Calendar No. 542 

103D CONGRESS 

2D SESSION S. 2357 

A BILL 

To achieve universal health insurance coverage, and 

for other purposes. 

AUGUST 5, 1984 

Read the second time and placed on the calendar 

II 

Calendar No. 542 

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 

AUGUST 5, 1984 

Read the second time and placed on the calendar 

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. 
2 

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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. 

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. 
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•S 2357 

Sec. 1212. Qualifications of board members. 

Sec. 1213. General duties and responsibilities. 

Sec. 1214. Powers. 

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. 
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•S 2357 

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. 

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. 
5 

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PART 4—OFFICE OF RURAL HEALTH POLICY

Sec. 1491. Office of rural health policy. 

Subtitle F—Participating State Responsibilities 

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
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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. 

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
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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. 

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. 
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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. 

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. 
9 

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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

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. 
10 

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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. 

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. 
11 

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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. 

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. 
12 

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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. 

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
13 

•S 2357 

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

Sec. 4616. Frail elderly demonstration project waivers. 

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
14 

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Sec. 5131. Accessing health information for authorized purposes. 

Sec. 5132. Responding to access requests. 

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. 
15 

•S 2357 

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. 

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. 
16 

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SUBPART B—CIVIL SANCTIONS

Sec. 5256. Civil penalty. 

Sec. 5257. Civil action. 

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. 
17 

•S 2357 

PART 2—DEMONSTRATION PROJECT RELATING TO MEDICAL MALPRACTICE

LIABILITY

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. 
18 

•S 2357 

Sec. 6004. Eligibility determinations. 

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

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. 
19 

•S 2357 

Subtitle C—Exempt Health Care Organizations 

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 
20 

•S 2357 

Sec. 8101. Purposes. 

Sec. 8102. Definitions. 

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. 
21 

•S 2357 

Sec. 10137. No loss of coverage. 

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 indi8 vidual 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 certi21 fying 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 indi4 vidual is eligible to elect other coverage and so 

5 elects. 

6 SEC. 1012. DEFINITIONS RELATING TO EMPLOYMENT AND 

7 INCOME. 

8 Except as otherwise specifically provided, in this Act 

9 the following definitions and rules apply: 

10 (1) EMPLOYER, EMPLOYEE, EMPLOYMENT, AND

11 WAGES DEFINED.—Except as provided in this sec12 tion— 

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

14 have the meanings given such terms under sec15 tion 3121 of the Internal Revenue Code of 

16 1986, 

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

18 given such term under section 3121 of such 

19 Code, subject to the provisions of chapter 25 of 

20 such Code, and 

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

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

23 such section 3121. 

24 (2) EXCEPTIONS.—For purposes of paragraph 

25 (1)— 
32 

•S 2357 

1 (A) EMPLOYMENT.— 

2 (i) EMPLOYMENT INCLUDED.—Para3 graphs (1), (2), (5), (7) (other than 

4 clauses (i) through (iv) of subparagraph 

5 (C) and clauses (i) through (v) of subpara6 graph (F)), (8), (9), (10), (11), (13), (15), 

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

8 Internal Revenue Code of 1986 shall not 

9 apply. 

10 (ii) EXCLUSION OF INMATES AS EM11 PLOYEES.—Employment shall not include 

12 services performed in a penal institution by 

13 an inmate thereof or in a hospital or other 

14 health care institution by a patient thereof. 

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

16 3121(a) of the Internal Revenue Code of 1986 

17 shall not apply. 

18 (C) EMPLOYEES.— 

19 (i) TREATMENT OF SELF-EM20 PLOYED.—The term ‘‘employee’’ includes a 

21 self-employed individual. 

22 (ii) EXCLUSION OF CERTAIN FOREIGN

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

24 not include an individual with respect to 

25 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 enti16 ty 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 indi13 vidual shall be determined taking into account 

14 the 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 pro17 viding 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 under-
48 

•S 2357 

1 service under a plan, the Secretary may provide 

2 rules under which the carrier providing the 

3 standard health plan is liable, to the subsequent 

4 standard health plan in which the individual is 

5 enrolled, for excess costs (as identified in ac6 cordance with such rules) during the period for 

7 which it may be reasonably anticipated that the 

8 individual would (but for such cause) have con9 tinued enrollment with the original standard 

10 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, med15 ical 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 INDI3 VIDUAL.—This subsection shall not apply— 

4 (A) during the first annual open enroll5 ment period specified by the appropriate certi6 fying 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 ben10 efit 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 

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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 

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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 

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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 mar7 keting, 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 

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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 PRO14 VIDERS. 

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 work10 force necessary to evaluate the providers compliance 

11 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 con3 tinuity. 

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.— 
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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 partici15 pating physicians to enrollees and prospective 

16 enrollees. 

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 pro21 viders (and prospective providers), the protocols and fi22 nancial incentives used by the plan, including utilization 

23 management protocols and physician incentive plans for 

24 controlling utilization and costs, while protecting propri-
82 

•S 2357 

1 etary business information to the extent specified by the 

2 Secretary. 

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 COPAY2 MENTS.—A cost-sharing plan may not provide any 

3 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 

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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 fol23 lowing, 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 

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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. 
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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 

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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 

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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, radi9 ology, and diagnostic services provided upon pre10 scription to individuals who are not inpatients of a 

11 hospital, hospice, skilled nursing facility, or rehabili12 tation 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.— 
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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 indi25 vidual who is under 22 years of age: 
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•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 pro17 viding services to inpatients that are equivalent to 

18 the services provided by a hospital defined in such 

19 section 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 med8 ical 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 pro8 viding 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 co15 payments, coinsurance, deductibles, and out-of-pock16 et limits. The copayments, coinsurance, deductibles 

17 and out-of-pocket limits on cost-sharing for a year 

18 under the schedules shall be applied based upon ex19 penses incurred for covered items and services fur20 nished 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 pro25 viding coverage for in vitro fertilization in the stand-
120 

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1 ard benefits package. Not later than July 1, 1996, 

2 the Board shall prepare and submit to the Secretary 

3 and 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 

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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. 
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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-
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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 
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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 
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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 com4 mittee or committees have been discharged 

5 from further consideration of the implementing 

6 bill. If prior to the passage by one House of an 

7 implementing 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 
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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 imple21 menting bill or to move to reconsider the vote 

22 by which an implementing bill is agreed to or 

23 disagreed to. 

24 (C) MOTION TO POSTPONE.—Motions to 

25 postpone, made in the House of Representatives 
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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. 
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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 pur23 chasing cooperative operating in the 

24 community rating area in which such 

25 employer is located, and if such coop-
131 

•S 2357 

1 erative 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 

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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 PUR18 CHASING 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 under2 taking 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 mar10 keting fees) with and enter into agreements with 

11 standard 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 pur20 chasing 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 pur14 chasing cooperatives in cases in which community-rated 

15 employers are located in one community rating area and 

16 their community-rated employees reside in a different 

17 community 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 pur25 chasing cooperative that requires direct payment of 
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1 premiums 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. 
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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 mar16 keting 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 
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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-
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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 pur19 chasing cooperative selected by the employer shall 

20 enroll in a standard health plan consistent with rules 

21 promulgated by the Secretary. The purchasing coop22 erative selected by the employer shall be responsible 

23 for forwarding premium payments to the appropriate 

24 plan or cooperative for each community-rated em-
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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- 
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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. 
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1 (2) ESTABLISHMENT BY OPM.—If no pur2 chasing cooperative exists in an area or if the Office 

3 of Personnel Management is unsuccessful in reach4 ing such an agreement, the Office of Personnel Man5 agement shall establish and administer a purchasing 

6 cooperative in such area. Such cooperative shall 

7 meet all the requirements of this part except rules 

8 regarding 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. 
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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 ben7 efit 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. 
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•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 
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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 

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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 responsi23 bility for a performance-based system of quality manage24 ment and improvement as required by section 5001. 
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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, 
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•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 certi2 fying 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. 
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•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, pre19 scribing the requirements for State health care sys20 tems under this title, except that in the case of a 

21 plan submitted under section 1501(a) before the 

22 date of issuance of such regulations, the Secretary 

23 shall take action on such document notwithstanding 

24 the fact 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: 
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•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 partici22 pating 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. 
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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. 
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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 ben17 efit 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. 
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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. 
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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. 
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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.— 
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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. 
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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 pri6 ority 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 

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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. 
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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.). 
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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 

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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 

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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 

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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 enti17 ty 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 pro4 viders in medical specialties or subspecialties partici5 pating 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 

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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 

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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. 
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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, 
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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- 
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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. 
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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). 
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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. 
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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’’. 
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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-
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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 ‘‘partici22 pating State’’ if the State meets the applicable re23 quirements of this subtitle. 

24 (2) SUBMISSION OF PLAN.—In order to be ap25 proved as a participating State under section 1411, 
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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 partici6 pating State with a State health care system in op7 eration by January 1, 1997, the provisions of sub8 part C of part 1 of subtitle E (relating to respon9 sibilities in absence of State systems) shall take ef10 fect. 

11 (4) SUBMISSION OF INFORMATION SUBSEQUENT

12 TO APPROVAL.—A State approved as a participating 

13 State under section 1411 shall submit to the Sec14 retary an annual update to the State health care 

15 system not later than February 15 of each year fol16 lowing the first year for which the State is a partici17 pating State. The update shall contain— 

18 (A) such information as the Secretary may 

19 require to determine that the system shall meet 

20 the applicable requirements of this Act for the 

21 succeeding year; and 

22 (B) such information as the Secretary may 

23 require to determine that the State operated 

24 the system during the previous year in accord-
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1 ance with the Secretary’s approval of the sys2 tem for such previous year. 

3 (b) HEALTH PLAN ACCREDITATION, CERTIFICATION

4 AND ENFORCEMENT PROGRAM.— 

5 (1) ESTABLISHMENT.—The Secretary shall es6 tablish a program for the accreditation, certification 

7 and enforcement of health plan standards by States 

8 (hereafter referred to in this subsection as the ‘‘ACE 

9 program’’). Under such program, the Secretary 

10 shall— 

11 (A) develop guidelines for the accredita12 tion, certification and enforcement of standards 

13 for certified standard health plans; 

14 (B) approve State ACE programs as meet15 ing such guidelines; and 

16 (C) monitor the compliance of States with 

17 such guidelines. 

18 (2) PROGRAM ELEMENTS.—The guidelines re19 ferred to in paragraph (1) shall include the following 

20 components: 

21 (A) CERTIFICATION.—State certification, 

22 and recertification not less frequently than once 

23 during each 3-year period, of standard health 

24 plans determined by the State to be in compli25 ance with the standards established under sub-
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1 title B and with the regulations promulgated by 

2 the Secretary concerning such standards. 

3 (B) DISENROLLMENT DATA.—State review 

4 of enrollee disenrollment from each standard 

5 health plan to determine whether there is a pat6 tern of disenrollment that does not reflect the 

7 distribution of such plans’ reenrolling member8 ship. 

9 (C) MONITORING.—State monitoring of 

10 the performance of each standard health plan 

11 to ensure that such plans continue to meet the 

12 criteria for certification. 

13 (3) STATE PROGRAMS.—Each participating 

14 State shall develop accreditation, certification and 

15 enforcement programs in accordance with the guide16 lines established by the Secretary under paragraph 

17 (1). 

18 (4) USE OF PRIVATE ORGANIZATIONS.— 

19 (A) IN GENERAL.—A State may utilize pri20 vate accreditation organizations to review the 

21 compliance by standard health plans with spe22 cific standards with which such organizations 

23 have demonstrated expertise. A State may use 

24 such reviews as the basis for determining plan 

25 compliance with such standards. The Secretary 
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1 shall approve eligible accreditation organiza2 tions and promulgate regulations prohibiting 

3 conflicts of interest in the use of such bodies by 

4 States. 

5 (B) LIMITATIONS.—The use of private ac6 creditation organizations by a State under sub7 paragraph (A) shall not relieve such State of its 

8 obligations under this subsection. In no case 

9 shall a State delegate enforcement authority or 

10 enforcement responsibilities to private organiza11 tions. 

12 (5) ENFORCEMENT.—A State ACE program 

13 shall establish a process for imposing sanctions on 

14 standard health plans that fail to comply with the 

15 standards established under this title. Such sanc16 tions may include— 

17 (A) limiting or prohibiting new member en18 rollment; 

19 (B) permitting existing members to 

20 disenroll from the health plan without penalty; 

21 (C) State operation of a health plan to 

22 provide transitional access; 

23 (D) the imposition of civil monetary pen24 alties in accordance with this Act; 
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1 (E) requiring that a plan follow a correc2 tive action plan developed by the State; and 

3 (F) decertification or denial of recertifi4 cation, but only after the plan has been pro5 vided a reasonable opportunity to comply with 

6 such standards. 

7 (6) MULTI-STATE PLANS.—The Secretary of 

8 Labor, in consultation with the Secretary, shall 

9 carry out all certification and enforcement activities 

10 described in this subsection with respect to 

11 multistate self-insured plans. 

12 (c) OTHER STATE DUTIES.—A participating State 

13 shall— 

14 (1) certify each purchasing cooperative that 

15 meets the requirements of part 2 of subtitle D; and 

16 (5) administer the State subsidies as provided 

17 for in title VI. 

18 (d) EFFECTIVE DATE.—Subsection (b) shall apply to 

19 standard health plans and supplemental health benefits 

20 plans sold, issued, or renewed on or after January 1, 

21 1997. 

22 SEC. 1502. COMMUNITY RATING AREAS AND HEALTH PLAN 

23 SERVICE AREAS. 

24 (a) IN GENERAL.—In accordance with this section, 

25 each participating State shall, subject to approval by the 
212 

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1 Secretary, provide for the division of the State into 1 or 

2 more community rating areas. 

3 (b) MULTIPLE AREAS.—With respect to a community 

4 rating area— 

5 (1) no metropolitan statistical area in a State 

6 may be incorporated into more than 1 such area in 

7 the State; 

8 (2) the number of individuals residing within 

9 such an area may not be less than 250,000; and 

10 (3) no area incorporated in a community rating 

11 area may be incorporated into another such area. 

12 (c) BOUNDARIES.— 

13 (1) IN GENERAL.—In establishing boundaries 

14 for community rating areas, a participating State 

15 shall comply with the antidiscrimination require16 ments of section 1602. 

17 (2) COORDINATING MULTIPLE COMMUNITY RAT18 ING AREAS.—Nothing in this section shall be con19 strued as preventing a participating State from co20 ordinating the activities of one or more community 

21 rating areas in the State. 

22 (3) INTERSTATE COMMUNITY RATING AREAS.— 

23 Community rating areas with respect to interstate 

24 areas shall be established in accordance with rules 

25 established by the Secretary. 
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1 (4) COORDINATION IN MULTI-STATE AREAS.— 

2 One or more participating States may coordinate 

3 their operations in contiguous community rating 

4 areas. Such coordination may include, the following 

5 activities, adoption of joint operating rules, con6 tracting with standard health plans, enforcement ac7 tivities, and establishment of fee schedules for health 

8 providers. 

9 (d) HEALTH PLAN SERVICE AREAS.— 

10 (1) IN GENERAL.—Pursuant to guidelines de11 veloped under paragraph (2), each State shall des12 ignate, by not later than January 1, 19ll, health 

13 plan service areas. 

14 (2) GUIDELINES.—The State shall designate 

15 one or more health plan service areas within each 

16 community rating area in the State, that— 

17 (A) prevent discrimination in accordance 

18 with section 1602; and 

19 (B) do not cross community rating area 

20 boundaries. 

21 SEC. 1503. OPEN ENROLLMENT PERIODS. 

22 Each participating State, based on rules and proce23 dures established by the Secretary, shall specify a uniform, 

24 annual open enrollment period for each community rating 

25 area during which all eligible individuals are permitted the 
214 

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1 opportunity to change enrollment among the standard 

2 health plans offered to such individuals in such area under 

3 this Act. The initial annual open enrollment period shall 

4 be for a period of 90 days. 

5 SEC. 1504. RISK ADJUSTMENT PROGRAM. 

6 (a) REQUIREMENT FOR IMPLEMENTATION.—In ac7 cordance with rules established by the Secretary, each 

8 State shall implement a risk adjustment methodology de9 veloped by the Secretary under subsection (d). 

10 (b) STATE RISK ADJUSTMENT ORGANIZATION.— 

11 Each State shall establish a State risk adjustment organi12 zation to carry out the adjustments required under the 

13 methodology implemented by the State under subsection 

14 (a) and make payments in accordance with subsection (c). 

15 Such organization shall meet standards established by the 

16 Secretary relating to organizational structure, operation, 

17 fiduciary responsibilities and financial management. 

