quality Coun15 cil shall establish national standards and perform16 ance measures for health plans, which may be used

17 to assess the provision of health care services and

18 access to such services, both for the general popu19 lation and population subgroups defined by demo20 graphic characteristics and health status. In subject

21 matter areas with which the National Quality Coun22 cil determines that sufficient information and con23 sensus exist, the Council shall establish goals for

24 performance by health plans consistent with the na-
858

•S 2357

1 tional goals and performance measures established

2 under section 5002.

3 (2) MEASURES AND STANDARDS.—

4 (A) MEASURES.—Quality measures under

5 this section shall relate, at a minimum, to:

6 (i) Access by consumers to health care

7 services and providers.

8 (ii) Appropriateness of health care

9 services.

10 (iii) Consumer satisfaction.

11 (iv) Outcomes of care.

12 (v) Disease prevention and health pro13 motion.

14 (B) STANDARDS.—Quality standards

15 under this section at a minimum shall relate to:

16 (i) Health plan compliance with mem17 bers’ rights under this Act.

18 (ii) Quality improvement and account19 ability.

20 (iii) Documentation and review of pro21 vider credentialing and competency.

22 (iv) Management of clinical, and ad23 ministrative and financial information.

24 (b) CERTIFICATION OF PLANS.—The National Qual25 ity Council shall provide information and technical assist-
859

•S 2357

1 ance to the Secretary and the States concerning the use

2 of national standards and performance measures devel3 oped under this section for State certification of health

4 plans.

5 SEC. 5004. PLAN DATA ANALYSIS AND CONSUMER SURVEYS.

6 (a) IN GENERAL.—The National Quality Council

7 shall oversee the design and conduct of periodic surveys

8 of health care consumers and plans to gather information

9 concerning the quality measures established under sec10 tions 5002 and 5003. The surveys shall monitor consumer

11 reaction to the implementation of this Act and, in coordi12 nation with relevant data from health plans and other

13 sources, be designed to assess the impact of this Act both

14 for the general population of the United States and for

15 populations vulnerable to discrimination or to receiving in16 adequate care due to health status, demographic charac17 teristics, or geographic location.

18 (b) SURVEY ADMINISTRATION AND DATA ANALY19 SIS.—The National Quality Council shall approve a stand20 ard design for the consumer surveys and sampling of rel21 evant plan data described in subsection (a) which shall be

22 administered by the Administrator of the Agency for

23 Health Care Policy and Research or such other appro24 priate entity as the Council shall designate on a plan-by25 plan and State-by-State basis. Sufficient consumer survey
860

•S 2357

1 and plan data shall be collected and verified to provide

2 for reliable and valid analysis. A State may add survey

3 questions on quality measures of local interest to surveys

4 conducted in the State. The plan-level survey shall include

5 a subset of consumer survey questions related to consumer

6 satisfaction, perceived health status, access, and such

7 other survey items designated by the Council.

8 (c) SAMPLING STRATEGIES.—The National Quality

9 Council shall approve sampling strategies under sub10 section (a) that ensure that appropriate survey samples

11 adequately measure populations that are considered to be

12 at risk of receiving inadequate health care or may be dif13 ficult to reach through consumer-sampling methods, in14 cluding individuals who—

15 (1) fail to enroll in a health plan;

16 (2) resign from a plan; or

17 (3) are vulnerable to discrimination or to receiv18 ing inadequate care due to health status, demo19 graphic characteristics, or geographic location.

20 (d) SURVEY INTEGRATION.—To the extent feasible,

21 the consumer and plan surveys developed under this sec22 tion shall be integrated with existing Federal surveys.
861

•S 2357

1 SEC. 5005. EVALUATION AND REPORTING OF QUALITY PER2 FORMANCE.

3 (a) HEALTH PLAN REPORTS.—Each State annually

4 shall publish and make available to the public and

5 Consumer Information and Advocacy Centers a perform6 ance report, in a standard format designated by the Na7 tional Quality Council, outlining the performance of each

8 health plan offered in the State with respect to the set

9 of national measures of quality performance developed

10 under sections 5002 and 5003. The report shall include—

11 (1) the results of a smaller number of such

12 measures for health care providers if the available

13 information is statistically meaningful; and

14 (2) the results of consumer surveys and an

15 analysis of the plan data collected in section 5004.

16 (b) CONSUMER REPORT CARDS.—The health plan re17 ports under subsection (a) shall be summarized in a

18 consumer report card as specified by the National Quality

19 Council and made available by the State through the

20 Consumer Information and Advocacy Centers to all indi21 viduals in the State.

22 (c) QUALITY REPORTS.—The National Quality Coun23 cil annually shall provide recommendations to the Con24 gress, the National Health Benefits Board, and the Sec25 retary in the form of a summary report that—
862

•S 2357

1 (1) outlines in a standard format the perform2 ance of each State;

3 (2) discusses State-level and national trends re4 lating to health care quality; and

5 (3) presents data for each State from health

6 plan reports and consumer surveys that were con7 ducted during the year.

8 SEC. 5006. DEVELOPMENT AND DISSEMINATION OF PRAC9 TICE GUIDELINES.

10 The National Quality Council may advise the Sec11 retary and the Administrator of the Agency for Health

12 Care Policy and Research concerning priorities for the de13 velopment and periodic review and updating of clinically

14 relevant guidelines established under section 912 of the

15 Public Health Service Act.

16 SEC. 5007. RESEARCH ON HEALTH CARE QUALITY.

17 The National Quality Council may make rec18 ommendations to the Secretary and the Administrator of

19 the Agency for Health Care Policy and Research concern20 ing priorities for research with respect to the quality, ap21 propriateness, and effectiveness of health care.

22 SEC. 5008. QUALITY IMPROVEMENT FOUNDATIONS.

23 (a) ESTABLISHMENT.—The National Quality Council

24 shall oversee the operation of quality improvement founda25 tions in performing the duties specified in subsection (c).
863

•S 2357

1 (b) STRUCTURE AND MEMBERSHIP.—

2 (1) GRANT PROCESS.—The Secretary, in con3 sultation with the Council, shall, through a competi4 tive grantmaking process, award grants for the es5 tablishment and operation of a quality improvement

6 foundation in each State or region (as defined in

7 paragraph (2)(B)).

8 (2) ESTABLISHMENT OF GEOGRAPHIC AREAS.—

9 The Secretary shall establish throughout the United

10 States geographic areas with respect to which grants

11 under this section will be made. In establishing such

12 areas, the Secretary shall take into account the fol13 lowing criteria:

14 (A) STATE AREAS.—Each State shall gen15 erally be designated as a geographic area for

16 purposes of this paragraph.

17 (B) MULTI-STATE AREAS.—The Secretary

18 may establish geographic areas comprised of

19 multiple contiguous States only where the Sec20 retary determines that volume of activity or

21 other relevant factors justifies such an estab22 lishment.

23 (3) ELIGIBLE APPLICANTS.—To be eligible to

24 receive a grant for the establishment of a quality im-
864

•S 2357

1 provement foundation under paragraph (1), an ap2 plicant entity shall meet the following conditions:

3 (A) NOT-FOR-PROFIT.—The entity shall be

4 a not-for-profit entity operating within the

5 State or region involved.

6 (B) BOARD.—The entity shall have a

7 board which includes—

8 (i) representatives of health care pro9 viders from throughout the State or region

10 involved, including both practicing provid11 ers and experts in the field of quality

12 measurement and improvement, which to13 gether shall comprise at least one-fourth of

14 the advisory board’s membership;

15 (ii) at least one representative of Aca16 demic Health Centers or Schools of Public

17 Health as defined in section 799 of the

18 Public Health Service Act operating within

19 the State or region involved (or operating

20 outside of the State or region if no such

21 Centers or schools operate within the State

22 or region), which shall comprise up to one23 fourth of the membership;

24 (iii) representatives of consumers re25 siding within the State or region involved,
865

•S 2357

1 who shall comprise one-fourth of the mem2 bership; and

3 (iv) representatives of purchasers of

4 health care, health plans, and other inter5 ested parties residing within the State or

6 region involved, and representatives of the

7 State or States within a region.

8 (C) STAFFING.—Each entity shall have

9 sufficient, competent staff of experts possessing

10 the skills and knowledge necessary to enable the

11 foundation to perform its duties.

12 (c) DUTIES.—

13 (1) IN GENERAL.—Each quality improvement

14 foundation shall carry out the duties described in

15 paragraph (2) for the State or region in which the

16 foundation is located. The foundation shall establish

17 a program of activities incorporating such duties and

18 shall be able to demonstrate the involvement of a

19 broad cross-section of the providers and health care

20 institutions throughout the State or region. A foun21 dation may apply for and conduct research described

22 in section 5007.

23 (2) DUTIES DESCRIBED.—The duties described

24 in this paragraph include the following:
866

•S 2357

1 (A) Collaboration with and technical assist2 ance to providers and health plans in ongoing

3 efforts to improve the quality of health care

4 provided to individuals in the State.

5 (B) Population-based monitoring of prac6 tice patterns and patient outcomes,on an other

7 than a case-by-case basis.

8 (C) Developing programs in lifetime learn9 ing for health professionals to improve the qual10 ity of health care by ensuring that health pro11 fessionals remain informed about new knowl12 edge, acquire new skills, and adopt new roles as

13 technology and societal demands change.

14 (D) Disseminating information about suc15 cessful quality improvement programs, practice

16 guidelines, and research findings, including in17 formation on innovative staffing of health pro18 fessionals.

19 (E) Assist in developing innovative patient

20 education systems that enhance patient involve21 ment in decisions relating to their health care,

22 including an emphasis on shared decisionmak23 ing between patients and health care providers.

24 (F) Issuing a report to the public regard25 ing the foundation’s activities for the previous
867

•S 2357

1 year including areas of success during the pre2 vious year and areas for opportunities in im3 proving health outcomes for the community,

4 and the adoption of guidelines.

5 (G) Providing notice to the State or appro6 priate entity if the foundation determines, after

7 reasonable opportunities for improvement, that

8 the quality of a provider or plan remains so in9 adequate that the patients or enrollees of such

10 a provider or plan are subject to potential harm

11 in utilizing the services of such provider or serv12 ices under such plan.

13 (d) RESTRICTIONS ON DISCLOSURE.—The restric14 tions on disclosure of information under section 1160 of

15 the Social Security Act shall apply to quality improvement

16 foundations under this section, except that—

17 (1) such foundations shall make data available

18 to qualified organizations and individuals for re19 search for public benefit;

20 (2) individuals and qualified organizations shall

21 meet standards consistent with the Public Health

22 Service Act and policies regarding the conduct of

23 scientific research, including provisions related to

24 confidentiality, privacy, protection of humans and

25 shall pay reasonable costs for data; and
868

•S 2357

1 (3) such foundations may exchange information

2 with other quality improvement foundations.

3 SEC. 5009. CONSUMER INFORMATION AND ADVOCACY.

4 (a) ESTABLISHMENT.—

5 (1) IN GENERAL.—The Secretary shall establish

6 (by grant or contract) and oversee a National Center

7 of Consumer Information and Advocacy to provide

8 technical assistance, adequate training and support

9 to States and Consumer Information and Advocacy

10 Centers in each State (hereafter referred to in this

11 section as the ‘‘Center’’) to carry out the duties of

12 this section, including providing public education to

13 consumers concerning this Act.

14 (2) REQUIREMENTS FOR NATIONAL CENTER.—

15 The National Center of Consumer Information and

16 Advocacy shall be a national non-profit organization

17 with public education and health policy expertise and

18 shall have sufficient staff to carry out its duties and

19 a demonstrated ability to represent and work with a

20 broad spectrum of consumers, including vulnerable

21 and underserved populations.

22 (3) STATE-BASED CENTERS.—The Consumer

23 Information and Advocacy Center in each State shall

24 disseminate State reports on quality performance (as

25 defined in section 5005(4)) and health plan
869

•S 2357

1 consumer report cards (as defined in section

2 5005(2)) in order to facilitate consumer choice of

3 health plans, perform public outreach and provide

4 education and assistance regarding consumer rights

5 and responsibilities under this Act, and assist con6 sumers in dealing with problems that arise with

7 consumer purchasing cooperatives, large group pur8 chasers, health plans, insurance agencies, and health

9 care providers operating in such State.

10 (b) CONTRACTS.—

11 (1) SOLICITATION.—The Secretary shall solicit

12 contracts from private non-profit organizations

13 based in each State to fulfill the duties of the Center

14 in the State. The Secretary may develop such regu15 lations and guidelines as necessary to oversee the

16 process of considering and awarding competitive con17 tracts under this section. In awarding such con18 tracts, the Secretary shall consult with the National

19 Center of Consumer Information and Advocacy and

20 shall, at a minimum, consider the demonstrated abil21 ity of the organization to represent and work with

22 a broad spectrum of consumers, including vulnerable

23 and underserved populations.

24 (2) CONTRACT PERIOD.—The contract period

25 for the State-based Consumer Information and Ad-
870

•S 2357

1 vocacy Centers and the National Center of

2 Consumer Information and Advocacy under this sec3 tion shall be not less than 4 years and not more

4 than 7 years.

5 (c) FUNCTIONS AND RESPONSIBILITIES.—

6 (1) DISSEMINATION OF REPORTS.—Each Cen7 ter shall disseminate State reports on quality per8 formance (as defined in section 5005(2)) and health

9 plan consumer report cards (as defined in section

10 5005(2)) in order to facilitate consumer choice of

11 health plans.

12 (2) STAFF, OFFICES AND HOTLINES.—Each

13 Center shall have sufficient staff, local offices

14 throughout the State, and a State-wide toll-free hot15 line to carry out the advocacy duties of this section.

16 Through direct contact and the hotline, the Center

17 shall provide the following services in the State, in18 cluding appropriate assistance to individuals with

19 limited English language ability—

20 (A) outreach and education relating to

21 consumer rights and responsibilities under this

22 Act, including such rights and services available

23 through the Center;
871

•S 2357

1 (B) assistance with enrollment in health

2 plans, or obtaining services or reimbursement

3 from health plans;

4 (C) assistance with filing an application for

5 premium or cost sharing subsidies;

6 (D) information to enrollees about existing

7 grievance procedures and coordination with

8 other entities to assist in identifying, investigat9 ing, and resolving enrollee grievances under this

10 Act (including grievances before State medical

11 boards);

12 (E) referrals to appropriate local providers

13 of legal assistance and to appropriate State and

14 Federal agencies which may be of assistance to

15 aggrieved individuals in the area; and

16 (F) conduct public hearings no less fre17 quently than once a year to identify and ad18 dress community health care needs.

19 (d) ACCESS TO INFORMATION.—The Secretary and

20 the States shall ensure that, for purposes of carrying out

21 the Center’s duties under this section, the Center (and of22 ficers and employees of the Center in local offices) have

23 appropriate access to necessary information subject to

24 protections for confidentiality of enrollee information.
872

•S 2357

1 Each Center shall have the capability to accept electronic

2 quality data from plans as required under subtitle B.

3 (e) EVALUATION AND REPORT.—The Secretary shall

4 have the right to evaluate the quality and effectiveness of

5 the organization in carrying out the functions specified in

6 the contract. The Center shall report to the Secretary and

7 the State annually on the nature and patterns of consumer

8 complaints received in the Center and its local offices dur9 ing each year and any policy, regulatory, and legislative

10 recommendations for needed improvements together with

11 a record of the activities of the Center.

12 (f) CONFLICTS OF INTEREST.—The Secretary shall

13 ensure that no individual involved in the designation of

14 a State Center, the Center itself, or of any delegate thereof

15 is subject to a conflict of interest, including affiliation with

16 (through ownership or common control) a health care fa17 cility, managed care organization, health insurance com18 pany or association of health care facilities or providers.

19 No grantee under this section may have a direct involve20 ment with the licensing, certification, or accreditation of

21 a health care facility, a health care plan, or a provider

22 of health care services .

23 (g) LEGAL COUNSEL.—The Secretary shall ensure

24 that adequate legal counsel is available, and is able, with-
873

•S 2357

1 out conflict of interest, to assist the Center, and the local

2 offices thereof in the performance of their official duties.

3 (h) COORDINATION.—The Center shall coordinate its

4 activities with all appropriate entities including Quality

5 Improvement Foundations (established under section

6 5008) and the State agencies designated to carry out cli7 ent advocacy activities pursuant to section 2106.

8 (i) CONSTRUCTION.—Nothing in this section shall re9 place grievance procedures established or otherwise re10 quired under this Act.

11 SEC. 5010. AUTHORIZATION OF APPROPRIATIONS.

12 (a) NATIONAL QUALITY COUNCIL.—For the purpose

13 of carrying out this subtitle with respect to the establish14 ment and activities of the National Quality Council, there

15 are authorized to be appropriated $4,000,000 for each of

16 the fiscal years 1995 through 2000.

17 (b) QUALITY IMPROVEMENT FOUNDATIONS.—For

18 the purpose of carrying out section 5008, the are author19 ized to be appropriated $100,000,000 for fiscal year 1996,

20 $200,000,000 for fiscal year 1997, and $300,000,000 for

21 each of the fiscal years 1998 through 2000.

22 (c) CONSUMER INFORMATION AND ADVOCACY CEN23 TERS.—For the purpose of carrying out section 5009, the

24 are authorized to be appropriated $100,000,000 for fiscal

25 year 1996, $200,000,000 for fiscal year 1997,
874

•S 2357

1 $300,000,000 for each of the fiscal years 1998 through

2 2000, of which $4,000,000 for each fiscal year shall be

3 made available to the National Center of Consumer Infor4 mation and Advocacy.

5 SEC. 5011. ROLE OF HEALTH PLANS IN QUALITY MANAGE6 MENT.

7 Each health plan shall—

8 (1) measure and disclose performance on qual9 ity measures as designated by this Act;

10 (2) furnish information required under subtitles

11 B and of this title and provide such other reports

12 and information on the quality of care delivered by

13 health care providers who are members of a provider

14 network of the plan as may be required under this

15 Act; and

16 (3) maintain quality management systems

17 that—

18 (A) use the national measures of quality

19 performance developed by the National Quality

20 Council under section 5003; and

21 (B) measure the quality of health care fur22 nished to enrollees under the plan by all health

23 care providers of the plan where practical.
875

•S 2357

1 SEC. 5012. INFORMATION ON HEALTH CARE PROVIDERS.

2 (a) STATE OBLIGATIONS.—Each State shall make

3 available to consumers, upon request, information con4 cerning providers of health care services or supplies. Such

5 information shall include—

6 (1) the identity of any provider that has been

7 convicted, under Federal or State law, of a criminal

8 offense relating to fraud, corruption, breach of fidu9 ciary responsibility, or other financial misconduct in

10 connection with the delivery of a health care service

11 or supply;

12 (2) the identity of any provider that has been

13 convicted, under Federal or State law, of a criminal

14 offense relating to neglect or abuse of patients in

15 connection with the delivery of a health care service

16 or supply;

17 (3) the identity of any provider that has been

18 convicted, under Federal or State law, of a criminal

19 offense relating to the unlawful manufacture, dis20 tribution, prescription, or dispensing of a controlled

21 substance; and

22 (4) the identity of any provider whose license to

23 provide health care services or supplies has been re24 voked, suspended, restricted, or not renewed, by a

25 State licensing authority for reasons relating to the

26 provider’s professional competence, professional per-
876

•S 2357

1 formance, or financial integrity, or any provider who

2 surrendered such a license while a formal discipli3 nary proceeding was pending before such an author4 ity, if the proceeding concerned the provider’s pro5 fessional competence, professional performance, or

6 financial integrity.

7 (b) PUBLIC AVAILABILITY OF INFORMATION IN NA8 TIONAL PRACTITIONER DATA BANK ON DEFENDANTS,

9 AWARDS, AND SETTLEMENTS.—

10 (1) IN GENERAL.—Section 427(a) of the Health

11 Care Quality Improvement Act (42 U.S.C. 11137

12 (a)) is amended by adding at the end the following

13 new sentence: ‘‘Not later the January 1, 1996, the

14 Secretary shall promulgate regulations under which

15 individuals seeking to enroll in health plans under

16 the Health Security Act shall be able to obtain infor17 mation reported under this part with respect to phy18 sicians and other licensed health practitioners par19 ticipating in such plans for whom information has

20 been reported under this part on repeated occa21 sions.’’.

22 (2) ACCESS TO DATA BANK FOR POINT-OF23 SERVICE CONTRACTORS UNDER MEDICARE.—Section

24 427(a) of such Act (42 U.S.C. 11137(a)) is amend25 ed—
877

•S 2357

1 (A) by inserting ‘‘to sponsors of point-of2 service networks under section 1990 of the So3 cial Security Act,’’, and

4 (B) in the heading, by inserting ‘‘RELAT5 ED’’ after ‘‘CARE’’.

6 SEC. 5013. CONFORMING AMENDMENTS TO PUBLIC

7 HEALTH SERVICE ACT.

8 Title IX of the Public Health Service Act is amend9 ed—

10 (1) in section 903(a)(4) (42 U.S.C. 299a–

11 1(a)(4)), by inserting ‘‘and Quality Improvement

12 Foundations’’ after ‘‘health agencies’’;

13 (2) in section 904(c)(1) (42 U.S.C. 299a–

14 2(c)(1)), by inserting ‘‘the National Quality Council

15 and’’ after ‘‘in consultation with’’;

16 (3) in section 912(b)(4) (42 U.S.C. 299b–

17 1(b)(4))—

18 (A) by inserting ‘‘outcomes,’’ before

19 ‘‘risks’’; and

20 (B) by inserting before the semicolon ‘‘to

21 the extent feasible given the availability of unbi22 ased, reliable, and valid data’’;

23 (4) in section 914 (42 U.S.C. 299b–3)—

24 (A) in subsection (a)(2)(B)—
878

•S 2357

1 (i) by inserting ‘‘the National Quality

2 Council,’’ after ‘‘shall consult with’’; and

3 (ii) by inserting before the period

4 ‘‘and relevant sections of the Health Secu5 rity Act’’;

6 (B) in subsection (c), by inserting ‘‘Quality

7 Improvement Foundations and other’’ after

8 ‘‘carried out through’’; and

9 (C) in subsection (f)—

10 (i) by striking ‘‘TO ADMINISTRATOR’’

11 in the subsection heading;

12 (ii) by striking ‘‘Administrator’’ and

13 inserting ‘‘National Quality Council and

14 the’’; and

15 (5) in section 927 (42 U.S.C. 299c–6), by add16 ing at the end thereof the following new paragraphs:

17 ‘‘(5) The term ‘National Quality Council’ means

18 the Council established under section 5001 of the

19 Health Security Act.

20 ‘‘(6) The term ‘‘Quality Improvement Founda21 tions’’ means the Foundations established under sec22 tion 5008 of the Health Security Act.’’.
879

•S 2357

1 Subtitle B—Administrative

2 Simplification

3 PART 1—PURPOSE AND DEFINITIONS

4 SEC. 5101. PURPOSE.

5 It is the purpose of this subtitle to improve the effi6 ciency and effectiveness of the health care system, includ7 ing the medicare program under title XVIII of the Social

8 Security Act and the medicaid program under title XIX

9 of such Act, by encouraging the development of a health

10 information network through the establishment of stand11 ards and requirements for the electronic transmission of

12 certain health information.

13 SEC. 5102. DEFINITIONS.

14 For purposes of this subtitle:

15 (1) CODE SET.—The term ‘‘code set’’ means

16 any set of codes used for encoding data elements,

17 such as tables of terms, medical concepts, medical

18 diagnostic codes, or medical procedure codes.

19 (2) COORDINATION OF BENEFITS.—The term

20 ‘‘coordination of benefits’’ means determining and

21 coordinating the financial obligations of health plans

22 when health care benefits are payable under 2 or

23 more health plans.

24 (3) HEALTH CARE PROVIDER.—The term

25 ‘‘health care provider’’ includes a provider of services
880

•S 2357

1 (as defined in section 1861(u) of the Social Security

2 Act), a provider of medical or other health services

3 (as defined in section 1861(s) of the Social Security

4 Act), and any other person furnishing health care

5 services or supplies.

6 (4) HEALTH INFORMATION.—The term ‘‘health

7 information’’ means any information, whether oral

8 or recorded in any form or medium that—

9 (A) is created or received by a health care

10 provider, health plan, health oversight agency

11 (as defined in section 5202), health researcher,

12 public health authority (as defined in section

13 5202), employer, life insurer, school or univer14 sity, or health information network service cer15 tified under section 5141; and

16 (B) relates to the past, present, or future

17 physical or mental health or condition of an in18 dividual, the provision of health care to an indi19 vidual, or the past, present, or future payment

20 for the provision of health care to an individual.

21 (5) HEALTH INFORMATION NETWORK.—The

22 term ‘‘health information network’’ means the health

23 information system that is formed through the appli24 cation of the requirements and standards established

25 under this subtitle.
881

•S 2357

1 (6) HEALTH INFORMATION PROTECTION ORGA2 NIZATION.—The term ‘‘health information protection

3 organization’’ means a private entity or an entity op4 erated by a State that accesses standard data ele5 ments of health information through the health in6 formation network, processes such information into

7 non-identifiable health information, and may store

8 such information.

9 (7) HEALTH INFORMATION NETWORK SERV10 ICE.—The term ‘‘health information network serv11 ice’’—

12 (A) means a private entity or an entity op13 erated by a State that enters into contracts

14 to—

15 (i) process or facilitate the processing

16 of nonstandard data elements of health in17 formation into standard data elements;

18 (ii) provide the means by which per19 sons are connected to the health informa20 tion network for purposes of meeting the

21 requirements of this subtitle, including the

22 holding of standard data elements of

23 health information;
882

•S 2357

1 (iii) provide authorized access to

2 health information through the health in3 formation network; or

4 (iv) provide specific information proc5 essing services, such as automated coordi6 nation of benefits and claims transaction

7 routing; and

8 (B) includes a health information protec9 tion organization.

10 (8) HEALTH PLAN.—The term ‘‘health plan’’

11 has the meaning given such term in section

12 1011(1)(A) except that such term shall include

13 clauses (iii), (iv), (v), (vi), and (viii) of such section.

14 (9) NON-IDENTIFIABLE HEALTH INFORMA15 TION.—The term ‘‘non-identifiable health informa16 tion’’ means health information that is not protected

17 health information as defined in section 5202.

18 (10) HEALTH RESEARCHER.—The term ‘‘health

19 researcher’’ shall have the meaning given such term

20 under section 5202.

21 (11) PATIENT MEDICAL RECORD INFORMA22 TION.—The term ‘‘patient medical record informa23 tion’’ means health information derived from a clini24 cal encounter that relates to the physical or mental

25 condition of an individual.
883

•S 2357

1 (12) STANDARD.—The term ‘‘standard’’ when

2 referring to an information transaction or to data

3 elements of health information means the trans4 action or data elements meet any standard adopted

5 by the Secretary under part 2 that applies to such

6 information transaction or data elements.

7 PART 2—STANDARDS FOR DATA ELEMENTS AND

8 INFORMATION TRANSACTIONS

9 SEC. 5111. GENERAL REQUIREMENTS ON SECRETARY.

10 (a) IN GENERAL.—The Secretary shall adopt stand11 ards and modifications to standards under this subtitle

12 that are—

13 (1) consistent with the objective of reducing the

14 costs of providing and paying for health care; and

15 (2) in use and generally accepted or developed

16 or modified by the standards setting organizations

17 accredited by the American National Standard Insti18 tute (ANSI).

19 (b) INITIAL STANDARDS.—The Secretary may de20 velop an expedited process for the adoption of initial

21 standards under this subtitle.

22 (c) FAILSAFE.—If the Secretary is unable to adopt

23 standards or modified standards in accordance with sub24 section (a) that meet the requirements of this subtitle—
884

•S 2357

1 (1) the Secretary may develop or modify such

2 standards and, after providing public notice and

3 after an adequate period for public comment, adopt

4 such standards; and

5 (2) if the Secretary adopts standards under

6 paragraph (1), the Secretary shall submit a report

7 to the appropriate committees of Congress on the

8 actions taken by the Secretary under this subsection.

9 (d) PAPER FORMATS.—The Secretary may develop

10 methods by which a person may use the standards adopted

11 by the Secretary under this subtitle with respect to health

12 information that is in written rather than electronic form.

13 SEC. 5112. STANDARDS FOR DATA ELEMENTS OF HEALTH

14 INFORMATION.

15 (a) IN GENERAL.—The Secretary shall adopt stand16 ards necessary to make data elements of the following

17 health information uniform and compatible for electronic

18 transmission through the health information network:

19 (1) the health information that is appropriate

20 for transmission in connection with transactions de21 scribed in subsections (a), (b), and (d) of section

22 5121;

23 (2) the quality information required to be sub24 mitted by a health plan under title I and subtitle A

25 of this title; and
885

•S 2357

1 (3) patient medical record information.

2 (b) ADDITIONS.—The Secretary may make additions

3 to the sets of data elements adopted under subsection (a)

4 as the Secretary determines appropriate in a manner that

5 minimizes the disruption and cost of compliance with such

6 additions.

7 (c) CERTAIN DATA ELEMENTS.—

8 (1) UNIQUE HEALTH IDENTIFIERS.—The Sec9 retary shall establish a system to provide for a

10 standard unique health identifier for each individual,

11 employer, health plan, and health care provider for

12 use in the health care system. The personal health

13 identifier for an individual shall be an encrypted

14 form of the social security account number assigned

15 to the individual by the Secretary under section

16 205(c)(2) of the Social Security Act.

17 (2) CODE SETS.—

18 (A) IN GENERAL.—The Secretary, in con19 sultation with experts from the private sector

20 and Federal agencies, shall—

21 (i) select code sets for appropriate

22 data elements from among the code sets

23 that have been developed by private and

24 public entities; or
886

•S 2357

1 (ii) establish code sets for such data

2 elements if no code sets for the data ele3 ments have been developed.

4 (B) DISTRIBUTION.—The Secretary shall

5 establish efficient and low-cost procedures for

6 distribution of code sets and modifications to

7 such code sets under section 5115(c).

8 SEC. 5113. INFORMATION TRANSACTION STANDARDS.

9 (a) IN GENERAL.—The Secretary shall adopt tech10 nical standards relating to the method by which data ele11 ments of health information that have been standardized

12 under section 5112 may be transmitted electronically, in13 cluding standards with respect to the format in which such

14 data elements shall be transmitted.

15 (b) SPECIAL RULE FOR COORDINATION OF BENE16 FITS.—Any standards adopted by the Secretary under

17 paragraph (1) that relate to coordination of benefits shall

18 provide that a claim for reimbursement for medical serv19 ices furnished is tested by an algorithm specified by the

20 Secretary against all records of enrollment and eligibility

21 for the individual who received such services to determine

22 any primary and secondary obligors for payment.

23 (c) ELECTRONIC SIGNATURE.—The Secretary, in co24 ordination with the Secretary of Commerce, shall promul25 gate regulations specifying procedures for the electronic
887

•S 2357

1 transmission and authentication of signatures, compliance

2 with which will be deemed to satisfy State and Federal

3 statutory requirements for written signatures with respect

4 to information transactions required by this Act and writ5 ten signatures on medical records and prescriptions.

6 SEC. 5114. STANDARDS RELATING TO WRITTEN CLAIMS

7 SUBMITTED BY INDIVIDUALS AND WRITTEN

8 EXPLANATIONS OF BENEFITS.

9 The Secretary shall adopt standard methods and for10 mats which—

11 (1) may be used by an individual to submit a

12 written claim when the individual’s health care pro13 vider does not submit the claim; and

14 (2) shall be used by health plans to submit a

15 written explanation of benefits to an enrollee.

16 SEC. 5115. TIMETABLES FOR ADOPTION OF STANDARDS.

17 (a) INITIAL STANDARDS FOR DATA ELEMENTS.—

18 The Secretary shall adopt standards relating to—

19 (1) the data elements for the information de20 scribed in section 5112(a)(1) not later than 9

21 months after the date of the enactment of this sub22 title (except in the case of standards with respect to

23 data elements for claims attachments which shall be

24 adopted not later than 24 months after the date of

25 the enactment of this subtitle);
888

•S 2357

1 (2) the data elements for the information de2 scribed in section 5112(a)(2) not later than 9

3 months after the date of the enactment of this sub4 title;

5 (3) data elements for patient medical record in6 formation not earlier than 24 months and not later

7 than 7 years after the date of the enactment of this

8 subtitle; and

9 (4) any addition to a set of data elements, in

10 conjunction with making such an addition.

11 (b) INITIAL STANDARDS FOR INFORMATION TRANS12 ACTIONS.—The Secretary shall adopt standards relating

13 to information transactions under section 5113 not later

14 than 9 months after the date of the enactment of this sub15 title (except in the case of standards for claims attach16 ments which shall be adopted not later than 24 months

17 after the date of the enactment of this subtitle).

18 (c) STANDARDS FOR WRITTEN CLAIMS AND EXPLA19 NATIONS OF BENEFITS.—The Secretary shall adopt

20 standard methods and formats described in section 5114

21 not later than 9 months after the date of the enactment

22 of this subtitle.

23 (d) MODIFICATIONS TO STANDARDS.—

24 (1) IN GENERAL.—Except as provided in para25 graph (2), the Secretary shall review the standards
889

•S 2357

1 adopted under this subtitle and shall adopt modified

2 standards as determined appropriate, but no more

3 frequently than once every 6 months. Any modifica4 tion to standards shall be completed in a manner

5 which minimizes the disruption and cost of compli6 ance.

7 (2) SPECIAL RULES.—

8 (A) MODIFICATIONS DURING FIRST 12-

9 MONTH PERIOD.—Except with respect to addi10 tions and modifications to code sets under sub11 paragraph (B), the Secretary shall not adopt

12 any modifications to standards adopted under

13 this subtitle during the 12-month period begin14 ning on the date such standards are adopted

15 unless the Secretary determines that a modi16 fication is necessary in order to permit compli17 ance with requirements relating to the stand18 ards.

19 (B) ADDITIONS AND MODIFICATIONS TO

20 CODE SETS.—

21 (i) IN GENERAL.—The Secretary shall

22 ensure that procedures exist for the rou23 tine maintenance, testing, enhancement,

24 and expansion of code sets to accommodate
890

•S 2357

1 changes in biomedical science and health

2 care delivery.

3 (ii) ADDITIONAL RULES.—If a code

4 set is modified under this subsection, the

5 modified code set shall include instructions

6 on how data elements that were encoded

7 prior to the modification are to be con8 verted or translated so as to preserve the

9 value of the data elements. Any modifica10 tion to a code set under this subsection

11 shall be implemented in a manner that

12 minimizes the disruption and cost of com13 plying with such modification.

14 (e) EVALUATION OF STANDARDS.—The Secretary

15 may establish a process to measure or verify the consist16 ency of standards adopted or modified under this subtitle.

17 Such process may include demonstration projects and

18 analysis of the cost of implementing such standards and

19 modifications.

20 PART 3—REQUIREMENTS WITH RESPECT TO

21 CERTAIN TRANSACTIONS AND INFORMATION

22 SEC. 5121. REQUIREMENTS WITH RESPECT TO CERTAIN

23 TRANSACTIONS AND INFORMATION.

24 (a) REQUIREMENTS ON PLANS AND PROVIDERS RE25 LATING TO FINANCIAL AND ADMINISTRATIVE TRANS-
891

•S 2357

1 ACTIONS.—If a health care provider or a health plan con2 ducts any of the following transactions, such transactions

3 shall be standard transactions and the information trans4 mitted or received in connection with such transaction

5 shall be in the form of standard data elements:

6 (1) Claims (including coordination of benefits).

7 (2) Claims attachments.

8 (3) Responses to research inquiries by a health

9 researcher.

10 (4) Other transactions determined appropriate

11 by the Secretary consistent with the goal of reducing

12 administrative costs.

13 (b) REQUIREMENT ONLY ON PLANS RELATING TO

14 FINANCIAL AND ADMINISTRATIVE TRANSACTIONS.—If a

15 person desires to conduct any of the following transactions

16 with a health plan as a standard transaction, the health

17 plan shall conduct such standard transaction and the in18 formation transmitted or received in connection with such

19 transaction shall be in the form of standard data elements:

20 (1) Enrollment and disenrollment.

21 (2) Eligibility.

22 (3) Payment and remittance advice.

23 (4) Premium payments.

24 (5) First report of injury.

25 (6) Claims status.
892

•S 2357

1 (7) Referral certification and authorization.

2 (8) Other transactions determined appropriate

3 by the Secretary consistent with the goal of reducing

4 administrative costs.

5 (c) REQUIREMENT ON PLANS RELATING TO QUALITY

6 INFORMATION.—Any quality information required to be

7 submitted by a health plan under title I or subtitle A of

8 this title shall be in the form of standard data elements

9 and the transmission of such data shall be in the form

10 of a standard transaction.

11 (d) REQUIREMENT ONLY ON PURCHASING COOPERA12 TIVES.—If a person desires to conduct any of the following

13 transactions with a purchasing cooperative (as defined in

14 section 1013(12)) as a standard transaction, the coopera15 tive shall conduct such standard transaction and the infor16 mation transmitted or received in connection with such

17 transaction shall be in the form of standard data elements:

18 (1) Enrollment and disenrollment.

19 (2) Premium payments.

20 (e) REQUIREMENT WITH RESPECT TO DISCLOSURE

21 OF INFORMATION.—

22 (1) IN GENERAL.—A health plan or health care

23 provider shall make the standard data elements

24 transmitted or received by such plan or provider in

25 connection with the transactions described in sub-
893

•S 2357

1 sections (a), (b), and (c) or acquired under section

2 5164(a) available for disclosure as authorized by this

3 subtitle.

4 (2) SPECIAL RULE.—In the case of a health

5 care provider that does not file claims, such provider

6 shall be responsible for making standard data ele7 ments for encounter information available for disclo8 sure as authorized by this subtitle.

9 (f) SATISFACTION OF REQUIREMENTS.—A health

10 care provider, health plan, or consumer purchasing cooper11 ative may satisfy the requirement imposed on such pro12 vider, plan, or cooperative under subsection (a), (b), (c),

13 (d), or (e) by—

14 (1) directly transmitting standard data ele15 ments;

16 (2) submitting nonstandard data elements to a

17 health information network service certified under

18 section 5141 for processing into standard data ele19 ments and transmission; or

20 (3) in the case of a provider, submitting data

21 elements to a plan which satisfies the requirements

22 imposed on such provider on the provider’s behalf.

23 (g) TIMELINESS.—A health care provider or health

24 plan shall be determined to have satisfied a requirement

25 imposed under this section only if the action required is
894

•S 2357

1 completed in a timely manner, as determined by the Sec2 retary. In setting standards for timeliness, the Secretary

3 shall take into consideration the age and the amount of

4 information being requested.

5 SEC. 5122. TIMETABLES FOR COMPLIANCE WITH REQUIRE6 MENTS.

7 (a) INITIAL COMPLIANCE.—

8 (1) IN GENERAL.—Not later than 12 months

9 after the date on which standards are adopted under

10 part 2 with respect to a type of transaction or data

11 elements for a type of health information, a health

12 plan, health care provider, or purchasing cooperative

13 shall comply with the requirements of this subtitle

14 with respect to such transaction or information.

15 (2) ADDITIONAL DATA ELEMENTS.—Not later

16 than 12 months after the date on which the Sec17 retary adopts an addition to a set of data elements

18 for health information under part 2, a health plan,

19 health care provider, or purchasing cooperative shall

20 comply with the requirements of this subtitle using

21 such data elements.

22 (b) COMPLIANCE WITH MODIFIED STANDARDS.—

23 (1) IN GENERAL.—If the Secretary adopts a

24 modified standard under part 2, a health plan,

25 health care provider, or purchasing cooperative shall
895

•S 2357

1 be required to comply with the modified standard at

2 such time as the Secretary determines appropriate

3 taking into account the time needed to comply due

4 to the nature and extent of the modification.

5 (2) SPECIAL RULE.—In the case of modifica6 tions to standards that do not occur within the 12-

7 month period beginning on the date such standards

8 are adopted, the time determined appropriate by the

9 Secretary under paragraph (1) shall be no sooner

10 than the last day of the 90-day period beginning on

11 the date such modified standard is adopted and no

12 later than the last day of the 12 month period begin13 ning on the date such modified standard is adopted.

14 PART 4—ACCESSING HEALTH INFORMATION

15 SEC. 5131. ACCESSING HEALTH INFORMATION FOR AU16 THORIZED PURPOSES.

17 (a) IN GENERAL.—The Secretary shall adopt tech18 nical standards for appropriate persons, including health

19 plans, health care providers, health information network

20 services certified under section 5141, health researchers,

21 and Federal and State agencies, to locate and access the

22 health information that is available through the health in23 formation network due to the requirements of this subtitle.

24 Such technical standards shall ensure that any request to
896

•S 2357

1 locate or access information shall be authorized under sub2 title C.

3 (b) PROCUREMENT RULE FOR GOVERNMENT AGEN4 CIES.—

5 (1) IN GENERAL.—Health information protec6 tion organizations certified under section 5141 shall

7 make available to a Federal or State agency pursu8 ant to a Federal Acquisition Regulation (or an

9 equivalent State system), any non-identifiable health

10 information that is requested by such agency.

11 (2) CERTAIN INFORMATION AVAILABLE AT LOW

12 COST.—If a health information protection organiza13 tion described in paragraph (1) needs information

14 from a health plan or health care provider in order

15 to comply with a request of a Federal or State agen16 cy that is necessary to comply with a requirement

17 under this Act, such plan or provider shall make

18 such information available to such organization for

19 a charge that does not exceed the reasonable cost of

20 transmitting the information. If requested, a health

21 information protection organization that receives in22 formation under the preceding sentence must make

23 such information available to any other such organi24 zation that is certified under section 5141 for a
897

•S 2357

1 charge that does not exceed the reasonable cost of

2 transmitting the information.

3 (c) FUNCTIONAL SEPARATION.—The standards

4 adopted by the Secretary under subsection (a) shall ensure

5 that any health information disclosed under such sub6 section shall not, after such disclosure, be used or released

7 for an administrative, regulatory, or law enforcement pur8 pose unless such disclosure was made for such purpose.

9 (d) PUBLIC USE FUNCTIONS.—Nothing in this sub10 title shall be construed to limit the authority of a Federal

11 or State agency to make non-identifiable health informa12 tion available for public use functions.

13 SEC. 5132. RESPONDING TO ACCESS REQUESTS.

14 (a) IN GENERAL.—The Secretary may adopt, and

15 modify as appropriate, standards under which a health

16 care provider or health plan shall respond to requests for

17 access to health information consistent with this subtitle

18 and subtitle C.

19 (b) STANDARDS DESCRIBED.—The standards under

20 subsection (a) shall provide—

21 (1) for a standard format under which a pro22 vider or plan will respond to each request either by

23 satisfying the request or responding with an expla24 nation of the specific restriction which results in a

25 failure to satisfy the request; and
898

•S 2357

1 (2) that any restrictions will not prevent a plan

2 or provider from responding to a request in a timely

3 manner taking into account the age and amount of

4 the information being requested.

5 (c) CONSTRUCTION.—Nothing in this section shall be

6 construed as permitting a health care provider or health

7 plan to refuse to disclose any health information that is

8 required to be disclosed by law.

9 SEC. 5133. LENGTH OF TIME INFORMATION SHOULD BE AC10 CESSIBLE.

11 The Secretary shall adopt standards with respect to

12 the length of time any standard data elements for a type

13 of health information should be accessible through the

14 health information network.

15 SEC. 5134. TIMETABLES FOR ADOPTION OF STANDARDS

16 AND COMPLIANCE.

17 (a) INITIAL STANDARDS.—The Secretary shall adopt

18 standards under this part not later than 9 months after

19 the date of the enactment of this subtitle and such stand20 ards shall be effective upon adoption.

21 (b) MODIFICATIONS TO STANDARDS.—

22 (1) IN GENERAL.—Except as provided in para23 graph (2), the Secretary shall review the standards

24 adopted under this part and shall adopt modified

25 standards as determined appropriate, but no more
899

•S 2357

1 frequently than once every 6 months. Any modifica2 tion to standards shall be completed in a manner

3 which minimizes the disruption and cost of compli4 ance. Any modifications to standards adopted under

5 this part shall be effective upon adoption.

6 (2) SPECIAL RULE.—The Secretary shall not

7 adopt modifications to any standards adopted under

8 this part during the 12-month period beginning on

9 the date such standards are adopted unless the Sec10 retary determines that a modification is necessary in

11 order to permit compliance with the requirements of

12 this part.

13 PART 5—STANDARDS AND CERTIFICATION FOR

14 HEALTH INFORMATION NETWORK

15 SEC. 5141. STANDARDS AND CERTIFICATION FOR HEALTH

16 INFORMATION NETWORK SERVICES.

17 (a) STANDARDS FOR OPERATION.—The Secretary

18 shall establish standards with respect to the operation of

19 health information network services, including standards

20 ensuring that—

21 (1) such services develop, operate, and cooper22 ate with one another to form the health information

23 network;

24 (2) such services meet all of the requirements

25 under subtitle C that are applicable to such services;
900

•S 2357

1 (3) such services make public information con2 cerning their performance, as measured by uniform

3 indicators such as accessibility, transaction respon4 siveness, administrative efficiency, reliability, de5 pendability, and any other indicator determined ap6 propriate by the Secretary;

7 (4) such services have security procedures that

8 are consistent with the privacy requirements under

9 subtitle C, including secure methods of access to and

10 transmission of data;

11 (5) such services, if they are part of a larger or12 ganization, have policies and procedures in place

13 which isolate their activities with respect to process14 ing information in a manner that prevents access to

15 such information by such larger organization.

16 (b) CERTIFICATION BY THE SECRETARY.—

17 (1) ESTABLISHMENT.—Not later than 12

18 months after the date of the enactment of this sub19 title, the Secretary shall establish a certification pro20 cedure for health information network services which

21 ensures that certified services are qualified to meet

22 the requirements of this subtitle and the standards

23 established by the Secretary under this section. Such

24 certification procedure shall be implemented in a
901

•S 2357

1 manner that minimizes the costs and delays of oper2 ations for such services.

3 (2) APPLICATION.—Each entity desiring to be

4 certified as a health information network service

5 shall apply to the Secretary for certification in a

6 form and manner determined appropriate by the

7 Secretary.

8 (3) AUDITS AND REPORTS.—The procedure es9 tablished under paragraph (1) shall provide for au10 dits by the Secretary and reports by an entity cer11 tified under this section as the Secretary determines

12 appropriate in order to monitor such entity’s compli13 ance with the requirements of this subtitle, subtitle

14 C, and the standards established by the Secretary

15 under this section.

16 (4) RECERTIFICATION.—A health information

17 network service must be recertified under this sub18 section at least every 3 years.

19 (c) LOSS OF CERTIFICATION.—

20 (1) MANDATORY TERMINATION.—Except as

21 provided in paragraph (3), if a health information

22 network service violates a requirement imposed on

23 such service under subtitle C, its certification under

24 this section shall be terminated unless the Secretary
902

•S 2357

1 determines that appropriate corrective action has

2 been taken.

3 (2) DISCRETIONARY TERMINATION.—If a health

4 information network service violates a requirement

5 or standard imposed under this subtitle and a pen6 alty has been imposed under section 5151, the Sec7 retary shall review the certification of such service

8 and may terminate such certification.

9 (3) CONDITIONAL CERTIFICATION—The Sec10 retary may establish a procedure under which a

11 health information network service may remain cer12 tified on a conditional basis if the service is operat13 ing consistently with a plan intended to correct any

14 violations described in paragraphs (1) or (2). Such

15 procedure may provide for the appointment of a

16 trustee to continue operation of the service until the

17 requirements for full certification are met.

18 (d) CERTIFICATION BY PRIVATE ENTITIES.—The

19 Secretary may designate private entities to conduct the

20 certification procedures established by the Secretary under

21 this section. A health information network service certified

22 by such an entity in accordance with such designation

23 shall be considered to be certified by the Secretary.
903

•S 2357

1 SEC. 5142. ENSURING AVAILABILITY OF INFORMATION.

2 The Secretary shall establish a procedure under

3 which a health plan or health care provider which does

4 not have the ability to transmit standard data elements

5 directly or does not have access to a health information

6 network service certified under section 5141 shall be able

7 to make health information available for disclosure as au8 thorized by this subtitle.

9 PART 6—PENALTIES

10 SEC. 5151. GENERAL PENALTY FOR FAILURE TO COMPLY

11 WITH REQUIREMENTS AND STANDARDS.

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

13 (b), the Secretary shall impose on any person that violates

14 a requirement or standard imposed under this subtitle a

15 penalty of not more than $1,000 for each violation. The

16 provisions of section 1128A of the Social Security Act

17 (other than subsections (a) and (b) and the second sen18 tence of subsection (f)) shall apply to the imposition of

19 a civil money penalty under this subsection in the same

20 manner as such provisions apply to the imposition of a

21 penalty under section 1128A of such Act.

22 (b) LIMITATIONS.—

23 (1) NONCOMPLIANCE NOT DISCOVERED EXER24 CISING REASONABLE DILIGENCE.—A penalty may

25 not be imposed under subsection (a) if it is estab26 lished to the satisfaction of the Secretary that the
904

•S 2357

1 person liable for the penalty did not know, and by

2 exercising reasonable diligence would not have

3 known, that such person failed to comply with the

4 requirement or standard described in subsection (a).

5 (2) FAILURES DUE TO REASONABLE CAUSE.—

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

7 subparagraphs (B) and (C), a penalty may not

8 be imposed under subsection (a) if—

9 (i) the failure to comply was due to

10 reasonable cause and not to willful neglect;

11 and

12 (ii) the failure to comply is corrected

13 during the 30-day period beginning on the

14 1st date the person liable for the penalty

15 knew, or by exercising reasonable diligence

16 would have known, that the failure to com17 ply occurred.

18 (B) EXTENSION OF PERIOD.—

19 (i) NO PENALTY.—The period re20 ferred to in subparagraph (A)(ii) may be

21 extended as determined appropriate by the

22 Secretary based on the nature and extent

23 of the failure to comply.

24 (ii) ASSISTANCE.—If the Secretary

25 determines that a health plan, health care
905

•S 2357

1 provider, or purchasing cooperative failed

2 to comply because such person was unable

3 to comply, the Secretary may provide tech4 nical assistance to such person. Such as5 sistance shall be provided in any manner

6 determined appropriate by the Secretary.

7 (3) REDUCTION.—In the case of a failure to

8 comply which is due to reasonable cause and not to

9 willful neglect, any penalty under subsection (a) that

10 is not entirely waived under paragraph (2) may be

11 waived to the extent that the payment of such pen12 alty would be excessive relative to the compliance

13 failure involved.

14 PART 7—MISCELLANEOUS PROVISIONS

15 SEC. 5161. IMPOSITION OF ADDITIONAL REQUIREMENTS.

16 (a) DATA ELEMENT STANDARDS.—A person may not

17 impose a standard on another person that is in addition

18 to the standards adopted by the Secretary under section

19 5112 unless—

20 (1) such person voluntarily agrees to such

21 standard; or

22 (2) a waiver is granted under subsection (c) to

23 impose such standard.

24 (b) TRANSACTIONS AND ACCESS STANDARDS.—A

25 person may not impose a standard on another person that
906

•S 2357

1 is in addition to the standards adopted by the Secretary

2 under section 5113 or 5131 unless such person voluntarily

3 agrees to such standard.

4 (c) CONDITIONS FOR WAIVERS.—

5 (1) IN GENERAL.—A person may request a

6 waiver from the Secretary in order to require an7 other person to comply with a standard that is in

8 addition to the standards adopted by the Secretary

9 under section 5112.

10 (2) CONSIDERATION OF WAIVER REQUESTS.—

11 No waiver may be granted unless the Secretary de12 termines that the value of the data to be exchanged

13 for research or other purposes significantly out14 weighs the administrative cost of the additional

15 standard taking into consideration the burden of the

16 timing of the imposition of the additional standard.

17 (3) ANONYMOUS REPORTING.—If a person at18 tempts to impose a standard in addition to the

19 standards adopted by the Secretary under section

20 5112, the person on whom such additional standard

21 is being imposed may contact the Secretary. The

22 Secretary shall develop a procedure under which the

23 contacting person shall remain anonymous. The Sec24 retary shall notify the person imposing the addi25 tional standard that the additional standard may not
907

•S 2357

1 be imposed unless the other person voluntarily

2 agrees to such standard or a waiver is obtained

3 under this subsection.

4 SEC. 5162. EFFECT ON STATE LAW.

5 (a) IN GENERAL.—A provision, requirement, or

6 standard under this subtitle shall supersede any contrary

7 provision of State law, including—

8 (1) a provision of State law that requires medi9 cal or health plan records (including billing informa10 tion) to be maintained or transmitted in written

11 rather than electronic form, and

12 (2) a provision of State law which provides for

13 requirements or standards that are more stringent

14 than the requirements or standards under this sub15 title;

16 except where the Secretary determines that the provision

17 is necessary to prevent fraud and abuse, with respect to

18 controlled substances, or for other purposes.

19 (b) PUBLIC HEALTH REPORTING.—Nothing in this

20 subtitle shall be construed to invalidate or limit the au21 thority, power, or procedures established under any law

22 providing for the reporting of disease or injury, child

23 abuse, birth, or death, public health surveillance, or public

24 health investigation or intervention.
908

•S 2357

1 SEC. 5164. HEALTH INFORMATION CONTINUITY.

2 (a) INFORMATION HELD BY HEALTH PLANS AND

3 PROVIDERS.—If a health plan or health care provider

4 takes any action that would threaten the continued avail5 ability of the standard data elements of health information

6 held by such plan or provider, such data elements shall

7 be obtained by the State in which such plan or provider

8 is located. The State shall ensure that such data elements

9 are transferred to a health plan or health care provider

10 in accordance with procedures established by the Sec11 retary.

12 (b) INFORMATION HELD BY HEALTH INFORMATION

13 NETWORK SERVICES.—If a health information network

14 service certified under section 5141 loses its certified sta15 tus or takes any action that would threaten the continued

16 availability of the standard data elements of health infor17 mation held by such service, such data elements shall be

18 transferred to another health information network service

19 certified under section 5141, as designated by the Sec20 retary.

21 SEC. 5165. PROTECTION OF COMMERCIAL INFORMATION.

22 In adopting standards under this subtitle, the Sec23 retary shall not require disclosure of trade secrets and

24 confidential commercial information by entities operating

25 in the health information network except as required by

26 law.
909

•S 2357

1 SEC. 5166. PAYMENT FOR HEALTH CARE SERVICES OR

2 HEALTH PLAN PREMIUMS.

3 Nothing in this subtitle shall be construed to prohibit

4 payments for health care services or health plan premiums

5 from being made by debit, credit, or other payment cards

6 or numbers or other electronic payment means.

7 SEC. 5167. HEALTH SECURITY CARDS.

8 (a) IN GENERAL.—The Secretary shall establish

9 standards relating to the form of health security cards is10 sued by health plans and the information to be encoded

11 electronically on such cards.

12 (b) FORM DESCRIBED.—The standard form for a

13 health security card shall be a card which—

14 (1) is made of plastic or a similar durable ma15 terial with a useful life of at least 5 years;

16 (2) is resistant to counterfeiting;

17 (3) can store information that can be encoded

18 and retrieved electronically;

19 (4) can be produced in a cost-effective manner

20 and used in all types of health care locations; and

21 (5) specifies on its face the social security ac22 count number assigned to the individual who is the

23 cardholder by the Secretary under section 205(c)(2)

24 of the Social Security Act.

25 (b) INFORMATION DESCRIBED.—The information

26 electronically encoded on a health security card shall in-
910

•S 2357

1 clude the identity of the individual to whom the card was

2 issued, including such individual’s personal health identi3 fier specified under section 5112(c)(1), and may include

4 any other information that the Secretary determines may

5 be useful in order for the card to serve the purpose of

6 easing access to and paying for health care services. A

7 health plan shall make available to an individual card8 holder, upon demand by such individual, a printed copy

9 of all information electronically encoded on such individ10 ual’s health security card.

11 SEC. 5168. MISUSE OF HEALTH SECURITY CARD OR PER12 SONAL HEALTH IDENTIFIER.

13 (a) HEALTH SECURITY CARD.—A person who—

14 (1) requires the display of, requires the use of,

15 or uses a health security card for any purpose other

16 than obtaining or paying for health care;

17 (2) falsely makes, forges, counterfeits or alters

18 a health security card;

19 (3) without lawful authority prints, photo20 graphs, or makes any impression in the likeness of

21 any health security card; or

22 (4) sells, transfers, or otherwise delivers a false,

23 forged, counterfeited, or altered health security card

24 knowing that the card is false, forged, counterfeited,

25 or altered;
911

•S 2357

1 shall be fined not more than $25,000, imprisoned not

2 more than 2 years, or both.

3 (b) PERSONAL HEALTH IDENTIFIER.—A person who

4 requires the disclosure of, requires the use of, or uses an

5 individual’s personal health identifier for any purpose that

6 is not authorized by the Secretary, shall be fined not more

7 than $25,000, imprisoned not more than 2 years, or both.

8 SEC. 5169. DIRECT BILLING FOR CLINICAL LABORATORY

9 SERVICES.

10 (a) IN GENERAL.—

11 (1) REQUIREMENT.—Except as provided in

12 paragraph (2), in the case of a claim for payment

13 for a clinical diagnostic laboratory test for which

14 payment may otherwise be made, payment may be

15 made only to the person who, or entity which, per16 formed or supervised the test.

17 (2) EXCEPTION.—Payment for a clinical diag18 nostic laboratory test may be made to a physician

19 with whom the physician who performed the test

20 shares a practice.

21 (b) ADDITIONAL EXCEPTIONS.—The Secretary may,

22 by regulation, establish exceptions to the requirement

23 under subsection (a)(1) that are in addition to the excep24 tion under subsection (a)(2). In establishing such excep25 tions the Secretary shall take into account—
912

•S 2357

1 (1) circumstances in which an individual’s pri2 vacy might be violated; or

3 (2) the need for confidentiality on the part of

4 the person furnishing the test.

5 SEC. 5170. AUTHORIZATION OF APPROPRIATIONS.

6 There are authorized to be appropriated such sums

7 as may be necessary to carry out the purposes of this sub8 title.

9 PART 8—ASSISTANCE TO THE SECRETARY

10 SEC. 5171. GENERAL REQUIREMENT ON SECRETARY.

11 In complying with any requirements imposed under

12 this subtitle, the Secretary shall rely on recommendations

13 of the Health Information Advisory Committee established

14 under section 5172 and shall consult with appropriate

15 Federal agencies.

16 SEC. 5172. HEALTH INFORMATION ADVISORY COMMITTEE.

17 (a) ESTABLISHMENT.—There is established a com18 mittee to be known as the Health Care Information Advi19 sory Committee.

20 (b) DUTY.—

21 (1) IN GENERAL.—The committee shall—

22 (A) provide assistance to the Secretary in

23 complying with the requirements imposed on

24 the Secretary under this subtitle and subtitle C;
913

•S 2357

1 (B) be generally responsible for advising

2 the Secretary and the Congress on the status of

3 the health information network; and

4 (C) make recommendations to correct any

5 problems that may occur in the network’s im6 plementation and ongoing operations and to re7 fine and improve the network.

8 (2) TECHNICAL ASSISTANCE.—In performing

9 its duties under this subsection, the committee shall

10 receive technical assistance from appropriate Federal

11 agencies.

12 (c) MEMBERSHIP.—

13 (1) IN GENERAL.—The committee shall consist

14 of 15 members to be appointed by the President not

15 later than 60 days after the date of the enactment

16 of this subtitle. The President shall designate 1

17 member as the Chair.

18 (2) EXPERTISE.—The membership of the com19 mittee shall consist of individuals who are of recog20 nized standing and distinction and who possess the

21 demonstrated capacity to discharge the duties im22 posed on the committee.

23 (3) TERMS.—Each member of the committee

24 shall be appointed for a term of 5 years, except that

25 the members first appointed shall serve staggered
914

•S 2357

1 terms such that the terms of no more than 3 mem2 bers expire at one time.

3 (4) VACANCIES.—

4 (A) IN GENERAL.—A vacancy on the com5 mittee shall be filled in the manner in which the

6 original appointment was made and shall be

7 subject to any conditions which applied with re8 spect to the original appointment.

9 (B) FILLING UNEXPIRED TERM.—An indi10 vidual chosen to fill a vacancy shall be ap11 pointed for the unexpired term of the member

12 replaced.

13 (C) EXPIRATION OF TERMS.—The term of

14 any member shall not expire before the date on

15 which the member’s successor takes office.

16 (5) CONFLICTS OF INTEREST.—Members of the

17 committee shall disclose upon appointment to the

18 committee or at any subsequent time that it may

19 occur, conflicts of interest.

20 (d) MEETINGS.—

21 (1) IN GENERAL.—Except as provided in para22 graph (2), the committee shall meet at the call of

23 the Chair.

24 (2) INITIAL MEETING.—Not later than 30 days

25 after the date on which all members of the commit-
915

•S 2357

1 tee have been appointed, the committee shall hold its

2 first meeting.

3 (3) QUORUM.—A majority of the members of

4 the committee shall constitute a quorum, but a less5 er number of members may hold hearings.

6 (e) POWER TO HOLD HEARINGS.—The committee

7 may hold such hearings, sit and act at such times and

8 places, take such testimony, and receive such evidence as

9 the committee considers advisable to carry out the pur10 poses of this section.

11 (f) OTHER ADMINISTRATIVE PROVISIONS.—Subpara12 graphs (C), (D), and (H) of section 1886(e)(6) of the So13 cial Security Act shall apply to the committee in the same

14 manner as they apply to the Prospective Payment Assess15 ment Commission.

16 (g) REPORTS.—

17 (1) IN GENERAL.—The committee shall annu18 ally prepare and submit to Congress and the Sec19 retary a report including at least an analysis of—

20 (A) the status of the health information

21 network established under this subtitle, includ22 ing whether the network is fulfilling the pur23 pose described in section 5101;

24 (B) the savings and costs of the network;
916

•S 2357

1 (C) the activities of health information net2 work services certified under section 5141,

3 health care providers, health plans, and other

4 entities using the network to exchange health

5 information;

6 (D) the extent to which entities described

7 in subparagraph (C) are meeting the standards

8 adopted under this subtitle and working to9 gether to form an integrated network that

10 meets the needs of its users;

11 (E) the extent to which entities described

12 in subparagraph (C) are meeting the privacy

13 and security protections of subtitle C;

14 (F) the number and types of penalties as15 sessed for noncompliance with the standards

16 adopted under this subtitle;

17 (G) whether the Federal Government and

18 State Governments are receiving information of

19 sufficient quality to meet their responsibilities

20 under the Health Security Act;

21 (H) any problems with respect to imple22 mentation of the network;

23 (I) the extent to which timetables under

24 this subtitle for the adoption and implementa25 tion of standards are being met; and
917

•S 2357

1 (J) any legislative recommendations relat2 ed to the health information network.

3 (2) AVAILABILITY TO THE PUBLIC.—Any infor4 mation in the report submitted to Congress under

5 paragraph (1) shall be made available to the public

6 unless such information may not be disclosed by law.

7 (h) DURATION.—Notwithstanding section 14(a) of

8 the Federal Advisory Committee Act, the committee shall

9 continue in existence until otherwise provided by law.

10 (i) AUTHORIZATION OF APPROPRIATIONS.—

11 (1) IN GENERAL.—There are authorized to be

12 appropriated such sums as may be necessary to

13 carry out the purposes of this section.

14 (2) AVAILABILITY.—Any sums appropriated

15 under the authorization contained in this subsection

16 shall remain available, without fiscal year limitation,

17 until expended.

18 PART 9—DEMONSTRATION PROJECTS FOR COM19 MUNITY-BASED CLINICAL INFORMATION

20 SYSTEMS

21 SEC. 5181. GRANTS FOR DEMONSTRATION PROJECTS.

22 (a) IN GENERAL.—The Secretary may make grants

23 for demonstration projects to promote the development

24 and use of electronically integrated community-based clini-
918

•S 2357

1 cal information systems and computerized patient medical

2 records.

3 (b) APPLICATIONS.—

4 (1) SUBMISSION.—To apply for a grant under

5 this part for any fiscal year, an applicant shall sub6 mit an application to the Secretary in accordance

7 with the procedures established by the Secretary.

8 (2) CRITERIA FOR APPROVAL.—The Secretary

9 may not approve an application submitted under

10 paragraph (1) unless the application includes assur11 ances satisfactory to the Secretary regarding the fol12 lowing:

13 (A) USE OF EXISTING TECHNOLOGY.—

14 Funds received under this part will be used to

15 apply telecommunications and information sys16 tems technology that is in existence on the date

17 the application is submitted in a manner that

18 improves the quality of health care, reduces the

19 costs of such care, and protects the privacy and

20 confidentiality of information relating to the

21 physical or mental condition of an individual.

22 (B) USE OF EXISTING INFORMATION SYS23 TEMS.—Funds received under this part will be

24 used—
919

•S 2357

1 (i) to enhance telecommunications or

2 information systems that are operating on

3 the date the application is submitted;

4 (ii) to integrate telecommunications or

5 information systems that are operating on

6 the date the application is submitted; or

7 (iii) to connect additional users to

8 telecommunications or information net9 works or systems that are operating on the

10 date the application is submitted.

11 (C) MATCHING FUNDS.—The applicant

12 shall make available funds for the demonstra13 tion project in an amount that equals at least

14 20 percent of the cost of the project.

15 (c) GEOGRAPHIC DIVERSITY.—In making any grants

16 under this part, the Secretary shall, to the extent prac17 ticable, make grants to persons representing different geo18 graphic areas of the United States, including urban and

19 rural areas.

20 (d) REVIEW AND SANCTIONS.—The Secretary shall

21 review at least annually the compliance of a person receiv22 ing a grant under this part with the provisions of this

23 part. The Secretary shall establish a procedure for deter24 mining whether such a person has failed to comply sub-
920

•S 2357

1 stantially within the provisions of this part and the sanc2 tions to be imposed for any such noncompliance.

3 (e) ANNUAL REPORT.—The Secretary shall submit

4 an annual report to the President for transmittal to Con5 gress containing a description of the activities carried out

6 under this part.

7 (g) AUTHORIZATION OF APPROPRIATIONS.—There

8 are authorized to be appropriated such sums as may be

9 necessary to carry out the purposes of this section.

10 PART 10—MEDICARE AND MEDICAID COVERAGE

11 DATA BANK

12 SEC. 5191. REPEAL OF MEDICARE AND MEDICAID COV13 ERAGE DATA BANK.

14 (a) REPEAL OF DATA BANK.—Section 1144 of the

15 Social Security Act (42 U.S.C. 1320b–14), as added by

16 section 13581 of the Omnibus Budget Reconciliation Act

17 of 1993, is repealed.

18 (b) CONFORMING AMENDMENTS.—

19 (1) MEDICARE.—Section 1862(b)(5) of such

20 Act (42 U.S.C. 1395y(b)(5)) is amended—

21 (A) in subparagraph (B), by striking ‘‘the

22 information received under’’ and all that follows

23 and inserting ‘‘the information received under

24 subparagraph (A) for the purposes of carrying

25 out this subsection.’’; and
921

•S 2357

1 (B) in subparagraph (C)(i), by striking

2 ‘‘subparagraph (B)(i)’’ and inserting ‘‘subpara3 graph (B)’’.

4 (2) MEDICAID.—Section 1902(a)(25)(A)(i) of

5 such Act (42 U.S.C. 1396(a)(25)(A)(i)) is amended

6 by striking ‘‘(including the use of information col7 lected by the Medicare and Medicaid Coverage Data

8 Bank under section 1144 and any additional meas9 ures as specified’’ and inserting ‘‘(as specified’’.

10 (3) CONFORMING AMENDMENT RELATED TO

11 DATA MATCHES.—Subsection (a)(8)(B) of section

12 552a of title 5, United States Code, is amended—

13 (A) in clause (v), by adding ‘‘; or’’ at the

14 end;

15 (B) in clause (vi), by striking ‘‘; or’’ and

16 inserting a semicolon; and

17 (C) by striking clause (vii).

18 (4) CONFORMING AMENDMENT TO ERISA.—

19 (A) Section 101 of the Employee Retire20 ment Income Security Act of 1974 (29 U.S.C.

21 1031) is amended—

22 (i) by striking subsection (f); and

23 (ii) by redesignating subsection (g) as

24 subsection (f).
922

•S 2357

1 (B) Section 502(a) of such Act (29 U.S.C.

2 1132(a)) is amended—

3 (i) in paragraph (6), by striking the

4 semicolon at the end and inserting ‘‘; or’’;

5 (ii) in paragraph (7), by striking ‘‘;

6 or’’ and inserting a period; and

7 (iii) by striking paragraph (8).

8 (C) Section 502(c) of such Act (29 U.S.C.

9 1132(c)) is amended by striking paragraph (4).

10 (D) Section 502(e)(1) of such Act (29

11 U.S.C. 1132(e)(1)) is amended by striking ‘‘fi12 duciary, or any person referred to in section

13 101(f)(1)’’ and inserting ‘‘or fiduciary’’.

14 Subtitle C—Privacy of Health

15 Information

16 PART 1—FINDINGS AND DEFINITIONS

17 SEC. 5201. FINDINGS AND PURPOSES.

18 (a) FINDINGS.—The Congress finds as follows:

19 (1) The improper disclosure of individually

20 identifiable health care information may cause sig21 nificant harm to an individual’s interests in privacy,

22 health care, and reputation and may unfairly affect

23 the ability of an individual to obtain employment,

24 education, insurance, and credit.
923

•S 2357

1 (2) The movement of people and health care re2 lated information across State lines, the availability

3 of, access to, and exchange of health care related in4 formation with Federally funded health care sys5 tems, the medicare program under title XVIII of the

6 Social Security Act, and the medicaid program

7 under title XIX of such Act, through automated

8 data banks and networks, and the emergence of

9 other multistate health care providers and payors

10 create a need for a uniform Federal law governing

11 the disclosure of health care information.

12 (b) PURPOSE.—The purpose of this subtitle is to es13 tablish effective mechanisms to protect the privacy of indi14 viduals with respect to individually identifiable health care

15 information that is created or maintained as part of health

16 treatment, enrollment, payment, testing, or research proc17 esses.

18 SEC. 5202. DEFINITIONS.

19 (a) TERMS RELATING TO PROTECTED HEALTH IN20 FORMATION.—In this subtitle:

21 (1) PROTECTED HEALTH INFORMATION.—The

22 term ‘‘protected health information’’ means any in23 formation, including demographic information col24 lected from an individual, whether oral or recorded

25 in any form or medium, that—
924

•S 2357

1 (A) is created or received by a health care

2 provider, health plan, health oversight agency,

3 health researcher, public health authority, em4 ployer, life insurer, school or university, or cer5 tified health information network service; and

6 (B) relates to the past, present, or future

7 physical or mental health or condition of an in8 dividual, the provision of health care to an indi9 vidual, or the past, present, or future payment

10 for the provision of health care to an individual,

11 and—

12 (i) identifies an individual; or

13 (ii) with respect to which there is a

14 reasonable basis to believe that the infor15 mation can be used to identify an individ16 ual.

17 (2) DISCLOSE.—The term ‘‘disclose’’, when

18 used with respect to protected health information,

19 means to provide access to the information, but only

20 if such access is provided to a person other than the

21 individual who is the subject of the information.

22 (b) TERMS RELATING TO HEALTH CARE SYSTEM

23 PARTICIPANTS.—In this subtitle:

24 (1) HEALTH INFORMATION TRUSTEE.—The

25 term ‘‘health information trustee’’ means—
925

•S 2357

1 (A) a health care provider, health plan,

2 health oversight agency, certified health infor3 mation network service, employer, life insurer,

4 or school or university insofar as it creates, re5 ceives, maintains, uses, or transmits protected

6 health information;

7 (B) any person who obtains protected

8 health information under section 5213, 5217,

9 5218, 5221, 5222, 5226, or 5231; and

10 (C) any employee or agent of a person cov11 ered under subparagraph (A) or (B).

12 (2) HEALTH CARE.—The term ‘‘health care’’—

13 (A) means—

14 (i) a preventative, diagnostic, thera15 peutic, rehabilitative, maintenance, or pal16 liative care, counseling, service, or proce17 dure—

18 (I) with respect to the physical or

19 mental condition of an individual; or

20 (II) affecting the structure or

21 function of the human body or any

22 part of the human body; or

23 (ii) any sale or dispensing of a drug,

24 device, equipment, or other item to an indi-
926

•S 2357

1 vidual, or for the use of an individual, pur2 suant to a prescription; but

3 (B) does not include any item or service

4 that is not furnished for the purpose of examin5 ing, maintaining, or improving the health of an

6 individual.

7 (3) HEALTH CARE PROVIDER.—The term

8 ‘‘health care provider’’ means a person who is li9 censed, certified, registered, or otherwise authorized

10 by law to provide an item or service that constitutes

11 health care in the ordinary course of business or

12 practice of a profession.

13 (4) HEALTH OVERSIGHT AGENCY.—The term

14 ‘‘health oversight agency’’ means a person who—

15 (A) performs or oversees the performance

16 of an assessment, evaluation, determination, or

17 investigation relating to the licensing, accredita18 tion, or certification of health care

19 providers; or

20 (B)(i) performs or oversees the perform21 ance of an assessment, evaluation, determina22 tion, or investigation relating to the effective23 ness of, compliance with, or applicability of

24 legal, fiscal, medical, or scientific standards or

25 aspects of performance related to the delivery
927

•S 2357

1 of, or payment for, health care or relating to

2 health care fraud or fraudulent claims for pay3 ment regarding health; and

4 (ii) is a public agency, acting on behalf of

5 a public agency, acting pursuant to a require6 ment of a public agency, or carrying out activi7 ties under a Federal or State law governing the

8 assessment, evaluation, determination, or inves9 tigation described in clause (i).

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

11 shall have the meaning given such term under sec12 tion 5102.

13 (6) HEALTH RESEARCHER.—The term ‘‘health

14 researcher’’ means a person who conducts a bio15 medical, public health, epidemiological, health serv16 ices, or health statistics research project or a re17 search project on social and behavioral factors relat18 ing to health.

19 (7) INSTITUTIONAL REVIEW BOARD.—The term

20 ‘‘institutional review board’’ means—

21 (A) a board established in accordance with

22 regulations of the Secretary under section

23 491(a) of the Public Health Service Act;
928

•S 2357

1 (B) a similar board established by the Sec2 retary for the protection of human subjects in

3 research conducted by the Secretary; or

4 (C) a similar board established under regu5 lations of a Federal Government authority other

6 than the Secretary.

7 (8) PUBLIC HEALTH AUTHORITY.—The term

8 ‘‘public health authority’’ means an authority or in9 strumentality of the United States, a State, or a po10 litical subdivision of a State that is (A) responsible

11 for public health matters; and (B) engaged in such

12 activities as injury reporting, public health surveil13 lance, and public health investigation or interven14 tion.

15 (c) REFERENCES TO CERTIFIED ENTITIES.—In this

16 subtitle:

17 (1) CERTIFIED HEALTH INFORMATION NET18 WORK SERVICE.—The term ‘‘certified health infor19 mation network service’’ means a health information

20 service (as defined under section 5102) that is cer21 tified under section 5141.

22 (2) CERTIFIED HEALTH INFORMATION PROTEC23 TION ORGANIZATION.—The term ‘‘certified health

24 information protection organization’’ means a health
929

•S 2357

1 information protection organization (as defined in

2 section 5102) that is certified under section 5141.

3 (d) OTHER TERMS.—In this subtitle:

4 (1) INDIVIDUAL REPRESENTATIVE.—The term

5 ‘‘individual representative’’ means any individual le6 gally empowered to make decisions concerning the

7 provision of health care to an individual (where the

8 individual lacks the legal capacity under State law to

9 make such decisions) or the administrator or execu10 tor of the estate of a deceased individual.