18 (c) ADJUSTMENTS AND PAYMENTS.— 

19 (1) CLASSES OF PURCHASERS.—The Secretary 

20 shall specify classes of individual health plan pur21 chasers whose expected expenditures are signifi22 cantly higher than those of employed individuals cov23 ered under community-rated plans. 

24 (2) ESTIMATES.—The Secretary shall annually 

25 estimate the amount by which the expected expendi-
215 

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1 tures related to specified high-cost community-rated 

2 individual health plan purchasers (as specified by 

3 the Secretary under the methodologies developed 

4 under subsection (a)) for the year involved will ex5 ceed the expected average expenditures for other 

6 community-rated health plan enrollees. Based on 

7 such estimates, the Secretary shall develop a per 

8 capita adjustment amount with respect to each com9 munity rating area. 

10 (3) PAYMENTS.— 

11 (A) IN GENERAL.—The State risk adjust12 ment organization shall, using the methodolo13 gies developed by the Secretary under sub14 section (a), apply the per capita adjustment 

15 amount to community-rated and experience16 rated (and multistate plans under subparagraph 

17 (C)) health plans offered within each commu18 nity rating area in the State. 

19 (B) STANDARD PLANS.—Standard health 

20 plans subject to an assessment under subpara21 graph (A) shall make payments to the State 

22 risk adjustment organization for the State in 

23 which such plans provide coverage. 

24 (C) MULTISTATE PLANS.—A multistate 

25 community-rated or experience-rated plan that 
216 

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1 is subject to an assessment under subparagraph 

2 (A) shall make payments to a single State risk 

3 adjustment organization and provide such orga4 nization with information concerning the geo5 graphic distribution of the enrollees in such 

6 plan. Such organization shall determine the 

7 amount of such payments that are applicable to 

8 each community-rating area and distribute such 

9 amounts to the appropriate State risk adjust10 ment organization. 

11 (D) DISTRIBUTION.—State risk adjust12 ment organizations shall distribute amounts col13 lected under this paragraph to community-rated 

14 or experience-rated health plans that are deter15 mined to have expenditures for items and serv16 ices provided to enrolled individuals that are 

17 greater than the average expenditures for en18 rollees in standard health plans. The amounts 

19 of such distributions shall be based on the 

20 methodology applied by the organization in21 volved. 

22 (d) DEVELOPMENT OF METHODOLOGIES.— 

23 (1) IN GENERAL.—Not later than 

24 lllllllll, the Secretary, in consultation 

25 with an advisory committee established by the Sec-
217 

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1 retary, shall develop a risk adjustment and reinsur2 ance methodology for use by States in accordance 

3 with this section. 

4 (2) METHODOLOGY.— 

5 (A) PURPOSES.—The risk adjustment 

6 methodology developed under paragraph (1) 

7 shall— 

8 (i) ensure that assessments imposed 

9 on or payments provided to standard 

10 health plans reflect the expected relative 

11 utilization and expenditures for covered 

12 items and services by the enrollees of each 

13 plan compared to the average utilization 

14 and expenditures for all eligible individ15 uals, and 

16 (ii) protect standard health plans that 

17 enroll a disproportionate share of eligible 

18 individuals with respect to whom expected 

19 utilization of health care services (included 

20 in the benefit package) and expected 

21 health care expenditures for such services 

22 are greater than the average level of such 

23 utilization and expenditures for eligible in24 dividuals. 
218 

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1 (B) FACTORS TO BE CONSIDERED.—The 

2 methodology shall take into account the fol3 lowing 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 

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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 

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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 

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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 pro11 viders 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 

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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 

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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 

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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 

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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 

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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 

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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 

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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 con14 sistent 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 pro24 viders who furnish items and services included 

25 in the standard benefits package established 
239 

•S 2357 

1 under subtitle C to individuals enrolled in the 

2 system, the State shall make payments directly, 

3 or through fiscal intermediaries, to such pro4 viders and assume (subject to subparagraph 

5 (B)) all financial risk associated with making 

6 such payments. 

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, nondis15 cretionary reductions in payments to health 

16 care providers will be imposed to the extent re17 quired to assure that such per capita expendi18 tures do not exceed the applicable target re19 ferred to in subparagraph (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 Secre18 taries shall establish not later than January 1, 1995, 

19 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 Secre3 taries shall provide that such consideration and dis4 position be completed within 90 days, and that if the 

5 application is approved, multistate employers be no6 tified 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 
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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 

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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 med7 ical 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 

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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 

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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 

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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 

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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 sub8 clause (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 coun10 seling individuals to whom covered out11 patient drugs are prescribed; and 

12 ‘‘(iii) identify (and to educate physi13 cians, patients, and pharmacists con14 cerning)— 

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 car2 rying 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-re7 lated 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 

6 issued 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) pre9 ceding 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 
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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 
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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’’; 
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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), 
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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’’. 
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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-
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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. 
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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 

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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— 
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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 

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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.— 
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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 

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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 Con9 sumer 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 non-
291 

•S 2357 

1 innovator-multiple source drug furnished 

2 over-the-counter and the average manufac3 turer retail price of the equivalent inno4 vator drug (except as provided in subpara5 graph (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 

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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), 
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•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 

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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 devel21 oping a review process to exempt small manu22 facturers 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 

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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 

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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 enti19 ty’’, 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— 
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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 

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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 

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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 

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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 indi8 vidual 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 

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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 

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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 

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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 ben21 efit incurred for such year under section 1834. 

22 ‘‘(C) DETERMINATION OF CLASSES OF IN23 DIVIDUALS AND RATE FACTORS FOR SUCH

24 CLASSES.— 
311 

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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 denomi10 nator of which is the number of all in11 dividuals 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 actu5 arial equivalence, including adjustments 

6 the Secretary may determine appropriate 

7 to 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 indi17 vidual. 

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 

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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 fol18 lowing 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 fur11 nishing the services described in subparagraph 

12 (C) under the State plan under this subtitle 

13 and the State plan under title XIX of the Social 

14 Security 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 con15 sumer 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 con20 sumer-directed providers of personal assistance 

21 services to licensure, certification, or other re22 quirements which the Secretary finds not to be 

23 necessary for the health and safety of individ24 uals 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 med2 ical 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. 
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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 

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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 

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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 

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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 

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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. 
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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 pro13 viders of rights and responsibilities under 

14 all applicable Federal labor and tax law; 

15 and 

16 (ii) assume responsibility for providing 

17 effective billing, payments for services, tax 

18 withholding, unemployment insurance, and 

19 workers’ compensation coverage, and act 

20 as the employer of the home care provider. 

21 (C) RIGHT OF CONSUMERS.—Notwith22 standing the State responsibilities described in 

23 subparagraph (B), service recipients, and, 

24 where appropriate, their designated representa25 tive, shall retain the right to independently se-
367 

•S 2357 

1 lect, hire, terminate, and direct (including man2 age, train, schedule, and verify services pro3 vided) the work of a home care provider. 

4 (3) AGENCY ADMINISTERED.—For purposes of 

5 this subtitle, the term ‘agency-administered’ means, 

6 with respect to such services, services that are not 

7 consumer-directed. 

8 SEC. 2105. COST SHARING. 

9 (a) NO COST SHARING FOR POOREST.— 

10 (1) IN GENERAL.—The State plan may not im11 pose any cost sharing for individuals with income (as 

12 determined under subsection (d)) less than 150 per13 cent of the official poverty level (referred to in para14 graph (2)) applicable to a family of the size involved. 

15 (2) OFFICIAL POVERTY LEVEL.—The term ‘ap16 plicable poverty level’ means, for a family for a year, 

17 the official poverty line (as defined by the Office of 

18 Management and Budget, and revised annually in 

19 accordance with section 673(2) of the Omnibus 

20 Budget Reconciliation Act of 1981) applicable to a 

21 family of the size involved. 

22 (b) SLIDING SCALE FOR REMAINDER.— 

23 (1) REQUIRED COINSURANCE.—The State plan 

24 shall impose cost sharing in the form of coinsurance 
368 

•S 2357 

1 (based on the amount paid under the State plan for 

2 a service)— 

3 (A) at a rate of 10 percent for individuals 

4 with disabilities with income not less than 150 

5 percent, and less than 175 percent, of such offi6 cial poverty line (as so applied); 

7 (B) at a rate of 15 percent for such indi8 viduals with income not less than 175 percent, 

9 and less than 225 percent, of such official pov10 erty line (as so applied); 

11 (C) at a rate of 25 percent for such indi12 viduals with income not less than 225 percent, 

13 and less than 275 percent, of such official pov14 erty line (as so applied); 

15 (D) at a rate of 30 percent for such indi16 viduals with income not less than 275 percent, 

17 and less than 325 percent, of such official pov18 erty line (as so applied); 

19 (E) at a rate of 35 percent for such indi20 viduals with income not less than 325 percent, 

21 and less than 400 percent, of such official pov22 erty line (as so applied); and 

23 (F) at a rate of 40 percent for such indi24 viduals with income equal to at least 400 per25 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— 
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•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 reg25 ular 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 

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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 con8 sumer price index for the preceding fiscal year, 

9 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 

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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 

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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 

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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 dis22 ability; and 

23 (4) the ability of service providers to sufficiently 

24 meet the demand for services. 
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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 
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1 ‘‘(B) if no State agency described in sub2 paragraph (A) applies with respect to a par3 ticular State, a public or nonprofit private enti4 ty. 

5 ‘‘(2) APPLICATIONS.—To be eligible to receive 

6 an incentive grant under subsection (b), an entity 

7 shall prepare and submit to the Secretary an appli8 cation at such time, in such manner and containing 

9 such information as the Secretary may require, in10 cluding— 

11 ‘‘(A) an assessment of the need within the 

12 community to be served for the establishment 

13 or expansion of a program to facilitate the dis14 charge of individuals in need of long-term care 

15 who are in hospitals or other acute care facili16 ties into home and community-care programs 

17 that provide individually planned, flexible serv18 ices that reflect individual choice or preference 

19 rather than nursing home or institutional set20 tings; 

21 ‘‘(B) a plan for establishing or expanding 

22 a program for identifying individuals in hospital 

23 or acute care facilities who are in need of indi24 vidualized long-term care provided in home and 

25 community-based settings rather than nursing 
394 

•S 2357 

1 homes or other institutional settings and under2 taking the planning and management of indi3 vidualized care plans to facilitate discharge into 

4 such settings; 

5 ‘‘(C) assurances that nongovernmental 

6 case management agencies funded under grants 

7 awarded under this section are not direct pro8 viders of home and community-based services; 

9 ‘‘(D) satisfactory assurances that adequate 

10 home and community-based long term care 

11 services are available, or will be made available, 

12 within the community to be served so that indi13 viduals being discharged from hospitals or acute 

14 care facilities under the proposed program can 

15 be served in such home and community-based 

16 settings, with flexible, individualized care which 

17 reflects individual choice and preference; 

18 ‘‘(E) a description of the manner in which 

19 the program to be administered with amounts 

20 received under the grant will be continued after 

21 the termination of the grant for which such ap22 plication is submitted; and 

23 ‘‘(F) a description of any waivers or ap24 provals necessary to expand the number of indi25 viduals served in federally funded home and 
395 

•S 2357 

1 community-based long term care programs in 

2 order to provide satisfactory assurances that 

3 adequate home and community-based long term 

4 care services are available in the community to 

5 be served. 

6 ‘‘(3) AWARDING OF GRANTS.— 

7 ‘‘(A) PREFERENCES.—In awarding grants 

8 under subsection (b), the Secretary shall give 

9 preference to entities submitting applications 

10 that— 

11 ‘‘(i) demonstrate an ability to coordi12 nate activities funded using amounts re13 ceived under the grant with programs pro14 viding individualized home and community15 based case management and services to in16 dividuals in need of long term care with 

17 hospital discharge planning programs; and 

18 ‘‘(ii) demonstrate that adequate home 

19 and community-based long term care man20 agement and services are available, or will 

21 be made available to individuals being 

22 served under the program funded with 

23 amounts received under subsection (b). 
396 

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1 ‘‘(B) DISTRIBUTION.—In awarding grants 

2 under subsection (b), the Secretary shall ensure 

3 that such grants— 

4 ‘‘(i) are equitably distributed on a ge5 ographic basis; 

6 ‘‘(ii) include projects operating in 

7 urban areas and projects operating in rural 

8 areas; and 

9 ‘‘(iii) are awarded for the expansion of 

10 existing hospital linkage programs as well 

11 as the establishment of new programs. 

12 ‘‘(C) EXPEDITED CONSIDERATION.—The 

13 Secretary shall provide for the expedited consid14 eration of any waiver application that is nec15 essary under title XIX of the Social Security 

16 Act to enable an applicant for a grant under 

17 subsection (b) to satisfy the assurance required 

18 under paragraph (1)(D). 

19 ‘‘(4) USE OF GRANTS.—An entity that receives 

20 amounts under a grant under subsection (b) may 

21 use such amounts for planning, development and 

22 evaluation services and to provide reimbursements 

23 for the costs of one or more case mangers to be lo24 cated in or assigned to selected hospitals who 

25 would— 
397 

•S 2357 

1 ‘‘(A) identify patients in need of individ2 ualized care in home and community-based 

3 long-term care; 

4 ‘‘(B) assess and develop care plans in co5 operation with the hospital discharge planning 

6 staff; and 

7 ‘‘(C) arrange for the provision of commu8 nity care either immediately upon discharge 

9 from the hospital or after any short term nurs10 ing-home stay that is needed for recuperation 

11 or rehabilitation; 

12 ‘‘(5) DIRECT SERVICES SUBJECT TO REIM13 BURSEMENTS.—None of the amounts provided 

14 under a grant under this section may be used to 

15 provide direct services, other than case management, 

16 for which reimbursements are otherwise available 

17 under title XVIII or XIX of the Social Security Act. 

18 ‘‘(6) LIMITATIONS.— 

19 ‘‘(A) TERM.—Grants awarded under this 

20 section shall be for terms of less than 3 years. 

21 ‘‘(B) AMOUNT.—Grants awarded to an en22 tity under this section shall not exceed 

23 $300,000 per year. The Secretary may waive 

24 the limitation under this subparagraph where 

25 an applicant demonstrates that the number of 
398 

•S 2357 

1 hospitals or individuals to be served under the 

2 grant justifies such increased amounts. 

3 ‘‘(C) SUPPLANTING OF FUNDS.—Amounts 

4 awarded under a grant under this section may 

5 not be used to supplant existing State funds 

6 that are provided to support hospital link pro7 grams. 

8 ‘‘(d) EVALUATION AND REPORTS.— 

9 ‘‘(1) BY GRANTEES.—An entity that receives a 

10 grant under this section shall evaluate the effective11 ness of the services provided under the grant in fa12 cilitating the placement of individuals being dis13 charged from hospitals or acute care facilities into 

14 home and community-based long term care settings 

15 rather than nursing homes. Such entity shall pre16 pare and submit to the Secretary a report containing 

17 such information and data concerning the activities 

18 funded under the grant as the Secretary determines 

19 appropriate. 

20 ‘‘(2) BY SECRETARY.—Not later than the end 

21 of the third fiscal year for which funds are appro22 priated under subsection (e), the Secretary shall pre23 pare and submit to the appropriate committees of 

24 Congress, a report concerning the results of the eval-
399 

•S 2357 

1 uations and reports conducted and prepared under 

2 paragraph (1). 

3 ‘‘(e) AUTHORIZATION OF APPROPRIATIONS.—There 

4 are authorized to be appropriated to carry out this section, 

5 $5,000,000 for each of the fiscal years 1994 through 

6 1996.’’. 

7 Subtitle C—Long-Term Care Insur8 ance Improvement and Account9 ability 

10 SEC. 2200. SHORT TITLE. 

11 This subtitle may be cited as the ‘‘Long-Term Care 

12 Insurance Improvement and Accountability Act’’. 

13 PART 1—PROMULGATION OF STANDARDS AND 

14 MODEL BENEFITS 

15 SEC. 2201. STANDARDS. 

16 (a) APPLICATION OF STANDARDS.— 

17 (1) IN GENERAL.—Except as provided in para18 graph (2), the Secretary, in consultation with the 

19 NAIC, shall develop and publish specific standards 

20 to implement the standards specified in this subtitle. 

21 (2) STATE STANDARDS.—Nothing in this sub22 title shall be construed as preventing a participating 

23 State from applying standards that provide greater 

24 protection to insured individuals under long-term 

25 care insurance policies than the standards promul-
400 

•S 2357 

1 gated under this subtitle, except that such State 

2 standards may not be inconsistent with any of the 

3 standards specified in this subtitle. 

4 (b) DEADLINE FOR APPLICATION OF STANDARDS.— 

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

6 the date specified in this subsection for a State is— 

7 (A) the date the State adopts the stand8 ards established under subsection (a)(1); or 

9 (B) the date that is 1 year after the first 

10 day of the first regular legislative session that 

11 begins after the date such standards are first 

12 established under subsection (a)(2); 

13 whichever is earlier. 

14 (2) STATE REQUIRING LEGISLATION.—In the 

15 case of a State which the Secretary identifies, in 

16 consultation with the NAIC, as— 

17 (A) requiring State legislation (other than 

18 legislation appropriating funds) in order for the 

19 standards established under subsection (a) to be 

20 applied; but 

21 (B) having a legislature which is not 

22 scheduled to meet within 1 year following the 

23 beginning of the next regular legislative session 

24 in which such legislation may be considered; 
401 

•S 2357 

1 the date specified in this subsection is the first day 

2 of the first calendar quarter beginning after the 

3 close of the first legislative session of the State legis4 lature that begins on or after January 1, 1995. For 

5 purposes of the previous sentence, in the case of a 

6 State that has a 2-year legislative session, each year 

7 of such session shall be deemed to be a separate reg8 ular session of the State legislature. 

9 (c) ITEMS INCLUDED IN STANDARDS.—The stand10 ards promulgated under subsection (a) shall include— 

11 (1) minimum Federal standards for long-term 

12 care insurance consistent with the provisions of this 

13 subtitle; 

14 (2) standards for the enhanced protection of 

15 consumers with long-term care insurance; and 

16 (3) procedures for the modification of the 

17 standards established under paragraph (1) in a 

18 manner consistent with future laws to expand exist19 ing Federal or State long-term care benefits or es20 tablish a comprehensive Federal or State long-term 

21 care benefit program. 

22 (d) CONSULTATION.—In establishing standards and 

23 models of benefits under this section, the Secretary shall, 

24 after consultation with representatives of carriers, con25 sumer groups, and providers of long-term care services— 
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 

19 issued, sold, or offered for sale as a long-term care 

20 insurance policy in a State on or after the date spec21 ified 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 

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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 col8 lecting premiums (through payroll deduc9 tions or dues checkoff) and remitting them 

10 to 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 

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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 
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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 

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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 

8 issued under this paragraph may, within 45 

9 days after the date the final order is issued, file 

10 a petition in the Court of Appeals for the ap11 propriate 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.— 
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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 

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1 when considering the purchase of a long-term care insur2 ance policy. 

3 (c) PROHIBITION OF SALE OR ISSUANCE TO MED4 ICAID BENEFICIARIES.—An agent, an association, or a 

5 carrier may not knowingly sell or issue a long-term care 

6 insurance 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 
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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 recerti17 fying agents who have completed such training and 

18 who are qualified to sell or offer for sale long-term 

19 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 
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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 

5 issues 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 
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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 

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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 

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1 sion of coverage if the policy entitles each indi2 vidual— 

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. 
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•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— 
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•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 con21 sumers of the long-term economic viability of car22 riers issuing 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 indi16 vidual 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; 
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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 

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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 fol10 lowing: 

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 

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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 

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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 

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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 

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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 sub7 sidiary that sells or offers for sale a long-term care insur8 ance 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— 
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•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 

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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 inter8 locking directorates, the organization or association 

9 shall 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 

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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 copay2 ment. 

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 indi13 vidual shall be entitled to the asset protection pro14 vided 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 

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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 pre24 ceding the initial enrollment period, the Secretary shall, 

25 either directly or through grants and contracts, conduct 
458 

•S 2357 

1 a public service and education campaign designed to in2 form potentially eligible individuals as to the nature of the 

3 benefits and the limited enrollment period. In conducting 

4 such campaigns the Secretary shall make information 

5 available to individuals through the open enrollment proc6 ess for obtaining 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 

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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, 
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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 fol23 lowing aspects of the Life Care Act: 

24 ‘‘(1) The current and projected premium rates. 
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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 

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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 
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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). 
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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). 
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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 

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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. 
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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 

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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. 
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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 pro12 viders, 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 

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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 

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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. 
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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 

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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. 
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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 

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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 sub8 mitted to the National Council a proposal for 

9 first year positions in approved physician train10 ing programs in that particular medical spe11 cialty for the academic years 1998–99, 1999– 

12 2000, and 2000–2001 and the total proposed 

13 number of all such positions for the specialty 

14 does not exceed the number of positions estab15 lished for such specialty under paragraph (1) 

16 for each 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 

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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 modi15 fying or eliminating workforce regulations shall be com16 piled in a report and transmitted by the Secretary to the 

17 President 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 consid-
485 

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1 ering the factors described in paragraph (2) annu2 ally 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 med19 ical 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 

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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 

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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 

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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 

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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 

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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 

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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 

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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 

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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 

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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; 
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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 

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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 con6 sumer 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 work20 force goals and shall compile the findings and rec21 ommendations derived from such study in a report 

22 to be submitted to the President and the Congress. 

23 (c) DETERMINATION OF FULL-TIME-EQUIVALENT

24 TRAINING PARTICIPANTS.— 
501 

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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 

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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 ‘‘con16 sumer price index’’ means the Consumer Price Index 

17 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 indi8 vidual, 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 
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1 costs paid by other payers, including private health 

2 plans; 

3 (3) the impact of the current payment method4 ology 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 

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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 

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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 

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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.— 
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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: 
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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 

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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 

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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 

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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 

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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 med12 ical 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 doc22 torate 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 inde9 pendent study and report to be completed, by the In10 stitute of Medicine or other similar entity, con11 cerning the impact of health reform on under12 graduate medical education. Such report shall be 

13 submitted to the President and the Congress and 

14 shall include appropriate findings and recommenda15 tions. 

16 (d) GENERAL HEALTH CARE INFLATION FACTOR.— 

17 As used in this subtitle, the term ‘‘general health care in18 flation factor’’ with respect to a year, has the meaning 

19 given such term in section 3033(e)(4) for such year. 

20 Subpart B—Payments to Nursing Programs 

21 SEC. 3071. FEDERAL PAYMENTS TO GRADUATE NURSE 

22 TRAINING PROGRAMS. 

23 (a) FEDERAL PAYMENTS TO GRADUATE NURSE

24 TRAINING PROGRAMS.— 
539 

•S 2357 

1 (1) ENTITLEMENT.—Each eligible graduate 

2 nurse training program that in accordance with 

3 paragraph (2) submits to the Secretary an applica4 tion for calendar year 1997 or any subsequent cal5 endar year shall be entitled to payments for such 

6 year to the program for the purpose specified in 

7 paragraph (3). The Secretary shall make such pay8 ments in an amount determined in accordance with 

9 subsection (b), and shall administer the payments as 

10 a grant. The preceding sentence constitutes budget 

11 authority in advance of appropriations Acts and rep12 resents the obligation of the Federal Government to 

13 provide funding for such payments in the amounts, 

14 and for the years specified in this subpart. 

15 (2) APPLICATION FOR PAYMENTS.—For pur16 poses of paragraph (1), an application for payments 

17 for a calendar year is in accordance with this para18 graph if— 

19 (A) the eligible graduate nurse training 

20 program involved submits the application not 

21 later than the date specified by the Secretary; 

22 (B) the application provides such assur23 ances as the Secretary may require that the 

24 program will expend payments only for the pur25 pose described in paragraph (3); 
540 

•S 2357 

1 (C) the application contains each funding 

2 agreement described in this subpart and the ap3 plication provides such assurances of compli4 ance with the agreements as the Secretary may 

5 require; 

6 (D) the application contains an assurance 

7 that the graduate nurse training program shall 

8 annually submit a report on the costs of clinical 

9 training of nurses in such manner as the Sec10 retary may require; and 

11 (E) the application is in such form, is 

12 made in such manner, and contains such agree13 ments, assurances, and information as the Sec14 retary determines to be necessary to carry out 

15 this part. 

16 (3) PAYMENTS FOR OPERATION OF GRADUATE

17 NURSE TRAINING PROGRAMS.—The purpose of pay18 ments under paragraph (1) is to assist an eligible 

19 graduate nurse training program with the costs of 

20 the clinical portions of training programs and sup21 porting full-time enrollees in such training pro22 grams. 

23 (b) AUTHORIZATION OF APPROPRIATIONS; ANNUAL

24 AMOUNT OF PAYMENTS.— 
541 

•S 2357 

1 (1) IN GENERAL.—The appropriation author2 ized for each of the following calendar years for 

3 making payments pursuant to subsection (a)(1) shall 

4 not be less than or in excess of the following: 

5 (A) In the case of calendar year 1997, 

6 $200,000,000. 

7 (B) In the case of each subsequent cal8 endar year, the amount specified in subpara9 graph (A) increased by the product of such 

10 amount and the general health care inflation 

11 factor as defined in subsection (c). 

12 (2) AMOUNT OF PAYMENTS FOR INDIVIDUAL

13 ELIGIBLE PROGRAMS.—Subject to the annual 

14 amount available under paragraph (1) for a calendar 

15 year, the amount of payments required under sub16 section (a) to be made to an eligible graduate nurse 

17 training program that submits to the Secretary an 

18 application for such year in accordance with sub19 section (a)(2) is an amount equal to the product 

20 of— 

21 (A) the number of full-time enrollees in the 

22 program; and 

23 (B) the estimated national average per 

24 full-time enrollee cost of each graduate nurse 

25 training program described in subsection (c)(1) 
542 

•S 2357 

1 for the calendar year (as determined by the 

2 Secretary), adjusted by a factor to reflect re3 gional differences in the applicable wage and 

4 wage related costs. 

5 (3) LIMITATION.—If the annual amount avail6 able under paragraph (1) for a calendar year is in7 sufficient for providing each eligible graduate nurse 

8 training program that submits to the Secretary an 

9 application for such year in accordance with sub10 section (a)(2) with the amount of payments deter11 mined under paragraph (2) for the program for such 

12 year, the Secretary shall make such pro rata reduc13 tions in the amounts so determined as may be nec14 essary to ensure that the total of payments made 

15 under subsection (a) for such year equals the total 

16 of such amount. 

17 (c) DEFINITIONS.—For purposes of this part: 

18 (1) ELIGIBLE GRADUATE NURSE TRAINING

19 PROGRAM.—The term ‘‘eligible graduate nurse train20 ing program’’ means programs in advanced practice 

21 nurse education that are programs for education as 

22 nurse practitioners, programs for education as nurse 

23 midwives, programs for education as nurse anes24 thetists, and programs for training clinical nurse 

25 specialists that are— 
543 

•S 2357 

1 (A) designated by the Secretary as eligible 

2 graduate nurse training programs; 

3 (B) accredited programs that award a 

4 master degree or a post-nurse master certificate 

5 and provide training preparing an individual for 

6 practice as an advanced practice nurse; and 

7 (C) existing programs funded in 1994 

8 under section 822 or 831 of the Public Health 

9 Service Act that do not award a master degree 

10 may also be designated eligible programs. 

11 (2) PROGRAMS FOR EDUCATION AS NURSE

12 PRACTITIONERS.—The term ‘‘programs for edu13 cation as nurse practitioners’’ means programs 

14 meeting the conditions to be programs for which 

15 awards of grants and contracts may be made under 

16 section 822 of the Public Health Service Act for 

17 education as a nurse practitioners. 

18 (3) PROGRAMS FOR EDUCATION AS NURSE MID19 WIVES.—The term ‘‘programs for education as nurse 

20 midwives’’ means programs meeting the conditions 

21 to be programs for which awards of grants and con22 tracts may be made under section 822 of the Public 

23 Health Service Act for education as nurse midwives. 

24 (4) PROGRAMS FOR TRAINING CLINICAL NURSE

25 SPECIALISTS.—The term ‘‘programs for training 
544 

•S 2357 

1 clinical nurse specialists’’ means programs in ad2 vanced practice nurse education meeting the condi3 tions to be programs for which awards of grants and 

4 contracts may be made under section 821 of the 

5 Public Health Service Act. 

6 (5) FULL-TIME ENROLLEE.—The term ‘‘full7 time enrollee’’ means an individual who is enrolled 

8 in an advanced nurse training program and qualifies 

9 as a full-time student at the institution operating 

10 such program. 

11 (6) GENERAL HEALTH CARE INFLATION FAC12 TOR.—The term ‘‘general health care inflation fac13 tor’’, with respect to a year, has the meaning given 

14 such term in section 3033(e)(4)for such year. 

15 SEC. 3072. NATIONAL COUNCIL ON GRADUATE NURSE 

16 TRAINING. 

17 (a) IN GENERAL.—There is established within the 

18 Department of Health and Human Services a council to 

19 be known as the National Council on Graduate Nurse 

20 Training. 

21 (b) DUTIES.—The National Council on Graduate 

22 Nurse Training shall— 

23 (1) collect and analyze data on trends of supply 

24 and demand for advanced practice nurses; 
545 

•S 2357 

1 (2) analyze and consider the supply of advanced 

2 practice nurses in the context of changes in the over3 all supply of health professionals; 

4 (3) recommend priorities for support of grad5 uate nurse training by type of programs described in 

6 section 3071(c); 

7 (4) report to Congress annually and include in 

8 its report the number of students who graduated the 

9 previous year from funded programs; and 

10 (5) consider and recommend appropriate stand11 ards for assessing the quality of advanced practice 

12 nursing clinical training programs. 

13 (c) COMPOSITION.— 

14 (1) IN GENERAL.—The membership of the Na15 tional Council on Graduate Nurse Training shall in16 clude individuals who are appointed to the Council 

17 from among individuals who are not officers or em18 ployees of the United States. Such individuals shall 

19 be appointed by the Secretary, and shall include— 

20 (A) a nurse practitioner, a nurse-midwife, 

21 a nurse anesthetist, and a clinical nurse spe22 cialist; and 

23 (B) an official of a school of nursing, an 

24 official of a teaching hospital or other health 
546 

•S 2357 

1 services entity, and other experts in health care 

2 financing, delivery, and professions training. 

3 (2) EX OFFICIO MEMBERS; OTHER FEDERAL

4 OFFICERS OR EMPLOYEES.—The membership of the 

5 National Council on Graduate Nurse Training shall 

6 include individuals designated by the Secretary, the 

7 Secretary of Veterans Affairs, and the Secretary of 

8 the Department of Defense to serve as members of 

9 the Council from among Federal officers or employ10 ees who are appointed by the President, by the Sec11 retary, the Secretary of Veterans Affairs, the Sec12 retary of Defense, or other Federal officers who are 

13 appointed by the President with the advice and con14 sent of the Senate. 

15 (d) CHAIR.—The Secretary shall, from among mem16 bers of the National Council on Graduate Nurse Training 

17 appointed under subsection (c)(1), designate an individual 

18 to serve as the Chair of the Council. 

19 Subpart C—Payments to Dental Schools 

20 SEC. 3073. DENTAL SCHOOLS. 

21 (a) FEDERAL PAYMENTS TO DENTAL SCHOOLS.— 

22 (1) ENTITLEMENT.—Each eligible school of 

23 dentistry that in accordance with paragraph (2) sub24 mits to the Secretary an application for calendar 

25 year 1997 or any subsequent calendar year shall be 
547 

•S 2357 

1 entitled to payments for such year to the program 

2 for the purpose specified in paragraph (3). The Sec3 retary shall make such payments in an amount de4 termined in accordance with subsection (b), and 

5 shall administer the payments as a grant. The pre6 ceding sentence constitutes budget authority in ad7 vance of appropriations Acts and represents the obli8 gation of the Federal Government to provide funding 

9 for such payments in the amounts, and for the years 

10 specified in this subpart. 

11 (2) APPLICATION FOR PAYMENTS.—For pur12 poses of paragraph (1), an application for payments 

13 for a calendar year is in accordance with this para14 graph if— 

15 (A) the dean (or appropriate presiding offi16 cial of the eligible school of dentistry involved) 

17 submits the application not later than the date 

18 specified by the Secretary; 

19 (B) the application provides such assur20 ances as the Secretary may require that the 

21 program will expend payments only for the pur22 pose described in paragraph (3); 

23 (C) the application contains each funding 

24 agreement described in this subpart and the ap25 plication provides such assurances of compli-
548 

•S 2357 

1 ance with the agreements as the Secretary may 

2 require; and 

3 (D) the application is in such form, is 

4 made in such manner, and contains such agree5 ments, assurances, and information as the Sec6 retary determines to be necessary to carry out 

7 this subpart. 

8 (3) PURPOSE.—With respect to an eligible 

9 school of dentistry, the purpose of payments under 

10 paragraph (1) is to assist such school with the costs 

11 of training dentists, including unreimbursed oral 

12 health care costs. A funding agreement for such pay13 ments is that the school of dentistry involved will ex14 pend the payments only for direct expenses deter15 mined as allowable by the Secretary. 

16 (4) SCHOOL OF DENTISTRY.—For purposes of 

17 this subtitle, the term ‘‘eligible school of dentistry’’ 

18 means an accredited public or nonprofit private 

19 school in a State that provides training leading to a 

20 degree of doctor of dentistry or an equivalent degree, 

21 and any advanced training relating to such training. 