11 (2) LAW ENFORCEMENT INQUIRY.—The term

12 ‘‘law enforcement inquiry’’ means an investigation or

13 official proceeding inquiring into whether there is a

14 violation of, or failure to comply with, any criminal

15 or civil statute or any regulation, rule, or order is16 sued pursuant to such a statute.

17 (3) PERSON.—The term ‘‘person’’ includes an

18 authority of the United States, a State, or a political

19 subdivision of a State.

20 PART 2—AUTHORIZED DISCLOSURES

21 Subpart A—General Provisions

22 SEC. 5206. GENERAL RULES REGARDING DISCLOSURE.

23 (a) GENERAL RULE.—A health information trustee

24 may disclose protected health information only for a pur25 pose that is authorized under this subtitle.
930

•S 2357

1 (b) DISCLOSURE WITHIN A TRUSTEE.—A health in2 formation trustee may disclose protected health informa3 tion to an officer, employee, or agent of the trustee, but

4 only for a purpose that is compatible with and related to

5 the purpose for which the information was collected or re6 ceived by that trustee.

7 (c) SCOPE OF DISCLOSURE.—

8 (1) IN GENERAL.—Every disclosure of protected

9 health information by a health information trustee

10 shall be limited to the minimum amount of informa11 tion necessary to accomplish the purpose for which

12 the information is disclosed.

13 (2) REGULATIONS.—The Secretary, after notice

14 and opportunity for public comment, may issue reg15 ulations under paragraph (1), which shall take into

16 account the technical capabilities of the record sys17 tems used to maintain protected health information

18 and the costs of limiting disclosure.

19 (d) NO GENERAL REQUIREMENT TO DISCLOSE.—

20 Nothing in this subtitle that permits a disclosure of health

21 information shall be construed to require such disclosure.

22 (e) USE AND REDISCLOSURE OF INFORMATION.—

23 The protected health information received under a disclo24 sure permitted by the subtitle may not be used or disclosed

25 unless the use or disclosure is necessary to fulfill the pur-
931

•S 2357

1 pose for which the information was obtained and is not

2 otherwise prohibited by law. Protected health information

3 about an individual that is disclosed under this subtitle

4 may not be used in, or disclosed to any person for use

5 in, any administrative, civil, or criminal action or inves6 tigation directed against the individual unless specifically

7 permitted by this subtitle.

8 (f) IDENTIFICATION OF DISCLOSED INFORMATION AS

9 PROTECTED INFORMATION.—

10 (1) IN GENERAL.—Except with respect to pro11 tected health information that is disclosed under sec12 tion 5213 and except as provided in paragraph (2),

13 a health information trustee may not disclose pro14 tected health information unless such information is

15 clearly identified as protected health information

16 that is subject to this subtitle.

17 (2) ROUTINE DISCLOSURES SUBJECT TO WRIT18 TEN AGREEMENT.—A health information trustee

19 who routinely discloses protected health information

20 to a person may satisfy the identification require21 ment in paragraph (1) through a written agreement

22 between the trustee and the person with respect to

23 the protected health information.

24 (g) CONSTRUCTION.—Nothing in this subtitle shall

25 be construed to limit the ability of a health information
932

•S 2357

1 trustee to charge a reasonable fee for the disclosure or

2 reproduction of health information.

3 (h) INFORMATION IN WHICH PROVIDERS ARE IDEN4 TIFIED.—The Secretary, after notice and opportunity for

5 public comment, may issue regulations protecting informa6 tion identifying providers in order to promote the availabil7 ity of health care services.

8 SEC. 5207. AUTHORIZATIONS FOR DISCLOSURE OF PRO9 TECTED HEALTH INFORMATION.

10 (a) WRITTEN AUTHORIZATIONS.—A health informa11 tion trustee may disclose protected health information

12 pursuant to an authorization executed by the individual

13 who is the subject of the information, if each of the follow14 ing requirements is met:

15 (1) WRITING.—The authorization is in writing,

16 signed by the individual who is the subject of the in17 formation, and dated on the date of such signature.

18 (2) SEPARATE FORM.—The authorization is not

19 on a form used to authorize or facilitate the provi20 sion of, or payment for, health care.

21 (3) TRUSTEE DESCRIBED.—The trustee is spe22 cifically named or generically described in the au23 thorization as authorized to disclose such informa24 tion.
933

•S 2357

1 (4) RECIPIENT DESCRIBED.—The person to

2 whom the information is to be disclosed is specifi3 cally named or generically described in the author4 ization as a person to whom such information may

5 be disclosed.

6 (5) STATEMENT OF INTENDED DISCLOSURES.—

7 The authorization contains an acknowledgment that

8 the individual who is the subject of the information

9 has read a statement of the disclosures that the per10 son to receive the protected health information in11 tends to make, which statement shall be in writing,

12 on a form that is distinct from the authorization for

13 disclosure, and which statement must be received by

14 the individual authorizing the disclosure on or before

15 such authorization is executed.

16 (6) INFORMATION DESCRIBED.—The informa17 tion to be disclosed is described in the authorization.

18 (7) EXPIRATION DATE SPECIFIED.—The au19 thorization specifies a date or event upon which the

20 authorization expires, which shall not exceed 2 years

21 from the date of the execution of the authorization.

22 (8) AUTHORIZATION TIMELY RECEIVED.—The

23 authorization is received by the trustee during a pe24 riod described in subsection (c)(1).
934

•S 2357

1 (9) DISCLOSURE TIMELY MADE.—The disclo2 sure occurs during a period described in subsection

3 (c)(2).

4 (b) AUTHORIZATIONS REQUESTED IN CONNECTION

5 WITH PROVISION OF HEALTH CARE.—

6 (1) IN GENERAL.—A health information trustee

7 may not request that an individual provide to any

8 other person an authorization described in sub9 section (a) on a day on which—

10 (A) the trustee provides health care to the

11 individual requested to provide the authoriza12 tion; or

13 (B) in the case of a trustee that is a health

14 facility, the individual is admitted into the facil15 ity as a resident or inpatient in order to receive

16 health care.

17 (2) EXCEPTION.—Paragraph (1) does not apply

18 if a health information trustee requests that an indi19 vidual provide an authorization described in sub20 section (a) for the purpose of assisting the individual

21 in obtaining counseling or social services from a per22 son other than the trustee.

23 (c) TIME LIMITATIONS ON AUTHORIZATIONS.—
935

•S 2357

1 (1) RECEIPT BY TRUSTEE.—For purposes of

2 subsection (a)(8), an authorization is timely received

3 if it is received by the trustee during—

4 (A) the 1-year period beginning on the

5 date on which the authorization is signed under

6 subsection (a)(1), if the authorization permits

7 the disclosure of protected health information to

8 a person who provides health counseling or so9 cial services to individuals; or

10 (B) the 30-day period beginning on the

11 date on which the authorization is signed under

12 subsection (a)(1), if the authorization permits

13 the disclosure of protected health information to

14 a person other than a person described in sub15 paragraph (A).

16 (2) DISCLOSURE BY TRUSTEE.—For purposes

17 of subsection (a)(9), a disclosure is timely made if

18 it occurs before the date or event specified in the au19 thorization upon which the authorization expires.

20 (d) REVOCATION OR AMENDMENT OF AUTHORIZA21 TION.—

22 (1) IN GENERAL.—An individual may in writing

23 revoke or amend an authorization described in sub24 section (a), in whole or in part, at any time, except

25 when—
936

•S 2357

1 (A) disclosure of protected health informa2 tion has been authorized to permit validation of

3 expenditures for health care; or

4 (B) action has been taken in reliance on

5 the authorization.

6 (2) NOTICE OF REVOCATION.—A health infor7 mation trustee who discloses protected health infor8 mation pursuant to an authorization that has been

9 revoked shall not be subject to any liability or pen10 alty under this subtitle if—

11 (A) the reliance was in good faith;

12 (B) the trustee had no notice of the rev13 ocation; and

14 (C) the disclosure was otherwise in accord15 ance with the requirements of this subtitle.

16 (e) DECEASED INDIVIDUAL.—The Secretary shall de17 velop and establish through regulation a procedure for ob18 taining protected health information relating to a deceased

19 individual when there is no individual representative for

20 such individual.

21 (f) MODEL AUTHORIZATIONS.—The Secretary, after

22 notice and opportunity for public comment, shall develop

23 and disseminate model written authorizations of the type

24 described in subsection (a) and model statements of in-
937

•S 2357

1 tended disclosures of the type described in subsection

2 (a)(5).

3 (g) COPY.—A health information trustee who dis4 closes protected health information pursuant to an author5 ization under this section shall maintain a copy of the au6 thorization.

7 SEC. 5208. CERTIFIED HEALTH INFORMATION NETWORK

8 SERVICES.

9 (a) IN GENERAL.—A health information trustee may

10 disclose protected health information to a certified health

11 information network service acting as an agent of the

12 trustee for any purpose permitted by this subtitle. Such

13 a service, acting as an agent of a trustee, may disclose

14 protected health information to another person as per15 mitted under this subtitle to facilitate the completion of

16 the purpose for which such information was disclosed to

17 the service.

18 (b) CERTIFIED HEALTH INFORMATION PROTECTION

19 ORGANIZATIONS.—A health information trustee may dis20 close protected health information to a certified health in21 formation protection organization for the purpose of creat22 ing non-identifiable health information (as defined in sec23 tion 5102).
938

•S 2357

1 Subpart B—Specific Disclosures Relating to Patient

2 SEC. 5211. DISCLOSURES FOR TREATMENT AND FINANCIAL

3 AND ADMINISTRATIVE TRANSACTIONS.

4 (a) HEALTH CARE TREATMENT.—A health care pro5 vider, health plan, employer, or person who receives pro6 tected health information under section 5213, may dis7 close protected health information to a health care pro8 vider for the purpose of providing health care to an indi9 vidual if the individual who is the subject of the informa10 tion has not previously objected in writing to the disclo11 sure.

12 (b) DISCLOSURE TO HEALTH PLANS FOR FINANCIAL

13 AND ADMINISTRATIVE PURPOSES.—A health care pro14 vider or employer may disclose protected health informa15 tion to a health plan for the purpose of providing for the

16 payment for, or reviewing the payment of, health care fur17 nished to an individual.

18 (c) DISCLOSURE BY HEALTH PLANS FOR FINANCIAL

19 AND ADMINISTRATIVE PURPOSES.—A health plan may

20 disclose protected health information to a health care pro21 vider or a health plan for the purpose of providing for

22 the payment for, or reviewing the payment of, health care

23 furnished to an individual.

24 SEC. 5212. NEXT OF KIN AND DIRECTORY INFORMATION.

25 (a) NEXT OF KIN.—A health care provider or person

26 who receives protected health information under section
939

•S 2357

1 5213 may disclose protected health information to the

2 next of kin, an individual representative of the individual

3 who is the subject of the information, or an individual with

4 whom that individual has a close personal relationship if—

5 (1) the individual who is the subject of the in6 formation—

7 (A) has been notified of the individual’s

8 right to object and has not objected to the dis9 closure;

10 (B) is not competent to be notified about

11 the right to object; or

12 (C) exigent circumstances exist such that

13 it would not be practicable to notify the individ14 ual of the right to object; and

15 (2) the information disclosed relates to health

16 care currently being provided to that individual.

17 (b) DIRECTORY INFORMATION.—A health care pro18 vider and a person receiving protected health information

19 under section 5213 may disclose protected health informa20 tion to any person if—

21 (1) the information does not reveal specific in22 formation about the physical or mental condition of

23 the individual who is the subject of the information

24 or health care provided to that person;
940

•S 2357

1 (2) the individual who is the subject of the in2 formation—

3 (A) has been notified of the individual’s

4 right to object and has not objected to the dis5 closure;

6 (B) is not competent to be notified about

7 the right to object; or

8 (C) exigent circumstances exist such that

9 it would not be practicable to notify the individ10 ual of the right to object; and

11 (3) the information consists only of 1 or more

12 of the following items:

13 (A) The name of the individual who is the

14 subject of the information.

15 (B) If the individual who is the subject of

16 the information is receiving health care from a

17 health care provider on a premises controlled by

18 the provider—

19 (i) the location of the individual on

20 the premises; and

21 (ii) the general health status of the in22 dividual, described as critical, poor, fair,

23 stable, or satisfactory or in terms denoting

24 similar conditions.
941

•S 2357

1 (d) IDENTIFICATION OF DECEASED INDIVIDUAL.—A

2 health care provider, health plan, employer, or life insurer,

3 may disclose protected health information if necessary to

4 assist in the identification of a deceased individual.

5 SEC. 5213. EMERGENCY CIRCUMSTANCES.

6 (a) IN GENERAL.—A health care provider, health

7 plan, employer, or person who receives protected health

8 information under this section may disclose protected

9 health information in emergency circumstances when nec10 essary to protect the health or safety of an individual from

11 imminent harm.

12 (b) SCOPE OF DISCLOSURE.—The disclosure of pro13 tected health information under this section shall be lim14 ited to persons who need the information to take action

15 to protect the health or safety of the individual.

16 Subpart C—Disclosure for Oversight, Public Health,

17 and Research Purposes

18 SEC. 5216. OVERSIGHT.

19 (a) IN GENERAL.—A health information trustee may

20 disclose protected health information to a health oversight

21 agency for an oversight function authorized by law.

22 (b) USE IN ACTION AGAINST INDIVIDUALS.—Not23 withstanding section 5206(e), protected health informa24 tion about an individual that is disclosed under this sec25 tion may be used in, or disclosed to any person for use
942

•S 2357

1 in, any administrative, civil, or criminal action or inves2 tigation directed against the individual who is the subject

3 of the information if the action or investigation arises out

4 of and is directly related to receipt of health care or pay5 ment for health care or an action involving a fraudulent

6 claim related to health.

7 SEC. 5217. PUBLIC HEALTH.

8 A health care provider, health plan, public health au9 thority, employer, or person who receives protected health

10 information under section 5213 may disclose protected

11 health information to a public health authority or other

12 person authorized by law for use in a legally authorized—

13 (1) disease or injury reporting;

14 (2) public health surveillance; or

15 (3) public health investigation or intervention.

16 SEC. 5218. HEALTH RESEARCH.

17 (a) IN GENERAL.—A health information trustee may

18 disclose protected health information to a health re19 searcher if an institutional review board determines that

20 the research project engaged in by the health researcher—

21 (1) requires use of the protected health infor22 mation for the effectiveness of the project; and

23 (2) is of sufficient importance to outweigh the

24 intrusion into the privacy of the individual who is
943

•S 2357

1 the subject of the information that would result from

2 the disclosure.

3 (b) RESEARCH REQUIRING DIRECT CONTACT.—A

4 health information trustee may disclose protected health

5 information to a health researcher for a research project

6 that includes direct contact with an individual who is the

7 subject of protected health information if an institutional

8 review board determines that—

9 (1) the research project meets the requirements

10 of paragraphs (1) and (2) of subsection (a);

11 (2) direct contact is necessary to accomplish the

12 research purpose; and

13 (3) the direct contact will be made in a manner

14 that minimizes the risk of harm, embarrassment, or

15 other adverse consequences to the individual.

16 (c) USE OF HEALTH INFORMATION NETWORK.—

17 (1) IN GENERAL.—A health information trustee

18 may disclose protected health information to a

19 health researcher using the health information net20 work (as defined in section 5102) only if an institu21 tional review board certified by the Secretary under

22 paragraph (2) determines that the research project

23 engaged in by the health researcher meets the re24 quirements of this section.
944

•S 2357

1 (2) CERTIFICATION OF INSTITUTIONAL REVIEW

2 BOARDS.—

3 (A) REGULATIONS.—The Secretary, after

4 notice and opportunity for public comment,

5 shall issue regulations establishing certification

6 requirements for institutional review boards

7 under this subtitle. Such regulations shall be

8 based on regulations issued under section

9 491(a) of the Public Health Service Act and

10 shall ensure that institutional review boards

11 certified under this paragraph have the quali12 fications to access and protect the confidential13 ity of research subjects.

14 (B) CERTIFICATION.—The Secretary shall

15 certify an institutional review board that meets

16 the certification requirements established by the

17 Secretary under subparagraph (A).

18 (d) OBLIGATIONS OF RECIPIENT.—A person who re19 ceives protected health information pursuant to subsection

20 (a)—

21 (1) shall remove or destroy, at the earliest op22 portunity consistent with the purposes of the project,

23 information that would enable an individual to be

24 identified, unless—
945

•S 2357

1 (A) an institutional review board has de2 termined that there is a health or research jus3 tification for retention of such identifiers; and

4 (B) there is an adequate plan to protect

5 the identifiers from disclosure that is inconsist6 ent with this section; and

7 (2) shall use protected health information solely

8 for purposes of the health research project for which

9 disclosure was authorized under this section.

10 Subpart D—Disclosure For Judicial, Administrative,

11 and Law Enforcement Purposes

12 SEC. 5221. JUDICIAL AND ADMINISTRATIVE PURPOSES.

13 A health care provider, health plan, health oversight

14 agency, or employer may disclose protected health infor15 mation—

16 (1) pursuant to the Federal Rules of Civil Pro17 cedure, the Federal Rules of Criminal Procedure, or

18 comparable rules of other courts or administrative

19 agencies in connection with litigation or proceedings

20 to which the individual who is the subject of the in21 formation is a party and in which the individual has

22 placed the individual’s physical or mental condition

23 in issue;

24 (2) to a court, and to others ordered by a court,

25 if the protected health information is developed in
946

•S 2357

1 response to a court-ordered physical or mental exam2 ination; or

3 (3) pursuant to a law requiring the reporting of

4 specific medical information to law enforcement au5 thorities.

6 SEC. 5222. LAW ENFORCEMENT.

7 (a) IN GENERAL.—A health care provider, health

8 plan, health oversight agency, employer, or person who re9 ceives protected health information under section 5213

10 may disclose protected health information to a law en11 forcement agency (other than a health oversight agency

12 governed by section 5216) if the information is requested

13 for use—

14 (1) in an investigation or prosecution of a

15 health information trustee;

16 (2) in the identification of a victim or witness

17 in a law enforcement inquiry; or

18 (3) in connection with the investigation of

19 criminal activity committed against the trustee or on

20 premises controlled by the trustee.

21 (b) CERTIFICATION.—When a law enforcement agen22 cy (other than a health oversight agency) requests that

23 a health information trustee disclose protected health in24 formation under this section, the law enforcement agency

25 shall provide the trustee with a written certification that—
947

•S 2357

1 (1) specifies the information requested;

2 (2) states that the information is needed for a

3 lawful purpose under this section; and

4 (3) is signed by a supervisory official of a rank

5 designated by the head of the agency.

6 (c) RESTRICTIONS ON ADDITIONAL DISCLOSURE.—

7 Notwithstanding section 5206(e), protected health infor8 mation about an individual that is disclosed to a law en9 forcement agency under this section may be used in, or

10 disclosed for, an administrative, civil, or criminal action

11 or investigation against the individual if the action or in12 vestigation arises out of and is directly related to the ac13 tion or investigation for which the information was ob14 tained.

15 Subpart E—Disclosure Pursuant to Government

16 Subpoena or Warrant

17 SEC. 5226. GOVERNMENT SUBPOENAS AND WARRANTS.

18 (a) IN GENERAL.—A health care provider, health

19 plan, health oversight agency, employer, or person who re20 ceives protected health information under section 5213

21 may disclose protected health information under this sec22 tion if the disclosure is pursuant to—

23 (1) a subpoena issued under the authority of a

24 grand jury, and the trustee is provided a written cer25 tification by the grand jury seeking the information
948

•S 2357

1 that the grand jury has complied with the applicable

2 access provisions of section 5227;

3 (2) an administrative subpoena or a judicial

4 subpoena or warrant, and the trustee is provided a

5 written certification by the person seeking the infor6 mation that the person has complied with the appli7 cable access provisions of section 5227; or

8 (3) an administrative subpoena or a judicial

9 subpoena or warrant, and the disclosure otherwise

10 meets the conditions of section 5216, 5217, 5221, or

11 5222.

12 (b) RESTRICTIONS ON ADDITIONAL DISCLOSURE.—

13 (1) ACTIONS OR INVESTIGATIONS.—Notwith14 standing section 5206(c), protected health informa15 tion about an individual that is received under sub16 section (a) may be disclosed for, or used in, any ad17 ministrative, civil, or criminal action or investigation

18 against the individual if the action or investigation

19 arises out of and is directly related to the inquiry for

20 which the information was obtained.

21 (2) SPECIAL RULE.—Protected health informa22 tion about an individual that is received under sub23 section (a)(3) may not be disclosed by the recipient

24 unless the recipient complies with the conditions and

25 restrictions on disclosure with which the recipient
949

•S 2357

1 would have been required to comply if the disclosure

2 had been made under section 5216, 5217, 5221, or

3 5222.

4 SEC. 5227. ACCESS PROCEDURES FOR LAW ENFORCEMENT

5 SUBPOENAS AND WARRANTS.

6 (a) PROBABLE CAUSE REQUIREMENT.—A govern7 ment authority may not obtain protected health informa8 tion about an individual under paragraph (1) or (2) of

9 section 5226(a) for use in a law enforcement inquiry un10 less there is probable cause to believe that the information

11 is relevant to a legitimate law enforcement inquiry being

12 conducted by the government authority.

13 (b) WARRANTS.—A government authority that ob14 tains protected health information about an individual

15 under circumstances described in subsection (a) and pur16 suant to a warrant shall, not later than 30 days after the

17 date the warrant was executed, serve the individual with,

18 or mail to the last known address of the individual, a no19 tice that protected health information about the individual

20 was so obtained, together with a notice of the individual’s

21 right to challenge the warrant in accordance with section

22 5228.

23 (c) SUBPOENAS.—Except as provided in subsection

24 (d), a government authority may not obtain protected

25 health information about an individual under cir-
950

•S 2357

1 cumstances described in subsection (a) and pursuant to

2 a subpoena unless a copy of the subpoena has been served

3 on the individual on or before the date of return of the

4 subpoena, together with a notice of the individual’s right

5 to challenge the subpoena in accordance with section

6 5228, and—

7 (1) 15 days have passed since the date of serv8 ice on the individual and within that time period the

9 individual has not initiated a challenge in accordance

10 with section 5228; or

11 (2) disclosure is ordered by a court after chal12 lenge under section 5228.

13 (d) APPLICATION FOR DELAY.—

14 (1) IN GENERAL.—A government authority may

15 apply ex parte and under seal to an appropriate

16 court to delay (for an initial period of not longer

17 than 90 days) serving a notice or copy of a subpoena

18 required under subsection (b) or (c) with respect to

19 a law enforcement inquiry. The government author20 ity may apply to the court for extensions of the

21 delay.

22 (2) REASONS FOR DELAY.—An application for

23 a delay, or extension of a delay, under this sub24 section shall state, with reasonable specificity, the

25 reasons why the delay or extension is being sought.
951

•S 2357

1 (3) EX PARTE ORDER.—The court shall enter

2 an ex parte order delaying or extending the delay of

3 notice, an order prohibiting the disclosure of the re4 quest for, or disclosure of, the protected health in5 formation, and an order requiring the disclosure of

6 the protected health information if the court finds

7 that—

8 (A) the inquiry being conducted is within

9 the lawful jurisdiction of the government au10 thority seeking the protected health informa11 tion;

12 (B) there is probable cause to believe that

13 the protected health information being sought is

14 relevant to a legitimate law enforcement in15 quiry;

16 (C) the government authority’s need for

17 the information outweighs the privacy interest

18 of the individual who is the subject of the infor19 mation; and

20 (D) there is reasonable ground to believe

21 that receipt of notice by the individual will re22 sult in—

23 (i) endangering the life or physical

24 safety of any individual;

25 (ii) flight from prosecution;
952

•S 2357

1 (iii) destruction of or tampering with

2 evidence or the information being sought;

3 or

4 (iv) intimidation of potential wit5 nesses.

6 SEC. 5228. CHALLENGE PROCEDURES FOR LAW ENFORCE7 MENT WARRANTS AND SUBPOENAS.

8 (a) MOTION TO QUASH.—Within 15 days after the

9 date of service of a notice of execution or a copy of a sub10 poena of a government authority seeking protected health

11 information about an individual under paragraph (1) or

12 (2) of section 5226(a), the individual may file a motion

13 to quash—

14 (1) in the case of a State judicial warrant or

15 subpoena, in the court which issued the warrant or

16 subpoena;

17 (2) in the case of a warrant or subpoena issued

18 under the authority of a State that is not a State

19 judicial warrant or subpoena, in a court of com20 petent jurisdiction; or

21 (3) in the case of any other warrant or sub22 poena issued under the authority of a Federal court

23 or the United States, in the United States district

24 court for the district in which the individual resides

25 or in which the warrant or subpoena was issued.
953

•S 2357

1 (b) COPY.—A copy of the motion shall be served by

2 the individual upon the government authority by reg3 istered or certified mail.

4 (c) PROCEEDINGS.—The government authority may

5 file with the court such papers, including affidavits and

6 other sworn documents, as sustain the validity of the war7 rant or subpoena. The individual may file with the court

8 reply papers in response to the government authority’s fil9 ing. The court, upon the request of the individual or the

10 government authority or both, may proceed in camera.

11 The court may conduct such proceedings as it deems ap12 propriate to rule on the motion, but shall endeavor to ex13 pedite its determination.

14 (d) STANDARD FOR DECISION.—A court may deny

15 a motion under subsection (a) if it finds there is probable

16 cause to believe the protected health information is rel17 evant to a legitimate law enforcement inquiry being con18 ducted by the government authority, unless the court finds

19 the individual’s privacy interest outweighs the government

20 authority’s need for the information. The individual shall

21 have the burden of demonstrating that the individual’s pri22 vacy interest outweighs the need by the government au23 thority for the information.
954

•S 2357

1 (e) SPECIFIC CONSIDERATIONS WITH RESPECT TO

2 PRIVACY INTEREST.—In reaching its determination, the

3 court shall consider—

4 (1) the particular purpose for which the infor5 mation was collected;

6 (2) the degree to which disclosure of the infor7 mation will embarrass, injure, or invade the privacy

8 of the individual;

9 (3) the effect of the disclosure on the individ10 ual’s future health care;

11 (4) the importance of the inquiry being con12 ducted by the government authority, and the impor13 tance of the information to that inquiry; and

14 (5) any other factor deemed relevant by the

15 court.

16 (f) ATTORNEY’S FEES.—In the case of a motion

17 brought under subsection (a) in which the individual has

18 substantially prevailed, the court may assess against the

19 government authority a reasonable attorney’s fee and

20 other litigation costs (including expert’s fees) reasonably

21 incurred.

22 (g) NO INTERLOCUTORY APPEAL.—A ruling denying

23 a motion to quash under this section shall not be deemed

24 to be a final order, and no interlocutory appeal may be

25 taken therefrom by the individual. An appeal of such a
955

•S 2357

1 ruling may be taken by the individual within such period

2 of time as is provided by law as part of any appeal from

3 a final order in any legal proceeding initiated against the

4 individual arising out of or based upon the protected

5 health information disclosed.

6 Subpart F—Disclosure Pursuant to Private Party

7 Subpoena

8 SEC. 5231. PRIVATE PARTY SUBPOENAS.

9 A health care provider, health plan, employer, or per10 son who receives protected health information under sec11 tion 5213 may disclose protected health information under

12 this section if the disclosure is pursuant to a subpoena

13 issued on behalf of a private party who has complied with

14 the access provisions of section 5232.

15 SEC. 5232. ACCESS PROCEDURES FOR PRIVATE PARTY SUB16 POENAS.

17 A private party may not obtain protected health in18 formation about an individual pursuant to a subpoena un19 less a copy of the subpoena together with a notice of the

20 individual’s right to challenge the subpoena in accordance

21 with section 5233 has been served upon the individual on

22 or before the date of return of the subpoena, and—

23 (1) 15 days have passed since the date of serv24 ice on the individual, and within that time period the
956

•S 2357

1 individual has not initiated a challenge in accordance

2 with section 5233; or

3 (2) disclosure is ordered by a court under sec4 tion 5233.

5 SEC. 5233. CHALLENGE PROCEDURES FOR PRIVATE PARTY

6 SUBPOENAS.

7 (a) MOTION TO QUASH SUBPOENA.—Within 15 days

8 after service of a copy of the subpoena seeking protected

9 health information under section 5231, the individual who

10 is the subject of the protected health information may file

11 in any court of competent jurisdiction a motion to quash

12 the subpoena and serve a copy of the motion on the person

13 seeking the information.

14 (b) STANDARD FOR DECISION.—The court shall

15 grant a motion under subsection (a) unless the respondent

16 demonstrates that—

17 (1) there is reasonable ground to believe the in18 formation is relevant to a lawsuit or other judicial

19 or administrative proceeding; and

20 (2) the need of the respondent for the informa21 tion outweighs the privacy interest of the individual.

22 (c) SPECIFIC CONSIDERATIONS WITH RESPECT TO

23 PRIVACY INTEREST.—In determining under subsection

24 (b) whether the need of the respondent for the information
957

•S 2357

1 outweighs the privacy interest of the individual, the court

2 shall consider—

3 (1) the particular purpose for which the infor4 mation was collected;

5 (2) the degree to which disclosure of the infor6 mation would embarrass, injure, or invade the pri7 vacy of the individual;

8 (3) the effect of the disclosure on the individ9 ual’s future health care;

10 (4) the importance of the information to the

11 lawsuit or proceeding; and

12 (5) any other relevant factor.

13 (d) ATTORNEY’S FEES.—In the case of a motion

14 brought under subsection (a) in which the individual has

15 substantially prevailed, the court may assess against the

16 respondent a reasonable attorney’s fee and other litigation

17 costs and expenses (including expert’s fees) reasonably in18 curred.

19 PART 3—PROCEDURES FOR ENSURING SECURITY

20 OF PROTECTED HEALTH INFORMATION

21 Subpart A—Establishment of Safeguards

22 SEC. 5236. ESTABLISHMENT OF SAFEGUARDS.

23 (a) IN GENERAL.—A health information trustee shall

24 establish and maintain appropriate administrative, tech25 nical, and physical safeguards—
958

•S 2357

1 (1) to ensure the integrity and confidentiality of

2 protected health information created or received by

3 the trustee; and

4 (2) to protect against any anticipated threats or

5 hazards to the security or integrity of such informa6 tion.

7 (b) REGULATIONS.—The Secretary shall promulgate

8 regulations regarding security measures for protected

9 health information.

10 SEC. 5237. ACCOUNTING FOR DISCLOSURES.

11 (a) IN GENERAL.—

12 (1) REQUIREMENT TO CREATE OR MAINTAIN

13 RECORD.—A health information trustee shall create

14 and maintain, with respect to any protected health

15 information disclosed in exceptional circumstances

16 (as described in paragraph (2)), a record of—

17 (A) the date and purpose of the disclosure;

18 (B) the name of the person to whom or to

19 which the disclosure was made;

20 (C) the address of the person to whom or

21 to which the disclosure was made or the loca22 tion to which the disclosure was made; and

23 (D) the information disclosed, if the re24 cording of the information disclosed is prac25 ticable, taking into account the technical capa-
959

•S 2357

1 bilities of the system used to maintain the

2 record and the costs of such maintenance.

3 (2) EXCEPTIONAL CIRCUMSTANCES DE4 SCRIBED.—For purposes of paragraph (1) protected

5 health information is disclosed in exceptional cir6 cumstances if the disclosure—

7 (A) is not a routine part of doing business,

8 as determined in accordance with guidelines

9 promulgated by the Secretary; or

10 (B) is permitted under sections 5213 and

11 5217.

12 (b) DISCLOSURE RECORD PART OF INFORMATION.—

13 A record created and maintained under paragraph (a)

14 shall be maintained as part of the protected health infor15 mation to which the record pertains.

16 Subpart B—Review of Protected Health Information

17 By Subjects of the Information

18 SEC. 5241. INSPECTION OF PROTECTED HEALTH INFORMA19 TION.

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

21 (c), a health care provider or health plan—

22 (1) shall permit an individual who is the subject

23 of protected health information to inspect any such

24 information that the provider or plan maintains;
960

•S 2357

1 (2) shall permit the individual to have a copy

2 of the information;

3 (3) shall permit a person who has been des4 ignated in writing by the individual who is the sub5 ject of the information to inspect, or to have a copy

6 of, the information on behalf of the individual or to

7 accompany the individual during the inspection; and

8 (4) may offer to explain or interpret informa9 tion that is inspected or copied under this sub10 section.

11 (b) ADDITIONAL REQUESTS.—Except as provided in

12 subsection (c), a health plan or health care provider shall,

13 upon written request of an individual—

14 (1) determine the identity of previous providers

15 to the individual; and

16 (2) obtain protected health information regard17 ing the individual.

18 (c) EXCEPTIONS.—A health care provider or health

19 plan is not required by this section to permit inspection

20 or copying of protected health information if any of the

21 following conditions apply:

22 (1) MENTAL HEALTH TREATMENT NOTES.—

23 The information consists of psychiatric, psycho24 logical, or mental health treatment notes, and the

25 provider or plan determines, based on reasonable
961

•S 2357

1 medical judgment, that inspection or copying of the

2 notes would cause sufficient harm to the individual

3 who is the subject of the notes so as to outweigh the

4 desirability of permitting access, and the provider or

5 plan has not disclosed the notes to any person not

6 directly engaged in treating the individual, except

7 with the authorization of the individual or under

8 compulsion of law.

9 (2) INFORMATION ABOUT OTHERS.—The infor10 mation relates to an individual other than the indi11 vidual seeking to inspect or have a copy of the infor12 mation and the provider or plan determines, based

13 on reasonable medical judgment, that inspection or

14 copying of the information would cause sufficient

15 harm to 1 or both of the individuals so as to out16 weigh the desirability of permitting access.

17 (3) ENDANGERMENT TO LIFE OR SAFETY.—

18 The provider or plan determines that disclosure of

19 the information could reasonably be expected to en20 danger the life or physical safety of any individual.

21 (4) CONFIDENTIAL SOURCE.—The information

22 identifies or could reasonably lead to the identifica23 tion of a person (other than a health care provider)

24 who provided information under a promise of con-
962

•S 2357

1 fidentiality to a health care provider concerning the

2 individual who is the subject of the information.

3 (5) ADMINISTRATIVE PURPOSES.—The informa4 tion—

5 (A) is used by the provider or plan solely

6 for administrative purposes and not in the pro7 vision of health care to the individual who is the

8 subject of the information; and

9 (B) has not been disclosed by the provider

10 or plan to any other person.

11 (d) INSPECTION AND COPYING OF SEGREGABLE POR12 TION.—A health care provider or health plan shall permit

13 inspection and copying under subsection (a) of any reason14 ably segregable portion of a record after deletion of any

15 portion that is exempt under subsection (c).

16 (e) CONDITIONS.—A health care provider or health

17 plan may require a written request for the inspection and

18 copying of protected health information under this sub19 section. The health care provider or health plan may re20 quire a cost reimbursement for such inspection and copy21 ing.

22 (f) STATEMENT OF REASONS FOR DENIAL.—If a

23 health care provider or health plan denies a request for

24 inspection or copying under this section, the provider or

25 plan shall provide the individual who made the request (or
963

•S 2357

1 the individual’s designated representative) with a written

2 statement of the reasons for the denial.

3 (g) DEADLINE.—A health care provider or health

4 plan shall comply with or deny a request for inspection

5 or copying of protected health information under this sec6 tion within the 30-day period beginning on the date on

7 which the provider or plan receives the request.

8 SEC. 5242. AMENDMENT OF PROTECTED HEALTH INFORMA9 TION.

10 (a) IN GENERAL.—A health care provider or health

11 plan shall, within the 45-day period beginning on the date

12 on which the provider or plan receives from an individual

13 a written request that the provider or plan correct or

14 amend the information—

15 (1) make the correction or amendment re16 quested;

17 (2) inform the individual of the correction or

18 amendment that has been made; and

19 (3) inform any person who is identified by the

20 individual, who is not an officer, employee or agent

21 of the provider or plan, and to whom the uncor22 rected or unamended portion of the information was

23 previously disclosed, of the correction or amendment

24 that has been made.
964

•S 2357

1 (b) REFUSAL TO CORRECT.—If the provider or plan

2 refuses to make the corrections, the provider or plan shall

3 inform the individual of—

4 (1) the reasons for the refusal of the provider

5 or plan to make the correction or amendment;

6 (2) any procedures for further review of the re7 fusal; and

8 (3) the individual’s right to file with the pro9 vider or plan a concise statement setting forth the

10 requested correction or amendment and the individ11 ual’s reasons for disagreeing with the refusal of the

12 provider or plan.

13 (c) BASES FOR REQUEST TO CORRECT OR AMEND.—

14 An individual may request correction or amendment of

15 protected health information about the individual under

16 paragraph (a) if the information is not timely, accurate,

17 relevant to the system of records, or complete.

18 (d) STATEMENT OF DISAGREEMENT.—After an indi19 vidual has filed a statement of disagreement under para20 graph (b)(3), the provider or plan, in any subsequent dis21 closure of the disputed portion of the information—

22 (1) shall include a copy of the individual’s

23 statement; and
965

•S 2357

1 (2) may include a concise statement of the rea2 sons of the provider or plan for not making the re3 quested correction or amendment.

4 (e) RULE OF CONSTRUCTION.—This section shall not

5 be construed to require a health care provider or health

6 plan to conduct a formal, informal, or other hearing or

7 proceeding concerning a request for a correction or

8 amendment to protected health information the provider

9 or plan maintains.

10 (f) CORRECTION.—For purposes of paragraph (a), a

11 correction is deemed to have been made to protected

12 health information when information that is not timely,

13 accurate, relevant to the system of records, or complete

14 is clearly marked as incorrect or when supplementary cor15 rect information is made part of the information.

16 SEC. 5243. NOTICE OF INFORMATION PRACTICES.

17 (a) PREPARATION OF WRITTEN NOTICE.—A health

18 care provider or health plan shall prepare a written notice

19 of information practices describing the following:

20 (1) PERSONAL RIGHTS OF AN INDIVIDUAL.—

21 The rights under this subpart of an individual who

22 is the subject of protected health information, in23 cluding the right to inspect and copy such informa24 tion and the right to seek amendments to such infor25 mation, and the procedures for authorizing disclo-
966

•S 2357

1 sures of protected health information and for revok2 ing such authorizations.

3 (2) PROCEDURES OF PROVIDER OR PLAN.—The

4 procedures established by the provider or plan for

5 the exercise of the rights of individuals about whom

6 protected health information is maintained.

7 (3) AUTHORIZED DISCLOSURES.—The disclo8 sures of protected health information that are au9 thorized.

10 (b) DISSEMINATION OF NOTICE.—A health care pro11 vider or health plan—

12 (1) shall, upon request, provide any individual

13 with a copy of the notice of information practices de14 scribed in subsection (a); and

15 (2) shall make reasonable efforts to inform indi16 viduals in a clear and conspicuous manner of the ex17 istence and availability of the notice.

18 (c) MODEL NOTICE.—The Secretary, after notice and

19 opportunity for public comment, shall develop and dissemi20 nate a model notice of information practices for use by

21 health care providers and health plans under this section.

22 Subpart C—Standards for Electronic Disclosures

23 SEC. 5246. STANDARDS FOR ELECTRONIC DISCLOSURES.

24 The Secretary shall promulgate standards for disclos25 ing protected health information in accordance with this
967

•S 2357

1 subtitle in electronic form. Such standards shall include

2 standards relating to the creation, transmission, receipt,

3 and maintenance, of any written document required or au4 thorized under this subtitle.

5 PART 4—SANCTIONS

6 Subpart A—No Sanctions for Permissible Actions

7 SEC. 5251. NO LIABILITY FOR PERMISSIBLE DISCLOSURES.

8 A health information trustee who makes a disclosure

9 of protected health information about an individual that

10 is permitted by this subtitle shall not be liable to the indi11 vidual for the disclosure under common law.

12 SEC. 5252. NO LIABILITY FOR INSTITUTIONAL REVIEW

13 BOARD DETERMINATIONS.

14 If the members of an institutional review board make

15 a determination in good faith that—

16 (1) a health research project is of sufficient im17 portance to outweigh the intrusion into the privacy

18 of an individual; and

19 (2) the effectiveness of the project requires use

20 of protected health information,

21 the members, the board, and the parent institution of the

22 board shall not be liable to the individual as a result of

23 the determination.
968

•S 2357

1 SEC. 5253. RELIANCE ON CERTIFIED ENTITY.

2 If a health information trustee contracts with a cer3 tified health information network service to make a disclo4 sure of any protected health information on behalf of such

5 trustee in accordance with this subtitle and such service

6 makes a disclosure of such information that is in violation

7 of this subtitle, the trustee shall not be liable to the indi8 vidual who is the subject of the information for such un9 lawful disclosure.

10 Subpart B—Civil Sanctions

11 SEC. 5256. CIVIL PENALTY.

12 (a) VIOLATION.—Any health information trustee who

13 the Secretary determines has substantially failed to com14 ply with this subtitle shall be subject, in addition to any

15 other penalties that may be prescribed by law, to a civil

16 penalty of not more than $10,000 for each such violation.

17 (b) PROCEDURES FOR IMPOSITION OF PENALTIES.—

18 Section 1128A of the Social Security Act, other than sub19 sections (a) and (b) and the second sentence of subsection

20 (f) of that section, shall apply to the imposition of a civil

21 monetary penalty under this section in the same manner

22 as such provisions apply with respect to the imposition of

23 a penalty under section 1128A of such Act.
969

•S 2357

1 SEC. 5257. CIVIL ACTION.

2 (a) IN GENERAL.—An individual who is aggrieved by

3 conduct in violation of this subtitle may bring a civil action

4 to recover—

5 (1) the greater of actual damages or liquidated

6 damages of $5,000;

7 (2) punitive damages;

8 (3) a reasonable attorney’s fee and expenses of

9 litigation;

10 (4) costs of litigation; and

11 (5) such preliminary and equitable relief as the

12 court determines to be appropriate.

13 (b) LIMITATION.—No action may be commenced

14 under this section more than 3 years after the date on

15 which the violation was or should reasonably have been

16 discovered.

17 Subpart C—Criminal Sanctions

18 SEC. 5261. WRONGFUL DISCLOSURE OF PROTECTED

19 HEALTH INFORMATION.

20 (a) OFFENSE.—A person who knowingly—

21 (1) obtains protected health information relat22 ing to an individual in violation of this subtitle; or

23 (2) discloses protected health information to an24 other person in violation of this subtitle,

25 shall be punished as provided in subsection (b).
970

•S 2357

1 (b) PENALTIES.—A person described in subsection

2 (a) shall—

3 (1) be fined not more than $50,000, imprisoned

4 not more than 1 year, or both;

5 (2) if the offense is committed under false pre6 tenses, be fined not more than $100,000, imprisoned

7 not more than 5 years, or both; and

8 (3) if the offense is committed with intent to

9 sell, transfer, or use protected health information for

10 commercial advantage, personal gain, or malicious

11 harm, fined not more than $250,000, imprisoned not

12 more than 10 years, or both.

13 PART 5—ADMINISTRATIVE PROVISIONS

14 SEC. 5266. RELATIONSHIP TO OTHER LAWS.

15 (a) STATE LAW.—Except as provided in subsections

16 (b), (c), and (d), this subtitle preempts State law.

17 (b) LAWS RELATING TO PUBLIC OR MENTAL

18 HEALTH.—Nothing in this subtitle shall be construed to

19 preempt or operate to the exclusion of any State law relat20 ing to public health or mental health that prevents or reg21 ulates disclosure of protected health information otherwise

22 allowed under this subtitle.

23 (c) PRIVILEGES.—Nothing in this subtitle is intended

24 to preempt or modify State common or statutory law to

25 the extent such law concerns a privilege of a witness or
971

•S 2357

1 person in a court of the State. This subtitle does not su2 persede or modify Federal common or statutory law to the

3 extent such law concerns a privilege of a witness or person

4 in a court of the United States. Authorizations pursuant

5 to section 5207 shall not be construed as a waiver of any

6 such privilege.

7 (d) CERTAIN DUTIES UNDER STATE OR FEDERAL

8 LAW.—This subtitle shall not be construed to preempt,

9 supersede, or modify the operation of—

10 (1) any law that provides for the reporting of

11 vital statistics such as birth or death information;

12 (2) any law requiring the reporting of abuse or

13 neglect information about any individual;

14 (3) subpart II of part E of title XXVI of the

15 Public Health Service Act (relating to notifications

16 of emergency response employees of possible expo17 sure to infectious diseases); or

18 (4) any Federal law or regulation governing

19 confidentiality of alcohol and drug patient records.

20 SEC. 5267. RIGHTS OF INCOMPETENTS.

21 (a) EFFECT OF DECLARATION OF INCOMPETENCE.—

22 Except as provided in section 5268, if an individual has

23 been declared to be incompetent by a court of competent

24 jurisdiction, the rights of the individual under this subtitle
972

•S 2357

1 shall be exercised and discharged in the best interests of

2 the individual through the individual’s representative.

3 (b) NO COURT DECLARATION.—Except as provided

4 in section 5268, if a health care provider determines that

5 an individual, who has not been declared to be incom6 petent by a court of competent jurisdiction, suffers from

7 a medical condition that prevents the individual from act8 ing knowingly or effectively on the individual’s own behalf,

9 the right of the individual to authorize disclosure may be

10 exercised and discharged in the best interest of the individ11 ual by the individual’s representative.

12 SEC. 5268. EXERCISE OF RIGHTS.

13 (a) INDIVIDUALS WHO ARE 18 OR LEGALLY CAPA14 BLE.—In the case of an individual—

15 (1) who is 18 years of age or older, all rights

16 of the individual shall be exercised by the individual;

17 or

18 (2) who, acting alone, has the legal right, as de19 termined by State law, to apply for and obtain a

20 type of medical examination, care, or treatment and

21 who has sought such examination, care, or treat22 ment, the individual shall exercise all rights of an in23 dividual under this subtitle with respect to protected

24 health information relating to such examination,

25 care, or treatment.
973

•S 2357

1 (b) INDIVIDUALS UNDER 18.—Except as provided in

2 subsection (a)(2), in the case of an individual who is—

3 (1) under 14 years of age, all the individual’s

4 rights under this subtitle shall be exercised through

5 the parent or legal guardian of the individual; or

6 (2) 14, 15, 16, or 17 years of age, the rights

7 of inspection and amendment, and the right to au8 thorize disclosure of protected health information of

9 the individual may be exercised either by the individ10 ual or by the parent or legal guardian of the individ11 ual.

12 Subtitle D—Expanded Efforts To

13 Combat Health Care Fraud and

14 Abuse Affecting Federal Outlay

15 Programs

16 PART 1—IMPROVED ENFORCEMENT

17 SEC. 5301. HEALTH CARE FRAUD AND ABUSE AFFECTING

18 FEDERAL OUTLAY PROGRAMS.

19 (a) IN GENERAL.—Not later than January 1, 1995,

20 the Secretary and the Attorney General of the United

21 States shall establish a joint program—

22 (1) to coordinate Federal, State, and local law

23 enforcement programs to control fraud and abuse af24 fecting Federal outlay programs,
974

•S 2357

1 (2) to conduct investigations (including

2 consumer complaint investigations), audits, evalua3 tions, and inspections relating to the delivery of and

4 payment for health care in the United States, and

5 (3) to facilitate the enforcement of this subtitle

6 and other statutes applicable to health care fraud

7 and abuse.

8 (b) COORDINATION WITH LAW ENFORCEMENT

9 AGENCIES.—In carrying out the program under sub10 section (a), the Secretary and the Attorney General shall

11 consult with, and arrange for the sharing of data and re12 sources with Federal, State and local law enforcement

13 agencies, State Medicaid Fraud Control Units, and State

14 agencies responsible for the licensing and certification of

15 health care providers.

16 (c) COORDINATION WITH PURCHASING COOPERA17 TIVES AND CERTIFIED HEALTH PLANS.—In carrying out

18 the program under subsection (a), the Secretary and the

19 Attorney General shall consult with, and arrange for the

20 sharing of data with representatives of purchasing co21 operatives and certified standard health plans.

22 (d) AUTHORITIES OF ATTORNEY GENERAL AND SEC23 RETARY.—In carrying out duties under subsection (a), the

24 Attorney General and the Secretary shall—
975

•S 2357

1 (1) conduct, supervise, and coordinate audits,

2 civil and criminal investigations, inspections, and

3 evaluations relating to the program established

4 under such subsection;

5 (2) have access (including on-line access as re6 quested and available) to all records available to pur7 chasing cooperatives and certified standard health

8 plans relating to the activities described in para9 graph (1) (subject to restrictions based on the con10 fidentiality of certain information under subtitles B

11 and C of this title); and

12 (3) issue advisory opinions, fraud alerts, and

13 other appropriate educational material to assist in

14 compliance with the provisions of this subtitle.

15 (e) QUALIFIED IMMUNITY FOR PROVIDING INFORMA16 TION.—The provisions of section 1157(a) of the Social Se17 curity Act (relating to limitation on liability) shall apply

18 to a person providing information or communications to

19 the Secretary or the Attorney General in conjunction with

20 their performance of duties under this section, in the same

21 manner as such section applies to information provided

22 to organizations with a contract under part 2.

23 (f) USE OF POWERS UNDER INSPECTOR GENERAL

24 ACT OF 1978.—In carrying out duties and responsibilities

25 under the program established under subsection (a), the
976

•S 2357

1 Inspector General is authorized to exercise all powers

2 granted under the Inspector General Act of 1978 to the

3 same manner and extent as provided in that Act.

4 (g) DEFINITIONS.—In this subtitle:

5 (1) CERTIFIED STANDARD HEALTH PLANS;

6 PURCHASING COOPERATIVES.—The terms ‘‘certified

7 standard health plan’’ and ‘‘purchasing cooperative’’

8 have the meanings given such terms by sections

9 1011(2) and 1013(16), respectively.

10 (2) FEDERAL OUTLAY PROGRAMS.—The term

11 ‘‘Federal outlay programs’’ means—

12 (A) any program under title XVIII of the

13 Social Security Act,

14 (B) any State health care program (as de15 fined in section 1128(h) of the Social Security

16 Act),

17 (C) any program under the Public Health

18 Service Act, and

19 (D) any program under this Act, including

20 any State program approved under title I which

21 certifies standard health plans, supplemental

22 health benefits plans, and long-term care poli23 cies.
977

•S 2357

1 (3) INSPECTOR GENERAL.—The term ‘‘Inspec2 tor General’’ means the Inspector General of the De3 partment of Health and Human Services.

4 SEC. 5302. ESTABLISHMENT OF FEDERAL OUTLAY PRO5 GRAM FRAUD AND ABUSE CONTROL AC6 COUNT.

7 (a) ESTABLISHMENT.—

8 (1) IN GENERAL.—There is hereby established

9 an account to be known as the ‘‘Federal Outlay Pro10 gram Fraud and Abuse Control Account’’ (in this

11 section referred to as the ‘‘Anti-Fraud Account’’).

12 The Anti-Fraud Account shall consist of—

13 (A) such gifts and bequests as may be

14 made as provided in paragraph (2);

15 (B) such amounts as may be deposited in

16 the Anti-Fraud Account as provided in section

17 5311(d)(2) and title IX of the Social Security

18 Act; and

19 (C) such amounts as are transferred to the

20 Anti-Fraud Account under paragraph (3).

21 (2) AUTHORIZATION TO ACCEPT GIFTS.—The

22 Anti-Fraud Account is authorized to accept on be23 half of the United States money gifts and bequests

24 made unconditionally to the Anti-Fraud Account, for
978

•S 2357

1 the benefit of the Anti-Fraud Account or any activ2 ity financed through the Anti-Fraud Account.

3 (3) TRANSFER OF AMOUNTS.—

4 (A) IN GENERAL.—Subject to the limita5 tion in subparagraph (B), the Secretary of the

6 Treasury shall transfer to the Anti-Fraud Ac7 count an amount equal to the sum of the fol8 lowing:

9 (i) Criminal fines imposed in cases in10 volving a Federal health care offense (as

11 defined in subsection (d)).

12 (ii) Penalties and damages imposed

13 under the False Claims Act (31 U.S.C.

14 3729 et seq.), in cases involving claims re15 lated to the provision of health care items

16 and services (other than funds awarded to

17 a relator or for restitution).

18 (iii) Administrative penalties and as19 sessments imposed under section 5311 (ex20 cept as otherwise provided by law).

21 (iv) Amounts resulting from the for22 feiture of property by reason of a Federal

23 health care offense.

24 (B) LIMITATION.—The Secretary of the

25 Treasury shall not transfer more than the
979

•S 2357

1 $75,000,000, plus 50 percent of the excess (if

2 any) of the amount described in subparagraph

3 (A) for any fiscal year (beginning in fiscal year

4 1995).

5 (b) USE OF FUNDS.—

6 (1) IN GENERAL.—Amounts in the Anti-Fraud

7 Account shall be available without appropriation and

8 until expended as determined jointly by the Sec9 retary and the Attorney General of the United

10 States in carrying out the Federal Outlay Program

11 Fraud and Abuse Control Program established

12 under section 5301 (including the administration of

13 the Program), and may be used to cover costs in14 curred in operating the Program, including costs

15 of—

16 (A) prosecuting health care matters

17 (through criminal, civil, and administrative pro18 ceedings);

19 (B) investigations;

20 (C) financial and performance audits of

21 health care programs and operations;

22 (D) inspections and other evaluations;

23 (E) rewards paid under section 5304; and

24 (F) provider and consumer education (in25 cluding the provision of advisory opinions) re-
980

•S 2357

1 garding compliance with the provisions of this

2 subtitle.

3 Twenty percent of the amounts available in the Anti4 Fraud Account for any fiscal year shall be used for

5 costs described in subparagraph (F).

6 (2) FUNDS USED TO SUPPLEMENT AGENCY AP7 PROPRIATIONS.—It is intended that disbursements

8 made from the Anti-Fraud Account to any Federal

9 agency be used to increase and not supplant the re10 cipient agency’s appropriated operating budget.

11 (c) ANNUAL REPORT.—The Secretary and the Attor12 ney General shall submit jointly an annual report to Con13 gress on the amount of revenue which is generated and

14 disbursed by the Anti-Fraud Account in each fiscal year.

15 (d) FEDERAL HEALTH CARE OFFENSE DEFINED.—

16 For purposes of subsection (a)(3)(A)(i), the term ‘‘Federal

17 health care offense’’ means a violation of, or a criminal

18 conspiracy to violate—

19 (1) sections 226, 668, 1033, or 1347 of title

20 18, United States Code;

21 (2) section 1128B of the Social Security Act;

22 (3) sections 287, 371, 664, 666, 1001, 1027,

23 1341, 1343, or 1954 of title 18, United States Code,

24 if the violation or conspiracy relates to health care

25 fraud;
981

•S 2357

1 (4) sections 501 or 511 of the Employee Retire2 ment Income Security Act of 1974, if the violation

3 or conspiracy relates to health care fraud; or

4 (5) sections 301, 303(a)(2), or 303 (b) or (e)

5 of the Federal Food Drug and Cosmetic Act, if the

6 violation or conspiracy relates to health care fraud.

7 SEC. 5303. USE OF FUNDS BY INSPECTOR GENERAL.

8 (a) REIMBURSEMENTS FOR INVESTIGATIONS.—

9 (1) IN GENERAL.—The Inspector General is au10 thorized to receive and retain for current use reim11 bursement for the costs of conducting investigations,

12 when such restitution is ordered by a court, volun13 tarily agreed to by the payer, or otherwise.

14 (2) CREDITING.—Funds received by the Inspec15 tor General as reimbursement for costs of conduct16 ing investigations shall be deposited to the credit of

17 the appropriation from which initially paid, or to ap18 propriations for similar purposes currently available

19 at the time of deposit, and shall remain available for

20 obligation for 1 year from the date of their deposit.

21 (3) EXCEPTION FOR FORFEITURES.—This sub22 section does not apply to investigative costs paid to

23 the Inspector General from the Department of Jus24 tice Asset Forfeiture Fund, which monies shall be
982

•S 2357

1 deposited and expended in accordance with sub2 section (b).

3 (b) HHS OFFICE OF INSPECTOR GENERAL ASSET

4 FORFEITURE PROCEEDS FUND.—

5 (1) IN GENERAL.—There is hereby established

6 the ‘‘HHS Office of Inspector General Asset Forfeit7 ure Proceeds Fund’’, to be administered by the In8 spector General, which shall be available to the In9 spector General without fiscal year limitation for ex10 penses relating to the investigation of matters within

11 the jurisdiction of the Inspector General.

12 (2) DEPOSITS.—There shall be deposited in the

13 Fund all proceeds from forfeitures that have been

14 transferred to the Inspector General from the De15 partment of Justice Asset Forfeiture Fund under

16 section 524 of title 28, United States Code.

17 SEC. 5304. REWARDS FOR INFORMATION LEADING TO

18 PROSECUTION AND CONVICTION.

19 (a) IN GENERAL.—In special circumstances, the Sec20 retary and the Attorney General of the United States may

21 jointly make a payment of up to $10,000 to a person who

22 furnishes information unknown to the Government relat23 ing to a possible prosecution of a Federal health care of24 fense (as defined in section 5302(d)).
983

•S 2357

1 (b) INELIGIBLE PERSONS.—A person is not eligible

2 for a payment under subsection (a) if—

3 (1) the person is a current or former officer or

4 employee of a Federal or State government agency

5 or instrumentality who furnishes information discov6 ered or gathered in the course of government em7 ployment;

8 (2) the person knowingly participated in the of9 fense;

10 (3) the information furnished by the person

11 consists of allegations or transactions that have been

12 disclosed to the public—

13 (A) in a criminal, civil, or administrative

14 proceeding;

15 (B) in a congressional, administrative, or

16 General Accounting Office report, hearing,

17 audit, or investigation; or

18 (C) by the news media, unless the person

19 is the original source of the information; or

20 (4) when, in the judgment of the Attorney Gen21 eral, it appears that a person whose illegal activities

22 are being prosecuted or investigated could benefit

23 from the award.

24 (c) DEFINITION.—For the purposes of subsection

25 (b)(3)(C), the term ‘‘original source’’ means a person who
984

•S 2357

1 has direct and independent knowledge of the information

2 that is furnished and has voluntarily provided the informa3 tion to the government prior to disclosure by the news

4 media.

5 (d) NO JUDICIAL REVIEW.—Neither the failure of

6 the Secretary and the Attorney General to authorize a

7 payment under subsection (a) nor the amount authorized

8 shall be subject to judicial review.

9 PART 2—CIVIL PENALTIES AND RIGHTS OF

10 ACTION

11 SEC. 5311. CIVIL MONETARY PENALTIES.

12 (a) ACTIONS SUBJECT TO PENALTY.—

13 (1) IN GENERAL.—Any person who is deter14 mined by the Secretary to have committed any ac15 tion with respect to a certified standard health plan

16 or certified long-term care plan or long-term care

17 services provided under this Act that would subject

18 the person to a penalty under paragraphs (1)

19 through (11) of section 1128A of the Social Security

20 Act if the action was taken with respect to title V,

21 XVIII, XIX, or XX of such Act, shall be subject to

22 a penalty in accordance with subsection (b).

23 (2) TREATMENT OF AMOUNTS RECOVERED.—

24 Any amounts recovered under the preceding sen25 tence shall be paid to the Secretary and such por-
985

•S 2357

1 tions of the amounts recovered as is determined to

2 have been improperly paid from a certified standard

3 health plan or certified long-term care policy for the

4 delivery of or payment for health care items or serv5 ices shall be repaid to such plan or policy (and en6 rollees of such plan or policy as appropriate) and the

7 remainder of the amounts recovered shall be depos8 ited in the Federal Outlays Program Fraud and

9 Abuse Control Account established under section

10 5302.

11 (b) PENALTIES.—

12 (1) GENERAL RULE.—In the case of a person

13 who the Secretary determines has committed an ac14 tion described in subsection (a), the person shall be

15 subject to the civil monetary penalty (together with

16 any additional assessment) to which the person

17 would be subject to under section 1128A of the So18 cial Security Act if the action was taken with respect

19 to title V, XVIII, XIX, or XX of such Act.

20 (2) PENALTIES DESCRIBED.—Section 1128A(a)

21 of the Social Security Act (42 U.S.C. 1320a-7a(a))

22 is amended—

23 (A) by striking ‘‘$2,000’’ and inserting

24 ‘‘$10,000’’; and
986

•S 2357

1 (B) by striking ‘‘twice the amount

2 claimed’’ and inserting ‘‘3 times the amount

3 claimed’’.

4 (3) INTEREST ON PENALTIES.—Section

5 1128A(f) of such Act (42 U.S.C. 1320a-7a(f)) is

6 amended by adding after the first sentence the fol7 lowing: ‘‘Interest shall accrue on the penalties and

8 assessments imposed by a final determination of the

9 Secretary in accordance with an annual rate estab10 lished by the Secretary under the Federal Claims

11 Collection Act. The rate of interest charged shall be

12 the rate in effect on the date the determination be13 comes final and shall remain fixed at that rate until

14 the entire amount due is paid. In addition, the Sec15 retary is authorized to recover the costs of collection

16 in any case where such penalties and assessments

17 are not paid within 30 days after the determination

18 becomes final, or in the case of a compromised

19 amount, where payments are more than 90 days

20 past due. In lieu of actual costs, the Secretary is au21 thorized to impose a charge of up to 10 percent of

22 the amount of such penalties and assessments owed

23 to cover the costs of collection.’’.

24 (c) ADDITIONAL OFFENSES.—
987

•S 2357

1 (1) IN GENERAL.—Section 1128A(a) of the So2 cial Security Act (42 U.S.C. 1320a–7a(a)) is amend3 ed—

4 (A) by striking ‘‘or’’ at the end of para5 graphs (1) and (2);

6 (B) by striking the comma at the end of

7 paragraph (2) and inserting a semicolon; and

8 (C) by inserting after paragraph (3) the

9 following new paragraphs:

10 ‘‘(4) offers, pays, or transfers remuneration to

11 any individual eligible for benefits under title XVIII

12 of this Act, or under a Federal outlay program (as

13 defined in section 5301(g)(1) of the Health Security

14 Act) that such person knows or should know is likely

15 to influence such individual to order or receive from

16 a particular provider, practitioner, or supplier any

17 item or service for which payment may be made, in

18 whole or in part, under title XVIII, or a Federal

19 outlay program;

20 ‘‘(5) in the case of a person who is not an orga21 nization, agency, or other entity, who is excluded

22 from participating in a program under title XVIII or

23 a Federal outlay program in accordance with this

24 section, section 1128, or section 1156 and who, dur25 ing the period of exclusion, retains either a direct or
988

•S 2357

1 indirect ownership or control interest of 5 percent or

2 more in, or an ownership or control interest (as de3 fined in section 1124(a)(3)) in, or who is an officer,

4 director, agent, or managing employee (as defined in

5 section 1126(b)) of, an entity that is participating in

6 a program under title XVIII;

7 ‘‘(6) engages in a practice that circumvents a

8 payment methodology intended to reimburse for two

9 or more discreet medical items or services at a single

10 or fixed amount, including but not limited to, mul11 tiple admissions or readmission to hospitals and

12 other institutions reimbursed on a diagnosis reim13 bursement grouping basis;

14 ‘‘(7) engages in a practice which has the effect

15 of limiting (as compared to other plan enrollees) the

16 appropriate utilization of health care services cov17 ered by law or under the service contract by title

18 XIX or other publicly subsidized patients, including

19 but not limited to differential standards for the loca20 tion and hours of service offered by providers par21 ticipating in the plan;

22 ‘‘(8) fails to comply with a quality assurance

23 program or a utilization review activity;

24 ‘‘(9) employs or contracts with any individual

25 or entity who is excluded from participating in a
989

•S 2357

1 program under title XVIII or a Federal outlay pro2 gram in accordance with this section, section 1128,

3 or section 1156, for the provision of any services (in4 cluding but not limited to health care, utilization re5 view, medical social work, or administrative), or em6 ploys or contracts with any entity for the direct or

7 indirect provision of such services, through such an

8 excluded individual or entity; or

9 ‘‘(10) submits false or fraudulent statements,

10 data or information, or claims to the Secretary, the

11 Secretary of Labor,any other Federal agency, a

12 State health care agency, a purchasing cooperative

13 (under subtitle ll of title ll of the Health Se14 curity Act), or any other Federal, State or local

15 agency charged with implementation or oversight of

16 a certified health plan under this Act or a public

17 program that the person knows or should know is

18 fraudulent;’’.

19 (2) REMUNERATION DEFINED.—Section

20 1128A(i) of such Act (42 U.S.C. 1320a–7a(i)) is

21 amended by adding at the end the following new

22 paragraph:

23 ‘‘(6) The term ‘remuneration’ includes the waiv24 er of coinsurance and deductible amounts (or any

25 part thereof), and transfers of items or services for
990

•S 2357

1 free or for other than fair market value, except that

2 such term does not include the waiver of coinsurance

3 or deductible amounts by a person or entity, if—

4 ‘‘(A) the waiver is not offered as part of

5 any advertisement or solicitation;

6 ‘‘(B) the person does not routinely waive

7 coinsurance or deductible amounts; and

8 ‘‘(C) the person—

9 ‘‘(i) waives the coinsurance and de10 ductible amounts after determining in good

11 faith that the individual is indigent;

12 ‘‘(ii) fails to collect coinsurance or de13 ductible amounts after making reasonable

14 collection efforts; or

15 ‘‘(iii) provides for any permissible

16 waiver as specified in section 1128B(b)(3)

17 or in regulations issued by the Secretary.’’.

18 (3) CLAIM FOR ITEM OR SERVICE BASED ON IN19 CORRECT CODING OR MEDICALLY UNNECESSARY

20 SERVICES.—Section 1128A(a)(1) of such Act (42

21 U.S.C. 1320a–7a(a)(1)) is amended—

22 (A) in subparagraph (A), by striking

23 ‘‘claimed,’’ and inserting the following:

24 ‘‘claimed, including any person who presents or

25 causes to be presented a claim for an item or
991

•S 2357

1 service which includes a procedure or diagnosis

2 code that the person knows or should know will

3 result in a greater payment to the person than

4 the code applicable to the item or service actu5 ally provided or actual patient medical condi6 tion,’’;

7 (B) in subparagraph (C), by striking ‘‘or’’

8 at the end;

9 (C) in subparagraph (D), by striking ‘‘;

10 or’’ and inserting ‘‘, or’’; and

11 (D) by inserting after subparagraph (D)

12 the following new subparagraph:

13 ‘‘(E) is for a medical or other item or serv14 ice that a person knows or should know is not

15 medically necessary; or’’.

16 (c) PROCEDURES FOR IMPOSITION OF PENALTIES.—

17 (1) APPLICABILITY OF PROCEDURES UNDER SO18 CIAL SECURITY ACT.—Except as otherwise provided

19 in paragraph (2), the provisions of section 1128A of

20 the Social Security Act (other than subsections (a)

21 and (b) and the second sentence of subsection (f))

22 shall apply to the imposition of a civil monetary pen23 alty, assessment, or exclusion under this section in

24 the same manner as such provisions apply with re-
992

•S 2357

1 spect to the imposition of a penalty, assessment, or

2 exclusion under section 1128A of such Act.

3 (4) AUTHORITY OF SECRETARY OF LABOR TO

4 IMPOSE PENALTIES, ASSESSMENTS, AND EXCLU5 SIONS.—

6 (A) IN GENERAL.—The Secretary of Labor

7 may initiate an action to impose a civil mone8 tary penalty, assessment, or exclusion under

9 this section with respect to actions relating to

10 a certified multistate self-insured health plan if

11 authorized by the Attorney General of the Unit12 ed States and the Secretary pursuant to regula13 tions promulgated by the Secretary in consulta14 tion with the Attorney General.

15 (B) REGULATIONS DESCRIBED.—Under

16 the regulations promulgated under subpara17 graph (A), the Attorney General and the Sec18 retary shall review an action proposed by the

19 Secretary of Labor, and not later than 60 days

20 after receiving notice of the proposed action

21 from the Secretary of Labor, shall—

22 (i) approve the proposed action to be

23 taken by the Secretary of Labor;

24 (ii) disapprove the proposed action; or
993

•S 2357

1 (iii) assume responsibility for initiat2 ing a criminal, civil, or administrative ac3 tion based on the information provided in

4 the notice.

5 (C) ACTION DEEMED APPROVED.—If the

6 Attorney General and the Secretary fail to re7 spond to a proposed action by the Secretary of

8 Labor within the period described in paragraph

9 (2), the Attorney General and the Secretary

10 shall be deemed to have approved the proposed

11 action to be taken by the Secretary of Labor.

12 (e) NOTIFICATION OF LICENSING AUTHORITIES.—

13 Whenever the Secretary’s determination to impose a pen14 alty, assessment, or exclusion under this section becomes

15 final, the Secretary shall notify the appropriate State or

16 local licensing agency or organization (including the agen17 cy specified in section 1864(a) and 1902(a)(33) of the So18 cial Security Act) that such a penalty, assessment, or ex19 clusion has become final and the reasons therefore.

20 SEC. 5312. PERMITTING PARTIES TO BRING ACTIONS ON

21 OWN BEHALF.

22 (a) IN GENERAL.—Subject to subsections (b) and (c),

23 a certified standard health plan (as defined in section

24 1011(2)) or an experience-rated employer (as defined in

25 section 1011(5)(E)) that suffers harm or monetary loss
994

•S 2357

1 exceeding the sum or value of $10,000 (excluding interest)

2 as a result of any activity of an individual or entity which

3 makes the individual or entity subject to a civil monetary

4 penalty under section 5311 may, in a civil action against

5 the individual or entity in the United States District

6 Court, obtain treble damages and costs including attor7 neys’ fees against the individual or entity and such equi8 table relief as is appropriate.

9 (b) REQUIREMENTS FOR BRINGING ACTION.—A per10 son may bring a civil action under this section only if—

11 (1) the person provides the Secretary with writ12 ten notice of—

13 (A) the person’s intent to bring an action

14 under this section,

15 (B) the identities of the individuals or enti16 ties the person intends to name as defendants

17 to the action, and

18 (C) all information the person possesses

19 regarding the activity that is the subject of the

20 action that may materially affect the Sec21 retary’s decision to initiate a proceeding to im22 pose a civil monetary penalty under section

23 5311 against the defendants, and

24 (2) one of the following conditions is met:
995

•S 2357

1 (A) During the 60-day period that begins

2 on the date the Secretary receives the written

3 notice described in paragraph (1), the Secretary

4 does not notify the person that the Secretary

5 intends to initiate an investigation to determine

6 whether to impose a civil monetary penalty

7 under section 5311 against the defendants.

8 (B) The Secretary notifies the person dur9 ing the 60-day period described in subpara10 graph (A) that the Secretary intends to initiate

11 an investigation to determine whether to impose

12 a civil monetary penalty under such section

13 against the defendants, and the Secretary sub14 sequently notifies the person that the Secretary

15 no longer intends to initiate an investigation or

16 proceeding to impose a civil monetary penalty

17 against the defendants.

18 (C) After the expiration of the 1-year pe19 riod that begins on the date written notice is

20 provided to the Secretary, the Secretary has not

21 initiated a proceeding to impose a civil mone22 tary penalty against the defendants.

23 (c) TREATMENT OF EXCESS AWARDS.—If a person

24 is awarded any amounts in an action brought under this

25 section that are in excess of the damages suffered by the
996

•S 2357

1 person as a result of the defendant’s activities, 20 percent

2 of such amounts shall be withheld from the person for pay3 ment into the Federal Outlays Program Fraud and Abuse

4 Control Account established under section 5302.

5 (d) STATUTE OF LIMITATIONS.—No action may be

6 brought under this section more than 6 years after the

7 date of the activity with respect to which the action is

8 brought.

9 (e) NO LIMITATION ON OTHER ACTIONS.—Nothing

10 in this section shall limit the right of any person to pursue

11 any other right of action or remedy available under the

12 law.

13 (f) PENDANT JURISDICTION.—Nothing in this sec14 tion shall be construed, by reason of a claim arising under

15 this section, to confer on the Courts of the United States

16 jurisdiction over any State law claim.

17 SEC. 5313. EXCLUSION FROM PROGRAM PARTICIPATION.

18 (a) MANDATORY EXCLUSION.—

19 (1) IN GENERAL.—Except as provided in para20 graph (2), the Secretary shall exclude an individual

21 or entity from participating in any applicable health

22 plan if the individual or entity—

23 (A) is excluded from participation in a

24 public program under, or is otherwise described

25 in, section 1128(a) of the Social Security Act
997

•S 2357

1 (relating to individuals and entities convicted of

2 health care-related crimes or patient abuse);

3 (B) has been convicted after the date of

4 the enactment of this section, under Federal or

5 State law, in connection with the delivery of a

6 health care item or service of a criminal offense

7 consisting of a felony relating to fraud, theft,

8 embezzlement, breach of fiduciary responsibil9 ity, or other financial misconduct; or

10 (C) has been convicted after such date,

11 under Federal or State law, of a criminal of12 fense consisting of a felony relating to the un13 lawful manufacture, distribution, prescription,

14 or dispensing of a controlled substance.

15 (2) WAIVER PERMITTED.—

16 (A) IN GENERAL.—When, in the opinion of the

17 Secretary, mandatory exclusion under paragraph (1)

18 of an individual or entity would significantly harm

19 the public health or pose a significant risk to the

20 public health, the Secretary may waive such exclu21 sion and shall apply such other appropriate penalties

22 as authorized under this subtitle.

23 (B) APPLICATION FOR WAIVER OF EXCLU24 SION.—
998

•S 2357

1 (i) IN GENERAL.—An individual or entity

2 subject to mandatory exclusion under this sub3 section may apply to the Secretary, in a manner

4 specified by the Secretary in regulations, for

5 waiver of the exclusion.

6 (ii) SECRETARIAL RESPONSE.—The Sec7 retary may waive the exclusion for the reasons

8 described in subparagraph (A).

9 (b) PERMISSIVE EXCLUSION.—The Secretary may

10 exclude and individual or entity from participating in any

11 applicable health plan if the individual or entity—

12 (1) is excluded from participation in a public

13 program under, or is otherwise described in, section

14 1128(b) of the Social Security Act (other than para15 graphs (3), (6)(A), (6)(C), (6)(D), (10), or (13) of

16 such section);

17 (2) has been convicted after the date of the en18 actment of this section, under Federal or State law,

19 in connection with the delivery of a health care item

20 or service of a criminal offense consisting of a mis21 demeanor relating to fraud, theft, embezzlement,

22 breach of fiduciary responsibility, or other financial

23 misconduct; or

24 (3) has been convicted after the date of the en25 actment of this section, under Federal or State law,
999

•S 2357

1 of a criminal offense consisting of a misdemeanor re2 lating to the unlawful manufacture, distribution,

3 prescription, or dispensing of a controlled substance.

4 (c) PERIOD OF EXCLUSION.—

5 (1) NOTICE OF EXCLUSION.—An exclusion

6 under this section shall be effective at such time and

7 upon such reasonable notice to the public and to the

8 individual or entity excluded as may be specified in

9 regulations consistent with paragraph (2).

10 (2) EFFECTIVE DATE OF EXCLUSION.—Such an

11 exclusion shall be effective with respect to services

12 furnished to an individual on or after the effective

13 date of the exclusion.

14 (3) PERIOD OF EXCLUSION.—

15 (A) IN GENERAL.—The Secretary shall

16 specify, in the notice of exclusion under para17 graph (1), the minimum period (or, in the case

18 of an exclusion of an individual excluded from

19 participation in a public program under, or is

20 otherwise described in, section 1128(b)(12) of

21 the Social Security Act, the period) of the ex22 clusion.

23 (B) MINIMUM PERIOD FOR MANDATORY

24 EXCLUSIONS.—In the case of a mandatory ex-
1000

•S 2357

1 clusion under subsection (a), the minimum pe2 riod of exclusion shall be not less than 2 years.