22 (b) AUTHORIZATION OF APPROPRIATIONS; ANNUAL

23 AMOUNT OF PAYMENTS.— 

24 (1) IN GENERAL.—The appropriation author25 ized for each of the following calendar years for 
549 

•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 each of calendar years 

4 1997, 1998, 1999 and 2000, $50,000,000. 

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 school of den15 tistry that submits to the Secretary an application 

16 for such year in accordance with subsection (a)(2) is 

17 an amount equal to the sum of— 

18 (A) 75 percent of the amount available 

19 pursuant to paragraph (1) multiplied by the 

20 ratio of the number of full-time equivalent 

21 training participants in the school of dentistry 

22 (determined in accordance with a method to be 

23 developed by the Secretary) to the national 

24 number of full-time equivalent training partici25 pants in all schools of dentistry (as determined 
550 

•S 2357 

1 by the Secretary) in the academic year 1993– 

2 1994; and 

3 (B) 25 percent of the amount available 

4 pursuant to paragraph (1) multiplied by the 

5 ratio of the unreimbursed oral health care costs 

6 of the school of dentistry to the national unre7 imbursed oral health care costs of all schools of 

8 dentistry (as determined by the Secretary). 

9 (c) ELIGIBLE SCHOOL OF DENTISTRY.—For pur10 poses of this subpart, the term ‘‘eligible school of den11 tistry’’ with respect to a calendar year involved, means a 

12 school of dentistry that submits to the Secretary an appli13 cation for such year in accordance with subsection (a)(2). 

14 Subpart D—Payments to Schools of Public Health 

15 SEC. 3074. SCHOOLS OF PUBLIC HEALTH. 

16 (a) FEDERAL PAYMENTS TO SCHOOLS OF PUBLIC

17 HEALTH.— 

18 (1) ENTITLEMENT.—Each eligible school of 

19 public health that in accordance with paragraph (2) 

20 submits 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 
551 

•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 public health in13 volved submits the application not later than 

14 the date 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-
552 

•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 public health, the purpose of payments 

6 under this paragraph is to assist such school with 

7 the costs of training public health professionals in 

8 disease prevention and health promotion, the man9 agement of health services, health care policy and 

10 health care organization, public health practice, out11 comes and quality of care, and epidemiologic and 

12 biostatistical research. A funding agreement for such 

13 payments is that the school of public health involved 

14 will expend the payments only for direct expenses 

15 determined as allowable by the Secretary. 

16 (4) SCHOOL OF PUBLIC HEALTH.—For pur17 poses of this subpart, the term ‘‘school of public 

18 health’’ means an accredited public or non-profit pri19 vate school in a State that— 

20 (A) is located within a university accred21 ited by one of the recognized regional accred22 iting bodies; 

23 (B) has as its central concept the preven24 tion of disease and the promotion of health 
553 

•S 2357 

1 through research, education and professional 

2 practice; 

3 (C) offers the Master of Public Health de4 gree; 

5 (D) provides, with sufficient faculty and 

6 other resources, education at the master degree 

7 level with an emphasis in at least each of the 

8 following areas: 

9 (i) Behavioral sciences. 

10 (ii) Biostatistics. 

11 (iii) Environmental and health 

12 sciences. 

13 (iv) Epidemiology. 

14 (v) Health services administration; 

15 and 

16 (E) offers graduate education at the doc17 toral degree level in at least 1 of the 5 areas 

18 described in subparagraph (D). 

19 (b) AUTHORIZATION OF APPROPRIATIONS; ANNUAL

20 AMOUNT OF PAYMENTS.— 

21 (1) IN GENERAL.—The appropriation author22 ized for each of the following calendar years for 

23 making payments pursuant to subsection (a)(1) shall 

24 not be less than or in excess of the following: 
554 

•S 2357 

1 (A) In the case of each of calendar years 

2 1997, 1998, 1999 and 2000, $25,000,000. 

3 (B) In the case of each subsequent cal4 endar year, the amount specified in subpara5 graph (A) increased by the product of such 

6 amount and the general health care inflation 

7 factor. 

8 (2) PAYMENTS TO SCHOOLS OF PUBLIC

9 HEALTH.— 

10 (A) IN GENERAL.—The amount required 

11 under subsection (a) to be made to an eligible 

12 school of public health is an amount equal to 

13 the product of— 

14 (i) the amount available for making 

15 such payments for the calendar year pur16 suant to paragraph (1); and 

17 (ii) the percentage constituted by the 

18 ratio of the number of full-time students 

19 enrolled in degree programs in such 

20 schools and the number of full-time equiva21 lents of part-time students enrolled in de22 gree programs in such school (determined 

23 in accordance with subparagraph (B)) to 

24 the national number of all such students in 
555 

•S 2357 

1 all schools of public health in the academic 

2 year beginning in the previous fiscal year. 

3 (B) FULL-TIME EQUIVALENCE.—For the 

4 purposes of this paragraph, the number of full5 time equivalents of part-time students for a 

6 school of public health for any school year is a 

7 number equal to— 

8 (i) the total number of credit hours of 

9 instructions in such year for which study 

10 leading to a graduate degree in public 

11 health or an equivalent degree, divided by 

12 (ii) the number of credit hours of in13 structions which a student pursuing a full14 time course of study leading to a graduate 

15 degree in public health or equivalent de16 gree. 

17 (C) NEW SCHOOL.—In the case of a new 

18 school of public health which applies for a grant 

19 under this section in the fiscal year preceding 

20 the fiscal year in which it will admit its first 

21 class, the enrollment for purposes of subpara22 graph (A)(ii) shall be the number of full-time 

23 students which the Secretary determines, on the 

24 basis of assurances provided by the school, will 
556 

•S 2357 

1 be enrolled in the school, in the fiscal year after 

2 the fiscal year in which the grant is made. 

3 (c) ELIGIBLE SCHOOL OF PUBLIC HEALTH.—The 

4 term ‘‘eligible school of public health’’ with respect to the 

5 calendar year involved, means a school of public health 

6 that submits to the Secretary for such year in accordance 

7 with subsection (a)(2). 

8 PART 3—RELATED PROGRAMS 

9 Subpart A—Workforce Development 

10 SEC. 3081. PROGRAMS OF THE SECRETARY OF HEALTH AND 

11 HUMAN SERVICES. 

12 (a) IN GENERAL.— 

13 (1) FUNDING.—For purposes of carrying out 

14 the programs described in this section, there is au15 thorized to be appropriated $100,000,000 for each 

16 of the fiscal years 1995 and 1996, and 

17 $150,000,000 for each of the fiscal years 1997 

18 through 2000 (in addition to amounts that may oth19 erwise be authorized to be appropriated for carrying 

20 out the programs). 

21 (2) ADMINISTRATION.—The programs described 

22 in this section and carried out with amounts made 

23 available under subsection (a) shall be carried out by 

24 the Secretary of Health and Human Services. 
557 

•S 2357 

1 (b) PRIMARY CARE PHYSICIAN AND PHYSICIAN AS2 SISTANT TRAINING.—For purposes of subsection (a), the 

3 programs described in this section include programs to 

4 support projects to train additional numbers of primary 

5 care physicians and physician assistants, including 

6 projects to enhance community-based generalist training 

7 for medical students, residents, and practicing physicians; 

8 to retrain mid-career physicians previously certified in a 

9 nonprimary care medical specialty; to expand the supply 

10 of physicians with special training to serve in rural and 

11 inner-city medically underserved areas; to support expan12 sion of service-linked educational networks that train a 

13 range of primary care providers in community settings; 

14 to provide for training in managed care, cost-effective 

15 practice management, and continuous quality improve16 ment; to provide interdisciplinary training for medical stu17 dents, residents or practicing physicians, and dental stu18 dents, residents, and dental hygienists, to deliver primary 

19 care to individuals with mental, physical, and develop20 mental disabilities, including mental retardation, particu21 larly those who are more than 18 years of age; and to 

22 develop additional information on primary care workforce 

23 issues as required to meet future needs in health care. 

24 (c) TRAINING OF UNDERREPRESENTED RACIAL AND

25 ETHNIC MINORITIES AND DISADVANTAGED PERSONS.— 
558 

•S 2357 

1 For purposes of subsection (a), the programs described 

2 in this section include a program to support projects to 

3 increase the number of racial and ethnic underrepresented 

4 minority and disadvantaged persons in medicine, osteop5 athy, dentistry, advanced practice nursing, public health, 

6 psychology, and other health professions, including 

7 projects to provide continuing financial assistance for such 

8 persons entering health professions training programs; for 

9 financial assistance for facility renovation or construction; 

10 to increase support for recruitment and retention of such 

11 persons in the health professions; to maintain efforts to 

12 foster interest in health careers among such persons at 

13 the preprofessional level; and to increase the number of 

14 racial and ethnic minority health professions faculty at 

15 programs that have a significant number of underrep16 resented racial and ethnic minorities. 

17 (d) EXPANDING RURAL HEALTH CAREER OPPORTU18 NITIES AND RETENTION EFFORTS.— 

19 (1) IN GENERAL.—For purposes of subsection 

20 (a), the programs described in this section include 

21 programs to support projects to increase the number 

22 of individuals living in rural, underserved commu23 nities who enter the fields of medicine, osteopathy, 

24 dentistry, advanced practice nursing, public health, 

25 psychology, and other health professions, and to en-
559 

•S 2357 

1 courage the retention of such health care profes2 sionals in rural, underserved communities. 

3 (2) RURAL HEALTH CAREER TRAINING.— 

4 Projects to increase the number of individuals re5 cruited from rural, underserved areas include 

6 projects— 

7 (A) to provide continuing financial assist8 ance for such persons entering health profes9 sions education and training programs; 

10 (B) to increase efforts to foster interest in 

11 health careers among such persons at the 

12 preprofessional level; 

13 (C) to foster the development of training 

14 curricula appropriate to rural health care set15 tings; and 

16 (D) to increase support for recruitment of 

17 such persons in the health professions. 

18 (3) RETENTION OF RURAL HEALTH CARE PRO19 VIDERS.—Projects to encourage the retention of in20 dividuals providing health care in rural, underserved 

21 areas include projects— 

22 (A) to establish State and regional locum 

23 tenans programs in rural health care settings so 

24 that substitute health care providers are avail-
560 

•S 2357 

1 able when permanent staff is absent from the 

2 health care setting; 

3 (B) to implement programs to foster inter4 disciplinary team approaches to rural health 

5 training and practice; and 

6 (C) to develop state-of-the-art network 

7 telecommunications and telemedicine systems to 

8 link rural health professionals to other health 

9 care providers and academic health care cen10 ters. 

11 (e) NURSE TRAINING.—For purposes of subsection 

12 (a), the programs described in this section include a pro13 gram to support projects to support midlevel provider 

14 training and address priority nursing workforce needs, in15 cluding projects to train additional nurse practitioners and 

16 nurse midwives; to support baccalaureate-level nurse 

17 training programs providing preparation for careers in 

18 teaching, community health service, and specialized clin19 ical care; to train additional nurse clinicians and nurse 

20 anesthetists; to support interdisciplinary school-based 

21 community nursing programs; and to promote research on 

22 nursing workforce issues. 

23 (f) INAPPROPRIATE PRACTICE BARRIERS; FULL UTI24 LIZATION OF SKILLS.—For purposes of subsection (a), the 

25 programs described in this section include a program— 
561 

•S 2357 

1 (1) to develop and encourage the adoption of 

2 model professional practice statutes for advanced 

3 practice nurses and physician assistants, and to oth4 erwise support efforts to remove inappropriate bar5 riers to practice by such nurses and such physician 

6 assistants; and 

7 (2) to promote the full utilization of the profes8 sional education and clinical skills of advanced prac9 tice nurses and physician assistants. 

10 (g) ADVISORY BOARD ON HEALTH CARE WORK11 FORCE DEVELOPMENT.— 

12 (1) IN GENERAL.—The Secretary shall establish 

13 an Advisory Board known as the National Advisory 

14 Board on Health Care Workforce Development to 

15 advise, consult with, and make recommendations to 

16 the Secretary and to the Secretary of Labor on mat17 ters relating to— 

18 (A) health care worker supply and its ade19 quacy to assure proper health care delivery sys20 tem staffing in both rural and urban areas; and 

21 (B) the impact of this Act, and of related 

22 changes in law regarding health care, on health 

23 care workers and the needs of such workers, in24 cluding needs regarding education, training, 

25 and other career development matters and the 
562 

•S 2357 

1 relationship of health care workers to health 

2 care professionals. 

3 (2) COMPOSITION.—The Board established 

4 under paragraph (1) shall be composed of the fol5 lowing members with expertise in health care work6 force issues appointed by the Secretary in consulta7 tion with the Secretary of Labor: 

8 (A) Five representatives of labor organiza9 tions representing health care workers. 

10 (B) Five representatives of health care de11 livery institutions. 

12 (C) Two representatives from health care 

13 education organizations. 

14 (D) Two representatives from consumer 

15 organizations. 

16 (3) ASSISTANCE.—The Secretary shall provide 

17 the Board with such administrative assistance as 

18 may be necessary for the Board to carry out this 

19 subsection. 

20 (h) OTHER PROGRAMS.—For purposes of subsection 

21 (a), the programs described in this section include a pro22 gram to train health professionals and administrators in 

23 managed care, cost-effective practice management, contin24 uous quality improvement practices, and provision of cul25 turally sensitive care. 
563 

•S 2357 

1 (i) RELATIONSHIP TO EXISTING PROGRAMS.—This 

2 section may be carried out through programs established 

3 in title VII or VIII of the Public Health Service Act, as 

4 appropriate and as consistent with the purposes of such 

5 programs. 

6 (j) MENTAL RETARDATION AND OTHER DEVELOP7 MENTAL DISABILITIES.—Title VII of the Public Health 

8 Service Act is amended by inserting after section 778, the 

9 following new section: 

10 ‘‘SEC. 779. MENTAL RETARDATION AND OTHER DEVELOP11 MENTAL DISABILITIES. 

12 ‘‘(a) IN GENERAL.—The Secretary may make grants 

13 and enter into contracts with university affiliated pro14 grams, schools of medicine, and schools of dentistry to as15 sist in meeting the costs of such programs or schools to— 

16 ‘‘(1) improve the interdisciplinary training of 

17 primary care physicians and dentists in the health 

18 care services needs of individuals with mental, phys19 ical, and developmental disabilities, including mental 

20 retardation, particularly those who are more than 18 

21 years of age; 

22 ‘‘(2) develop, evaluate, and disseminate cur23 ricula relating to the health care service needs of in24 dividuals with mental, physical, and developmental 

25 disabilities, including mental retardation, particu-
564 

•S 2357 

1 larly those individuals who are more than 18 years 

2 of age; 

3 ‘‘(3) support the training and retraining of fac4 ulty to provide such instruction; and 

5 ‘‘(4) support continuing education of health 

6 professionals who provide health care services and 

7 support to individuals with mental, physical, and de8 velopmental disabilities, including mental retarda9 tion, particularly those who are more than 18 years 

10 of age. 

11 ‘‘(b) AUTHORIZATION OF APPROPRIATIONS.—For 

12 purposes of carrying out this section, there are authorized 

13 to be appropriated, $10,000,000 for each of the fiscal 

14 years 1995 through 2000.’’. 

15 SEC. 3082. PROGRAMS OF THE SECRETARY OF LABOR. 

16 (a) IN GENERAL.— 

17 (1) FUNDING.—For purposes of carrying out 

18 the programs described in this section, and for car19 rying out section 3083, there is authorized to be ap20 propriated $200,000,000 for fiscal year 1995 and 

21 each subsequent fiscal year (in addition to amounts 

22 that may otherwise be authorized to be appropriated 

23 for carrying out the programs). 

24 (2) ADMINISTRATION.—The programs described 

25 in this section and carried out with amounts made 
565 

•S 2357 

1 available under subsection (a) shall be carried out by 

2 the Secretary of Labor (in this section referred to as 

3 the ‘‘Secretary’’). 

4 (b) RETRAINING PROGRAMS; ADVANCED CAREER

5 POSITIONS; WORKFORCE ADJUSTMENT PROGRAMS.— 

6 (1) IN GENERAL.—For purposes of subsection 

7 (a), the programs described in this section are the 

8 following: 

9 (A) A program for skills upgrading and oc10 cupational retraining (including retraining 

11 health care workers for more advanced positions 

12 as technicians, nurses, and physician assist13 ants), and for quality and workforce improve14 ment. 

15 (B) A demonstration program to assist 

16 workers in health care institutions in obtaining 

17 advanced career positions. 