3 (C) M INIMUM PERIOD FOR CERTAIN PER4 MISSIVE EXCLUSIONS.—

5 (i) F RAUD, OBSTRUCTION OF INVES6 TIGATION, AND CONTROLLED SUBSTANCE

7 CONVICTION.—In the case of an exclusion

8 of an individual excluded from participa9 tion in a public program under, or is other10 wise described in, paragraph (1) or (2) of

11 section 1128(b) of the Social Security Act

12 or paragraph (1), (2), or (3) of subsection

13 (b) of this section, the period of exclusion

14 shall be a minimum of 1 year, unless the

15 Secretary determines that a longer period

16 is necessary because of aggravating cir17 cumstances.

18 (ii) S USPENSIONS.—In the case of an

19 exclusion of an individual or entity ex20 cluded from participation in a public pro21 gram under, or is otherwise described in,

22 paragraph (4), (5)(A), or (5)(B) of section

23 1128(b) of the Social Security Act, the pe24 riod of the exclusion shall not be less than

25 the period during which the individual’s or
1001

•S 2357

1 entity’s license to provide health care is re2 voked, suspended or surrendered, or the in3 dividual or the entity is excluded or sus4 pended from a Federal or State health

5 care program.

6 (iii) UNNECESSARY SERVICES.—In the

7 case of an exclusion of an individual or en8 tity described in paragraph (6)(B) of sec9 tion 1128(b) of the Social Security Act,

10 the period of the exclusion shall be not less

11 than 1 year.

12 (d) N OTICE TO ENTITIES ADMINISTERING PUBLIC

13 PROGRAMS FOR THE DELIVERY OF OR PAYMENT FOR

14 HEALTH CARE ITEMS OR SERVICES.—

15 (1) I N GENERAL.—The Secretary shall exercise

16 the authority under this section in a manner that re17 sults in an individual’s or entity’s exclusion from all

18 certified standard health plans under such program

19 for the delivery of or payment for health care items

20 or services.

21 (2) NOTIFICATION.—The Secretary shall

22 promptly notify each sponsor of an applicable health

23 plan and each entity that administers a State health

24 care program described in section 1128(h) of the So25 cial Security Act of the fact and circumstances of
1002

•S 2357

1 each exclusion (together with the period thereof) ef2 fected against an individual or entity under this sec3 tion or under section 5311(b)(3).

4 (e) N OTICE TO STATE LICENSING AGENCIES.—The

5 provisions of section 1128(e) of the Social Security Act

6 shall apply to this section in the same manner as such

7 provisions apply to sections 1128 and 1128A of such Act.

8 (f) NOTICE, HEARING, AND JUDICIAL REVIEW.—

9 (1) I N GENERAL.—Subject to paragraph (2),

10 any individual or entity that is excluded (or directed

11 to be excluded) from participation under this section

12 is entitled to reasonable notice and opportunity for

13 a hearing thereon by the Secretary to the same ex14 tent as is provided in section 205(b) of the Social

15 Security Act, and to judicial review of the Sec16 retary’s final decision after such hearing as is pro17 vided in section 205(g) of such Act, except that such

18 action shall be brought in the Court of Appeals of

19 the United States for the judicial circuit in which

20 the individual or entity resides, or has a principal

21 place of business, or, if the individual or entity does

22 not reside or have a principal place of business with23 in any such judicial circuit, in the United States

24 Court of Appeals for the District of Columbia Cir25 cuit.
1003

•S 2357

1 (2) ADMINISTRATIVE HEARING.—Unless the

2 Secretary determines that the health or safety of in3 dividuals receiving services warrants the exclusion

4 taking effect earlier, any individual or entity that is

5 the subject of an adverse determination based on

6 paragraphs (6)(B), (7), (8), (9), (11), (12), (14), or

7 (15) of section 1128(b) of the Social Security Act,

8 shall be entitled to a hearing by an administrative

9 law judge (as provided under section 205(b) of the

10 Social Security Act) on the determination before any

11 exclusion based upon the determination takes effect.

12 If a hearing is requested, the exclusion shall be ef13 fective upon the issuance of an order by the adminis14 trative law judge upholding the determination of the

15 Secretary to exclude.

16 (g) CONVICTED DEFINED.—In this section, the term

17 ‘‘convicted’’ has the meaning given such term in section

18 1128(i) of the Social Security Act.

19 (h) REQUEST FOR EXCLUSION.—

20 (1) IN GENERAL.—The sponsor of any standard

21 health plan, the board of any purchasing coopera22 tive, and the Secretary of Labor in the case of a

23 multistate self-insured health plan may request that

24 the Secretary of Health and Human Services exclude

25 an individual or entity with respect to actions under
1004

•S 2357

1 a certified health plan in accordance with this sec2 tion.

3 (2) RESPONSE BY SECRETARY.—

4 (A) I N GENERAL.—An individual or entity

5 excluded (or directed to be excluded) from par6 ticipation under this section or section

7 5411(b)(3) may apply to the Secretary, in a

8 manner specified by the Secretary in regula9 tions and at the end of the minimum period of

10 exclusion (or, in the case of an individual or en11 tity described in section 1128(b)(12) of the So12 cial Security Act, the period of exclusion) pro13 vided under this section or section 5411(b)(3)

14 and at such other times as the Secretary may

15 provide, for termination of the exclusion.

16 (B) SECRETARIAL RESPONSE.—The Sec17 retary may terminate the exclusion if the Sec18 retary determines, on the basis of the conduct

19 of the applicant which occurred after the date

20 of the notice of exclusion or which was un21 known to the Secretary at the time of the exclu22 sion, that—

23 (i) there is no basis under this section

24 or section 5411(b)(3) for a continuation of

25 the exclusion, and
1005

•S 2357

1 (ii) there are reasonable assurances

2 that the types of actions which formed the

3 basis for the original exclusion have not re4 curred and will not recur.

5 (C) NOTIFICATION OF TERMINATION.—

6 The Secretary shall promptly notify each spon7 sor of an applicable health plan and each entity

8 that administers a State health care program

9 described in section 1128(h) of the Social Secu10 rity Act of each termination of exclusion made

11 under this paragraph.

12 (i) E FFECT OF EXCLUSION.—Notwithstanding any

13 other provision of this Act, no payment may be made

14 under a certified standard health plan for the delivery of

15 or payment for any item or service (other than an emer16 gency item or service, not including items or services fur17 nished in an emergency room of a hospital) furnished—

18 (1) by an individual or entity during the period

19 when such individual or entity is excluded pursuant

20 to this section from participation in a certified

21 standard health plan; or

22 (2) at the medical direction or on the prescrip23 tion of a physician during the period when the physi24 cian is excluded pursuant to this section from par25 ticipation in a certified health plan and the person
1006

•S 2357

1 furnishing the item or service knew or had reason to

2 know of the exclusion (after a reasonable time period

3 after reasonable notice has been furnished to the

4 person).

5 PART 3—AMENDMENTS TO CRIMINAL LAW

6 SEC. 5321. HEALTH CARE FRAUD.

7 (a) I N GENERAL.—Chapter 63 of title 18, United

8 States Code, is amended by adding at the end the follow9 ing:

10 ‘‘§ 1347. Health care fraud

11 ‘‘(a) Whoever knowingly executes, or attempts to exe12 cute, a scheme or artifice—

13 ‘‘(1) to defraud any purchasing cooperative,

14 certified standard health plan, certified long-term

15 care insurance policy, or other person, in connection

16 with the delivery of or payment for health care bene17 fits, items, or services; or

18 ‘‘(2) to obtain, by means of false or fraudulent

19 pretenses, representations, or promises, any of the

20 money or property owned by, or under the custody

21 or control of, any purchasing cooperative, certified

22 standard health plan, certified long-term care insur23 ance policy, or person in connection with the delivery

24 of or payment for health care benefits, items, or

25 services;
1007

•S 2357

1 shall be fined under this title or imprisoned not more than

2 10 years, or both. If the violation results in serious bodily

3 injury (as defined in section 1365 of this title) such person

4 shall be imprisoned for any term of years.

5 ‘‘(b) As used in this section the terms ‘purchasing

6 cooperative’, ‘certified standard health plan’, and ‘certified

7 long-term care insurance policy’ have the meanings given

8 those terms in sections 1013(16), 1011(2), and 1011(4)

9 of the Health Security Act, respectively.’’.

10 (b) C LERICAL AMENDMENT.—The table of sections

11 at the beginning of chapter 63 of title 18, United States

12 Code, is amended by adding at the end the following:

‘‘1347. Health care fraud.’’.

13 SEC. 5322. THEFT OR EMBEZZLEMENT.

14 (a) I N GENERAL.—Chapter 31 of title 18, United

15 States Code, is amended by adding at the end the follow16 ing:

17 ‘‘§ 668. Theft or embezzlement in connection with

18 health care

19 ‘‘(a) Whoever embezzles, steals, willfully and unlaw20 fully converts to the use of any person other than the

21 rightful owner, or intentionally misapplies any of the mon22 eys, securities, premiums, credits, property, or other assets

23 of a purchasing cooperative, certified standard health

24 plan, certified long-term care insurance policy, or of any

25 fund connected with such a cooperative, plan, or policy,
1008

•S 2357

1 shall be fined under this title or imprisoned not more than

2 10 years, or both.

3 ‘‘(b) As used in this section, the terms ‘purchasing

4 cooperative’, ‘certified standard health plan’, and ‘certified

5 long-term care insurance policy’ have the meanings given

6 those terms in sections 1013(16), 1011(2), and 1011(4)

7 of the Health Security Act, respectively.’’.

8 (b) C LERICAL AMENDMENT.—The table of sections

9 at the beginning of chapter 31 of title 18, United States

10 Code, is amended by adding at the end the following:

‘‘668. Theft or embezzlement in connection with health care.’’.

11 SEC. 5323. FALSE STATEMENTS.

12 (a) I N GENERAL.—Chapter 47 of title 18, United

13 States Code, is amended by adding at the end the follow14 ing:

15 ‘‘§ 1033. False statements relating to health care mat16 ters

17 ‘‘(a) Whoever, in any matter involving a purchasing

18 cooperative, certified standard health plan, or certified

19 long-term care insurance policy, knowingly and willfully

20 falsifies, conceals, or covers up by any trick, scheme, or

21 device a material fact, or makes any false, fictitious, or

22 fraudulent statements or representations, or makes or

23 uses any false writing or document knowing the same to

24 contain any false, fictitious, or fraudulent statement or
1009

•S 2357

1 entry, shall be fined under this title or imprisoned not

2 more than 5 years, or both.

3 ‘‘(b) As used in this section, the terms ‘purchasing

4 cooperative’, ‘certified standard health plan’, and ‘certified

5 long-term care insurance policy’ have the meanings given

6 those terms in sections 1013(16), 1011(2), and 1011(4)

7 of the Health Security Act, respectively.’’.

8 (b) C LERICAL AMENDMENT.—The table of sections

9 at the beginning of chapter 47 of title 18, United States

10 Code, is amended by adding at the end the following:

‘‘1033. False statements relating to health care matters.’’.

11 SEC. 5324. BRIBERY AND GRAFT.

12 (a) I N GENERAL.—Chapter 11 of title 18, United

13 States Code, is amended by adding at the end the follow14 ing:

15 ‘‘§ 226. Bribery and graft in connection with health

16 care

17 ‘‘(a) Whoever—

18 ‘‘(1) directly or indirectly, corruptly gives, of19 fers, or promises anything of value to a health care

20 official, or offers or promises a health care official

21 to give anything of value to any other person, with

22 intent—

23 ‘‘(A) to influence any of the health care of24 ficial’s actions, decisions, or duties relating to a

25 purchasing cooperative, certified standard
1010

•S 2357

1 health plan, or certified long-term care insur2 ance policy;

3 ‘‘(B) to influence such an official to com4 mit or aid in the committing, or collude in or

5 allow, any fraud, or make opportunity for the

6 commission of any fraud, on a purchasing coop7 erative, certified standard health plan, or cer8 tified long-term care insurance policy; or

9 ‘‘(C) to induce such an official to engage

10 in any conduct in violation of the lawful duty of

11 such official; or

12 ‘‘(2) being a health care official, directly or in13 directly, corruptly demands, seeks, receives, accepts,

14 or agrees to accept anything of value personally or

15 for any other person or entity, the giving of which

16 violates paragraph (1) of this subsection;

17 shall be fined under this title or imprisoned not more than

18 15 years, or both.

19 ‘‘(b) Whoever, otherwise than as provided by law for

20 the proper discharge of any duty, directly or indirectly

21 gives, offers, or promises anything of value to a health

22 care official, for or because of any of the health care offi23 cial’s actions, decisions, or duties relating to a purchasing

24 cooperative, certified standard health plan, or certified
1011

•S 2357

1 long-term care insurance policy, shall be fined under this

2 title or imprisoned not more than two years, or both.

3 ‘‘(c) As used in this section—

4 ‘‘(1) the term ‘health care official’ means—

5 ‘‘(A) an administrator, officer, trustee, fi6 duciary, custodian, counsel, agent, or employee

7 of any purchasing cooperative, certified stand8 ard health plan, or certified long-term care in9 surance policy;

10 ‘‘(B) an officer, counsel, agent, or em11 ployee, of an organization that provides services

12 under contract to any purchasing cooperative,

13 certified standard health plan, or certified long14 term care insurance policy;

15 ‘‘(C) an official or employee of a State

16 agency having regulatory authority over any

17 purchasing cooperative, certified standard

18 health plan, or certified long-term care insur19 ance policy;

20 ‘‘(D) an officer, counsel, agent, or em21 ployee of a health care sponsor;

22 ‘‘(2) the term ‘health care sponsor’ means any

23 individual or entity serving as the sponsor of a cer24 tified health plan for purposes of the Health Secu25 rity Act, and includes the joint board of trustees or
1012

•S 2357

1 other similar body used by two or more employers

2 to administer a certified standard health plan for

3 purposes of such Act; and

4 ‘‘(3) the terms ‘purchasing cooperative’, ‘cer5 tified standard health plan’, and ‘certified long-term

6 care insurance policy’ have the meanings given those

7 terms in sections 1013(16), 1011(2), and 1011(4) of

8 the Health Security Act, respectively.’’.

9 (b) C LERICAL AMENDMENT.—The table of chapters

10 at the beginning of chapter 11 of title 18, United States

11 Code, is amended by adding at the end the following:

‘‘226. Bribery and graft in connection with health care.’’.

12 SEC. 5325. INJUNCTIVE RELIEF RELATING TO HEALTH

13 CARE OFFENSES.

14 Section 1345(a)(1) of title 18, United States Code,

15 is amended—

16 (1) by striking ‘‘or’’ at the end of subparagraph

17 (A);

18 (2) by inserting ‘‘or’’ at the end of subpara19 graph (B); and

20 (3) by adding at the end the following:

21 ‘‘(C) committing or about to commit a Federal

22 health care offense (as defined in section 5302(d) of

23 the Health Security Act);’’.
1013

•S 2357

1 SEC. 5326. GRAND JURY DISCLOSURE.

2 Section 3322 of title 18, United States Code, is

3 amended—

4 (1) by redesignating subsections (c) and (d) as

5 subsections (d) and (e), respectively; and

6 (2) by inserting after subsection (b) the follow7 ing:

8 ‘‘(c) A person who is privy to grand jury information

9 concerning a health law violation—

10 ‘‘(1) received in the course of duty as an attor11 ney for the Government; or

12 ‘‘(2) disclosed under rule 6(e)(3)(A)(ii) of the

13 Federal Rules of Criminal Procedure;

14 may disclose that information to an attorney for the Gov15 ernment to use in any civil proceeding related to a Federal

16 health care offense (as defined in section 5302(d) of the

17 Health Security Act).’’.

18 SEC. 5327. FORFEITURES FOR VIOLATIONS OF FRAUD STAT19 UTES.

20 Section 982(a) of title 18, United States Code, is

21 amended by inserting after paragraph (5) the following:

22 ‘‘(6) The court, in imposing sentence on a person con23 victed of a Federal health care offense (as defined in sec24 tion 5302(d) of the Health Security Act), shall order such

25 person to forfeit to the United States any property, real

26 or personal, constituting or traceable to the gross proceeds
1014

•S 2357

1 obtained, directly or indirectly, as a result of the commis2 sion of the offense.’’.

3 PART 4—AMENDMENTS TO CIVIL FALSE CLAIMS

4 ACT

5 SEC. 5331. AMENDMENTS TO CIVIL FALSE CLAIMS ACT.

6 Section 3729 of title 31, United States Code, is

7 amended—

8 (1) in subsection (a)(7), by inserting ‘‘or to a

9 certified standard health plan or certified long-term

10 care insurance policy’’ after ‘‘property to the Gov11 ernment’’;

12 (2) in the matter following subsection (a)(7), by

13 inserting ‘‘or certified standard health plan or cer14 tified long-term care insurance policy’’ before ‘‘sus15 tains because of the act of that person,’’;

16 (3) at the end of the first sentence of sub17 section (a), by inserting ‘‘or certified standard

18 health plan or certified long-term care insurance pol19 icy’’ before ‘‘sustains because of the act of the per20 son.’’;

21 (4) in subsection (c)—

22 (A) by inserting ‘‘the term’’ after ‘‘sec23 tion,’’; and

24 (B) by adding at the end the following:

25 ‘‘The term also includes any request or demand,
1015

•S 2357

1 whether under contract of otherwise, for money

2 or property which is made or presented to a

3 certified standard health plan or certified long4 term care insurance policy.’’; and

5 (5) by adding at the end the following:

6 ‘‘(f) CERTIFIED STANDARD HEALTH PLAN AND CER7 TIFIED LONG-TERM CARE INSURANCE POLICY DE8 FINED.—For purposes of this section, the terms ‘purchas9 ing cooperative’, ‘certified standard health plan’, and ‘cer10 tified long-term care insurance policy’ have the meanings

11 given those terms in sections 1013(16), 1011(2), and

12 1011(4) of the Health Security Act, respectively.’’.

13 PART 5—EFFECTIVE DATE

14 SEC. 5341. EFFECTIVE DATE.

15 Except as otherwise provided in this subtitle, the pro16 visions of, and amendments made by, this subtitle shall

17 be effective on and after January 1, 1996.

18 Subtitle E—Medical Liability

19 Reform

20 PART 1—SYSTEM REFORMS

21 SEC. 5401. FEDERAL TORT REFORM.

22 (a) APPLICABILITY.—

23 (1) I N GENERAL.—Except as provided in sec24 tion 5402, this subtitle shall apply with respect to

25 any medical malpractice liability action brought in
1016

•S 2357

1 any State or Federal court, except that this subtitle

2 shall not apply to a claim or action for damages

3 arising from a vaccine-related injury or death to the

4 extent that title XXI of the Public Health Service

5 Act applies to the claim or action.

6 (2) P REEMPTION.—The provisions of this sub7 title shall preempt any State law to the extent that

8 such law is inconsistent with the limitations con9 tained in such provisions.

10 (3) EFFECT ON SOVEREIGN IMMUNITY AND

11 CHOICE OF LAW OR VENUE.—Nothing in this sub12 title shall be construed to—

13 (A) waive or affect any defense of sov14 ereign immunity asserted by any State under

15 any provision of law;

16 (B) waive or affect any defense of sov17 ereign immunity asserted by the United States;

18 (C) affect the applicability of any provision

19 of the Foreign Sovereign Immunities Act of

20 1976;

21 (D) preempt State choice-of-law rules with

22 respect to claims brought by a foreign nation or

23 a citizen of a foreign nation; or

24 (E) affect the right of any court to trans25 fer venue or to apply the law of a foreign nation
1017

•S 2357

1 or to dismiss a claim of a foreign nation or of

2 a citizen of a foreign nation on the ground of

3 inconvenient forum.

4 (4) FEDERAL COURT JURISDICTION NOT ES5 TABLISHED ON FEDERAL QUESTION GROUNDS.—

6 Nothing in this subtitle shall be construed to estab7 lish any jurisdiction in the district courts of the

8 United States over medical malpractice liability ac9 tions on the basis of section 1331 or 1337 of title

10 28, United States Code.

11 (b) DEFINITIONS.—In this subtitle, the following

12 definitions apply:

13 (1) A LTERNATIVE DISPUTE RESOLUTION SYS14 TEM; ADR.—The term ‘‘alternative dispute resolu15 tion system’’ or ‘‘ADR’’ means a system that pro16 vides for the resolution of medical malpractice claims

17 in a manner other than through medical malpractice

18 liability actions.

19 (2) CLAIMANT.—The term ‘‘claimant’’ means

20 any person who alleges a medical malpractice claim,

21 and any person on whose behalf such a claim is al22 leged, including the decedent in the case of an action

23 brought through or on behalf of an estate.

24 (3) H EALTH CARE PROFESSIONAL.—The term

25 ‘‘health care professional’’ means any individual who
1018

•S 2357

1 provides health care services in a State and who is

2 required by the laws or regulations of the State to

3 be licensed or certified by the State to provide such

4 services in the State.

5 (4) HEALTH CARE PROVIDER.—The term

6 ‘‘health care provider’’ means any organization or

7 institution that is engaged in the delivery of health

8 care services in a State and that is required by the

9 laws or regulations of the State to be licensed or cer10 tified by the State to engage in the delivery of such

11 services in the State.

12 (5) INJURY.—The term ‘‘injury’’ means any ill13 ness, disease, or other harm that is the subject of

14 a medical malpractice liability action or a medical

15 malpractice claim.

16 (6) MEDICAL MALPRACTICE LIABILITY AC17 TION.—The term ‘‘medical malpractice liability ac18 tion’’ means a cause of action brought in a State or

19 Federal court against a health care provider or

20 health care professional by which the plaintiff brings

21 a medical malpractice claim.

22 (7) M EDICAL MALPRACTICE CLAIM.—The term

23 ‘‘medical malpractice claim’’ means a claim brought

24 against a health care provider or health care profes25 sional in which a claimant alleges that injury was
1019

•S 2357

1 caused by the provision of (or the failure to provide)

2 health care services, except that such term does not

3 include—

4 (A) any claim based on an allegation of an

5 intentional tort;

6 (B) any claim based on an allegation that

7 a product is defective that is brought against

8 any individual or entity that is not a health

9 care professional or health care provider; or

10 (C) any claim brought pursuant to subtitle

11 F.

12 SEC. 5402. STATE-BASED ALTERNATIVE DISPUTE RESOLU13 TION MECHANISMS.

14 (a) APPLICATION TO MALPRACTICE CLAIMS UNDER

15 PLANS.—Prior to or immediately following the commence16 ment of any medical malpractice action, the parties shall

17 participate in the alternative dispute resolution system ad18 ministered by the State under subsection (b). Such partici19 pation shall be in lieu of any other provision of Federal

20 or State law or any contractual agreement made by or on

21 behalf of the parties prior to the commencement of the

22 medical malpractice action.

23 (b) ADOPTION OF MECHANISM BY STATE.—Each

24 State shall—
1020

•S 2357

1 (1) maintain or adopt at least one of the alter2 native dispute resolution methods satisfying the re3 quirements specified under subsection (c) and (d) for

4 the resolution of medical malpractice claims arising

5 from the provision of (or failure to provide) health

6 care services to individuals enrolled in a standard

7 health plan; and

8 (2) clearly disclose to enrollees (and potential

9 enrollees) the availability and procedures for

10 consumer grievances, including a description of the

11 alternative dispute resolution method or methods

12 adopted under this subsection.

13 (c) S PECIFICATION OF PERMISSIBLE ALTERNATIVE

14 DISPUTE RESOLUTION METHODS.—

15 (1) IN GENERAL.—The Attorney General, in

16 consultation with the Secretary, shall, by regulation,

17 develop alternative dispute resolution methods for

18 the use by States in resolving medical malpractice

19 claims under subsection (a). Such methods shall in20 clude at least the following:

21 (A) ARBITRATION.—The use of arbitra22 tion, a nonjury adversarial dispute resolution

23 process which may, subject to subsection (d),

24 result in a final decision as to facts, law, liabil25 ity or damages.
1021

•S 2357

1 (B) C LAIMANT-REQUESTED BINDING ARBI2 TRATION.—For claims involving a sum of

3 money that falls below a threshold amount set

4 by the Secretary, the use of arbitration not sub5 ject to subsection (d). Such binding arbitration

6 shall be at the sole discretion of the claimant.

7 (C) M EDIATION.—The use of mediation, a

8 settlement process coordinated by a neutral

9 third party without the ultimate rendering of a

10 formal opinion as to factual or legal findings.

11 (D) E ARLY NEUTRAL EVALUATION.—The

12 use of early neutral evaluation, in which the

13 parties make a presentation to a neutral attor14 ney or other neutral evaluator for an assess15 ment of the merits, to encourage settlement. If

16 the parties do not settle as a result of assess17 ment and proceed to trial, the neutral eval18 uator’s opinion shall be kept confidential.

19 (2) STANDARDS FOR ESTABLISHING METH20 ODS.—In developing alternative dispute resolution

21 methods under paragraph (1), the Attorney General

22 shall assure that the methods promote the resolution

23 of medical malpractice claims in a manner that—

24 (A) is affordable for the parties involved;
1022

•S 2357

1 (B) provides for timely resolution of

2 claims;

3 (C) provides for the consistent and fair

4 resolution of claims; and

5 (D) provides for reasonably convenient ac6 cess to dispute resolution for individuals en7 rolled in plans.

8 (3) W AIVER AUTHORITY.—Upon application of

9 a State, the Attorney General, in consultation with

10 the Secretary, may grant the State the authority to

11 fulfill the requirement of subsection (b) by adopting

12 a mechanism other than a mechanism established by

13 the Attorney General pursuant to this subsection,

14 except that such mechanism must meet the stand15 ards set forth in paragraph (2).

16 (d) FURTHER REDRESS.—Except with respect to the

17 claimant-requested binding arbitration method set forth in

18 subsection (c)(1)(B), and notwithstanding any other provi19 sion of a law or contractual agreement, a plan enrollee

20 dissatisfied with the determination reached as a result of

21 an alternative dispute resolution method applied under

22 this section may, after the final resolution of the enrollee’s

23 claim under the method, initiate or resume a cause of ac24 tion to seek damages or other redress with respect to the

25 claim to the extent otherwise permitted under State law.
1023

•S 2357

1 The results of any alternative dispute resolution procedure

2 are inadmissible at any subsequent trial, as are all state3 ments, offers, and other communications made during

4 such procedures, unless otherwise admissible under State

5 law.

6 SEC. 5403. REQUIREMENT OF CERTIFICATE OF MERIT.

7 (a) REQUIRING SUBMISSION WITH COMPLAINT.—

8 Except as provided in subsection (c) and subject to the

9 penalties of subsection (e), no medical malpractice liability

10 action may be brought by any individual unless, at the

11 time the individual commences such action, the individual

12 or the individual’s attorney submits an affidavit declaring

13 that—

14 (1) the individual (or the individual’s attorney)

15 has consulted and reviewed the facts of the claim

16 with a qualified specialist (as defined in subsection

17 (d));

18 (2) the individual or the individual’s attorney

19 has obtained a written report by a qualified special20 ist that clearly identifies the individual and that in21 cludes the specialist’s determination that, based

22 upon a review of the available medical record and

23 other relevant material, a reasonable medical inter24 pretation of the facts supports a finding that the
1024

•S 2357

1 claim against the defendant is meritorious and based

2 on good cause; and

3 (3) on the basis of the qualified specialist’s re4 view and consultation, the individual (or the individ5 ual’s attorney) has concluded that the claim is meri6 torious and based on good cause.

7 (b) IDENTITY OF SPECIALIST.—Only upon a showing

8 of good cause may a court order that the identity of the

9 specialist used for purposes of subsection (a) be revealed.

10 In such an event, such identity shall be reviewed by the

11 court on an in camera basis only.

12 (c) EXTENSION IN CERTAIN INSTANCES.—

13 (1) I N GENERAL.—Subject to paragraph (2),

14 subsection (a) shall not apply with respect to an in15 dividual who brings a medical malpractice liability

16 action without submitting an affidavit described in

17 such subsection if—

18 (A) despite good faith efforts, the individ19 ual is unable to obtain the written report before

20 the expiration of the applicable statute of limi21 tations;

22 (B) despite good faith efforts, at the time

23 the individual commences the action, the indi24 vidual has been unable to obtain medical

25 records or other information necessary, pursu-
1025

•S 2357

1 ant to any applicable law, to prepare the writ2 ten report requested; or

3 (C) the court of competent jurisdiction de4 termines that the affidavit requirement shall be

5 extended upon a showing of good cause.

6 (2) DEADLINE FOR SUBMISSION WHERE EX7 TENSION APPLIES.—In the case of an individual who

8 brings an action to which paragraph (1) applies, the

9 action shall be dismissed unless the individual sub10 mits the affidavit described in subsection (a) not

11 later than—

12 (A) in the case of an action to which sub13 paragraph (A) of paragraph (1) applies, 90

14 days after commencing the action; or

15 (B) in the case of an action to which sub16 paragraph (B) of paragraph (1) applies, 90

17 days after obtaining the information described

18 in such subparagraph or when good cause for

19 an extension no longer exists.

20 (d) QUALIFIED SPECIALIST DEFINED.—

21 (1) I N GENERAL.—As used in subsection (a),

22 the term ‘‘qualified specialist’’ means, with respect

23 to a medical malpractice liability action, a health

24 care professional who is reasonably believed by the

25 individual bringing the action (or the individual’s at-
1026

•S 2357

1 torney) to have expertise in the same or substan2 tially similar area of practice to that involved in the

3 action.

4 (2) E VIDENCE OF EXPERTISE.—For purposes

5 of paragraph (1), evidence of required expertise may

6 include evidence that the individual—

7 (A) practices (or has practiced) or teaches

8 (or has taught) in the same or substantially

9 similar area of health care or medicine to that

10 involved in the action; or

11 (B) is otherwise qualified by experience or

12 demonstrated competence in the relevant prac13 tice area.

14 (e) S ANCTIONS FOR SUBMITTING FALSE AFFIDA15 VIT.—Upon the motion of any party or on its own initia16 tive, the court in a medical malpractice liability action may

17 impose a sanction on a party, the party’s attorney, or

18 both, for—

19 (1) any knowingly false statement made in an

20 affidavit described in subsection (a);

21 (2) making any false representations in order to

22 obtain a qualified specialist’s report; or

23 (3) failing to have the qualified specialist’s writ24 ten report in his or her custody and control;
1027

•S 2357

1 and may require that the sanctioned party reimburse the

2 other party to the action for costs and reasonable attor3 ney’s fees.

4 SEC. 5404. LIMITATION ON AMOUNT OF ATTORNEY’S CON5 TINGENCY FEES.

6 (a) I N GENERAL.—An attorney who represents, on

7 a contingency fee basis, a plaintiff in a medical mal8 practice liability action may not charge, demand, receive,

9 or collect for services rendered in connection with such ac10 tion (including the resolution of the claim that is the sub11 ject of the action under any alternative dispute resolution

12 system) in excess of—

(1) 33 1 13 ⁄3 percent of the first $150,000 of the

14 total amount recovered by judgment or settlement in

15 such action; plus

16 (2) 25 percent of any amount recovered above

17 the amount described in paragraph (1);

18 unless otherwise determined under State law. Such

19 amount shall be computed after deductions are made for

20 all the expenses associated with the claim other than those

21 attributable to the normal operating expenses of the attor22 ney.

23 (b) CALCULATION OF PERIODIC PAYMENTS.—In the

24 event that a judgment or settlement includes periodic or

25 future payments of damages, the amount recovered for
1028

•S 2357

1 purposes of computing the limitation on the contingency

2 fee under subsection (a) may, in the discretion of the

3 court, be based on the cost of the annuity or trust estab4 lished to make the payments. In any case in which an an5 nuity or trust is not established to make such payments,

6 such amount shall be based on the present value of the

7 payments.

8 (c) C ONTINGENCY FEE DEFINED.—As used in this

9 section, the term ‘‘contingency fee’’ means any fee for pro10 fessional legal services which is, in whole or in part, con11 tingent upon the recovery of any amount of damages,

12 whether through judgment or settlement.

13 SEC. 5405. PERIODIC PAYMENT OF AWARDS.

14 (a) IN GENERAL.—A party to a medical malpractice

15 liability action may petition the court to instruct the trier

16 of fact to award any future damages on an appropriate

17 periodic basis. If the court, in its discretion, so instructs

18 the trier of fact, and damages are awarded on a periodic

19 basis, the court may require the defendant to purchase

20 an annuity or other security instrument (typically based

21 on future damages discounted to present value) adequate

22 to assure payments of future damages.

23 (b) F AILURE OR INABILITY TO PAY.—With respect

24 to an award of damages described in subsection (a), if a

25 defendant fails to make payments in a timely fashion, or
1029

•S 2357

1 if the defendant becomes or is at risk of becoming insol2 vent, upon such a showing the claimant may petition the

3 court for an order requiring that remaining balance be dis4 counted to present value and paid to the claimant in a

5 lump-sum.

6 (c) M ODIFICATION OF PAYMENT SCHEDULE.—The

7 court shall retain authority to modify the payment sched8 ule based on changed circumstances.

9 (d) F UTURE DAMAGES DEFINED.—As used in this

10 section, the term ‘‘future damages’’ means any economic

11 or noneconomic loss other than that incurred or accrued

12 as of the time of judgment.

13 SEC. 5406. FEDERAL STUDY ON MEDICAL NEGLIGENCE.

14 (a) S TUDY.—To improve the level of empirical data

15 on the incidence and effect of medical negligence in the

16 United States, the Secretary of Health and Human Serv17 ices shall commission and oversee a nationwide inter18 disciplinary study to evaluate—

19 (1) the incidence of injuries resulting from med20 ical treatment, including a determination of the per21 centage of such injuries that resulted from the neg22 ligence of a physician, other health care provider or

23 health care institution;

24 (2) the costs of medical expenses and lost wages

25 to the victims of medical negligence and their fami-
1030

•S 2357

1 lies, and their compensation for such losses under

2 the current malpractice system;

3 (3) methods to reduce the incidence and costs

4 of medical negligence; and

5 (4) methods to promote the efficient and fair

6 resolution of legal claims stemming from the inci7 dence of medical negligence.

8 (b) ACCESS TO RECORDS.—For the purposes of the

9 study conducted under subsection (a), the Secretary of

10 Health and Human Services shall have the powers nec11 essary to access hospital patients’ records while maintain12 ing patient confidentiality.

13 (c) REPORT TO CONGRESS.—Not later than 3 years

14 after the commission of the study under subsection (a),

15 the study shall be completed and the Secretary of Health

16 and Human Services shall prepare and submit to Congress

17 a report describing the findings of the study.

18 PART 2—DEMONSTRATION PROJECT RELATING

19 TO MEDICAL MALPRACTICE LIABILITY

20 SEC. 5411. PILOT PROGRAM APPLYING PRACTICE GUIDE21 LINES TO MEDICAL MALPRACTICE LIABILITY

22 ACTIONS.

23 (a) E STABLISHMENT.—Not later than 1 year after

24 the Secretary of Health and Human Services determines

25 that appropriate practice guidelines are available and were
1031

•S 2357

1 developed with the input of health care providers, legal

2 professionals and consumer representatives, the Secretary

3 shall establish pilot programs under which the Secretary

4 shall provide funds (in such amounts as the Secretary de5 termines appropriate) to one or more eligible States to de6 termine the effect of applying practice guidelines in the

7 resolution of medical malpractice liability actions.

8 (b) ELIGIBILITY OF STATE.—To be eligible to partici9 pate in a pilot program under subsection (a), a State shall

10 prepare and submit to the Secretary an application at

11 such time, in such manner, and containing such informa12 tion as the Secretary may require, including—

13 (1) assurances that, under the law of the State,

14 in the resolution of any medical malpractice liability

15 action, compliance or noncompliance with an appro16 priate practice guideline shall be admissible by either

17 party at trial as presumptive evidence-of nonliability

18 or liability for medical negligence; and

19 (2) such other information and assurances as

20 the Secretary may require.

21 (c) REPORTS TO CONGRESS.—Not later than 3

22 months after the last day of each year for which a pilot

23 program established under subsection (a) is in effect, the

24 Secretary of Health and Human Services shall prepare

25 and submit to Congress a report describing the operation
1032

•S 2357

1 of the program during the year for which the report is

2 submitted. Such report shall contain such recommenda3 tions as the Secretary considers appropriate, include rec4 ommendations relating to revisions to the laws governing

5 medical practice liability.

6 SEC. 5412. ENTERPRISE LIABILITY DEMONSTRATION

7 PROJECT.

8 (a) ESTABLISHMENT.—The Secretary of Health and

9 Human Services shall establish a demonstration project

10 under which the Secretary shall provide funds (in such

11 amount as the Secretary considers appropriate) to one or

12 more eligible States to demonstrate whether substituting

13 liability for medical malpractice on the part of the health

14 plan in which a physician participates for the personal li15 ability of the physician will result in improvements in the

16 quality of care provided under the plan, reductions in de17 fensive medical practices, and better risk management.

18 (b) E LIGIBILITY OF STATE.—A State is eligible to

19 participate in the demonstration project established under

20 subsection (a) if the State submits an application to the

21 Secretary (at such time and in such form as the Secretary

22 may require) containing such information and assurances

23 as the Secretary may require, including assurances that

24 the State—
1033

•S 2357

1 (1) has entered into an agreement with a health

2 plan (other than a fee-for-service plan) operating in

3 the State under which the plan assumes legal liabil4 ity with respect to any medical malpractice claim

5 arising from the provision of (or failure to provide)

6 services under the plan by any physician participat7 ing in the plan;

8 (2) has provided that, under the law of the

9 State, a physician participating in a plan that has

10 entered into an agreement with the State under

11 paragraph (1) may not be liable in damages or oth12 erwise for such a claim and the plan may not require

13 such physician to indemnify the plan for any such li14 ability; and

15 (3) will provide the Secretary with such reports

16 on the operation of the project as the Secretary may

17 require.

18 (c) AUTHORIZATION OF APPROPRIATIONS.—There

19 are authorized to be appropriated such sums as may be

20 necessary to carry out demonstration projects under this

21 section.
1034

•S 2357

1 Subtitle F—Remedies and

2 Enforcement

3 PART 1—REVIEW OF BENEFIT DETERMINATIONS

4 FOR ENROLLED INDIVIDUALS

5 Subpart A—General Rules

6 SEC. 5501. HEALTH PLAN CLAIMS PROCEDURE.

7 (a) DEFINITIONS.—For purposes of this section—

8 (1) C LAIM.—The term ‘‘claim’’ means a claim

9 for payment or provision of benefits under a health

10 plan, a request for preauthorization of items or serv11 ices which is submitted to a health plan prior to re12 ceipt of the items or services, or the denial, reduc13 tion or termination of any service or request for a

14 referral or reimbursement.

15 (2) I NDIVIDUAL CLAIMANT.—The term ‘‘indi16 vidual claimant’’ with respect to a claim means any

17 individual who submits the claim to a health plan in

18 connection with the individual’s enrollment under

19 the plan, or on whose behalf the claim is submitted

20 to the plan by a provider.

21 (3) P ROVIDER CLAIMANT.—The term ‘‘provider

22 claimant’’ with respect to a claim means any pro23 vider who submits the claim to a health plan with

24 respect to items or services provided to an individual

25 enrolled under the plan.
1035

•S 2357

1 (b) G ENERAL RULES GOVERNING TREATMENT OF

2 CLAIMS.—

3 (1) ADEQUATE NOTICE OF DISPOSITION OF

4 CLAIM.—In any case in which a claim is submitted

5 in complete form to a health plan, the plan shall

6 provide to the individual claimant and any provider

7 claimant with respect to the claim a written notice

8 of the plan’s approval or denial of the claim within

9 15 days after the date of the submission of the

10 claim. The notice to the individual claimant shall be

11 written in language calculated to be understood by

12 the typical individual enrolled under the plan and in

13 a form which takes into account accessibility to the

14 information by individuals whose primary language

15 is not English. In the case of a denial of the claim,

16 the notice shall be provided within 5 days after the

17 date of the determination to deny the claim, and

18 shall set forth the specific reasons for the denial.

19 Such notice shall include an explanation of the spe20 cific reasons and facts underlying the decision to re21 duce or fail to provide services or pay the claim. The

22 notice of a denial shall clearly explain the right to

23 appeal the denial under paragraph (2) and a de24 scription of the process for appealing such decision

25 sufficient to allow the claimant to initiate an appeal
1036

•S 2357

1 and submit evidence to the decision maker in sup2 port of the position of the claimant. Failure by any

3 plan to comply with the requirements of this para4 graph with respect to any claim submitted to the

5 plan shall be treated as approval by the plan of the

6 claim.

7 (2) P LAN’S DUTY TO REVIEW DENIALS UPON

8 TIMELY REQUEST.—The plan shall review its denial

9 of the claim if an individual claimant or provider

10 claimant with respect to the claim submits to the

11 plan a written request for reconsideration of the

12 claim after receipt of written notice from the plan of

13 the denial. The plan shall allow any such claimant

14 not less than 60 days, after receipt of written notice

15 from the plan of the denial, to submit the claimant’s

16 request for reconsideration of the claim.

17 (3) T IME LIMIT FOR REVIEW.—The plan shall

18 complete any review required under paragraph (2),

19 and shall provide the individual claimant and any

20 provider claimant with respect to the claim written

21 notice of the plan’s decision on the claim after re22 consideration pursuant to the review, within 30 days

23 after the date of the receipt of the request for recon24 sideration.
1037

•S 2357

1 (4) D E NOVO REVIEWS.—Any review required

2 under paragraph (2)—

3 (A) shall be de novo,

4 (B) shall be conducted by an individual

5 who did not make the initial decision denying

6 the claim and who is authorized to approve the

7 claim, and

8 (C) shall include review by a qualified phy9 sician in the same speciality as the treating

10 physician if the resolution of any issues involved

11 requires medical expertise.

12 (c) T REATMENT OF URGENT REQUESTS TO PLANS

13 FOR PREAUTHORIZATION.—

14 (1) I N GENERAL.—This subsection applies in

15 the case of any claim submitted by an individual

16 claimant or a provider claimant consisting of a re17 quest for preauthorization of items or services which

18 is accompanied by an attestation that—

19 (A) failure to immediately provide the

20 items or services could reasonably be expected

21 to result in—

22 (i) placing the health of the individual

23 claimant (or, with respect to an individual

24 claimant who is a pregnant woman, the
1038

•S 2357

1 health of the woman or her unborn child)

2 in serious jeopardy,

3 (ii) serious impairment to bodily func4 tions, or

5 (iii) serious dysfunction of any bodily

6 organ or part,

7 or

8 (B) immediate provision of the items or

9 services is necessary because the individual

10 claimant has made or is at serious risk of mak11 ing an attempt to harm such individual claim12 ant or another individual.

13 (2) SHORTENED TIME LIMIT FOR CONSIDER14 ATION OF REQUESTS FOR PREAUTHORIZATION.—

15 Notwithstanding subsection (b)(1), a health plan

16 shall approve or deny any claim described in para17 graph (1) within 12 hours after submission of the

18 claim to the plan. Failure by the plan to comply with

19 the requirements of this paragraph with respect to

20 the claim shall be treated as approval by the plan of

21 the claim.

22 (3) EXPEDITED EXHAUSTION OF PLAN REM23 EDIES.—Any claim described in paragraph (1) which

24 is denied by the plan shall be treated as a claim with

25 respect to which all remedies under the plan pro-
1039

•S 2357

1 vided pursuant to this section are exhausted, irre2 spective of any review provided under subsection

3 (b)(2).

4 (4) DENIAL OF PREVIOUSLY AUTHORIZED

5 CLAIMS NOT PERMITTED.—In any case in which a

6 health plan approves a claim described in paragraph

7 (1)—

8 (A) the plan may not subsequently deny

9 payment or provision of benefits pursuant to

10 the claim, unless the plan makes a showing of

11 an intentional misrepresentation of a material

12 fact by the individual claimant, and

13 (B) in the case of a violation of subpara14 graph (A) in connection with the claim, all rem15 edies under the plan provided pursuant to this

16 section with respect to the claim shall be treat17 ed as exhausted.

18 (d) T IME LIMIT FOR DETERMINATION OF INCOM19 PLETENESS OF CLAIM.—For purposes of this section—

20 (1) any claim submitted by an individual claim21 ant and accepted by a provider serving under con22 tract with a health plan and any claim described in

23 subsection (b)(1) shall be treated with respect to the

24 individual claimant as submitted in complete form,

25 and
1040

•S 2357

1 (2) any other claim for benefits under the plan

2 shall be treated as filed in complete form as of 10

3 days after the date of the submission of the claim,

4 unless the plan provides to the individual claimant

5 and any provider claimant, within such period, a

6 written notice of any required matter remaining to

7 be filed in order to complete the claim.

8 Any filing by the individual claimant or the provider claim9 ant of additional matter requested by the plan pursuant

10 to paragraph (2) shall be treated for purposes of this sec11 tion as an initial filing of the claim.

12 (e) ADDITIONAL NOTICE AND DISCLOSURE RE13 QUIREMENTS FOR HEALTH PLANS.—In the case of a de14 nial of a claim for benefits under a health plan, the plan

15 shall include, together with the specific reasons provided

16 to the individual claimant and any provider claimant

17 under subsection (b)(1)—

18 (1) if the denial is based in whole or in part on

19 a determination that the claim is for an item or

20 service which is not covered by the comprehensive

21 benefit package or exceeds payment rates under the

22 applicable fee schedule, the factual basis for the de23 termination,

24 (2) if the denial is based in whole or in part on

25 exclusion of coverage with respect to services be-
1041

•S 2357

1 cause the services are determined to comprise an ex2 perimental treatment or investigatory procedure, the

3 medical basis for the determination and a descrip4 tion of the process used in making the determina5 tion, and

6 (3) if the denial is based in whole or in part on

7 a determination that the treatment is not medically

8 necessary or appropriate or is inconsistent with the

9 plan’s practice guidelines, the medical basis for the

10 determination, the guidelines used in making the de11 termination, and a description of the process used in

12 making the determination.

13 (f) WAIVER OF RIGHTS PROHIBITED.—A health plan

14 may not require any party to waive any right under the

15 plan or this Act as a condition for approval of any claim

16 under the plan, except to the extent otherwise specified

17 in a formal settlement agreement.

18 SEC. 5502. REVIEW IN AREA COMPLAINT REVIEW OFFICES

19 OF GRIEVANCES BASED ON ACTS OR PRAC20 TICES BY HEALTH PLANS.

21 (a) COMPLAINT REVIEW OFFICES.—

22 (1) IN GENERAL.—In accordance with rules

23 which shall be prescribed by the Secretary of Labor,

24 each State shall establish and maintain a complaint

25 review office for each community rating area estab-
1042

•S 2357

1 lished by such State. According to designations

2 which shall be made by each State under regulations

3 of the Secretary of Labor, the complaint review of4 fice for a community rating area established by such

5 State shall also serve as the complaint review office

6 for large group sponsors operating in the State with

7 respect to individuals who are enrolled under health

8 plans maintained by such sponsors and who reside

9 within the area of the community rating area.

10 (2) H EALTH SYSTEMS NOT ESTABLISHED BY

11 STATES.—In the case of any health care system es12 tablished in any State by the Secretary of Health

13 and Human Services, the Secretary of Health and

14 Human Services shall assume all duties and obliga15 tions of such State under this part in accordance

16 with the applicable regulations of the Secretary of

17 Labor under this part.

18 (b) F ILINGS OF COMPLAINTS BY AGGRIEVED PER19 SONS.—In the case of any person who is aggrieved by—

20 (1) any act or practice engaged in by any

21 health plan which consists of or results in denial of

22 payment or provision of benefits under the plan or

23 delay in the payment or provision of benefits, or

24 (2) any act or practice engaged in by any other

25 plan maintained in a community rating area or by
1043

•S 2357

1 a large group sponsor which consists of or results in

2 denial of payment or provision of benefits under a

3 supplemental benefit policy or a cost sharing policy

4 or delay in the payment or provision of the benefits,

5 if the claimant alleges that the denial or delay consists

6 of a failure to comply with the terms of the plan (including

7 the provision of benefits in full when due in accordance

8 with the terms of the plan), or with the applicable require9 ments of this Act, such person may file a complaint with

10 the appropriate complaint review office.

11 (c) E XHAUSTION OF PLAN REMEDIES.—Any com12 plaint including a claim to which section 5501 applies may

13 not be filed until the complainant has exhausted all rem14 edies provided under the plan with respect to the claim

15 in accordance with such section.

16 (d) F ORM OF COMPLAINT.—The complaint shall be

17 in writing under oath or affirmation, shall set forth the

18 complaint in a manner calculated to give notice of the na19 ture of the complaint, and shall contain such information

20 as may be prescribed in regulations of the Secretary of

21 Labor.

22 (e) NOTICE OF FILING.—The complaint review office

23 shall serve by certified mail a notice of the complaint (in24 cluding the date, place, and circumstances of the alleged

25 violation) on the person or persons alleged in the com-
1044

•S 2357

1 plaint to have committed the violation within 10 days after

2 the filing of the complaint.

3 (f) TIME LIMITATION.—Complaints may not be

4 brought under this section with respect to any violation

5 later than one year after the date on which the complain6 ing party knows or should have reasonably known that a

7 violation has occurred. This subsection shall not prevent

8 the subsequent amending of a complaint.

9 SEC. 5503. INITIAL PROCEEDINGS IN COMPLAINT REVIEW

10 OFFICES.

11 (a) E LECTIONS.—Whenever a complaint is brought

12 to the complaint review office under section 5502(b), the

13 complaint review office shall provide the complainant with

14 an opportunity, in such form and manner as shall be pre15 scribed in regulations of the Secretary of Labor, to elect

16 one of the following:

17 (1) To forego further proceedings in the com18 plaint review office and rely on remedies available in

19 a court of competent jurisdiction.

20 (2) To submit the complaint as a dispute under

21 the Early Resolution Program established under

22 subpart B and thereby suspend further review pro23 ceedings under this section pending termination of

24 proceedings under the Program.
1045

•S 2357

1 (3) In any case in which an election under

2 paragraph (1) or (2) is not made, or an election

3 under paragraph (2) was made but resolution of all

4 matters in the complaint was not obtained upon ter5 mination of proceedings pursuant to the election by

6 settlement agreement or otherwise, to proceed with

7 the complaint to a hearing in the complaint review

8 office under section 5504 regarding the unresolved

9 matters.

10 (b) DUTY OF COMPLAINT REVIEW OFFICE.—The

11 complaint review office shall provide (in a linguistically ap12 propriate manner) an explanation to complainants bring13 ing complaints to the office concerning the legal and other

14 ramifications of each option available under this section.

15 (c) EFFECT OF PARTICIPATION IN EARLY RESOLU16 TION PROGRAM.—Any matter in a complaint brought to

17 the complaint review office which is included in a dispute

18 which is timely submitted to the Early Resolution Pro19 gram established under subpart B shall not be assigned

20 to a hearing under section 5504 unless the proceedings

21 under the Program with respect to the dispute are termi22 nated without settlement or resolution of the dispute with

23 respect to such matter. Upon termination of any proceed24 ings regarding a dispute submitted to the Program, the

25 applicability of this section to any matter in a complaint
1046

•S 2357

1 which was included in the dispute shall not be affected

2 by participation in the proceedings, except to the extent

3 otherwise required under the terms of any settlement

4 agreement or other formal resolution obtained in the pro5 ceedings.

6 SEC. 5504. HEARINGS BEFORE HEARING OFFICERS IN COM7 PLAINT REVIEW OFFICES.

8 (a) HEARING PROCESS.—

9 (1) A SSIGNMENT OF COMPLAINTS TO HEARING

10 OFFICERS AND NOTICE TO PARTIES.—

11 (A) I N GENERAL.—In the case of an elec12 tion under section 5503(a)(3)—

13 (i) the complaint review office shall

14 assign the complaint, and each motion in

15 connection with the complaint, to a hearing

16 officer employed by the State in the office;

17 and

18 (ii) the hearing officer shall have the

19 power to issue and cause to be served upon

20 the plan named in the complaint a copy of

21 the complaint and a notice of hearing be22 fore the hearing officer at a place fixed in

23 the notice, not less than 5 days after the

24 serving of the complaint.
1047

•S 2357

1 (B) Q UALIFICATIONS FOR HEARING OFFI2 CERS.—No individual may serve in a complaint

3 review office as a hearing officer unless the in4 dividual meets standards which shall be pre5 scribed by the Secretary of Labor. Such stand6 ards shall include experience, training, ability to

7 communicate with the enrollee, affiliations, dili8 gence, absence of actual or potential conflicts of

9 interest, and other qualifications deemed rel10 evant by the Secretary of Labor. At no time

11 shall a hearing officer have any official, finan12 cial, or personal conflict of interest with respect

13 to issues in controversy before the hearing offi14 cer.

15 (2) A MENDMENT OF COMPLAINTS.—Any such

16 complaint may be amended by the hearing officer

17 conducting the hearing, upon the motion of the com18 plainant, in the hearing officer’s discretion at any

19 time prior to the issuance of an order based thereon.

20 (3) ANSWERS.—The party against whom the

21 complaint is filed shall have the right to file an an22 swer to the original or amended complaint and to

23 appear in person or otherwise and give testimony at

24 the place and time fixed in the complaint.
1048

•S 2357

1 (b) A DDITIONAL PARTIES.—In the discretion of the

2 hearing officer conducting the hearing, any other person

3 may be allowed to intervene in the proceeding and to

4 present testimony.

5 (c) HEARINGS.—

6 (1) D E NOVO HEARING.—Each hearing officer

7 shall hear complaints and motions de novo.

8 (2) T ESTIMONY.—The testimony taken by the

9 hearing officer shall be reduced to writing. There10 after, the hearing officer, in his or her discretion,

11 upon notice may provide for the taking of further

12 testimony or hear argument.

13 (3) A UTHORITY OF HEARING OFFICERS.—The

14 hearing officer may compel by subpoena the attend15 ance of witnesses and the production of evidence at

16 any designated place or hearing. In case of contu17 macy or refusal to obey a subpoena lawfully issued

18 under this paragraph and upon application of the

19 hearing officer, an appropriate district court of the

20 United States may issue an order requiring compli21 ance with the subpoena and any failure to obey the

22 order may be punished by the court as a contempt

23 thereof. The hearing officer may also seek enforce24 ment of the subpoena in a State court of competent

25 jurisdiction.
1049

•S 2357

1 (4) EXPEDITED HEARINGS.—Notwithstanding

2 section 5503 and the preceding provisions of this

3 section, upon receipt of a complaint containing a

4 claim described in section 5501(c)(1), the complaint

5 review office shall promptly provide the complainant

6 with the opportunity to make an election under sec7 tion 5503(a)(3) and assignment to a hearing on the

8 complaint before a hearing officer. The complaint re9 view office shall ensure that such a hearing com10 mences not later than 24 hours after receipt of the

11 complaint by the complaint hearing office and not

12 later than 3 days after the receipt of a complaint,

13 the Complaint Review Office shall provide a decision.

14 (d) DECISION OF HEARING OFFICER.—

15 (1) IN GENERAL.—Not later than 120 days

16 after the date on which a complaint is assigned

17 under this section, the hearing officer shall decide if

18 the preponderance of the evidence justifies the denial

19 of services and whether to decide in favor of the

20 complainant with respect to each alleged act or prac21 tice. Each such decision—

22 (A) shall include the hearing officer’s find23 ings of fact, and

24 (B) shall constitute the hearing officer’s

25 final disposition of the proceedings.
1050

•S 2357

1 (2) DECISIONS FINDING IN FAVOR OF COM2 PLAINANT.—If the hearing officer’s decision includes

3 a determination that any party named in the com4 plaint has engaged in or is engaged in an act or

5 practice described in section 5502(b), the hearing of6 ficer shall issue and cause to be served on such

7 party an order which requires such party—

8 (A) to cease and desist from such act or

9 practice,

10 (B) to provide the benefits due under the

11 terms of the plan and to otherwise comply with

12 the terms of the plan and the applicable re13 quirements of this Act,

14 (C) to pay to the complainant prejudgment

15 interest on the actual costs incurred in obtain16 ing the items and services at issue in the com17 plaint,

18 (D) to pay to the prevailing complainant a

19 reasonable attorney’s fee, reasonable expert wit20 ness fees, and other reasonable costs relating to

21 the hearing on the charges on which the com22 plainant prevails, and

23 (E) to provide other appropriate relief.

24 (3) D ECISIONS NOT IN FAVOR OF COMPLAIN25 ANT.—If the hearing officer’s decision includes a de-
1051

•S 2357

1 termination that the party named in the complaint

2 has not engaged in or is not engaged in an act or

3 practice referred to in section 5502(b), the hearing

4 officer—

5 (A) shall include in the decision a dismissal

6 of the charge in the complaint relating to the

7 act or practice, and

8 (B) upon a finding that such charge is

9 frivolous, shall issue and cause to be served on

10 the complainant an order which requires the

11 complainant to pay to such party a reasonable

12 attorney’s fee, reasonable expert witness fees,

13 and other reasonable costs relating to the pro14 ceedings on such charge.

15 (4) SUBMISSION AND SERVICE OF DECISIONS.—

16 The hearing officer shall submit each decision to the

17 complaint review office at the conclusion of the pro18 ceedings and the office shall cause a copy of the de19 cision to be served on the parties to the proceedings.

20 (e) F INAL DECISION.—The decision of the hearing

21 officer shall be final and binding upon all parties.

22 (f) COURT ENFORCEMENT OF ORDERS.—

23 (1) I N GENERAL.—The complainant may peti24 tion any court of competent jurisdiction for enforce-
1052

•S 2357

1 ment of the order. In any such proceeding, the order

2 of the hearing officer shall not be subject to review.

3 (2) A WARDING OF COSTS.—In any action for

4 court enforcement under this subsection, a prevailing

5 complainant shall be entitled to a reasonable attor6 ney’s fee, reasonable expert witness fees, and other

7 reasonable costs relating to such action.

8 SEC. 5505. CIVIL MONEY PENALTIES.

9 (a) D ENIAL OR DELAY IN PAYMENT OR PROVISION

10 OF BENEFITS.—

11 (1) IN GENERAL.—The Secretary of Labor may

12 assess a civil penalty against any health plan, or

13 against any other plan in connection with benefits

14 provided thereunder under a supplemental benefit

15 policy or a cost sharing policy, for unreasonable de16 nial or delay in the payment or provision of benefits

17 thereunder, in an amount not to exceed—

18 (A) $25,000 per violation, or $75,000 per

19 violation in the case of a finding of bad faith

20 on the part of the plan, and

21 (B) in the case of a finding of a pattern

22 or practice of such violations engaged in by the

23 plan, $1,000,000 in addition to the total

24 amount of penalties assessed under subpara25 graph (A) with respect to such violations.
1053

•S 2357

1 For purposes of subparagraph (A), each violation

2 with respect to any single individual shall be treated

3 as a separate violation.

4 (2) CIVIL ACTION TO ENFORCE CIVIL PEN5 ALTY.—The Secretary of Labor may commence a

6 civil action in any court of competent jurisdiction to

7 enforce a civil penalty assessed under paragraph (1).

8 (3) SUPPLEMENTAL PLANS.—Nothing in this

9 section shall be construed to limit the rights and

10 remedies available under State law with respect to

11 supplemental benefit plans.

12 (b) CIVIL PENALTIES FOR CERTAIN OTHER AC13 TIONS.—The Secretary of Labor may assess a civil penalty

14 described in section 5505(b)(1) against any experience15 rated health plan, or against any other plan sponsored by

16 a large employer group purchaser in connection with bene17 fits provided thereunder under a cost sharing policy, for

18 any action described in section 5505(a). The Secretary of

19 Labor may initiate proceedings to impose such penalty in

20 the same manner as the Secretary of Health and Human

21 Services may initiate proceedings under section 5505 with

22 respect to actions described in section 5505(a).
1054

•S 2357

1 Subpart B—Early Resolution Programs

2 SEC. 5511. ESTABLISHMENT OF EARLY RESOLUTION PRO3 GRAMS IN COMPLAINT REVIEW OFFICES.

4 (a) ESTABLISHMENT OF PROGRAMS.—Each State

5 shall establish and maintain an Early Resolution Program

6 in each complaint review office in such State. The Pro7 gram shall include—

8 (1) the establishment and maintenance of fo9 rums for mediation of disputes in accordance with

10 this subpart, and

11 (2) the establishment and maintenance of such

12 forums for other forms of alternative dispute resolu13 tion (including binding arbitration) as may be pre14 scribed in regulations of the Secretary of Labor.

15 Each State shall ensure that the standards applied in

16 Early Resolution Programs administered in such State

17 which apply to any form of alternative dispute resolution

18 described in paragraph (2) and which relate to time re19 quirements, qualifications of facilitators, arbitrators, or

20 other mediators, and confidentiality are at least equivalent

21 to the standards which apply to mediation proceedings

22 under this subpart.

23 (b) DUTIES OF COMPLAINT REVIEW OFFICES.—

24 Each complaint review office in a State—
1055

•S 2357

1 (1) shall administer its Early Resolution Pro2 gram in accordance with regulations of the Secretary

3 of Labor,

4 (2) shall, pursuant to subsection (a)(1)—

5 (A) recruit and train individuals to serve

6 as facilitators for mediation proceedings under

7 the Early Resolution Program from attorneys

8 who have the requisite expertise for such serv9 ice, which shall be specified in regulations of

10 the Secretary of Labor,

11 (B) provide meeting sites, maintain

12 records, and provide facilitators with adminis13 trative support staff, and

14 (C) establish and maintain attorney refer15 ral panels,

16 (3) shall ensure that, upon the filing of a com17 plaint with the office, the complainant is adequately

18 apprised of the complainant’s options for review

19 under this part, and

20 (4) shall monitor and evaluate the Program on

21 an ongoing basis.

22 SEC. 5512. INITIATION OF PARTICIPATION IN MEDIATION

23 PROCEEDINGS.

24 (a) ELIGIBILITY OF CASES FOR SUBMISSION TO

25 EARLY RESOLUTION PROGRAM.—A dispute may be sub-
1056

•S 2357

1 mitted to the Early Resolution Program only if the follow2 ing requirements are met with respect to the dispute:

3 (1) N ATURE OF DISPUTE.—The dispute con4 sists of—

5 (A) an assertion by an individual enrolled

6 under a health plan of one or more claims

7 against the health plan for payment or provi8 sion of benefits, or against any other health

9 plan with respect to benefits provided under a

10 supplemental benefit policy or a cost sharing

11 policy, based on alleged coverage under the

12 plan; and

13 (B) a denial by the plan of the claims, or

14 a denial of appropriate reimbursement based on

15 the claims, by the plan.

16 (2) NATURE OF DISPUTED CLAIM.—Each claim

17 consists of—

18 (A) a claim for payment or provision of

19 benefits under the plan; or

20 (B) a request for information or docu21 ments the disclosure of which is required under

22 this Act (including claims of entitlement to dis23 closure based on colorable claims to rights to

24 benefits under the plan).
1057

•S 2357

1 (b) F ILING OF ELECTION.—A complainant with a

2 dispute which is eligible for submission to the Early Reso3 lution Program may make the election under section

4 5503(a)(2) to submit the dispute to mediation proceedings

5 under the Program not later than 15 days after the date

6 the complaint is filed with the complaint review office

7 under section 5502(b).

8 (c) AGREEMENT TO PARTICIPATE.—

9 (1) E LECTION BY CLAIMANT.—A complainant

10 may elect participation in the mediation proceedings

11 only by entering into a written participation agree12 ment (including an agreement to comply with the

13 rules of the Program and consent for the complaint

14 review office to contact the health plan regarding the

15 agreement), and by releasing plan records to the

16 Program for the exclusive use of the facilitator as17 signed to the dispute.

18 (2) PARTICIPATION BY PLANS OR HEALTH BEN19 EFITS CONTRACTORS.—Each party whose participa20 tion in the mediation proceedings has been elected

21 by a claimant pursuant to paragraph (1) shall par22 ticipate in, and cooperate fully with, the proceedings.

23 The claims review office shall provide such party

24 with a copy of the participation agreement described

25 in paragraph (1), together with a written description
1058

•S 2357

1 of the Program. Such party shall submit the copy of

2 the agreement, together with its authorized signa3 ture signifying receipt of notice of the agreement, to

4 the claims review office, and shall include in the sub5 mission to the claims review office a copy of the

6 written record of the plan claims procedure com7 pleted pursuant to section 5501 with respect to the

8 dispute and all relevant plan documents. The rel9 evant documents shall include all documents under

10 which the plan is or was administered or operated,

11 including copies of any insurance contracts under

12 which benefits are or were provided and any fee or

13 reimbursement schedules for health care providers.

14 SEC. 5513. MEDIATION PROCEEDINGS.

15 (a) ROLE OF FACILITATOR.—In the course of medi16 ation proceedings under the Early Resolution Program,

17 the facilitator assigned to the dispute shall prepare the

18 parties for a conference regarding the dispute and serve

19 as a neutral mediator at such conference, with the goal

20 of achieving settlement of the dispute.

21 (b) P REPARATIONS FOR CONFERENCE.—In advance

22 of convening the conference, after identifying the nec23 essary parties and confirming that the case is eligible for

24 the Program, the facilitator shall analyze the record of the

25 claims procedure conducted pursuant to section 5501 and
1059

•S 2357

1 any position papers submitted by the parties to determine

2 if further case development is needed to clarify the legal

3 and factual issues in dispute, and whether there is any

4 need for additional information and documents.

5 (c) C ONFERENCE.—Upon convening the conference,

6 the facilitator shall assist the parties in identifying undis7 puted issues and exploring settlement. If settlement is

8 reached, the facilitator shall assist in the preparation of

9 a written settlement agreement. If no settlement is

10 reached, the facilitator shall present the facilitator’s eval11 uation, including an assessment of the parties’ positions,

12 the likely outcome of further administrative action or liti13 gation, and suggestions for narrowing the issues in dis14 pute.

15 (d) T IME LIMIT.—The facilitator shall ensure that

16 mediation proceedings with respect to any dispute under

17 the Early Resolution Program shall be completed within

18 120 days after the election to participate. The parties may

19 agree to one extension of the proceedings by not more than

20 30 days if the proceedings are suspended to obtain an

21 agency ruling or to reconvene the conference in a subse22 quent session.

23 (e) I NAPPLICABILITY OF FORMAL RULES.—Formal

24 rules of evidence shall not apply to mediation proceedings

25 under the Early Resolution Program. All statements made
1060

•S 2357

1 and evidence presented in the proceedings shall be admis2 sible in the proceedings. The facilitator shall be the sole

3 judge of the proper weight to be afforded to each submis4 sion. The parties to mediation proceedings under the Pro5 gram shall not be required to make statements or present

6 evidence under oath.

7 (f) R EPRESENTATION.—Parties may participate pro

8 se or be represented by attorneys throughout the proceed9 ings of the Early Resolution Program.

10 (g) CONFIDENTIALITY.—

11 (1) IN GENERAL.—Under regulations of the

12 Secretary of Labor, rules similar to the rules under

13 section 574 of title 5, United States Code (relating

14 to confidentiality in dispute resolution proceedings)

15 shall apply to the mediation proceedings under the

16 Early Resolution Program.

17 (2) C IVIL REMEDIES.—The Secretary of Labor

18 may assess a civil penalty against any person who

19 discloses information in violation of the regulations

20 prescribed pursuant to paragraph (1) in the amount

21 of three times the amount of the claim involved. The

22 Secretary of Labor may bring a civil action to en23 force such civil penalty in any court of competent ju24 risdiction.
1061

•S 2357

1 SEC. 5514. LEGAL EFFECT OF PARTICIPATION IN MEDI2 ATION PROCEEDINGS.

3 (a) P ROCESS NONBINDING.—Findings and conclu4 sions made in the mediation proceedings of the Early Res5 olution Program shall be treated as advisory in nature and

6 nonbinding. Except as provided in subsection (b), the

7 rights of the parties under subpart A shall not be affected

8 by participation in the Program.

9 (b) R ESOLUTION THROUGH SETTLEMENT AGREE10 MENT.—If a case is settled through participation in medi11 ation proceedings under the Program, the facilitator shall

12 assist the parties in drawing up an agreement which shall

13 constitute, upon signature of the parties, a binding con14 tract between the parties, which shall be enforceable under

15 section 5515.

16 (c) P RESERVATION OF RIGHTS OF NON-PARTIES.—

17 The settlement agreement shall not have the effect of

18 waiving or otherwise affecting any rights to review under

19 subpart A, or any other right under this Act or the plan,

20 with respect to any person who is not a party to the settle21 ment agreement.

22 SEC. 5515. ENFORCEMENT OF SETTLEMENT AGREEMENTS.

23 (a) ENFORCEMENT.—Any party to a settlement

24 agreement entered pursuant to mediation proceedings

25 under this subpart may petition any court of competent

26 jurisdiction for the enforcement of the agreement, by filing
1062

•S 2357

1 in the court a written petition praying that the agreement

2 be enforced. In such a proceeding, the order of the hearing

3 officer shall not be subject to review.

4 (b) COURT REVIEW.—It shall be the duty of the court

5 to advance on the docket and to expedite to the greatest

6 possible extent the disposition of any petition filed under

7 this section, with due deference to the role of settlement

8 agreements under this part in achieving prompt resolution

9 of disputes involving health plans.

10 (c) A WARDING OF ATTORNEY’S FEES AND OTHER

11 COSTS AND EXPENSES.—In any action by an individual

12 enrolled under a health plan for court enforcement under

13 this section, a prevailing plaintiff shall be entitled to rea14 sonable costs and expenses (including a reasonable attor15 ney’s fee and reasonable expert witness fees) on the

16 charges on which the plaintiff prevails.

17 SEC. 5516. DUE PROCESS FOR HEALTH CARE PROVIDERS.

18 (a) P UBLICLY AVAILABLE STANDARDS AND PROC19 ESS.—Each health plan shall establish and utilize—

20 (1) publicly available standards for contracting

21 with health care providers; and

22 (2) a publicly available process for dismissing

23 such providers or failing to renew contracts with

24 such providers.

25 (b) NOTICE REQUIREMENT.—
1063

•S 2357

1 (1) IN GENERAL.—The process established by a

2 health plan under subsection (a) shall include rea3 sonable notification to a health care provider of a

4 decision to dismiss such provider or not to renew a

5 contract with such provider before such decision

6 takes effect.

7 (2) EXCEPTION.—The notice required under

8 paragraph (1) shall not apply if failure to dismiss a

9 provider or renewing a provider’s contract would ad10 versely affect the health or safety of a patient.

11 (3) C ONTENTS OF NOTICE.—Each notice to a

12 health care provider under paragraph (1) shall con13 tain the reasons for the dismissal or failure to

14 renew. Such reasons shall be consistent with the

15 standards established under subsection (a).

16 (c) R EVIEW.—The process established by a health

17 plan under subsection (a) shall include an opportunity for

18 review of the health plan’s action by a health care provider

19 who is dismissed by a health plan or with respect to whom

20 a health plan fails to renew a contract. Such review shall

21 be conducted by—

22 (1) the provider’s peers who have contracts

23 with, or are employed by, the health plan; and
1064

•S 2357

1 (2) if there is mutual consent of the provider

2 and the health plan, one or more enrollees in the

3 health plan.

4 A health care provider may have an attorney present in

5 connection with any review under this subsection if the

6 provider notifies the health plan that an attorney will be

7 present in advance of the review proceeding.

8 (d) E FFECT ON OTHER LAWS.—The provisions of

9 this section shall not supersede any other provision of Fed10 eral or State law.

11 PART 2—ADDITIONAL REMEDIES AND

12 ENFORCEMENT PROVISIONS

13 SEC. 5531. JUDICIAL REVIEW OF FEDERAL ACTION ON

14 STATE SYSTEMS.

15 (a) I N GENERAL.—Any State that is aggrieved by a

16 determination by the Secretary under subpart B of part

17 1 of subtitle E of title I shall be entitled to judicial review

18 of such determination in accordance with this section.

19 (b) JUDICIAL REVIEW.—

20 (1) J URISDICTION.—The courts of appeals of

21 the United States (other than the United States

22 Court of Appeals for the Federal Circuit) shall have

23 jurisdiction to review a determination described in

24 subsection (a), to affirm the determination, or to set

25 it aside, in whole or in part. A judgment of a court
1065

•S 2357

1 of appeals in such an action shall be subject to re2 view by the Supreme Court of the United States

3 upon certiorari or certification as provided in section

4 1254 of title 28, United States Code.

5 (2) P ETITION FOR REVIEW.—A State that de6 sires judicial review of a determination described in

7 subsection (a) shall, within 30 days after it has been

8 notified of such determination, file with the United

9 States court of appeals for the circuit in which the

10 State is located a petition for review of such deter11 mination. A copy of the petition shall be transmitted

12 by the clerk of the court to the Secretary, and the

13 Secretary shall file in the court the record of the

14 proceedings on which the determination or action

15 was based, as provided in section 2112 of title 28,

16 United States Code.

17 (3) SCOPE OF REVIEW.—The findings of fact of

18 the Secretary, if supported by substantial evidence,

19 shall be conclusive; but the court, for good cause

20 shown, may remand the case to the Secretary to

21 take further evidence, and the Secretary may make

22 new or modified findings of fact and may modify its

23 previous action, and shall certify to the court the

24 record of the further proceedings. Such new or modi-
1066

•S 2357

1 fied findings of fact shall likewise be conclusive if

2 supported by substantial evidence.

3 SEC. 5532. CIVIL ENFORCEMENT.

4 Unless otherwise provided in this Act, the district

5 courts of the United States shall have jurisdiction of civil

6 actions brought by—

7 (1) the Secretary of Labor to enforce any final

8 order of such Secretary or to collect any civil mone9 tary penalty assessed by such Secretary under this

10 Act; and

11 (2) the Secretary of Health and Human Serv12 ices to enforce any final order of such Secretary or

13 to collect any civil monetary penalty assessed by

14 such Secretary under this Act.

15 SEC. 5533. PRIORITY OF CERTAIN BANKRUPTCY CLAIMS.

16 Section 507(a)(8) of title 11, United States Code, is

17 amended to read as follows:

18 ‘‘(8) Eighth, allowed unsecured claims—

19 ‘‘(A) based upon any commitment by the

20 debtor to the Federal Deposit Insurance Cor21 poration, the Resolution Trust Corporation, the

22 Director of the Office of Thrift Supervision, the

23 Comptroller of the Currency, or the Board of

24 Governors of the Federal Reserve System, or

25 their predecessors or successors, to maintain
1067

•S 2357

1 the capital of an insured depository institution;

2 or

3 ‘‘(B) for payments under title X of the

4 Health Security Act owed to a State.’’.

5 SEC. 5534. PRIVATE RIGHT TO ENFORCE STATE RESPON6 SIBILITIES.

7 The failure of a participating State to carry out a

8 responsibility applicable to participating States under this

9 Act constitutes a deprivation of rights secured by this Act

10 for the purposes of section 1977 of the Revised Statutes

11 of the United States (42 U.S.C. 1983). In an action

12 brought under such section, the court shall exercise juris13 diction without regard to whether the aggrieved person

14 has exhausted any administrative or other remedies that

15 may be provided by law.

16 SEC. 5535. PRIVATE RIGHT TO ENFORCE FEDERAL RESPON17 SIBILITIES IN OPERATING A SYSTEM IN A

18 STATE.

19 (a) I N GENERAL.—The failure of the Secretary of

20 Health and Human Services to carry out a responsibility

21 under subpart C of part 1 of subtitle E of title I, confers

22 an enforceable right of action on any person who is ag23 grieved by such failure. Such a person may commence a

24 civil action against the Secretary in an appropriate State

25 court or district court of the United States.
1068

•S 2357

1 (b) EXHAUSTION OF REMEDIES.—In an action under

2 subsection (a), the court shall exercise jurisdiction without

3 regard to whether the aggrieved person has exhausted any

4 administrative or other remedies that may be provided by

5 law.

6 (c) R ELIEF.—In an action under subsection (a), if

7 the court finds that a failure described in such subsection

8 has occurred, the aggrieved person may recover compen9 satory damages and the court may award any other appro10 priate relief.