18 (C) A program to develop and operate 

19 health care industry worker job banks in local 

20 employment services agencies or one-stop career 

21 centers, subject to the following: 

22 (i) Such job banks shall be available 

23 to all health care providers in the commu24 nity involved. 
566 

•S 2357 

1 (ii) Such job banks shall begin oper2 ation not later than 90 days after the date 

3 of the enactment of this Act. 

4 (iii)(I) With respect to each affected 

5 community, the local employment service 

6 agency or one-stop career center serving 

7 such community shall be allocated not less 

8 than one counselor whose responsibility it 

9 shall be to develop and operate health and 

10 insurance industry worker job banks. 

11 Where the impact of health care industry 

12 restructuring in the affected community is 

13 such that the functions required under this 

14 clause cannot be adequately provided by 

15 one counselor, additional counselors shall 

16 be allocated to carry out such functions. 

17 (II) Such counselor shall solicit job 

18 openings from local health care industry 

19 employers, maintain frequent contacts with 

20 these and other employers, and monitor 

21 and update all job listings appropriate for 

22 displaced health care workers seeking em23 ployment. 

24 (III) The local employment service 

25 agency or one-stop career center shall pro-
567 

•S 2357 

1 vide directly, or facilitate the provision of, 

2 labor exchange services to displaced health 

3 care industry workers, including assess4 ment, counseling, testing, job-search assist5 ance, job referral and placement, and re6 ferral to training and educational pro7 grams, where appropriate. 

8 (IV) The Secretary of Labor shall de9 velop performance goals for the effective 

10 performance of such job banks with respect 

11 to the number and quality of jobs listed, 

12 the degree of participation by employers in 

13 the affected community, and success in 

14 placement of job bank users in jobs listed, 

15 taking into account specific geographic, 

16 economic and labor market characteristics 

17 of the community served. 

18 (D) A program to provide for joint labor19 management decision-making in the health care 

20 sector on workplace matters related to the re21 structuring of the health care delivery system 

22 provided for in this Act. 

23 (E) A program to collect data regarding 

24 the adequacy of the supply of health care work25 ers by occupation and sector of the health in-
568 

•S 2357 

1 dustry in light of existing and projected demand 

2 for such workers. 

3 (F)(i) A program to encourage the adop4 tion and utilization of high performance, high 

5 quality health care delivery systems, including 

6 employee participation committees and em7 ployee team systems that will contribute to 

8 more effective health care by increasing the role 

9 and the area of independent decisionmaking of 

10 health care workers. 

11 (ii) For purposes of this subparagraph, the 

12 term ‘‘employee participation committees’’ 

13 means committees of workers independently se14 lected by and from a facility’s nonmanagerial 

15 workforce, or selected by unions where collective 

16 bargaining agreements are in effect, and which 

17 operate independently without employer inter18 ference and consult with management on issues 

19 of efficiency, productivity, and quality of care, 

20 except that an employee participation com21 mittee established under and operating in con22 formity with this subparagraph shall not be 

23 considered a labor organization within the 

24 meaning of section 2(5) of the National Labor 

25 Relations Act or a representative within the 
569 

•S 2357 

1 meaning of section 1, sixth, of the Railway 

2 Labor Act. 

3 (2) USE OF FUNDS.—Amounts made available 

4 under subsection (a) for carrying out this section 

5 may be expended for program support, faculty devel6 opment, trainee support, workforce analysis, and dis7 semination of information, as necessary to produce 

8 required performance outcomes. 

9 (c) CERTAIN REQUIREMENTS FOR PROGRAMS.—In 

10 carrying out the programs described in subsection (b), the 

11 Secretary shall, with respect to the organizations and em12 ployment positions involved, provide for the following: 

13 (1) Explicit, clearly defined skill requirements 

14 developed for all the positions and projections of the 

15 number of openings for each position. 

16 (2) Opportunities for internal career movement. 

17 (3) Opportunities to work while training or 

18 completing an educational program. 

19 (4) Evaluation and dissemination. 

20 (5) Training opportunities in several forms, as 

21 appropriate. 

22 (d) ADMINISTRATIVE REQUIREMENTS.—In carrying 

23 out the programs described in subsection (b), the Sec24 retary shall, with respect to the organizations and employ25 ment positions involved, provide for the following: 
570 

•S 2357 

1 (1) Joint labor-management implementation 

2 and administration. 

3 (2) Discussion with employees as to training 

4 needs for career advancement. 

5 (3) Commitment to a policy of internal hirings 

6 and promotion. 

7 (4) Provision of support services. 

8 (5) Consultations with employers and with or9 ganized labor. 

10 SEC. 3083. REQUIREMENT FOR CERTAIN PROGRAMS RE11 GARDING REDEPLOYMENT OF HEALTH CARE 

12 WORKERS. 

13 (a) STATE PROGRAMS FOR HOME AND COMMUNITY14 BASED SERVICES FOR INDIVIDUALS WITH DISABIL15 ITIES.—With respect to the plan required in section 

16 2102(a) (for State programs for home and community17 based services for individuals with disabilities under part 

18 1 of subtitle B of title II), the plan shall, in addition to 

19 requirements under such part, provide for the following: 

20 (1) Before initiating the process of imple21 menting the State program under such plan, nego22 tiations will be commenced with labor unions rep23 resenting the employees of the affected hospitals or 

24 other facilities. 
571 

•S 2357 

1 (2) Negotiations under paragraph (1) will ad2 dress the following: 

3 (A) The impact of the implementation of 

4 the program upon the workforce. 

5 (B) Methods to redeploy workers to posi6 tions in the proposed system, in the case of 

7 workers affected by the program. 

8 (3) The plan will provide evidence that there 

9 has been compliance with paragraphs (1) and (2), 

10 including a description of the results of the negotia11 tions. 

12 (b) PLAN FOR INTEGRATION OF MENTAL HEALTH

13 SYSTEMS.—With respect to the plan required in section 

14 3511(a) (relating to the integration of the mental health 

15 and substance abuse services of a State and its political 

16 subdivisions with the mental health and substance abuse 

17 services included in the comprehensive benefit package 

18 under title I), the plan shall, in addition to requirements 

19 under such section, provide for the following: 

20 (1) Before initiating the process of imple21 menting the integration of such services, negotia22 tions will be commenced with labor unions rep23 resenting the employees of the affected hospitals or 

24 other facilities. 
572 

•S 2357 

1 (2) Negotiations under paragraph (1) will ad2 dress the following: 

3 (A) The impact of the proposed changes 

4 upon the workforce. 

5 (B) Methods to redeploy workers to posi6 tions in the proposed system, in the case of 

7 workers affected by the proposed changes. 

8 (3) The plan will provide evidence that there 

9 has been compliance with paragraphs (1) and (2), 

10 including a description of the results of the negotia11 tions. 

12 Subpart B—Transitional Provisions for Workforce 

13 Stability 

14 SEC. 3091. APPLICATION. 

15 (a) LIMITATION TO TRANSITION PERIOD.—The pro16 visions of this subpart are intended to minimize, to the 

17 extent possible, disruptions in established employment re18 lationships during the period of transition to a restruc19 tured health care delivery system, and shall terminate De20 cember 31, 2000. 

21 (b) HEALTH CARE ENTITIES COVERED BY SUB22 PART.—The provisions of this subpart, including ref23 erences to displacing employers, hiring employers, succes24 sors and contractors, apply only to health care entities 

25 that employ more than 25 individuals. 
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1 SEC. 3092. DEFINITIONS. 

2 (a) HEALTH CARE ENTITY.—As used in this sub3 part, the term ‘‘health care entity’’ includes individuals, 

4 sole proprietorships, partnerships, associations, business 

5 trusts, corporations, governmental institutions, and public 

6 agencies (including state governments and political sub7 divisions thereof) that— 

8 (1) provide health care services under title I 

9 (including nonmandatory health care services under 

10 title I) or under the amendments made or programs 

11 referred to in titles IV and VIII; or 

12 (2) provide necessary related services, including 

13 administrative, food service, janitorial or mainte14 nance services, to an entity that provides health care 

15 services (as described in subparagraph (1)); 

16 except that an entity that solely manufactures or provides 

17 goods or equipment to a health care entity shall not be 

18 considered a health care entity. 

19 (b) AFFILIATED ENTERPRISE.—As used in this sub20 part, the term ‘‘affiliated enterprise’’ means a health care 

21 entity that, together with the displacing employer, is con22 sidered a single employer as defined under 414 of the In23 ternal Revenue Code of 1986. 

24 (c) PREFERENCE ELIGIBLE EMPLOYEE.—As used in 

25 this subpart, the term ‘‘preference eligible employee’’ 

26 means an employee who— 
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1 (1) has been employed for in excess of 1 year 

2 by a health care entity; and 

3 (2) has been displaced by or has received notice 

4 of an impending displacement by such entity. 

5 (d) DISPLACEMENT.—As used in this subpart, the 

6 term ‘‘displacement’’ includes a lay off, termination, sig7 nificant cutback in paid work hours, or other loss of em8 ployment, except that a discharge for just cause shall not 

9 constitute a displacement within the meaning of this para10 graph. 

11 SEC. 3093. OBLIGATIONS OF DISPLACING EMPLOYER AND 

12 AFFILIATED ENTERPRISES IN EVENT OF DIS13 PLACEMENT. 

14 (a) NOTICE.—A health care entity which displaces a 

15 preference eligible employee shall provide such employee 

16 with— 

17 (1) written notice, no later than the date of dis18 placement, of employment rights under this subpart, 

19 including employment rights with respect to affili20 ated enterprises of the displacing employer; and 

21 (2) notice of any existing or subsequent vacan22 cies with the displacing employer or an affiliated en23 terprise, which notice may be given by posting of 

24 such vacancies wherever notices to applicants for 

25 employment are customarily posted, by listing such 
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1 vacancies with the local employment services agency, 

2 or in such other manner as the Secretary of Labor, 

3 by regulation, may hereafter specify. 

4 Any such vacancy shall remain open for applications by 

5 preference eligible employees for not less than 14 calendar 

6 days from the date on which the initial notice is provided. 

7 (b) HIRING PREFERENCE.— 

8 (1) IN GENERAL.—A qualified preference eligi9 ble employee who applies during the notice period 

10 described in subsection (a)(2) for a vacant position 

11 with the displacing employer or an affiliated enter12 prise, which position is in the employee’s occupa13 tional specialty and is located in the same State or 

14 Standard Metropolitan Statistical Area in which the 

15 employee was employed prior to the displacement, 

16 shall be given the right to accept or decline the posi17 tion before the employer may offer the position to a 

18 nonpreference eligible employee. 

19 (2) MULTIPLE APPLICATIONS.—When consid20 ering applications from more than one qualified pref21 erence eligible employee, the hiring health care enti22 ty shall have discretion as to which of such employ23 ees will be offered the position. 

24 (3) EMPLOYMENT QUALIFICATIONS.—Nothing 

25 in this subsection shall be construed to prohibit the 
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1 hiring health care entity from establishing reason2 able employment qualifications for a vacancy to 

3 which this subpart applies, except that employees 

4 who performed essentially the same work prior to 

5 their displacement shall be deemed presumptively 

6 qualified for comparable positions. 

7 (c) TERMINATION OF PREFERENCE ELIGIBILITY.— 

8 A displaced employee’s preference eligibility shall termi9 nate— 

10 (1) at such time as the displaced employee ob11 tains substantially equivalent employment with the 

12 displacing employer; or 

13 (2) if the employee does not obtain such em14 ployment— 

15 (A) with respect to health care entities 

16 other than the displacing employer, 2 years 

17 after the date of the displacement; or 

18 (B) with respect to the displacing em19 ployer, upon the termination of this subpart 

20 pursuant to section 3081(a). 

21 SEC. 3094. EMPLOYMENT WITH SUCCESSORS. 

22 A health care entity that succeeds another health care 

23 entity through merger, consolidation, acquisition, contract, 

24 or other similar manner shall provide employees of the 

25 previous health care entity who would otherwise be dis-
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1 placed the right to continued employment in the job posi2 tions held by such employees prior thereto, unless the em3 ployer can establish that such positions no longer exist. 

4 SEC. 3095. COLLECTIVE BARGAINING OBLIGATIONS DUR5 ING TRANSITION PERIOD. 

6 (a) CONTINUATION OF PREVIOUSLY RECOGNIZED

7 BARGAINING REPRESENTATIVES AND AGREEMENTS.—If 

8 a majority of the employees in an appropriate bargaining 

9 unit consists of employees who were previously covered by 

10 a bargaining agreement or represented by an exclusive 

11 representative with respect to terms and conditions of em12 ployment, and there has not been a substantial change in 

13 the operations performed by the employees in that unit, 

14 the employer shall recognize such representative as the ex15 clusive representative for the unit and shall assume the 

16 bargaining agreement, except that where application of 

17 this subsection would result in the recognition of more 

18 than one bargaining representative for a single unit, the 

19 question concerning which representative shall be recog20 nized as the exclusive representative for the unit shall be 

21 resolved in accordance with applicable Federal or State 

22 law. 

23 (b) JOINT EMPLOYER STATUS.—If employees of a 

24 contractor are assigned on a regular basis to perform work 

25 on the premises of a contracting entity and the tasks per-
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1 formed by these employees are functionally integrated with 

2 the operations of the contracting entity on whose premises 

3 such employees work, both the contractor and the con4 tracting entity shall be considered joint employers of the 

5 employees with respect to work performed on those prem6 ises for purposes of determining compliance with labor re7 lations laws. Employees of such joint employers may not 

8 be excluded from a bargaining unit within either entity 

9 on the basis of such joint employer status. 

10 SEC. 3096. GENERAL PROVISIONS. 

11 (a) REGULATIONS.—Not later than 120 days after 

12 the date of enactment of this Act, the Secretary shall pro13 mulgate regulations to implement the requirements of sec14 tion 3093. 

15 (b) OTHER LAWS.—The standards and requirements 

16 of this subpart shall not preempt or excuse noncompliance 

17 with any other applicable Federal or State law, regulation 

18 or municipal ordinance that establishes additional notice 

19 and preference standards or requirements concerning em20 ployee dislocation, employee representation, or collective 

21 bargaining. 

22 (c) RULES OF CONSTRUCTION.—Nothing in this sub23 part shall be construed— 

24 (1) to excuse or otherwise limit the obligation 

25 of an employer to comply with any collective bar-
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1 gaining agreement or any employment benefit plan 

2 that provides rights to employees in addition to 

3 those provided under this subpart; or 

4 (2) to require an employer to recognize or bar5 gain with a labor organization in violation of State 

6 law. 

7 (d) ENFORCEMENT.—Unless otherwise specifically 

8 provided in this subpart, the enforcement provisions of 

9 section 107 of the Family and Medical Leave Act of 1993 

10 (29 U.S.C. 2617) shall apply with respect to the enforce11 ment of the individual rights, including notice require12 ments, provided under section 3093. The collective bar13 gaining and contractual rights provided under sections 

14 3094 and 3095 shall be enforced through administrative 

15 and judicial procedures otherwise provided under Federal 

16 or State law with respect to such rights. 

17 Subtitle B—Academic Health 

18 Centers 

19 SEC. 3131. DISCRETIONARY GRANTS REGARDING ACCESS 

20 TO CENTERS. 

21 (a) RURAL INFORMATION AND REFERRAL SYS22 TEMS.—The Secretary may make grants to eligible centers 

23 for the establishment and operation of information and re24 ferral systems to provide the services of such centers to 

25 rural health plans. 
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1 (b) OTHER PURPOSES REGARDING URBAN AND

2 RURAL AREAS.—The Secretary may make grants to 

3 community- and provider-based health plans under section 

4 1651(d) to carry out activities (other than activities car5 ried out under subsection (a)) for the purpose of providing 

6 the services of eligible centers to residents of rural or 

7 urban communities who otherwise would not have ade8 quate access to such services. 

9 (c) AUTHORIZATION OF APPROPRIATIONS.—For the 

10 purpose of carrying out this section, there are authorized 

11 to be appropriate, $3,000,000 for fiscal year 1995, 

12 $4,000,000 for fiscal year 1996, and $5,000,000 for each 

13 of the fiscal years 1997 through 2000. 

14 Subtitle C—Health Research 

15 Initiatives 

16 PART 1—PROGRAMS FOR CERTAIN AGENCIES 

17 SEC. 3201. BIOMEDICAL, BEHAVIORAL AND HEALTH SERV18 ICES RESEARCH. 

19 (a) FINDINGS.—Congress finds the following: 

20 (1) Nearly 4 of 5 peer reviewed research 

21 projects deemed worthy of funding by the National 

22 Institutes of Health are not funded, and 9 of 10 

23 peer reviewed research projects deemed worthy of 

24 funding by the Agency for Health Care Policy and 

25 Research are not funded. 
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1 (2) Less than 2 percent of the nearly one tril2 lion dollars our Nation spends on health care is de3 voted to health research, while the defense industry 

4 spends 15 percent of its budget on research. 

5 (3) Public opinion surveys have shown that 

6 Americans want more Federal resources put into 

7 health research and support by having a portion of 

8 their health insurance premiums set aside for this 

9 purpose. 

10 (4) Ample evidence exists to demonstrate that 

11 health research has improved the quality of health 

12 care in the United States. Advances such as the de13 velopment of vaccines, the cure of many childhood 

14 cancers, drugs that effectively treat a host of dis15 eases and disorders, a process to protect our Na16 tion’s blood supply from the HIV virus, progress 

17 against cardiovasculor disease including heart attack 

18 and stroke, and new strategies for the early detec19 tion and treatment of diseases such as colon, breast, 

20 and prostate cancer clearly demonstrates the bene21 fits of health research. 

22 (5) Among the most effective methods to con23 trol health care costs are the prevention of inten24 tional and unintentional injury and the prevention 

25 and cure of disease and disability, thus, health re-
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1 search which holds the promise of prevention of in2 tentional and unintentional injury and cure and pre3 vention of disease and disability is a critical compo4 nent of any comprehensive health care reform plan. 

5 (6) The state of our Nation’s research facilities 

6 at the National Institutes of Health and at univer7 sities is deteriorating significantly. Renovation and 

8 repair of these facilities are badly needed to main9 tain and improve the quality of research. 

10 (7) Because the Omnibus Budget Reconciliation 

11 Act of 1993 freezes discretionary spending for the 

12 next 5 years, the Nation’s investment in health re13 search through the National Institutes of Health 

14 and the Agency for Health Care Policy and Re15 search is likely to decline in real terms unless correc16 tive legislative action is taken. 

17 (8) A health research fund is needed to main18 tain our Nation’s commitment to health research 

19 and to increase the percentage of approved projects 

20 which receive funding at the National Institutes of 

21 Health and the Agency for Health Care Policy and 

22 Research to at least 33 percent. 

23 (9) Private sector investment in research and 

24 development has been responsible for the vast major25 ity of new developments in pharmaceuticals, medical 
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1 devices, biotechnology and other health care innova2 tions. Over 90 percent of the most prescribed drugs 

3 in the United States were discovered by the re4 search-based pharmaceutical industry. 

5 (10) United States industry is the preeminent 

6 world leader in the research, development and deliv7 ery of innovative therapies that improve the quality 

8 of care for people throughout the world. 

9 (11) Global health care budgets may constrict 

10 private sector investment in research and develop11 ment. Further, they may be inconsistent with the 

12 goal of developing promising new cost effective treat13 ment therapies. 

14 (b) AVAILABILITY OF FUNDS.— 

15 (1) IN GENERAL.—With respect to each cal16 endar year, the Secretary shall pay, from funds in 

17 the Treasury not otherwise appropriated, for activi18 ties under this section, an amount equal to 0.25 per19 cent in 1996 and subsequent years, of all private 

20 premiums required to be paid in accordance with the 

21 Act. 

22 (2) DEFINITION.—For purposes of this sub23 section, the term ‘‘private health premiums’’ means 

24 all premium related payments made by employers, 

25 individuals, and families for coverage under this Act. 
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1 (3) MAINTENANCE OF EFFORT.—No amounts 

2 made available under this subsection shall replace or 

3 reduce the amount of appropriations for the Na4 tional Institutes of Health or the Agency for Health 

5 Care Policy and Research. 

6 (c) PURPOSES FOR EXPENDITURES.—Part A of title 

7 IV of the Public Health Service Act (42 U.S.C. 281 et 

8 seq.) is amended by adding at the end thereof the fol9 lowing new section: 

10 ‘‘SEC. 404F. EXPENDITURES FOR BIOMEDICAL AND BEHAV11 IORAL RESEARCH. 

12 ‘‘(a) IN GENERAL.—With respect to 80 percent of the 

13 amounts made available under section 3201 of the Health 

14 Security Act in a fiscal year, the Secretary shall dis15 tribute— 

16 ‘‘(1) 2 percent of such amounts during any fis17 cal year to the Office of the Director of the National 

18 Institutes of Health to be allocated at the Director’s 

19 discretion for the following activities: 

20 ‘‘(A) for carrying out the responsibilities of 

21 the Office of the Director, in including the Of22 fice of Research on Women’s Health and the 

23 Office of Research on Minority Health, the Of24 fice of Alternative Medicine and the Office of 

25 Rare Diseases Research; and 
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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 
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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-
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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-
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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 investi22 gator positions shall not be counted against any 

23 Federal employment ceilings affecting the Agency.’’. 
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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, 
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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. 
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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-
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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 pro18 viding a comprehensive context for understanding 

19 the economic and social factors related to the devel20 opment 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— 
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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; 
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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 
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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.— 
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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. 
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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: 
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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 car18 rying out the medical technology assessment re19 quired under this subsection, the Administrator shall 

20 consider various factors, including those outlined in 

21 section 904(b)(2) of the Public Health Service Act 

22 and government and private payor reimbursement 

23 policies that impede or encourage innovation that 

24 improves patient outcomes. The diseases or condi25 tions studied in such Study shall be those considered 
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1 to be high priority according to the following cri2 teria: 

3 (A) Aggregate economic costs to the 

4 United 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-
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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 Sep20 tember 30 of that year, the Administrator shall 

21 enter into grants and contracts with appropriate en22 tities to conduct any investigations and analyses that 

23 may be required to carry out the design of the Med24 ical Technology Impact Study under subsection (a). 
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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. 
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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-
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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 con19 sumers and providers about their roles in preventing 

20 injury, preventing and controlling disease and the 

21 appropriate 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, 
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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-
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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 anal6 ysis 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. 
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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. 
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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 trans5 mitted diseases, domestic violence, poor diet, phys6 ical inactivity, and low childhood immunization lev7 els. 

8 (5) Accountability and quality assurance activi9 ties, including monitoring the quality of personal 

10 health services furnished by health plans and pro11 viders of medical and health services in a manner 

12 consistent with the overall quality of care monitoring 

13 activities undertaken under title V, and monitoring 

14 communities’ overall access to health services. 

15 (6) Provision of public health laboratory serv16 ices to complement private clinical laboratory serv17 ices and that screen for diseases and conditions such 

18 as metabolic diseases in newborns, provide toxicology 

19 assessments of blood lead levels and other environ20 mental toxins, diagnose sexually transmitted dis21 eases, tuberculosis and other diseases requiring part22 ner notification, test for infectious and food-borne 

23 diseases, and monitor the safety of water and food 

24 supplies. 
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1 (7) Training and education to assure provision 

2 of care by all health professionals, with special em3 phasis placed on the training of public health profes4 sions including epidemiologists, biostatisticians, 

5 health educators, public health administrators, 

6 sanitarians and laboratory technicians. 

7 (8) Leadership, policy development and admin8 istration activities, including needs assessment, the 

9 setting of public health standards, the development 

10 of community public health policies, and the develop11 ment of community public health coalitions. 

12 (9) Establishment of programs that encourage 

13 partnerships among local law enforcement and com14 munity groups for the purpose of developing commu15 nity response teams to assist victims of domestic vio16 lence. 

17 (c) RESTRICTIONS ON USE OF GRANT.— 

18 (1) IN GENERAL.—A funding agreement for a 

19 grant under subsection (a) for a State is that the 

20 grant will not be expended— 

21 (A) to provide inpatient services; 

22 (B) to make cash payments to intended re23 cipients of health services; 

24 (C) to purchase or improve land, purchase, 

25 construct, or permanently improve (other than 
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1 minor remodeling) any building or other facil2 ity, or purchase major medical equipment; 

3 (D) to satisfy any requirement for the ex4 penditure of non-Federal funds as a condition 

5 for the receipt of Federal funds; or 

6 (E) to provide financial assistance to any 

7 entity other than a public or nonprofit private 

8 entity. 

9 (2) LIMITATION ON ADMINISTRATIVE EX10 PENSES.—A funding agreement for a grant under 

11 subsection (a) is that the State involved will not ex12 pend more than 10 percent of the grant for adminis13 trative expenses with respect to the grant. 

14 (d) MAINTENANCE OF EFFORT.—A funding agree15 ment for a grant under subsection (a) is that the State 

16 involved will maintain expenditures of non-Federal 

17 amounts for core health functions at a level that is not 

18 less than the level of such expenditures maintained by the 

19 State for the fiscal year preceding the first fiscal year for 

20 which the State receives such a grant. 

21 SEC. 3313. SUBMISSION OF INFORMATION. 

22 The Secretary may make a grant under section 3312 

23 only if the State involved submits to the Secretary the fol24 lowing information: 
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1 (1) A description of existing deficiencies in the 

2 State’s public health system (at the State level and 

3 the local level), using standards of sufficiency devel4 oped by the Secretary. 

5 (2) A description of health status measures to 

6 be improved within the State (at the State level and 

7 the local level) through expanded public health func8 tions. 

9 (3) Measurable outcomes and process objectives 

10 for improving health status and core health func11 tions for which the grant is to be expended. 

12 (4) Information regarding each such function, 

13 which— 

14 (A) identifies the amount of State and 

15 local funding expended on each such function 

16 for the fiscal year preceding the fiscal year for 

17 which the grant is sought; and 

18 (B) provides a detailed description of how 

19 additional Federal funding will improve each 

20 such function by both the State and local public 

21 health agencies. 

22 (5) A description of the core health functions to 

23 be carried out at the local level, and a specification 

24 for each such function of— 
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1 (A) the communities in which the function 

2 will be carried out; and 

3 (B) the amount of the grant to be ex4 pended for the function in each community so 

5 specified. 

6 SEC. 3314. REPORTS. 

7 A funding agreement for a grant under section 3312 

8 is that the States involved will, not later than the date 

9 specified by the Secretary, submit to the Secretary a re10 port describing— 

11 (1) the purposes for which the grant was ex12 pended; and 

13 (2) describing the extent of progress made by 

14 the State in achieving measurable outcomes and 

15 process objectives described in section 3313(3). 

16 SEC. 3315. APPLICATION FOR GRANT. 

17 The Secretary may make a grant under section 3312 

18 only if an application for the grant is submitted to the 

19 Secretary, the application contains each agreement de20 scribed in this part, the application contains the informa21 tion required in section 3314, and the application is in 

22 such form, is made in such manner, and contains such 

23 agreements, assurances, and information as the Secretary 

24 determines to be necessary to carry out this part. 
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1 SEC. 3316. ALLOCATIONS FOR CERTAIN ACTIVITIES. 

2 Of the amounts made available under section 3301 

3 for a fiscal year for carrying out this part, the Secretary 

4 may reserve not more than 5 percent for carrying out the 

5 following activities: 

6 (1) Technical assistance with respect to plan7 ning, development, and operation of core health 

8 functions carried out under section 3312, including 

9 provision of biostatistical and epidemiological exper10 tise and provision of laboratory expertise. 

11 (2) Development and operation of a national in12 formation network among State and local health 

13 agencies. 

14 (3) Program monitoring and evaluation of core 

15 health functions carried out under section 3312. 

16 (4) Development of a unified electronic report17 ing mechanism to improve the efficiency of adminis18 trative management requirements regarding the pro19 vision of Federal grants to State public health agen20 cies. 

21 SEC. 3317. DEFINITIONS. 

22 For purposes of this part: 

23 (1) The term ‘‘funding agreement’’, with re24 spect to a grant under section 3312 to a State, 

25 means that the Secretary may make the grant only 

26 if the State makes the agreement involved. 
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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 
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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. 
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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. 
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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; 
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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; 
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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; 
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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. 
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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; 
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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. 
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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. 
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1 Subpart B—Development of Telemedicine in Rural 

2 Underserved Areas 

3 SEC. 3341. GRANTS FOR DEVELOPMENT OF RURAL TELE4 MEDICINE. 

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 telemedi12 cine. Grants shall be awarded under this section to 

13 encourage the initial development of rural telemedi14 cine networks, expand existing networks, link exist15 ing networks together, or link such networks to ex16 isting fiber optic telecommunications systems. 

17 (2) ELIGIBLE ENTITY.—For purposes of this 

18 section, the term ‘‘eligible entity’’ means a public or 

19 nonprofit entity operating in a nonmetropolitan area 

20 (as defined by the Secretary of Commerce) as part 

21 of a network of community-based providers that in22 cludes at least three of the following: 

23 (A) Community or migrant health centers. 

24 (B) Local health departments. 

25 (C) Community mental health centers. 

26 (D) Nonprofit hospitals. 
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1 (E) Private practice health professionals, 

2 including rural health clinics. 

3 (F) Other publicly funded health or social 

4 services agencies. 

5 (b) APPLICATION.—To be eligible to receive a grant 

6 under this section an entity shall prepare and submit to 

7 the Secretary an application at such time, in such manner 

8 and containing such information as the Secretary may re9 quire, including a description of the use to which the entity 

10 will apply any amounts received under the grant. 

11 (c) PREFERENCE.—The Secretary shall, in awarding 

12 grants under this section, give preference to applicants 

13 that— 

14 (1) are health care providers in rural health 

15 care networks or providers that propose to form 

16 such networks, and the majority of the providers in 

17 such a network are located in a medically under18 served or health professional shortage areas; 

19 (2) can demonstrate broad geographic coverage 

20 in the rural areas of the State, or States in which 

21 the applicant is located; 

22 (3) propose to use Federal funds to develop 

23 plans for, or to establish, telemedicine systems that 

24 will link rural hospitals and rural health care pro25 viders to other hospitals and health care providers; 
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1 (4) will use the amounts provided under the 

2 grant for a range of health care applications such as 

3 teleradiology, telepathology, interactive video con4 sultation and remote educational services, and to 

5 promote greater efficiency in the use of health care 

6 resources; and 

7 (5) propose to use local matching funds to fi8 nance projects. 

9 (d) USE OF AMOUNTS.—Amounts received under a 

10 grant awarded under this section shall be utilized for the 

11 development of telemedicine networks involving two or 

12 more providers. Such amounts may be used to cover the 

13 costs associated with the development of telemedicine net14 works and the acquisition or construction of telecommuni15 cations facilities and equipment including— 

16 (1) the development and acquisition through 

17 lease or purchase of computer hardware and soft18 ware, audio and visual equipment, computer network 

19 equipment, telecommunications transmission facili20 ties, telecommunications terminal equipments, inter21 active video equipment, data terminal equipment, 

22 and other facilities and equipment that would fur23 ther the purposes of this section; 
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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: 
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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. 
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1 SEC. 3343. REGULATIONS ON REIMBURSEMENT OF TELE2 MEDICINE. 

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 
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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 
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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 
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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, 
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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 
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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 nonmetropoli8 tan areas (as defined by the Department of Com9 merce) in a consortium of community-based pro10 viders that includes at least three of the following: 

11 (A) community or migrant health centers; 

12 (B) local health departments; 

13 (C) community mental health centers; 

14 (D) nonprofit hospitals; 

15 (E) private practice health professionals, 

16 including rural health clinics; or 

17 (F) other publicly funded health or social 

18 services agencies; 

19 except that such eligibility is restricted to the receipt 

20 of grants or contracts under section 3421(a). 

21 (d) PRIORITY.—In making awards from amounts ap22 propriated under subsection (a)(1)(B) and section 3462, 

23 the Secretary shall give the highest priority to providing 

24 adequate assistance to federally qualified health centers 

25 in order to ensure the provision of comprehensive primary 
638 

•S 2357 

1 health care services, other covered services and benefits, 

2 and enabling services to medically underserved populations 

3 that were served by such centers prior to the date of enact4 ment of this Act, except that such federally qualified 

5 health centers must continue to meet the requirements for 

6 designation under section 1861(aa)(4) of the Social Secu7 rity Act. 

8 (e) EQUITABLE DISTRIBUTION.—The Secretary 

9 shall, in awarding grants, entering into contracts, and 

10 making loans under this part, assure an equitable distribu11 tion of funds between rural and urban areas. 

12 Subpart B—Development of Community Health 

13 Groups and Health Care Sites and Services 

14 SEC. 3421. GRANTS AND CONTRACTS FOR DEVELOPMENT 

15 OF PLANS AND NETWORKS AND THE EXPAN16 SION AND DEVELOPMENT OF HEALTH CARE 

17 SITES AND SERVICES. 

18 (a) AUTHORITY.— 

19 (1) IN GENERAL.—The Secretary may make 

20 grants to and enter into contracts with eligible enti21 ties described in section 3411(c) for— 

22 (A) the development of community health 

23 groups whose principal purpose is to provide 

24 the comprehensive benefit package under title I 

25 in one or more health professional shortage 
639 

•S 2357 

1 areas or to provide such items and services to 

2 a significant number of individuals who are 

3 members of a medically underserved population; 

4 and 

5 (B) the expansion of existing health deliv6 ery sites and services and the development of 

7 new health delivery sites and services. 