11 (d) A TTORNEY’S FEES.—In an action under sub12 section (a), the court, in its discretion, may allow the pre13 vailing party, other than the United States, a reasonable

14 attorney’s fee (including expert fees) as part of the costs,

15 and the United States shall be liable for costs the same

16 as a private person.

17 SEC. 5536. ENFORCEMENT OF CONSUMER PROTECTIONS.

18 (a) C OVERED VIOLATIONS.—The provisions of this

19 section shall apply with respect to a health plan that fails

20 to fulfill a duty imposed on the plan under section 1122

21 and subtitle A of this title.

22 (b) ADMINISTRATIVE ENFORCEMENT AND CIVIL

23 PENALTIES.—The penalties described in section

24 1867(d)(1) of the Social Security Act and the procedures

25 described in section 1128A of such Act (other than the
1069

•S 2357

1 first two sentences of subsection (a) and subsection (b))

2 shall apply to health plans described in subsection (a). In

3 addition to such penalties, an amount not to exceed

4 $1,000,000 may be assessed in the case of a finding of

5 a pattern or practice of such violations. The Secretary

6 shall establish procedures whereby, when a consumer has

7 disenrolled from a health plan violating the duties de8 scribed in subsection (a), successor health plans may re9 cover from the original health plan for health care costs

10 attributable to such violations.

11 (c) C ORRECTION OF SUBSTANTIAL VIOLATIONS.—

12 Upon an administrative or judicial finding of a substantial

13 violation of the duties described in subsection (a), the

14 State or court may—

15 (1) inform all current enrollees of the plan of

16 the violation and that they may disenroll imme17 diately from that plan and enroll with another com18 munity-rated health plan; and

19 (2) notify the health plan that it shall imme20 diately cease enrollment activities until it has ob21 tained certifications from the appropriate certifying

22 entity or court that the violation has been corrected.

23 Such actions shall not be taken without providing the

24 health plan with a reasonable opportunity to correct such
1070

•S 2357

1 violations, except where providing such an opportunity

2 would risk health or safety.

3 SEC. 5537. DISCRIMINATION CLAIMS.

4 (a) CIVIL ACTION BY AGGRIEVED PERSON.—

5 (1) IN GENERAL.—Any person who is aggrieved

6 by a violation of section 1602 may commence a civil

7 action against the party or parties committing such

8 violation in an appropriate State court or district

9 court of the United States.

10 (2) STANDARDS.—The standards used to deter11 mine whether a violation has occurred in a complaint

12 alleging discrimination on the basis of age or disabil13 ity under section 1602 shall be the standards ap14 plied under the Age Discrimination Act of 1975 (42

15 U.S.C. 6101 et seq.) and the Americans with Dis16 abilities Act of 1990 (42 U.S.C. 12101 et seq.).

17 (3) R ELIEF.—In any action under paragraph

18 (1), if the court finds a violation of section 1602, the

19 court may award such equitable and injunctive relief

20 as it deems appropriate, and may award to the ag21 grieved person any sums lost as a result of the viola22 tion. If the court finds that the party or parties

23 committing a violation engaged in intentional dis24 crimination in violation of section 1602, the ag25 grieved person may recover compensatory damages.
1071

•S 2357

1 If the court finds that the party or parties commit2 ting such violation did so with malice or reckless in3 difference to the federally protected rights of the ag4 grieved person, the aggrieved person may recover

5 punitive damages under this section against a de6 fendant other than a government, government agen7 cy or political subdivision.

8 (4) A TTORNEYS’ FEES.—In any action under

9 paragraph (1), the court, in its discretion, may allow

10 the prevailing party, other than the United States,

11 a reasonable attorney’s fee (including expert fees

12 and other litigation expenses) as part of the costs,

13 and the United States shall be liable for costs the

14 same as a private person.

15 (b) ACTION BY SECRETARY.—Whenever the Sec16 retary of Health and Human Services finds that a party

17 has failed to comply with section 1602 or with an applica18 ble regulation issued under such section, the Secretary

19 shall notify the party. If within a reasonable period of time

20 the party fails or refuses to comply, the Secretary may—

21 (1) refer the matter to the Attorney General

22 with a recommendation that an appropriate civil ac23 tion be instituted;

24 (2) terminate or limit the participation of such

25 party in the programs authorized by this Act;
1072

•S 2357

1 (3) withhold Federal financial assistance to the

2 party; or

3 (4) take such other action as may be provided

4 by law.

5 (c) ACTION BY ATTORNEY GENERAL.—When a mat6 ter is referred to the Attorney General under subsection

7 (b)(1), the Attorney General may bring a civil action in

8 a district court of the United States for such relief as may

9 be appropriate, including injunctive relief. In a civil action

10 under this section, the court—

11 (1) may grant any equitable relief that the

12 court considers to be appropriate;

13 (2) may award such other relief as the court

14 considers to be appropriate, including in cases of in15 tentional discrimination compensatory and punitive

16 damages; and

17 (3) may, to vindicate the public interest when

18 requested by the Attorney General, assess a civil

19 money penalty against the party in an amount—

20 (A) not exceeding $50,000 for a first viola21 tion; and

22 (B) not exceeding $100,000 for any subse23 quent violation.
1073

•S 2357

1 SEC. 5538. NONDISCRIMINATION IN FEDERALLY ASSISTED

2 PROGRAMS.

3 Federal payments under this Act shall be treated as

4 Federal financial assistance for purposes of section 504

5 of the Rehabilitation Act of 1973 (29 U.S.C. 794), section

6 303 of the Age Discrimination Act of 1975 (42 U.S.C.

7 6102), and section 601 of the Civil Rights Act of 1964

8 (42 U.S.C. 2000d).

9 SEC. 5539. CIVIL AND ADMINISTRATION ACTION BY ESSEN10 TIAL COMMUNITY PROVIDER.

11 (a) I N GENERAL.—An electing essential community

12 provider (as defined in section 1466(d)) who is aggrieved

13 by the failure of a health plan to fulfill a duty imposed

14 on the plan by section 1466 may commence a civil action

15 against the plan in an appropriate State court or district

16 court of the United States.

17 (b) R ELIEF.—In an action under subsection (a), if

18 the court finds that the health plan has failed to fulfill

19 a duty imposed on the plan by section 1466, the electing

20 essential community provider may recover compensatory

21 damages and the court may order any other appropriate

22 relief.

23 (c) A TTORNEY’S FEES.—In any action under sub24 section (a), the court, in its discretion, may allow the pre25 vailing party, other than the United States, a reasonable

26 attorney’s fee (including expert fees) as part of the costs,
1074

•S 2357

1 and the United States shall be liable for costs the same

2 as a private person.

3 (d) S TATE COMPLAINT SYSTEM REQUIRED.—Prior

4 to commencing an action under subsection (a), the ag5 grieved essential community provider may first elect to

6 utilize the administrative process provided under this sub7 section as follows:

8 (1) The Secretary shall prescribe regulations

9 governing administrative grievance actions by essen10 tial community providers that shall be consistent

11 with the requirements of section 5504 and that shall

12 provide for the consolidation of complaints (at the

13 election of the essential community providers) in

14 cases involving multiple complaints against a single

15 health plan.

16 (2) A State shall make available to each elect17 ing essential community provider that is aggrieved

18 by an action of a health plan under section 1466,

19 the opportunity to file a complaint in the complaint

20 review office established under section 5502. In the

21 case of essential community providers located in a

22 cooperative established in any State by the Sec23 retary, the Secretary shall assume all of the duties

24 and obligations of such State under this section.
1075

•S 2357

1 SEC. 5540. FACIAL CONSTITUTIONAL CHALLENGES.

2 (a) JURISDICTION.—The United States District

3 Court for the District of Columbia shall have original and

4 exclusive jurisdiction of any civil action brought to invali5 date this Act or a provision of this Act on the ground of

6 its being repugnant to the Constitution of the United

7 States on its face and for every purpose. In any action

8 described in this subsection, the district court may not

9 grant any temporary order or preliminary injunction re10 straining the enforcement, operation, or execution of this

11 Act or any provision of this Act.

12 (b) C ONVENING OF THREE-JUDGE COURT.—An ac13 tion described in subsection (a) shall be heard and deter14 mined by a district court of three judges in accordance

15 with section 2284 of title 28, United States Code.

16 (c) CONSOLIDATION.—When actions described in

17 subsection (a) involving a common question of law or fact

18 are pending before a district court, the court shall order

19 all the actions consolidated.

20 (d) D IRECT APPEAL TO SUPREME COURT.—In any

21 action described in subsection (a), an appeal may be taken

22 directly to the Supreme Court of the United States from

23 any final judgment, decree, or order in which the district

24 court—

25 (1) holds this Act or any provision of this Act

26 invalid; and
1076

•S 2357

1 (2) makes a determination that its holding will

2 materially undermine the application of the Act as

3 whole.

4 (e) CONSTRUCTION.—This section does not limit—

5 (1) the right of any person—

6 (A) to a litigation concerning the Act or

7 any portion of the Act; or

8 (B) to petition the Supreme Court for re9 view of any holding of a district court by writ

10 of certiorari at any time before the rendition of

11 judgment in a court of appeals; or

12 (2) the authority of the Supreme Court to grant

13 a writ of certiorari for the review described in para14 graph (1)(B).

15 SEC. 5541. TREATMENT OF PLANS AS PARTIES IN CIVIL AC16 TIONS.

17 (a) IN GENERAL.—A health plan may sue or be sued

18 under this Act as an entity. Service of summons, sub19 poena, or other legal process of a court or hearing officer

20 upon a trustee or an administrator of any such plan in

21 his or her capacity as such shall constitute service upon

22 the plan. In a case where a plan has not designated in

23 applicable plan documents an individual as agent for the

24 service of legal process, service upon the Secretary of

25 Health and Human Services (in the case of a community-
1077

•S 2357

1 rated health plan) or the Secretary of Labor (in the case

2 of an experienced-rated health plan) shall constitute such

3 service. The Secretary, not later than 15 days after receipt

4 of service under the preceding sentence, shall notify the

5 administrator or any trustee of the plan of receipt of such

6 service.

7 (b) O THER PARTIES.—Any money judgment under

8 this Act against a plan referred to in subsection (a) shall

9 be enforceable only against the plan as an entity and shall

10 not be enforceable against any other person unless liability

11 against such person is established in his individual capac12 ity under this Act.

13 SEC. 5542. WHISTLEBLOWER PROTECTIONS.

14 (a) IN GENERAL.—A health plan may not discharge,

15 discriminate or otherwise take adverse action against any

16 employee with respect to compensation, terms, conditions

17 or privileges of employment because the employee (or any

18 person acting pursuant to the request of the employee)

19 provided information to any Federal, State or private su20 pervisory agency or entity regarding a possible violation

21 of any provision of this Act or any regulation issued under

22 this Act.

23 (b) CIVIL ACTION.—An employee or former employee

24 who believes that such employee has been discharged, dis25 criminated or otherwise subject to adverse action in viola-
1078

•S 2357

1 tion of subsection (a) may file a civil action in the appro2 priate United States district court within 2 years of the

3 date of such discharge, discrimination or adverse action.

4 (c) DETERMINATION OF COURT.—If a court in an ac5 tion under subsection (b) determines that a violation of

6 subsection (a) has occurred, the court may order the

7 health care entity or plan that committed the violation—

8 (1) to reinstate the employee to his or her

9 former position;

10 (2) to pay compensatory damages to the em11 ployee;

12 (3) to pay reasonable costs and attorneys fees

13 incurred by the employee in bringing such action;

14 and

15 (4) to take such other appropriate actions to

16 remedy any past discrimination.

17 SEC. 5543. GENERAL NONPREEMPTION OF RIGHTS AND

18 REMEDIES.

19 Nothing in this subtitle shall be construed to deny,

20 impair, or otherwise adversely affect a right or remedy

21 available under law to any person, except to the extent

22 the right or remedy is inconsistent with this title.
1079

•S 2357

1 Subtitle G—Repeal of Exemption

2 SEC. 5601. REPEAL OF EXEMPTION FOR HEALTH INSUR3 ANCE.

4 (a) IN GENERAL.—Section 3 of the Act of March 9,

5 1945 (15 U.S.C. 1013), known as the McCarran-Ferguson

6 Act, is amended by adding at the end the following:

7 ‘‘(c) Notwithstanding that the business of insurance

8 is regulated by State law, nothing in this Act shall limit

9 the applicability of the following Acts to the business of

10 insurance to the extent that such business relates to the

11 provision of health benefits:

12 ‘‘(1) The Sherman Act (15 U.S.C. 1 et seq.).

13 ‘‘(2) The Clayton Act (15 U.S.C. 12 et seq.).

14 ‘‘(3) Federal Trade Commission Act (15 U.S.C.

15 41 et seq.).

16 ‘‘(4) The Act of June 19, 1936 (49 Stat. 1526;

17 15 U.S.C. 21a et seq.), known as the Robinson-Pat18 man Antidiscrimination Act.’’.

19 (b) E FFECTIVE DATE.—The amendment made by

20 subsection (a) shall take effect on the first day of the sixth

21 month beginning after the date of the enactment of this

22 Act.
1080

•S 2357

1 TITLE VI—INDIVIDUAL AND

2 EMPLOYER SUBSIDIES

3 Subtitle A—Individual Premium

4 and Cost-Sharing Assistance

5 SEC. 6001. REQUIREMENT TO OPERATE STATE PROGRAM.

6 (a) I N GENERAL.—A participating State shall have

7 in effect a program for furnishing premium assistance and

8 cost-sharing assistance in accordance with this subtitle for

9 calendar years beginning after 1996.

10 (b) DESIGNATION OF STATE AGENCY.—A State may

11 designate any appropriate State agency to administer the

12 program under this subtitle.

13 SEC. 6002. ASSISTANCE WITH STANDARD HEALTH PLAN

14 PREMIUMS.

15 (a) ELIGIBILITY.—

16 (1) IN GENERAL.—An eligible individual (as de17 fined in section 6008(4)) who has been determined

18 by a State under section 6004 to be a premium sub19 sidy eligible individual (as defined in paragraph (2))

20 shall be eligible for premium assistance in the

21 amount determined under subsection (b).

22 (2) PREMIUM SUBSIDY ELIGIBLE INDIVID23 UAL.—For purposes of this subtitle, the term ‘‘pre24 mium subsidy eligible individual’’ means any of the

25 following individuals:
1081

•S 2357

1 (A) I NDIVIDUALS WITH INCOMES BELOW A

2 CERTAIN INCOME THRESHOLD.—An eligible in3 dividual who has a family income determined

4 under section 6008(3) which does not exceed

5 200 percent of the poverty line (as defined in

6 section 6008(5)).

7 (B) CHILDREN.—An eligible individual

8 who—

9 (i) is a child (as defined in section

10 6008(2));

11 (ii) has a family income determined

12 under section 6008(3) which does not ex13 ceed 240 percent of the poverty line; and

14 (iii) has not been enrolled in a health

15 plan during the 6-month period ending on

16 the date the individual submits an applica17 tion to the State for premium assistance

18 under this subtitle.

19 (C) P REGNANT WOMEN.—An eligible indi20 vidual who—

21 (i) is a pregnant woman (as defined in

22 section 6008(6));

23 (ii) has a family income determined

24 under section 6008(3) which does not ex25 ceed 240 percent of the poverty line; and
1082

•S 2357

1 (iii) is not enrolled in a health plan on

2 the date the individual submits an applica3 tion to the State for premium assistance

4 under this subtitle.

5 (3) SPECIAL RULE WITH RESPECT TO CHIL6 DREN AND PREGNANT WOMEN.—An eligible individ7 ual may not be a premium subsidy eligible individual

8 described in subparagraphs (B) or (C) of paragraph

9 (2) if an employer contribution of at least 80 per10 cent of the premium under a standard health plan

11 that is available to the individual through the em12 ployer is made or offered to be made on behalf of

13 the individual.

14 (b) AMOUNT OF ASSISTANCE.—

15 (1) IN GENERAL.—

16 (A) F ORMULA.—The amount of premium

17 assistance for a month for a premium subsidy

18 eligible individual is—

19 (i) the least of —

20 (I) the subsidy percentage speci21 fied in paragraph (2) multiplied by 1 22 ⁄12th of the annual premium paid for

23 coverage under a standard health plan

24 in which the individual is enrolled;
1083

•S 2357

1 (II) the subsidy percentage speci2 fied in paragraph (2) multiplied by 1 3 ⁄12th of the weighted average annual

4 premium rate (as defined in subpara5 graph (B)) for all community-rated

6 standard health plans offered in the

7 community rating area in which the

8 individual resides; or

9 (III) the subsidy percentage spec10 ified in paragraph (2) multiplied by 1 11 ⁄12th of the annual reference pre12 mium for the community rating area

13 in which the individual resides (as de14 fined in subparagraph (C)); minus

15 (ii) the amount of any employer con16 tribution made or offered to be made on

17 behalf of the individual for coverage under

18 the standard health plan that is available

19 to the individual through an employer.

20 (B) WEIGHTED AVERAGE ANNUAL PRE21 MIUM RATE.—For purposes of this paragraph,

22 the term ‘‘weighted average annual premium

23 rate’’ means the average premium for the com24 munity-rated standard health plans offered in

25 the community rating area in which the individ-
1084

•S 2357

1 ual resides, weighted to reflect the total enroll2 ment of community-rated eligible individuals

3 among such plans.

4 (C) R EFERENCE PREMIUM.—For purposes

5 of this paragraph, the term ‘‘reference pre6 mium’’ means the reference premium estab7 lished under section 4512 of the Internal Reve8 nue Code of 1986.

9 (D) SPECIAL RULES FOR DETERMINING

10 AMOUNT OF EMPLOYER CONTRIBUTIONS.—For

11 purposes of determining the amount of an em12 ployer contribution under subparagraph (A),

13 the following rules shall apply:

14 (i) FAMILY CONTRIBUTIONS.—If an

15 employer makes a contribution on behalf of

16 a family (rather than any particular indi17 vidual) such contribution shall be allocated

18 ratably among the individuals in the fam19 ily.

20 (ii) G REATEST EMPLOYER CONTRIBU21 TION AVAILABLE.—The employer contribu22 tion with respect to any individual is the

23 largest employer contribution offered to be

24 made on behalf of the individual by the in-
1085

•S 2357

1 dividual’s employer or any employer of any

2 member of the individual’s family.

3 (2) SUBSIDY PERCENTAGE.—For purposes of

4 paragraph (1)(A), the term ‘‘subsidy percentage’’

5 means the following:

6 (A) I NDIVIDUALS WITH INCOMES BELOW

7 CERTAIN INCOME THRESHOLD.—

8 (i) I N GENERAL.—Except as provided

9 in clauses (ii) and (iii), for a premium sub10 sidy eligible individual described in sub11 section (a)(2)(A), 100 percent reduced

12 (but not below zero) by .80 percentage

13 points for each 1 percentage point (or por14 tion thereof) by which such individual’s

15 family income exceeds 100 percent of the

16 poverty line.

17 (ii) AFDC RECIPIENTS.—For a pre18 mium subsidy eligible individual described

19 in subsection (a)(2)(A) who is a member of

20 a family receiving aid to families with de21 pendent children under part A or E of title

22 IV of the Social Security Act, the subsidy

23 percentage shall be 100 percent.

24 (iii) NON-CASH MEDICAID ELIGI25 BLES.—
1086

•S 2357

1 (I) IN GENERAL.—For a pre2 mium subsidy eligible individual de3 scribed in subsection (a)(2)(A) who is

4 a non-cash medicaid eligible described

5 in subclause (II), the subsidy percent6 age shall be 100 percent during the 6-

7 month period beginning on January 1,

8 1997.

9 (II) N ON-CASH MEDICAID ELIGI10 BLE.—The non-cash medicaid eligibles

11 described in this subclause are indi12 viduals receiving medical assistance

13 under the State plan under title XIX

14 of the Social Security Act as of De15 cember 31, 1996, who are not individ16 uals—

17 (aa) who are members of a

18 family receiving aid to families

19 with dependent children under

20 part A or E of title IV of the So21 cial Security Act;

22 (bb) with respect to whom

23 supplemental security income

24 benefits are being paid under

25 title XVI of such Act; or
1087

•S 2357

1 (cc) eligible for benefits

2 under part A of title XVIII of

3 such Act.

4 (B) C HILDREN AND PREGNANT WOMEN.—

5 For a premium subsidy eligible individual de6 scribed in subparagraph (B) or (C) of sub7 section (a)(2), 100 percent reduced (but not

8 below zero) by 1.82 percentage points for each

9 1 percentage point (or portion thereof) by which

10 such individuals family income exceeds 185 per11 cent of the poverty line.

12 (c) PAYMENTS.—

13 (1) IN GENERAL.—The amount of the premium

14 assistance available to a premium subsidy eligible in15 dividual under subsection (b) shall be paid by the

16 State in which the individual resides directly to the

17 standard health plan in which the individual is en18 rolled. Payments under the preceding sentence shall

19 commence in the first month during which the indi20 vidual is enrolled in a certified standard health plan

21 and determined under section 6004 to be a premium

22 subsidy eligible individual.

23 (2) SPECIAL RULE WITH RESPECT TO FAMILIES

24 WITH MULTIPLE CHILDREN.—If a family includes

25 more than 1 child described in subsection (a)(2)(B),
1088

•S 2357

1 no premium assistance may be paid to a plan under

2 paragraph (1) on behalf of any such child unless

3 such assistance is paid on behalf of all such children.

4 (3) A DMINISTRATIVE ERRORS.—A State is fi5 nancially responsible for premium assistance paid

6 based on an eligibility determination error to the ex7 tent the State’s error rate for eligibility determina8 tions exceeds a maximum permissible error rate to

9 be specified by the Secretary.

10 SEC. 6003. ASSISTANCE WITH COST-SHARING FOR STAND11 ARD HEALTH PLANS.

12 (a) NON-AFDC LOW-INCOME INDIVIDUALS.—

13 (1) INDIVIDUALS WORKING FOR COMMUNITY14 RATED EMPLOYERS.—

15 (A) I N GENERAL.—If a non-AFDC low-in16 come individual described in subparagraph (B)

17 is enrolled in a community-rated standard

18 health plan providing a high cost-sharing sched19 ule, such individual shall be eligible for cost20 sharing assistance consisting of a reduction in

21 the cost-sharing under such plan to the level of

22 a plan providing a low cost-sharing schedule.

23 (B) INDIVIDUAL DESCRIBED.—A non24 AFDC low-income individual described in this

25 subparagraph is an individual who is employed
1089

•S 2357

1 by a community-rated employer and who is un2 able to enroll in a standard health plan—

3 (i) with a premium at or below the

4 weighted average premium rate for all

5 community-rated standard health plans of6 fered through the purchasing cooperative

7 offered by the individual’s employer, and

8 (ii) providing a low or combination

9 cost-sharing schedule.

10 (2) I NDIVIDUALS WORKING FOR EXPERIENCE11 RATED EMPLOYERS.—

12 (A) I N GENERAL.—If a non-AFDC low-in13 come individual described in subparagraph (B)

14 is enrolled in an experience-rated standard

15 health plan providing a high cost-sharing sched16 ule, such individual shall be eligible for cost17 sharing assistance consisting of a reduction in

18 the cost-sharing under such plan to the level of

19 a plan providing a low cost-sharing schedule.

20 (B) INDIVIDUAL DESCRIBED.—A non21 AFDC low-income individual described in this

22 subparagraph is an individual who is employed

23 by an experience-rated employer and who is un24 able to enroll in a standard health plan offered
1090

•S 2357

1 by such employer providing a low or combina2 tion cost-sharing schedule.

3 (3) NON-WORKING INDIVIDUALS.—

4 (A) I N GENERAL.—If a non-AFDC low-in5 come individual described in subparagraph (B)

6 is enrolled in a community-rated standard plan

7 providing a high cost-sharing schedule, such in8 dividual shall be eligible for cost-sharing assist9 ance consisting of a reduction in the cost-shar10 ing under such plan to the level of a plan pro11 viding a low cost-sharing schedule.

12 (B) INDIVIDUAL DESCRIBED.—A non13 AFDC low-income individual described in this

14 subparagraph is an individual who is not em15 ployed and who is unable to enroll in a stand16 ard health plan—

17 (i) with a premium at or below the

18 weighted average premium rate for all

19 community-rated standard health plans of20 fered in the community rating area in

21 which the individual resides, and

22 (ii) providing a low or combination

23 cost-sharing schedule.

24 (4) N ON-AFDC LOW-INCOME INDIVIDUAL.—For

25 purposes of this subsection, the term ‘‘non-AFDC
1091

•S 2357

1 low-income individual’’ means an eligible individual

2 who—

3 (A) has a family income determined under

4 section 6008(3) which does not exceed 150 per5 cent of the poverty line; and

6 (B) is not a member of a family receiving

7 aid to families with dependent children under

8 part A or E of title IV of the Social Security

9 Act.

10 (b) AFDC RECIPIENTS.—

11 (1) LOW OR COMBINATION COST-SHARING

12 PLAN.—An AFDC recipient enrolled in a commu13 nity-rated standard plan—

14 (A) with a premium at or below the

15 weighted average premium rate for all commu16 nity rated-standard health plans offered in the

17 community rating area in which the individual

18 resides, and

19 (B) providing a low or combination cost20 sharing schedule,

21 shall be eligible for cost-sharing assistance consisting

22 of a reduction in the amount of copayment applied

23 with respect to an item or service in an amount

24 equal to 20 percent of the copayment amount other-
1092

•S 2357

1 wise applicable under the plan, rounded to the near2 est dollar.

3 (2) H IGH COST-SHARING PLAN.—If an AFDC

4 recipient is unable to enroll in a health plan de5 scribed in paragraph (1) and such individual is en6 rolled in a community-rated standard plan providing

7 a high cost-sharing schedule, such individual shall be

8 eligible for cost-sharing assistance consisting of a re9 duction in the cost-sharing under such plan to the

10 level of a plan providing a low cost-sharing schedule.

11 (3) AFDC RECIPIENT.—For purposes of this

12 subsection, the term ‘‘AFDC recipient’’ means an el13 igible individual who is a member of a family receiv14 ing aid to families with dependent children under

15 part A or E of title IV of the Social Security Act.

16 (c) N OTIFICATION OF HEALTH PLANS.—If a State

17 determines that an individual is eligible for cost-sharing

18 assistance under this section, the State shall notify the

19 standard health plan in which such individual is enrolled

20 of such determination in a timely manner.

21 SEC. 6004. ELIGIBILITY DETERMINATIONS.

22 (a) I N GENERAL.—The Secretary shall promulgate

23 regulations specifying requirements for State programs

24 under this subtitle with respect to determining eligibility

25 for premium and cost-sharing assistance.
1093

•S 2357

1 (b) SPECIFICATIONS FOR REGULATIONS.—The regu2 lations promulgated by the Secretary under subsection (a)

3 shall include the following requirements:

4 (1) FREQUENCY OF APPLICATIONS.—A State

5 program shall provide that an individual may file an

6 application for assistance with an agency designated

7 by the State at any time, in person or by mail.

8 (2) APPLICATION FORM.—A State program

9 shall provide for the use of an application form de10 veloped by the Secretary under subsection (c).

11 (3) D ISTRIBUTION OF APPLICATIONS.—A State

12 program shall make applications accessible at loca13 tions where individuals are most likely to obtain the

14 applications.

15 (4) R EQUIREMENT TO SUBMIT REVISED APPLI16 CATION.—A State program shall require individuals

17 to submit revised applications to reflect changes in

18 estimated family incomes, including changes in em19 ployment status of family members, during the year.

20 The State shall revise the amount of any premium

21 assistance based on such a revised application.

22 (5) VERIFICATION.—A State program shall pro23 vide for verification of the information supplied in

24 applications under this subtitle. Such verification

25 may include examining return information disclosed
1094

•S 2357

1 to the State for such purpose under section

2 6103(l)(15) of the Internal Revenue Code of 1986.

3 (c) ADMINISTRATION OF STATE PROGRAMS.—

4 (1) IN GENERAL.—The Secretary shall establish

5 standards for States operating programs under this

6 subtitle which ensure that such programs are oper7 ated in a uniform manner with respect to application

8 procedures, data processing systems, and such other

9 administrative activities as the Secretary determines

10 to be necessary.

11 (2) A PPLICATION FORMS.—The Secretary shall

12 develop an application form for assistance which

13 shall—

14 (A) be simple in form and understandable

15 to the average individual;

16 (B) require the provision of information

17 necessary to make a determination as to wheth18 er an individual is eligible for assistance, includ19 ing a declaration of estimated income by the in20 dividual based, at the election of the individ21 ual—

22 (i) on multiplying by a factor of 4 the

23 individual’s family income for the 3-month

24 period immediately preceding the month in

25 which the application is made; or
1095

•S 2357

1 (ii) on estimated income for the entire

2 year for which the application is submitted;

3 and

4 (C) require attachment of such documenta5 tion as deemed necessary by the Secretary in

6 order to ensure eligibility for assistance.

7 (d) EFFECTIVENESS OF ELIGIBILITY.—A determina8 tion by a State that an individual is a premium subsidy

9 eligible individual or an individual eligible for cost-sharing

10 assistance shall be effective for the calendar year for which

11 such determination is made unless a revised application

12 submitted under subsection (b)(4) indicates that an indi13 vidual is no longer eligible for assistance.

14 (e) PENALTIES FOR MATERIAL MISREPRESENTA15 TIONS.—

16 (1) I N GENERAL.—Any individual who know17 ingly makes a material misrepresentation of infor18 mation in an application for assistance under this

19 subtitle shall be liable to the Federal Government

20 for the amount any assistance received by individual

21 on the basis of a misrepresentation and interest on

22 such amount at a rate specified by the Secretary,

23 and, shall, in addition, be liable to the Federal Gov24 ernment for $2,000 or, if greater, 3 times the
1096

•S 2357

1 amount any assistance received by individual on the

2 basis of a misrepresentation.

3 (2) COLLECTION OF PENALTY AMOUNTS.—A

4 State which receives an application for assistance

5 with respect to which a material misrepresentation

6 has been made shall collect the penalty amount re7 quired under paragraph (1) and submit such amount

8 to the Secretary in a timely manner.

9 SEC. 6005. END-OF-YEAR RECONCILIATION FOR PREMIUM

10 ASSISTANCE.

11 (a) IN GENERAL.—

12 (1) R EQUIREMENT TO FILE STATEMENT.—An

13 individual who received premium assistance under

14 this subtitle from a State for any month in a cal15 endar year shall file with the State an income rec16 onciliation statement to verify the individual’s family

17 income for the year. Such a statement shall be filed

18 at such time, and contain such information, as the

19 State may specify in accordance with regulations

20 promulgated by the Secretary.

21 (2) N OTICE OF REQUIREMENT.—A State shall

22 provide a written notice of the requirement under

23 paragraph (1) at the end of the year to an individual

24 who received premium assistance under this subtitle

25 from such State in any month during the year.
1097

•S 2357

1 (b) RECONCILIATION OF PREMIUM ASSISTANCE

2 BASED ON ACTUAL INCOME.—

3 (1) I N GENERAL.—Based on and using the in4 come reported in the reconciliation statement filed

5 under subsection (a) with respect to an individual,

6 the State shall compute the amount of premium as7 sistance that should have been provided under this

8 subtitle with respect to the individual for the year

9 involved.

10 (2) OVERPAYMENT OF ASSISTANCE.—If the

11 total amount of the premium assistance provided

12 was greater than the amount computed under para13 graph (1), the individual is liable to the State to pay

14 an amount equal to the amount of the excess pay15 ment. Any amount collected by a State under this

16 paragraph shall be submitted to the Secretary in a

17 timely manner.

18 (3) UNDERPAYMENT OF ASSISTANCE.—If the

19 total amount of the premium assistance provided

20 was less than the amount computed under para21 graph (1), the State shall pay to the individual an

22 amount equal to the amount of the deficit.

23 (4) S TATE OPTION.—A State may, in accord24 ance with regulations promulgated by the Secretary,

25 establish a procedure under which any overpayments
1098

•S 2357

1 or underpayments of premium assistance determined

2 under paragraphs (2) and (3) with respect to an in3 dividual for a year may be collected or paid, as ap4 propriate, through adjustments to the premium as5 sistance furnished to such individual in the succeed6 ing year.

7 (c) VERIFICATION.—Each State may use such infor8 mation as it has available to verify income of individuals

9 with applications filed under this subtitle, including return

10 information disclosed to the State for such purpose under

11 section 6103(l)(15) of the Internal Revenue Code of 1986.

12 (d) PENALTIES FOR FAILURE TO FILE.—In the case

13 of an individual who is required to file a statement under

14 this section in a year who fails to file such a statement,

15 the entire amount of the premium assistance provided in

16 such year shall be considered an excess amount under sub17 section (b)(2) and such individual shall not be eligible for

18 premium assistance under this subtitle until such state19 ment is filed. A State, using rules established by the Sec20 retary, shall waive the application of this subsection if the

21 individual establishes, to the satisfaction of the State

22 under such rules, good cause for the failure to file the

23 statement on a timely basis.

24 (e) PENALTIES FOR FALSE INFORMATION.—Any in25 dividual who provides false information in a statement
1099

•S 2357

1 filed under subsection (a) is subject to the same penalties

2 as are provided under section 6004(e) for a misrepresenta3 tion of material fact described in such section.

4 SEC. 6006. ENROLLMENT OUTREACH.

5 (a) I N GENERAL.—The Secretary shall promulgate

6 regulations under which each State operating a program

7 for premium assistance under this subtitle shall have in

8 effect an enrollment outreach system under which individ9 uals may be determined eligible for such assistance by

10 health care providers who furnish services to such individ11 uals.

12 (b) SPECIFICATIONS FOR REGULATIONS.—The regu13 lations promulgated by the Secretary under subsection (a)

14 shall include the following requirements:

15 (1) HEALTH CARE PROVIDERS.—Each State

16 shall permit only the classes or categories of health

17 care providers determined appropriate by the Sec18 retary (referred to in this subsection as ‘‘eligible

19 health care providers’’) to participate in an enroll20 ment outreach system established by the State.

21 (2) APPLICATION FOR ASSISTANCE.—Each

22 State shall develop and make available to eligible

23 health care providers in the State an enrollment

24 package for distribution to potentially eligible indi25 viduals which includes a simple form for individuals
1100

•S 2357

1 who receive services from such providers to apply for

2 premium assistance. Such form shall—

3 (A) permit an individual completing the

4 form to make a declaration that the individual

5 is eligible for a full subsidy under section 6002;

6 and

7 (B) permit an individual to enroll in a

8 community-rated standard health plan offered

9 in the community rating area in which the indi10 vidual resides.

11 (3) SUBMISSION OF COMPLETED APPLICA12 TION.—An individual who receives an enrollment ap13 plication form from an eligible health care provider

14 may complete the form and submit it to the individ15 ual’s provider or the State agency operating the pro16 gram for premium assistance under this subtitle. If

17 a health care provider receives an application under

18 this section the provider shall submit the application

19 to the State agency administering the premium as20 sistance program under this subtitle within a period

21 of time determined appropriate by the Secretary in

22 regulations.

23 (4) SELECTION OF HEALTH PLAN.—An individ24 ual may select a community-rated standard health

25 plan with which to enroll on the date the individual
1101

•S 2357

1 submits an application form under this section or

2 the individual may make such selection at a later

3 date determined appropriate by the Secretary in reg4 ulations. If an individual fails to select a health plan

5 with which to enroll by the date determined appro6 priate by the Secretary, the State agency shall select

7 such a plan for the individual.

8 (5) EFFECTIVE DATE OF ENROLLMENT.—An

9 individual who is enrolled in a community-rated

10 standard health plan in accordance with the enroll11 ment eligibility system established under this section

12 shall be an enrollee of the plan as of the date the

13 individual submits an application to the State agen14 cy or a health care provider.

15 (6) PERIOD OF ELIGIBILITY.—An individual

16 who submits an application to a health care provider

17 under an enrollment outreach system under this sec18 tion shall be eligible for premium assistance under

19 this subtitle for the period beginning on the date

20 such application is submitted and ending 60 days

21 after such date.

22 (7) N O STATE RESPONSIBILITY FOR ADMINIS23 TRATIVE ERRORS.—Section 6002(c)(3) shall not

24 apply to any eligibility determinations made under

25 this section.
1102

•S 2357

1 (8) N O RECONCILIATION REQUIRED.—The rec2 onciliation provisions of section 6005 shall not apply

3 to any premium assistance paid on behalf of an indi4 vidual during a period of eligibility for such assist5 ance under this section.

6 (9) R EQUIREMENT ON STATES.—During a pe7 riod of eligibility for premium assistance under this

8 section, an individual shall be given an opportunity

9 by a State to apply for continuing eligibility for pre10 mium assistance under this subtitle.

11 SEC. 6007. PAYMENTS TO STATES.

12 (a) IN GENERAL.—

13 (1) PAYMENTS FROM THE SECRETARY.—A

14 State operating a program for furnishing premium

15 assistance under this subtitle shall be entitled to re16 ceive payments from the Secretary in an amount

17 equal to the premium assistance paid on behalf of

18 individuals eligible for such assistance under this

19 subtitle. Such payments shall be made at such time

20 and in such form as provided in regulations promul21 gated by the Secretary.

22 (2) STATE ENTITLEMENT.—This subsection

23 constitutes budget authority in advance of appro24 priations Acts, and represents the obligation of the

25 Federal Government to provide payments to States
1103

•S 2357

1 operating programs under this subtitle in accordance

2 with this section.

3 (b) STATE ASSESSMENTS FOR ADMINISTRATION

4 COSTS.—A State operating a program for furnishing pre5 mium and cost-sharing assistance under this subtitle may

6 impose a premium assessment on the insured health plans

7 offered in the State in an amount not to exceed one per8 cent of the amount of the premium. Amounts collected

9 pursuant to this subsection may only be used to cover the

10 administrative costs of the State in operating such pro11 gram.

12 (c) A UDITS.—The Secretary shall conduct regular

13 audits of the activities under the State programs con14 ducted under this subtitle.

15 SEC. 6008. DEFINITIONS AND DETERMINATIONS OF IN16 COME.

17 For purposes of this subtitle:

18 (1) STANDARD HEALTH PLAN.—The term

19 ‘‘standard health plan’’ means a health plan (as de20 fined in section 1011(2)(B)) providing the standard

21 benefits package as described in section 1201(a).

22 (2) C HILD.—The term ‘‘child’’ means an indi23 vidual who is under 19 years of age.

24 (3) DETERMINATIONS OF INCOME.—
1104

•S 2357

1 (A) F AMILY INCOME.—The term ‘‘family

2 income’’ means, with respect to an individual

3 who—

4 (i) is not a dependent (as defined in

5 subparagraph (B)) of another individual,

6 the sum of the modified adjusted gross in7 comes (as defined in subparagraph (D))

8 for the individual, the individual’s spouse,

9 and children who are dependents of the in10 dividual; or

11 (ii) is a dependent of another individ12 ual, the sum of the modified adjusted gross

13 incomes for the other individual, the other

14 individual’s spouse, and children who are

15 dependents of the other individual.

16 (B) D EPENDENT.—The term ‘‘dependent’’

17 shall have the meaning given such term under

18 section 152 of the Internal Revenue Code of

19 1986.

20 (C) SPECIAL RULE FOR FOSTER CHIL21 DREN.—For purposes of subparagraph (A), a

22 child who is placed in foster care by a State

23 agency shall not be considered a dependent of

24 another individual.
1105

•S 2357

1 (D) MODIFIED ADJUSTED GROSS IN2 COME.—The term ‘‘modified adjusted gross in3 come’’ means adjusted gross income (as defined

4 in section 62(a) of the Internal Revenue Code

5 of 1986)—

6 (i) determined without regard to sec7 tions 135, 162(l), 911, 931, and 933 of

8 such Code, and

9 (ii) increased by—

10 (I) the amount of interest re11 ceived or accrued by the individual

12 during the taxable year which is ex13 empt from tax, and

14 (II) the amount of the social se15 curity benefits (as defined in section

16 86(d) of such Code) received during

17 the taxable year to the extent not in18 cluded in gross income under section

19 86 of such Code.

20 The determination under the preceding sen21 tence shall be made without regard to any car22 ryover or carryback.

23 (E) SPECIAL RULE FOR INDIVIDUALS TEM24 PORARILY UNEMPLOYED.—
1106

•S 2357

1 (i) IN GENERAL.—For purposes of de2 termining eligibility for premium assistance

3 under this subtitle for an individual who

4 becomes unemployed, such individual’s

5 spouse, and children who are dependents of

6 such individual, the family income for such

7 individuals determined under subparagraph

8 (A) shall be reduced—

9 (I) for each month before and

10 after the period of unemployment, by

11 an amount equal to the lesser of the

12 gross wages of the individual for the month or 1 13 ⁄12th of the amount equal

14 to 75 percent of the poverty line for

15 an individual; and

16 (II) for each month after the

17 date the individual becomes unem18 ployed, by an amount equal to any

19 unemployment compensation under an

20 unemployment compensation law of a

21 State or of the United States received

22 by or on behalf of the unemployed in23 dividual.
1107

•S 2357

1 (ii) L IMITATION.—Clause (i) shall no

2 longer apply to an individual on the earlier

3 of—

4 (I) the date on which the period

5 of unemployment ends; or

6 (II) the end of the 6-month pe7 riod beginning on the first day of the

8 first month during which the individ9 ual receives premium assistance under

10 this subtitle that would not be avail11 able to such individual if the provi12 sions of clause (i) did not apply.

13 (iii) S PECIAL RULE.—Clause (i) shall

14 not apply if an employer contribution of at

15 least 80 percent of the premium under a

16 standard health plan is available to the un17 employed individual through an employer

18 of a member of the individual’s family.

19 (4) ELIGIBLE INDIVIDUAL.—

20 (A) IN GENERAL.—The term ‘‘eligible indi21 vidual’’ means an individual who is residing in

22 the United States and who is—

23 (i) a citizen or national of the United

24 States; or
1108

•S 2357

1 (ii) an alien permanently residing in

2 the United States under color of law (as

3 defined in subparagraph (C)).

4 (B) E XCLUSION.—The term ‘‘eligible indi5 vidual’’ shall not include an individual who is

6 an inmate of a public institution (except as a

7 patient of a medical institution).

8 (C) ALIEN PERMANENTLY RESIDING IN

9 THE UNITED STATES UNDER COLOR OF LAW.—

10 The term ‘‘alien permanently residing in the

11 United States under color of law’’ means an

12 alien lawfully admitted for permanent residence

13 (within the meaning of section 101(a)(20) of

14 the Immigration and Nationality Act), and in15 cludes any of the following:

16 (i) An alien who is admitted as a refu17 gee under section 207 of the Immigration

18 and Nationality Act.

19 (ii) An alien who is granted asylum

20 under section 208 of such Act.

21 (iii) An alien whose deportation is

22 withheld under section 243(h) of such Act.

23 (iv) An alien who is admitted for tem24 porary residence under section 210, 210A,

25 or 245A of such Act.
1109

•S 2357

1 (v) An alien who has been paroled

2 into the United States under section

3 212(d)(5) of such Act for an indefinite pe4 riod or who has been granted extended vol5 untary departure as a member of a nation6 ality group.

7 (vi) An alien who is the spouse or un8 married child under 21 years of age of a

9 citizen of the United States, or the parent

10 of such a citizen if the citizen is over 21

11 years of age, and with respect to whom an

12 application for adjustment to lawful per13 manent residence is pending.

14 (5) P OVERTY LINE.—The term ‘‘poverty line’’

15 means, for a family for a year, the official poverty

16 line (as defined by the Office of Management and

17 Budget, and revised annually in accordance with sec18 tion 673(2) of the Omnibus Budget Reconciliation

19 Act of 1981) applicable to a family of the size in20 volved.

21 (6) PREGNANT WOMAN.—

22 (A) IN GENERAL.—The term ‘‘pregnant

23 woman’’ includes a woman deemed to be a

24 pregnant woman under subparagraph (B).
1110

•S 2357

1 (B) PERIOD AFTER TERMINATION OF

2 PREGNANCY.—For purposes of this subtitle, a

3 woman shall be deemed to be a pregnant

4 woman during the period beginning on the date

5 of the termination of the pregnancy and ending

6 on the first day of the first month that begins

7 more than 90 days after such date.

8 Subtitle B—Employer Subsidies

9 SEC. 6101. PURPOSE.

10 It is the purpose of this subtitle to provide subsidies

11 to eligible employers to assist such employers in providing,

12 or expanding the provision of, health care coverage for the

13 employees of such employers.

14 SEC. 6102. ELIGIBLE EMPLOYERS.

15 (a) IN GENERAL.—To be eligible for a subsidy under

16 this subtitle an employer shall—

17 (1) comply with the requirements of part 1 of

18 subtitle D of title I;

19 (2) contribute to the cost of health care cov20 erage for all employees of the same class (limited to

21 full- or part-time) employed by the employer;

22 (3) contribute not less than 50 percent of the

23 cost of health care coverage for each class of family

24 enrollment for each employee so covered; and
1111

•S 2357

1 (4) prepare and submit to the Secretary of

2 Labor an application, at such time, in such manner

3 and containing such information as the Secretary

4 may require.

5 (b) APPLICATION OF REQUIREMENTS.—

6 (1) I N GENERAL.—The requirements of para7 graphs (2) and (3) of subsection (a) shall only apply

8 with respect to the employees described in paragraph

9 (2).

10 (2) COVERAGE OF EMPLOYEES.—The employees

11 described in this paragraph are those employees—

12 (A) for which the employer is contributing

13 to the costs of health care coverage; and

14 (B) for which the employer did not make

15 such a contribution prior to the date of enact16 ment of this Act.

17 (c) S OLE PROPRIETORSHIPS.—A sole proprietorship

18 with not less than 3 full-time employees (including the sole

19 proprietor) shall be eligible for a subsidy under this sub20 title if such proprietorship reports the payment of wages

21 (as defined in the Internal Revenue Code of 1986), in the

22 year prior to the year for which the subsidy is applied for,

23 in an amount required under regulations promulgated by

24 the Secretary of Labor.

25 (d) INELIGIBILITY.—
1112

•S 2357

1 (1) S ELF-EMPLOYED.—A self-employed individ2 ual (as such term is defined in section 1011(c)) shall

3 not be eligible for a subsidy under this subtitle.

4 (2) E MPLOYEE LEASING FIRMS.—An employer

5 that is an employee leasing firm shall not be eligible

6 for a subsidy under this subtitle. The Secretary of

7 Labor shall promulgate regulations defining the

8 term ‘‘employee leasing firm’’.

9 (3) S TATE OR LOCAL GOVERNMENTS.—An em10 ployer that is a State or local government shall not

11 be eligible for a subsidy under this section.

12 SEC. 6103. EMPLOYER CERTIFICATION.

13 (a) R EQUIREMENT.—An employer that submits an

14 application under section 6102(a)(4) shall certify that

15 such employer, prior to the date of enactment of this Act,

16 did not contribute to the costs of health care coverage for

17 the employees for which the employer is applying for the

18 subsidy.

19 (b) CONTRIBUTION LIMIT.—For purposes of sub20 section (a), an employer shall be treated as having contrib21 uted to the health care coverage of an employee if the

22 amount of such contribution is $500 or more (as

23 annualized).

24 (c) U NION SICKNESS FUNDS.—For purposes of this

25 subtitle, employers that contribute to union sickness funds
1113

•S 2357

1 on behalf of their employees shall be deemed to have con2 tributed to the costs of health care coverage for the em3 ployees of such employer.

4 (d) REGULATIONS.—For purposes of this section, the

5 Secretary of Labor shall promulgate regulations to enable

6 an employer to determine whether and to what extent an

7 employer contributed to the costs of an employee’s health

8 care coverage prior to the date of enactment of this Act.

9 An employer shall utilize such regulations in submitting

10 a certification under this section.

11 SEC. 6104. AMOUNT OF SUBSIDY.

12 (a) I N GENERAL.—With respect to an employee for

13 which a subsidy application submitted by an employer has

14 been approved by the Secretary of Labor under this sub15 title, the employer shall receive a subsidy (to be paid over

16 a 5-year period) in an amount that equals—

17 (1) with respect to the first 3 years after the

18 date of enactment of this Act—

19 (A)(i) in the case of a community-rated

20 employer, 50 percent of the lesser of—

21 (I) the weighted average premium

22 rate (as defined in section 6002(b)(1)(C))

23 for the purchasing cooperative through

24 which the employer has contributed to the
1114

•S 2357

1 employee’s health care coverage (for the

2 year involved);

3 (II) the community-rate of the stand4 ard health plan under which the employee

5 received coverage (for the year involved);

6 or

7 (III) the weighted average premium

8 rate of the community rating area in which

9 the employee resides; or

10 (ii) in the case of an experience-rated em11 ployer, 50 percent of the lesser of—

12 (I) the weighted average premium

13 rate of the community rating area in which

14 the employee resides; or

15 (II) the premium rate for the experi16 ence-rated plan under which the employee

17 received coverage (for the year involved);

18 less

19 (B) 12 percent of the wages of the em20 ployee (for the year involved);

21 (2) with respect to the fourth year after the

22 date of enactment of this Act—

23 (A) 37.5 percent of the lesser of the

24 amounts referred to in subparagraph (A) of
1115

•S 2357

1 paragraph (1) (for the type of employer and the

2 year involved); less

3 (B) 12 percent of the wages of the em4 ployee (for the year involved); and

5 (3) with respect to the fifth year after the date

6 of enactment of this Act—

7 (A) 25 percent of the lesser of the amounts

8 referred to in subparagraph (A) of paragraph

9 (1) (for the type of employer and the year in10 volved); less

11 (B) 12 percent of the wages of the em12 ployee (for the year involved).

13 (b) LIMITATIONS.—

14 (1) A MOUNT OF CONTRIBUTION.—If, in apply15 ing the formula under subsection (a), the Secretary

16 of Labor determines that an employer’s contribu17 tions to the health care coverage costs of its employ18 ees exceeds 50 percent of the weighted average pre19 mium rate for the purchasing cooperative through

20 which the employer has so contributed (for the year

21 involved), the Secretary shall notify such employer

22 that such employer is not eligible for a subsidy

23 under this subtitle.

24 (2) P ART-TIME EMPLOYEES.—With respect to

25 subsidies for health care coverage for part-time em-
1116

•S 2357

1 ployee, the Secretary of Labor shall develop a for2 mula for the pro-rata reduction in such subsidies

3 based on the formula described in subsection (a) and

4 the hours of work performed by the employee.

5 (3) S INGLE SUBSIDY.—An employer shall not

6 be eligible to receive more than one subsidy under

7 this section. The Secretary of Labor shall promul8 gate regulations to ensure that no employer will re9 ceive a second or subsequent subsidy under this sub10 title regardless of whether such employer had pre11 viously received the previous subsidy as an employer

12 in a capacity different from that of the employer’s

13 present capacity.

14 SEC. 6105. DEFINITION.

15 For purposes of this Act, an employee who is em16 ployed by an employer—

17 (1) for at least 120 hours in a month shall be

18 deemed to be employed on a full-time basis with re19 spect to that month, or

20 (2) for at least 40 hours, but less than 120

21 hours, in a month shall be deemed to be employed

22 on a part-time basis.
1117

•S 2357

1 TITLE VII—REVENUE

2 PROVISIONS

3 SEC. 7000. 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—Financing Provisions

11 PART 1—INCREASE IN TAX ON TOBACCO

12 PRODUCTS

13 SEC. 7101. INCREASE IN EXCISE TAXES ON TOBACCO

14 PRODUCTS.

15 (a) CIGARETTES.—Subsection (b) of section 5701 is

16 amended by striking paragraph (1) and all that follows

17 and inserting the following:

18 ‘‘(1) SMALL CIGARETTES.—On cigarettes,

19 weighing not more than 3 pounds per thousand, the

20 amount per thousand determined under the follow21 ing table:

‘‘In the case of cigarettes removed— The tax per

thousand is—

After July 31, 1995, and before January 1, 1997 ............. $19.50 During 1997 ....................................................................... $24.50 During 1998 ....................................................................... $29.50 After December 31, 1998 ................................................... $34.50.
1118

•S 2357

1 ‘‘(2) LARGE CIGARETTES.—On cigarettes,

2 weighing more than 3 pounds per thousand, removed

3 at any time, an amount per thousand equal to 2.1

4 times the tax per thousand imposed by paragraph

5 (1) on cigarettes removed at such time; except that,

if more than 6 1 6 ⁄2 inches in length, they shall be tax7 able at the rate prescribed for cigarettes weighing

8 not more than 3 pounds per thousand, counting each

23 9 ⁄4 inches, or fraction thereof, of the length of each

10 as one cigarette.’’

11 (b) CIGARS.—Paragraphs (1) and (2) of section

12 5701(a) are amended to read as follows:

13 ‘‘(1) S MALL CIGARS.—On cigars, weighing not

14 more than 3 pounds per thousand, the amount per

15 thousand determined under the following table:

‘‘In the case of cigars removed— The tax per

thousand is—

After July 31, 1995, and before January 1, 1997 ............. $1.83 During 1997 ....................................................................... $2.30 During 1998 ....................................................................... $2.77 After December 31, 1998 ................................................... $3.23.

16 ‘‘(2) LARGE CIGARS.—On cigars, weighing more

17 than 3 pounds per thousand, the applicable percent18 age (determined under the following table) of the

19 price for which sold but not more than the applica-
1119

•S 2357

1 ble limitation (determined under such table) per

2 thousand:

‘‘In the case of cigars removed— The applicable percentage

is—

The limitation

is—

After July 31, 1995 and before January 1, 1997 ............................................................ 21 percent $48.75 During 1997 ................................................... 26 percent $61.26 During 1998 ................................................... 31 percent $73.74 After December 31, 1998 ............................... 37 percent $86.25.’’

3 (c) C IGARETTE PAPERS.—Subsection (c) of section

4 5701 is amended—

5 (1) by striking ‘‘0.75 cent (0.625 cent on ciga6 rette papers removed during 1991 or 1992)’’ and in7 serting ‘‘the amount determined in accordance with

8 the following table’’, and

9 (2) by adding at the end the following:

‘‘In the case of cigarette papers removed— The tax for each 50 papers

is—

After July 31, 1995 and before January 1, 1997 .............. 1.22 cents During 1997 ....................................................................... 1.53 cents During 1998 ....................................................................... 1.84 cents After December 31, 1998 ................................................... 2.16 cents.’’

10 (d) C IGARETTE TUBES.—Subsection (d) of section

11 5701 is amended—

12 (1) by striking ‘‘1.5 cents (1.25 cents on ciga13 rette tubes removed during 1991 or 1992)’’ and in14 serting ‘‘the amount determined in accordance with

15 the following table’’, and

16 (2) by adding at the end the following:

‘‘In the case of cigarette tubes removed—

The tax for each 50 tubes is—

After July 31, 1995 and before January 1, 1997 .............. 2.44 cents
1120

•S 2357

‘‘In the case of cigarette tubes removed—

The tax for each 50 tubes

is—

During 1997 ....................................................................... 3.06 cents During 1998 ....................................................................... 3.69 cents After December 31, 1998 ................................................... 4.31 cents.’’

1 (e) S NUFF.—Paragraph (1) of section 5701(e) is

2 amended—

3 (1) by striking ‘‘36 cents (30 cents on snuff re4 moved during 1991 or 1992)’’ and inserting ‘‘the

5 amount determined in accordance with the following

6 table’’, and

7 (2) by adding at the end the following:

‘‘In the case of snuff removed— The tax per pound is—

After July 31, 1995 and before January 1, 1997 .............. 58.5 cents During 1997 ....................................................................... 73.5 cents During 1998 ....................................................................... 88.5 cents After December 31, 1998 ................................................... $1.03 1

⁄2.’’

8 (f) C HEWING TOBACCO.—Paragraph (2) of section

9 5701(e) is amended—

10 (1) by striking ‘‘12 cents (10 cents on chewing

11 tobacco removed during 1991 or 1992)’’ and insert12 ing ‘‘the amount determined in accordance with the

13 following table’’, and

14 (2) by adding at the end the following:

‘‘In the case of chewing tobacco removed— The tax per pound is—

After July 31, 1995 and before January 1, 1997 .............. 19.5 cents During 1997 ....................................................................... 24.5 cents During 1998 ....................................................................... 29.5 cents After December 31, 1998 ................................................... 34.5 cents.’’

15 (g) PIPE TOBACCO.—Subsection (f) of section 5701

16 is amended—
1121

•S 2357

1 (1) by striking ‘‘67.5 cents (56.25 cents on pipe

2 tobacco removed during 1991 or 1992)’’ and insert3 ing ‘‘the amount determined in accordance with the

4 following table’’, and

5 (2) by adding at the end the following:

‘‘In the case of pipe tobacco removed— The tax per pound is—

After July 31, 1995 and before January 1, 1997 .............. $1.10 During 1997 ....................................................................... $1.38 During 1998 ....................................................................... $1.66 After December 31, 1998 ................................................... $1.94.’’

6 (h) APPLICATION OF TAX INCREASE TO PUERTO

7 RICO.—Section 5701 is amended by adding at the end the

8 following new subsection:

9 ‘‘(h) A PPLICATION OF TAXES TO PUERTO RICO.—

10 Notwithstanding subsections (b) and (c) of section 7653

11 and any other provision of law—

12 ‘‘(1) IN GENERAL.—On tobacco products and

13 cigarette papers and tubes, manufactured in or im14 ported into the Commonwealth of Puerto Rico, there

15 is hereby imposed a tax at the rate equal to the ex16 cess of—

17 ‘‘(A) the rate of tax applicable under this

18 section to like articles manufactured in the

19 United States, over

20 ‘‘(B) the rate referred to in subparagraph

21 (A) as in effect on the day before the date of

22 the enactment of the Health Security Act.
1122

•S 2357

1 ‘‘(2) S HIPMENTS TO PUERTO RICO FROM THE

2 UNITED STATES.—Only the rates of tax in effect on

3 the day before the date of the enactment of the

4 Health Security Act shall be taken into account in

5 determining the amount of any exemption from, or

6 credit or drawback of, any tax imposed by this sec7 tion on any article shipped to the Commonwealth of

8 Puerto Rico from the United States.

9 ‘‘(3) S HIPMENTS FROM PUERTO RICO TO THE

10 UNITED STATES.—The rates of tax taken into ac11 count under section 7652(a) with respect to tobacco

12 products and cigarette papers and tubes coming into

13 the United States from the Commonwealth of Puer14 to Rico shall be the rates of tax in effect on the day

15 before the date of the enactment of the Health Secu16 rity Act.

17 ‘‘(4) DISPOSITION OF REVENUES.—The provi18 sions of section 7652(a)(3) shall not apply to any

19 tax imposed by reason of this subsection.’’

20 (i) E FFECTIVE DATE.—The amendments made by

21 this section shall apply to articles removed (as defined in

22 section 5702(k) of the Internal Revenue Code of 1986,

23 as amended by this Act) after July 31, 1995.

24 (j) FLOOR STOCKS TAXES.—
1123

•S 2357

1 (1) I MPOSITION OF TAX.—On tobacco products

2 and cigarette papers and tubes manufactured in or

3 imported into the United States or the Common4 wealth of Puerto Rico which are removed before any

5 tax-increase date and held on such date for sale by

6 any person, there is hereby imposed a tax in an

7 amount equal to the excess of—

8 (A) the tax which would be imposed under

9 section 5701 of the Internal Revenue Code of

10 1986 on the article if the article had been re11 moved on such date, over

12 (B) the prior tax (if any) imposed under

13 section 5701 or 7652 of such Code on such ar14 ticle.

15 (2) A UTHORITY TO EXEMPT CIGARETTES HELD

16 IN VENDING MACHINES.—To the extent provided in

17 regulations prescribed by the Secretary, no tax shall

18 be imposed by paragraph (1) on cigarettes held for

19 retail sale on any tax-increase date, by any person

20 in any vending machine. If the Secretary provides

21 such a benefit with respect to any person, the Sec22 retary may reduce the $500 amount in paragraph

23 (3) with respect to such person.

24 (3) C REDIT AGAINST TAX.—Each person shall

25 be allowed as a credit against the taxes imposed by
1124

•S 2357

1 paragraph (1) on each tax-increase date an amount

2 equal to $500. Such credit shall not exceed the

3 amount of taxes imposed by paragraph (1) on such

4 date for which such person is liable.

5 (4) L IABILITY FOR TAX AND METHOD OF PAY6 MENT.—

7 (A) L IABILITY FOR TAX.—A person hold8 ing any article on any tax-increase date to

9 which any tax imposed by paragraph (1) applies

10 shall be liable for such tax.

11 (B) M ETHOD OF PAYMENT.—The tax im12 posed by paragraph (1) shall be paid in such

13 manner as the Secretary shall prescribe by reg14 ulations.

15 (C) TIME FOR PAYMENT.—The tax im16 posed by paragraph (1) on any tax-increase

17 date shall be paid on or before the date which

18 is 3 months after such tax-increase date.

19 (5) ARTICLES IN FOREIGN TRADE ZONES.—

20 Notwithstanding the Act of June 18, 1934 (48 Stat.

21 998, 19 U.S.C. 81a) and any other provision of law,

22 any article which is located in a foreign trade zone

23 on any tax-increase date shall be subject to the taxes

24 imposed by paragraph (1) if—
1125

•S 2357

1 (A) internal revenue taxes have been deter2 mined, or customs duties liquidated, with re3 spect to such article before such date pursuant

4 to a request made under the 1st proviso of sec5 tion 3(a) of such Act, or

6 (B) such article is held on such date under

7 the supervision of a customs officer pursuant to

8 the 2d proviso of such section 3(a).

9 (6) D EFINITIONS.—For purposes of this sub10 section—

11 (A) TAX-INCREASE DATE.—The term ‘‘tax12 increase date’’ means August 1, 1995, January

13 1, 1997, January 1, 1998, and January 1,

14 1999.

15 (B) OTHER DEFINITIONS.—Terms used in

16 this subsection which are also used in section

17 5702 of the Internal Revenue Code of 1986

18 shall have the respective meanings such terms

19 have in such section, as amended by this Act.

20 (C) SECRETARY.—The term ‘‘Secretary’’

21 means the Secretary of the Treasury or his del22 egate.

23 (7) CONTROLLED GROUPS.—Rules similar to

24 the rules of section 5061(e)(3) of such Code shall

25 apply for purposes of this subsection.
1126

•S 2357

1 (8) O THER LAWS APPLICABLE.—All provisions

2 of law, including penalties, applicable with respect to

3 the taxes imposed by section 5701 of such Code

4 shall, insofar as applicable and not inconsistent with

5 the provisions of this subsection, apply to the floor

6 stocks taxes imposed by paragraph (1), to the same

7 extent as if such taxes were imposed by such section

8 5701. The Secretary may treat any person who bore

9 the ultimate burden of the tax imposed by para10 graph (1) as the person to whom a credit or refund

11 under such provisions may be allowed or made.

12 SEC. 7102. MODIFICATIONS OF CERTAIN TOBACCO TAX

13 PROVISIONS.

14 (a) E XEMPTION FOR EXPORTED TOBACCO PROD15 UCTS AND CIGARETTE PAPERS AND TUBES TO APPLY

16 ONLY TO ARTICLES MARKED FOR EXPORT.—

17 (1) Subsection (b) of section 5704 is amended

18 by adding at the end the following new sentence:

19 ‘‘Tobacco products and cigarette papers and tubes

20 may not be transferred or removed under this sub21 section unless such products or papers and tubes

22 bear such marks, labels, or notices as the Secretary

23 shall by regulations prescribe.’’

24 (2) Section 5761 is amended by redesignating

25 subsections (c) and (d) as subsections (d) and (e),
1127

•S 2357

1 respectively, and by inserting after subsection (b)

2 the following new subsection:

3 ‘‘(c) SALE OF TOBACCO PRODUCTS AND CIGARETTE

4 PAPERS AND TUBES FOR EXPORT.—Except as provided

5 in subsections (b) and (d) of section 5704—

6 ‘‘(1) every person who sells, relands, or receives

7 within the jurisdiction of the United States any to8 bacco products or cigarette papers or tubes which

9 have been labeled or shipped for exportation under

10 this chapter,

11 ‘‘(2) every person who sells or receives such

12 relanded tobacco products or cigarette papers or

13 tubes, and

14 ‘‘(3) every person who aids or abets in such

15 selling, relanding, or receiving,

16 shall, in addition to the tax and any other penalty provided

17 in this title, be liable for a penalty equal to the greater

18 of $1,000 or 5 times the amount of the tax imposed by

19 this chapter. All tobacco products and cigarette papers

20 and tubes relanded within the jurisdiction of the United

21 States, and all vessels, vehicles, and aircraft used in such

22 relanding or in removing such products, papers, and tubes

23 from the place where relanded, shall be forfeited to the

24 United States.’’
1128

•S 2357

1 (3) Subsection (a) of section 5761 is amended

2 by striking ‘‘subsection (b)’’ and inserting ‘‘sub3 section (b) or (c)’’.

4 (4) Subsection (d) of section 5761, as redesig5 nated by paragraph (2), is amended by striking

6 ‘‘The penalty imposed by subsection (b)’’ and insert7 ing ‘‘The penalties imposed by subsections (b) and

8 (c)’’.

9 (5)(A) Subpart F of chapter 52 is amended by

10 adding at the end the following new section:

11 ‘‘SEC. 5754. RESTRICTION ON IMPORTATION OF PRE12 VIOUSLY EXPORTED TOBACCO PRODUCTS.

13 ‘‘(a) I N GENERAL.—Tobacco products and cigarette

14 papers and tubes previously exported from the United

15 States may be imported or brought into the United States

16 only as provided in section 5704(d). For purposes of this

17 section, section 5704(d), section 5761, and such other pro18 visions as the Secretary may specify by regulations, ref19 erences to exportation shall be treated as including a ref20 erence to shipment to the Commonwealth of Puerto Rico.

21 ‘‘(b) CROSS REFERENCE.—

‘‘For penalty for the sale of tobacco products and

cigarette papers and tubes in the United States which are labeled for export, see section 5761(c).’’
1129

•S 2357

1 (B) The table of sections for subpart F of chap2 ter 52 is amended by adding at the end the following

3 new item:

‘‘Sec. 5754. Restriction on importation of previously exported to- bacco products.’’

4 (b) IMPORTERS REQUIRED TO BE QUALIFIED.—

5 (1) Sections 5712, 5713(a), 5721, 5722,

6 5762(a)(1), and 5763 (b) and (c) are each amended

7 by inserting ‘‘or importer’’ after ‘‘manufacturer’’.

8 (2) The heading of subsection (b) of section

9 5763 is amended by inserting ‘‘QUALIFIED IMPORT10 ERS,’’ after ‘‘M ANUFACTURERS,’’.

11 (3) The heading for subchapter B of chapter 52

12 is amended by inserting ‘‘and Importers’’ after

13 ‘‘Manufacturers’’.

14 (4) The item relating to subchapter B in the

15 table of subchapters for chapter 52 is amended by

16 inserting ‘‘and importers’’ after ‘‘manufacturers’’.

17 (c) REPEAL OF TAX-EXEMPT SALES TO EMPLOYEES

18 OF CIGARETTE MANUFACTURERS.—

19 (1) Subsection (a) of section 5704 is amend20 ed—

21 (A) by striking ‘‘EMPLOYEE USE OR’’ in

22 the heading, and

23 (B) by striking ‘‘for use or consumption by

24 employees or’’ in the text.
1130

•S 2357

1 (2) Subsection (e) of section 5723 is amended

2 by striking ‘‘for use or consumption by their employ3 ees, or for experimental purposes’’ and inserting

4 ‘‘for experimental purposes’’.

5 (d) R EPEAL OF TAX-EXEMPT SALES TO UNITED

6 STATES.—Subsection (b) of section 5704 is amended by

7 striking ‘‘and manufacturers may similarly remove such

8 articles for use of the United States;’’.

9 (e) B OOKS OF 25 OR FEWER CIGARETTE PAPERS

10 SUBJECT TO TAX.—Subsection (c) of section 5701 is

11 amended by striking ‘‘On each book or set of cigarette

12 papers containing more than 25 papers,’’ and inserting

13 ‘‘On cigarette papers,’’.

14 (f) S TORAGE OF TOBACCO PRODUCTS.—Subsection

15 (k) of section 5702 is amended by inserting ‘‘under section

16 5704’’ after ‘‘internal revenue bond’’.

17 (g) AUTHORITY TO PRESCRIBE MINIMUM MANUFAC18 TURING ACTIVITY REQUIREMENTS.—Section 5712 is

19 amended by striking ‘‘or’’ at the end of paragraph (1),

20 by redesignating paragraph (2) as paragraph (3), and by

21 inserting after paragraph (1) the following new paragraph:

22 ‘‘(2) the activity proposed to be carried out at

23 such premises does not meet such minimum capacity

24 or activity requirements as the Secretary may pre25 scribe, or’’.
1131

•S 2357

1 (h) S PECIAL RULES RELATING TO PUERTO RICO

2 AND THE VIRGIN ISLANDS.—Section 7652 is amended by

3 adding at the end the following new subsection:

4 ‘‘(h) L IMITATION ON COVER OVER OF TAX ON TO5 BACCO PRODUCTS.—For purposes of this section, with re6 spect to taxes imposed under section 5701 or this section

7 on any tobacco product or cigarette paper or tube, the

8 amount covered into the treasuries of Puerto Rico and the

9 Virgin Islands shall not exceed the rate of tax under sec10 tion 5701 in effect on the article on the day before the

11 date of the enactment of the Health Security Act.’’

12 (i) E FFECTIVE DATE.—The amendments made by

13 this section shall apply to articles removed (as defined in

14 section 5702(k) of the Internal Revenue Code of 1986,

15 as amended by this Act) after December 31, 1994.

16 SEC. 7103. IMPOSITION OF EXCISE TAX ON MANUFACTURE

17 OR IMPORTATION OF ROLL-YOUR-OWN TO18 BACCO.

19 (a) I N GENERAL.—Section 5701 (relating to rate of

20 tax), as amended by section 7101, is amended by redesig21 nating subsections (g) and (h) as subsections (h) and (i)

22 and by inserting after subsection (f) the following new

23 subsection:

24 ‘‘(g) R OLL-YOUR-OWN TOBACCO.—On roll-your-own

25 tobacco, manufactured in or imported into the United
1132

•S 2357

1 States, there shall be imposed a tax of the amount deter2 mined in accordance with the following table per pound

3 (and a proportionate tax at the like rate on all fractional

4 parts of a pound).

‘‘In the case of roll-your-own tobacco removed— The tax per pound is—

After July 31, 1995 and before January 1, 1997 .............. $1.10 During 1997 ....................................................................... $1.38 During 1998 ....................................................................... $1.66 After December 31, 1998 ................................................... $1.94.’’

5 (b) R OLL-YOUR-OWN TOBACCO.—Section 5702 (re6 lating to definitions) is amended by adding at the end the

7 following new subsection:

8 ‘‘(p) ROLL-YOUR-OWN TOBACCO.—The term ‘roll9 your-own tobacco’ means any tobacco which, because of

10 its appearance, type, packaging, or labeling, is suitable for

11 use and likely to be offered to, or purchased by, consumers

12 as tobacco for making cigarettes.’’

13 (c) TECHNICAL AMENDMENTS.—

14 (1) Subsection (c) of section 5702 is amended

15 by striking ‘‘and pipe tobacco’’ and inserting ‘‘pipe

16 tobacco, and roll-your-own tobacco’’.

17 (2) Subsection (d) of section 5702 is amend18 ed—

19 (A) in the material preceding paragraph

20 (1), by striking ‘‘or pipe tobacco’’ and inserting

21 ‘‘pipe tobacco, or roll-your-own tobacco’’, and
1133

•S 2357

1 (B) by striking paragraph (1) and insert2 ing the following new paragraph:

3 ‘‘(1) a person who produces cigars, cigarettes,

4 smokeless tobacco, pipe tobacco, or roll-your-own to5 bacco solely for the person’s own personal consump6 tion or use, and’’.

7 (3) The chapter heading for chapter 52 is

8 amended to read as follows:

9 ‘‘CHAPTER 52—TOBACCO PRODUCTS AND

10 CIGARETTE PAPERS AND TUBES’’.

11 (4) The table of chapters for subtitle E is

12 amended by striking the item relating to chapter 52

13 and inserting the following new item:

‘‘CHAPTER 52. Tobacco products and cigarette papers and tubes.’’

14 (d) EFFECTIVE DATE.—

15 (1) I N GENERAL.—The amendments made by

16 this section shall apply to roll-your-own tobacco re17 moved (as defined in section 5702(k) of the Internal

18 Revenue Code of 1986, as amended by this Act)

19 after July 31, 1995.

20 (2) TRANSITIONAL RULE.—Any person who—

21 (A) on the date of the enactment of this

22 Act is engaged in business as a manufacturer of

23 roll-your-own tobacco or as an importer of to24 bacco products or cigarette papers and tubes,

25 and
1134

•S 2357

1 (B) before August 1, 1995, submits an ap2 plication under subchapter B of chapter 52 of

3 such Code to engage in such business,

4 may, notwithstanding such subchapter B, continue

5 to engage in such business pending final action on

6 such application. Pending such final action, all pro7 visions of such chapter 52 shall apply to such appli8 cant in the same manner and to the same extent as

9 if such applicant were a holder of a permit under

10 such chapter 52 to engage in such business.

11 PART 2—HEALTH RELATED ASSESSMENTS

12 SEC. 7111. ASSESSMENTS ON INSURED AND SELF-INSURED

13 HEALTH PLANS.

14 (a) G ENERAL RULE.—Subtitle D (relating to mis15 cellaneous excise taxes) is amended by adding after chap16 ter 36 the following new chapter:

17 ‘‘CHAPTER 37—HEALTH RELATED

18 ASSESSMENTS

‘‘SUBCHAPTER A. Insured and self-insured health plans.

19 ‘‘Subchapter A—Insured and Self-Insured

20 Health Plans

‘‘Sec. 4501. Health insurance and health-related administrative

services.

‘‘Sec. 4502. Self-insured health plans.

‘‘Sec. 4503. Definitions and special rules.
1135

•S 2357

1 ‘‘SEC. 4501. HEALTH INSURANCE AND HEALTH-RELATED

2 ADMINISTRATIVE SERVICES.

3 ‘‘(a) IMPOSITION OF TAX.—There is hereby im4 posed—

5 ‘‘(1) on each taxable health insurance policy, a

6 tax equal to 1.75 percent of the premiums received

7 under such policy, and

8 ‘‘(2) on each amount received for health-related

9 administrative services, a tax equal to 1.75 percent

10 of the amount so received.

11 ‘‘(b) LIABILITY FOR TAX.—

12 ‘‘(1) HEALTH INSURANCE.—The tax imposed

13 by subsection (a)(1) shall be paid by the issuer of

14 the policy.

15 ‘‘(2) HEALTH-RELATED ADMINISTRATIVE SERV16 ICES.—The tax imposed by subsection (a)(2) shall

17 be paid by the person providing the health-related

18 administrative services.

19 ‘‘(c) TAXABLE HEALTH INSURANCE POLICY.—For

20 purposes of this section—

21 ‘‘(1) IN GENERAL.—Except as otherwise pro22 vided in this section, the term ‘taxable health insur23 ance policy’ means any insurance policy providing

24 accident or health insurance with respect to individ25 uals residing in the United States.
1136

•S 2357

1 ‘‘(2) E XEMPTION OF CERTAIN POLICIES.—The

2 term ‘taxable health insurance policy’ does not in3 clude any insurance policy if substantially all of the

4 coverage provided under such policy relates to—

5 ‘‘(A) liabilities incurred under workers’

6 compensation laws,

7 ‘‘(B) tort liabilities,

8 ‘‘(C) liabilities relating to ownership or use

9 of property,

10 ‘‘(D) credit insurance, or

11 ‘‘(E) such other similar liabilities as the

12 Secretary may specify by regulations.

13 ‘‘(3) S PECIAL RULE WHERE POLICY PROVIDES

14 OTHER COVERAGE.—In the case of any taxable

15 health insurance policy under which amounts are

16 payable other than for accident or health coverage,

17 in determining the amount of the tax imposed by

18 subsection (a)(1) on any premium paid under such

19 policy, there shall be excluded the amount of the

20 charge for the nonaccident or health coverage if—

21 ‘‘(A) the charge for such nonaccident or

22 health coverage is either separately stated in

23 the policy, or furnished to the policyholder in a

24 separate statement, and
1137

•S 2357

1 ‘‘(B) such charge is reasonable in relation

2 to the total charges under the policy.

3 In any other case, the entire amount of the premium

4 paid under such a policy shall be subject to tax

5 under subsection (a)(1).

6 ‘‘(4) TREATMENT OF PREPAID HEALTH COV7 ERAGE ARRANGEMENTS.—

8 ‘‘(A) IN GENERAL.—In the case of any ar9 rangement described in subparagraph (B)—

10 ‘‘(i) such arrangement shall be treated

11 as a taxable health insurance policy,

12 ‘‘(ii) the payments or premiums re13 ferred to in subparagraph (B)(i) shall be

14 treated as premiums received for a taxable

15 health insurance policy, and

16 ‘‘(iii) the person referred to in sub17 paragraph (B)(i) shall be treated as the is18 suer.

19 ‘‘(B) D ESCRIPTION OF ARRANGEMENTS.—

20 An arrangement is described in this subpara21 graph if under such arrangement—

22 ‘‘(i) fixed payments or premiums are

23 received as consideration for any person’s

24 agreement to provide or arrange for the

25 provision of accident or health coverage to
1138

•S 2357

1 residents of the United States, regardless

2 of how such coverage is provided or ar3 ranged to be provided, and

4 ‘‘(ii) substantially all of the risks of

5 the rates of utilization of services is as6 sumed by such person or the provider of

7 such services.

8 ‘‘(d) HEALTH-RELATED ADMINISTRATIVE SERV9 ICES.—For purposes of this section, the term ‘health-re10 lated administrative services’ means—

11 ‘‘(1) the processing of claims or performance of

12 other administrative services in connection with acci13 dent or health coverage under a taxable health in14 surance policy if the charge for such services is not

15 included in the premiums under such policy, and

16 ‘‘(2) processing claims, arranging for provision

17 of accident or health coverage, or performing other

18 administrative services in connection with an appli19 cable self-insured health plan (as defined in section

20 4502(c)) established or maintained by a person

21 other than the person performing the services.

22 For purposes of paragraph (1), rules similar to the rules

23 of subsection (c)(3) shall apply.
1139

•S 2357

1 ‘‘SEC. 4502. SELF-INSURED HEALTH PLANS.

2 ‘‘(a) IMPOSITION OF TAX.—In the case of any appli3 cable self-insured health plan, there is hereby imposed a

4 tax for each month equal to 1.75 percent of the sum of—

5 ‘‘(1) the accident or health coverage expendi6 tures for such month under such plan, and

7 ‘‘(2) the direct administrative expenditures for

8 such month under such plan.

9 ‘‘(b) LIABILITY FOR TAX.—

10 ‘‘(1) IN GENERAL.—The tax imposed by sub11 section (a) shall be paid by the plan sponsor.

12 ‘‘(2) PLAN SPONSOR.—For purposes of para13 graph (1), the term ‘plan sponsor’ means—

14 ‘‘(A) the employer in the case of a plan es15 tablished or maintained by a single employer,

16 ‘‘(B) the employee organization in the case

17 of a plan established or maintained by an em18 ployee organization, or

19 ‘‘(C) in the case of—

20 ‘‘(i) a plan established or maintained

21 by 2 or more employers or jointly by 1 or

22 more employers and 1 or more employee

23 organizations,

24 ‘‘(ii) a voluntary employees’ bene25 ficiary association under section 501(c)(9),

26 or
1140

•S 2357

1 ‘‘(iii) a plan described in subsection

2 (c)(2)(F),

3 the association, committee, joint board of trust4 ees, cooperative, or other similar group of rep5 resentatives of the parties who establish or

6 maintain the plan.

7 ‘‘(c) A PPLICABLE SELF-INSURED HEALTH PLAN.—

8 For purposes of this section, the term ‘applicable self-in9 sured health plan’ means any plan for providing accident

10 or health coverage if—

11 ‘‘(1) any portion of such coverage is provided

12 other than through an insurance policy, and

13 ‘‘(2) such plan is established or maintained—

14 ‘‘(A) by one or more employers for the

15 benefit of their employees or former employees,

16 ‘‘(B) by one or more employee organiza17 tions for the benefit of their members or former

18 members,

19 ‘‘(C) jointly by 1 or more employers and 1

20 or more employee organizations for the benefit

21 of employees or former employees,

22 ‘‘(D) by a voluntary employees’ beneficiary

23 association described in section 501(c)(9),

24 ‘‘(E) by any organization described in sec25 tion 501(c)(6), or
1141

•S 2357

1 ‘‘(F) in the case of a plan not described in

2 the preceding subparagraphs, by a multiple em3 ployer welfare arrangement, a rural electric co4 operative, or a rural telephone cooperative asso5 ciation, as such terms are defined in section

6 3(40) of the Employee Retirement Income Se7 curities Act of 1974.

8 ‘‘(d) ACCIDENT OR HEALTH COVERAGE EXPENDI9 TURES.—For purposes of this section—

10 ‘‘(1) IN GENERAL.—The accident or health cov11 erage expenditures of any applicable self-insured

12 health plan for any month are the aggregate expend13 itures paid in such month for accident or health cov14 erage provided under such plan to the extent such

15 expenditures are not subject to tax under section

16 4501.

17 ‘‘(2) TREATMENT OF REIMBURSEMENTS.—In

18 determining accident or health coverage expenditures

19 during any month of any applicable self-insured

20 health plan, reimbursements (by insurance or other21 wise) received during such month shall be taken into

22 account as a reduction in accident or health coverage

23 expenditures.

24 ‘‘(3) CERTAIN EXPENDITURES DISREGARDED.—

25 Paragraph (1) shall not apply to any expenditure for
1142

•S 2357

1 the acquisition or improvement of land or for the ac2 quisition or improvement of any property to be used

3 in connection with the provision of accident or

4 health coverage which is subject to the allowance

5 under section 167, except that, for purposes of para6 graph (1), allowances under section 167 shall be

7 considered as expenditures.

8 ‘‘(e) DIRECT ADMINISTRATIVE EXPENDITURES.—

9 For purposes of this section, the term ‘direct administra10 tive expenditures’ means the administrative expenditures

11 under the plan to the extent such expenditures are not

12 subject to tax under section 4501. In determining the

13 amount of such expenditures, rules similar to the rules of

14 subsection (d)(3) shall apply.

15 ‘‘SEC. 4503. DEFINITIONS AND SPECIAL RULES.

16 ‘‘(a) DEFINITIONS.—For purposes of this sub17 chapter—

18 ‘‘(1) ACCIDENT OR HEALTH COVERAGE.—The

19 term ‘accident or health coverage’ means any cov20 erage which, if provided by an insurance policy,

21 would cause such policy to be a taxable health insur22 ance policy (as defined in section 4501(c)).

23 ‘‘(2) I NSURANCE POLICY.—The term ‘insurance

24 policy’ means any policy or other instrument where-
1143

•S 2357

1 by a contract of insurance is issued, renewed, or ex2 tended.

3 ‘‘(3) PREMIUM.—The term ‘premium’ means

4 the gross amount of premiums and other consider5 ation (including advance premiums, deposits, fees,

6 and assessments) arising from policies issued by a

7 person acting as the primary insurer, adjusted for

8 any return or additional premiums paid as a result

9 of endorsements, cancellations, audits, or retrospec10 tive rating. Amounts returned where the amount is

11 not fixed in the contract but depends on the experi12 ence of the insurer or the discretion of management

13 shall not be included in return premiums.

14 ‘‘(4) UNITED STATES.—The term ‘United

15 States’ includes any possession of the United States.

16 ‘‘(b) T REATMENT OF GOVERNMENTAL ENTITIES.—

17 ‘‘(1) I N GENERAL.—For purposes of this sub18 chapter—

19 ‘‘(A) the term ‘person’ includes any gov20 ernmental entity, and

21 ‘‘(B) notwithstanding any other law or rule

22 of law, governmental entities shall not be ex23 empt from the taxes imposed by this subchapter

24 except as provided in paragraph (2).
1144

•S 2357

1 ‘‘(2) E XEMPT GOVERNMENTAL PROGRAMS.—In

2 the case of an exempt governmental program—

3 ‘‘(A) no tax shall be imposed under section

4 4501 on any premium received pursuant to

5 such program or on any amount received for

6 health-related administrative services pursuant

7 to such program, and

8 ‘‘(B) no tax shall be imposed under section

9 4502 on any expenditures pursuant to such

10 program.

11 ‘‘(3) E XEMPT GOVERNMENTAL PROGRAM.—For

12 purposes of this subchapter, the term ‘exempt gov13 ernmental program’ means—

14 ‘‘(A) the insurance programs established

15 by parts A and B of title XVIII of the Social

16 Security Act,

17 ‘‘(B) the medical assistance program es18 tablished by title XIX of the Social Security

19 Act,

20 ‘‘(C) any program established by Federal

21 law for providing medical care (other than

22 through insurance policies) to individuals (or

23 the spouses and dependents thereof) by reason

24 of such individuals being—
1145

•S 2357

1 ‘‘(i) members of the Armed Forces of

2 the United States, or

3 ‘‘(ii) veterans, and

4 ‘‘(D) any program established by Federal

5 law for providing medical care (other than

6 through insurance policies) to members of In7 dian tribes (as defined in section 4(d) of the In8 dian Health Care Improvement Act).

9 ‘‘(c) N O COVER OVER TO POSSESSIONS.—Notwith10 standing any other provision of law, no amount collected

11 under this subchapter shall be covered over to any posses12 sion of the United States.’’

13 (b) C LERICAL AMENDMENT.—The table of chapters

14 for subtitle D is amended by inserting after the item relat15 ing to chapter 36 the following new item:

‘‘CHAPTER 37. Health related assessments.’’

16 (c) E FFECTIVE DATE.—The amendments made by

17 this section shall apply with respect to premiums received,

18 and expenses incurred, with respect to coverage for peri19 ods after December 31, 1995.

20 SEC. 7112. HIGH COST HEALTH PLAN ASSESSMENT.

21 (a) I N GENERAL.—Subchapter A of chapter 37 (re22 lating to assessments on insured and self-insured health

23 benefits), as added by section 7111, is amended by adding

24 at the end the following new part:
1146

•S 2357

1 ‘‘PART II—HIGH COST HEALTH PLANS

‘‘Subpart A. Community-rated plans.

‘‘Subpart B. Experience-rated plans.

‘‘Subpart C. Definitions and special rules.

2 ‘‘Subpart A—Community-Rated Plans

‘‘Sec. 4511. Community-rated plans.

‘‘Sec. 4512. Reference premiums.

3 ‘‘SEC. 4511. COMMUNITY-RATED PLANS.

4 ‘‘(a) IMPOSITION OF TAX.—

5 ‘‘(1) I N GENERAL.—If a community-rated cer6 tified standard health plan is a high cost plan for

7 any coverage period beginning after December 31,

8 1996, there is hereby imposed a tax equal to 25 per9 cent of the excess premiums of the plan for the pe10 riod.

11 ‘‘(2) LIABILITY FOR TAX.—The tax imposed by

12 this section shall be paid by the issuer of the high

13 cost plan.

14 ‘‘(b) H IGH COST PLAN.—For purposes of this sec15 tion—

16 ‘‘(1) I N GENERAL.—A plan is a high cost plan

17 for any coverage period if—

18 ‘‘(A) it is operating within a noncompeti19 tive community rating area, and

20 ‘‘(B) it has excess premiums for the pe21 riod.
1147

•S 2357

1 ‘‘(2) NONCOMPETITIVE COMMUNITY RATING

2 AREA.—A community rating area is a noncompeti3 tive community rating area for any coverage period

4 if, for the preceding coverage period—

5 ‘‘(A) the weighted average premium per

6 primary insured in community-rated certified

7 standard health plans in the area, exceeded

8 ‘‘(B) the weighted average reference pre9 mium for all such plans.

10 The determination under this paragraph shall be

11 made on the basis of enrollment during the annual

12 open enrollment period for such preceding coverage

13 period.

14 ‘‘(c) E XCESS PREMIUMS.—For purposes of this sec15 tion—

16 ‘‘(1) IN GENERAL.—The term ‘excess pre17 miums’ means, with respect to a certified standard

18 health plan, the excess (if any) of—

19 ‘‘(A) the premiums received under the plan

20 during the coverage period, over

21 ‘‘(B) the sum of the amounts determined

22 under paragraph (2) with respect to each class

23 of enrollment.

24 ‘‘(2) EXCESS PREMIUM BASELINE.—
1148

•S 2357

1 ‘‘(A) IN GENERAL.—The amount deter2 mined under this paragraph for any class of en3 rollment for any coverage period is an amount

4 equal to the product of the reference premium

5 for such class and the number of primary

6 insureds in such class for the period.

7 ‘‘(B) PROPORTIONATE REDUCTION OF

8 REFERENCE PREMIUM.—The reference pre9 mium applicable under subparagraph (A) to an

10 individual who was a primary insured for only

11 a portion of the coverage period shall be propor12 tionately reduced to reflect the period the indi13 vidual was not a primary insured.

14 ‘‘(3) DISREGARD OF AGE ADJUSTMENT.—The

15 amount determined under paragraph (1)(A) shall be

16 adjusted to reflect the premiums which would have

17 been received if no age adjustment were permitted

18 under section 1116 of the Health Security Act.

19 ‘‘(4) REDUCTION FOR TAXES.—The amount de20 termined under paragraph (1)(A) shall be reduced

21 by the amount of the tax imposed by this section in22 cluded in determining the amount of the premiums.

23 ‘‘(d) COVERAGE PERIOD.—For purposes of this sub24 part, the term ‘coverage period’ means, with respect to

25 any community rating area, the 12-month period for which
1149

•S 2357

1 an individual is covered under a standard health plan if

2 the individual enrolls in the plan during the annual open

3 enrollment period for the area under section 1503 of the

4 Health Security Act.

5 ‘‘(e) P LANS COVERING MORE THAN ONE AREA.—

6 For purposes of this subpart, if a community-rated plan

7 covers individuals residing in more than 1 community rat8 ing area, the plan shall be treated as a separate plan with

9 respect to each such area.

10 ‘‘SEC. 4512. REFERENCE PREMIUMS.

11 ‘‘(a) ESTABLISHMENT OF REFERENCE PREMIUMS.—

12 For purposes of this subpart—

13 ‘‘(1) IN GENERAL.—The Secretary shall, in con14 sultation with the Secretary of Health and Human

15 Services, establish for each coverage period a ref16 erence premium for each class of enrollment for

17 community-rated plans within a community rating

18 area. The Secretary shall publish such reference pre19 miums within a reasonable period of time before the

20 annual open enrollment period for the coverage pe21 riod.

22 ‘‘(2) METHOD OF DETERMINING REFERENCE

23 PREMIUM.—Each reference premium for a class of

24 enrollment for any coverage period shall be the ref-
1150

•S 2357

1 erence premium in effect for such class for the pre2 ceding coverage period—

3 ‘‘(A) increased by the target growth rate

4 for the coverage period as provided under sub5 section (b)(1), and

6 ‘‘(B) adjusted to reflect—

7 ‘‘(i) material changes in the charac8 teristics of community-rated individuals as

9 provided under subsection (b)(2), and

10 ‘‘(ii) changes in the actuarial value of

11 the standard benefits package as provided

12 under subsection (b)(3).

13 ‘‘(b) A NNUAL ADJUSTMENTS TO REFERENCE PRE14 MIUMS.—For purposes of subsection (a)(2)—

15 ‘‘(1) TARGET GROWTH RATE.—The target

16 growth rate for any coverage period is the percent17 age increase in the Consumer Price Index (as de18 fined in section 1(f)(4)) which the Secretary esti19 mates will occur during the coverage period—

20 ‘‘(A) increased by 2 percentage points (3

21 and 2.5 percentage points in the case of cov22 erage periods beginning in 1997 and 1998, re23 spectively), and
1151

•S 2357

1 ‘‘(B) increased or decreased by the amount

2 the estimate under this paragraph was incorrect

3 for the preceding coverage period.

4 ‘‘(2) MATERIAL CHANGES.—

5 ‘‘(A) IN GENERAL.—The Secretary may, in

6 consultation with the Secretary of Health and

7 Human Services and pursuant to such method

8 as the Secretary prescribes, adjust the reference

9 premium to reflect changes in the demographic

10 characteristics (including factors such as age,

11 gender, and socioeconomic status) and health

12 status of community-rated individuals in the

13 community rating area which are materially dif14 ferent when compared to the average changes in

15 such characteristics and status in the United

16 States.

17 ‘‘(B) E FFECT ON WEIGHTED AVERAGE.—

18 Any adjustments under subparagraph (A) for

19 any coverage period shall not result in a change

20 in the weighted average of such factors for all

21 community rating areas in the United States.

22 ‘‘(3) CHANGES IN BENEFIT PACKAGE.—If the

23 actuarial value of the standard benefits package is

24 changed pursuant to subtitle C of title I of the

25 Health Security Act, the Secretary shall adjust the
1152

•S 2357

1 reference premiums appropriately to reflect such

2 change.

3 ‘‘(c) C OMPUTATION OF REFERENCE PREMIUM FOR

4 1996.—

5 ‘‘(1) IN GENERAL.—The Secretary, in consulta6 tion with the Secretary of Health and Human Serv7 ices, shall compute the reference premium for each

8 class of enrollment for 1996. Each such reference

9 premium shall be the reference premium which is

10 adjusted under subsection (a)(2) in determining the

11 reference premium for coverage periods beginning in

12 1997.

13 ‘‘(2) METHOD OF DETERMINING REFERENCE

14 PREMIUMS.—Each reference premium under para15 graph (1) shall be equal to the national average per

16 capita current coverage health expenditures for 1994

17 (determined under subsection (d))—

18 ‘‘(A) increased as provided in paragraph

19 (3),

20 ‘‘(B) adjusted to reflect the differences in

21 the community rating area as provided in para22 graph (4), and

23 ‘‘(C) modified to reflect the class of enroll24 ment for which it is being determined in the
1153

•S 2357

1 same manner as premiums are modified under

2 section 1116 of the Health Security Act.

3 ‘‘(3) U PDATING FOR 1995 AND 1996.—The Sec4 retary shall update the national average per capita

5 current coverage health expenditures for 1994 to re6 flect the annual percentage increases for calendar

7 years 1995 and 1996 in private sector health care

8 spending for items and services included in the

9 standard benefits package. Such increase shall not

10 exceed the current projected increase in per capita

11 private health insurance premiums for such years

12 contained in the estimate of national health insur13 ance expenditures published by the Congressional

14 Budget Office in the fall of 1993.

15 ‘‘(4) AREA ADJUSTMENTS.—

16 ‘‘(A) IN GENERAL.—The Secretary shall,

17 using information of the type described in sub18 paragraph (B), establish an adjustment for

19 each community rating area which takes into

20 account the differences among community rat21 ing areas, including variations in health care ex22 penditures, in rates of uninsurance and

23 underinsurance, and in the proportion of ex24 penditures for services provided by academic

25 health centers.
1154

•S 2357

1 ‘‘(B) TYPE OF INFORMATION.—The type

2 of information described in this subparagraph

3 is—

4 ‘‘(i) information on variations in pre5 miums across States and across commu6 nity rating areas within a State (based on

7 surveys and other data);

8 ‘‘(ii) information on variations in per

9 capita health spending by State, as meas10 ured by the Secretary;

11 ‘‘(iii) information on variations across

12 States in per capita spending under the

13 medicare program and in such spending

14 among community rating areas within a

15 State under such program; and

16 ‘‘(iv) area rating factors commonly

17 used by actuaries.

18 ‘‘(C) C ONSULTATION PROCESS.—The Sec19 retary shall, in cooperation with the Secretary

20 of Health and Human Services, consult with

21 representatives of States and community rating

22 areas before establishing the adjustment under

23 this subsection.

24 ‘‘(d) D ETERMINATION OF NATIONAL AVERAGE PER

25 CAPITA CURRENT COVERAGE HEALTH EXPENDITURES.—
1155

•S 2357

1 ‘‘(1) IN GENERAL.—The national average per

2 capita current coverage health expenditures are

3 equal to—

4 ‘‘(A) the total amount of covered current

5 health care expenditures described in paragraph

6 (2), divided by

7 ‘‘(B) the estimated population in the Unit8 ed States of community-rated individuals as of

9 1994 (as determined under paragraph (4)) for

10 whom such expenditures were determined.

11 The population under subparagraph (B) shall not in12 clude SSI recipients.

13 ‘‘(2) COVERED CURRENT HEALTH CARE EX14 PENDITURES.—

15 ‘‘(A) I N GENERAL.—For purposes of para16 graph (1), the term ‘covered current health care

17 expenditures’ means the amount of total pay18 ments made in the United States during 1994

19 (other than amounts for cost sharing) for items

20 and services included in the standard benefits

21 package.

22 ‘‘(B) REMOVAL OF CERTAIN EXPENDI23 TURES NOT TO BE COVERED.—The amount de24 termined under subparagraph (A) shall be de-
1156

•S 2357

1 creased by the proportion of such amount that

2 is attributable to any of the following:

3 ‘‘(i) Medicare beneficiaries.

4 ‘‘(ii) SSI recipients.

5 ‘‘(iii) Expenditures which are paid for

6 through workers’ compensation or auto7 mobile or other liability insurance.

8 ‘‘(iv) Any other expenditures by par9 ties (including the Federal Government)

10 that the Secretary estimates will not be

11 payable by community-rated plans for cov12 erage under the standard benefits package.

13 ‘‘(C) A DDITION OF PROJECTED EXPENDI14 TURES FOR UNINSURED AND UNDERINSURED

15 INDIVIDUALS.—The amount determined under

16 subparagraph (A) (as adjusted under subpara17 graph (B)) shall be increased to take into ac18 count increased utilization of, and expenditures

19 for, items and services covered under the stand20 ard benefits package likely to occur, as a result

21 of coverage under a community-rated plan of

22 individuals who, as of 1994, were uninsured or

23 underinsured with respect to the standard bene24 fits package. In making such determination,

25 such expenditures shall be based on the esti-
1157

•S 2357

1 mated average cost for such services in 1994

2 (and not on private payment rates established

3 for such services). In making such determina4 tion, the estimated amount of uncompensated

5 care in 1994 shall be reduced to reflect the

6 number and characteristics of the currently un7 insured who will become insured by reason of

8 the Health Security Act and will not include ad9 justments to offset payments below costs by

10 public programs.

11 ‘‘(D) A DDITION OF HEALTH PLAN ADMIN12 ISTRATION COSTS.—The amount determined

13 under subparagraph (A) (as adjusted under the

14 preceding subparagraphs) shall be increased by

15 an estimated percentage (determined by the

16 Secretary, but no more than 15 percent) that

17 reflects the proportion of premiums that are re18 quired for administration and for State pre19 mium taxes (which taxes shall be limited to

20 such amounts in 1994 as are attributable to the

21 health benefits to be included in the standard

22 benefits package).

23 ‘‘(E) DECREASE FOR COST SHARING.—The

24 amount determined under subparagraph (A) (as

25 adjusted under the preceding subparagraphs)
1158

•S 2357

1 shall be decreased by a percentage that reflects

2 (i) the estimated average percentage of total

3 amounts payable for items and services covered

4 under the standard benefits package that will

5 be payments in the form of cost sharing under

6 a certified standard benefit plan with a high

7 cost-sharing option, and (ii) the percentage re8 duction in utilization estimated to result from

9 the application of such cost sharing.

10 ‘‘(3) SPECIAL RULES.—

11 ‘‘(A) BENEFITS USED.—The determina12 tions under this subsection shall be based on

13 the standard benefits package as in effect in

14 1996.

15 ‘‘(B) A SSUMING NO CHANGE IN EXPENDI16 TURE PATTERN.—The determination under

17 paragraph (2) shall be made without regard to

18 any change in the pattern of expenditures that

19 may result from the enrollment of SSI recipi20 ents in community-rated plans.

21 ‘‘(4) ELIGIBLE INDIVIDUALS.—The determina22 tion of individuals who are community-rated individ23 uals under this subsection shall be made as though

24 the Health Security Act was fully in effect in each

25 State as of 1994.
1159

•S 2357

1 ‘‘(e) TREATMENT OF CERTAIN STATES.—For pur2 poses of this section—

3 ‘‘(1) N ONPARTICIPATING STATES.—In the case

4 of a State that is not a participating State or other5 wise has not established community rating areas, the

6 entire State shall be treated as a single community

7 rating area.

8 ‘‘(2) CHANGES IN BOUNDARIES.—In the case of

9 a State that changes the boundaries of its commu10 nity rating areas, the Secretary shall provide a

11 method for computing reference premiums for each

12 area affected by such change in a manner that—

13 ‘‘(A) reflects the factors taken into account

14 in establishing the adjustment factors under

15 this section, and

16 ‘‘(B) results in the weighted average of the

17 newly computed reference premiums for the

18 areas affected by the change being equal to the

19 weighted average of the reference premiums for

20 the areas as previously established.

21 ‘‘Subpart B—Experience-Rated Plans

‘‘Sec. 4515. Experience-rated plans.

22 ‘‘SEC. 4515. EXPERIENCE-RATED PLANS.

23 ‘‘(a) IMPOSITION OF TAX.—
1160

•S 2357

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

2 year beginning after December 31, 1999, there is

3 hereby imposed a tax equal to 25 percent of the ex4 cess premium equivalents of an experience-rated

5 standard health plan.

6 ‘‘(2) LIABILITY FOR TAX.—The tax imposed by

7 this section shall be paid by the plan sponsor.

8 ‘‘(b) EXCESS PREMIUM EQUIVALENTS.—For pur9 poses of this section—

10 ‘‘(1) I N GENERAL.—The term ‘excess premium

11 equivalents’ means the excess (if any) of—

12 ‘‘(A) the premium equivalents of the plan

13 for the calendar year, over

14 ‘‘(B) the product of the reference premium

15 and the number of primary insureds covered by

16 the plan during the calendar year.

17 ‘‘(2) PROPORTIONATE REDUCTION IN REF18 ERENCE PREMIUM.—The reference premium applica19 ble under paragraph (1)(B) to a primary insured

20 covered under the plan for only a portion of the cal21 endar year shall be proportionately reduced to reflect

22 the period the individual was not a primary insured.

23 ‘‘(c) REFERENCE PREMIUM.—For purposes of this

24 section—
1161

•S 2357

1 ‘‘(1) I N GENERAL.—The reference premium for

2 any plan for any calendar year shall be the reference

3 premium in effect for the preceding calendar year—

4 ‘‘(A) increased by the target growth rate

5 for the calendar year as provided under para6 graph (2), and

7 ‘‘(B) adjusted to reflect—

8 ‘‘(i) material changes in the charac9 teristics of individuals covered by the plan

10 as provided under paragraph (3), and

11 ‘‘(ii) changes in the actuarial value of

12 the standard benefits package as provided

13 under paragraph (4).

14 ‘‘(2) TARGET GROWTH RATE.—The target

15 growth rate for any calendar year is the percentage

16 increase in the Consumer Price Index (as defined in

17 section 1(f)(4)) which the Secretary estimates will

18 occur during the calendar year—

19 ‘‘(A) increased by 2 percentage points, and

20 ‘‘(B) increased or decreased by the amount

21 the estimate under this paragraph was incorrect

22 for the preceding calendar year.

23 ‘‘(3) MATERIAL CHANGES.—The Secretary may,

24 in consultation with the Secretary of Health and

25 Human Services, establish such method as the Sec-
1162

•S 2357

1 retary determines appropriate for adjusting the ref2 erence premium for any plan to reflect changes in

3 the demographic characteristics (including factors

4 such as age, gender, socioeconomic status, and class

5 of enrollment) and health status of individuals in the

6 plan which are materially different when compared

7 to the average changes in such characteristics and

8 status in the United States.

9 ‘‘(4) CHANGES IN BENEFIT PACKAGE.—If the

10 actuarial value of the standard benefits package is

11 changed pursuant to subtitle C of title I of the

12 Health Security Act, the Secretary shall adjust the

13 reference premiums appropriately to reflect such

14 change.

15 ‘‘(d) REFERENCE PREMIUM FOR 1999.—

16 ‘‘(1) I N GENERAL.—The reference premium for

17 calendar year 1999 shall be equal to the average of

18 the per capita premium equivalents for calendar

19 years 1997, 1998, and 1999. Such reference pre20 mium shall be the reference premium which is ad21 justed under subsection (c) for determining the ref22 erence premium for calendar year 2000.

23 ‘‘(2) PER CAPITA PREMIUM EQUIVALENT.—

24 ‘‘(A) IN GENERAL.—The per capita pre25 mium equivalent for any calendar year shall be
1163

•S 2357

1 equal to the premium equivalent for providing

2 the standard benefits package to each primary

3 insured, adjusted as provided under subpara4 graph (B).

5 ‘‘(B) GROWTH FACTORS.—The amount de6 termined under subparagraph (A)—

7 ‘‘(i) for calendar year 1997 shall be

8 increased by the target growth rates for

9 calendar years 1998 and 1999, and

10 ‘‘(ii) for calendar year 1998 shall be

11 increased by the target growth rate for cal12 endar year 1999.

13 For purposes of this subparagraph, the target

14 growth rate shall be determined under sub15 section (c)(2), except that subsection (c)(2)(A)

16 shall be applied for calendar year 1998 by sub17 stituting ‘2.5’ for ‘2’.

18 ‘‘(e) PREMIUM EQUIVALENTS.—For purposes of this

19 section—

20 ‘‘(1) IN GENERAL.—The term ‘premium equiva21 lents’ means, with respect to any calendar year, the

22 sum of—

23 ‘‘(A) expenditures described in subsections

24 (d) and (e) of section 4502 with respect to cov25 erage under the plan, and
1164

•S 2357

1 ‘‘(B) in the case of any coverage provided

2 through an insurance policy, premiums paid for

3 such coverage.

4 ‘‘(2) EXCLUSION OF NONSTANDARD COV5 ERAGE.—The premium equivalents for any calendar

6 year shall not include amounts with respect to—

7 ‘‘(A) any coverage other than coverage for

8 the standard benefits package, or

9 ‘‘(B) any cost-sharing coverage.

10 ‘‘(3) R ISK ADJUSTMENT PAYMENTS.—The pre11 mium equivalents for any calendar year shall include

12 payments under any risk adjustment program estab13 lished under title I of the Health Security Act.

14 ‘‘(4) TAXES DISREGARDED.—The premium

15 equivalents for any calendar year shall not include

16 the amount of any tax imposed by this section.

17 ‘‘(f) SPECIAL RULES.—For purposes of this sec18 tion—

19 ‘‘(1) AGGREGATION RULES.—

20 ‘‘(A) PLANS.—All plans maintained by the

21 same plan sponsor shall be treated as 1 plan.

22 ‘‘(B) S PONSORS.—All plan sponsors which

23 are treated as a single employer under sub24 section (b) or (c) of section 414 shall be treated

25 as 1 plan sponsor.
1165

•S 2357

1 ‘‘(2) S TARTUP PLANS.—If a plan sponsor first

2 begins operation of an experience-rated plan after

3 1997, the reference premium for the first calendar

4 year for which the plan is in operation and to which

5 this section applies shall, under regulations pre6 scribed by the Secretary, be determined as if the ref7 erence premium for the preceding calendar year

8 were equal to the average of the reference premiums

9 for all community-rated plans for the preceding cal10 endar year in the areas in which the plan is operat11 ing, adjusted to reflect the factors described in sub12 section (c)(3) under the plan which materially differ

13 from such factors under the community-rated plans.

14 ‘‘(3) ACQUISITIONS AND DISPOSITIONS.—The

15 reference premium after an acquisition or disposition

16 described in section 41(f)(3) involving the plan spon17 sor of an experience-rated plan shall be made pursu18 ant to such regulations as the Secretary may pre19 scribe.

20 ‘‘(4) INFORMATION.—The Secretary may re21 quire a plan sponsor of an experience-rated plan to

22 adopt such conventions as are necessary in its ac23 counting practices and financial records to assure

24 that only costs related to the standard benefits pack-
1166

•S 2357

1 age are taken into account in determining the pre2 mium equivalents with respect to the plan.

3 ‘‘Subpart C—Definitions and Special Rules

‘‘Sec. 4518. Right of recovery.

‘‘Sec. 4519. Definitions and special rules.

4 ‘‘SEC. 4518. RIGHT OF RECOVERY FROM PROVIDERS.

5 ‘‘(a) GENERAL RULE.—Each issuer or plan sponsor

6 of a certified standard health plan shall be entitled to re7 cover from the providers of items or services covered by

8 the plan an amount equal to 50 percent of the amount

9 of any tax imposed by this part on the issuer or sponsor.

10 ‘‘(b) R ECOVERY.—For purposes of subsection (a)—

11 ‘‘(1) any amount recovered from any provider

12 shall not exceed the provider’s proportionate share of

13 items or services provided under the plan for the pe14 riod the tax was imposed, and

15 ‘‘(2) an issuer or plan sponsor may recover an

16 amount from a provider through a reduction in pay17 ments under the plan, direct payments from the pro18 vider, or such other manner as may be provided

19 under State law adopted pursuant to section 1510 of

20 the Health Security Act.

21 ‘‘(c) BALANCE BILLING.—For prohibition of balance

22 billing of any amount recovered from a provider under this

23 section, see section 1128(h)(3) of the Health Security Act.
1167

•S 2357

1 ‘‘SEC. 4519. DEFINITIONS AND SPECIAL RULES.

2 ‘‘(a) H EALTH PLANS.—For purposes of this part—

3 ‘‘(1) STANDARD HEALTH PLAN.—The term

4 ‘standard health plan’ has the meaning given such

5 term by section 1011(2)(B) of the Health Security

6 Act, except that such term does not include a plan

7 offering the alternative standard benefit package de8 scribed in 1201(b) of such Act.

9 ‘‘(2) STANDARD BENEFITS PACKAGE.—The

10 term ‘standard benefits package’ has the meaning

11 given such term by section 1201(a) of such Act.

12 ‘‘(b) COMMUNITY RATING AREAS AND PLANS.—For

13 purposes of this part—

14 ‘‘(1) COMMUNITY RATING AREA.—The term

15 ‘community rating area’ means an area established

16 under section 1502 of the Health Security Act.

17 ‘‘(2) COMMUNITY-RATED PLAN.—The term

18 ‘community-rated plan’ means a plan which is com19 munity-rated under section 1116 of such Act.

20 ‘‘(3) EXPERIENCE-RATED PLAN.—The term ‘ex21 perience-rated plan’ means any plan which is not a

22 community-rated plan.

23 ‘‘(c) PREMIUMS.—For purposes of this part—

24 ‘‘(1) IN GENERAL.—The term ‘premium’ has

25 the meaning given such term by section 4503(a)(3).
1168

•S 2357

1 ‘‘(2) ADMINISTRATIVE COSTS.—Amounts re2 ceived for health-related administrative services (as

3 defined in section 4501(d)) provided in connection

4 with any standard health plan taken into account

5 under section 4511(c)(3) shall be treated as pre6 miums.

7 ‘‘(3) RISK ADJUSTMENT PAYMENTS.—Payments

8 under a risk adjustment program established under

9 title I of the Health Security Act shall be dis10 regarded in computing the amount of any premiums.

11 ‘‘(d) INSURANCE POLICY AND PLAN SPONSOR.—For

12 purposes of this part—

13 ‘‘(1) I NSURANCE POLICY.—The term ‘insurance

14 policy’ has the meaning given such term by section

15 4503(a)(2).

16 ‘‘(2) P LAN SPONSOR.—The term ‘plan sponsor’

17 has the meaning given such term by section

18 4502(b)(2), except that in the case of a plan not de19 scribed in such section, such term means the person

20 or persons who establish or maintain the plan.

21 ‘‘(e) S PECIAL RULES.—For purposes of this part—

22 ‘‘(1) DEPOSITS.—The Secretary may require

23 deposits of any taxes imposed by subpart A or B at

24 such times as the Secretary determines appropriate.
1169

•S 2357

1 ‘‘(2) GOVERNMENTAL ENTITIES SUBJECT TO

2 TAX.—The rules of section 4503(b) shall apply for

3 purposes of this part.

4 ‘‘(3) N O COVER OVER TO POSSESSIONS.—Not5 withstanding any other provision of law, no amount

6 collected under this part shall be covered over to any

7 possession of the United States.

8 ‘‘(f) R EGULATIONS.—The Secretary shall issue such

9 regulations as are necessary to carry out the provisions

10 of this part, including regulations—

11 ‘‘(1) requiring the maintenance of such records,

12 and the reporting of such information as the Sec13 retary determines necessary, and

14 ‘‘(2) which provide that 2 or more plans of a

15 person or any related persons must be aggregated,

16 or a plan must be treated as 2 or more separate

17 plans.’’

18 (b) CONFORMING AMENDMENTS.—

19 (1) Subchapter A of chapter 37, as added by

20 section 7111, is amended by inserting after the sub21 chapter heading the following:

‘‘Part I. Premium and related assessments.

‘‘Part II. High cost health plans.
1170

•S 2357

1 ‘‘PART I—PREMIUM AND RELATED

2 ASSESSMENTS’’.

3 (2) Section 4503, as so added, is amended by

4 striking ‘‘subchapter’’ each place it appears and in5 serting ‘‘part’’.

6 (c) E FFECTIVE DATE.—The amendments made by

7 this section shall take effect on January 1, 1996.

8 PART 3—RECAPTURE OF CERTAIN HEALTH CARE

9 SUBSIDIES

10 SEC. 7121. RECAPTURE OF CERTAIN HEALTH CARE SUB11 SIDIES RECEIVED BY HIGH-INCOME INDIVID12 UALS.

13 (a) I N GENERAL.—Subchapter A of chapter 1 is

14 amended by adding at the end the following new part:

15 ‘‘PART VIII—CERTAIN HEALTH CARE SUBSIDIES

16 RECEIVED BY HIGH-INCOME INDIVIDUALS

‘‘Sec. 59B. Recapture of certain health care subsidies.

17 ‘‘SEC. 59B. RECAPTURE OF CERTAIN HEALTH CARE SUB18 SIDIES.

19 ‘‘(a) I MPOSITION OF RECAPTURE AMOUNT.—In the

20 case of an individual, if the modified adjusted gross in21 come of the taxpayer for the taxable year exceeds the

22 threshold amount, such taxpayer shall pay (in addition to

23 any other amount imposed by this subtitle) a recapture

24 amount for such taxable year equal to the aggregate of

25 the Medicare part B recapture amounts (if any) for
1171

•S 2357

1 months during such year that a premium is paid under

2 part B of title XVIII of the Social Security Act for the

3 coverage of the individual under such part.

4 ‘‘(b) MEDICARE PART B P REMIUM RECAPTURE

5 AMOUNT FOR MONTH.—For purposes of this section, the

6 Medicare part B premium recapture amount for any

7 month is the amount equal to the excess of—

8 ‘‘(1) 150 percent of the monthly actuarial rate

9 for enrollees age 65 and over determined for that

10 calendar year under section 1839(b) of the Social

11 Security Act, over

12 ‘‘(2) the total monthly premium under section

13 1839 of the Social Security Act (determined without

14 regard to subsections (b) and (f) of section 1839 of

15 such Act).

16 ‘‘(c) PHASE-IN OF RECAPTURE AMOUNT.—

17 ‘‘(1) IN GENERAL.—If the modified adjusted

18 gross income of the taxpayer for any taxable year

19 exceeds the threshold amount by less than $15,000,

20 the recapture amount imposed by this section for

21 such taxable year shall be an amount which bears

22 the same ratio to the recapture amount which would

23 (but for this subsection) be imposed by this section

24 for such taxable year as such excess bears to

25 $15,000.
1172

•S 2357

1 ‘‘(2) J OINT RETURNS.—If a recapture amount

2 is determined separately for each spouse filing a

3 joint return, paragraph (1) shall be applied by sub4 stituting ‘$30,000’ for ‘$15,000’ each place it ap5 pears.

6 ‘‘(d) O THER DEFINITIONS AND SPECIAL RULES.—

7 For purposes of this section—

8 ‘‘(1) T HRESHOLD AMOUNT.—The term ‘thresh9 old amount’ means—

10 ‘‘(A) except as otherwise provided in this

11 paragraph, $90,000,

12 ‘‘(B) $115,000 in the case of a joint re13 turn, and

14 ‘‘(C) zero in the case of a taxpayer who—

15 ‘‘(i) is married (as determined under

16 section 7703) but does not file a joint re17 turn for such year, and

18 ‘‘(ii) does not live apart from his

19 spouse at all times during the taxable year.

20 ‘‘(2) MODIFIED ADJUSTED GROSS INCOME.—

21 The term ‘modified adjusted gross income’ means

22 adjusted gross income—

23 ‘‘(A) determined without regard to sections

24 135, 911, 931, and 933, and
1173

•S 2357

1 ‘‘(B) increased by the amount of interest

2 received or accrued by the taxpayer during the

3 taxable year which is exempt from tax.

4 ‘‘(3) J OINT RETURNS.—In the case of a joint

5 return—

6 ‘‘(A) the recapture amount under sub7 section (a) shall be the sum of the recapture

8 amounts determined separately for each spouse,

9 and

10 ‘‘(B) subsections (a) and (c) shall be ap11 plied by taking into account the combined modi12 fied adjusted gross income of the spouses.

13 ‘‘(4) COORDINATION WITH OTHER PROVI14 SIONS.—

15 ‘‘(A) TREATED AS TAX FOR SUBTITLE F.—

16 For purposes of subtitle F, the recapture

17 amount imposed by this section shall be treated

18 as if it were a tax imposed by section 1.

19 ‘‘(B) N OT TREATED AS TAX FOR CERTAIN

20 PURPOSES.—The recapture amount imposed by

21 this section shall not be treated as a tax im22 posed by this chapter for purposes of determin23 ing—

24 ‘‘(i) the amount of any credit allow25 able under this chapter, or
1174

•S 2357

1 ‘‘(ii) the amount of the minimum tax

2 under section 55.

3 ‘‘(C) TREATED AS PAYMENT FOR MEDICAL

4 INSURANCE.—The recapture amount imposed

5 by this section shall be treated as an amount

6 paid for insurance covering medical care, within

7 the meaning of section 213(d).

8 ‘‘(5) TAXES IMPOSED BY POSSESSIONS.—The

9 tax imposed by this section shall not apply to a bona

10 fide resident of a possession with respect to which

11 the requirements of section 1509 of the Health Se12 curity Act are met.’’

13 (b) TRANSFERS TO FEDERAL SUPPLEMENTARY

14 MEDICAL INSURANCE TRUST FUND.—

15 (1) IN GENERAL.—There are hereby appro16 priated to the Federal Supplementary Medical Insur17 ance Trust Fund amounts equivalent to the aggre18 gate increase in liabilities under chapter 1 of the In19 ternal Revenue Code of 1986 which is attributable

20 to the application of section 59B(a) of such Code, as

21 added by this section.

22 (2) TRANSFERS.—The amounts appropriated

23 by paragraph (1) to the Federal Supplementary

24 Medical Insurance Trust Fund shall be transferred

25 from time to time (but not less frequently than
1175

•S 2357

1 quarterly) from the general fund of the Treasury on

2 the basis of estimates made by the Secretary of the

3 Treasury of the amounts referred to in paragraph

4 (1). Any quarterly payment shall be made on the

5 first day of such quarter and shall take into account

6 the recapture amounts referred to in such section

7 59B(a) for such quarter. Proper adjustments shall

8 be made in the amounts subsequently transferred to

9 the extent prior estimates were in excess of or less

10 than the amounts required to be transferred.

11 (c) REPORTING REQUIREMENTS.—

12 (1) Paragraph (1) of section 6050F(a) (relating

13 to returns relating to social security benefits) is

14 amended by striking ‘‘and’’ at the end of subpara15 graph (B) and by inserting after subparagraph (C)

16 the following new subparagraph:

17 ‘‘(D) the number of months during the cal18 endar year for which a premium was paid under

19 part B of title XVIII of the Social Security Act

20 for the coverage of such individual under such

21 part, and’’.

22 (2) Paragraph (2) of section 6050F(b) is

23 amended to read as follows:

24 ‘‘(2) the information required to be shown on

25 such return with respect to such individual.’’
1176

•S 2357

1 (3) Subparagraph (A) of section 6050F(c)(1) is

2 amended by inserting before the comma ‘‘and in the

3 case of the information specified in subsection

4 (a)(1)(D)’’.

5 (4) The heading for section 6050F is amended

6 by inserting ‘‘AND MEDICARE PART B COV7 ERAGE’’ before the period.

8 (5) The item relating to section 6050F in the

9 table of sections for subpart B of part III of sub10 chapter A of chapter 61 is amended by inserting

11 ‘‘and Medicare part B coverage’’ before the period.

12 (d) WAIVER OF CERTAIN ESTIMATED TAX PEN13 ALTIES.—No addition to tax shall be imposed under sec14 tion 6654 of the Internal Revenue Code of 1986 (relating

15 to failure to pay estimated income tax) for any period be16 fore April 16, 1997, with respect to any underpayment

17 to the extent that such underpayment resulted from sec18 tion 59B(a) of the Internal Revenue Code of 1986, as

19 added by this section.

20 (e) C LERICAL AMENDMENT.—The table of parts for

21 subchapter A of chapter 1 is amended by adding at the

22 end thereof the following new item:

‘‘Part VIII. Certain health care subsidies received by high-income

individuals.’’
1177

•S 2357

1 (f) E FFECTIVE DATE.—The amendments made by

2 this section shall apply to taxable years beginning after

3 December 31, 1995.

4 PART 4—OTHER PROVISIONS

5 SEC. 7131. INCREASE IN TAX ON CERTAIN HOLLOW POINT

6 AND LARGE CALIBER HANDGUN AMMUNI7 TION.

8 (a) INCREASE IN MANUFACTURERS TAX.—

9 (1) IN GENERAL.—Section 4181 (relating to

10 imposition of tax on firearms) is amended—

11 (A) by striking ‘‘Shells, and cartridges’’

12 and inserting ‘‘Shells and cartridges not taxable

13 at 10,000 percent’’, and

14 (B) by adding at the end the following:

15 ‘‘ARTICLES TAXABLE AT 10,000 PERCENT.—

16 ‘‘Any jacketed, hollow point projectile

17 which may be used in a handgun and the jacket

18 of which is designed to produce, upon impact,

19 sharp-tipped, barb-like projections that extend

20 beyond the diameter of the unfired projectile.

21 ‘‘Any cartridge with a projectile measuring

22 .500 inch or greater in diameter which may be

23 used in a handgun.’’

24 (2) A DDITIONAL TAXES ADDED TO THE GEN25 ERAL FUND.—Section 3(a) of the Act of September
1178

•S 2357

1 2, 1937 (16 U.S.C. 669b(a)), commonly referred to

2 as the ‘‘Pittman-Robertson Wildlife Restoration

3 Act’’, is amended by adding at the end the following

4 new sentence: ‘‘There shall not be covered into the

5 fund the portion of the tax imposed by such section

6 4181 that is attributable to any increase in amounts

7 received in the Treasury under such section by rea8 son of the amendments made by section 7131(a)(1)

9 of the Health Security Act, as estimated by the Sec10 retary.’’

11 (b) EFFECTIVE DATES.—

12 (1) I N GENERAL.—The amendments made by

13 this section shall apply to sales after December 31,

14 1994.

15 (2) FLOOR STOCKS TAX.—

16 (A) IN GENERAL.—In the case of any arti17 cle held on January 1, 1995, which is taxable

18 under section 4181 of the Internal Revenue

19 Code of 1986 on and after such date at a tax

20 rate of 10,000 percent, there is hereby imposed

21 a tax equal to the excess of—

22 (i) the tax which would be imposed

23 under section 4181 of such Code if the ar24 ticle were sold on such date, over
1179

•S 2357

1 (ii) the prior tax (if any) imposed

2 under such section on such article.

3 (B) CREDIT.—Each person shall be al4 lowed as a credit against the taxes imposed by

5 subparagraph (A) an amount equal to the taxes

6 imposed on articles which such person destroys

7 (in such manner as the Secretary may pre8 scribe) after December 31, 1994, and before

9 April 1, 1995.

10 (C) PAYMENT.—The taxes imposed by sub11 paragraph (A) on any article shall be paid by

12 the person holding the article on January 1,

13 1995. Such taxes shall be paid before April 1,

14 1995, in such manner as the Secretary of the

15 Treasury may prescribe.

16 (D) ARTICLES IN FOREIGN TRADE

17 ZONES.—Notwithstanding the Act of June 18,

18 1934 (48 Stat. 998, 19 U.S.C. 81a) and any

19 other provision of law, any article which is lo20 cated in a foreign trade zone on January 1,

21 1995, shall be subject to the tax imposed by

22 subparagraph (A) if—

23 (i) internal revenue taxes have been

24 determined, or customs duties liquidated,

25 with respect to such article before such
1180

•S 2357

1 date pursuant to a request made under the

2 1st proviso of section 3(a) of such Act, or

3 (ii) such article is held on such date

4 under the supervision of a customs officer

5 pursuant to the 2d proviso of such section

6 3(a).

7 (E) C ONTROLLED GROUPS.—Rules similar

8 to the rules of section 5061(e)(3) of such Code

9 shall apply for purposes of this paragraph.

10 (F) OTHER LAWS APPLICABLE.—All provi11 sions of law, including penalties, applicable with

12 respect to the taxes imposed by section 4181 of

13 such Code shall, insofar as applicable and not

14 inconsistent with the provisions of this sub15 section, apply to the floor stocks taxes imposed

16 by subparagraph (A), to the same extent as if

17 such taxes were imposed by such section 4181.

18 The Secretary may treat any person who bore

19 the ultimate burden of the tax imposed by sub20 paragraph (A) as the person to whom a credit

21 or refund under such provisions may be allowed

22 or made.
1181

•S 2357

1 SEC. 7132. MODIFICATION TO SELF-EMPLOYMENT TAX

2 TREATMENT OF CERTAIN S CORPORATION

3 SHAREHOLDERS AND PARTNERS.

4 (a) TREATMENT OF CERTAIN S CORPORATION

5 SHAREHOLDERS.—

6 (1) AMENDMENT TO INTERNAL REVENUE

7 CODE.—Section 1402 (relating to definitions) is

8 amended by adding at the end the following new

9 subsection:

10 ‘‘(k) TREATMENT OF CERTAIN S C ORPORATION

11 SHAREHOLDERS.—

12 ‘‘(1) I N GENERAL.—In the case of any individ13 ual—

14 ‘‘(A) who is a 2-percent shareholder (as

15 defined in section 1372(b)) of an S corporation

16 for any taxable year of such corporation, and

17 ‘‘(B) who provides significant services to or

18 on behalf of such S corporation during such

19 taxable year,

20 such shareholder’s net earnings from self-employ21 ment shall include 80 percent of such shareholder’s

22 pro rata share (as determined under section

23 1366(a)) of the taxable income or loss of such cor24 poration for such taxable year from service-related

25 businesses carried on by such corporation, and to

26 the extent provided in regulations, for any other tax-
1182

•S 2357

1 able year to the extent such income or loss is attrib2 utable to such services.

3 ‘‘(2) C ERTAIN EXCEPTIONS TO APPLY.—In de4 termining the amount to be taken into account

5 under paragraph (1), the exceptions provided in sub6 section (a) shall apply, except that, in the case of

7 the exceptions provided in subsection (a)(5), rules

8 similar to the rules of subparagraph (B) thereof

9 shall apply to shareholders in S corporations.

10 ‘‘(3) SERVICE-RELATED BUSINESS.—For pur11 poses of this subsection, the term ‘service-related

12 business’ means—

13 ‘‘(A) any trade or business involving the

14 performance of services in the fields of health

15 (other than with respect to inpatient personal

16 care facilities), law, engineering, architecture,

17 accounting, actuarial services, performing arts,

18 consulting, athletics, or financial services (other

19 than lending or brokerage services), or

20 ‘‘(B) any other trade or business with re21 spect to which the Secretary determines that

22 capital is an insignificant income-producing fac23 tor.

24 ‘‘(4) APPLICATION OF DEFERRED COMPENSA25 TION RULES.—For purposes of subchapter D of
1183

•S 2357

1 chapter 1 (and any other provision of this title relat2 ing thereto), in the case of an individual who is

3 treated as having net earnings from self-employment

4 by reason of paragraph (1)—

5 ‘‘(A) such individual shall not be treated as

6 a self-employed individual (within the meaning

7 of section 401(c)(1)) with respect to services

8 performed for the S corporation, and

9 ‘‘(B) such net earnings shall be treated as

10 compensation received by the individual as an

11 employee of the S corporation.’’

12 (2) A MENDMENT TO SOCIAL SECURITY ACT.—

13 Section 211 of the Social Security Act is amended

14 by adding at the end the following new subsection:

15 ‘‘Treatment of Certain S Corporation Shareholders

16 ‘‘(k)(1) In the case of any individual—

17 ‘‘(A) who is a 2-percent shareholder (as defined

18 in section 1372(b) of the Internal Revenue Code of

19 1986) of an S corporation for any taxable year of

20 such corporation, and

21 ‘‘(B) who provides significant services to or on

22 behalf of such S corporation during such taxable

23 year,

24 such shareholder’s net earnings from self-employment

25 shall include 80 percent of such shareholder’s pro rata
1184

•S 2357

1 share (as determined under section 1366(a) of such Code)

2 of the taxable income or loss of such corporation for such

3 taxable year from service-related businesses (as defined in

4 section 1402(k)(3) of such Code) carried on by such cor5 poration, and to the extent provided in regulations, for any

6 other taxable year to the extent such income or loss is

7 attributable to such services.

8 ‘‘(2) In determining the amount to be taken into ac9 count under paragraph (1), the exceptions provided in

10 subsection (a) shall apply, except that, in the case of the

11 exceptions provided in subsection (a)(5), rules similar to

12 the rules of subparagraph (B) thereof shall apply to share13 holders in S corporations.’’

14 (b) TREATMENT OF CERTAIN LIMITED PARTNERS.—

15 (1) A MENDMENT OF THE INTERNAL REVENUE

16 CODE.—Paragraph (13) of section 1402(a) is

17 amended to read as follows:

18 ‘‘(13) there shall be excluded the distributive

19 share of any item of income or loss of a limited part20 ner, as such, other than—

21 ‘‘(A) guaranteed payments described in

22 section 707(c) to that partner for services actu23 ally rendered to or on behalf of the partnership

24 to the extent that those payments are estab-
1185

•S 2357

1 lished to be in the nature of remuneration for

2 those services, or

3 ‘‘(B) in the case of a limited partner who

4 provides significant services to or on behalf of

5 the partnership for any taxable year of the

6 partnership, 80 percent of the limited partner’s

7 distributive share (determined without regard to

8 payments described in subparagraph (A)) of the

9 taxable income or loss of such partnership—

10 ‘‘(i) for such taxable year from serv11 ice-related businesses (as defined in sub12 section (k)(3)) of such partnership, and

13 ‘‘(ii) to the extent provided in regula14 tions, for any other taxable year to the ex15 tent attributable to such services;’’.

16 (2) AMENDMENT OF THE SOCIAL SECURITY

17 ACT.—Paragraph (12) of section 211(a) of the So18 cial Security Act is amended to read as follows:

19 ‘‘(12) there shall be excluded the distributive

20 share of any item of income or loss of a limited part21 ner, as such, other than—

22 ‘‘(A) guaranteed payments described in

23 section 707(c) of the Internal Revenue Code of

24 1986 to that partner for services actually ren25 dered to or on behalf of the partnership to the
1186

•S 2357

1 extent that those payments are established to

2 be in the nature of remuneration for those serv3 ices, or

4 ‘‘(B) in the case of a limited partner who

5 provides significant services to or on behalf of

6 the partnership for any taxable year of the

7 partnership, 80 percent of the limited partner’s

8 distributive share (determined without regard to

9 payments described in subparagraph (A)) of the

10 taxable income or loss of such partnership—

11 ‘‘(i) for such taxable year from serv12 ice-related businesses (as defined in section

13 1402(k)(3) of such Code) of such partner14 ship, and

15 ‘‘(ii) to the extent provided in regula16 tions prescribed by the Secretary of the

17 Treasury, for any other taxable year to the

18 extent attributable to such services;’’.

19 (c) I NVENTORY INCOME.—Section 1402 (relating to

20 definitions), as amended by subsection (a), is amended by

21 adding at the end the following new subsection:

22 ‘‘(l) INVENTORY INCOME.—

23 ‘‘(1) IN GENERAL.—The net earnings from self24 employment of any taxpayer for any taxable year

25 under subsection (a) (determined without regard to
1187

•S 2357

1 this subsection) shall be reduced by 40 percent of

2 the lesser of—

3 ‘‘(A) the taxpayer’s allocable share of net

4 inventory income, or

5 ‘‘(B) the amount of such net earnings in

6 excess of the applicable amount for the taxable

7 year.

8 ‘‘(2) NET INVENTORY INCOME.—

9 ‘‘(A) I N GENERAL.—For purposes of para10 graph (1), the term ‘net inventory income’

11 means net income from the sale of property de12 scribed in section 1221(1).

13 ‘‘(B) D EALERS IN SECURITIES.—For pur14 poses of subparagraph (A)—

15 ‘‘(i) any security described in section

16 475(c)(2) (without regard to the last sen17 tence thereof) which is held by a person as

18 a dealer in securities (as defined in section

19 475(c)(1)) shall be treated as property de20 scribed in section 1221(1), and

21 ‘‘(ii) net income from any such secu22 rity shall be taken into account to the ex23 tent otherwise taken into account in com24 puting net earnings from self-employment.
1188

•S 2357

1 ‘‘(3) APPLICABLE AMOUNT.—For purposes of

2 paragraph (1), the term ‘applicable amount’ means

3 the excess of—

4 ‘‘(A) $135,000, adjusted, in the case of

5 any taxable year beginning in any calendar year

6 after 1996, in the same manner as is used in

7 adjusting the contribution and benefit base for

8 the calendar year under section 230(b) of the

9 Social Security Act, over

10 ‘‘(B) the amount of wages paid to the indi11 vidual during the taxable year.’’

12 (d) E FFECTIVE DATE.—The amendments made by

13 this section shall apply to taxable years of individuals be14 ginning after December 31, 1995, and to taxable years

15 of S corporations and partnerships ending with or within

16 such taxable years of individuals.

17 SEC. 7133. EXTENDING MEDICARE COVERAGE OF, AND AP18 PLICATION OF HOSPITAL INSURANCE TAX

19 TO, ALL STATE AND LOCAL GOVERNMENT

20 EMPLOYEES.

21 (a) IN GENERAL.—

22 (1) APPLICATION OF HOSPITAL INSURANCE

23 TAX.—Section 3121(u)(2) is amended by striking

24 subparagraphs (C) and (D).
1189

•S 2357

1 (2) COVERAGE UNDER MEDICARE.—Section

2 210(p) of the Social Security Act (42 U.S.C. 410(p))

3 is amended by striking paragraphs (3) and (4).

4 (3) EFFECTIVE DATE.—The amendments made

5 by this subsection shall apply to services performed

6 after September 30, 1995.

7 (b) TRANSITION IN BENEFITS FOR STATE AND

8 LOCAL GOVERNMENT EMPLOYEES AND FORMER EM9 PLOYEES.—

10 (1) IN GENERAL.—

11 (A) EMPLOYEES NEWLY SUBJECT TO

12 TAX.—For purposes of sections 226, 226A, and

13 1811 of the Social Security Act, in the case of

14 any individual who performs services during the

15 calendar quarter beginning October 1, 1995,

16 the wages for which are subject to the tax im17 posed by section 3101(b) of the Internal Reve18 nue Code of 1986 only because of the amend19 ment made by subsection (a), the individual’s

20 medicare qualified State or local government

21 employment (as defined in subparagraph (B))

22 performed before October 1, 1995, shall be con23 sidered to be ‘‘employment’’ (as defined for pur24 poses of title II of such Act), but only for pur25 poses of providing the individual (or another
1190

•S 2357

1 person) with entitlement to hospital insurance

2 benefits under part A of title XVIII of such Act

3 for months beginning with October 1995.

4 (B) MEDICARE QUALIFIED STATE OR

5 LOCAL GOVERNMENT EMPLOYMENT DE6 FINED.—In this paragraph, the term ‘‘medicare

7 qualified State or local government employ8 ment’’ means medicare qualified government

9 employment described in section 210(p)(1)(B)

10 of the Social Security Act (determined without

11 regard to section 210(p)(3) of such Act, as in

12 effect before its repeal under subsection (a)(2)).

13 (2) AUTHORIZATION OF APPROPRIATIONS.—

14 There are authorized to be appropriated to the Fed15 eral Hospital Insurance Trust Fund from time to

16 time such sums as the Secretary of Health and

17 Human Services deems necessary for any fiscal year

18 on account of—

19 (A) payments made or to be made during

20 such fiscal year from such Trust Fund with re21 spect to individuals who are entitled to benefits

22 under title XVIII of the Social Security Act

23 solely by reason of paragraph (1),

24 (B) the additional administrative expenses

25 resulting or expected to result therefrom, and
1191

•S 2357

1 (C) any loss in interest to such Trust

2 Fund resulting from the payment of those

3 amounts, in order to place such Trust Fund in

4 the same position at the end of such fiscal year

5 as it would have been in if this subsection had

6 not been enacted.

7 (3) I NFORMATION TO INDIVIDUALS WHO ARE

8 PROSPECTIVE MEDICARE BENEFICIARIES BASED ON

9 STATE AND LOCAL GOVERNMENT EMPLOYMENT.—

10 Section 226(g) of the Social Security Act (42 U.S.C.

11 426(g)) is amended—

12 (A) by redesignating paragraphs (1)

13 through (3) as subparagraphs (A) through (C),

14 respectively,

15 (B) by inserting ‘‘(1)’’ after ‘‘(g)’’, and

16 (C) by adding at the end the following new

17 paragraph:

18 ‘‘(2) The Secretary, in consultation with State

19 and local governments, shall provide procedures de20 signed to assure that individuals who perform medi21 care qualified government employment by virtue of

22 service described in section 210(a)(7) are fully in23 formed with respect to (A) their eligibility or poten24 tial eligibility for hospital insurance benefits (based

25 on such employment) under part A of title XVIII,
1192

•S 2357

1 (B) the requirements for, and conditions of, such eli2 gibility, and (C) the necessity of timely application

3 as a condition of becoming entitled under subsection

4 (b)(2)(C), giving particular attention to individuals

5 who apply for an annuity or retirement benefit and

6 whose eligibility for such annuity or retirement bene7 fit is based on a disability.’’

8 (c) TECHNICAL AMENDMENTS.—

9 (1) Subparagraph (A) of section 3121(u)(2) is

10 amended by striking ‘‘subparagraphs (B) and (C),’’

11 and inserting ‘‘subparagraph (B),’’.

12 (2) Subparagraph (B) of section 210(p)(1) of

13 the Social Security Act (42 U.S.C. 410(p)(1)) is

14 amended by striking ‘‘paragraphs (2) and (3).’’ and

15 inserting ‘‘paragraph (2).’’

16 (3) Section 218 of the Social Security Act (42

17 U.S.C. 418) is amended by striking subsection (n).

18 (4) The amendments made by this subsection

19 shall apply after September 30, 1995.
1193

•S 2357

1 Subtitle B—Tax Treatment of

2 Employer-Provided Health Care

3 PART 1—GENERAL PROVISIONS

4 SEC. 7201. LIMITATION ON EXCLUSION FOR EMPLOYER5 PROVIDED HEALTH BENEFITS.

6 (a) G ENERAL RULE.—Section 106 (relating to con7 tributions by employer to accident and health plans) is

8 amended to read as follows:

9 ‘‘SEC. 106. CONTRIBUTIONS BY EMPLOYER TO ACCIDENT

10 AND HEALTH PLANS.

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

12 in this section, gross income of an employee does not in13 clude employer-provided coverage under an accident or

14 health plan.

15 ‘‘(b) I NCLUSION OF CERTAIN BENEFITS NOT PART

16 OF PERMITTED COVERAGE.—

17 ‘‘(1) IN GENERAL.—Effective on and after Jan18 uary 1, 2004, gross income of an employee shall in19 clude employer-provided coverage under any accident

20 or health plan which is not permitted coverage.

21 ‘‘(2) P ERMITTED COVERAGE.—For purposes of

22 this subsection, the term ‘permitted coverage’ means

23 any—
1194

•S 2357

1 ‘‘(A) coverage under a certified standard

2 health plan (as defined in section 1011(2)(A) of

3 the Health Security Act),

4 ‘‘(B) coverage under a certified supple5 mental health benefit plan (as defined in section

6 1011(3)(A) of the Health Security Act) which

7 consists of the payment of cost sharing

8 amounts under a certified standard health plan

9 (as so defined) providing the standard benefits

10 package described in part 1 of subtitle C of title

11 I of such Act,

12 ‘‘(C) coverage under a qualified long-term

13 care insurance policy (as defined in section

14 7702B(b)),

15 ‘‘(D) coverage providing wages or pay16 ments in lieu of wages for any period during

17 which the employee is absent from work on ac18 count of sickness or injury,

19 ‘‘(E) coverage only for accidental death or

20 dismemberment,

21 ‘‘(F) coverage under a medicare supple22 mental policy (as defined in section 1882(g)(1)

23 of the Social Security Act),
1195

•S 2357

1 ‘‘(G) coverage under an equivalent health

2 care program (as defined in section 1013(3) of

3 the Health Security Act), and

4 ‘‘(H) other coverage to the extent that the

5 Secretary determines that the continuation of

6 an exclusion for such coverage is not inconsist7 ent with the purposes of this subsection.

8 ‘‘(3) S PECIAL RULES FOR FLEXIBLE SPENDING

9 ARRANGEMENTS.—

10 ‘‘(A) IN GENERAL.—To the extent that

11 any employer-provided coverage is provided

12 through a flexible spending or similar arrange13 ment, paragraph (1) shall be applied by sub14 stituting ‘January 1, 1996,’ for ‘January 1,

15 2004’.

16 ‘‘(B) FLEXIBLE SPENDING ARRANGE17 MENT.—For purposes of this paragraph, a

18 flexible spending arrangement is a benefit pro19 gram which provides employees with coverage

20 under which—

21 ‘‘(i) specified incurred expenses may

22 be reimbursed (subject to reimbursement

23 maximums and other reasonable condi24 tions), and
1196

•S 2357

1 ‘‘(ii) the maximum amount of reim2 bursement which is reasonably available to

3 a participant for such coverage is less than

4 500 percent of the value of such coverage.

5 In the case of an insured plan, the maximum

6 amount reasonably available shall be deter7 mined on the basis of the underlying coverage.’’

8 (b) EMPLOYMENT TAX TREATMENT.—

9 (1) SOCIAL SECURITY TAX.—

10 (A) Subsection (a) of section 3121 is

11 amended by inserting after paragraph (21) the

12 following new sentence:

13 ‘‘Nothing in paragraph (2) shall exclude from the term

14 ‘wages’ any amount which is required to be included in

15 gross income under section 106(b).’’

16 (B) Subsection (a) of section 209 of the

17 Social Security Act is amended by inserting

18 after paragraph (21) the following new sen19 tence:

20 ‘‘Nothing in paragraph (2) shall exclude from the term

21 ‘wages’ any amount which is required to be included in

22 gross income under section 106(b) of the Internal Revenue

23 Code of 1986.’’

24 (2) R AILROAD RETIREMENT TAX.—Paragraph

25 (1) of section 3231(e) is amended by adding at the
1197

•S 2357

1 end the following new sentence: ‘‘Nothing in clause

2 (i) of the second sentence of this paragraph shall ex3 clude from the term ‘compensation’ any amount

4 which is required to be included in gross income

5 under section 106(b).’’

6 (3) U NEMPLOYMENT TAX.—Subsection (b) of

7 section 3306 is amended by inserting after para8 graph (16) the following new sentence:

9 ‘‘Nothing in paragraph (2) shall exclude from the term

10 ‘wages’ any amount which is required to be included in

11 gross income under section 106(b).’’

12 (4) WAGE WITHHOLDING.—Subsection (a) of

13 section 3401 is amended by adding at the end the

14 following new sentence:

15 ‘‘Nothing in the preceding provisions of this subsection

16 shall exclude from the term ‘wages’ any amount which is

17 required to be included in gross income under section

18 106(b).’’

19 (c) EFFECTIVE DATES.—

20 (1) I N GENERAL.—The amendments made by

21 this section shall take effect on January 1, 1996.

22 (2) B ENEFITS PROVIDED PURSUANT TO COL23 LECTIVE BARGAINING AGREEMENTS.—In the case of

24 a flexible spending arrangement maintained pursu25 ant to 1 or more collective bargaining agreements
1198

•S 2357

1 between employee representatives and 1 or more em2 ployers which was ratified before June 30, 1994, the

3 amendments referred to in paragraph (1) shall not

4 apply to benefits pursuant to any such agreement

5 before the later of—

6 (A) January 1, 1996, or

7 (B) the earlier of—

8 (i) the date on which the last of such

9 agreements terminate (determined without

10 regard to any extension thereof on or after

11 June 30, 1994), or

12 (ii) January 1, 1998.

13 SEC. 7202. HEALTH BENEFITS MAY NOT BE PROVIDED

14 UNDER CAFETERIA PLANS.

15 (a) G ENERAL RULE.—Subsection (f) of section 125

16 (defining qualified benefits) is amended by adding at the

17 end the following new sentence: ‘‘Such term shall not in18 clude any benefits or coverage under an accident or health

19 plan.’’

20 (b) C ONFORMING AMENDMENT.—Subsection (g) of

21 section 125 is amended by striking paragraph (2) and re22 designating paragraphs (3) and (4) as paragraphs (2) and

23 (3), respectively.

24 (c) EFFECTIVE DATES.—
1199

•S 2357

1 (1) I N GENERAL.—The amendments made by

2 this section shall take effect on January 1, 1997.

3 (2) B ENEFITS PROVIDED PURSUANT TO COL4 LECTIVE BARGAINING AGREEMENTS.—In the case of

5 a cafeteria plan maintained pursuant to 1 or more

6 collective bargaining agreements between employee

7 representatives and 1 or more employers which was

8 ratified before June 30, 1994, the amendments re9 ferred to in paragraph (1) shall not apply to benefits

10 pursuant to any such agreement before the later

11 of—

12 (A) January 1, 1997, or

13 (B) the earlier of—

14 (i) the date on which the last of such

15 agreements terminate (determined without

16 regard to any extension thereof on or after

17 June 30, 1994), or

18 (ii) January 1, 1999.

19 SEC. 7203. INCREASE IN DEDUCTION FOR HEALTH INSUR20 ANCE COSTS OF SELF-EMPLOYED INDIVID21 UALS.

22 (a) PROVISION MADE PERMANENT.—

23 (1) IN GENERAL.—Subsection (l) of section 162

24 (relating to special rules for health insurance costs
1200

•S 2357

1 of self-employed individuals) is amended by striking

2 paragraph (6).

3 (2) E FFECTIVE DATE.—The amendment made

4 by paragraph (1) shall apply to taxable years begin5 ning after December 31, 1993.

6 (b) AMOUNT OF DEDUCTION.—

7 (1) I N GENERAL.—Paragraphs (1) and (2) of

8 section 162(l) are amended to read as follows:

9 ‘‘(1) IN GENERAL.—In the case of an individual

10 who is an employee within the meaning of section

11 401(c), there shall be allowed as a deduction under

12 this section an amount equal to 50 percent of the

13 amount paid during the taxable year for coverage

14 under a certified standard health plan (as defined in

15 section 1011(2)(A) of the Health Security Act).

16 ‘‘(2) LIMITATIONS.—

17 ‘‘(A) LOWER PERCENTAGE IN CERTAIN

18 CASES.—

19 ‘‘(i) IN GENERAL.—If the taxpayer

20 has 1 or more employees in a trade or

21 business with respect to which such tax22 payer is treated as an employee within the

23 meaning of section 401(c), the deduction

24 under paragraph (1) shall not exceed the

25 portion of the amount paid which is equiv-
1201

•S 2357

1 alent to the largest employer contribution

2 made on behalf of any such employee for

3 coverage under a certified standard health

4 plan.

5 ‘‘(ii) EQUIVALENT CONTRIBUTION.—

6 For purposes of clause (i), the amount

7 paid is equivalent to a contribution if—

8 ‘‘(I) it is the same dollar amount

9 as the contribution,

10 ‘‘(II) it represents the same per11 centage of cost under the plan to

12 which it is made as does the contribu13 tion, or

14 ‘‘(III) it represents the same per15 centage of the weighted average pre16 mium for the class of enrollment (as

17 defined in section 1113(c) of the

18 Health Security Act) for the commu19 nity rating area in which the employee

20 works as does the contribution.

21 For purposes of applying subclause (II) or

22 (III), any dollar limitation applicable to all

23 employer contributions (whether expressed

24 as a dollar amount or a percentage de-
1202

•S 2357

1 scribed in subclause (III)) shall be dis2 regarded.

3 ‘‘(B) DEDUCTION LIMITED TO EARNED IN4 COME.—No deduction shall be allowed under

5 paragraph (1) to the extent that the amount of

6 such deduction exceeds the taxpayer’s earned

7 income (within the meaning of section 401(c)).

8 ‘‘(C) OTHER COVERAGE.—Paragraph (1)

9 shall not apply to any taxpayer for any calendar

10 month for which the taxpayer is eligible to par11 ticipate in any subsidized health plan main12 tained by any employer of the taxpayer or the

13 taxpayer’s spouse.’’

14 (2) C ONFORMING AMENDMENT.—Subparagraph

15 (A) of section 162(l)(5) is amended by striking

16 ‘‘shall be treated as such individual’s earned in17 come’’ and inserting ‘‘shall be included in such indi18 vidual’s earned income’’.

19 (3) EFFECTIVE DATE.—The amendments made

20 by this subsection shall apply to taxable years begin21 ning after December 31, 1995.
1203

•S 2357

1 SEC. 7204. LIMITATION ON PREPAYMENT OF MEDICAL IN2 SURANCE PREMIUMS.

3 (a) GENERAL RULE.—Subsection (d) of section 213

4 is amended by adding at the end the following new para5 graph:

6 ‘‘(10) LIMITATION ON PREPAYMENTS.—If—

7 ‘‘(A) the taxpayer pays a premium or other

8 amount which constitutes medical care under

9 paragraph (1), and

10 ‘‘(B) such premium or other amount is

11 properly allocable to insurance coverage or care

12 to be provided during periods more than 12

13 months after the month in which such payment

14 is made,

15 such premium or other amount shall be treated as

16 paid ratably over the period during which such in17 surance coverage or care is to be provided. The pre18 ceding sentence shall not apply to any premium to

19 which paragraph (7) applies.’’

20 (b) E FFECTIVE DATE.—The amendment made by

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

22 31, 1994.
1204

•S 2357

1 PART 2—VOLUNTARY EMPLOYER HEALTH CARE

2 CONTRIBUTIONS

3 SEC. 7111. TAX TREATMENT OF VOLUNTARY EMPLOYER

4 HEALTH CARE CONTRIBUTIONS.

5 (a) IN GENERAL.—Chapter 37 (relating to health-re6 lated taxes), as added by section 7111, is amended by add7 ing at the end the following new subchapter:

8 ‘‘Subchapter B—Voluntary Employer9 Provided Health Benefits

‘‘Sec. 4521. Taxable employer-provided health benefits.

‘‘Sec. 4522. Discriminatory employer practices.

‘‘Sec. 4523. Exceptions.