8 (2) CONSIDERATION BY SECRETARY.—In 

9 awarding grants or contracts under paragraph (1), 

10 the Secretary shall give consideration to— 

11 (A) the geographic proximity of the grant 

12 applicants and recipients; 

13 (B) cultural and language differences ex14 isting within the communities to be served 

15 under the grants or contracts; and 

16 (C) the capacity needs of the communities 

17 to be served. 

18 (b) SERVICE AREA.—In making an award under sub19 section (a), the Secretary shall designate the geographic 

20 area with respect to which the community health group 

21 involved is to provide health services. 

22 (c) PRIORITY.—In making awards under subsection 

23 (a)(1), the Secretary shall give priority to proposals in 

24 which a greater number of eligible entities and other 

25 health care providers, especially providers in community- 
640 

•S 2357 

1 and provider-based health plans under section 1651(d), 

2 are participants in the community health group, except in 

3 areas such as rural areas, where providers are severely 

4 limited in number. 

5 (d) LIMITATION ON AWARDS.—The Secretary may 

6 not make awards under subsection (a)(1) for more than 

7 5 years to the same community health group. 

8 (e) DEFINITIONS.—For purposes of this subpart: 

9 (1) The term ‘‘community health group’’ 

10 means— 

11 (A) a community health network that— 

12 (i) is a public or nonprofit private 

13 consortium of health care providers that 

14 principally provides some of the items and 

15 services of the standard benefit package to 

16 medically underserved populations, and 

17 residents of health professional shortage 

18 areas; 

19 (ii) has an agreement with one or 

20 more health plans; and 

21 (iii) has a written agreement gov22 erning the participation of health care pro23 viders in the consortium to which each par24 ticipating provider is a party; or 

25 (B) a community health plan that— 
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•S 2357 

1 (i) is a public or nonprofit private en2 tity that principally provides all of the 

3 items and services of the standard benefit 

4 package to medically underserved popu5 lations, and residents of health professional 

6 shortage areas; 

7 (ii) is a participant in one or more 

8 health alliances; and 

9 (iii) has a written agreement gov10 erning the participation of health care pro11 viders in the consortium to which each par12 ticipating provider is a party. 

13 (2) The term ‘‘health professional shortage 

14 areas’’ means health professional shortage areas des15 ignated under section 332 of the Public Health Serv16 ice Act. 

17 (3) The term ‘‘medically underserved popu18 lation’’ means a medically underserved population 

19 designated under section 330(b)(3) of the Public 

20 Health Service Act, populations residing in health 

21 professional shortage areas under section 332 of the 

22 Public Health Service Act, and populations eligible 

23 for premium subsidies and cost sharing reductions 

24 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 
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•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. 
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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. 
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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 
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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 

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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 

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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 

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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 

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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 car20 rying out section 3461(b), there are authorized to be ap21 propriated $17,200,000 for fiscal year 1996, $68,900,000 

22 for each of the fiscal years 1997 through 1999, 

23 $68,900,000 for fiscal year 2000, and $2,000,000 for each 

24 of the fiscal years 2001 through 2004. 
656 

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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 

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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 practi4 tioners, nurse midwives, or nurse anesthetists or are serv5 ing 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 

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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 

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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 

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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 

17 issuance of a certification of readiness by the Secretary 

18 for a State, the limits set forth in subsections (d)(2)(B) 

19 and (e)(2)(A) of section 1106 shall not apply to the provi20 sion of mental illness and substance abuse services in the 

21 State. 

22 SEC. 3511. REPORT ON INTEGRATION OF MENTAL HEALTH 

23 SYSTEMS. 

24 (a) IN GENERAL.—As a condition of being a partici25 pating State under title I, each State shall, not later than 
666 

•S 2357 

1 October 1, 1998, submit to the Secretary a report con2 taining the information described in subsection (b) on (in3 cluding a plan for) the measures to be implemented by 

4 the State to achieve the integration of the mental illness 

5 and substance abuse services of the State and its political 

6 subdivisions with the mental illness and substance abuse 

7 services that are included in the comprehensive benefit 

8 package under title I. The plan required in the preceding 

9 sentence shall meet the conditions described in section 

10 3083(b). In addition, each State shall submit to the Sec11 retary a report containing the information described in 

12 subsection (c) for each year in which the State participates 

13 under title I up to and including the year 2001 or the 

14 date on which an unlimited benefit for mental illness and 

15 substance abuse services is provided, whichever occurs 

16 later. 

17 (b) REQUIRED CONTENTS OF INTEGRATION RE18 PORT.—With respect to the provision of items and services 

19 relating to mental illness and substance abuse, the report 

20 of a State under subsection (a) shall, at a minimum, con21 tain the following information: 

22 (1) Information on the number of individuals 

23 served by or through mental illness and substance 

24 abuse programs administered by State and local 
667 

•S 2357 

1 agencies and the proportion who are eligible persons 

2 under title I. 

3 (2) Information on the extent to which each 

4 health provider furnishing mental illness and sub5 stance abuse services under a State program partici6 pates or will participate in one or more regional or 

7 corporate alliance health plans, and, in the case of 

8 providers that do not so participate, the reasons for 

9 the lack of participation. 

10 (3) With respect to the two years preceding the 

11 year in which the State becomes a participating 

12 State under title I— 

13 (A) the amount of funds expended by the 

14 State and its political subdivisions for each of 

15 such years for items and services that are in16 cluded in the comprehensive benefit package 

17 under such title; 

18 (B) the amount of funds expended for 

19 medically necessary and appropriate items and 

20 services not included in such benefit package, 

21 including medical care, other health care, and 

22 supportive services related to the provision of 

23 health care. 

24 (4) An estimate of the amount that the State 

25 will expend to furnish items and services not in-
668 

•S 2357 

1 cluded in such package once the expansion of cov2 erage for mental illness and substance abuse services 

3 is implemented in the year 2001. 

4 (5) A description of how the State will assure 

5 that all individuals served by mental illness and sub6 stance abuse programs funded by the State will be 

7 enrolled in a health plan and how mental illness and 

8 substance abuse services not covered under the ben9 efit package will continue to be furnished to such en10 rollees. 

11 (6) A description of the conditions under which 

12 the integration of mental illness and substance abuse 

13 providers into regional and corporate alliances can 

14 be achieved, and an identification of changes in par15 ticipation and certification requirements that are 

16 needed to achieve the integration of such programs 

17 and providers into health plans. 

18 (7) If the integration of mental illness and sub19 stance abuse programs operated by the State into 

20 one or more health plans is not medically appro21 priate or feasible for one or more groups of individ22 uals treated under State programs, a description of 

23 the reasons that integration is not feasible or appro24 priate and a plan for assuring the coordination for 

25 such individuals of the care and services covered 
669 

•S 2357 

1 under the comprehensive benefit package with the 

2 additional items and services furnished by such pro3 grams. 

4 (8) A description of the manner in which the 

5 resources that the State and its political subdivisions 

6 currently spend on mental health and substance 

7 abuse services will be used to facilitate integration. 

8 (c) REQUIRED CONTENTS OF TRANSITION RE9 PORT.—With respect to the a report required under this 

10 subsection, the report shall, at a minimum, contain the 

11 following information: 

12 (1) The amount of funds expended for sub13 stance abuse and mental health services by the 

14 source of revenue, including, Federal block grant 

15 funds, under title XIX of the Public Health Service 

16 Act, Federal categorical grant funds, State and local 

17 revenues and health plan payments. 

18 (2) The amount of funds expended for sup19 portive services to individuals enrolled in substance 

20 abuse and mental health treatment programs, in21 cluding transportation, child care, educational and 

22 vocational training and coordination with other pub23 lic systems such as the social service, child welfare 

24 and juvenile and criminal justice systems, by source 

25 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 sub14 mitted in years following the implementation of an unlim15 ited benefit for mental illness and substance abuse serv16 ices. 

17 (e) REPORTING REQUIREMENT.—Each State shall 

18 report annually to the Secretary on the incidence and 

19 prevalence of mental illness and substance abuse disorders 

20 in the prison population, changes in such incidence and 

21 prevalence in the prison population, and potential causa22 tive factors with respect to such changes, including an es23 timate of the extent to which the denial of treatment, or 

24 the provision of inadequate treatment, to individuals with 
671 

•S 2357 

1 mental illness and substance abuse disorders is contrib2 uting to the criminal activity of such individuals. 

3 PART 2—ASSISTANCE FOR STATE MANAGED MEN4 TAL HEALTH AND SUBSTANCE ABUSE PRO5 GRAMS 

6 SEC. 3531. AVAILABILITY OF ASSISTANCE. 

7 (a) IN GENERAL.—The Secretary shall make grants 

8 to States for the development and operation of comprehen9 sive managed mental health and substance abuse pro10 grams that are integrated with the health delivery system 

11 established under this Act. Such programs shall— 

12 (1) promote the development of integrated de13 livery systems for the management of the mental 

14 health and substance abuse services provided under 

15 the comprehensive benefits package; 

16 (2) give priority to providing services to low-in17 come adults with serious mental illness or substance 

18 abuse disorders and children with serious emotional 

19 disturbance or substance abuse disorders and pro20 vide for the phase-in of such services for all eligible 

21 persons within 5 years; 

22 (3) ensure that individuals participating in the 

23 program have access to all medically necessary men24 tal health and substance abuse services; 
672 

•S 2357 

1 (4) promote the linkage of mental health and 

2 substance abuse services with primary and preven3 tive health care services; and 

4 (5) meet such other requirements as the Sec5 retary may impose. 

6 (b) EXCEPTION.—Nothing in this part shall be con7 strued as preventing States that have separate administra8 tive entities for mental health and for substance abuse 

9 services from establishing separate comprehensive man10 aged care programs for such services and receiving assist11 ance under this part for either or both programs. 

12 SEC. 3532. PLAN REQUIREMENTS. 

13 In order to receive a grant under this part, a State 

14 must have a plan for a comprehensive managed mental 

15 health and substance abuse program which is approved 

16 by the Secretary. Such plan shall— 

17 (1) describe the management, access, and refer18 ral structure that the State will use to promote and 

19 achieve integration of mental health and substance 

20 abuse services with the health delivery system estab21 lished under this Act for eligible individuals in the 

22 State; 

23 (2) describe how the State will ensure that pro24 viders of specialized services will meet appropriate 

25 standards and provide assurances that the State has 
673 

•S 2357 

1 complied with section 1504 as it affects mental 

2 health and substance abuse services; 

3 (3) describe payment, utilization review, and 

4 other mechanisms that the State will use to encour5 age appropriate service delivery and management of 

6 costs; 

7 (4) describe uniform patient placement criteria 

8 that the State will use to ensure placement in appro9 priate substance abuse treatment programs; 

10 (5) describe the processes the State will use to 

11 ensure that individuals will continue to have access 

12 to treatment through referrals from nonhealth public 

13 entities, such the juvenile or criminal justice sys14 tems, or social service systems; 

15 (6) specify the methods the State will use to en16 sure that individuals receiving services under the 

17 program have access to all medically necessary and 

18 appropriate mental health and substance abuse serv19 ices; 

20 (7) define terms that will be used by the State 

21 in determining the eligibility of individuals for serv22 ices under the program; 

23 (8) describe how health plans will use services 

24 under the comprehensive managed mental health 
674 

•S 2357 

1 and substance abuse programs established under 

2 this part; 

3 (9) describe the role of local government in fi4 nancing and managing the integrated mental illness 

5 and substance abuse treatment system; 

6 (10) describe the sources of funding, including 

7 Medicaid and the block grants authorized by title 

8 XIX of the Public Health Service Act, that will be 

9 used by the State, other than the grant received 

10 under this part, to operate the program, and provide 

11 the status of any request for a Medicaid waiver 

12 made by the State to the Secretary; 

13 (11) describe how the State provided for broad14 based public input in the development of the plan, 

15 and the mechanism that will be used for ongoing 

16 public comment on and review of amendments to the 

17 plan; and 

18 (12) describe grievance procedures that will be 

19 available for individuals dissatisfied with their health 

20 plan’s participation in the comprehensive managed 

21 mental health and substance abuse program, and 

22 mechanisms that will be available to review the per23 formance of health plans and fee-for-service arrange24 ments to ensure against under treatment. 
675 

•S 2357 

1 SEC. 3533. ADDITIONAL FEDERAL RESPONSIBILITIES. 

2 The Secretary shall, upon the submission of a State’s 

3 plan under section 3532, ensure the timely consideration 

4 of any Medicaid waiver requests submitted by the State, 

5 affirm that section 1504 has been implemented, and en6 sure the timely implementation of section 1641(b)(5). 

7 SEC. 3534. AUTHORIZATION OF APPROPRIATIONS. 

8 There are authorized to be appropriated for grants 

9 under this part, $82,000,000 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 G—Comprehensive School 

13 Health Education; School-Re14 lated Health Services 

15 PART 1—HEALTHY STUDENTS-HEALTHY 

16 SCHOOLS GRANTS FOR SCHOOL HEALTH 

17 EDUCATION 

18 SEC. 3601. PURPOSES. 

19 It is the purpose of this part— 

20 (1) to support the development and implemen21 tation of comprehensive age appropriate health edu22 cation programs in public schools for children and 

23 youth kindergarten through grade 12; and 

24 (2) to increase access to preventive and primary 

25 health care services for children and youth through 
676 

•S 2357 

1 school-based or school-linked health service sites in 

2 accordance with locally determined needs. 

3 SEC. 3602. HEALTHY STUDENTS-HEALTHY SCHOOLS 

4 GRANTS. 

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

6 with the Secretary of Education, shall award grants to 

7 State educational agencies in eligible States to integrate 

8 comprehensive school health education in schools within 

9 the State, with priority given within States to those com10 munities in greatest need as defined by section 3683(a). 

11 (b) ELIGIBLE USES OF FUNDS.—Funds made avail12 able under this section shall be used— 

13 (1) to implement comprehensive school health 

14 education programs, as defined in subsection (f)(1) 

15 through grants to local educational agencies; 

16 (2) to provide staff development and technical 

17 assistance to local educational agencies, schools, 

18 local health agencies, and other community organiza19 tions involved in providing comprehensive school 

20 health education programs; 

21 (3) to evaluate and report to the Secretary on 

22 the progress made towards attaining the goals and 

23 objectives described under subsection (c)(1)(A); and 
677 

•S 2357 

1 (4) to conduct such other activities to achieve 

2 the objectives of this subpart as the Secretary may 

3 require. 

4 (c) APPLICATION.—An application for a grant under 

5 subsection (a), shall be jointly developed by the State edu6 cational agency and the State health agencies of the State 

7 involved, and shall contain— 

8 (1) a State plan for comprehensive school 

9 health education programs, that outlines— 

10 (A) the goals and objectives of the State 

11 for school health education programs, and the 

12 manner in which the State will allocate funds to 

13 local educational agencies in order to achieve 

14 these goals and objectives; 

15 (B) the manner in which the State will co16 ordinate programs under this part with other 

17 Federal, State and local health education pro18 grams and resources, and school health serv19 ices; 

20 (C) the manner in which comprehensive 

21 school health education programs will be coordi22 nated with other Federal, State and local edu23 cation programs (such as programs under titles 

24 I, II, and IV of the Elementary and Secondary 

25 Education Act of 1965), with the school im-
678 

•S 2357 

1 provement plan of the State, if any, under title 

2 III of the Goals 2000: Educate America Act, 

3 and with any similar programs; 

4 (D) the manner in which the State shall 

5 work with State and local educational agencies 

6 and with State and local health agencies to re7 duce barriers to implementing school health 

8 education programs; 

9 (E) the manner in which the State will 

10 monitor the implementation of such programs 

11 by local educational agencies and establish out12 come criteria by which to evaluate their effec13 tiveness in achieving progress towards the goals 

14 and objectives described in subparagraph (A); 

15 (F) the manner in which the State will 

16 provide staff development and technical assist17 ance to local educational agencies, and build ca18 pacity for professional development of health 

19 educators; and 

20 (G) the manner in which such school 

21 health education programs will be, to the extent 

22 practicable, culturally competent and linguis23 tically appropriate and responsive to the diverse 

24 needs of the students served; 
679 

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1 (2) a description of the respective roles of the 

2 State educational agency, local educational agencies, 

3 the State health agency and local health agencies in 

4 developing and implementing the State’s school 

5 health education plan and resulting programs; 

6 (3) a description of the input of the local com7 munity (including students and parents) in the de8 velopment and operation of comprehensive school 

9 health education programs; 

10 (4) an assurance that communities identified in 

11 section 3683(a) receive priority as locations for com12 prehensive school health education programs for all 

13 grades to the extent that a State does not implement 

14 a statewide program; and 

15 (5) an assurance that grants to local edu16 cational agencies under subsection (b)(1) are contin17 gent upon submission by such agencies of a plan 

18 consistent with the requirements for the State plan 

19 as required under this subsection. 