‘‘Sec. 4524. Definitions and special rules.

10 ‘‘SEC. 4521. TAXABLE EMPLOYER-PROVIDED HEALTH BENE11 FITS.

12 ‘‘(a) IMPOSITION OF TAX.—There is hereby imposed

13 a tax equal to the product of—

14 ‘‘(1) the sum of—

15 ‘‘(A) the taxable employer contributions for

16 any taxable year, plus

17 ‘‘(B) the aggregate employer contributions

18 for permitted coverage described in subpara19 graph (A) or (B) of subsection (b)(2) during

20 any portion of the taxable year during which

21 there is discriminatory permitted coverage, and

22 ‘‘(2) the highest rate of tax imposed under sec23 tion 11(b) for the taxable year.
1205

•S 2357

1 ‘‘(b) TAXABLE EMPLOYER CONTRIBUTION.—For

2 purposes of this section—

3 ‘‘(1) IN GENERAL.—The term ‘taxable employer

4 contribution’ means any employer contribution under

5 an accident or health plan for coverage of an em6 ployee other than permitted coverage.

7 ‘‘(2) P ERMITTED COVERAGE.—For purposes of

8 this subsection, the term ‘permitted coverage’

9 means—

10 ‘‘(A) coverage under a certified standard

11 health plan (as defined in section 1011(2)(A) of

12 the Health Security Act),

13 ‘‘(B) coverage under a certified supple14 mental health benefit plan (as defined in section

15 1011(3)(A) of such Act), except that this sub16 paragraph shall not apply to coverage of any

17 employee who is covered under a certified

18 standard health plan which provides the alter19 native standard benefits package described in

20 subtitle C of title I of such Act,

21 ‘‘(C) coverage under a qualified long-term

22 care insurance policy (as defined in section

23 7702B(b)),

24 ‘‘(D) coverage providing wages or pay25 ments in lieu of wages for any period during
1206

•S 2357

1 which the employee is absent from work on ac2 count of sickness or injury,

3 ‘‘(E) coverage only for accidental death or

4 dismemberment,

5 ‘‘(F) coverage under a medicare supple6 mental policy (as defined in section 1882(g)(1)

7 of the Social Security Act), and

8 ‘‘(G) coverage under an equivalent health

9 care program (as defined in section 1013(3) of

10 the Health Security Act).

11 ‘‘(c) DISCRIMINATORY PERMITTED COVERAGE.—For

12 purposes of this section, the term ‘discriminatory per13 mitted coverage’ means, with respect to any period, cov14 erage—

15 ‘‘(1) which is permitted coverage described in

16 subparagraph (A) or (B) of subsection (b)(2), and

17 ‘‘(2) with respect to which the requirements of

18 subsection (a) or (b) of section 4522 are not met

19 during such period.

20 ‘‘SEC. 4522. DISCRIMINATORY EMPLOYER PRACTICES.

21 ‘‘(a) HEALTH STATUS REQUIREMENTS.—For pur22 poses of section 4521(c), an employer meets the require23 ments of this subsection if, with respect to coverage de24 scribed in such section—
1207

•S 2357

1 ‘‘(1) there is no waiting period or denial of cov2 erage with respect to an employee, and

3 ‘‘(2) the amount of the employer contribution

4 on behalf of an employee is not conditioned, and

5 does not vary,

6 by reason of the employee’s health status, claims experi7 ence, medical history, receipt of health care, or lack of evi8 dence of insurability.

9 ‘‘(b) UNIFORM CONTRIBUTION REQUIREMENTS.—

10 ‘‘(1) IN GENERAL.—For purposes of section

11 4521(c), an employer meets the requirements of this

12 subsection if the employer contribution on behalf of

13 an employee for coverage described in such section

14 is equivalent to each employer contribution on behalf

15 of all other employees who elect such coverage under

16 plans offered by the employer.

17 ‘‘(2) EQUIVALENT CONTRIBUTION.—For pur18 poses of paragraph (1), a contribution is equivalent

19 to any other contribution if—

20 ‘‘(A) it is the same dollar amount as the

21 other contribution,

22 ‘‘(B) it represents the same percentage of

23 cost under the plan to which it is made as does

24 the other contribution, or
1208

•S 2357

1 ‘‘(C) it represents the same percentage of

2 the weighted average premium for the class of

3 enrollment (as defined in section 1113(c) of the

4 Health Security Act) for the community rating

5 area in which the employee works as does the

6 other contribution.

7 For purposes of applying subparagraph (B) or (C),

8 any dollar limitation applicable to all employer con9 tributions (whether expressed as a dollar amount or

10 a percentage described in subparagraph (C)) shall be

11 disregarded.

12 ‘‘(3) EXCLUDED EMPLOYEES.—

13 ‘‘(A) I N GENERAL.—The following employ14 ees of an employer shall be excluded from con15 sideration under this subsection:

16 ‘‘(i) Any employee before the employee

17 has completed 6 months of service with the

18 employer.

19 ‘‘(ii) Any employee who normally

20 works less than 24 hours per week.

21 ‘‘(iii) Any employee who normally

22 works during not more than 6 months of

23 any year.

24 ‘‘(iv) Any employee who has not at25 tained age 18.
1209

•S 2357

1 ‘‘(v) Any employee who is included in

2 a unit of employees covered by an agree3 ment which the Secretary finds to be a col4 lective bargaining agreement between em5 ployee representatives and 1 or more em6 ployers if there is evidence that employer7 provided benefits for standard health bene8 fits coverage was the subject of good faith

9 bargaining between the employee rep10 resentatives and employer or employers.

11 ‘‘(vi) Any employee who is a non12 resident alien and who receives no earned

13 income (within the meaning of section

14 911(d)(2)) from the employer which con15 stitutes income from sources within the

16 United States (within the meaning of sec17 tion 861(a)(3)).

18 ‘‘(vii) Any former employee.

19 ‘‘(B) COVERAGE OF PART-TIME EMPLOY20 EES.—

21 ‘‘(i) IN GENERAL.—If an employer

22 makes an employer contribution for any

23 period for coverage described in section

24 4521(c) for any employee who normally

25 works at least 10 hours but less than 24
1210

•S 2357

1 hours per week, subparagraph (A)(ii) shall

2 be applied by substituting ‘10 hours’ for

3 ‘24 hours’.

4 ‘‘(ii) REQUIREMENTS MAY BE MET

5 SEPARATELY.—If an employer elects the

6 application of this clause—

7 ‘‘(I) the requirements of this sub8 section shall be applied separately to

9 employees to whom this subsection ap10 plies by reason of clause (i), and

11 ‘‘(II) such employees shall be ex12 cluded in determining whether such

13 requirements are met with respect to

14 any other employees.

15 ‘‘(iii) PRO RATA CONTRIBUTIONS PER16 MISSIBLE.—For purposes of this sub17 section, contributions on behalf of any em18 ployee to which this subsection applies by

19 reason of clause (i) shall not fail to be

20 treated as equivalent solely because they

21 are proportionate to the number of hours

22 the employee works.

23 ‘‘(4) AGGREGATION RULES.—For purposes of

24 this subsection—
1211

•S 2357

1 ‘‘(A) I N GENERAL.—All employers treated

2 as a single employer under subsection (b) or (c)

3 of section 414 shall be treated as a single em4 ployer.

5 ‘‘(B) AFFILIATED SERVICE GROUPS.—All

6 employees of members of an affiliated service

7 group (as defined in section 414(m)) shall be

8 treated as employed by a single employer.

9 ‘‘(5) SEPARATE LINES OF BUSINESS.—If, under

10 section 414(r), an employer is treated as operating

11 separate lines of business for a year, the employer

12 may apply this subsection separately to employees in

13 each separate line of business.

14 ‘‘SEC. 4523. EXCEPTIONS.

15 ‘‘(a) EXCEPTION FOR REASONABLE DILIGENCE.—No

16 tax shall be imposed by this subchapter during any period

17 for which it is established to the satisfaction of the Sec18 retary that the employer did not know, or exercising rea19 sonable diligence would not have known, that the employer

20 had taken any action subject to tax under this subchapter.

21 ‘‘(b) CORRECTIONS WITHIN 30 DAYS.—No tax shall

22 be imposed by this subchapter with respect to any action

23 subject to tax under this subchapter if—

24 ‘‘(1) such action was due to reasonable cause

25 and not to willful neglect, and
1212

•S 2357

1 ‘‘(2) such action is corrected during the 30-day

2 period beginning on the 1st date the employer knew,

3 or exercising reasonable diligence would have known,

4 that such action was subject to such tax.

5 ‘‘(c) WAIVER BY SECRETARY.—In the case of any ac6 tion subject to tax under this subchapter which is due to

7 reasonable cause and not to willful neglect, the Secretary

8 may waive part or all of any tax imposed by this sub9 chapter to the extent that the payment of such tax would

10 be excessive relative to the action involved.

11 ‘‘SEC. 4524. DEFINITIONS AND SPECIAL RULES.

12 ‘‘(a) DEFINITIONS.—For purposes of this sub13 chapter—

14 ‘‘(1) EMPLOYER.—

15 ‘‘(A) IN GENERAL.—The term ‘employer’

16 means any person or governmental entity for

17 whom an individual performs services, of what18 ever nature, as an employee (as defined in sec19 tion 3401(c)).

20 ‘‘(B) SPECIAL RULES.—

21 ‘‘(i) A partnership shall be treated as

22 the employer of each partner who is an

23 employee within the meaning of section

24 401(c)(1).
1213

•S 2357

1 ‘‘(ii) An S corporation shall be treated

2 as the employer of each shareholder who is

3 an employee within the meaning of section

4 401(c)(1).

5 ‘‘(2) EMPLOYER CONTRIBUTIONS.—The term

6 ‘employer contribution’ means, with respect to cov7 erage under a health plan, a reasonable estimate of

8 the portion of the cost of the coverage which is to

9 be provided by the employer.

10 ‘‘(b) LIABILITY FOR TAX.—Any tax imposed by this

11 subchapter shall be paid by the employer.

12 ‘‘(c) TAXES TO APPLY TO GOVERNMENTAL AND

13 OTHER TAX-EXEMPT ENTITIES.—Notwithstanding any

14 other provision of law or rule of law, none of the following

15 shall be exempt from the taxes imposed by this sub16 chapter:

17 ‘‘(1) The United States, any State or political

18 subdivision thereof, the District of Columbia, and

19 any agency or instrumentality of any of the fore20 going.

21 ‘‘(2) Any other entity otherwise exempt from

22 tax under chapter 1.

23 ‘‘(d) N O COVER OVER TO POSSESSIONS.—Notwith24 standing any other provision of law, no amount collected
1214

•S 2357

1 under this subchapter shall be covered over to any posses2 sion of the United States.

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

4 such regulations as are necessary to carry out the provi5 sions of this subchapter, including regulations providing

6 for the determination of the amount of any employer con7 tribution, the aggregation of governmental and tax-exempt

8 entities, and the prevention of the avoidance of any tax

9 imposed by this subchapter through the use of any ar10 rangement described in section 414(o).’’

11 (b) E MPLOYEE LEASING.—Paragraph (3) of section

12 414(n) is amended by striking ‘‘and’’ at the end of sub13 paragraph (B), by striking the period at the end of sub14 paragraph (C) and inserting ‘‘, and’’, and by adding at

15 the end the following new subparagraph:

16 ‘‘(D) subchapter B of chapter 37.’’

17 (c) TAX NOT DEDUCTIBLE.—Section 275(a) is

18 amended by adding at the end the following new para19 graph:

20 ‘‘(7) The taxes imposed by section 4521 (relat21 ing to taxable employer-provided health benefits).’’

22 (d) C ONFORMING AMENDMENT.—The table of sub23 chapters for chapter 37 is amended by adding at the end

24 the following new item:

‘‘SUBCHAPTER B. Voluntary employer-provided health benefits.’’
1215

•S 2357

1 (e) E FFECTIVE DATE.—The amendments made by

2 this section shall take effect on January 1, 1996.

3 Subtitle C—Exempt Health Care

4 Organizations

5 PART 1—GENERAL PROVISIONS

6 SEC. 7301. QUALIFICATION AND DISCLOSURE REQUIRE7 MENTS FOR NONPROFIT HEALTH CARE OR8 GANIZATIONS.

9 (a) T REATMENT OF HOSPITALS AND OTHER ENTI10 TIES PROVIDING HEALTH CARE SERVICES.—Section 501

11 (relating to exemption from tax on corporations, certain

12 trusts, etc.) is amended by redesignating subsection (n)

13 as subsection (o) and by inserting after subsection (m) the

14 following new subsection:

15 ‘‘(n) Q UALIFICATION OF HEALTH CARE ORGANIZA16 TIONS AS EXEMPT ORGANIZATIONS.—

17 ‘‘(1) IN GENERAL.—An organization which is

18 described in paragraph (3) or (4) of subsection (c)

19 and the predominant activity of which is the provi20 sion of health care services shall be exempt from tax

21 under subsection (a) only if—

22 ‘‘(A) such organization, with the participa23 tion of community representatives, annually—
1216

•S 2357

1 ‘‘(i) assesses its community’s needs

2 for health care services and qualified out3 reach services, and

4 ‘‘(ii) prepares a written plan to meet

5 those needs,

6 ‘‘(B) pursuant to such plan, such organiza7 tion provides (directly or indirectly) significant

8 qualified outreach services,

9 ‘‘(C) such organization does not discrimi10 nate against individuals in the provision of

11 health care services on the basis of participation

12 in a government-sponsored health plan, and

13 ‘‘(D) such organization does not discrimi14 nate against individuals in the provision of

15 emergency health care services on the basis of

16 ability to pay.

17 ‘‘(2) SPECIAL RULE FOR HEALTH MAINTE18 NANCE ORGANIZATIONS.—A health maintenance or19 ganization shall not be treated as described in sub20 section (c)(3) unless substantially all of its primary

21 care health services are provided as described in sub22 section (m)(6)(A).

23 ‘‘(3) DEFINITIONS AND SPECIAL RULE.—For

24 purposes of this subsection—
1217

•S 2357

1 ‘‘(A) QUALIFIED OUTREACH SERVICES.—

2 The term ‘qualified outreach services’ means

3 health care services (or preventive care, edu4 cational, or social services programs related

5 thereto) which are provided—

6 ‘‘(i) in 1 or more medically under7 served areas,

8 ‘‘(ii) at below cost to individuals who

9 are otherwise unable to afford such serv10 ices, or

11 ‘‘(iii) at emergency care facilities

12 which provide specialty services and which

13 normally operate at a loss.

14 Such term shall not include insurance described

15 in subparagraph (B)(iii) unless such insurance

16 is provided on a subsidized basis.

17 ‘‘(B) HEALTH CARE SERVICES.—The term

18 ‘health care services’ means—

19 ‘‘(i) any activity which consists of pro20 viding medical care (as defined in section

21 213(d)(1)(A)) to individuals,

22 ‘‘(ii) in the case of an organization de23 scribed in subsection (c)(3), any activity

24 which is treated as accomplishing an ex25 empt purpose of the organization solely be-
1218

•S 2357

1 cause it is carried on as part of an activity

2 described in clause (i), and

3 ‘‘(iii) insurance (other than commer4 cial-type insurance, as defined in sub5 section (m)) for the activities described in

6 clauses (i) and (ii).

7 ‘‘(C) MEDICALLY UNDERSERVED AREA.—

8 The term ‘medically underserved area’ means,

9 with respect to a health care service, any area

10 reasonably determined by the organization (in a

11 manner not inconsistent with regulations pre12 scribed by the Secretary) to have—

13 ‘‘(i) a shortage (relative to the num14 ber of individuals needing such service) of

15 health professionals performing such serv16 ice, or

17 ‘‘(ii) a population group experiencing

18 such a shortage.

19 Such term includes a health professional short20 age area (as defined in section 332 of the Pub21 lic Health Service Act).

22 ‘‘(4) EXCEPTIONS.—This subsection shall not

23 apply to any organization which—

24 ‘‘(A) demonstrates, in a manner not incon25 sistent with regulations prescribed by the Sec-
1219

•S 2357

1 retary, that one of its principal purposes is aca2 demic training or medical research, or

3 ‘‘(B) provides health care services exclu4 sively on an uncompensated basis, regardless of

5 ability to pay.

6 ‘‘(5) DISALLOWANCE OF CHARITABLE DEDUC7 TIONS.—No gift or bequest to an organization which

8 is not exempt from tax by reason of this subsection

9 shall be allowed as a deduction under section 170,

10 545(b)(2), 556(b)(2), 642(c), 2055, 2106(a)(2), or

11 2522.

12 ‘‘(6) R EQUIREMENTS SUPPLEMENT OTHER RE13 QUIREMENTS.—The requirements of this subsection

14 are in addition to, and not in lieu of, the require15 ments otherwise applicable to an organization de16 scribed in paragraph (3) or (4) of subsection (c).’’

17 (b) R EPORTING AND DISCLOSURE OF NEEDS AS18 SESSMENT AND PLAN.—

19 (1) REPORTING.—

20 (A) O RGANIZATIONS DESCRIBED IN SEC21 TION 501(C)(3).—Subsection (b) of section 6033

22 (relating to certain organizations described in

23 section 501(c)(3)) is amended by striking

24 ‘‘and’’ at the end of paragraph (9), by redesig25 nating paragraph (10) as paragraph (12), and
1220

•S 2357

1 by inserting after paragraph (9) the following

2 new paragraphs:

3 ‘‘(10) in the case of an organization which pre4 pares a plan described in section 501(n)(1)(A) (re5 lating to community needs)—

6 ‘‘(A) a copy of such plan for the year, and

7 ‘‘(B) information on the implementation of

8 such plan for the year (including unrecovered

9 costs and revenues foregone in furtherance of

10 such plan),

11 ‘‘(11) such information as the Secretary may

12 require with respect to any taxable inurement (as

13 defined in section 4958(d)), and’’.

14 (B) O RGANIZATIONS DESCRIBED IN SEC15 TION 501(C)(4).—Section 6033 is amended by re16 designating subsection (f) as subsection (g) and

17 by inserting after subsection (e) the following

18 new subsection:

19 ‘‘(f) C ERTAIN ORGANIZATIONS DESCRIBED IN SEC20 TION 501(c)(4).—Every organization described in section

21 501(c)(4) which is subject to the requirements of sub22 section (a) and which prepares a plan described in section

23 501(n)(1)(A) (relating to community needs) for the

24 year—
1221

•S 2357

1 ‘‘(1) shall include a copy of such plan with the

2 return required under subsection (a) for the year,

3 and

4 ‘‘(2) shall include on such return the informa5 tion referred to in paragraphs (10)(B) and (11) of

6 subsection (b) with respect to such organization.’’

7 (2) DISCLOSURE.—

8 (A) I N GENERAL.—Subsection (e) of sec9 tion 6104 (relating to public inspection of cer10 tain annual returns and applications for exemp11 tion) is amended by adding at the end the fol12 lowing new paragraph:

13 ‘‘(3) COMMUNITY HEALTH CARE NEEDS AS14 SESSMENT AND PLAN.—

15 ‘‘(A) IN GENERAL.—Every organization

16 which is required to prepare a plan described in

17 section 501(n)(1)(A) (relating to community

18 needs)—

19 ‘‘(i) shall make a copy of such plan

20 (and the assessment on which such plan is

21 based) available for inspection during regu22 lar business hours by any individual at the

23 principal office of such organization and, if

24 such organization regularly maintains 1 or

25 more regional or district offices having 3
1222

•S 2357

1 or more employees, at each such regional

2 or district office, and

3 ‘‘(ii) upon request of an individual

4 made at such principal office or such a re5 gional or district office, shall provide—

6 ‘‘(I) a copy of such plan (and as7 sessment), and

8 ‘‘(II) a copy of the annual return

9 filed under section 6033,

10 to such individual without charge other

11 than a reasonable fee for any reproduction

12 and mailing costs.

13 If the request under clause (ii) is made in per14 son, such copies shall be provided immediately

15 and, if made other than in person, shall be pro16 vided within 30 days.

17 ‘‘(B) PERIOD OF AVAILABILITY.—Subpara18 graph (A) shall apply—

19 ‘‘(i) with respect to any plan (and as20 sessment) during the 3-year period after

21 the close of the year for which such plan

22 is prepared, and

23 ‘‘(ii) with respect to any return, dur24 ing the 3-year period beginning on the fil25 ing date (as defined in paragraph (1)(D)).
1223

•S 2357

1 ‘‘(C) LIMITATION.—Subparagraph (A)(ii)

2 shall not apply to any request if the Secretary

3 determines, upon application by an organiza4 tion, that such request is part of a harassment

5 campaign and that compliance with such re6 quest is not in the public interest.’’

7 (B) T ECHNICAL AMENDMENT.—The head8 ing for subsection (e) of section 6104 is amend9 ed by striking ‘‘AND APPLICATIONS FOR EX10 EMPTION’’ and inserting ‘‘, APPLICATIONS FOR

11 EXEMPTION, AND COMMUNITY NEEDS ASSESS12 MENT AND PLAN FOR HEALTH AND OUTREACH

13 SERVICES’’.

14 (c) EFFECTIVE DATES.—

15 (1) I N GENERAL.—Except as provided in para16 graph (2), the amendments made by this section

17 shall take effect on January 1, 1995.

18 (2) HMO SERVICE REQUIREMENT.—So much of

19 the amendments made by this section as relates to

20 section 501(n)(2) of the Internal Revenue Code of

21 1986, as added by this section, shall take effect on

22 the date of the enactment of this Act.
1224

•S 2357

1 SEC. 7302. EXCISE TAXES FOR PRIVATE INUREMENT BY

2 TAX-EXEMPT HEALTH CARE ORGANIZATIONS.

3 (a) I N GENERAL.—Chapter 42 (relating to private

4 foundations and certain other tax-exempt organizations)

5 is amended by redesignating subchapter D as subchapter

6 E and by inserting after subchapter C the following new

7 subchapter:

8 ‘‘Subchapter D—Private Inurement by Tax9 Exempt Health Care Organizations

‘‘Sec. 4958. Taxes on private inurement.

‘‘Sec. 4959. Other definitions.

10 ‘‘SEC. 4958. TAXES ON PRIVATE INUREMENT.

11 ‘‘(a) INITIAL TAXES.—

12 ‘‘(1) ON THE BENEFICIARY.—There is hereby

13 imposed on any taxable inurement a tax equal to 25

14 percent of the amount thereof. The tax imposed by

15 this paragraph shall be paid by any beneficiary of

16 such inurement.

17 ‘‘(2) ON THE MANAGEMENT.—In any case in

18 which there is a tax imposed by paragraph (1), there

19 is hereby imposed on the participation of any organi20 zation manager of an organization in any taxable

21 inurement which occurs with respect to such organi22 zation, knowing that it is taxable inurement, a tax

equal to 21 23 ⁄2 percent of the amount thereof, unless

24 such participation is not willful and is due to reason-
1225

•S 2357

1 able cause. The tax imposed by this paragraph shall

2 be paid by any organization manager who partici3 pated in the taxable inurement.

4 ‘‘(b) ADDITIONAL TAXES.—

5 ‘‘(1) ON THE BENEFICIARY.—In any case in

6 which an initial tax is imposed by subsection (a)(1)

7 on any taxable inurement and such inurement is not

8 corrected within the taxable period, there is hereby

9 imposed a tax equal to 200 percent of the amount

10 of the taxable inurement. The tax imposed by this

11 paragraph shall be paid by any beneficiary of such

12 inurement.

13 ‘‘(2) ON THE MANAGEMENT.—In any case in

14 which an additional tax is imposed by paragraph (1),

15 if an organization manager refused to agree to part

16 or all of the correction, there is hereby imposed a

17 tax equal to 50 percent of the amount of the taxable

18 inurement. The tax imposed by this paragraph shall

19 be paid by any organization manager who refused to

20 agree to part or all of the correction.

21 ‘‘(c) S PECIAL RULES RELATING TO LIABILITY FOR

22 TAX.—For purposes of this section—

23 ‘‘(1) J OINT AND SEVERAL LIABILITY.—If more

24 than one person is liable under any paragraph of

25 subsection (a) or (b) with respect to any one taxable
1226

•S 2357

1 inurement, all such persons shall be jointly and sev2 erally liable under such paragraph with respect to

3 such inurement.

4 ‘‘(2) LIMIT FOR MANAGEMENT.—With respect

5 to any 1 taxable inurement, the maximum amount

6 of the tax imposed by subsection (a)(2) shall not ex7 ceed $10,000, and the maximum amount of the tax

8 imposed by subsection (b)(2) shall not exceed

9 $10,000.

10 ‘‘(d) TAXABLE INUREMENT.—For purposes of this

11 section, the term ‘taxable inurement’ means any

12 inurement not permitted under paragraph (3) or (4) of

13 section 501(c), as the case may be, in a transaction involv14 ing an applicable tax-exempt health care organization in

15 which—

16 ‘‘(1) the value of any economic benefit provided

17 to or for the use of a disqualified person exceeds the

18 value of the consideration (including the perform19 ance of services) received by the organization for

20 providing such benefit, or

21 ‘‘(2) the amount of any economic benefit pro22 vided to or for the use of a disqualified person is de23 termined in whole or in part by the gross or net rev24 enues of 1 or more activities of the organization.
1227

•S 2357

1 The amount of any taxable inurement with respect to any

2 such transaction shall be the excess described in para3 graph (1) or the amount described in paragraph (2). For

4 purposes of paragraph (1), an economic benefit shall not

5 be treated as provided as consideration for the perform6 ance of services unless the organization clearly indicated

7 its intent to so treat such benefit.

8 ‘‘(e) OTHER DEFINITIONS.—For purposes of this

9 section—

10 ‘‘(1) DISQUALIFIED PERSON.—The term ‘dis11 qualified person’ means, with respect to any trans12 action—

13 ‘‘(A) any person who was, at any time dur14 ing the 5-year period ending on the date of

15 such transaction—

16 ‘‘(i) an organization manager, or

17 ‘‘(ii) an individual (other than an or18 ganization manager)—

19 ‘‘(I) in a position to exercise sub20 stantial influence over the affairs of

21 the organization, or

22 ‘‘(II) performing substantial

23 medical services as a physician pursu24 ant to an employment or other con-
1228

•S 2357

1 tractual relationship with the organi2 zation or a related organization,

3 ‘‘(B) a member of the family of an individ4 ual described in subparagraph (A), and

5 ‘‘(C) a 35-percent controlled entity.

6 ‘‘(2) O RGANIZATION MANAGER.—The term ‘or7 ganization manager’ means, with respect to any ap8 plicable tax-exempt health care organization, any of9 ficer, director, or trustee of such organization (or

10 any individual having powers or responsibilities simi11 lar to those of officers, directors, or trustees of the

12 organization).

13 ‘‘(3) 35-PERCENT CONTROLLED ENTITY.—

14 ‘‘(A) I N GENERAL.—The term ‘35-percent

15 controlled entity’ means—

16 ‘‘(i) a corporation in which persons

17 described in subparagraph (A) or (B) of

18 paragraph (1) own more than 35 percent

19 of the total combined voting power,

20 ‘‘(ii) a partnership in which such per21 sons own more than 35 percent of the

22 profits interest, and

23 ‘‘(iii) a trust or estate in which such

24 persons own more than 35 percent of the

25 beneficial interest.
1229

•S 2357

1 ‘‘(B) CONSTRUCTIVE OWNERSHIP

2 RULES.—Rules similar to the rules of para3 graphs (3) and (4) of section 4946(a) shall

4 apply for purposes of this subsection.

5 ‘‘(4) FAMILY MEMBERS.—The members of an

6 individual’s family shall be determined under section

7 4946(d); except that such members also shall in8 clude the brothers and sisters (whether by the whole

9 or halfblood) of the individual and their spouses.

10 ‘‘(f) TREATMENT OF PREVIOUSLY EXEMPT ORGANI11 ZATIONS.—

12 ‘‘(1) IN GENERAL.—For purposes of this sec13 tion, the status of any organization as an applicable

14 tax-exempt health care organization shall be termi15 nated only if—

16 ‘‘(A)(i) such organization notifies the Sec17 retary (at such time and in such manner as the

18 Secretary may by regulations prescribe) of its

19 intent to accomplish such termination, or

20 ‘‘(ii) there is a final determination by the

21 Secretary that such status has terminated, and

22 ‘‘(B)(i) such organization pays the tax im23 posed by paragraph (2) (or any portion not

24 abated pursuant to paragraph (3)), or
1230

•S 2357

1 ‘‘(ii) the entire amount of such tax is

2 abated pursuant to paragraph (3).

3 ‘‘(2) I MPOSITION OF TAX.—There is hereby im4 posed on each organization referred to in paragraph

5 (1) a tax equal to the lesser of—

6 ‘‘(A) the amount which the organization

7 substantiates by adequate records or other cor8 roborating evidence as the aggregate tax benefit

9 resulting from its exemption from tax under

10 section 501(a), or

11 ‘‘(B) the value of the net assets of such or12 ganization.

13 ‘‘(3) A BATEMENT OF TAX.—The Secretary may

14 abate the unpaid portion of the assessment of any

15 tax imposed by paragraph (2), or any liability in re16 spect thereof, if the applicable tax-exempt health

17 care organization distributes all of its net assets to

18 1 or more organizations each of which has been in

19 existence, and described in section 501(c)(3), for a

20 continuous period of at least 60 calendar months. If

21 the distributing organization is described in section

22 501(c)(4), the preceding sentence shall be applied by

23 treating the reference to section 501(c)(3) as includ24 ing a reference to section 501(c)(4).
1231

•S 2357

1 ‘‘(4) CERTAIN RULES MADE APPLICABLE.—

2 Rules similar to the rules of subsections (d), (e), and

3 (f) of section 507 shall apply for purposes of this

4 subsection.

5 ‘‘SEC. 4959. OTHER DEFINITIONS.

6 ‘‘(a) APPLICABLE TAX-EXEMPT HEALTH CARE OR7 GANIZATION.—For purposes of this subchapter, the term

8 ‘applicable tax-exempt health care organization’ means

9 any organization—

10 ‘‘(1) the predominant activity of which is the

11 provision of health care services (as defined in sec12 tion 501(n)(3)), and

13 ‘‘(2) which (without regard to any taxable

14 inurement) would be described in paragraph (3) or

15 (4) of section 501(c) and exempt from tax under

16 section 501(a).

17 Such term does not include a private foundation (as de18 fined in section 509(a)).

19 ‘‘(b) TAXABLE PERIOD; CORRECTION.—For purposes

20 of this subchapter—

21 ‘‘(1) TAXABLE PERIOD.—The term ‘taxable pe22 riod’ means, with respect to any taxable inurement,

23 the period beginning with the date on which the

24 inurement occurs and ending on the earliest of—
1232

•S 2357

1 ‘‘(A) the date of mailing a notice of defi2 ciency under section 6212 with respect to the

3 tax imposed by subsection (a)(1) of section

4 4958, or

5 ‘‘(B) the date on which the tax imposed by

6 such subsection (a)(1) is assessed.

7 ‘‘(2) CORRECTION.—The terms ‘correction’ and

8 ‘correct’ mean, with respect to any taxable

9 inurement, undoing the inurement to the extent pos10 sible, establishing safeguards to prevent future such

11 inurement, and where fully undoing the inurement is

12 not possible, such additional corrective action as is

13 prescribed by the Secretary by regulations.’’

14 (b) APPLICATION OF PRIVATE INUREMENT RULE TO

15 TAX-EXEMPT HEALTH CARE ORGANIZATIONS DE16 SCRIBED IN SECTION 501(c)(4).—Paragraph (4) of sec17 tion 501(c) is amended by inserting ‘‘(A)’’ after ‘‘(4)’’ and

18 by adding at the end the following:

19 ‘‘(B) Subparagraph (A) shall not apply to an

20 entity the predominant activity of which is the provi21 sion of health care services (as defined in subsection

22 (n)(3)) unless no part of the net earnings of such

23 entity inures to the benefit of any private share24 holder or individual.’’

25 (c) TECHNICAL AND CONFORMING AMENDMENTS.—
1233

•S 2357

1 (1) Subsection (e) of section 4955 is amend2 ed—

3 (A) by striking ‘‘SECTION 4945’’ in the

4 heading and inserting ‘‘SECTIONS 4945 and

5 4958’’, and

6 (B) by inserting before the period ‘‘or a

7 taxable inurement for purposes of section

8 4958’’.

9 (2) Subsections (a), (b), and (c) of section 4963

10 are each amended by inserting ‘‘4958,’’ after

11 ‘‘4955,’’.

12 (3) Subsection (e) of section 6213 is amended

13 by inserting ‘‘4958 (relating to private inurement),’’

14 before ‘‘4971’’.

15 (4) Paragraphs (2) and (3) of section 7422(g)

16 are each amended by inserting ‘‘4958,’’ after

17 ‘‘4955,’’.

18 (5) Subsection (b) of section 7454 is amended

19 by inserting ‘‘or whether an organization manager

20 (as defined in section 4958(f)) has ‘knowingly’ par21 ticipated in taxable inurement (as defined in section

22 4958(d)),’’ after ‘‘section 4912(b),’’.

23 (6) The table of subchapters for chapter 42 is

24 amended by striking the last item and inserting the

25 following:
1234

•S 2357

‘‘SUBCHAPTER D. Private inurement by tax-exempt health care organizations.

‘‘SUBCHAPTER E. Abatement of first and second tier taxes in cer- tain cases.’’

1 (d) EFFECTIVE DATES.—

2 (1) I N GENERAL.—Except as provided in para3 graph (2), the amendments made by this section

4 shall apply to inurement occurring on or after June

5 30, 1994.

6 (2) APPLICATION OF BINDING CONTRACT RULE

7 TO TAX-EXEMPT HEALTH CARE ORGANIZATIONS DE8 SCRIBED IN SECTION 501(C)(4).—The amendments

9 made by this section shall not apply to any

10 inurement involving an organization described in

11 section 501(c)(4) of the Internal Revenue Code of

12 1986 occurring before July 1, 1996, pursuant to a

13 written contract which was binding on June 29,

14 1994, and at all times thereafter before such

15 inurement occurred.

16 SEC. 7303. TREATMENT OF HEALTH MAINTENANCE ORGA17 NIZATIONS, PARENT ORGANIZATIONS, AND

18 HEALTH INSURANCE PURCHASING COOPERA19 TIVES.

20 (a) INSURANCE PROVIDED BY HEALTH MAINTE21 NANCE ORGANIZATIONS.—

22 (1) I N GENERAL.—Section 501(m) (relating to

23 certain organizations providing commercial-type in-
1235

•S 2357

1 surance not exempt from tax) is amended by adding

2 at the end the following new paragraph:

3 ‘‘(6) CERTAIN ACTIVITIES PROVIDED BY

4 HEALTH MAINTENANCE ORGANIZATIONS NOT TREAT5 ED AS COMMERCIAL-TYPE INSURANCE.—For pur6 poses of this subsection, the provision of (or the ar7 ranging for the provision of) medical care on a pre8 paid basis by a health maintenance organization

9 shall not be treated as providing commercial-type in10 surance if (and only if) such care is—

11 ‘‘(A) care provided by such organization to

12 its members at its own facilities through health

13 care professionals who do not provide substan14 tial health care services other than on behalf of

15 such organization,

16 ‘‘(B) care provided by a health care profes17 sional to a member of such organization on a

18 basis under which substantially all of the risks

19 of the rates of utilization is assumed by the

20 provider of such care,

21 ‘‘(C) care (other than primary care) pro22 vided to a member of such organization pursu23 ant to a referral by such organization, or
1236

•S 2357

1 ‘‘(D) emergency care provided to a member

2 of such organization at a location outside such

3 member’s area of residence.’’

4 (2) TECHNICAL AMENDMENTS.—

5 (A) Paragraph (3) of section 501(m) is

6 amended by striking subparagraph (B) and by

7 redesignating subparagraphs (C), (D), and (E)

8 as subparagraphs (B), (C), and (D), respec9 tively.

10 (B) Paragraph (5) of section 501(m) is

11 amended by striking ‘‘paragraph (3)(E)’’ and

12 inserting ‘‘paragraph (3)(D)’’.

13 (b) TREATMENT OF PARENT ORGANIZATIONS OF

14 HEALTH CARE PROVIDERS.—Section 509(a) (defining

15 private foundation) is amended by striking ‘‘and’’ at the

16 end of paragraph (3), by redesignating paragraph (4) as

17 paragraph (5), and by inserting after paragraph (3) the

18 following new paragraph:

19 ‘‘(4) an organization which is organized and op20 erated for the benefit of, and which directly or indi21 rectly controls, an organization described in section

22 170(b)(1)(A)(iii), and’’.

23 (c) PURCHASING COOPERATIVES EXEMPT FROM

24 TAX.—
1237

•S 2357

1 (1) IN GENERAL.—Subsection (c) of section

2 501 (relating to exemption from tax on corporations,

3 certain trusts, etc.) is amended by adding at the end

4 the following new paragraph:

5 ‘‘(26)(A) Any health insurance purchasing co6 operative described in section 1013(12) of the

7 Health Security Act.

8 ‘‘(B) Such a cooperative shall not be exempt

9 from tax pursuant to any provision other than this

10 paragraph.

11 ‘‘(C) Such a cooperative shall not be exempt

12 from tax unless—

13 ‘‘(i) no part of the net earnings of such co14 operative inures to the benefit of any private

15 shareholder or individual,

16 ‘‘(ii) no substantial part of the activities of

17 such cooperative is carrying on propaganda, or

18 otherwise attempting, to influence legislation

19 (except as otherwise provided in subsection (h)),

20 and

21 ‘‘(iii) such cooperative does not participate

22 in, or intervene in (including the publishing or

23 distributing of statements), any political cam24 paign on behalf of (or in opposition to) any can25 didate for public office.’’
1238

•S 2357

1 (2) C ERTAIN PROVISIONS APPLICABLE TO OR2 GANIZATIONS DESCRIBED IN SECTION 501(C)(3) MADE

3 APPLICABLE TO PURCHASING COOPERATIVES.—Sec4 tion 501 is amended by redesignating subsection (o)

5 as subsection (p) and by inserting after subsection

6 (n) the following new subsection:

7 ‘‘(o) CERTAIN PROVISIONS MADE APPLICABLE TO

8 HEALTH INSURANCE PURCHASING COOPERATIVES.—A

9 health insurance purchasing cooperative described in sub10 section (c)(26) shall be treated—

11 ‘‘(1) as described in subsection (c)(3) for pur12 poses of applying subsection (h) (relating to expendi13 tures by public charities to influence legislation),

14 section 4955 (relating to taxes on political expendi15 tures of section 501(c)(3) organizations), and sec16 tion 4958 (relating to private inurement), and

17 ‘‘(2) as described in subsection (h)(4).’’

18 (d) E FFECTIVE DATE.—The amendments made by

19 this section shall take effect on the date of the enactment

20 of this Act.
1239

•S 2357

1 SEC. 7304. TAX TREATMENT OF TAXABLE ORGANIZATIONS

2 PROVIDING HEALTH INSURANCE AND OTHER

3 PREPAID HEALTH CARE SERVICES.

4 (a) GENERAL RULE.—Section 831 is amended by re5 designating subsection (c) as subsection (d) and by insert6 ing after subsection (b) the following new subsection:

7 ‘‘(c) TREATMENT OF ORGANIZATIONS PROVIDING

8 HEALTH INSURANCE AND OTHER PREPAID HEALTH

9 CARE SERVICES.—

10 ‘‘(1) GENERAL RULE.—Any organization to

11 which this subsection applies shall be taxable under

12 this part in the same manner as if it were an insur13 ance company other than a life insurance company.

14 ‘‘(2) ORGANIZATIONS TO WHICH SUBSECTION

15 APPLIES.—This subsection shall apply to any organi16 zation—

17 ‘‘(A) which is not exempt from taxation

18 under this subtitle,

19 ‘‘(B) which is not taxable as a life insur20 ance company under part I of this subchapter,

21 and

22 ‘‘(C) the primary and predominant busi23 ness activity of which during the taxable year

24 consists of 1 or more of the following:

25 ‘‘(i) Issuing accident and health insur26 ance contracts or the reinsuring of risks
1240

•S 2357

1 undertaken by other insurance companies

2 under such contracts.

3 ‘‘(ii) Operating as a health mainte4 nance organization.

5 ‘‘(iii) Entering into arrangements

6 under which—

7 ‘‘(I) fixed payments or premiums

8 are received as consideration for the

9 organization’s agreement to provide or

10 arrange for the provision of health

11 care services, regardless of how the

12 health care services are provided or

13 arranged to be provided, and

14 ‘‘(II) substantially all of the risks

15 of the rates of utilization of such serv16 ices is assumed by such organization

17 or the provider of such services.

18 In the case of an organization which has as a mate19 rial business activity the issuing of accident and

20 health insurance contracts or the reinsuring of risks

21 undertaken by other insurance companies under

22 such contracts, the administering of accident and

23 health insurance contracts by such organization shall

24 be treated as part of such business activity for pur25 poses of subparagraph (C)(i).’’
1241

•S 2357

1 (b) EFFECTIVE DATE.—

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

3 this section shall apply to taxable years beginning

4 after December 31, 1994.

5 (2) TRANSITIONAL RULES.—

6 (A) ORGANIZATIONS TO WHICH PARA7 GRAPH APPLIES.—This paragraph shall apply

8 to any organization to which section 831(c) of

9 the Internal Revenue Code of 1986 (as added

10 by subsection (a)) applies for such organiza11 tion’s first taxable year beginning after Decem12 ber 31, 1994; except that this paragraph shall

13 not apply if such organization treated itself as

14 an insurance company taxable under part II of

15 subchapter L of chapter 1 of such Code on its

16 original Federal income tax return for its tax17 able year beginning in 1992 and for all of its

18 taxable years thereafter beginning before Janu19 ary 1, 1995.

20 (B) TREATMENT OF CURRENTLY TAXABLE

21 COMPANIES.—Except as provided in regulations

22 prescribed by the Secretary of the Treasury or

23 his delegate, in the case of any organization to

24 which this paragraph applies—
1242

•S 2357

1 (i) the amendments made by this sec2 tion shall be treated as a change in the

3 method of accounting, and

4 (ii) all adjustments required to be

5 taken into account under section 481 of

6 the Internal Revenue Code of 1986 shall

7 be taken into account for such company’s

8 first taxable year beginning after Decem9 ber 31, 1994.

10 (C) T REATMENT OF CURRENTLY TAX-EX11 EMPT COMPANIES.—Except as provided in regu12 lations prescribed by the Secretary of the

13 Treasury or his delegates, in the case of any or14 ganization to which this paragraph applies and

15 which was exempt from tax under chapter 1 of

16 the Internal Revenue Code of 1986 for such or17 ganization’s last taxable year beginning before

18 January 1, 1995—

19 (i) no adjustment shall be made under

20 section 481 (or any other provision) of

21 such Code on account of a change in its

22 method of accounting required by this sec23 tion for its first taxable year beginning

24 after December 31, 1994, and
1243

•S 2357

1 (ii) for purposes of determining gain

2 or loss, the adjusted basis of any asset

3 held by such organization on the first day

4 of such taxable year shall be treated as

5 equal to its fair market value as of such

6 day.

7 SEC. 7305. REPEAL OF SECTION 833.

8 (a) REPEAL OF SECTION 833.—

9 (1) IN GENERAL.—Section 833 (relating to

10 treatment of Blue Cross and Blue Shield and similar

11 organizations) is hereby repealed.

12 (2) CONFORMING AMENDMENTS.—

13 (A) Section 56(c) is amended by striking

14 paragraph (3).

15 (B) The table of sections for part II of

16 subchapter L of chapter 1 is amended by strik17 ing the item relating to section 833.

18 (b) A PPLICATION OF SECTION 833 P RIOR TO RE19 PEAL.—

20 (1) I N GENERAL.—Section 833(c) (relating to

21 organization to which section applies) is amended by

22 adding at the end the following new paragraph:

23 ‘‘(4) TREATMENT AS EXISTING BLUE CROSS OR

24 BLUE SHIELD ORGANIZATION.—
1244

•S 2357

1 ‘‘(A) IN GENERAL.—Paragraph (2) shall

2 be applied to an organization described in sub3 paragraph (B) as if it were a Blue Cross or

4 Blue Shield organization.

5 ‘‘(B) APPLICABLE ORGANIZATION.—An or6 ganization is described in this subparagraph if

7 it—

8 ‘‘(i) is organized and governed by

9 State laws which are specifically and exclu10 sively applicable to not-for-profit insurance

11 or health-service type organizations, and

12 ‘‘(ii) is not a Blue Cross or Blue

13 Shield organization or health maintenance

14 organization.’’

15 (2) E FFECTIVE DATE.—The amendment made

16 by this section shall apply to taxable years beginning

17 after December 31, 1986.

18 (c) EFFECTIVE DATE OF REPEAL.—

19 (1) IN GENERAL.—Except as otherwise pro20 vided in this subsection, the amendments made by

21 subsection (a) shall apply to taxable years beginning

22 after December 31, 1996.

23 (2) T RANSITION RULES FOR BLUE CROSS AND

24 BLUE SHIELD AND SIMILAR ORGANIZATIONS.—
1245

•S 2357

1 (A) PRIOR FRESH START PRESERVED.—

2 The adjusted basis of any asset determined

3 under section 1012(c)(3)(A)(ii) of the Tax Re4 form Act of 1986 shall not be affected by the

5 amendments made by this section.

6 (B) RECOUPMENT OF PRIOR RESERVE

7 BENEFIT.—In the case of any organization enti8 tled to the benefits of section 833(a)(3) of the

9 Internal Revenue Code of 1986 (as in effect

10 after the amendment made by subsection (a))

11 for such organization’s last taxable year begin12 ning before January 1, 1997, the amount deter13 mined under paragraph (4) of section 832(b) of

14 such Code for each of such organization’s first

15 6 taxable years beginning after December 31,

16 1996, shall be increased by an amount equal to

31 17 ⁄3 percent of its unearned premiums on out18 standing business as of the close of such organi19 zation’s last taxable year beginning before Jan20 uary 1, 1997.

21 SEC. 7306. TAX EXEMPTION FOR HIGH-RISK INSURANCE

22 POOLS.

23 Subsection (c) of section 501 (relating to list of ex24 empt organizations) is amended by adding at the end the

25 following new paragraph:
1246

•S 2357

1 ‘‘(27)(A) In the case of taxable years beginning after

2 December 31, 1989, and before January 1, 1997, a quali3 fied high risk health insurance pool.

4 ‘‘(B) For purposes of subparagraph (A), the term

5 ‘qualified high risk health insurance pool’ means an en6 tity—

7 ‘‘(i) which was established by a State or politi8 cal subdivision thereof to provide health insurance

9 on a nonprofit basis to persons unable to obtain

10 health insurance because of health conditions,

11 ‘‘(ii) with respect to which the State or political

12 subdivision—

13 ‘‘(I) participates in the ongoing governance

14 of the entity, and

15 ‘‘(II) subsidizes the operation of the entity,

16 and

17 ‘‘(iii) no part of the net earnings of which inure

18 to the benefit of any private shareholder, member, or

19 individual.’’

20 PART 2—TAX TREATMENT OF SECTION 501(c)(3)

21 BONDS

22 SEC. 748. TAX TREATMENT OF 501(c)(3) BONDS SIMILAR TO

23 GOVERNMENTAL BONDS.

24 (a) IN GENERAL.—Subsection (a) of section 150 (re25 lating to definitions and special rules) is amended by strik-
1247

•S 2357

1 ing paragraphs (2) and (4), by redesignating paragraphs

2 (5) and (6) as paragraphs (4) and (5), respectively, and

3 by inserting after paragraph (1) the following new para4 graph:

5 ‘‘(2) EXEMPT PERSON.—

6 ‘‘(A) IN GENERAL.—The term ‘exempt per7 son’ means—

8 ‘‘(i) a governmental unit, or

9 ‘‘(ii) a 501(c)(3) organization, but

10 only with respect to its activities which do

11 not constitute unrelated trades or busi12 nesses as determined by applying section

13 513(a).

14 ‘‘(B) GOVERNMENTAL UNIT NOT TO IN15 CLUDE FEDERAL GOVERNMENT.—The term

16 ‘governmental unit’ does not include the United

17 States or any agency or instrumentality thereof.

18 ‘‘(C) 501(c)(3) ORGANIZATION.—The term

19 ‘501(c)(3) organization’ means any organization

20 described in section 501(c)(3) and exempt from

21 tax under section 501(a).’’

22 (b) R EPEAL OF QUALIFIED 501(c)(3) BOND DES23 IGNATION.—Section 145 (relating to qualified 501(c)(3)

24 bonds) is repealed.

25 (c) CONFORMING AMENDMENTS.—
1248

•S 2357

1 (1) Paragraph (3) of section 141(b) is amend2 ed—

3 (A) by striking ‘‘government use’’ in sub4 paragraph (A)(ii)(I) and subparagraph (B)(ii)

5 and inserting ‘‘exempt person use’’,

6 (B) by striking ‘‘a government use’’ in sub7 paragraph (B) and inserting ‘‘an exempt person

8 use’’,

9 (C) by striking ‘‘related business use’’ in

10 subparagraph (A)(ii)(II) and subparagraph (B)

11 and inserting ‘‘related private business use’’,

12 (D) by striking ‘‘RELATED BUSINESS USE’’

13 in the heading of subparagraph (B) and insert14 ing ‘‘RELATED PRIVATE BUSINESS USE’’, and

15 (E) by striking ‘‘ GOVERNMENT USE’’ in the

16 heading thereof and inserting ‘‘EXEMPT PERSON

17 USE’’.

18 (2) Subparagraph (A) of section 141(b)(6) is

19 amended by striking ‘‘a governmental unit’’ and in20 serting ‘‘an exempt person’’.

21 (3) Paragraph (7) of section 141(b) is amend22 ed—

23 (A) by striking ‘‘government use’’ and in24 serting ‘‘exempt person use’’, and
1249

•S 2357

1 (B) by striking ‘‘GOVERNMENT USE’’ in

2 the heading thereof and inserting ‘‘EXEMPT

3 PERSON USE’’.

4 (4) Section 141(b) is amended by striking para5 graph (9).

6 (5) Paragraph (1) of section 141(c) is amended

7 by striking ‘‘governmental units’’ and inserting ‘‘ex8 empt persons’’.

9 (6) Section 141 is amended by redesignating

10 subsection (e) as subsection (f) and by inserting

11 after subsection (d) the following new subsection:

12 ‘‘(e) CERTAIN ISSUES USED TO PROVIDE RESIDEN13 TIAL RENTAL HOUSING FOR FAMILY UNITS.—

14 ‘‘(1) IN GENERAL.—Except as provided in para15 graph (2), for purposes of this title, the term ‘pri16 vate activity bond’ includes any bond issued as part

17 of an issue if any portion of the net proceeds of the

18 issue are to be used (directly or indirectly) by an ex19 empt person described in section 150(a)(2)(A)(ii) to

20 provide residential rental property for family units.

21 This paragraph shall not apply if the bond would

22 not be a private activity bond if the section

23 501(c)(3) organization were not an exempt person.

24 ‘‘(2) EXCEPTION FOR BONDS USED TO PROVIDE

25 QUALIFIED RESIDENTIAL RENTAL PROJECTS.—
1250

•S 2357

1 Paragraph (1) shall not apply to any bond issued as

2 part of an issue if the portion of such issue which

3 is to be used as described in paragraph (1) is to be

4 used to provide—

5 ‘‘(A) a residential rental property for fam6 ily units if the first use of such property is pur7 suant to such issue,

8 ‘‘(B) qualified residential rental projects

9 (as defined in section 142(d)), or

10 ‘‘(C) property which is to be substantially

11 rehabilitated in a rehabilitation beginning with12 in the 2-year period ending 1 year after the

13 date of the acquisition of such property.

14 ‘‘(3) SUBSTANTIAL REHABILITATION.—

15 ‘‘(A) I N GENERAL.—Except as provided in

16 subparagraph (B), rules similar to the rules of

17 section 47(c)(1)(C) shall apply in determining

18 for purposes of paragraph (2)(C) whether prop19 erty is substantially rehabilitated.

20 ‘‘(B) EXCEPTION.—For purposes of sub21 paragraph (A), clause (ii) of section 47(c)(1)(C)

22 shall not apply, but the Secretary may extend

23 the 24-month period in section 47(c)(1)(C)(i)

24 where appropriate due to circumstances not

25 within the control of the owner.
1251

•S 2357

1 ‘‘(4) CERTAIN PROPERTY TREATED AS NEW

2 PROPERTY.—Solely for purposes of determining

3 under paragraph (2)(A) whether the 1st use of prop4 erty is pursuant to tax-exempt financing—

5 ‘‘(A) IN GENERAL.—If—

6 ‘‘(i) the 1st use of property is pursu7 ant to taxable financing,

8 ‘‘(ii) there was a reasonable expecta9 tion (at the time such taxable financing

10 was provided) that such financing would be

11 replaced by tax-exempt financing, and

12 ‘‘(iii) the taxable financing is in fact

13 so replaced within a reasonable period

14 after the taxable financing was provided,

15 then the 1st use of such property shall be treat16 ed as being pursuant to the tax-exempt financ17 ing.

18 ‘‘(B) SPECIAL RULE WHERE NO OPERAT19 ING STATE OR LOCAL PROGRAM FOR TAX-EX20 EMPT FINANCING.—If, at the time of the 1st

21 use of property, there was no operating State or

22 local program for tax-exempt financing of the

23 property, the 1st use of the property shall be

24 treated as pursuant to the 1st tax-exempt fi25 nancing of the property.
1252

•S 2357

1 ‘‘(C) D EFINITIONS.—For purposes of this

2 paragraph:

3 ‘‘(i) TAX-EXEMPT FINANCING.—The

4 term ‘tax-exempt financing’ means financ5 ing provided by tax-exempt bonds.

6 ‘‘(ii) TAXABLE FINANCING.—The

7 term ‘taxable financing’ means financing

8 which is not tax-exempt financing.’’

9 (7) Section 141(f), as redesignated by para10 graph (6), is amended—

11 (A) by adding ‘‘or’’ at the end of subpara12 graph (E),

13 (B) by striking ‘‘, or’’ at the end of sub14 paragraph (F), and inserting in lieu thereof a

15 period, and

16 (C) by striking subparagraph (G).

17 (8) The last sentence of section 144(b)(1) is

18 amended by striking ‘‘(determined’’ and all that fol19 lows to the period.

20 (9) Clause (ii) of section 144(c)(2)(C) is

21 amended by striking ‘‘a governmental unit’’ and in22 serting ‘‘an exempt person’’.

23 (10) Section 146(g) is amended—

24 (A) by striking paragraph (2), and
1253

•S 2357

1 (B) by redesignating the remaining para2 graphs after paragraph (1) as paragraphs (2)

3 and (3), respectively.

4 (11) The heading of section 146(k)(3) is

5 amended by striking ‘‘GOVERNMENTAL’’ and insert6 ing ‘‘EXEMPT PERSON’’.

7 (12) The heading of section 146(m) is amended

8 by striking ‘‘G OVERNMENT’’ and inserting ‘‘EXEMPT

9 PERSON’’.

10 (13) Subsection (h) of section 147 is amended

11 to read as follows:

12 ‘‘(h) CERTAIN RULES NOT TO APPLY TO MORTGAGE

13 REVENUE BONDS AND QUALIFIED STUDENT LOAN

14 BONDS.—Subsections (a), (b), (c), and (d) shall not apply

15 to any qualified mortgage bond, qualified veterans’ mort16 gage bond, or qualified student loan bond.’’

17 (14) Section 147 is amended by striking para18 graph (4) of subsection (b) and redesignating para19 graph (5) of such subsection as paragraph (4).

20 (15) Subparagraph (F) of section 148(d)(3) is

21 amended—

22 (A) by striking ‘‘or which is a qualified

23 501(c)(3) bond’’, and
1254

•S 2357

1 (B) by striking ‘‘GOVERNMENTAL USE

2 BONDS AND QUALIFIED 501(c)(3)’’ in the heading

3 thereof and inserting ‘‘ EXEMPT PERSON’’.

4 (16) Subclause (II) of section 148(f)(4)(B)(ii)

5 is amended by striking ‘‘(other than a qualified

6 501(c)(3) bond)’’.

7 (17) Clause (iv) of section 148(f)(4)(C) is

8 amended—

9 (A) by striking ‘‘a governmental unit or a

10 501(c)(3) organization’’ each place it appears

11 and inserting ‘‘an exempt person’’,

12 (B) by striking ‘‘qualified 501(c)(3)

13 bonds,’’, and

14 (C) by striking the comma after ‘‘private

15 activity bonds’’ the first place it appears.

16 (18) Subparagraph (A) of section 148(f)(7) is

17 amended by striking ‘‘(other than a qualified

18 501(c)(3) bond)’’.

19 (19) Paragraph (2) of section 149(d) is amend20 ed—

21 (A) by striking ‘‘(other than a qualified

22 501(c)(3) bond)’’, and

23 (B) by striking ‘‘CERTAIN PRIVATE’’ in the

24 heading thereof and inserting ‘‘PRIVATE’’.

25 (20) Section 149(e)(2) is amended—
1255

•S 2357

1 (A) by striking ‘‘which is not a private ac2 tivity bond’’ in the second sentence and insert3 ing ‘‘which is a bond issued for an exempt per4 son described in section 150(a)(2)(A)(i)’’, and

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

6 sentence: ‘‘Subparagraph (D) shall not apply to

7 any bond which is not a private activity bond

8 but which would be such a bond if the

9 501(c)(3) organization using the proceeds

10 thereof were not an exempt person.’’

11 (21) The heading of subsection (b) of section

12 150 is amended by striking ‘‘TAX-EXEMPT PRIVATE

13 ACTIVITY BONDS’’ and inserting ‘‘C ERTAIN TAX-EX14 EMPT BONDS’’.

15 (22) Paragraph (3) of section 150(b) is

16 amended—

17 (A) by inserting ‘‘owned by a 501(c)(3) or18 ganization’’ after ‘‘any facility’’ in subpara19 graph (A),

20 (B) by striking ‘‘any private activity bond

21 which, when issued, purported to be a tax-ex22 empt qualified 501(c)(3) bond’’ in subpara23 graph (A) and inserting ‘‘any bond which, when

24 issued, purported to be a tax-exempt bond, and

25 which would be a private activity bond if the
1256

•S 2357

1 501(c)(3) organization using the proceeds

2 thereof were not an exempt person’’, and

3 (C) by striking the heading thereof and in4 serting ‘‘BONDS FOR EXEMPT PERSONS OTHER

5 THAN GOVERNMENTAL UNITS.—’’.

6 (23) Paragraph (5) of section 150(b) is

7 amended—

8 (A) by striking ‘‘private activity’’ in sub9 paragraph (A),

10 (B) by inserting ‘‘and which would be a

11 private activity bond if the 501(c)(3) organiza12 tion using the proceeds thereof were not an ex13 empt person’’ after ‘‘tax-exempt bond’’ in sub14 paragraph (A),

15 (C) by striking subparagraph (B) and in16 serting the following new subparagraph:

17 ‘‘(B) such facility is required to be owned

18 by an exempt person, and’’, and

19 (D) by striking ‘‘GOVERNMENTAL UNITS

20 OR 501(c)(3) ORGANIZATIONS’’ in the heading

21 thereof and inserting ‘‘ EXEMPT PERSONS’’.

22 (24) Section 150 is amended by adding at the

23 end the following new subsection:

24 ‘‘(f) CERTAIN RULES TO APPLY TO BONDS FOR EX25 EMPT PERSONS OTHER THAN GOVERNMENTAL UNITS.—
1257

•S 2357

1 ‘‘(1) I N GENERAL.—Nothing in section 103(a)

2 or any other provision of law shall be construed to

3 provide an exemption from Federal income tax for

4 interest on any bond which would be a private activ5 ity bond if the 501(c)(3) organization using the pro6 ceeds thereof were not an exempt person unless such

7 bond satisfies the requirements of subsections (b)

8 and (f) of section 147.

9 ‘‘(2) SPECIAL RULE FOR POOLED FINANCING

10 OF 501(c)(3) ORGANIZATION.—

11 ‘‘(A) I N GENERAL.—At the election of the

12 issuer, a bond described in paragraph (1) shall

13 be treated as meeting the requirements of sec14 tion 147(b) if such bond meets the require15 ments of subparagraph (B).

16 ‘‘(B) R EQUIREMENTS.—A bond meets the

17 requirements of this subparagraph if—

18 ‘‘(i) 95 percent or more of the net

19 proceeds of the issue of which such bond is

20 a part are to be used to make or finance

21 loans to 2 or more 501(c)(3) organizations

22 or governmental units for acquisition of

23 property to be used by such organizations,

24 ‘‘(ii) each loan described in clause (i)

25 satisfies the requirements of section 147(b)
1258

•S 2357

1 (determined by treating each loan as a sep2 arate issue),

3 ‘‘(iii) before such bond is issued, a de4 mand survey was conducted which shows a

5 demand for financing greater than an

6 amount equal to 120 percent of the

7 lendable proceeds of such issue, and

8 ‘‘(iv) 95 percent or more of the net

9 proceeds of such issue are to be loaned to

10 501(c)(3) organizations or governmental

11 units within 1 year of issuance and, to the

12 extent there are any unspent proceeds

13 after such 1-year period, bonds issued as

14 part of such issue are to be redeemed as

15 soon as possible thereafter (and in no

16 event later than 18 months after issuance).

17 A bond shall not meet the requirements of this

18 subparagraph if the maturity date of any bond

19 issued as part of such issue is more than 30

20 years after the date on which the bond was is21 sued (or, in the case of a refunding or series of

22 refundings, the date on which the original bond

23 was issued).’’

24 (25) Section 1302 of the Tax Reform Act of

25 1986 is repealed.
1259

•S 2357

1 (26) Subparagraph (C) of section 57(a)(5) is

2 amended by striking clause (ii) and redesignating

3 clauses (iii) and (iv) as clauses (ii) and (iii), respec4 tively.

5 (27) Paragraph (3) of section 103(b) is amend6 ed by inserting ‘‘and section 150(f)’’ after ‘‘section

7 149’’.

8 (28) Paragraph (3) of section 265(b) is amend9 ed—

10 (A) by striking clause (ii) of subparagraph

11 (B) and inserting the following:

12 ‘‘(ii) CERTAIN BONDS NOT TREATED

13 AS PRIVATE ACTIVITY BONDS.—For pur14 poses of clause (i)(II), there shall not be

15 treated as a private activity bond any obli16 gation issued to refund (or which is part of

17 a series of obligations issued to refund) an

18 obligation issued before August 8, 1986,

19 which was not an industrial development

20 bond (as defined in section 103(b)(2) as in

21 effect on the day before the date of the en22 actment of the Tax Reform Act of 1986)

23 or a private loan bond (as defined in sec24 tion 103(o)(2)(A), as so in effect, but with25 out regard to any exemption from such
1260

•S 2357

1 definition other than section

2 103(o)(2)(A)).’’; and

3 (B) by striking ‘‘(other than a qualified

4 501(c)(3) bond, as defined in section 145)’’ in

5 subparagraph (C)(ii)(I).

6 (d) E FFECTIVE DATE.—The amendments made by

7 this section shall apply to bonds (including refunding

8 bonds) issued after December 31, 1994.

9 Subtitle D—Tax Treatment of

10 Long-Term Care Insurance and

11 Services

12 SEC. 7401. QUALIFIED LONG-TERM CARE SERVICES TREAT13 ED AS MEDICAL CARE.

14 (a) GENERAL RULE.—Paragraph (1) of section

15 213(d) (defining medical care) is amended by striking

16 ‘‘or’’ at the end of subparagraph (B), by redesignating

17 subparagraph (C) as subparagraph (D), and by inserting

18 after subparagraph (B) the following new subparagraph:

19 ‘‘(C) for qualified long-term care services

20 (as defined in subsection (g)), or’’.

21 (b) QUALIFIED LONG-TERM CARE SERVICES DE22 FINED.—Section 213 (relating to the deduction for medi23 cal, dental, etc., expenses) is amended by adding at the

24 end the following new subsection:
1261

•S 2357

1 ‘‘(g) QUALIFIED LONG-TERM CARE SERVICES.—For

2 purposes of this section—

3 ‘‘(1) IN GENERAL.—The term ‘qualified long4 term care services’ means necessary diagnostic, cur5 ing, mitigating, treating, preventive, therapeutic, and

6 rehabilitative services, and maintenance and per7 sonal care services (whether performed in a residen8 tial or nonresidential setting) which—

9 ‘‘(A) are required by an individual during

10 any period the individual is an incapacitated in11 dividual (as defined in paragraph (2)),

12 ‘‘(B) have as their primary purpose—

13 ‘‘(i) the provision of needed assistance

14 with 1 or more activities of daily living (as

15 defined in paragraph (3)), or

16 ‘‘(ii) protection from threats to health

17 and safety due to severe cognitive impair18 ment, and

19 ‘‘(C) are provided pursuant to a continuing

20 plan of care prescribed by a licensed profes21 sional (as defined in paragraph (4)).

22 ‘‘(2) INCAPACITATED INDIVIDUAL.—The term

23 ‘incapacitated individual’ means any individual

24 who—
1262

•S 2357

1 ‘‘(A) is unable to perform, without sub2 stantial assistance from another individual (in3 cluding assistance involving cueing or substan4 tial supervision), at least 2 activities of daily

5 living as defined in paragraph (3), or

6 ‘‘(B) has severe cognitive impairment as

7 defined by the Secretary in consultation with

8 the Secretary of Health and Human Services.

9 Such term shall not include any individual otherwise

10 meeting the requirements of the preceding sentence

11 unless a licensed professional within the preceding

12 12-month period has certified that such individual

13 meets such requirements.

14 ‘‘(3) ACTIVITIES OF DAILY LIVING.—Each of

15 the following is an activity of daily living:

16 ‘‘(A) Eating.

17 ‘‘(B) Toileting.

18 ‘‘(C) Transferring.

19 ‘‘(D) Bathing.

20 ‘‘(E) Dressing.

21 ‘‘(4) L ICENSED PROFESSIONAL.—The term ‘li22 censed professional’ means—

23 ‘‘(A) a physician or registered professional

24 nurse, or
1263

•S 2357

1 ‘‘(B) any other individual who meets such

2 requirements as may be prescribed by the Sec3 retary after consultation with the Secretary of

4 Health and Human Services.

5 ‘‘(5) C ERTAIN SERVICES NOT INCLUDED.—The

6 term ‘qualified long-term care services’ shall not in7 clude any services provided to an individual—

8 ‘‘(A) by a relative (directly or through a

9 partnership, corporation, or other entity) unless

10 the relative is a licensed professional with re11 spect to such services, or

12 ‘‘(B) by a corporation or partnership which

13 is related (within the meaning of section 267(b)

14 or 707(b)) to the individual.

15 For purposes of this paragraph, the term ‘relative’

16 means an individual bearing a relationship to the in17 dividual which is described in paragraphs (1)

18 through (8) of section 152(a).’’

19 (c) TECHNICAL AMENDMENTS.—

20 (1) Subparagraph (D) of section 213(d)(1) (as

21 redesignated by subsection (a)) is amended to read

22 as follows:

23 ‘‘(D) for insurance (including amounts

24 paid as premiums under part B of title XVIII

25 of the Social Security Act, relating to supple-
1264

•S 2357

1 mentary medical insurance for the aged) cover2 ing medical care referred to in—

3 ‘‘(i) subparagraphs (A) and (B), or

4 ‘‘(ii) subparagraph (C), but only if

5 such insurance is provided under a quali6 fied long-term care insurance policy (as de7 fined in section 7702B(b)) and the amount

8 paid for such insurance is not disallowed

9 under section 7702B(d)(4).’’

10 (2) Paragraph (6) of section 213(d) is amend11 ed—

12 (A) by striking ‘‘subparagraphs (A) and

13 (B)’’ and inserting ‘‘subparagraph (A), (B),

14 and (C)’’, and

15 (B) by striking ‘‘paragraph (1)(C)’’ in sub16 paragraph (A) and inserting ‘‘paragraph

17 (1)(D)’’.

18 (d) E FFECTIVE DATE.—The amendments made by

19 this section shall apply to taxable years beginning after

20 December 31, 1995.

21 SEC. 7402. TREATMENT OF LONG-TERM CARE INSURANCE.

22 (a) GENERAL RULE.—Chapter 79 (relating to defini23 tions) is amended by inserting after section 7702A the fol24 lowing new section:
1265

•S 2357

1 ‘‘SEC. 7702B. TREATMENT OF LONG-TERM CARE INSUR2 ANCE.

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

4 ‘‘(1) a qualified long-term care insurance policy

5 (as defined in subsection (b)) shall be treated as an

6 accident or health insurance contract,

7 ‘‘(2) amounts (other than policyholder dividends

8 (as defined in section 808) or premium refunds) re9 ceived under a qualified long-term care insurance

10 policy shall be treated as amounts received for per11 sonal injuries and sickness and shall be treated as

12 reimbursement for expenses actually incurred for

13 medical care (as defined in section 213(d)),

14 ‘‘(3) any plan of an employer providing cov15 erage under a qualified long-term care insurance pol16 icy shall be treated as an accident or health plan

17 with respect to such coverage,

18 ‘‘(4) except as provided in subsection (d)(4),

19 amounts paid for a qualified long-term care insur20 ance policy providing the benefits described in sub21 section (b)(6)(B) shall be treated as payments made

22 for insurance for purposes of section 213(d)(1)(D),

23 and

24 ‘‘(5) a qualified long-term care insurance policy

25 shall be treated as a guaranteed renewable contract

26 subject to the rules of section 816(e).
1266

•S 2357

1 ‘‘(b) QUALIFIED LONG-TERM CARE INSURANCE POL2 ICY.—For purposes of this title:

3 ‘‘(1) IN GENERAL.—The term ‘qualified long4 term care insurance policy’ means any certified long5 term care policy (as defined in section 1011(4)(A))

6 of the Health Security Act) that—

7 ‘‘(A) limits benefits under such policy to

8 individuals who are certified by a licensed pro9 fessional (as defined in section 213(g)(4)) with10 in the preceding 12-month period—

11 ‘‘(i) as being unable to perform, with12 out substantial assistance from another in13 dividual (including assistance involving

14 cueing or substantial supervision), 2 or

15 more activities of daily living (as defined in

16 section 213(g)(3)), or

17 ‘‘(ii) having a severe cognitive impair18 ment (as defined in section 213(g)(2)(B)),

19 and

20 ‘‘(B) satisfies the requirements of para21 graphs (2), (3), (4), (5), and (6).

22 ‘‘(2) PREMIUM REQUIREMENTS.—The require23 ments of this paragraph are met with respect to a

24 policy if such policy provides that premium pay25 ments may not be made earlier than the date such
1267

•S 2357

1 payments would have been made if the contract pro2 vided for level annual payments over the life expect3 ancy of the insured or 20 years, whichever is short4 er. A policy shall not be treated as failing to meet

5 the requirements of the preceding sentence solely by

6 reason of a provision in the policy providing for a

7 waiver of premiums if the insured becomes an indi8 vidual certified in accordance with paragraph (1)(A).

9 ‘‘(3) PROHIBITION OF CASH VALUE.—The re10 quirements of this paragraph are met if the policy

11 does not provide for a cash value or other money

12 that can be paid, assigned, pledged as collateral for

13 a loan, or borrowed, other than as provided in para14 graph (4).

15 ‘‘(4) REFUNDS OF PREMIUMS AND DIVI16 DENDS.—The requirements of this paragraph are

17 met with respect to a policy if such policy provides

18 that—

19 ‘‘(A) policyholder dividends are required to

20 be applied as a reduction in future premiums

21 or, to the extent permitted under paragraph

22 (6), to increase benefits described in subsection

23 (a)(2),

24 ‘‘(B) refunds of premiums upon a partial

25 surrender or a partial cancellation are required
1268

•S 2357

1 to be applied as a reduction in future pre2 miums, and

3 ‘‘(C) any refund on the death of the in4 sured, or on a complete surrender or cancella5 tion of the policy, cannot exceed the aggregate

6 premiums paid under the contract.

7 Any refund on a complete surrender or cancellation

8 of the policy shall be includible in gross income to

9 the extent that any deduction or exclusion was allow10 able with respect to the premiums.

11 ‘‘(5) COORDINATION WITH OTHER ENTITLE12 MENTS.—The requirements of this paragraph are

13 met with respect to a policy if such policy does not

14 pay, or provide reimbursement for, expenses in15 curred to the extent that such expenses are also paid

16 or reimbursed under title XVIII of the Social Secu17 rity Act or are paid or reimbursed under a certified

18 standard health plan (as defined in section

19 1011(2)(A)) of the Health Security Act).

20 ‘‘(6) MAXIMUM BENEFIT.—

21 ‘‘(A) IN GENERAL.—The requirements of

22 this paragraph are met if the benefits payable

23 under the policy for any period (whether on a

24 periodic basis or otherwise) may not exceed the

25 dollar amount in effect for such period.
1269

•S 2357

1 ‘‘(B) NONREIMBURSEMENT PAYMENTS

2 PERMITTED.—Benefits shall include all pay3 ments described in subsection (a)(2) to or on

4 behalf of an insured individual without regard

5 to the expenses incurred during the period to

6 which the payments relate. For purposes of sec7 tion 213(a), such payments shall be treated as

8 compensation for expenses paid for medical

9 care.

10 ‘‘(C) DOLLAR AMOUNT.—The dollar

11 amount in effect under this paragraph shall be

12 $150 per day (or the equivalent amount within

13 the calendar year in the case of payments on

14 other than a per diem basis).

15 ‘‘(D) ADJUSTMENTS FOR INCREASED

16 COSTS.—

17 ‘‘(i) IN GENERAL.—In the case of any

18 calendar year after 1996, the dollar

19 amount in effect under subparagraph (C)

20 for any period or portion thereof occurring

21 during such calendar year shall be equal to

22 the sum of—

23 ‘‘(I) the amount in effect under

24 subparagraph (C) for the preceding
1270

•S 2357

1 calendar year (after application of this

2 subparagraph), plus

3 ‘‘(II) the product of the amount

4 referred to in subclause (I) multiplied

5 by the cost-of-living adjustment for

6 the calendar year.

7 ‘‘(ii) COST-OF-LIVING ADJUSTMENT.—

8 For purposes of clause (i), the cost-of-liv9 ing adjustment for any calendar year is the

10 percentage (if any) by which the cost index

11 under clause (iii) for the preceding cal12 endar year exceeds such index for the sec13 ond preceding calendar year.

14 ‘‘(iii) COST INDEX.—The Secretary, in

15 consultation with the Secretary of Health

16 and Human Services, shall before January

17 1, 1997, establish a cost index to measure

18 increases in costs of nursing home and

19 similar facilities. The Secretary may from

20 time to time revise such index to the extent

21 necessary to accurately measure increases

22 or decreases in such costs.

23 ‘‘(iv) SPECIAL RULE FOR CALENDAR

24 YEAR 1997.—Notwithstanding clause (ii),

25 for purposes of clause (i), the cost-of-living
1271

•S 2357

1 adjustment for calendar year 1997 is the

2 sum of 1.5 percent plus the percentage by

3 which the CPI for calendar year 1996 (as

4 defined in section 1(f)(4)) exceeds the CPI

5 for calendar year 1995 (as so defined).

6 ‘‘(E) PERIOD.—For purposes of this para7 graph, a period begins on the date that an indi8 vidual has a condition which would qualify for

9 certification under subsection (b)(1)(A) and

10 ends on the earlier of the date upon which—

11 ‘‘(i) such individual has not been so

12 certified within the preceding 12-months,

13 or

14 ‘‘(ii) the individual’s condition ceases

15 to be such as to qualify for certification

16 under subsection (b)(1)(A).

17 ‘‘(F) A GGREGATION RULE.—For purposes

18 of this paragraph, all policies issued with re19 spect to the same insured shall be treated as

20 one policy.

21 ‘‘(c) TREATMENT OF LONG-TERM CARE INSURANCE

22 POLICIES.—For purposes of this title, any amount re23 ceived or coverage provided under a long-term care insur24 ance policy that is not a qualified long-term care insurance

25 policy shall not be treated as an amount received for per-
1272

•S 2357

1 sonal injuries or sickness or provided under an accident

2 or health plan and shall not be treated as excludible from

3 gross income under any provision of this title.

4 ‘‘(d) TREATMENT OF COVERAGE PROVIDED AS PART

5 OF A LIFE INSURANCE CONTRACT.—Except as otherwise

6 provided in regulations prescribed by the Secretary, in the

7 case of any long-term care insurance coverage (whether

8 or not qualified) provided by rider on a life insurance con9 tract—

10 ‘‘(1) I N GENERAL.—This section shall apply as

11 if the portion of the contract providing such cov12 erage is a separate contract or policy.

13 ‘‘(2) PREMIUMS AND CHARGES FOR LONG-TERM

14 CARE COVERAGE.—Premium payments for coverage

15 under a long-term care insurance policy and charges

16 against the life insurance contract’s cash surrender

17 value (within the meaning of section 7702(f)(2)(A))

18 for such coverage shall be treated as premiums for

19 purposes of subsection (b)(2).

20 ‘‘(3) APPLICATION OF SECTION 7702.—Section

21 7702(c)(2) (relating to the guideline premium limi22 tation) shall be applied by increasing the guideline

23 premium limitation with respect to a life insurance

24 contract, as of any date—
1273

•S 2357

1 ‘‘(A) by the sum of any charges (but not

2 premium payments) described in paragraph (2)

3 made to that date under the contract, less

4 ‘‘(B) any such charges the imposition of

5 which reduces the premiums paid for the con6 tract (within the meaning of section

7 7702(f)(1)).

8 ‘‘(4) APPLICATION OF SECTION 213.—No deduc9 tion shall be allowed under section 213(a) for

10 charges against the life insurance contract’s cash

11 surrender value described in paragraph (2), unless

12 such charges are includible in income as a result of

13 the application of section 72(e)(10) and the coverage

14 provided by the rider is a qualified long-term care

15 insurance policy under subsection (b).

16 ‘‘(5) AMOUNT OF DISTRIBUTION UNDER

17 RIDER.—This subsection shall not apply to any rider

18 on a life insurance contract unless the percentage re19 duction in the cash surrender value of the contract

20 by reason of any payment under the rider does not

21 exceed the percentage reduction in the death benefit

22 payable under the contract by reason of the pay23 ment.

24 For purposes of this subsection, the term ‘portion’ means

25 only the terms and benefits under a life insurance contract
1274

•S 2357

1 that are in addition to the terms and benefits under the

2 contract without regard to the coverage under a long-term

3 care insurance policy, except that the coverage under a

4 rider described in this subsection shall not fail to be treat5 ed as such an addition by reason of a reduction in the

6 contract’s death benefit or cash surrender value resulting

7 from any payment under the rider.

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

9 such regulations as may be necessary to carry out the re10 quirements of this section, including regulations to prevent

11 the avoidance of this section by providing long-term care

12 insurance coverage under a life insurance contract and to

13 provide for the proper allocation of amounts between the

14 long-term care and life insurance portions of a contract.’’

15 (b) C AFETERIA PLANS.—Section 125(f) is amended

16 by adding at the end the following new sentence: ‘‘Such

17 term does not include any coverage or benefits under a

18 qualified long-term care policy (as defined in section

19 7702B).’’

20 (c) R ESERVES.—Clause (iii) of section 807(d)(3)(A)

21 is amended by inserting ‘‘(other than a qualified long-term

22 care insurance policy within the meaning of section

23 7702(B))’’ after ‘‘contract’’.
1275

•S 2357

1 (d) C LERICAL AMENDMENT.—The table of sections

2 for chapter 79 is amended by inserting after the item re3 lating to section 7702A the following new item:

‘‘Sec. 7702B. Treatment of long-term care insurance.’’

4 (e) EFFECTIVE DATE.—

5 (1) I N GENERAL.—The amendments made by

6 this section shall apply to policies issued after De7 cember 31, 1995, except that a policy issued before

8 January 1, 1996, which, on January 1, 1996, satis9 fies the requirements of a qualified long-term care

10 insurance policy as set forth in section 7702B(b) of

11 the Internal Revenue Code of 1986 shall be treated

12 as having been issued on January 1, 1996.

13 (2) T RANSITION RULE.—If, after the date of

14 enactment of this Act and before January 1, 1996,

15 a policy providing for long-term care insurance cov16 erage is exchanged solely for a qualified long-term

17 care insurance policy (as defined in section

18 7702B(b) of such code), no gain or loss shall be rec19 ognized on the exchange, except that gain (if any)

20 shall be recognized to the extent of the sum of the

21 money and the fair market value of the other prop22 erty received. For purposes of this paragraph, the

23 cancellation of a policy providing for long-term care

24 insurance coverage and reinvestment of the cancella25 tion proceeds in a qualified long-term care insurance
1276

•S 2357

1 policy within 60 days thereafter shall be treated as

2 an exchange.

3 (3) I SSUANCE OF RIDER NOT TREATED AS MA4 TERIAL CHANGE.—For purposes of applying section

5 101(f), 7702, or 7702A of such Code to any con6 tract, the issuance of a rider on a life insurance con7 tract providing long-term care insurance coverage

8 shall not be treated as a modification or material

9 change of such contract.

10 SEC. 7403. TAX TREATMENT OF ACCELERATED DEATH BEN11 EFITS UNDER LIFE INSURANCE CONTRACTS.

12 (a) G ENERAL RULE.—Section 101 (relating to cer13 tain death benefits) is amended by adding at the end the

14 following new subsection:

15 ‘‘(g) TREATMENT OF CERTAIN ACCELERATED

16 DEATH BENEFITS.—

17 ‘‘(1) IN GENERAL.—For purposes of this sec18 tion, any amount received under a life insurance

19 contract on the life of an insured who is a terminally

20 ill individual shall be treated as an amount paid by

21 reason of the death of such insured.

22 ‘‘(2) NECESSARY CONDITIONS.—

23 ‘‘(A) IN GENERAL.—Paragraph (1) shall

24 not apply to any amount received unless—
1277

•S 2357

1 ‘‘(i) the total amount received is not

2 less than the present value (determined

3 under subparagraph (B)) of the reduction

4 in the death benefit otherwise payable in

5 the event of the death of the insured, and

6 ‘‘(ii) the percentage reduction in the

7 cash surrender value of the contract by

8 reason of the distribution does not exceed

9 the percentage reduction in the death ben10 efit payable under the contract by reason

11 of such distribution.

12 ‘‘(B) PRESENT VALUE.—The present value

13 of the reduction in the death benefit shall be

14 determined by—

15 ‘‘(i) using a discount rate which is

16 based on an interest rate which does not

17 exceed the highest interest rate set forth in

18 subparagraph (C), and

19 ‘‘(ii) assuming that the death benefit

20 (or the portion thereof) would have been

21 paid on the date which is 12 months after

22 the date of the certification referred to in

23 paragraph (3).

24 ‘‘(C) R ATES.—The interest rates set forth

25 in this subparagraph are the following:
1278

•S 2357

1 ‘‘(i) the 90-day Treasury bill yield,

2 ‘‘(ii) the rate described as Moody’s

3 Corporate Bond Yield Average-Monthly

4 Average Corporates as published by

5 Moody’s Investors Service, Inc., or any

6 successor thereto, for the calendar month

7 ending 2 months before the date on which

8 the rate is determined, and

9 ‘‘(iii) the rate used to compute the

10 cash surrender values under the contract

11 during the applicable period plus 1 percent

12 per annum.

13 ‘‘(D) SPECIAL RULES RELATING TO

14 LIENS.—If a lien is imposed against a life in15 surance contract with respect to any amount re16 ferred to in paragraph (1)—

17 ‘‘(i) for purposes of subparagraph (A),

18 the amount of such lien shall be treated as

19 a reduction (at the time of receipt) in the

20 death benefit or cash surrender value to

21 the extent that such benefit or value, as

22 the case may be, is (or may become) sub23 ject to the lien, and

24 ‘‘(ii) paragraph (1) shall not apply to

25 the amount received unless any rate of in-
1279

•S 2357

1 terest with respect to any amount in con2 nection with which such lien is imposed

3 does not exceed the highest rate set forth

4 in subparagraph (C).

5 ‘‘(3) T ERMINALLY ILL INDIVIDUAL.—For pur6 poses of this subsection, the term ‘terminally ill indi7 vidual’ means an individual who the insurer has de8 termined, after receipt of an acceptable certification

9 by a licensed physician, has an illness or physical

10 condition which can reasonably be expected to result

11 in death within 12 months after the date of certifi12 cation.

13 ‘‘(4) EXCEPTION FOR BUSINESS-RELATED POLI14 CIES.—This subsection shall not apply in the case of

15 any amount paid to any taxpayer other than the in16 sured if such taxpayer has an insurable interest with

17 respect to the life of the insured by reason of the in18 sured being a director, officer, or employee of the

19 taxpayer or by reason of the insured having a finan20 cial interest in any trade or business carried on by

21 the taxpayer.’’

22 (b) EFFECTIVE DATES.—

23 (1) I N GENERAL.—Except as provided in para24 graph (2), the amendment made by this section shall
1280

•S 2357

1 apply to amounts received after the date of the en2 actment of this Act.

3 (2) DELAY IN APPLICATION OF DISCOUNT

4 RULES.—Clause (i) of section 101(g)(2)(A) of the

5 Internal Revenue Code of 1986 shall not apply to

6 any amount received before January 1, 1995.

7 (3) I SSUANCE OF RIDER NOT TREATED AS MA8 TERIAL CHANGE.—For purposes of applying section

9 101(f), 7702, or 7702A of the Internal Revenue

10 Code of 1986 to any contract, the issuance of a

11 qualified accelerated death benefit rider (as defined

12 in section 818(g) of such Code (as added by this

13 Act)) shall not be treated as a modification or mate14 rial change of such contract.

15 SEC. 7404. TAX TREATMENT OF COMPANIES ISSUING

16 QUALIFIED ACCELERATED DEATH BENEFIT

17 RIDERS.

18 (a) QUALIFIED ACCELERATED DEATH BENEFIT RID19 ERS TREATED AS LIFE INSURANCE.—Section 818 (relat20 ing to other definitions and special rules) is amended by

21 adding at the end the following new subsection:

22 ‘‘(g) QUALIFIED ACCELERATED DEATH BENEFIT

23 RIDERS TREATED AS LIFE INSURANCE.—For purposes of

24 this part—
1281

•S 2357

1 ‘‘(1) I N GENERAL.—Any reference to a life in2 surance contract shall be treated as including a ref3 erence to a qualified accelerated death benefit rider

4 on such contract.

5 ‘‘(2) QUALIFIED ACCELERATED DEATH BENE6 FIT RIDERS.—For purposes of this subsection, the

7 term ‘qualified accelerated death benefit rider’

8 means any rider on a life insurance contract which

9 provides for a distribution to an individual upon the

10 insured becoming a terminally ill individual (as de11 fined in section 101(g)(3)).’’

12 (b) E FFECTIVE DATE.—The amendments made by

13 this section shall take effect on January 1, 1995.

14 Subtitle E—Other Revenue

15 Provisions

16 PART 1—EMPLOYMENT STATUS PROVISIONS

17 SEC. 7501. EMPLOYMENT STATUS PROPOSAL REQUIRED

18 FROM DEPARTMENT OF THE TREASURY.

19 Not later than January 1, 1996, the Secretary of the

20 Treasury shall submit to the Committee on Ways and

21 Means of the House of Representatives and the Committee

22 on Finance of the Senate a legislative proposal providing

23 statutory standards for the classification of workers as

24 employees or independent contractors.
1282

•S 2357

1 SEC. 7502. INCREASE IN SERVICES REPORTING PENALTIES.

2 (a) INCREASE IN PENALTY.—Section 6721(a) (relat3 ing to imposition of penalty) is amended by adding at the

4 end the following new paragraph:

5 ‘‘(3) INCREASED PENALTY FOR RETURNS IN6 VOLVING PAYMENTS FOR SERVICES.—

7 ‘‘(A) I N GENERAL.—Subject to the overall

8 limitation of paragraph (1), the amount of the

9 penalty under paragraph (1) for any failure

10 with respect to any applicable return shall be

11 equal to the greater of $50 or 5 percent of the

12 amount required to be reported correctly but

13 not so reported.

14 ‘‘(B) EXCEPTION WHERE SUBSTANTIAL

15 COMPLIANCE.—Subparagraph (A) shall not

16 apply to failures with respect to applicable re17 turns required to be filed by a person during

18 any calendar year if the aggregate amount

19 which is timely and correctly reported on appli20 cable returns filed by the person for the cal21 endar year is at least 97 percent of the aggre22 gate amount which is required to be reported

23 on applicable returns by the person for the cal24 endar year.

25 ‘‘(C) APPLICABLE RETURN.—For purposes

26 of this paragraph, the term ‘applicable return’
1283

•S 2357

1 means any information return required to be

2 filed under—

3 ‘‘(i) section 6041(a) but only if such

4 return relates to payments to any person

5 for services performed by such person

6 (other than as an employee), or

7 ‘‘(ii) section 6041A(a).’’

8 (b) CONFORMING AMENDMENT.—Section 6721(a)(1)

9 is amended by striking ‘‘In’’ and inserting ‘‘Except as pro10 vided in paragraph (3), in’’.

11 (c) E FFECTIVE DATE.—The amendments made by

12 this section shall apply to returns the due date for which

13 (without regard to extensions) is more than 30 days after

14 the date of the enactment of this Act.

15 PART 2—TAX INCENTIVES FOR HEALTH

16 SERVICES PROVIDERS

17 SEC. 7511. NONREFUNDABLE CREDIT FOR CERTAIN PRI18 MARY HEALTH SERVICES PROVIDERS.

19 (a) I N GENERAL.—Subpart A of part IV of sub20 chapter A of chapter 1 (relating to nonrefundable personal

21 credits) is amended by inserting after section 22 the fol22 lowing new section:
1284

•S 2357

1 ‘‘SEC. 23. PRIMARY HEALTH SERVICES PROVIDERS.

2 ‘‘(a) ALLOWANCE OF CREDIT.—There shall be al3 lowed as a credit against the tax imposed by this chapter

4 for the taxable year an amount equal to the product of—

5 ‘‘(1) the number of months during such taxable

6 year—

7 ‘‘(A) during which the taxpayer is a quali8 fied primary health services provider, and

9 ‘‘(B) which are within the taxpayer’s eligi10 ble service period, and

11 ‘‘(2) $1,000 ($500 in the case of a qualified

12 practitioner who is not a physician).

13 ‘‘(b) Q UALIFIED PRIMARY HEALTH SERVICES PRO14 VIDER.—For purposes of this section—

15 ‘‘(1) IN GENERAL.—The term ‘qualified pri16 mary health services provider’ means, with respect to

17 any month, any qualified practitioner who—

18 ‘‘(A) has in effect a certification by the

19 Bureau as a provider of primary health services

20 and such certification is, when issued, for a

21 health professional shortage area in which the

22 qualified practitioner is providing primary

23 health services,

24 ‘‘(B) is providing primary health services

25 full time in the health professional shortage

26 area identified in such certification, and
1285

•S 2357

1 ‘‘(C) has not received a scholarship under

2 the National Health Service Corps Scholarship

3 Program or any loan repayments under the

4 National Health Service Corps Loan Repay5 ment Program.

6 ‘‘(2) S PECIAL RULES RELATING TO SHORTAGE

7 AREAS.—

8 ‘‘(A) AREAS CEASING TO BE SHORTAGE

9 AREAS.—For purposes of paragraph (1)(B) and

10 subsection (e)(2), a provider shall be treated as

11 providing services in a health professional

12 shortage area when such area ceases to be such

13 an area if it was such an area on the first day

14 of the provider’s eligible service period.

15 ‘‘(B) AREAS WITHIN METROPOLITAN

16 AREAS.—A qualified practitioner who is provid17 ing services within a metropolitan statistical

18 area (as defined in section 143(k)(2)) shall not

19 be treated as meeting the requirements of para20 graph (1)(B) unless such services are provided

21 for, or on behalf of, a governmental or non22 profit entity.

23 ‘‘(3) QUALIFIED PRACTITIONER.—The term

24 ‘qualified practitioner’ means a physician, a physi-
1286

•S 2357

1 cian assistant, a nurse practitioner, or a certified

2 nurse-midwife.

3 ‘‘(c) E LIGIBLE SERVICE PERIOD.—For purposes of

4 this section, the term ‘eligible service period’ means the

5 period of 36 consecutive calendar months beginning with

6 the first month the taxpayer is a qualified primary health

7 services provider (as specified in the certification under

8 subsection (b)(1)(A)). A taxpayer shall not have more

9 than 1 eligible service period.

10 ‘‘(d) O THER DEFINITIONS AND SPECIAL RULES.—

11 For purposes of this section—

12 ‘‘(1) B UREAU.—The term ‘Bureau’ means the

13 Bureau of Primary Health Care, Health Resources

14 and Services Administration of the United States

15 Public Health Service.

16 ‘‘(2) PHYSICIAN.—The term ‘physician’ has the

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

18 the Social Security Act.

19 ‘‘(3) PHYSICIAN ASSISTANT; NURSE PRACTI20 TIONER.—The terms ‘physician assistant’ and ‘nurse

21 practitioner’ have the meanings given to such terms

22 by section 1861(aa)(5) of the Social Security Act.

23 ‘‘(4) CERTIFIED NURSE-MIDWIFE.—The term

24 ‘certified nurse-midwife’ has the meaning given to
1287

•S 2357

1 such term by section 1861(gg)(2) of the Social Secu2 rity Act.

3 ‘‘(5) PRIMARY HEALTH SERVICES.—The term

4 ‘primary health services’ has the meaning given such

5 term by section 330(b)(1) of the Public Health Serv6 ice Act.

7 ‘‘(6) HEALTH PROFESSIONAL SHORTAGE

8 AREA.—The term ‘health professional shortage area’

9 has the meaning given such term by section

10 332(a)(1)(A) of the Public Health Service Act.

11 ‘‘(7) PRACTITIONER CURRENTLY PRACTICING IN

12 SHORTAGE AREAS.—In the case of a qualified practi13 tioner who, on December 31, 1994, was providing

14 primary health services in any health professional

15 shortage area—

16 ‘‘(A) the practitioner’s eligible service pe17 riod shall begin on January 1, 1995, and

18 ‘‘(B) if such practitioner is a physician,

19 subsection (a)(2) shall be applied by substitut20 ing ‘$500’ for ‘$1,000’.

21 ‘‘(e) RECAPTURE OF CREDIT.—

22 ‘‘(1) IN GENERAL.—If there is a recapture

23 event during any taxable year, then—
1288

•S 2357

1 ‘‘(A) no credit shall be allowed under sub2 section (a) for such taxable year and any suc3 ceeding taxable year, and

4 ‘‘(B) the tax of the taxpayer under this

5 chapter for such taxable year shall be increased

6 by an amount equal to the aggregate credits al7 lowed to such taxpayer under this section for all

8 prior taxable years.

9 ‘‘(2) RECAPTURE EVENT DEFINED.—

10 ‘‘(A) IN GENERAL.—For purposes of this

11 subsection, the term ‘recapture event’ means

12 the failure of the taxpayer to be a qualified pri13 mary health services provider during any of the

14 first 24 months during the taxpayer’s eligible

15 service period.

16 ‘‘(B) SECRETARIAL WAIVER.—The Sec17 retary, in consultation with the Secretary of

18 Health and Human Services, may waive any re19 capture event caused by extraordinary cir20 cumstances.

21 ‘‘(3) NO CREDITS AGAINST TAX; MINIMUM

22 TAX.—Any increase in tax under this subsection

23 shall not be treated as a tax imposed by this chapter

24 for purposes of determining the amount of any cred-
1289

•S 2357

1 it under subpart A, B, or D of this part or for pur2 poses of section 55.’’

3 (b) C LERICAL AMENDMENT.—The table of sections

4 for subpart A of part IV of subchapter A of chapter 1

5 is amended by inserting after the item relating to section

6 22 the following new item:

‘‘Sec. 23. Primary health services providers.’’

7 (c) E FFECTIVE DATE.—The amendments made by

8 this section shall apply to taxable years beginning after

9 December 31, 1994.

10 SEC. 7512. EXPENSING OF MEDICAL EQUIPMENT.

11 (a) I N GENERAL.—Paragraph (1) of section 179(b)

12 (relating to dollar limitation on expensing of certain depre13 ciable business assets) is amended to read as follows:

14 ‘‘(1) DOLLAR LIMITATION.—

15 ‘‘(A) GENERAL RULE.—The aggregate cost

16 which may be taken into account under sub17 section (a) for any taxable year shall not exceed

18 $17,500.

19 ‘‘(B) H EALTH CARE PROPERTY.—The ag20 gregate cost which may be taken into account

21 under subsection (a) shall be increased by the

22 lesser of—

23 ‘‘(i) the cost of section 179 property

24 which is health care property placed in

25 service during the taxable year, or
1290

•S 2357

1 ‘‘(ii) $10,000.’’

2 (b) DEFINITION.—Section 179(d) (relating to defini3 tions) is amended by adding at the end the following new

4 paragraph:

5 ‘‘(11) HEALTH CARE PROPERTY.—

6 ‘‘(A) IN GENERAL.—For purposes of this

7 section, the term ‘health care property’ means

8 section 179 property—

9 ‘‘(i) which is medical equipment used

10 in the screening, monitoring, observation,

11 diagnosis, or treatment of patients in a

12 laboratory, medical, or hospital environ13 ment,

14 ‘‘(ii) which is owned (directly or indi15 rectly) and used by 1 or more physicians

16 (as defined in section 1861(r) of the Social

17 Security Act) in the active conduct of the

18 full-time trade or business of all such phy19 sicians of providing primary health services

20 (as defined in section 330(b)(1) of the

21 Public Health Service Act) in a health pro22 fessional shortage area (as defined in sec23 tion 332(a)(1)(A) of the Public Health

24 Service Act), and
1291

•S 2357

1 ‘‘(iii) substantially all the use of which

2 is in such area.

3 ‘‘(B) SPECIAL RULE FOR METROPOLITAN

4 STATISTICAL AREAS.—A physician who is pro5 viding services within a metropolitan statistical

6 area (as defined in section 143(k)(2)) shall not

7 be treated as meeting the requirements of sub8 paragraph (A)(ii) unless such services are pro9 vided for, or on behalf of, a governmental or

10 nonprofit entity.’’

11 (c) R ECAPTURE.—Paragraph (10) of section 179(d)

12 is amended by inserting ‘‘and with respect to any health

13 care property which ceases (other than by an area failing

14 to be treated as a health professional shortage area) to

15 be health care property at any time’’ before the period.

16 (d) E FFECTIVE DATE.—The amendments made by

17 this section shall apply to property placed in service in

18 taxable years beginning after December 31, 1994.

19 PART 3—MISCELLANEOUS PROVISIONS

20 SEC. 7521. POST-RETIREMENT MEDICAL AND LIFE INSUR21 ANCE RESERVES.

22 (a) M INIMUM PERIOD FOR WORKING LIVES.—Sec23 tion 419A(c)(2) (relating to additional reserves for post24 retirement medical and life insurance benefits) is amended
1292

•S 2357

1 by inserting ‘‘(but not less than 10 years)’’ after ‘‘working

2 lives of the covered employees’’.

3 (b) SEPARATE ACCOUNTING.—

4 (1) REQUIREMENT.—Section 419A(c)(2) is

5 amended by adding at the end the following new

6 flush sentence:

7 ‘‘Such reserve shall be maintained as a separate account.’’

8 (2) USE OF RESERVE FOR OTHER PURPOSES.—

9 Paragraph (1) of section 4976(b) (defining disquali10 fied benefit) is amended by striking ‘‘and’’ at the

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

12 the end of subparagraph (C) and inserting ‘‘, and’’,

13 and by adding after subparagraph (C) the following

14 new subparagraph:

15 ‘‘(D) any payment to which subparagraph

16 (C) does not apply which is out of an account

17 described in section 419A(c)(2) and which is

18 not used to provide a post-retirement medical

19 benefit or life insurance benefit.’’

20 (c) EFFECTIVE DATES.—

21 (1) I N GENERAL.—Except as provided in para22 graph (2), the amendments made by this section

23 shall apply to contributions paid or accrued after

24 December 31, 1994, in taxable years ending after

25 such date.
1293

•S 2357

1 (2) SEPARATE ACCOUNTING.—The amendments

2 made by subsection (b) shall apply to contributions

3 paid or accrued after the date of the enactment of

4 this Act, in taxable years ending after such date.

5 SEC. 7522. CREDIT FOR COST OF PERSONAL ASSISTANCE

6 SERVICES REQUIRED BY EMPLOYED INDIVID7 UALS.

8 (a) I N GENERAL.—Subpart A of part IV of sub9 chapter A of chapter 1 (relating to nonrefundable personal

10 credits), as amended by section 7511, is amended by in11 serting after section 23 the following new section:

12 ‘‘SEC. 24. COST OF PERSONAL ASSISTANCE SERVICES RE13 QUIRED BY EMPLOYED INDIVIDUALS.

14 ‘‘(a) ALLOWANCE OF CREDIT.—

15 ‘‘(1) IN GENERAL.—In the case of an eligible

16 individual, there shall be allowed as a credit against

17 the tax imposed by this chapter for the taxable year

18 an amount equal to the applicable percentage of the

19 personal assistance expenses paid or incurred by the

20 taxpayer during such taxable year.

21 ‘‘(2) APPLICABLE PERCENTAGE.—For purposes

22 of paragraph (1), the term ‘applicable percentage’

23 means 50 percent reduced (but not below zero) by

24 10 percentage points for each $5,000 by which the

25 modified adjusted gross income (as defined in sec-
1294

•S 2357

1 tion 59B(d)(2)) of the taxpayer for the taxable year

2 exceeds $45,000. In the case of a married individual

3 filing a separate return, the preceding sentence shall

4 be applied by substituting ‘$2,500’ for ‘$5,000’ and

5 ‘$22,500’ for ‘$45,000’.

6 ‘‘(b) L IMITATION.—The amount of personal assist7 ance expenses for the benefit of an individual which may

8 be taken into account under subsection (a) for the taxable

9 year shall not exceed the lesser of—

10 ‘‘(1) $15,000, or

11 ‘‘(2) such individual’s earned income (as de12 fined in section 32(c)(2)) for the taxable year.

13 In the case of a joint return, the amount under the preced14 ing sentence shall be determined separately for each

15 spouse.

16 ‘‘(c) ELIGIBLE INDIVIDUAL.—For purposes of this

17 section, the term ‘eligible individual’ means any individual

18 (other than a nonresident alien) who, by reason of any

19 medically determinable physical impairment which can be

20 expected to result in death or which has lasted or can be

21 expected to last for a continuous period of not less than

22 12 months, is unable to engage in any substantial gainful

23 activity without personal assistance services appropriate to

24 carry out activities of daily living. An individual shall not

25 be treated as an eligible individual unless such individual
1295

•S 2357

1 furnishes such proof thereof (in such form and manner,

2 and at such times) as the Secretary may require.

3 ‘‘(d) OTHER DEFINITIONS.—For purposes of this

4 section—

5 ‘‘(1) PERSONAL ASSISTANCE EXPENSES.—The

6 term ‘personal assistance expenses’ means expenses

7 for—

8 ‘‘(A) personal assistance services appro9 priate to carry out activities of daily living in or

10 outside the home,

11 ‘‘(B) homemaker/chore services incidental

12 to the provision of such personal assistance

13 services,

14 ‘‘(C) in the case of an individual with a

15 cognitive impairment, assistance with life skills,

16 ‘‘(D) communication services,

17 ‘‘(E) work-related support services,

18 ‘‘(F) coordination of services described in

19 this paragraph,

20 ‘‘(G) assistive technology and devices, in21 cluding assessment of the need for particular

22 technology and devices and training of family

23 members, and

24 ‘‘(H) modifications to the principal place of

25 abode of the individual to the extent the ex-
1296

•S 2357

1 penses for such modifications would (but for

2 subsection (e)(2)) be expenses for medical care

3 (as defined by section 213) of such individual.

4 ‘‘(2) A CTIVITIES OF DAILY LIVING.—The term

5 ‘activities of daily living’ means eating, toileting,

6 transferring, bathing, and dressing.

7 ‘‘(e) SPECIAL RULES.—

8 ‘‘(1) PAYMENTS TO RELATED PERSONS.—No

9 credit shall be allowed under this section for any

10 amount paid by the taxpayer to any person who is

11 related (within the meaning of section 267 or

12 707(b)) to the taxpayer.

13 ‘‘(2) COORDINATION WITH MEDICAL EXPENSE

14 DEDUCTION.—Any amount taken into account in de15 termining the credit under this section shall not be

16 taken into account in determining the amount of the

17 deduction under section 213.

18 ‘‘(3) B ASIS REDUCTION.—For purposes of this

19 subtitle, if a credit is allowed under this section for

20 any expense with respect to any property, the in21 crease in the basis of such property which would

22 (but for this paragraph) result from such expense

23 shall be reduced by the amount of the credit so al24 lowed.
1297

•S 2357

1 ‘‘(f) COST-OF-LIVING ADJUSTMENT.—In the case of

2 any taxable year beginning after 1996, the $45,000 and

3 $22,500 amounts in subsection (a)(2) and the $15,000

4 amount in subsection (b) shall be increased by an amount

5 equal to—

6 ‘‘(1) such dollar amount, multiplied by

7 ‘‘(2) the cost-of-living adjustment determined

8 under section 1(f)(3) for the calendar year in which

9 the taxable year begins by substituting ‘calendar

10 year 1995’ for ‘calendar year 1992’ in subparagraph

11 (B) thereof.

12 If any increase determined under the preceding sentence

13 is not a multiple of $1,000, such increase shall be rounded

14 to the nearest multiple of $1,000.’’

15 (b) TECHNICAL AMENDMENT.—Subsection (a) of

16 section 1016 is amended by striking ‘‘and’’ at the end of

17 paragraph (24), by striking the period at the end of para18 graph (25) and inserting ‘‘, and’’, and by adding at the

19 end thereof the following new paragraph:

20 ‘‘(26) in the case of any property with respect

21 to which a credit has been allowed under section 24,

22 to the extent provided in section 24(e)(3).’’

23 (c) C LERICAL AMENDMENT.—The table of sections

24 for subpart A of part IV of subchapter A of chapter 1
1298

•S 2357

1 is amended by inserting after the item relating to section

2 23 the following new item:

‘‘Sec. 24. Cost of personal assistance services required by em- ployed individuals.’’

3 (d) E FFECTIVE DATE.—The amendments made by

4 this section shall apply to taxable years beginning after

5 December 31, 1995.

6 SEC. 7523. DISCLOSURE OF RETURN INFORMATION FOR AD7 MINISTRATION OF CERTAIN PROGRAMS

8 UNDER THE HEALTH SECURITY ACT.

9 (a) I N GENERAL.—Section 6103(l) (relating to dis10 closure of returns and return information for purposes

11 other than tax administration) is amended by adding at

12 the end the following new paragraph:

13 ‘‘(15) DISCLOSURE OF RETURN INFORMATION

14 FOR PURPOSES OF HEALTH SECURITY ACT.—

15 ‘‘(A) IN GENERAL.—The Secretary shall,

16 upon written request, disclose current return in17 formation described in subparagraph (B) to any

18 Federal, State, or local agency administering an

19 assistance program under the Health Security

20 Act.

21 ‘‘(B) I NFORMATION.—The information de22 scribed in this subparagraph is information

23 which consists only of adjusted gross income,

24 the untaxed portion of social security benefits,
1299

•S 2357

1 tax-exempt interest income, marital status, and

2 dependents.

3 ‘‘(C) R ESTRICTION ON DISCLOSURE.—The

4 Secretary shall disclose return information

5 under subparagraph (A) only for purposes of,

6 and to the extent necessary in, determining eli7 gibility for, or the correct amount of, assistance

8 provided under the Health Security Act.

9 ‘‘(D) EXCLUSION FROM MATCHING PRO10 GRAM.—Any matches of information under this

11 paragraph shall not be treated as a matching

12 program for purposes of section 552a of title 5,

13 United States Code.’’

14 (b) CONFORMING AMENDMENTS.—

15 (1) Section 6103(9)(2) is amended by inserting

16 ‘‘or (15)’’ after ‘‘subsection (l)(7)(D)’’.

17 (2) Section 6103(p)(3)(A) is amended by strik18 ing ‘‘or (14)’’ and inserting ‘‘(14), or (15)’’.

19 (3) Section 6103(p)(4) is amended—

20 (A) by striking ‘‘or (12)’’ in the matter

21 preceding subparagraph (A) and inserting

22 ‘‘(12), or (15)’’, and

23 (B) by striking ‘‘or (14)’’ in subparagraph

24 (F)(ii) and inserting ‘‘(14), or (15)’’.
1300

•S 2357

1 (4) Section 7213(a)(2) is amended by striking

2 ‘‘or (12)’’ and inserting ‘‘(12), or (15)’’.

3 Subtitle F—Graduate Medical Edu4 cation and Academic Health

5 Centers Trust Fund

6 SEC. 7601. ESTABLISHMENT OF GRADUATE MEDICAL EDU7 CATION AND ACADEMIC HEALTH CENTERS

8 TRUST FUND.

9 (a) I N GENERAL.—Subchapter A of chapter 98 (re10 lating to establishment of trust funds) is amended by add11 ing at the end the following new part:

12 ‘‘PART II—HEALTH CARE TRUST FUNDS

‘‘Sec. 9551. Graduate Medical Education and Academic Health Centers Trust Fund

13 ‘‘SEC. 9551. GRADUATE MEDICAL EDUCATION AND ACA14 DEMIC HEALTH CENTERS TRUST FUND.

15 ‘‘(a) CREATION OF TRUST FUND.—

16 ‘‘(1) I N GENERAL.—There is established in the

17 Treasury of the United States a trust fund to be

18 known as the ‘Graduate Medical Education and Aca19 demic Health Centers Trust Fund’, consisting of

20 such amounts as may be appropriated or credited to

21 the Academic Health Centers Trust Fund as pro22 vided in this section or section 9602(b).

23 ‘‘(2) ACCOUNTS IN THE TRUST FUND.—The

24 Graduate Medical Education and Academic Health
1301

•S 2357

1 Centers Trust Fund shall consist of the following 2

2 accounts:

3 ‘‘(A) The Graduate Medical Education Ac4 count.

5 ‘‘(B) The Academic Health Centers Ac6 count.

7 Each such account shall consist of such amounts as

8 are allocated to it under this section.

9 ‘‘(b) TRANSFERS TO THE TRUST FUND.—

10 ‘‘(1) TAXES.—There are hereby appropriated to

11 the Graduate Medical Education and Academic

12 Health Centers Trust Fund amounts received in the

13 Treasury under sections 4501 and 4502 (relating to

14 assessments on insured and self-insured health

15 plans) to the extent attributable to the rates of such

16 taxes not in excess of 1.5 percent.

17 ‘‘(2) TRANSFERS FROM OTHER TRUST

18 FUNDS.—The Secretary of Health and Human Serv19 ices shall transfer each fiscal year to the Graduate

20 Medical Education and Academic Health Centers

21 Trust Fund from the Federal Hospital Insurance

22 Trust Fund and the Federal Supplementary Medical

23 Insurance Trust Fund established under the Social

24 Security Act the sum of—
1302

•S 2357

1 ‘‘(A) the amount that would have been

2 paid from the Federal Hospital Insurance Trust

3 Fund in such fiscal year under section

4 1886(d)(5)(B) of such Act (as in effect before

5 the date of the enactment of the Health Secu6 rity Act), plus

7 ‘‘(B) the amount that would have been

8 paid from such trust funds in such fiscal year

9 under section 1886(h) of such Act (as so in ef10 fect).

11 ‘‘(c) G RADUATE MEDICAL EDUCATION ACCOUNT.—

12 ‘‘(1) TRANSFERS.—There is allocated to the

13 Graduate Medical Education Account each fiscal

14 year an amount equal to the sum of—

15 ‘‘(A) amounts described in subsection

16 (b)(2)(B), plus

17 ‘‘(B) the excess of—

18 ‘‘(i) the amounts made available

19 under section 3033 of the Health Security

20 Act, over

21 ‘‘(ii) the amount described in subpara22 graph (A).

23 ‘‘(2) EXPENDITURES.—Amounts in the Grad24 uate Medical Education Account are appropriated to

25 make the payments described in sections 3031 and
1303

•S 2357

1 3055 of the Health Security Act, and to the extent

2 any such amount is not expended during any fiscal

3 year, such amount shall be available for such pur4 pose for subsequent fiscal years.

5 ‘‘(d) ACADEMIC HEALTH CENTERS ACCOUNT.—

6 ‘‘(1) TRANSFERS.—There is allocated to the

7 Academic Health Centers Account each fiscal year

8 an amount equal to the sum of—

9 ‘‘(A) amounts described in subsection

10 (b)(2)(A), plus

11 ‘‘(B) the excess of—

12 ‘‘(i) the amounts made available

13 under section 3053 of the Health Security

14 Act, over

15 ‘‘(ii) the amount described in subpara16 graph (A).

17 ‘‘(2) EXPENDITURES.—Amounts in the Aca18 demic Health Centers Account are appropriated to

19 make the payments described in section 3051 of the

20 Health Security Act, and to the extent any such

21 amount is not expended during any fiscal year, such

22 amount shall be available for such purpose for sub23 sequent fiscal years.

24 ‘‘(e) RULES RELATING TO ACCOUNTS.—
1304

•S 2357

1 ‘‘(1) I NSUFFICIENT FUNDS.—If, for any fiscal

2 year, the sum of the amounts required to be allo3 cated under subsections (c) and (d) exceeds the

4 amounts received in the Graduate Medical Edu5 cation and Academic Health Centers Trust Fund,

6 then each of such amounts required to be so allo7 cated shall be reduced to an amount which bears the

8 same ratio to such amount as the amounts received

9 in the trust fund bear to the amounts required to be

10 so allocated (without regard to this paragraph).

11 ‘‘(2) A LLOCATION OF EXCESS FUNDS AND IN12 TEREST.—Amounts received in the Graduate Medi13 cal Education and Academic Health Centers Trust

14 Fund in excess of the amounts required to be allo15 cated under subsections (c) and (d), and amounts

16 credited to such trust fund under section 9602(b),

17 for any fiscal year shall be allocated to each account

18 ratably on the basis of the amounts allocated to the

19 account for the fiscal year (without regard to this

20 paragraph).’’.

21 (b) C ONFORMING AMENDMENT.—Subchapter A of

22 chapter 98 is amended by inserting after the subchapter

23 heading the following new items:

‘‘Part I. General trust funds.

‘‘Part II. Health care trust funds.
1305

•S 2357

1 ‘‘PART I—GENERAL TRUST FUNDS’’.

2 TITLE VIII—OTHER FEDERAL

3 PROGRAMS

4 Subtitle A—Indian Health Service

5 SEC. 8101. PURPOSES.

6 The purposes of this subtitle are as follows:

7 (1) To ensure the delivery of health care serv8 ices to American Indians and Alaska Natives in a

9 culturally appropriate manner in fulfillment of the

10 unique trust responsibility of the Federal Govern11 ment and legal obligation to American Indian and

12 Alaska Native people—

13 (A) derived from the province of inter14 national law; and

15 (B) founded in the treaties, Constitution,

16 statutes, and court decisions of the United

17 States.

18 (2) To provide sufficient funding for the provi19 sion of the standard benefit package as it applies to

20 all eligible beneficiaries under this subtitle.

21 (3) To ensure that funding levels for services

22 and benefits that are not part of the standard bene23 fits package described in this subtitle are not diluted

24 or diminished.

25 (4) To raise the health status of American Indi26 ans and Alaska Natives to the highest possible level.
1306

•S 2357

1 (5) To raise the quality of health care delivery

2 to American Indians and Alaska Natives to the high3 est possible level.

4 (6) To ensure that health care services provided

5 to American Indians and Alaska Natives are pro6 vided in a manner consistent with, and carries out,

7 the recognized Indian self-determination and tribal

8 self-governance policy of the United States.

9 SEC. 8102. DEFINITIONS.

10 For the purposes of this subtitle—

11 (1) the term ‘‘American Indian’’ has the mean12 ing provided the term ‘‘Indian’’ under paragraph

13 (6);

14 (2) the term ‘‘Alaska Native’’ has the meaning

15 provided the term ‘‘Native’’ under section 3(b) of

16 the Alaska Native Claims Settlement Act (43 U.S.C.

17 1602(b));

18 (3) the term ‘‘health program of the Indian

19 Health Service’’ means a program which provides or

20 is responsible for obtaining health services under

21 this Act or any other applicable law through pro22 grams operated by the Indian Health Service, Indian

23 tribes, or tribal organizations, including Indian

24 tribes or tribal organizations operating under the au-
1307

•S 2357

1 thority of the Indian Self-Determination and Edu2 cation Assistance Act (25 U.S.C. 450 et seq.);

3 (4) the term ‘‘reservation’’ means the reserva4 tion of any federally recognized Indian tribe, former

5 Indian reservations in Oklahoma, and lands held by

6 incorporated Native groups, regional corporations,

7 and village corporations under the provisions of the

8 Alaska Native Claims Settlement Act (43 U.S.C.

9 1601 et seq.);

10 (5) the term ‘‘urban Indian program’’ means

11 any program operated pursuant to title V of the In12 dian Health Care Improvement Act; and

13 (6) the terms ‘‘Indian’’, ‘‘Indian tribe’’, ‘‘tribal

14 organization’’, ‘‘urban Indian’’, ‘‘urban Indian orga15 nization’’, and ‘‘service unit’’ have the same meaning

16 as given such terms under the Indian Health Care

17 Improvement Act (25 U.S.C. 1601 et seq.).

18 SEC. 8103. ELIGIBILITY AND HEALTH SERVICE COVERAGE

19 OF INDIANS.

20 (a) COVERAGE.—The programs of the Indian Health

21 Service shall remain as the principal provider of health

22 care for Indians, except that nothing in this subtitle shall

23 limit the ability of Indians to seek care from providers out24 side the programs of the Indian Health Service.
1308

•S 2357

1 (b) E LIGIBILITY.—An Indian is eligible for services

2 under a program of the Indian Health Service if the indi3 vidual is—

4 (1) eligible to receive services pursuant to sec5 tions 36.1 through 36.14 of title 42, Code of Federal

6 Regulations (as in effect on the day before the date

7 of enactment of this Act);

8 (2) an urban Indian residing in an area served

9 by an urban Indian program; or

10 (3) an Indian described in section 809(b) of the

11 Indian Health Care Improvement Act (25 U.S.C.

12 1679(b)).

13 (c) L IMITATION ON CHARGES.—An eligible Indian

14 (as defined in subsection (b)) receiving services from or

15 being referred by a health program of the Indian Health

16 Service shall not be subject to any charge for deductibles,

17 copayments, coinsurance, or any other cost for health serv18 ices provided under such program.

19 SEC. 8104. SUPPLEMENTAL INDIAN HEALTH CARE BENE20 FITS.

21 (a) I N GENERAL.—All individuals described in sec22 tion 8103(b) shall remain eligible for such benefits under

23 the laws administered by the Indian Health Service as

24 supplement the standard benefit package. The individual
1309

•S 2357

1 shall not be subject to any charge or any other cost for

2 such benefits.

3 (b) MAINTENANCE OF EFFORT.—The Secretary shall

4 ensure that the requirements of this subtitle do not result

5 in a reduction of the level of supplemental benefits pro6 vided by or through the Indian Health Service.

7 SEC. 8105. PROVISION OF HEALTH SERVICES TO NON-INDI8 ANS.

9 (a) C ONTRACTS WITH HEALTH PLANS.—A health

10 program of the Indian Health Service may enter into a

11 contract with a health plan for the provision of health care

12 services to individuals enrolled in such health plan if—

13 (1) the appropriate official of the program de14 termines that the provision of such health services

15 will not result in a denial or diminishment of health

16 services to any individual described in section

17 8103(b); and

18 (2) each tribe or urban Indian organization

19 served by the program authorizes or has authorized

20 the provision of services to such individuals.

21 (b) FAMILY TREATMENT.—A health program of the

22 Indian Health Service may provide health care services to

23 insured non-Indian family members of individuals de24 scribed in section 8103(b) under the same restrictions as

25 those described in subsection (a).
1310

•S 2357

1 (c) A PPLICABLE INDIVIDUAL CHARGES.—Non-Indi2 ans receiving services in a program under subsection (b)

3 shall be subject to any applicable deductibles, copayments,

4 coinsurance, or any other cost for health services provided.

5 SEC. 8106. ESSENTIAL COMMUNITY PROVIDERS.

6 A health program of the Indian Health Service auto7 matically certified as an essential community provider

8 under section 1462 may elect to accept certification—

9 (1) only for eligible individuals described in sec10 tion 8103(b);

11 (2) for non-Indian individuals if each tribe or

12 tribal organization served by the program authorizes

13 or has authorized serving non-Indians; or

14 (3) for eligible individuals described in section

15 8103(b) and family members of such individuals de16 scribed in section 8505(b) who are enrolled in a plan

17 other than a health program of the Indian Health

18 Service, if each tribe or urban Indian organization

19 served by the program authorizes or has authorized

20 serving such family members.

21 SEC. 8107. PAYMENT BY OTHER PROVIDERS.

22 (a) P AYMENT FOR SERVICES PROVIDED BY INDIAN

23 HEALTH SERVICE PROGRAMS.—Nothing in this subtitle

24 shall be construed as amending section 206, 401, or 402

25 of the Indian Health Care Improvement Act (25 U.S.C.
1311

•S 2357

1 1621e, 1641, or 1642) or any other provision of law relat2 ing to payments on behalf of Indians for health services

3 from other Federal programs or from other third party

4 payers.

5 (b) P AYMENT FOR SERVICES PROVIDED BY CON6 TRACTORS.—Nothing in this subtitle shall be construed as

7 affecting any other provision of law, regulation, or judicial

8 or administrative interpretation of law or policy concern9 ing the status of the Indian Health Service as the payer

10 of last resort for Indians eligible for contract health serv11 ices under a health program of the Indian Health Service.

12 (c) P AYMENT FOR SERVICES BY MEDICARE.—Pro13 grams of the Indian Health Service shall be eligible for

14 payments for services provided to Medicare beneficiaries.

15 (d) RETENTION OF RECEIPTS.—Notwithstanding

16 any other provision of law, the collections made by a

17 health program of the Indian Health Service shall remain

18 with the health program if the receipts are used to—

19 (1) expand or improve its services;

20 (2) increase the number of persons it is able to

21 serve;

22 (3) construct, expand or modernize its health

23 care facilities;

24 (4) improve the administration of its health

25 service programs; or
1312

•S 2357

1 (5) develop or improve linkages with other

2 health care providers.

3 (e) C OLLECTION.—Each health program of the In4 dian Health Service shall make every reasonable effort to

5 collect appropriate reimbursement for its costs in provid6 ing health services to persons who are covered by public

7 or private health insurance programs.

8 SEC. 8108. CONTRACTING AUTHORITY.

9 Section 601(d)(1)(B) of the Indian Health Care Im10 provement Act (25 U.S.C. 1661(d)(1)(B)) is amended by

11 inserting ‘‘(including personal services for the provision of

12 direct health care services)’’ after ‘‘goods and services’’.

13 SEC. 8109. CONSULTATION.

14 (a) OMB AND SECRETARY.—The Director of the Of15 fice of Management and Budget and the Secretary shall

16 consult, on an annual basis, with representatives of Indian

17 tribes, tribal organizations, and urban Indian organiza18 tions concerning health care reform initiatives that affect

19 Indian communities, and policy, funding, and administra20 tion of health programs of the Indian Health Service. The

21 Secretary shall solicit and consider the views and rec22 ommendations provided by Indian tribes, tribal organiza23 tions, and representatives of urban Indian organizations

24 in making determinations that affect Indians and Indian
1313

•S 2357

1 tribes and shall resolve any differences in favor of Indians

2 and Indian tribes.

3 (b) FEDERAL ADVISORY GROUP.—

4 (1) E STABLISHMENT.—The Secretary shall es5 tablish an advisory group to assess all aspects of the

6 development and administration of the budget for

7 programs of the Indian Health Service and advise

8 the Office of Management and Budget, the Sec9 retary and Congress with respect to such aspects.

10 (2) COMPOSITION.—The advisory group shall be

11 comprised of—

12 (A) not less than one representative from

13 each area of the Indian Health Service to be

14 appointed by the Secretary from nominees of

15 tribes and tribal organizations in the respective

16 areas;

17 (B) not less than one urban Indian rep18 resentative from each area the Indian Health

19 Service with an urban Indian (as defined in sec20 tion 4(f) of the Indian Health Care Improve21 ment Act (25 U.S.C. 1603(f)) program to be

22 appointed by the Secretary; and

23 (C) such other appointees as the Secretary

24 determines appropriate, on the condition that a

25 majority of the members are selected from
1314

•S 2357

1 nominations submitted to the Secretary by a

2 tribe or tribal organization.

3 SEC. 8110. TRANSITIONAL STUDIES.

4 (a) IN GENERAL.—The Secretary shall conduct plan5 ning, feasibility, or similar health services studies related

6 to the transition of the health programs of the Indian

7 Health Service under health care reform. Such studies

8 shall take into account the measurements and the means

9 to accomplish the Healthy People 2000 objectives as re10 quired under sections 3 and 214 of the Indian Health Care

11 Improvement Act. Such studies shall include an assess12 ment of—

13 (1) the feasibility of developing an Indian

14 health plan or plans;

15 (2) the financing necessary to provide the same

16 level of standard benefits to American Indians and

17 Alaska Natives as will be available to all other

18 Americans;

19 (3) the staffing, program and infrastructure en20 hancements required to deliver the standard benefits

21 package;

22 (4) the facility and capital construction needs

23 necessary to provide the standard benefit package;

24 and
1315

•S 2357

1 (5) the administrative improvements necessary

2 to network, share and access patient data, quality

3 management and improvement data, and financial

4 information.

5 (b) ADVISORY GROUP.—

6 (1) E STABLISHMENT.—The Secretary shall es7 tablish an advisory group to provide the Secretary

8 with advise concerning the focus, content and con9 duct of studies under subsection (a).

10 (2) COMPOSITION.—The advisory group shall be

11 comprised of—

12 (A) not less than one representative from

13 each area of the Indian Health Service to be

14 appointed by the Secretary from among nomi15 nees of tribes and tribal organizations in the re16 spective areas;

17 (B) not less than one urban Indian rep18 resentative from each area of the Indian Health

19 Service which an urban Indian (as defined in

20 section 4(f) of the Indian Health Care Improve21 ment Act (25 U.S.C. 1603(f)) program to ap22 pointed by the Secretary; and

23 (C) other appointees as the Secretary de24 termines appropriate, except that the Secretary

25 shall ensure that a majority of the members so
1316

•S 2357

1 appointed are selected from nominations sub2 mitted to the Secretary by tribes or tribal orga3 nizations.

4 (c) R ECOMMENDATIONS.—Not later than June 30,

5 1997, the Secretary shall submit to Congress rec6 ommendations based on the studies conducted under this

7 section, including recommendations for changes in the

8 structure of Indian Health Services. A time-table for im9 plementing health care reform activities shall be included

10 in such final recommendations.

11 SEC. 8111. LOANS AND LOAN GUARANTEES.

12 The Secretary may make loans, and guarantee the

13 payment of principal and interest, to Federal and non14 Federal lenders on behalf of health programs of the Indian

15 Health Service for the purpose of improving and expand16 ing such facilities. Loans and loan guarantees under this

17 section shall be provided under such terms and conditions

18 as the Secretary may prescribe.

19 SEC. 8112. SIMPLIFICATION OF BILLING.

20 The Secretary shall take such action as may be nec21 essary to ensure that health programs of the Indian

22 Health Service may submit all claims for benefits or pay23 ment for services entitled to reimbursement in a manner

24 consistent with that of all other health care providers.
1317

•S 2357

1 SEC. 8113. LONG-TERM CARE DEMONSTRATIONS.

2 Subject to the availability of appropriations under

3 subtitle B of title II (for home and community-based long4 term care services), the Secretary shall establish a dem5 onstration program to provide five grants to health pro6 grams of the Indian Health Service to enable such Pro7 grams to plan and implement innovative methods of pro8 viding enhanced home and community-based long-term

9 care services.

10 SEC. 8114. TECHNICAL ASSISTANCE.

11 Indian tribes shall be eligible for funds made avail12 able under this Act for technical assistance or transitional

13 support.

14 SEC. 8115. PUBLIC HEALTH PROGRAMS.

15 Health programs of the Indian Health Service shall

16 be eligible to apply for funding under public health pro17 grams authorized under title III of this Act (including

18 those under section 3695(b)(14)), as deemed appropriate

19 by the Secretary.

20 SEC. 8116. SURVEY OF HEALTH SERVICES AVAILABLE TO

21 INDIAN VETERANS.

22 (a) I N GENERAL.—The Secretary, in consultation

23 with the Secretary of Veterans Affairs, Indian tribes and

24 tribal organizations, shall conduct a survey to assess the

25 availability and accessibility of health care services for In26 dian veterans residing on Indian reservations.
1318

•S 2357

1 (b) REPORT.—Not later than 180 days after the date

2 of enactment of this Act, the Secretary shall submit a re3 port to Congress that shall include recommendations con4 cerning the survey conducted under subsection (a).

5 SEC. 8117. RULE OF CONSTRUCTION.

6 Unless otherwise provided in this Act, no part of this

7 Act shall be construed to rescind or otherwise modify any

8 obligations, findings, or purposes contained in the Indian

9 Health Care Improvement Act (25 U.S.C. 1601 et seq.)

10 and in the Indian Self-Determination and Education As11 sistance Act (25 U.S.C. 450 et seq).

12 SEC. 8118. AUTHORIZATION OF APPROPRIATIONS.

13 (a) AUTHORIZATION.—

14 (1) I N GENERAL.—For the purpose of carrying

15 out this subtitle, including transitional costs and the

16 purchase of additional contract health care services

17 for individual eligible Indians, there are authorized

18 to be appropriated $515,000,000 for fiscal year

19 1995, $930,000,000 for fiscal year 1996, and

20 $1,150,000,000 for each of the fiscal years 1997

21 through 2004.

22 (2) SUPPLEMENTAL INDIAN HEALTH CARE

23 BENEFITS.—In addition to amounts otherwise au24 thorized to be appropriated (including the amounts

25 authorized to be appropriated under paragraph (1)),
1319

•S 2357

1 for the purpose of carrying out section 8104, there

2 are authorized to be appropriated $360,000,000 for

3 fiscal year 1995, $400,000,000 for each of the fiscal

4 years 1996 through 1999, and such sums as may be

5 necessary for fiscal year 2000 and each fiscal year

6 thereafter.

7 (3) L OANS AND LOAN GUARANTEES.—In addi8 tion to amounts otherwise authorized to be appro9 priated (including the amounts authorized to be ap10 propriated under paragraph (1)), for the purpose of

11 carrying out section 8111, there are authorized to be

12 appropriated $500,000,000 for the principal of the

13 loan. The authority of the Secretary to make loans

14 and to guarantee loans under such section shall be

15 subject to such amounts as may be provided for in

16 each fiscal year in advance in an appropriations Act.

17 (b) R ELATION TO OTHER FUNDS.—The authoriza18 tions of appropriations established under this subtitle are

19 in addition to any other authorizations of appropriations

20 that are available for the purposes of carrying out this

21 subtitle.

22 SEC. 8119. FUNDING METHODOLOGY.

23 The Secretary shall establish new methodologies, con24 sistent with the Indian Health Care Improvement Act, for

25 the distribution to Indian tribes of all new funds that be-
1320

•S 2357

1 come available for health care initiatives under this sub2 title. New distribution methodologies should consider dif3 ferences in local resources, status of health (as declared

4 under section 3 of such Act), socioeconomic status of trib5 al people, and facilities, equipment and staff available in

6 concert with the establishment of Indian epidemiological

7 centers under such Act.

8 Subtitle B—Department of

9 Veterans Affairs

10 SEC. 8101. SHORT TITLE.

11 This Act may be cited as the ‘‘Veterans Health Care

12 Reform Act of 1994’’.

13 SEC. 8102. BENEFITS AND ELIGIBILITY THROUGH DEPART14 MENT OF VETERANS AFFAIRS MEDICAL SYS15 TEM.

16 (a) DEPARTMENT OF VETERANS AFFAIRS AS A PAR17 TICIPANT IN HEALTH CARE REFORM.—

18 (1) IN GENERAL.—Title 38, United States

19 Code, is amended by inserting after chapter 17 the

20 following new chapter:

21 ‘‘CHAPTER 18—ELIGIBILITY AND BENEFITS

22 UNDER HEALTH SECURITY ACT

‘‘SUBCHAPTER I—GENERAL

‘‘1801. Definitions.

‘‘SUBCHAPTER II—ENROLLMENT

‘‘1811. Enrollment: veterans.

‘‘1812. Enrollment: CHAMPVA eligibles.
1321

•S 2357

‘‘1813. Enrollment: family members.

‘‘SUBCHAPTER III—BENEFITS

‘‘1821. Benefits for VA enrollees.

‘‘1822. Chapter 17 benefits.

‘‘1823. Supplemental health benefits plans.

‘‘1824. Limitation regarding veterans enrolled with health plans outside Depart- ment.

‘‘SUBCHAPTER IV—FINANCIAL MATTERS

‘‘1831. Premiums, copayments, and other charges.

‘‘1832. Medicare coverage and reimbursement.

‘‘1833. Recovery of cost of certain care and services.

‘‘1834. Health Plan Fund.

1 ‘‘SUBCHAPTER I—GENERAL

2 ‘‘§ 1801. Definitions

3 ‘‘For purposes of this chapter:

4 ‘‘(1) The term ‘health plan’ means an entity

5 that has been certified under the Health Security

6 Act as a health plan.

7 ‘‘(2) The term ‘VA health plan’ means a health

8 plan that is operated by the Secretary under section

9 7341 of this title.

10 ‘‘(3) The term ‘VA enrollee’ means an individ11 ual enrolled under the Health Security Act in a VA

12 health plan.

13 ‘‘(4) The term ‘standard benefit package’

14 means the package of benefits required to be pro15 vided by a health plan under the Health Security

16 Act.
1322

•S 2357

1 ‘‘SUBCHAPTER II—ENROLLMENT

2 ‘‘§ 1811. Enrollment: veterans

3 ‘‘Each veteran may enroll with a VA health plan. A

4 veteran who wants to receive the standard benefit package

5 through the Department shall enroll with a VA health

6 plan.

7 ‘‘§ 1812. Enrollment: CHAMPVA eligibles

8 ‘‘An individual who is eligible for benefits under sec9 tion 1713 of this title may enroll with a VA health plan

10 in the same manner as a veteran.

11 ‘‘§ 1813. Enrollment: family members

12 ‘‘(a) The Secretary may authorize a VA health plan

13 to enroll members of the family of an enrollee under sec14 tion 1811 or 1812 of this title, subject to payment of pre15 miums, deductibles, copayments, and coinsurance as re16 quired under the Health Security Act.

17 ‘‘(b) For purposes of subsection (a), an enrollee’s

18 family is those individuals (other than the enrollee) in19 cluded within the term ‘family’ as defined in section

20 1113(b) of the Health Security Act.

21 ‘‘SUBCHAPTER III—BENEFITS

22 ‘‘§ 1821. Benefits for VA enrollees

23 ‘‘The Secretary shall ensure that each VA health plan

24 provides to each individual enrolled with it the items and

25 services in the standard benefit package under the Health
1323

•S 2357

1 Security Act, to the extent that such items and services

2 can be provided consistent with appropriations for that

3 purpose. In the event that appropriations are insufficient

4 the Secretary may revise the standard benefit package

5 available to enrolled individuals.

6 ‘‘§ 1822. Chapter 17 benefits

7 ‘‘The Secretary shall provide to a veteran the care

8 and services not included in the standard benefit package

9 that are authorized to be provided under chapter 17 of

10 this title in accordance with the terms and conditions ap11 plicable to that veteran and that care under such chapter,

12 to the extent that such items and services can be provided

13 consistent with appropriations for that purpose. In the

14 event that appropriations are insufficient the Secretary

15 may revise the standard benefit package available to en16 rolled individuals.

17 ‘‘§ 1823. Supplemental health benefits plans

18 ‘‘(a) As part of a VA health plan, the Secretary may

19 offer to veterans—

20 ‘‘(1) supplemental health benefits plans (as that

21 term is defined in section 1011(3)(B) of the Health

22 Security Act) for the care and services described in

23 subsection (b); and
1324

•S 2357

1 ‘‘(2) cost-sharing plans consistent with the re2 quirements of part 4 of subtitle B of title I of the

3 Health Security Act.

4 ‘‘(b) The care and services referred to in subsection

5 (a) are care and services that—

6 ‘‘(1) are not available under the standard bene7 fit package; and

8 ‘‘(2) can be provided by the Secretary at rea9 sonable cost.

10 ‘‘§ 1824. Limitation regarding veterans enrolled with

11 health plans outside Department

12 ‘‘A veteran who is residing in a community-rated area

13 in which the Department operates a health plan and who

14 is enrolled in a health plan that is not operated by the

15 Department may be provided the items and services in the

16 standard benefit package by a VA health plan only if the

17 plan is reimbursed for the care provided.

18 ‘‘SUBCHAPTER IV—FINANCIAL MATTERS

19 ‘‘§ 1831. Premiums, copayments, and other charges

20 ‘‘(a) Except as provided in paragraph (2), the Sec21 retary may not impose on or collect from a veteran de22 scribed in subsection (b) who is a VA enrollee a cost-share

23 charge of any kind (whether a premium, copayment, de24 ductible, coinsurance charge, or other charge) for items
1325

•S 2357

1 and services in the standard benefit package that a VA

2 health plan provides.

3 ‘‘(b) The veterans referred to in subsection (a) are

4 the following:

5 ‘‘(1) Any veteran with a compensable service6 connected disability.

7 ‘‘(2) Any veteran whose discharge or release

8 from the active military, naval or air service was for

9 a disability incurred or aggravated in the line of

10 duty.

11 ‘‘(3) Any veteran who is in receipt of, or who,

12 but for a suspension pursuant to section 1151 of

13 this title (or both such a suspension and the receipt

14 of retired pay), would be entitled to disability com15 pensation, but only to the extent that such a veter16 an’s continuing eligibility for such care is provided

17 for in the judgment or settlement provided for in

18 such section.

19 ‘‘(4) Any veteran who is a former prisoner of

20 war.

21 ‘‘(5) Any veteran of the Mexican border period

22 or World War I.

23 ‘‘(6) Any veteran who is unable to defray the

24 expenses of necessary care as determined under sec25 tion 1722(a) of this title.
1326

•S 2357

1 ‘‘(7) Any veteran referred to in subparagraph

2 (A), (B), or (C) of section 1710(e) of this title.

3 ‘‘(c)(1) Except as provided in paragraph (2), in the

4 case of a VA enrollee who is not described in subsection

5 (b), the Secretary shall charge premiums and establish

6 copayments, deductibles, and coinsurance amounts for

7 care and services provided under this chapter. The pre8 mium rate, and the rates for deductibles and copayments,

9 for each VA health plan shall be established by that health

10 plan based on rules established under the Health Security

11 Act.

12 ‘‘(2) The Secretary may not charge a veteran referred

13 to in paragraph (1) a premium for any care or service

14 that the Secretary provides the veteran under a supple15 mental health benefits plan offered under section 1823 of

16 this title if the Secretary is required to provide such care

17 or service under chapter 17 of this title.

18 ‘‘§ 1832. Medicare coverage and reimbursement

19 ‘‘(a) For purposes of any program administered by

20 the Secretary of Health and Human Services under title

21 XVIII of the Social Security Act (42 U.S.C. 1395 et seq.),

22 a Department facility shall be deemed to be a Medicare

23 provider.

24 ‘‘(b)(1) A VA health plan shall be considered to be

25 a Medicare HMO.
1327

•S 2357

1 ‘‘(2) For purposes of this section, the term ‘Medicare

2 HMO’ means an eligible organization under section 1876

3 of the Social Security Act.

4 ‘‘(c) In the case of care provided under this chapter

5 to a veteran (other than a veteran described in section

6 1831(b) of this title), or to a family member of a veteran,

7 who is eligible for benefits under the Medicare program

8 under title XVIII of the Social Security Act, the Secretary

9 of Health and Human Services shall reimburse a VA

10 health plan or Department health-care facility providing

11 services as a Medicare provider or Medicare HMO in the

12 same amounts and under the same terms and conditions

13 as that Secretary reimburses other Medicare providers or

14 Medicare HMOs, respectively. The Secretary of Health

15 and Human Services shall include with each such reim16 bursement a Medicare explanation of benefits.

17 ‘‘(d) When the Secretary provides care to a veteran,

18 or a family member of a veteran, for which the Secretary

19 receives reimbursement under this section, the Secretary

20 shall require the veteran to pay to the Department any

21 applicable deductible or copayment that is not covered by

22 Medicare.

23 ‘‘§ 1833. Recovery of cost of certain care and services

24 ‘‘(a) In the case of an individual provided care or

25 services through a VA health plan who has coverage under
1328

•S 2357

1 a supplemental health benefits plan pursuant to part 4

2 of subtitle B of title I of the Health Security Act, a Medi3 care supplemental health insurance plan, or any other pro4 vision of law, the Secretary has the right to recover or

5 collect charges for care or services (as determined by the

6 Secretary, but not including care or services for a service7 connected disability) from the party providing that cov8 erage to the extent that the individual (or the provider

9 of the care or services) would be eligible to receive pay10 ment for such care or services from such party if the care

11 or services had not been furnished by a department or

12 agency of the United States.

13 ‘‘(b) In the case of a veteran referred to in section

14 1831(b) of this title who is enrolled in a health plan other

15 than a VA health plan and who is provided care or services

16 for a service-connected disability by a VA health plan, the

17 Secretary has the right to recover or collect charges for

18 such care and services from the party operating the health

19 plan to the extent that the veteran (or the provider of the

20 care or services) would be eligible to receive payment for

21 such care or services from such party if the care or serv22 ices had not been furnished by a department or agency

23 of the United States.

24 ‘‘(c) The provisions of subsections (b) through (f) of

25 section 1729 of this title shall apply with respect to claims
1329

•S 2357

1 by the United States under subsection (a) or (b) in the

2 same manner as they apply to claims under subsection (a)

3 of that section.

4 ‘‘§ 1834. Health Plan Fund

5 ‘‘(a) There is hereby established in the Treasury a

6 revolving fund to be known as the ‘Department of Veter7 ans Affairs Health Plan Fund’.

8 ‘‘(b)(1) Subject to paragraphs (2) and (3), amounts

9 collected or recovered by the Department under this sub10 chapter by reason of the furnishing of care and services

11 to an individual by a VA health plan or the enrollment

12 of an individual with a VA health plan (including amounts

13 received as premiums, premium discount payments,

14 copayments or coinsurance, and deductibles, amounts re15 ceived as third-party reimbursements or reimbursements

16 from Medicare, and amounts received as reimbursements

17 from another health plan for care furnished to one of its

18 enrollees) shall be credited to the revolving fund.

19 ‘‘(2) Premiums collected by the Department under

20 this subchapter during fiscal year 1996 or 1997 by reason

21 of the furnishing of care and services under a VA health

22 plan to a veteran referred to in section 1831(b) of this

23 title shall be credited to the revolving fund established

24 under subsection (a) only if the amount of funds appro25 priated to the Veterans Health Care Investment Fund es-
1330

•S 2357

1 tablished under subsection (a)(1) of section 7346 of this

2 title for the fiscal year concerned is less than the amount

3 specified to be credited to that fund for that fiscal year

4 under subsection (c) of such section 7346.

5 ‘‘(3) Premiums received by the Department under

6 this subchapter in any fiscal year after fiscal year 1997

7 by reason of the furnishing of care and services under a

8 VA health plan to a veteran referred to in paragraph (2)

9 shall be credited to the revolving fund established under

10 subsection (a) only if the cost of providing such care and

11 services is not covered by appropriations. The amount so

12 credited shall be the amount of such premiums received

13 that is necessary to cover the difference between the cost

14 of such care and services and such appropriations.

15 ‘‘(c) The Secretary shall establish in the revolving

16 fund a separate account for each VA health plan. The Sec17 retary shall credit any amount received under subsection

18 (b) by reason of the furnishing of care and services in or

19 through a VA health plan or the enrollment of an individ20 ual with a VA health plan.

21 ‘‘(d) Amounts credited to the account of the revolving

22 fund for a VA health plan under subsection (b) are hereby

23 made available to the VA health plan for the expenses of

24 the delivery by the VA health plan of the items and serv-
1331

•S 2357

1 ices in the standard benefit package and any supplemental

2 health benefits plan offered by the VA health plan.’’.

3 (2) The table of chapters at the beginning of

4 title 38, United States Code, and at the beginning

5 of part II of such title, is amended by inserting after

6 the item relating to chapter 17 the following new

7 item:

‘‘18. Benefits and Eligibility Under Health Security Act ........................ 1801.’’.

8 (b) PRESERVATION OF EXISTING BENEFITS FOR FA9 CILITIES NOT OPERATING AS HEALTH PLANS.—(1)

10 Chapter 17 of title 38, United States Code, is amended

11 by inserting after section 1704 the following new section:

12 ‘‘§ 1705. Facilities not operating within health plans

13 ‘‘The provisions of this chapter shall apply with re14 spect to the furnishing of care and services by any facility

15 of the Department when it is not operating as or within

16 a health plan certified as a health plan under the Health

17 Security Act.’’.

18 (2) The table of sections at the beginning of such

19 chapter is amended by inserting after the item relating

20 to section 1704 the following new item:

‘‘1705. Facilities not operating within health plans.’’.

21 SEC. 8103. ORGANIZATION OF DEPARTMENT OF VETERANS

22 AFFAIRS FACILITIES AS HEALTH PLANS.

23 (a) I N GENERAL.—Chapter 73 of title 38, United

24 States Code, is amended—
1332

•S 2357

1 (1) by redesignating subchapter IV as sub2 chapter V; and

3 (2) by inserting after subchapter III the follow4 ing new subchapter IV:

5 ‘‘SUBCHAPTER IV—PARTICIPATION AS PART OF

6 NATIONAL HEALTH CARE REFORM

7 ‘‘§ 7341. Organization of health care facilities as

8 health plans

9 ‘‘(a)(1) The Secretary may, subject to the availability

10 of appropriations, organize health plans and operate De11 partment facilities as or within health plans under the

12 Health Security Act.

13 ‘‘(2)(A) The Secretary may prescribe regulations es14 tablishing standards for the operation of Department

15 health care facilities as or within health plans under that

16 Act. In prescribing such standards, the Secretary shall en17 sure that they conform, to the extent possible under the

18 requirements of section 1821, to the requirements for

19 health plans generally set forth in part 1 of subtitle B

20 of title I of the Health Security Act.

21 ‘‘(B) Not later than 30 days after prescribing such

22 standards, the Secretary shall submit to the Committees

23 on Veterans’ Affairs of the Senate and the House of Rep24 resentatives a report describing the differences, if any, be-
1333

•S 2357

1 tween such standards and the requirements for health

2 plans generally referred to in subparagraph (A).

3 ‘‘(b) Health care facilities of the Department located

4 within an area or region may be organized to operate as

5 a single health plan encompassing all Department facili6 ties within that area or region or may be organized to op7 erate as several health plans.

8 ‘‘(c) In carrying out responsibilities under the Health

9 Security Act, a State (or a State-established entity)—

10 ‘‘(1) may not impose any standard or require11 ment on a VA health plan that is inconsistent with

12 this chapter or any regulation prescribed under this

13 chapter or other Federal laws regarding the oper14 ation of this chapter; and

15 ‘‘(2) may not deny certification of a VA health

16 plan under the Health Security Act on the basis of

17 a conflict between a rule of a State and this chapter

18 or regulations prescribed under this chapter or other

19 Federal laws regarding the operation of this chapter.

20 ‘‘§ 7342. Contract authority for facilities operating as

21 or within health plans

22 ‘‘(a) The Secretary shall designate a health plan di23 rector for each VA health plan organized and operated

24 under this subchapter.
1334

•S 2357

1 ‘‘(b) The health plan director of a VA health plan

2 may enter into contracts and agreements for the provision

3 of care and services to be provided under the VA health

4 plan and contracts and agreements for other services (in5 cluding procurement of equipment, maintenance and re6 pair services, and other services related to the provision

7 of health care services) consistent with section 1821 of

8 this title.

9 ‘‘(c) Contracts and agreements (including leases)

10 under subsection (a) shall not be subject to the following

11 provisions of law:

12 ‘‘(1) Section 8110(c) of this title, relating to

13 the contracting of services at Department health14 care facilities.

15 ‘‘(2) Section 8122(a)(1) of this title, relating to

16 the lease of Department property.

17 ‘‘(3) Section 8125 of this title, relating to local

18 contracts for the procurement of health-care items.

19 ‘‘(4) Section 702 of title 5, relating to the right

20 of review of agency wrongs by courts of the United

21 States.

22 ‘‘(5) Sections 1346(a)(2) and 1491 of title 28,

23 relating to the jurisdiction of the district courts of

24 the United States and the United States Court of
1335

•S 2357

1 Federal Claims, respectively, for the actions enumer2 ated in such sections.

3 ‘‘(6) Subchapter V of chapter 35 of title 31, re4 lating to adjudication of protests of violations of pro5 curement statutes and regulations.

6 ‘‘(7) Sections 3526 and 3702 of such title, re7 lating to the settlement of accounts and claims, re8 spectively, of the United States.

9 ‘‘(8) Subsections (b)(7), (e), (f), (g), and (h) of

10 section 8 of the Small Business Act (15 U.S.C.

11 637(b)(7), (e), (f), (g), and (h)), relating to require12 ments with respect to small businesses for contracts

13 for property and services.

14 ‘‘(9) The provisions of law assembled for pur15 poses of codification of the United States Code as

16 section 471 through 544 of title 40 that relate to the

17 authority of the Administrator of General Services

18 over the lease and disposal of Federal Government

19 property.

20 ‘‘(10) The provisions of the Office of Federal

21 Procurement Policy Act (41 U.S.C. 401 et seq.), re22 lating to the procurement of property and services

23 by the Federal Government.

24 ‘‘(11) Chapter 3 of the Federal Property and

25 Administrative Services Act of 1949 (41 U.S.C. 251
1336

•S 2357

1 et seq.), relating to the procurement of property and

2 services by the Federal Government.

3 ‘‘(12) Office of Management and Budget Cir4 cular A–76.

5 ‘‘(c)(1) Contracts and agreements for the provision

6 of care and services under subsection (a) may include any

7 contract or other agreement that the health plan director

8 of a VA health plan determines is consistent with section

9 1821 of this title and appropriate in order to provide care

10 and services under the VA health plan.

11 ‘‘(2) Contracts and agreements under this subsection

12 may be entered into without prior review by the Central

13 Office of the Department.

14 ‘‘(d)(1) The entry into a contract or agreement under

15 this section for services other than the services referred

16 to in subsection (c) (including contracts and agreements

17 for procurement of equipment, maintenance and repair

18 services, and other services related to the provision of

19 health care services) shall not be subject to prior review

20 by the Central Office if the contract is consistent with sec21 tion 1821 of this title and the amount of the contract or

22 agreement is less than $250,000.

23 ‘‘(2) The Central Office may conduct a prior review

24 of a contract or agreement referred to in paragraph (1)
1337

•S 2357

1 if the amount of the contract or agreement is $250,000

2 or greater.

3 ‘‘§ 7343. Resource sharing authority

4 ‘‘(a) The Secretary may, consistent with section 1821

5 of this title, enter into agreements under section 8153 of

6 this title with other health care plans, with health care

7 providers, and with other health industry organizations,

8 and with individuals, for the sharing of resources of the

9 Department under a VA health plan.

10 ‘‘(b) The Secretary may, consistent with section 1821

11 of this title, enter into agreements with other departments

12 and agencies of the Federal Government for the sharing

13 of resources of the Department and such departments and

14 agencies in order to provide care and services under a VA

15 health plan.

16 ‘‘§ 7344. Administrative and personnel flexibility

17 ‘‘(a) Notwithstanding any other provision of law, the

18 Secretary may—

19 ‘‘(1) appoint health care personnel to positions

20 in any facility of the Department operating as or

21 within a VA health plan in accordance with such

22 qualifications for such positions as the Secretary

23 may establish; and
1338

•S 2357

1 ‘‘(2) promote and advance personnel serving in

2 such positions in accordance with such qualifications

3 as the Secretary may establish.

4 ‘‘(b) Subject to the provisions of section 1125 of the

5 Health Security Act, the Secretary may carry out appro6 priate promotional, advertising, and marketing activities

7 to inform individuals of the availability of VA health plans.

8 ‘‘§ 7345. Expenditure authority

9 ‘‘(a)(1) To the extent that appropriations are avail10 able, the director of a VA health plan may expend funds

11 available to a VA health plan (including funds available

12 under section 1834(c) of this title, funds available under

13 section 7346(d)(2)(B) of this title, and funds otherwise

14 made available to the VA health plan by the Secretary)

15 for any purpose, and in any amount, that the director de16 termines appropriate in order to ensure that the VA health

17 plan meets the requirements and the requirements of fur18 nishing care and services to veterans under chapter 17 of

19 this title.

20 ‘‘(2) Funds may be expended under this subsection

21 in order to cover the following costs:

22 ‘‘(A) The costs of marketing and advertising

23 under a VA health plan.
1339

•S 2357

1 ‘‘(B) The costs of legal services provided to a

2 VA health plan by the General Counsel of the De3 partment.

4 ‘‘(C) The costs of acquisition (including acquisi5 tion of land), construction, repair, or renovation of

6 facilities.

7 ‘‘(3) The exercise by a health plan director of the au8 thority provided in paragraph (1) shall not be subject to

9 prior review by the Central Office of the Department.

10 ‘‘(b) Subsection (a) shall not apply to expenditures

11 of funds provided to a facility by the Central Office of

12 the Department exclusively for the purpose of the provi13 sion of the following services:

14 ‘‘(1) Services relating to post-traumatic stress

15 disorder.

16 ‘‘(2) Services relating to spinal-cord dysfunc17 tion.

18 ‘‘(3) Services relating to substance abuse.

19 ‘‘(4) Services relating to the rehabilitation of

20 blind veterans.

21 ‘‘§ 7346. Veterans Health Care Investment Fund

22 ‘‘(a) There is hereby established in the Treasury of

23 the United States a fund to be known as the Veterans

24 Health Care Investment Fund (in this section referred to

25 as the ‘Fund’).
1340

•S 2357

1 ‘‘(b) There is hereby authorized to be appropriated

2 to the Department, in addition to amounts otherwise au3 thorized to be appropriated to the Department for VA

4 health plans, such amounts as are necessary for the Sec5 retary of the Treasury to fulfill the requirement of sub6 section (c).

7 ‘‘(c) For each of fiscal years 1995, 1996, and 1997,

8 the Secretary of the Treasury shall, subject to the avail9 ability of appropriated funds, credit to the Fund an

10 amount in that fiscal year as follows:

11 ‘‘(1) For fiscal year 1995, $1,225,000,000.

12 ‘‘(2) For fiscal year 1996, $600,000,000.

13 ‘‘(3) For fiscal year 1997, $1,700,000,000.

14 ‘‘(d)(1) Subject to paragraph (2), amounts in the

15 Fund shall be available to the Secretary only for the VA

16 health plans organized and operated under this sub17 chapter.

18 ‘‘(2)(A) For each of fiscal years 1996 and 1997, the

19 Secretary shall estimate the total amount to be collected

20 or recovered under sections 1831, 1832, and 1833 of this

21 title by reason of the provision of care and services

22 through VA health plans under chapter 18 of this title

23 or the enrollment of individuals in such plans under that

24 chapter. The Secretary shall estimate the amount to be
1341

•S 2357

1 so collected or recovered with respect to each VA health

2 plan and with respect to all VA health plans.

3 ‘‘(B) For each such fiscal year, the Secretary shall

4 make available to each VA health plan an amount that

5 bears the same relationship to the total amount available

6 in the Fund for the fiscal year as the amount estimated

7 to be collected or recovered by the VA health plan during

8 the fiscal year bears to the total amount estimated to be

9 collected or recovered by all VA health plans during that

10 fiscal year.

11 ‘‘(e) Not later than March 1, 1997, the Secretary

12 shall submit to Congress a report concerning the operation

13 of the Department of Veterans Affairs health care system

14 in preparing for, and operating under, national health care

15 reform under the Health Security Act during fiscal years

16 1995 and 1996. The report shall include a discussion of—

17 ‘‘(1) the adequacy of amounts in the Fund for

18 the operation of VA health plans;

19 ‘‘(2) the quality of care provided by such plans;

20 and

21 ‘‘(3) the ability of such plans to attract pa22 tients.
1342

•S 2357

1 ‘‘§ 7347. Funding provisions: grants and other sources

2 of assistance

3 ‘‘The Secretary may apply for and accept, if awarded,

4 any grant or other source of funding that is intended to

5 meet the needs of special populations and that but for this

6 section is unavailable to facilities of the Department or

7 to health plans operated by the Government if funds ob8 tained through the grant or other source of funding will

9 be used through a facility of the Department operating

10 as or within a health plan.’’.

11 (b) C LERICAL AMENDMENT.—The table of sections

12 at the beginning of chapter 73 is amended by striking out

13 the item relating to the heading for subchapter IV and

14 inserting in lieu thereof the following:

‘‘SUBCHAPTER IV—PARTICIPATION AS PART OF NATIONAL HEALTH CARE

REFORM

‘‘7341. Organization of health care facilities as health plans.

‘‘7342. Contract authority for facilities operating as or within health plans.

‘‘7343. Resource sharing authority.

‘‘7344. Administrative and personnel flexibility.

‘‘7345. Expenditure authority.

‘‘7346. Veterans Health Care Investment Fund.

‘‘7347. Funding provisions: grants and other sources of assistance.

‘‘SUBCHAPTER V—RESEARCH CORPORATIONS’’.
1343

•S 2357

1 TITLE IX—WORKERS COMPENSA2 TION MEDICAL SERVICES

3 SEC. 9000. APPLICATION OF INFORMATION REQUIRE4 MENTS.

5 (a) I N GENERAL.—The provisions of subtitle B of

6 title V shall apply to the provision of workers compensa7 tion medical services provided by a health plan or health

8 care provider in the same manner as such provisions apply

9 with respect to the provision of services included in the

10 standard benefit package.

11 (b) INFORMATION.—Subject to the provisions of sub12 title C of title V, health plans and health care providers

13 that render workers compensation medical services shall

14 provide to the worker and to the workers compensation

15 carrier, the employer or both, as appropriate, relevant

16 health care information necessary to assist the worker in

17 the safe and timely return to work.

18 (c) COMPLIANCE WITH DUTIES AND REQUIRE19 MENTS.—A health plan to which this section applies and

20 its providers shall comply with legal duties and reporting

21 requirements under State workers compensation laws, and

22 other Federal and State laws, including laws regarding the

23 reporting of occupational injuries and diseases.

24 (d) R ULES.—The Secretary of Labor shall promul25 gate rules to clarify the responsibilities of health plans and
1344

•S 2357

1 health care providers in carrying out the provisions re2 ferred to in subsection (a).

3 SEC. 9001. PROVISION OF CARE IN DISPUTED CASES.

4 (a) IN GENERAL.—In cases in which a workers com5 pensation claim is challenged by the employer, the workers

6 compensation carrier, or both, a health plan shall provide

7 or pay for all medical care included in the standard benefit

8 package according to the applicable workers compensation

9 fee schedule, if any, until such time as a determination

10 is made through the adjudication process that the claim

11 is compensable as a workers compensation claim. If such

12 a determination is made, the workers compensation carrier

13 (or the employer, if self-insured) shall reimburse the

14 health plan (for the cost of services delivered to the mem15 ber for the work-related illness or injury) and the worker

16 (for any copayments, deductibles or coinsurance costs in17 curred for such services).

18 (b) A PPLICABILITY.—Subsection (a) shall not apply

19 in a case where compensation has been accepted by the

20 insurer or the employer, or paid without prejudice.

21 SEC. 9002. DEMONSTRATION PROJECTS.

22 (a) A UTHORIZATION.—The Secretary of Health and

23 Human Services and the Secretary of Labor are author24 ized to conduct demonstration projects under this section
1345

•S 2357

1 in one or more States with respect to treatment of work2 related injuries and illnesses.

3 (b) DEVELOPMENT OF WORK-RELATED PROTO4 COLS.—

5 (1) IN GENERAL.—The Secretary of Health and

6 Human Services and the Secretary of Labor, in con7 sultation with the States and such experts on work8 related injuries and illnesses as each such Secretary

9 finds appropriate, shall develop protocols for the ap10 propriate treatment of work-related conditions.

11 (2) TESTING OF PROTOCOLS.—The Secretary of

12 Health and Human Services and the Secretary of

13 Labor shall enter into contracts with one or more

14 community-rated health plans to test the validity of

15 the protocols developed under subsection (a).

16 (c) D EVELOPMENT OF CAPITATION PAYMENT MOD17 ELS.—The Secretary of Health and Human Services and

18 the Secretary of Labor shall develop, using protocols devel19 oped under subsection (b) if possible, methods of providing

20 for payment by workers compensation carriers to health

21 plans on a per case basis, capitated payment for the treat22 ment of specified work-related injuries and illnesses.
1346

•S 2357

1 SEC. 9003. COMMISSION ON WORKERS COMPENSATION

2 MEDICAL SERVICES.

3 (a) ESTABLISHMENT.—There is hereby established a

4 Commission on Workers Compensation Medical Services

5 (hereafter in this section referred to as the ‘‘Commis6 sion’’).

7 (b) COMPOSITION.—

8 (1) I N GENERAL.—The Commission shall con9 sist of 15 members appointed in accordance with

10 paragraph (2). Members of the Commission shall in11 clude—

12 (A) one or more individuals representing

13 State workers compensation commissioners;

14 (B) one or more individuals representing

15 State workers compensation funds;

16 (C) one or more individuals representing

17 labor organizations;

18 (D) one or more individuals representing

19 employers (other than workers compensation in20 surance carriers);

21 (E) one or more individuals representing

22 workers compensation insurance carriers;

23 (F) one or more members of the medical

24 profession having expertise in occupational

25 health; and
1347

•S 2357

1 (G) one or more educators or researchers

2 having expertise in the field of occupational

3 health.

4 Eight members of the Commission shall constitute a

5 quorum.

6 (2) APPOINTMENTS.—Members of the Commis7 sion shall be appointed by the President and shall

8 include—

9 (A) three members appointed from among

10 individuals recommended by the Speaker of the

11 House of Representatives;

12 (B) three members appointed from among

13 individuals recommended by the Minority Lead14 er of the House of Representatives;

15 (C) three members appointed from among

16 individuals recommended by the Majority Lead17 er of the Senate; and

18 (D) three members appointed from among

19 individuals recommended by the Minority Lead20 er of the Senate.

21 (3) NO COMPENSATION EXCEPT TRAVEL EX22 PENSES.—Members of the Commission shall serve

23 without compensation, but each member shall receive

24 travel expenses, including per diem in lieu of subsist-
1348

•S 2357

1 ence, in accordance with sections 5702 and 5703 of

2 title 5, United States Code.

3 (c) DUTIES.—

4 (1) I N GENERAL.—The Commission shall study

5 the relationship of workers compensation medical

6 services to the new health system under this Act in

7 terms of impact on the cost of workers compensation

8 medical services, access to appropriate care for in9 jured workers, and quality of medical care and its

10 impact on functional and vocational outcomes for in11 jured workers.

12 (2) EVALUATION ISSUES TO BE ADDRESSED.—

13 In its deliberations under paragraph (1), the Com14 mission shall consider the following issues in examin15 ing the relationship between health plans and work16 ers compensation medical services:

17 (A) The impact of health reform on work18 ers compensation medical costs and premium

19 rates charged to employers for workers com20 pensation insurance.

21 (B) The extent and impact of cost-shifting

22 and price discrimination between the workers

23 compensation medical system and traditional

24 health insurers.
1349

•S 2357

1 (C) The impact of experience rating ad2 justments resulting from workers compensation

3 medical services on workplace safety.

4 (D) The advantages and disadvantages of

5 maintaining separate financing, payment and

6 delivery systems for workers compensation med7 ical services, including the impact on—

8 (i) the quality of medical care deliv9 ered to workers injured or made ill on the

10 job;

11 (ii) the incentives for employers to

12 maintain safe work-places; and

13 (iii) workers compensation indemnity

14 benefit costs, medical costs and the overall

15 costs of the workers compensation system.

16 (E) The advisability and appropriateness

17 of transferring financial responsibility for some

18 or all workers compensation medical benefits to

19 health plans.

20 (F) The impact of State-to-State variations

21 in medical and rehabilitation benefits on costs,

22 access and quality of care.

23 (G) The options that are available to ac24 complish the delivery of workers compensation
1350

•S 2357

1 benefits not included in the standard benefit

2 package in integrated systems

3 (H) Whether capitated rates can be devel4 oped for workers compensation medical bene5 fits, and the impact of using such rates on med6 ical and indemnity costs, access, and quality of

7 care.

8 (I) The impact of provider choice, with re9 spect to an injured worker, on workers com10 pensation medical costs, wage-loss benefits

11 costs, and quality of care.

12 (d) STAFF SUPPORT.—The Secretary of Health and

13 Human Services and the Secretary of Labor shall provide

14 staff support for the Commission.

15 (e) R EPORTS.—Not later than October 1, 2000, the

16 Commission shall submit a final report on its work to the

17 President, the Committee on Labor and Human Resources

18 of the Senate and the Committee on Education and Labor

19 of the House of Representatives. Such report shall include

20 a recommendation as to whether a transfer of financial

21 responsibility for some or all medical benefits to health

22 plans should be effected, and a detailed implementation

23 plan should such a transfer be recommended. Prior to the

24 submission of the final report, the Commission shall sub25 mit such interim reports on issues addressed by the Com-
1351

•S 2357

1 mission as the members of the Commission determine to

2 be appropriate.

3 TITLE X—PREMIUM FINANCING

4 Subtitle A—National Health Care

5 Cost and Coverage Commission

6 SEC. 10001. NATIONAL HEALTH CARE COST AND COVERAGE

7 COMMISSION.

8 There is established a commission to be known as the

9 National Health Care Cost and Coverage Commission

10 (hereafter in this title referred to as the ‘‘Commission’’).

11 SEC. 10002. COMPOSITION.

12 (a) C OMPOSITION.—The Commission shall be com13 posed of 7 members appointed by the President and con14 firmed by the Senate. Members shall be appointed not

15 later than 9 months after the date of the enactment of

16 this Act based on their expertise and national recognition

17 in the fields of health economics including insurance prac18 tices, health care benefit design, health care provider orga19 nization and reimbursement, and labor markets. In ap20 pointing members of the Commission, the President shall

21 ensure that no more than 4 members of the Commission

22 are affiliated with the same political party.

23 (b) CHAIRPERSON.—The President shall designate 1

24 individual described in subsection (a) who shall serve as

25 Chairperson of the Commission.
1352

•S 2357

1 (c) TERMS.—

2 (1) I N GENERAL.—The terms of members of

3 the Commission shall be for 6 years to commence on

4 January 1, 1996, except that of the members first

5 appointed, 3 shall be appointed for an initial term

6 of 4 years, 3 shall be appointed for an initial term

7 of 5 years and the chairperson shall be appoint for

8 an initial term of 6 years.

9 (2) CONTINUATION IN OFFICE.—Upon the expi10 ration of a term of office, a member shall continue

11 to serve until a successor is appointed and qualified.

12 (d) VACANCIES.—

13 (1) I N GENERAL.—A vacancy in the Commis14 sion shall be filled in the same manner as the origi15 nal appointment, but the individual appointed to fill

16 the vacancy shall serve only for the unexpired por17 tion of the term for which the individual’s prede18 cessor was appointed.

19 (2) NO IMPAIRMENT OF FUNCTION.—A vacancy

20 in the membership of the Commission does not im21 pair the authority of the remaining members to exer22 cise all of the powers of the Commission.

23 (3) ACTING CHAIRPERSON.—The Commission

24 may designate a member to act as Chairperson dur-
1353

•S 2357

1 ing any period in which there is no Chairperson des2 ignated by the President.

3 SEC. 10003. DUTIES OF COMMISSION.

4 (a) I N GENERAL.—The general duties of the Com5 mission are to monitor and respond to—

6 (1) trends in health care coverage; and

7 (2) changes in per-capita premiums and other

8 indicators of health care inflation.

9 The Commission may be advised by individuals with exper10 tise concerning the economic, demographic, and insurance

11 market factors that affect the cost and coverage of health

12 insurance.

13 (b) ANNUAL REPORTS.—

14 (1) IN GENERAL.—The Commission shall report

15 to Congress annually on January 1 (beginning in

16 1997) concerning trends in health care coverage and

17 costs. Such reports shall categorize such information

18 on a national basis, a State by State basis, and a

19 community rating area basis.

20 (2) H EALTH CARE COVERAGE.—For purposes

21 of this title, the term ‘‘health care coverage’’ means

22 coverage under—

23 (A) a certified standard health plan provid24 ing a standard benefits package or an alter25 native standard benefits package;
1354

•S 2357

1 (B) the medicare program under title

2 XVIII of the Social Security Act;

3 (C) the medicaid program under title XIX

4 of the Social Security Act;

5 (D) the health care program for active

6 military personnel under title 10, United States

7 Code;

8 (E) the veterans health care program

9 under chapter 17 of title 38, United States

10 Code;

11 (F) the Civilian Health and Medical Pro12 gram of the Uniformed Services (CHAMPUS),

13 as defined in section 1073(4) of title 10, United

14 States Code;

15 (G) the Indian health service program

16 under the Indian Health Care Improvement Act

17 (25 U.S.C. 1601 et seq.);

18 (H) a State single-payer system approved

19 under subpart B of part 3 of subtitle F of title

20 I; or

21 (I) any governmental health care program

22 for institutionalized individuals.

23 (3) CONTENTS OF REPORT.—Each report under

24 paragraph (1) shall include the findings of the Com25 mission with respect to the following:
1355

•S 2357

1 (A) Demographics and employment status

2 of the uninsured individuals, and findings on

3 why such individuals are uninsured.

4 (B) Structure of delivery systems.

5 (C) Status of insurance reforms.

6 (D) Development and operation of pur7 chasing cooperatives and other buyer reforms.

8 (E) Success of market and other mecha9 nisms in expanding coverage and controlling

10 health expenditures and premium costs among

11 employers and families.

12 (F) Success of the tax imposed under sec13 tion 4521 of the Internal Revenue Code of

14 1986.

15 (G) Success and adequacy of the individual

16 and employer subsidy programs under title VI

17 in expanding coverage through employers and

18 families.

19 (H) Per capita cost of health care, includ20 ing—

21 (i) the rate of growth in health care

22 costs categorized by type of health care

23 provider and type of payor in States and

24 community rating areas;
1356

•S 2357

1 (ii) the expected rate of growth in per

2 capita health care costs;

3 (iii) the causes of such growth; and

4 (iv) proposed strategies for controlling

5 such growth.

6 (I) The percentage of the resident popu7 lation in the United States, and each State,

8 that has health care coverage.

9 (4) B ENEFITS ISSUES.—The Commission shall

10 consult with the National Health Benefits Board in

11 gathering data and in making recommendations con12 cerning issues that effect the standard benefit pack13 age.

14 (c) AFFORDABILITY REPORTS.—

15 (1) I N GENERAL.—As part of each annual re16 port under subsection (b), beginning with the report

17 for 1999, the Commission shall include information

18 on—

19 (A) the affordability of health care cov20 erage for families and employers; and

21 (B) the success of market incentives and

22 other provisions of this Act in achieving health

23 care cost containment.

24 (2) DETERMINATION AND RECOMMENDA25 TIONS.—If the Commission determines for any year
1357

•S 2357

1 that health care coverage is unaffordable (as de2 scribed in paragraph (3)) or that cost containment

3 efforts under this Act are unsuccessful, the Commis4 sion shall submit recommendations in the annual re5 port for systematic improvements as provided for in

6 paragraph (4).

7 (3) COST OF COVERAGE.—The Commission

8 shall make a determination of unaffordability under

9 paragraph (2) if the Commission finds that, with re10 spect to the year for which the report is submitted,

11 fewer than 35 percent of those eligible to enroll in

12 community-rated health plans were able to enroll in

13 plans with a premium that was at or below the ref14 erence premium for the community rating area in15 volved.

16 (4) RECOMMENDATIONS.—If the Commission

17 makes a finding under paragraph (3) with respect to

18 any year, the Commission shall recommend to Con19 gress a means of controlling health care costs in

20 order to ensure that the growth in the per capita

21 premium for community-rated plans is at or below

22 the growth in the target per capita premium for the

23 community rating area involved. The Commission

24 may recommend alternative target per capita pre-
1358

•S 2357

1 mium growth if the Commission determines that

2 such alternative would be more appropriate.

3 (5) CONGRESSIONAL CONSIDERATION.—The

4 recommendations of the Commission under para5 graph (4) shall be submitted to Congress in the form

6 of an implementing bill which contains such statu7 tory provisions as the Commission determines are

8 necessary or appropriate to implement such rec9 ommendations. Such bill shall be considered under

10 the procedures established under section 10004.

11 (d) COVERAGE TRIGGER.—

12 (1) C OMMISSION DETERMINATION.—By Janu13 ary 1, 2000, the Commission shall make a deter14 mination as to the percentage of the resident popu15 lation in the United States, and each State, that has

16 health care coverage.

17 (2) ATTAINMENT OF COVERAGE GOAL.—

18 (A) IN GENERAL.—If, under paragraph

19 (1), the Commission determines that health

20 care coverage of at least 95 percent of the resi21 dent population in the United States has been

22 attained, the Commission shall submit rec23 ommendations (under subparagraph (B)) in its

24 annual report to Congress on January 1, 2000.
1359

•S 2357

1 (B) RECOMMENDATION REQUIREMENT.—

2 The recommendations of the Commission under

3 subparagraph (A) shall include methods to ex4 pand health care coverage to those who are not

5 covered. Such recommendations shall address

6 all relevant parties, including States, employers,

7 employees, unemployed and low-income individ8 uals, and public program participants.

9 (3) COVERAGE GOAL NOT ATTAINED.—

10 (A) IN GENERAL.—If, under paragraph

11 (1), the Commission determines that health

12 care coverage of at least 95 percent of the resi13 dent population in the United States has not

14 been attained by January 1, 2000, the Commis15 sion shall submit recommendations (under sub16 paragraph (B)) in its annual report to Congress

17 not later than May 15, 2000.

18 (B) R ECOMMENDATION REQUIREMENTS.—

19 The recommendations of the Commission under

20 paragraph (1) shall include one or more legisla21 tive proposals for expanding health care cov22 erage to cover the remaining uninsured popu23 lation. Such recommendations shall address all

24 relevant parties, including States, employers,
1360

•S 2357

1 employees, unemployed and low-income individ2 uals, and public program participants.

3 (C) CONGRESSIONAL CONSIDERATION.—

4 The recommendations of the Commission under

5 subparagraph (A) shall be submitted to Con6 gress in the form of one or more implementing

7 bills which contains such statutory provisions as

8 the Commission determines are necessary or ap9 propriate to implement such recommendations.

10 Such bill shall be considered under the proce11 dures established under section 10004.

12 SEC. 10004. CONGRESSIONAL CONSIDERATION OF COMMIS13 SION RECOMMENDATIONS.

14 (a) IMPLEMENTING BILLS.—

15 (1) I N GENERAL.—Except as provided in para16 graph (2), an implementing bill described in section

17 10003(c)(5) or section 10003(d)(3)(C) shall be con18 sidered by Congress under the procedures for consid19 eration described in subsection (b), except that with

20 respect to an implementing bill described in section

21 10003(c)(5), the date described in subsection (b)(3)

22 shall not apply.

23 (2) GAO CONSIDERATION.—With respect to an

24 implementing bill described in section

25 10003(d)(3)(C), to be eligible for Congressional con-
1361

•S 2357

1 sideration under subsection (b), the General Ac2 counting Office must certify that, if implemented,

3 the legislative proposals in such bill would expand

4 health care coverage to cover the remaining unin5 sured population.

6 (b) CONGRESSIONAL CONSIDERATION.—

7 (1) RULES OF HOUSE OF REPRESENTATIVES

8 AND SENATE.—This subsection is enacted by Con9 gress—

10 (A) as an exercise of the rulemaking power

11 of the House of Representatives and the Sen12 ate, respectively, and as such is deemed a part

13 of the rules of each House, respectively, but ap14 plicable only with respect to the procedure to be

15 followed in that House in the case of an imple16 menting bill described in subsection (a), and su17 persedes other rules only to the extent that

18 such rules are inconsistent therewith; and

19 (B) with full recognition of the constitu20 tional right of either House to change the rules

21 (so far as relating to the procedure of that

22 House) at any time, in the same manner and

23 to the same extent as in the case of any other

24 rule of that House.
1362

•S 2357

1 (2) INTRODUCTION AND REFERRAL.—On the

2 day on which the implementing bill described in sub3 section (a) is transmitted to the House of Represent4 atives and the Senate, such bill shall be introduced

5 (by request) in the House of Representatives by the

6 Majority Leader of the House, for himself or herself

7 and the Minority Leader of the House, or by Mem8 bers of the House designated by the Majority Leader

9 and Minority Leader of the House and shall be in10 troduced (by request) in the Senate by the Majority

11 Leader of the Senate, for himself or herself and the

12 Minority Leader of the Senate, or by Members of

13 the Senate designated by the Majority Leader and

14 Minority Leader of the Senate. If either House is

15 not in session on the day on which the implementing

16 bill is transmitted, the bill shall be introduced in

17 that House, as provided in the preceding sentence,

18 on the first day thereafter on which that House is

19 in session. If the implementing bill is not introduced

20 within 5 days of its transmission, any Member of the

21 House and of the Senate may introduce such bill.

22 The implementing bill introduced in the House of

23 Representatives and the Senate shall be referred to

24 the appropriate committees of each House.
1363

•S 2357

1 (3) PERIOD FOR COMMITTEE CONSIDER2 ATION.—If the committee or committees of either

3 House to which an implementing bill has been re4 ferred have not reported the bill at the close of July

5 1, 2000 (or if such House is not in session, the next

6 day such House is in session), such committee or

7 committees shall be automatically discharged from

8 further consideration of the implementing bill and it

9 shall be placed on the appropriate calendar.

10 (4) FLOOR CONSIDERATION IN THE SENATE.—

11 (A) IN GENERAL.—Within 5 days after the

12 implementing bill is placed on the calendar, the

13 Majority Leader, at a time to be determined by

14 the Majority Leader in consultation with the

15 Minority Leader, shall proceed to the consider16 ation of the bill. If on the sixth day after the

17 bill is placed on the calendar, the Senate has

18 not proceeded to consideration of the bill, then

19 the presiding officer shall automatically place

20 the bill before the Senate for consideration. A

21 motion in the Senate to proceed to the consider22 ation of an implementing bill shall be privileged

23 and not debatable. An amendment to the mo24 tion shall not be in order, nor shall it be in
1364

•S 2357

1 order to move to reconsider the vote by which

2 the motion is agreed to or disagreed to.

3 (B) T IME LIMITATION ON CONSIDERATION

4 OF BILL.—

5 (i) I N GENERAL.—Debate in the Sen6 ate on an implementing bill, and all

7 amendments and debatable motions and

8 appeals in connection therewith, shall be

9 limited to not more than 30 hours. The

10 time shall be equally divided between, and

11 controlled by, the Majority Leader and the

12 Minority Leader or their designees.

13 (ii) DEBATE OF AMENDMENTS, MO14 TIONS, POINTS OF ORDER, AND AP15 PEALS.—In the Senate, no amendment

16 which is not relevant to the bill shall be in

17 order. Debate in the Senate on any amend18 ment, debatable motion or appeal, or point

19 of order in connection with an implement20 ing bill shall be limited to—

21 (I) not more than 2 hours for

22 each first degree relevant amendment,

23 (II) one hour for each second de24 gree relevant amendment, and
1365

•S 2357

1 (III) 30 minutes for each debat2 able motion or appeal, or point of

3 order submitted to the Senate,

4 to be equally divided between, and con5 trolled by, the mover and the manager of

6 the implementing bill, except that in the

7 event the manager of the implementing bill

8 is in favor of any such amendment, mo9 tion, appeal, or point of order, the time in

10 opposition thereto, shall be controlled by

11 the Minority Leader or designee of the Mi12 nority Leader. The Majority Leader and

13 Minority Leader, or either of them, may,

14 from time under their control on the pas15 sage of an implementing bill, allot addi16 tional time to any Senator during the con17 sideration of any amendment, debatable

18 motion or appeal, or point of order.

19 (C) OTHER MOTIONS.—A motion to recom20 mit an implementing bill is not in order.

21 (D) FINAL PASSAGE.—Upon the expiration

22 of the 30 hours available for consideration of

23 the implementing bill, it shall not be in order to

24 offer or vote on any amendment to, or motion

25 with respect to, such bill. Immediately following
1366

•S 2357

1 the conclusion of debate in the Senate on an

2 implementing bill that was introduced in the

3 Senate, such bill shall be deemed to have been

4 read a third time and the vote on final passage

5 of such bill shall occur without any intervening

6 action or debate.

7 (E) D EBATE ON DIFFERENCES BETWEEN

8 THE HOUSES.—Debate in the Senate on mo9 tions and amendments appropriate to resolve

10 the differences between the Houses, at any par11 ticular stage of the proceedings, shall be limited

12 to not more than 5 hours.

13 (F) D EBATE ON CONFERENCE REPORT.—

14 Debate in the Senate on the conference report

15 shall be limited to not more than 10 hours.

16 (5) F LOOR CONSIDERATION IN THE HOUSE OF

17 REPRESENTATIVES.—

18 (A) PROCEED TO CONSIDERATION.—On

19 the sixth day after the implementing bill is

20 placed on the calendar, it shall be privileged for

21 any Member to move without debate that the

22 House resolve itself into the Committee of the

23 Whole House on the State of the Union, for the

24 consideration of the bill, and the first reading

25 of the bill shall be dispensed with.
1367

•S 2357

1 (B) G ENERAL DEBATE.—After general de2 bate, which shall be confined to the implement3 ing bill and which shall not exceed 4 hours, to

4 be equally divided and controlled by the Chair5 man and Ranking Minority Member of the

6 Committee or Committees to which the bill had

7 been referred, the bill shall be considered for

8 amendment by title under the 5-minute rule

9 and each title shall be considered as having

10 been read. The total time for considering all

11 amendments shall be limited to 26 hours of

12 which the total time for debating each amend13 ment under the 5-minute rule shall not exceed

14 one hour.

15 (C) RISE AND REPORT.—At the conclusion

16 of the consideration of the implementing bill for

17 amendment, the Committee of the Whole on the

18 State of the Union shall rise and report the bill

19 to the House with such amendments as may

20 have been adopted, and the previous question

21 shall be considered as ordered on the bill and

22 the amendments thereto, and the House shall

23 proceed to vote on final passage without inter24 vening motion except one motion to recommit.
1368

•S 2357

1 (6) C OMPUTATION OF DAYS.—For purposes of

2 this subsection, in computing a number of days in

3 either House, there shall be excluded—

4 (A) the days on which either House is not

5 in session because of an adjournment of more

6 than 3 days to a day certain, or an adjourn7 ment of the Congress sine die, and

8 (B) any Saturday and Sunday not ex9 cluded under subparagraph (A) when either

10 House is not in session.

11 (7) P OINTS OF ORDER BASED ON EXPANDING

12 COVERAGE.—

13 (A) I N GENERAL.—It shall not be in order

14 in the Senate to consider—

15 (i) any bill;

16 (ii) any bill prior to third reading; or

17 (iii) any conference report;

18 under the procedures described in this sub19 section if such bill or conference report has not

20 been certified by the General Accounting Office

21 under subsection (a)(2) as expanding coverage

22 to cover the remaining uninsured.

23 (B) WAIVER OR SUSPENSION.—Subpara24 graph (A) may be waived or suspended in the

Senate only by the affirmative vote of 3 25 ⁄5 of the
1369

•S 2357

1 members duly chosen and sworn. An affirmative

vote of 3 2 ⁄5 of the members of the Senate duly

3 chosen and sworn shall be required in the Sen4 ate to sustain an appeal of the ruling of the

5 chair on a point of order raised under this

6 paragraph.

7 (c) FAILURE TO ENACT LEGISLATION.—If Congress

8 fails to enact legislation with respect to an implementing

9 bill under section 10003(d)(3)(C) by December 31, 2000,

10 the employer and individual premium financing provisions

11 of subtitle B shall become effective on January 1, 2002

12 with respect to those States determined by the Commis13 sion under 10003(d)(3)(A) to have health care coverage

14 for less than 95 percent of the resident populations of

15 each such State.

16 SEC. 10005. OPERATION OF THE COMMISSION.

17 (a) MEETINGS; QUORUM.—

18 (1) M EETINGS.—The Chairperson shall preside

19 at meetings of the Commission, and in the absence

20 of the Chairperson, the Commission shall elect a

21 member to act as Chairperson pro tempore.

22 (2) Q UORUM.—Four members of the Commis23 sion shall constitute a quorum thereof.

24 (b) ADMINISTRATIVE PROVISIONS.—
1370

•S 2357

1 (1) F ACA NOT APPLICABLE.—The Federal Ad2 visory Committee Act (5 U.S.C. App.) shall not

3 apply to the Commission.

4 (2) PAY AND TRAVEL EXPENSES.—

5 (A) P AY.—Each member of the Commis6 sion shall be paid at a rate equal to the daily

7 equivalent of the minimum annual rate of basic

8 pay payable for level IV of the Executive Sched9 ule under section 5315 of title 5, United States

10 Code, for each day (including travel time) dur11 ing which the member is engaged in the actual

12 performance of duties vested in the Commis13 sion.

14 (B) T RAVEL EXPENSES.—Members of the

15 Commission shall receive travel expenses, in16 cluding per diem in lieu of subsistence, in ac17 cordance with sections 5702 and 5703 of title

18 5, United States Code.

19 (3) EXECUTIVE DIRECTOR.—

20 (A) I N GENERAL.—The Commission shall,

21 without regard to section 5311(b) of title 5,

22 United States Code, appoint an Executive Di23 rector.
1371

•S 2357

1 (B) PAY.—The Executive Director shall be

2 paid at a rate equivalent to a rate for the Sen3 ior Executive Service.

4 (4) STAFF.—

5 (A) IN GENERAL.—Subject to subpara6 graphs (B) and (C), the Executive Director,

7 with the approval of the Commission, may ap8 point and fix the pay of additional personnel.

9 (B) PAY.—The Executive Director may

10 make such appointments without regard to the

11 provisions of title 5, United States Code, gov12 erning appointments in the competitive service,

13 and any personnel so appointed may be paid

14 without regard to the provisions of chapter 51

15 and subchapter III of chapter 53 of such title,

16 relating to classification and General Schedule

17 pay rates, except that an individual so ap18 pointed may not receive pay in excess of 120

19 percent of the annual rate of basic pay payable

20 for GS–15 of the General Schedule.

21 (C) DETAILED PERSONNEL.—Upon re22 quest of the Executive Director, the head of any

23 Federal department or agency may detail any

24 of the personnel of that department or agency
1372

•S 2357

1 to the Commission to assist the Commission in

2 carrying out its duties under this Act.

3 (5) OTHER AUTHORITY.—

4 (A) C ONTRACT SERVICES.—The Commis5 sion may procure by contract, to the extent

6 funds are available, the temporary or intermit7 tent services of experts or consultants pursuant

8 to section 3109 of title 5, United States Code.

9 (B) L EASES AND PROPERTY.—The Com10 mission may lease space and acquire personal

11 property to the extent funds are available.

12 (c) AUTHORIZATION OF APPROPRIATIONS.—There

13 are authorized to be appropriated such sums as are nec14 essary for the operation of the Commission.

15 Subtitle B—Employer and Individ16 ual Premium Requirements and

17 Assistance

18 SEC. 10101. APPLICATION OF SUBTITLE.

19 (a) IN GENERAL.—The provisions of the subtitle

20 shall apply as provided in section 10003(c).

21 (b) APPLICATION WITH RESPECT TO INDIVID22 UALS.—

23 (1) LAWFUL RESIDENTS.—
1373

•S 2357

1 (A) I N GENERAL.—This subtitle shall only

2 apply with respect to an individual who is resid3 ing in a State involved and who is—

4 (i) a citizen or national of the United

5 States; or

6 (ii) an alien permanently residing in

7 the United States under color of law (as

8 defined in subparagraph (B)).

9 (B) ALIEN PERMANENTLY RESIDING IN

10 THE UNITED STATES UNDER COLOR OF LAW.—

11 The term ‘‘alien permanently residing in the

12 United States under color of law’’ means an

13 alien lawfully admitted for permanent residence

14 (within the meaning of section 101(a)(20) of

15 the Immigration and Nationality Act), and in16 cludes any of the following:

17 (i) An alien who is admitted as a refu18 gee under section 207 of the Immigration

19 and Nationality Act.

20 (ii) An alien who is granted asylum

21 under section 208 of such Act.

22 (iii) An alien whose deportation is

23 withheld under section 243(h) of such Act.
1374

•S 2357

1 (iv) An alien who is admitted for tem2 porary residence under section 210, 210A,

3 or 245A of such Act.

4 (v) An alien who has been paroled

5 into the United States under section

6 212(d)(5) of such Act for an indefinite pe7 riod or who has been granted extended vol8 untary departure as a member of a nation9 ality group.

10 (vi) An alien who is the spouse or un11 married child under 21 years of age of a

12 citizen of the United States, or the parent

13 of such a citizen if the citizen is over 21

14 years of age, and with respect to whom an

15 application for adjustment to lawful per16 manent residence is pending.

17 (2) I NDIVIDUAL RESPONSIBILITIES.—With re18 spect to a State to which this subtitle applies, each

19 individual described in paragraph (1)(A)—

20 (A) must enroll in (or be covered under) a

21 health plan for the individual, and

22 (B) must pay any premium required, con23 sistent with this Act, with respect to such en24 rollment.
1375

•S 2357

1 (3) INDIVIDUALS COVERED UNDER EQUIVALENT

2 HEALTH CARE PROGRAMS.—This subtitle shall not

3 apply with respect to an individual covered under an

4 equivalent health care program.

5 (4) EQUIVALENT HEALTH CARE PROGRAM.—As

6 used in paragraph (1), the term ‘‘equivalent health

7 care program’’ means—

8 (A) part A or part B of the medicare pro9 gram under title XVIII of the Social Security

10 Act,

11 (B) the medicaid program under title XIX

12 of the Social Security Act,

13 (C) the health care program for active

14 military personnel under title 10, United States

15 Code,

16 (D) the veterans health care program

17 under chapter 17 of title 38, United States

18 Code,

19 (E) the Civilian Health and Medical Pro20 gram of the Uniformed Services (CHAMPUS),

21 as defined in section 1073(4) of title 10, United

22 States Code,

23 (F) the Indian health service program

24 under the Indian Health Care Improvement Act

25 (25 U.S.C. 1601 et seq.), and
1376

•S 2357

1 (G) a State single-payer system approved

2 by the Secretary under subpart B of part 3 of

3 subtitle F.

4 (5) INMATES.—This subtitle shall not apply

5 with respect to an individual who is an inmate of a

6 public institution (except as a patient of a medical

7 institution).

8 (6) EXEMPTION.—

9 (A) IN GENERAL.—The requirements of

10 this subtitle shall not apply with respect to an

11 individual granted a qualified religious exemp12 tion.

13 (B) Q UALIFIED RELIGIOUS EXEMPTION.—

14 (i) I N GENERAL.—The term ‘qualified

15 religious exemption’ means an exemption

16 granted by the Secretary to an individ17 ual—

18 (I) who is a member of a recog19 nized religious sect or division thereof

20 with respect to which such Secretary

21 makes the findings referred to in sub22 paragraphs (C), (D), and (E) of sec23 tion 1402(g)(1) of the Internal Reve24 nue Code of 1986,
1377

•S 2357

1 (II) who is an adherent of estab2 lished tenets or teachings of such sect

3 or division as described in such sec4 tion, and

5 (III) who submits an application

6 for such exemption which contains or

7 is accompanied by the evidence de8 scribed in section 1402(g)(1)(A) of

9 such Act and a waiver described in

10 section 1402(g)(1)(B) of such Act.

11 (C) LIMITATION.—An exemption granted

12 under this paragraph shall cease to apply begin13 ning on the date such Secretary determines

14 that the individual, or the sect or division,

15 ceased to meet the requirements of subpara16 graph (B).

17 SEC. 10102. DEFINITIONS.

18 For purposes of this title:

19 (1) FULL-TIME EQUIVALENT EMPLOYEES;

20 PART-TIME EMPLOYEES.—

21 (A) I N GENERAL.—A qualifying employee

22 who is employed by an employer—

23 (i) for at least 120 hours in a month,

24 is counted as 1 full-time equivalent em-
1378

•S 2357

1 ployee for the month and shall be deemed

2 to be employed on a full-time basis, or

3 (ii) for at least 40 hours, but less

4 than 120 hours, in a month, is counted as

5 a fraction of a full-time equivalent em6 ployee in the month equal to the full-time

7 employment ratio (as defined in subpara8 graph (B)) for the employee and shall be

9 deemed to be employed on a part-time

10 basis.

11 (B) F ULL-TIME EMPLOYMENT RATIO DE12 FINED.—The term ‘‘full-time employment

13 ratio’’ means, with respect to a qualifying em14 ployee of an employer in a month, the lesser of

15 1 or the ratio of—

16 (i) the number of hours of employ17 ment such employee is employed by such

18 employer for the month, to

19 (ii) 120 hours.

20 (C) FULL-TIME EMPLOYEE.—The term

21 ‘‘full-time employee’’ means, with respect to an

22 employer, an employee who is employed on a

23 full-time basis (as specified in subparagraph

24 (A)) by the employer.
1379

•S 2357

1 (D) PART-TIME EMPLOYEE.—The term

2 ‘‘part-time employee’’ means, with respect to an

3 employer, an employee who is employed on a

4 part-time basis (as specified in subparagraph

5 (A)) by the employer.

6 (E) C ONSIDERATION OF INDUSTRY PRAC7 TICE.—As provided under rules established by

8 the Secretary of Labor, an employee who is not

9 described in subparagraph (C) or (D) shall be

10 considered to be employed on a full-time or

11 part-time basis by an employer (and to be a

12 full-time or part-time employee of an employer)

13 for a month (or for all months in a 12-month

14 period) if the employee is employed by that em15 ployer on a continuing basis that, taking into

16 account the structure or nature of employment

17 in the industry, represents full or part-time em18 ployment in that industry.

19 (F) QUALIFYING EMPLOYEE.—

20 (i) The term ‘‘qualifying employee’’

21 means, with respect to an employer for a

22 month, an employee who is employed by

23 the employer for at least 40 hours in the

24 month, subject to the limitation set forth

25 in clause (ii).
1380

•S 2357

1 (i) The term qualifying employee shall

2 not include, with respect to an employer

3 for a month, an employee of a nonelecting

4 employer.

5 (2) FAMILY ADJUSTED INCOME.—

6 (A) IN GENERAL.—Except as otherwise

7 provided, the term ‘‘family adjusted income’’

8 means, with respect to a family, the sum of the

9 adjusted incomes (as defined in subparagraph

10 (B)) for all members of the family.

11 (B) ADJUSTED INCOME.—In subparagraph

12 (A), the term ‘‘adjusted income’’ means, with

13 respect to an individual, adjusted gross income

14 (as defined in section 62(a) of the Internal Rev15 enue Code of 1986)—

16 (i) determined without regard to sec17 tions 135, 162(l), 911, 931, and 933 of

18 such Code, and

19 (ii) increased by the amount of inter20 est received or accrued by the individual

21 which is exempt from tax.

22 (C) P RESENCE OF ADDITIONAL DEPEND23 ENTS.—At the option of an individual, a family

24 may include (and not be required to separate

25 out) the income of other individuals who are
1381

•S 2357

1 claimed as dependents of the family for income

2 tax purposes, but such individuals shall not be

3 counted as part of the family for purposes of

4 determining the size of the family.

5 (3) NONENROLLING EMPLOYEE.—The term

6 ‘‘nonenrolling employee’’ means an employee of an

7 employer who does not enroll in a health plan of8 fered by the employer.

9 (4) REFERENCE PREMIUM.—The term ‘‘ref10 erence premium’’ means the reference premium es11 tablished under section 4512 of the Internal Reve12 nue Code of 1986.

13 (5) SECRETARY.—The term ‘‘Secretary’’ means

14 the Secretary of Labor.

15 (6) SELF-EMPLOYED INDIVIDUAL.—The term

16 ‘‘self-employed individual’’ means, for a year, an in17 dividual who has net earnings (as defined in section

18 1402(a) of the Internal Revenue Code of 1986) from

19 self-employment for the year.

20 (7) W EIGHTED AVERAGE PREMIUM.—The term

21 ‘‘weighted average premium’’ has the same meaning

22 given such term in section 6002(b)(1)(C).
1382

•S 2357

1 PART 1—EMPLOYER PREMIUM PAYMENTS

2 SEC. 10111. OBLIGATION.

3 (a) I N GENERAL.—Except as otherwise provided in

4 this subtitle, a contributing employer (as defined in sub5 section (b)) shall make health care coverage premium pay6 ments on behalf of the qualifying employees of the em7 ployer in accordance with this subtitle.

8 (b) CONTRIBUTING EMPLOYER.—As used in sub9 section (a), the term ‘‘contributing employer’’ means an

10 employer that—

11 (1) employs, on average, 25 or more employees;

12 or

13 (2) employs less than 25 employees that elects

14 under subsection (c) to be a contributing employee.

15 (c) ELECTION.—

16 (1) I N GENERAL.—An employer that does not

17 meet the requirements of subsection (b) may elect to

18 be treated as a community-rated employer under the

19 procedures to be developed by the Secretary.

20 (2) COMMUNITY-RATED EMPLOYER.—An ex21 empt employer shall be treated as a community22 rated employer as of the first date of the first year

23 following an election made under paragraph (1).

24 (3) S ELF-EMPLOYED.—A self-employed individ25 ual that does not employ at least one full-time em-
1383

•S 2357

1 ployee may not make an election under paragraph

2 (1).

3 SEC. 10112. COMMUNITY-RATED EMPLOYERS.

4 (a) REQUIREMENT.—

5 (1) I N GENERAL.—Each community-rated con6 tributing employer for a month shall pay at least an

7 amount equal to the sum across all qualifying em8 ployees of the amount specified in subsection (b) for

9 each such qualifying employee of the employer. Such

10 payments shall be made in accordance with stand11 ards established by the Secretary.

12 (2) T REATMENT OF CERTAIN EMPLOYMENT BY

13 EXPERIENCE-RATED EMPLOYERS.—An experience14 rated employer shall be deemed, for purposes of this

15 subtitle, to be a community-rated employer with re16 spect to qualifying employees who are not experience

17 rate eligible individuals.

18 (b) PREMIUM PAYMENT AMOUNT.—

19 (1) G ENERAL RULE.—The amount of the em20 ployer premium payment under subsection (a) for a

21 month for each qualifying employee of the employer

22 who is residing in a community rating area, shall be

23 equal to the sum of—

24 (A) 50 percent of the weighted average

25 premium of the purchasing cooperative through
1384

•S 2357

1 which the employer offered health plan coverage

2 with respect to each such employee in such

3 area; and

4 (B) the employer collection shortfall add5 on described in paragraph (2).

6 (2) E MPLOYER COLLECTION SHORTFALL ADD7 ON.—The employer collection shortfall add-on for a

8 month for each qualifying employee of the employer

9 residing in a community rating area shall be equal

10 to 50 percent of the amount described in section

11 10134 with respect to each such employee.

12 (3) PART-TIME EMPLOYEES.—With respect to a

13 part-time employee, the payment required under

14 paragraph (1) (and the add-on described in para15 graph (2)) shall be based on a pro-rated share (to

16 be established by the Secretary) of the weighted av17 erage premium of the purchasing cooperative in18 volved (or, with respect to the shortfall add-on, the

19 amount described in paragraph (2)).

20 SEC. 10113. EXPERIENCE RATED EMPLOYERS.

21 (a) REQUIREMENT.—Each experience-rated employer

22 that in a month employs a qualifying employee who is—

23 (1) enrolled in an experienced-rated health plan

24 sponsored by the employer, shall provide for a pay25 ment toward the premium for the plan for such em-
1385

•S 2357

1 ployee in an amount specified under subsection (b);

2 or

3 (2) is not so enrolled, shall make employer pre4 mium payments with respect to such employee in an

5 amount that is equal to 50 percent of the weighted

6 average premium (for the applicable class of family

7 enrollment) of the community rating area in which

8 the employee resides.

9 (b) PREMIUM PAYMENT AMOUNT.—

10 (1) GENERAL RULE.—The amount of the expe11 rience rated employer premium payment under sub12 section (a)(1) for a month for each qualifying em13 ployee of the employer, shall be equal to 50 percent

14 of the weighted average premium of the health plans

15 offered by the employer.

16 (2) S ELF-INSURED PLANS.—In the case of a

17 self-insured health plan, the amount of the premium

18 payment under subsection (a) shall be equal to the

19 premium equivalent of the self-insured health plan.

20 (3) PART-TIME EMPLOYEES.—With respect to a

21 part-time employee, the payment required under

22 paragraph (1) shall be a pro-rated share (to be es23 tablished by the Secretary) of the amount described

24 in subsection (a)(2).
1386

•S 2357

1 (4) PREMIUM AREAS.—An experience-rated

2 plan sponsor employer may, based on regulations

3 promulgated by the Secretary, establish premium

4 areas. Experience rated employers may base their

5 payments under this section on the weighted average

6 premium of the health plans offered in such pre7 mium areas.

8 PART 2—FAMILY PAYMENT RESPONSIBILITIES

9 Subpart A—Family Share

10 SEC. 10131. ENROLLMENT AND PREMIUM PAYMENTS.

11 (a) REQUIREMENT.—Each family enrolled in a com12 munity-rated health plan or in a experienced-rated health

13 plan in a class of family enrollment is responsible for pay14 ment of the family share of premium payable respecting

15 such enrollment. Such premium may be paid by an em16 ployer or other person on behalf of such a family.

17 (b) FAMILY SHARE OF PREMIUM DEFINED.—In this

18 part, the term ‘‘family share of premium’’ means, with re19 spect to enrollment of a family—

20 (1) in a community-rated health plan, the

21 amount specified in section 10132(a) for the class;

22 or

23 (2) in an experienced-rated health plan, the

24 amount specified in section 10132(b) for the class.
1387

•S 2357

1 SEC. 10132. FAMILY SHARE OF PREMIUMS.

2 (a) COMMUNITY-RATED HEALTH PLANS.—

3 (1) IN GENERAL.—The family share of pre4 miums for a family enrolled in a community-rated

5 health plan based on a class of family enrollment

6 shall equal the sum of the base amounts described

7 in paragraph (2) reduced (but not below zero) by the

8 sum of the amounts described in paragraph (3).

9 (2) BASE.—The base amounts described in this

10 paragraph (for a plan for a class of enrollment)

11 are—

12 (A) the applicable premium specified in

13 section 10133(a) with respect to such class of

14 enrollment;

15 (B) 50 percent of the applicable collection

16 shortfall add-on (computed under section 10134

17 for such class); and

18 (C) any applicable marketing fee as de19 scribed in section 1112(f).

20 (3) C REDITS AND DISCOUNTS.—The amounts

21 described in this paragraph (for a plan for a class

22 of enrollment) are—

23 (A) the amount of the family credit under

24 section 10135(a); and

25 (B) the amount of any premium discount

26 provided under section 10136(a)(1).
1388

•S 2357

1 (b) EXPERIENCE-RATED HEALTH PLANS.—

2 (1) IN GENERAL.—The family share of pre3 miums for a family enrolled in an experience-rated

4 health plan based on a class of family enrollment

5 shall equal the premium described in paragraph (2)

6 reduced (but not below zero) by the sum of the

7 amounts described in paragraph (3).

8 (2) P REMIUM.—The premium described in this

9 paragraph (for a plan for a class of enrollment) is

10 the applicable plan premium specified in section

11 10133(b) with respect to the plan and class of en12 rollment involved.

13 (3) C REDITS AND DISCOUNTS.—The amounts

14 described in this paragraph (for a plan for a class

15 of enrollment) are—

16 (A) the amount of the family credit under

17 section 10135(a); and

18 (B) the amount of any premium discount

19 provided under section 10136(a).

20 (4) MULTISTATE EMPLOYERS.—For purposes

21 of this subsection, the Secretary shall establish alter22 native contribution rules for multistate self-insured

23 employers.
1389

•S 2357

1 SEC. 10133. AMOUNT OF PREMIUM.

2 (a) COMMUNITY-RATED PLANS.—The amount of the

3 applicable premium charged by a community-rated health

4 plan for all families in a class of family enrollment under

5 a community-rated health plan offered in the health care

6 coverage area is equal to the product of—

7 (1) the final community rate for the plan; and

8 (2) the premium class factor established by the

9 Secretary of Health and Human Service for that

10 class under subpart D of part 1 of subtitle E of title

11 I;

12 increased for any applicable plan marketing fees (de13 scribed in section 1112(f)) and purchasing cooperative

14 membership fees (described in section 1324).

15 (b) REFERENCE TO OTHER PREMIUMS.—The

16 amount of the premium charged by an experience-rated

17 employer for all families in a class of family enrollment

18 under an experience-rated health plan is specified under

19 section 10113.

20 SEC. 10134. COLLECTION SHORTFALL ADD-ON.

21 (a) IN GENERAL.—The collection shortfall add-on for

22 a community rating area for a class of enrollment for a

23 year, is a per enrollee amount (determined under rules de24 veloped by the Secretary of Health and Human Services),

25 adjusted proportionately by the premium class factors de26 scribed in section 10133(a)(2), such that the total of the
1390

•S 2357

1 adjusted per enrollee amounts in the community rating

2 area equals the aggregate collection shortfall as deter3 mined under subsection (b).

4 (b) AGGREGATE COLLECTION SHORTFALL.—

5 (1) I N GENERAL.—Each State shall estimate,

6 for each community rating area for each year (be7 ginning with the first year for which this section ap8 plies) the total amount of payments which the State

9 can reasonably identify as owed to community-rated

10 health plans under this Act for the year and not

11 likely to be collected during a period specified by the

12 Secretary beginning on the first day of the year.

13 (2) E XCLUSION OF GOVERNMENT DEBTS.—The

14 amount under paragraph (1) shall not include any

15 payments owed to a community-rated health plan by

16 the Federal, State, or local governments.

17 (3) ADJUSTMENT FOR PREVIOUS SHORTFALL

18 ESTIMATION DISCREPANCY.—The amount estimated

19 under this subsection for a year shall be adjusted to

20 reflect over (or under) estimations in the amounts so

21 computed under this subsection for previous years

22 (based on actual collections), taking into account in23 terest payable based upon borrowings (or savings)

24 attributable to such over or under estimations.
1391

•S 2357

1 SEC. 10135. FAMILY CREDIT.

2 (a) I N GENERAL.—The credit provided under this

3 section for a family enrolled through an employer in a

4 community-rated or experience-rated plan for a class of

5 family enrollment is equal to the amount of the minimum

6 employer premium payment required under part 1 with

7 respect to the family.

8 (b) FAMILY NOT ENROLLED THROUGH EM9 PLOYER.—The credit provided under this section for a

10 family that is not enrolled in a community-rated or experi11 ence-rated plan through an employer for a class of family

12 enrollment is equal to 50 percent of the premium of the

13 plan in which the family is enrolled. In no case shall such

14 amount exceed the weighted average premium in the com15 munity rating area involved.

16 SEC. 10136. PREMIUM SUBSIDY.

17 (a) I N GENERAL.—Except as otherwise provided in

18 this section, each family enrolled with a community-rated

19 or experience-rated plan is entitled to a premium discount

20 under this section, in the amount specified in subsection

21 (b)(1).

22 (b) AMOUNT OF PREMIUM DISCOUNT.—

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

24 paragraphs of this subsection, the amount of the

25 premium discount under this subsection for a family

26 under a class of family enrollment is equal to—
1392

•S 2357

1 (A) 50 percent of the lesser of—

2 (i) the weighted average premium for

3 community-rated plans offered in the com4 munity-rating area involved, increased by

5 any amount provided under paragraph (2);

6 or

7 (ii)(I) in the case of a family enrolled

8 through a community-rated employer, the

9 weighted average premium for the purchas10 ing cooperative through which the family

11 obtains coverage; or

12 (II) in the case of a family enrolled

13 through an experience-rated employer, the

14 weighted average premium for the pre15 mium area of the health plans offered by

16 the employer; less

17 (B) the sum of—

18 (i) the family obligation amount de19 scribed in subsection (c); and

20 (ii) the amount of any voluntary em21 ployer payment (not required under part

22 1) towards the family share of premiums

23 for covered members of the family.

24 (2) INCREASE FOR COMMUNITY-RATED FAMI25 LIES TO ASSURE ENROLLMENT IN AT-OR-BELOW-AV-
1393

•S 2357

1 ERAGE-COST PLAN.—In the case of a family enrolled

2 in a community-rated plan, if a State determines

3 that a family eligible for a discount under this sec4 tion is unable to enroll in an at-or-below-average5 cost plan (as defined in paragraph (3)) that serves

6 the area in which the family resides, the amount of

7 the premium discount under this subsection is in8 creased to the extent that such amount will permit

9 the family to enroll in a community-rated plan with10 out the need to pay a family share of premium

11 under this part in excess of the sum described in

12 paragraph (1)(B).

13 (3) AT-OR-BELOW-AVERAGE-COST PLAN DE14 FINED.—In this section, the term ‘‘at-or-below-aver15 age-cost plan’’ means a community-rated plan the

16 premium for which does not exceed, for the class of

17 family enrollment involved, the weighted average

18 premium for the community-rating area.

19 (c) FAMILY OBLIGATION AMOUNT.—

20 (1) DETERMINATION.—Subject to paragraphs

21 (2) and (3), the family obligation amount under this

22 subsection is determined as follows:

23 (A) NO OBLIGATION IF INCOME BELOW IN24 COME THRESHOLD AMOUNT.—If the family ad25 justed income of the family is less than the in-
1394

•S 2357

1 come threshold amount (specified in paragraph

2 (4)), the family obligation amount is zero.

3 (B) I NCOME ABOVE INCOME THRESHOLD

4 AMOUNT.—If such income is at least such in5 come threshold amount, the family obligation

6 amount is the sum of the following:

7 (i) FOR INCOME (ABOVE INCOME

8 THRESHOLD AMOUNT) UP TO THE POV9 ERTY LEVEL.—The product of the initial

10 marginal rate for the applicable class of

11 family enrollment (specified in paragraph

12 (2)) and the amount by which—

13 (I) the family adjusted income

14 (not including any portion that ex15 ceeds the applicable poverty level for

16 the class of family involved), exceeds;

17 (II) such income threshold

18 amount.

19 (ii) G RADUATED PHASE OUT OF DIS20 COUNT UP TO 200 PERCENT OF POVERTY

21 LEVEL.—The product of the final marginal

22 rate for the applicable class of family en23 rollment (specified in paragraph (2)) and

24 the amount by which the family adjusted

25 income exceeds 100 percent (but is less
1395

•S 2357

1 than 200 percent) of the applicable poverty

2 level.

3 (2) MARGINAL RATES.—In paragraph (1), for a

4 year:

5 (A) I NITIAL MARGINAL RATE.—The initial

6 marginal rate is the ratio of—

7 (i) 4 percent of the applicable poverty

8 level for the class of enrollment involved

9 for the year; to

10 (ii) the amount by which such poverty

11 level exceeds such income threshold

12 amount.

13 (B) FINAL MARGINAL RATE.—The final

14 marginal rate is 12 percent.

15 (3) LIMITATION TO 8 PERCENT FOR ALL FAMI16 LIES.—

17 (A) IN GENERAL.—In no case shall the

18 family obligation amount under this subsection

19 for the year exceed 8 percent of the adjusted in20 come of the family.

21 (B) F AMILIES ABOVE 200 percent of pov22 erty.—With respect to a family with a family

23 adjusted income that exceeds 200 percent of the

24 applicable poverty level, the family obligation
1396

•S 2357

1 amount shall be equal to 8 percent of such fam2 ily adjusted income.

3 (4) INCOME THRESHOLD AMOUNT.—

4 (A) IN GENERAL.—For purposes of this

5 subtitle, the income threshold amount specified

6 in this paragraph is $1,000 (adjusted under

7 subparagraph (B)).

8 (B) I NDEXING.—For the 1-year period be9 ginning on January 1, 1995, the income thresh10 old amount specified in subparagraph (A) shall

11 be increased or decreased by the same percent12 age as the percentage increase or decrease by

13 which the average CPI for the 12-month-period

14 ending with August 31 of the preceding year

15 exceeds such average for the 12-month period

16 ending with August 31. 1993.

17 (C) R OUNDING.—Any increase or decrease

18 under subparagraph (B) for a year shall be

19 rounded to the nearest multiple of $10.

20 SEC. 10137. NO LOSS OF COVERAGE.

21 In no case shall the failure to pay amounts owed

22 under this Act result in an individual’s or family’s loss

23 of coverage.
1397

•S 2357

1 Subpart B—Payment of Family Credit by Certain

2 Families

3 SEC. 10141. PAYMENT OF FAMILY CREDIT BY NONWORKING

4 AND PART-TIME CERTAIN FAMILIES.

5 Subject to the limitations described in section 10142,

6 a family with an employer contribution for a month that

7 is less than the family credit amount described in section

8 10135, shall be liable for payment of an amount equal to

9 the family credit amount less any employer contributions

10 for the family for the month.

11 SEC. 10142. LIMITATION OF LIABILITY BASED ON INCOME.

12 (a) I N GENERAL.—In the case of an eligible family

13 described in subsection (b), the repayment amount re14 quired under section 10141 with respect to a year shall

15 not exceed the amount of liability described in subsection

16 (c) for the year.

17 (b) ELIGIBLE FAMILY DESCRIBED.—An eligible fam18 ily described in this subsection is a family which is deter19 mined by the State for the community rating area in which

20 the family resides, to have wage-adjusted income (as de21 fined in subsection (d)) below 200 percent of the applica22 ble poverty level.

23 (c) AMOUNT OF LIABILITY.—

24 (1) DETERMINATION.—Subject to subsection

25 (f), in the case of a family enrolled in a class of en26 rollment with wage-adjusted income (as defined in
1398

•S 2357

1 subsection (d)), the amount of liability under this

2 subsection is determined as follows:

3 (A) NO OBLIGATION IF INCOME BELOW IN4 COME THRESHOLD AMOUNT.—If such income is

5 less than the income threshold amount (speci6 fied in section 10136(c)(4)), the amount of li7 ability is zero.

8 (B) I NCOME ABOVE INCOME THRESHOLD

9 AMOUNT.—If such income is at least such in10 come threshold amount, the amount of liability

11 is the sum of the following:

12 (i) INITIAL MARGINAL RATE.—The

13 initial marginal rate (specified in para14 graph (2)(A)) of the amount by which—

15 (I) the wage-adjusted income

16 (not including any portion that ex17 ceeds the applicable poverty level for

18 the class of family involved), exceeds

19 (II) such income threshold

20 amount.

21 (ii) FINAL MARGINAL RATE.—Where

22 wage-adjusted income exceeds 100 percent

23 of the applicable poverty level, the final

24 marginal rate (specified in paragraph

25 (2)(B)) of the amount by which the wage-
1399

•S 2357

1 adjusted income exceeds 100 percent of the

2 applicable poverty level.

3 (2) MARGINAL RATES.—In paragraph (1)—

4 (A) I NITIAL MARGINAL RATE.—The initial

5 marginal rate, for a year for a class of enroll6 ment, is the ratio of—

7 (i) 4 percent of the applicable poverty

8 level for the class of enrollment for the

9 year, to

10 (ii) the amount by which such poverty

11 level exceeds such income threshold

12 amount.

13 (B) FINAL MARGINAL RATE.—The final

14 marginal rate, for a year for a class of enroll15 ment, is the ratio of—

16 (i) the amount by which (I) 50 per17 cent of the weighted average premium in

18 the community rating area (for the class

19 and year) exceeds (II) 4 percent of applica20 ble poverty level (for the class and year);

21 to

22 (ii) 100 percent of such poverty level.

23 (d) WAGE-ADJUSTED INCOME DEFINED.—In this

24 subtitle, the term ‘‘wage-adjusted income’’ means, for a
1400

•S 2357

1 family, family adjusted income of the family, reduced by

2 the sum of the following:

3 (1)(A) Subject to subparagraph (B), the

4 amount of any wages included in such family’s in5 come that is received for employment which is taken

6 into account in the computation of the amount of

7 employer premiums under part 1.

8 (B) The reduction under subparagraph (A)

9 shall not exceed for a year $5,000 (adjusted under

10 section 10136(c)(3)(B)) multiplied by the number of

11 months (including portions of months) of employ12 ment with respect to which employer premiums were

13 payable under part 1.

14 (2) The amount of unemployment compensation

15 included in income under section 85 of the Internal

16 Revenue Code of 1986.

17 (e) DETERMINATIONS.—A family’s wage-adjusted in18 come and the amount of liability under subsection (c) shall

19 be determined by the State upon application by a family.

20 TITLE XI—ENSURING HEALTH

21 CARE REFORM FINANCING

22 SEC. 11001. ENSURING HEALTH CARE REFORM FINANCING.

23 (a) PURPOSE.—The purpose of this section is to en24 sure that the enactment of this Act does not result in un25 anticipated increases in the Federal deficit.
1401

•S 2357

1 (b) LEGAL ENTITLEMENTS CONTINGENT.—Any enti2 tlement provided by this Act, including those to premium

3 assistance, shall be subject to the operation of this section.

4 (c) DETERMINATION OF UNFINANCED HEALTH

5 SPENDING.—

6 (1) INITIAL HEALTH CARE BASELINE.—Not

7 later than the date that is 60 days after the date of

8 enactment of this Act, the President shall, using up9 to-date estimates, issue an order setting forth the

10 initial health care baseline for fiscal year 1995 and

11 for each subsequent fiscal year through 2004, which

12 shall consist of estimates (for each year) projecting

13 the following:

14 (A) total direct spending outlays resulting

15 from this Act and under the Medicare and Med16 icaid programs; and

17 (B) total revenues resulting from this Act.

18 (2) P RESIDENT’S BUDGET TO INCLUDE A CUR19 RENT HEALTH CARE BASELINE.—When the Presi20 dent submits the budget for fiscal year 1997 (as re21 quired by section 1105 of title 31), and for each fis22 cal year through 2004, the President shall include—

23 (A) a current health care baseline (as spec24 ified in paragraph (3)) with respect to the cur-
1402

•S 2357

1 rent fiscal year, the budget year, and the 4 fol2 lowing fiscal years; and

3 (B) an estimate of the difference between

4 the current health care baseline and the initial

5 health care baseline for the current fiscal year,

6 the budget year, and the 4 following fiscal

7 years.

8 (3) C URRENT HEALTH CARE BASELINE.—The

9 current health care baseline shall, for the applicable

10 fiscal year, consist of—

11 (A) updated spending and revenue

12 amounts contained in the initial projection (as

13 set forth in paragraph (1)); plus or minus

14 (B) other outlays or revenue changes con15 tained in legislation enacted after the date of

16 enactment of this Act offsetting outlays or reve17 nues resulting from this Act.

18 (4) COMPARING INITIAL AND CURRENT HEALTH

19 CARE BASELINES.—Once OMB has determined the

20 difference between the initial and current health care

21 baselines, OMB shall remove from that difference

22 any health care variable not attributable either to

23 this Act or to any legislation described in paragraph

24 (3)(B).
1403

•S 2357

1 (d) OFFSETTING UNFINANCED HEALTH SPEND2 ING.—

3 (1) REQUIREMENT FOR SEQUESTRATION TO

4 FULLY OFFSET UNFINANCED HEALTH SPENDING.—

5 If the President’s budget includes a determination

6 that the current health care baseline exceeds the ini7 tial health care baseline pursuant to subsection

8 (c)(2)(B) for the budget year and the current fiscal

9 year by more than $10,000,000,000 in total, such

10 determination shall be accompanied by a proposed

11 order to become effective on October 1 of that cal12 endar year which fully offsets in the budget year and

13 the following fiscal year the sum of such excess (for

14 the budget year and the current fiscal year) in the

15 manner provided in this subsection. Such proposed

16 order shall be accompanied by such proposed regula17 tions as the President deems necessary to carry out

18 the sequester.

19 (2) OFFSETS.—

20 (A) IN GENERAL.—The offsets required by

21 this subsection shall be accomplished through a

22 combination of—

23 (i) subject to the provisions of sub24 paragraph (B), in the case of the premium

25 assistance program, reducing the percent-
1404

•S 2357

1 ages otherwise in effect for the fiscal year

2 under subparagraphs (A), (B), and (C) of

3 section 6002(a)(2);

4 (ii) adjusting the deductible for Medi5 care drugs as provided in section

6 1834(d)(1)(B)(i) of the Social Security

7 Act; and

8 (iii) reducing each direct spending

9 program provided in the Act by a uniform

10 percentage,

11 to the extent (subject to paragraph (3)) nec12 essary to accomplish all of the sequestrations

13 necessary to fully offset the amounts required

14 for that fiscal year.

15 (B) E LIGIBILITY PERCENTAGE FOR PREG16 NANT WOMEN AND CHILDREN REDUCED

17 LAST.—Any reduction under subparagraph

18 (A)(i)—

19 (i) shall be made first by reducing the

20 percentages under section 6002(a)(2)(A);

21 and

22 (ii) to the extent sufficient offsets may

23 not be made under subparagraph (A), shall

24 then be made by reducing the percentages

25 under section 6002(a)(2) (B) and (C).
1405

•S 2357

1 (3) PROPORTIONALITY.—The President shall

2 apply the offset mechanisms provided in paragraph

3 (2)(A) (i), (ii), and (iii) proportionally (based on the

4 ratio of the outlays caused by each program to the

5 total outlays of all sequesterable programs under

6 paragraph (2)(A)), to the extent possible, in the

7 budget year and the following fiscal year, but in no

8 case shall the total amount of offsets be less than

9 the amount required by paragraph (1).

10 (4) EFFECTIVE PERIOD.—For purposes of a fis11 cal year not subject to an order under this section

12 following a fiscal year subject to an order under this

13 section, this Act and the amendments made by this

14 Act shall be assumed to continue as if the order had

15 not been issued.

16 (5) C ONSULTATION.—The President shall con17 fer with the National Health Benefits Board and the

18 National Health Care Cost and Coverage Commis19 sion in carrying out this subsection.

20 (e) FINAL SEQUESTER DETERMINATION.—Using the

21 same economic and technical assumptions as used in mak22 ing the preliminary determination under subsection (c),

23 the President shall reestimate the current health care

24 baselines on September 15 based on legislation in effect

25 as of September 10. If the aggregate difference between
1406

•S 2357

1 the initial and updated baseline is more than

2 $10,000,000,000 in the current fiscal year and budget

3 year combined, the President shall issue a final order (and

4 accompanying final regulations) following the procedure

5 set forth in subsection (d).

6 (f) S USPENSION IN THE EVENT OF WAR OR LOW

7 GROWTH.—

8 (1) LOW GROWTH.—The President shall not

9 issue either a proposed or final order under this sec10 tion if the Office of Management and Budget noti11 fies the Congress that—

12 (A) during the period consisting of the

13 quarter during which such notification is given,

14 the quarter preceding such notification, and the

15 4 quarters following such notification, the Of16 fice of Management and Budget has determined

17 that real economic growth is projected or esti18 mated to be less than zero with respect to each

19 of any 2 consecutive quarters within such pe20 riod; or

21 (B) the most recent of the Department of

22 Commerce’s advance preliminary or final re23 ports of actual real economic growth indicate

24 that the rate of real economic growth for each

25 of the most recently reported quarter and the
1407

•S 2357

1 immediately preceding quarter is less than 1

2 percent.

3 (2) W AR.—The President shall not issue either

4 a proposed or final order under this section if a dec5 laration of war is in effect.

6 (g) R ECOMMENDATIONS FOR ALTERNATIVE REDUC7 TIONS.—If the President’s budget for a fiscal year is ac8 companied by an order under subsection (d)(1), the Na9 tional Health Benefits Board shall, within a reasonable

10 time, transmit to the President, the Speaker of the House

11 of Representatives, and the President of the Senate a re12 port including alternative proposals to offset the projected

13 excess set forth in subsection (c)(4).

14 (h) GAO A UDIT OF REDUCTIONS.—If the President

15 has issued an order under subsection (d)(1), the General

16 Accounting Office shall report to Congress, as soon there17 after as possible following the date of transmittal of the

18 President’s budget, an analysis of whether the order has

19 fully complied with the requirements of this section.

20 (i) A DDITIONAL OMB R EPORTING REQUIREMENTS

21 TO BE INCLUDED IN PRESIDENT’S BUDGET.—

22 (1) A DJUSTED ESTIMATE OF TOTAL FEDERAL

23 HEALTH CARE COSTS.—

24 (A) IN GENERAL.—When the President

25 submits the budget for fiscal year 1997, and
1408

•S 2357

1 each fiscal thereafter through 2004, the Presi2 dent shall include an estimate of total Federal

3 health care costs as described in subparagraph

4 (B).

5 (B) TOTAL FEDERAL HEALTH CARE

6 COSTS.—Total Federal health care costs are—

7 (i) Federal spending in the current

8 health care baseline (as determined under

9 subsection (c)(3)); plus

10 (ii) discretionary health care spending

11 on—

12 (I) the health care program for

13 active military personnel under title

14 10, United States Code;

15 (II) the veterans health care pro16 gram under chapter 17 of title 38,

17 United States Code;

18 (III) the Civilian Health and

19 Medical Program of the Uniformed

20 Services (CHAMPUS), as defined in

21 section 1073(4) of title 10, United

22 States Code;

23 (IV) the Federal Employee

24 Health Benefit Plan under chapter 89
1409

•S 2357

1 of title 5, United States Code

2 (FEHB); and

3 (V) the Indian health service pro4 gram under the Indian Health Care

5 Improvement Act (25 U.S.C. 1601 et

6 seq.).

7 (2) COST AS A PERCENT OF TOTAL REVE8 NUES.—The President shall include with the esti9 mate required by this subsection a calculation by

10 OMB of the percentage of personal and corporate

11 income taxes needed to pay for total Federal health

12 care costs, as adjusted by this subsection, in excess

13 of dedicated health revenues. OMB shall assume

14 that all dedicated health revenues resulting from

15 amendments made by this Act will be allocated for

16 total Federal health care costs, as adjusted by this

17 subsection.

18 (j) A DDITIONAL COMMISSION REPORTING REQUIRE19 MENTS.—Effective beginning in 1997, the National

20 Health Care Commission shall report annually on how

21 health care expenses are being financed. Among other

22 things, this report shall include—

23 (1) how much is spent annually in premiums,

24 out-of-pocket expenses, and third party expenses;

25 and
1410

•S 2357

1 (2) the number of businesses that provide

2 health insurance and a profile of businesses that do

3 not provide health insurance, including the earnings

4 of such businesses.

Æ