20 (d) WAIVERS OF STATUTORY AND REGULATORY RE21 QUIREMENTS.— 

22 (1) WAIVERS.— Except as provided in para23 graph (4), upon the request of an entity and under 

24 a relevant program described in paragraph (2), the 

25 Secretary of Health and Human Services and the 
680 

•S 2357 

1 Secretary of Education may grant to the entity a 

2 waiver of any requirement of such program regard3 ing the use of funds, or of the regulations issued for 

4 the program by the Secretary involved, if the fol5 lowing conditions are met with respect to such pro6 gram: 

7 (A) The Secretary involved determines that 

8 the requirements of such program impede the 

9 ability of the State educational agency to 

10 achieve more effectively the purposes described 

11 in section 3601. 

12 (B) The Secretary involved determines 

13 that, with respect to the use of funds under 

14 such program, the requested use of the funds 

15 by the entity would be consistent with the pur16 poses described in section 3601. 

17 (C) The State educational agency provides 

18 all interested local educational agencies in the 

19 State with notice and an opportunity to com20 ment on the proposal and makes these com21 ments available to the Secretary. 

22 (2) RELEVANT PROGRAMS.—For purposes of 

23 paragraph (1), the programs described in this sub24 paragraph are the following: 
681 

•S 2357 

1 (A) In the case of programs administered 

2 by the Secretary of Health and Human Serv3 ices, the following: 

4 (i) The program known as the Preven5 tion, Treatment, and Rehabilitation Model 

6 Projects for High Risk Youth, carried out 

7 under section 517 of the Public Health 

8 Service Act. 

9 (ii) The program known as the State 

10 and Local Comprehensive School Health 

11 Programs to Prevent Important Health 

12 Problems and Improve Educational Out13 comes, carried out under such Act. 

14 (B) In the case of programs administered 

15 by the Secretary of Education, any program 

16 carried out under part B of the Drug-Free 

17 Schools and Communities Act of 1986, except 

18 that a component of such comprehensive school 

19 health education must be consistent with the 

20 statutory intent and purposes of such Act. 

21 (3) WAIVER PERIOD.—A waiver under this 

22 paragraph shall be for a period not to exceed 3 

23 years, unless the Secretary involved determines 

24 that— 
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1 (A) the waiver has been effective in ena2 bling the State to carry out the activities for 

3 which it was requested and has contributed to 

4 improved performance of comprehensive health 

5 education programs; and 

6 (B) such extension is in the public interest; 

7 (4) WAIVERS NOT AUTHORIZED.—The Sec8 retary involved under paragraph (1), may not waive, 

9 under this section, any statutory or regulatory re10 quirements relating to— 

11 (A) comparability of services; 

12 (B) maintenance of effort; 

13 (C) parental participation and involvement; 

14 (D) the distribution of funds to States or 

15 to local educational agencies or other recipients 

16 of funds under the programs described in para17 graph (2); 

18 (E) maintenance of records; 

19 (F) applicable civil rights requirements; or 

20 (G) the requirements of sections 438 and 

21 439 of the General Education Provisions Act. 

22 (5) TERMINATION OF WAIVER.—The Secretary 

23 involved under paragraph (1) shall terminate a waiv24 er under this subsection if the Secretary determines 

25 that the performance of the State affected by the 
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1 waiver has been inadequate to justify a continuation 

2 of the waiver or if it is no longer necessary to 

3 achieve its original purpose. 

4 (e) DEFINITIONS.—As used in this section: 

5 (1) COMPREHENSIVE SCHOOL HEALTH EDU6 CATION.—The term ‘‘comprehensive school health 

7 education’’ means a planned, sequential program of 

8 health education that addresses the physical, emo9 tional and social dimensions of student health in 

10 kindergarten through grade 12. Such program 

11 shall— 

12 (A) be designed to assist students in devel13 oping the knowledge and behavioral skills need14 ed to make positive health choices and maintain 

15 and improve their health, prevent disease and 

16 injuries, and reduce risk behaviors which ad17 versely impact health; 

18 (B) be comprehensive and include a variety 

19 of components addressing personal health, com20 munity and environmental health, injury pre21 vention and safety, nutritional health, the ef22 fects of substance use and abuse, consumer 

23 health regarding the benefits and appropriate 

24 use of medical services including immunizations 

25 and other clinical preventive services, and other 
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1 components deemed appropriate by the local 

2 educational agencies; 

3 (C) be designed to be linguistically and cul4 turally competent and responsive to the needs 

5 of the students served; and 

6 (D) address locally relevant priorities as 

7 determined by parents, students, teachers, and 

8 school administrators and health officials. 

9 (2) ELIGIBLE STATE.—The term ‘‘eligible 

10 State’’ means a State with a memorandum of under11 standing or a written cooperative agreement entered 

12 into by the agencies responsible for health and edu13 cation concerning the planning and implementation 

14 of comprehensive school health education programs. 

15 Among these States a priority shall be given to 

16 qualified States as defined in section 3682(c). 

17 (3) STATE EDUCATIONAL AGENCY.—The term 

18 ‘‘State educational agency’’ means the officer or 

19 agency primarily responsible for the State super20 vision of public elementary and secondary schools. 

21 (4) LOCAL EDUCATIONAL AGENCY.—The term 

22 ‘‘local educational agency’’ means a public board of 

23 education or other public authority legally con24 stituted within a State for either administrative con25 trol or direction of, or to perform a service function 
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1 for, public elementary or secondary schools in a city, 

2 county, township, school district, or other political 

3 subdivision of a State, or such combination of school 

4 districts or counties as are recognized in a State as 

5 an administrative agency for its public elementary or 

6 secondary schools. Such term includes any other 

7 public institution or agency having administrative 

8 control and direction of a public elementary or sec9 ondary school. 

10 (f) AUTHORIZED FUNDING.—For the purpose of car11 rying out this section, out of the funds available under 

12 section 3695(b)(2), there are made available, not to exceed 

13 $15,000,000 for fiscal year 1995, $20,000,000 for fiscal 

14 year 1996, $25,000,000 for fiscal year 1997, $30,000,000 

15 for fiscal year 1998, $40,000,000 for fiscal year 1999, and 

16 $50,000,000 for fiscal year 2000. 

17 SEC. 3603. HEALTHY STUDENTS-HEALTHY SCHOOLS INTER18 AGENCY TASK FORCE. 

19 (a) ESTABLISHMENT.—Not later than 120 days after 

20 the date of enactment of this Act, the Secretary shall es21 tablish a Healthy Students-Healthy Schools Interagency 

22 Task Force to be composed of representatives of the Office 

23 of Disease Prevention and Health Promotion, the National 

24 Institutes of Health, the Centers for Disease Control and 

25 Prevention, the Health Resources and Services Adminis-
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1 tration, the Office of School Health Education within the 

2 Department of Education, and other Federal agencies and 

3 departments which have responsibility for components of 

4 school health and education. 

5 (b) CO-CHAIRPERSONS.—The Assistant Secretary for 

6 Health and the Assistant Secretary for Elementary and 

7 Secondary Education shall serve as co-chairpersons of the 

8 task force established under subsection (a). 

9 (c) FUNCTIONS AND ACTIVITIES.—The task force es10 tablished under subsection (a) shall— 

11 (1) review and coordinate all Federal efforts in 

12 school health education and health services; 

13 (2) provide scientific and technical advice con14 cerning the development and implementation of 

15 model comprehensive school health education pro16 grams and curricula; 

17 (3) develop model student learning objectives 

18 and assessment instruments that shall be made 

19 available to all States; 

20 (4) develop a uniform grant application form (a 

21 form that serves as the principal document con22 taining the core information concerning a particular 

23 entity) and procedures that may be used with re24 spect to all school health education-related programs 

25 (including supplementary information procedures to 
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1 be implemented when an entity that has already sub2 mitted an application form is applying for additional 

3 assistance) that require the submission of an appli4 cation; and 

5 (5) recommend to the Secretary, for inclusion 

6 in the biennial report required by section 3604(2), 

7 methods for effectively linking school health edu8 cation and health services research findings at the 

9 Federal level with implementation at the State and 

10 local levels. 

11 (d) CONSOLIDATION OF INITIATIVES.—Not later 

12 than 12 months after the date of enactment of this Act, 

13 the task force established under subsection (a) shall pre14 pare and submit to the Congress a report containing the 

15 recommendations of the task force for the consolidation 

16 of Federal school health education initiatives. 

17 SEC. 3604. DUTIES OF THE SECRETARY. 

18 The Secretary shall— 

19 (1) establish and maintain a national clearing20 house, using advanced technologies to the maximum 

21 extent practicable, and mechanisms for the diverse 

22 dissemination of school health education material, 

23 including written, audio-visual, and electronically 

24 conveyed information to educators, schools, health 
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1 care providers, and other individuals, organizations, 

2 and governmental entities; 

3 (2) submit a biennial report to the Committee 

4 on Labor and Human Resources of the Senate and 

5 the appropriate committees of the House of Rep6 resentatives on the implementation and contribution 

7 of comprehensive school health education programs 

8 funded under this part toward achieving relevant 

9 National Healthy People 2000 objectives established 

10 by the Secretary; and 

11 (3) encourage coordination among Federal 

12 agencies, State and local governments, educators, 

13 school health providers, community-based organiza14 tions, and private sector entities to support develop15 ment of comprehensive school health education pro16 grams and school health services. 

17 PART 5—SCHOOL-RELATED HEALTH SERVICES 

18 Subpart A—Development and Operation 

19 SEC. 3681. AUTHORIZATION OF APPROPRIATIONS. 

20 (a) FUNDING FOR SCHOOL-RELATED HEALTH SERV21 ICES.—For the purpose of carrying out this subpart, there 

22 are authorized to be appropriated $82,000,000 for fiscal 

23 year 1995, $164,000,000 for fiscal year 1996, 

24 $266,500,000 for fiscal year 1997, and $369,000,000 for 

25 fiscal year 1998, $471,500,000 for fiscal year 1999, 
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1 $574,000,000 for fiscal year 2000, and $2,000,000 for 

2 each of the fiscal years 2001 through 2004. 

3 (b) FUNDING FOR PLANNING AND DEVELOPMENT

4 GRANTS.—Of amounts made available under this section, 

5 not to exceed $10,000,000 for each of fiscal years 1995 

6 and 1996 may be utilized to carry out section 3684. 

7 SEC. 3682. ELIGIBILITY FOR GRANTS. 

8 (a) IN GENERAL.— 

9 (1) PLANNING AND DEVELOPMENT GRANTS.— 

10 Entities eligible to apply for and receive grants 

11 under section 3684 are— 

12 (A) State health agencies that apply on be13 half of local community partnerships; or 

14 (B) local community partnerships in States 

15 in which health agencies have not successfully 

16 applied. 

17 (2) OPERATIONAL GRANTS.—Entities eligible to 

18 apply for and receive grants under section 3685 

19 are— 

20 (A) a qualified State as designated under 

21 subsection (c) that apply on behalf of local com22 munity partnerships; or 

23 (B) local community partnerships in States 

24 that are not designated under subparagraph 

25 (A). 
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1 (b) LOCAL COMMUNITY PARTNERSHIPS.— 

2 (1) IN GENERAL.—A local community partner3 ship under subsection (a)(1)(B) and (a)(2)(B) is an 

4 entity that, at a minimum includes— 

5 (A) a local health care provider, which may 

6 be a local public health department, with expe7 rience in delivering services to children and 

8 youth or medically underserved populations; 

9 (B) local educational agency on behalf of 

10 one or more public schools; and 

11 (C) one community based organization lo12 cated in the community to be served that has 

13 a history of providing services to at-risk chil14 dren and youth. 

15 (2) RURAL COMMUNITIES.—In rural commu16 nities, local partnerships should seek to include, to 

17 the fullest extent practicable, providers and commu18 nity based organizations with experience in serving 

19 the target population. 

20 (3) PARENT AND COMMUNITY PARTICIPA21 TION.—An applicant described in subsection (a) 

22 shall, to the maximum extent feasible, involve broad23 based community participation (including parents of 

24 the youth to be served). 
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1 (c) QUALIFIED STATE.—A qualified State under sub2 section (a)(2)(A) is a State that, at a minimum— 

3 (1) demonstrates an organizational commitment 

4 (including a strategic plan) to providing a broad 

5 range of health, health education and support serv6 ices to at-risk youth; and 

7 (2) has a memorandum of understanding or co8 operative agreement jointly entered into by the State 

9 agencies responsible for health and education re10 garding the planned delivery of health and support 

11 services in school-based or school-linked centers. 

12 SEC. 3683. PREFERENCES. 

13 In making grants under sections 3684 and 3685, the 

14 Secretary shall give priority to applicants whose-commu15 nities to be served show the most substantial level of need 

16 for health services among children and youth. 

17 SEC. 3684. PLANNING AND DEVELOPMENT GRANTS. 

18 (a) IN GENERAL.—The Secretary may make grants 

19 during fiscal years 1995 and 1996 to entities eligible 

20 under section 3862 to develop school-based or school21 linked health service sites. 

22 (b) USE OF FUNDS.—Amounts provided under a 

23 grant under this section may be used for the following: 

24 (1) Planning for the provision of school health 

25 services, including— 
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1 (A) an assessment of the need for health 

2 services among youth in the communities to be 

3 served; 

4 (B) the health services to be provided and 

5 how new services will be integrated with exist6 ing services; 

7 (C) assessing and planning for the mod8 ernization and expansion of existing facilities 

9 and equipment to accommodate such services; 

10 and 

11 (D) an affiliation with relevant health 

12 plans. 

13 (2) recruitment and training of staff for the ad14 ministration and delivery of school health services; 

15 (3) the establishment of local community part16 nerships as described in section 3682 (b); 

17 (4) in the case of States, the development of 

18 memorandums of understanding or cooperative 

19 agreements for the coordinated delivery of health 

20 and support services through school health service 

21 sites; and 

22 (5) other activities necessary to assume oper23 ational status. 

24 (c) APPLICATION FOR GRANTS.—To be eligible to re25 ceive a grant under this section an entity described in sec-
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1 tion 3682 (a) shall submit an application in a form and 

2 manner prescribed by the Secretary. 

3 (d) NUMBER OF GRANTS.—Not more than one plan4 ning grant may be made to a single applicant. A planning 

5 grant may not exceed 2 years in duration. 

6 (e) AMOUNT AVAILABLE FOR DEVELOPMENT

7 GRANT.—The Secretary may award not to exceed— 

8 (1) $150,000 to entities under section 

9 3682(a)(1)(A) and to localities planning for a city10 wide or countywide school health services delivery 

11 system; and 

12 (2) $50,000 to entities under section 

13 3682(a)(1)(B). 

14 SEC. 3685. GRANTS FOR OPERATION OF SCHOOL HEALTH 

15 SERVICES. 

16 (a) IN GENERAL.—The Secretary may make grants 

17 to eligible entities described in section 3682(a)(2) that 

18 submit applications consistent with the requirements of 

19 this section, to pay the cost of operating school-based or 

20 school-linked health service sites. 

21 (b) USE OF GRANT.—Amounts provided under a 

22 grant under this section may be used for the following— 

23 (1) health services, including diagnosis and 

24 treatment of simple illnesses and minor injuries; 
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1 (2) preventive health services, including health 

2 screenings follow-up health care, mental health, and 

3 preventive health education; 

4 (3) enabling services, as defined in section 

5 3461(b), and other necessary support services; 

6 (4) training, recruitment, and compensation of 

7 health professionals and other staff necessary for the 

8 administration and delivery of school health services; 

9 and 

10 (5) referral services, including the linkage of in11 dividuals to health plans, and community-based 

12 health and social service providers. 

13 (c) APPLICATION FOR GRANT.—To be eligible to re14 ceive a grant under this section an entity described in sec15 tion 3682(a)(2) shall submit an application in a form and 

16 manner prescribed by the Secretary. In order to receive 

17 a grant under this section, an applicant must include in 

18 the application the following information— 

19 (1) a description of the services to be furnished 

20 by the applicant; 

21 (2) the amounts and sources of funding that 

22 the applicant will expend, including estimates of the 

23 amount of payments the applicant will receive from 

24 health plans and other sources; 
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1 (3) a description of local community partner2 ships, including parent and community participation; 

3 (4) a description of the linkages with other 

4 health and social service providers; and 

5 (5) such other information as the Secretary de6 termines to be appropriate. 

7 (d) ASSURANCES.—In order to receive a grant under 

8 this section, an applicant must meet the following condi9 tions— 

10 (1) school health service sites will, directly or 

11 indirectly, provide a broad range of health services, 

12 in accordance with the determinations of the local 

13 community partnership, that may include— 

14 (A) diagnosis and treatment of simple ill15 nesses and minor injuries; 

16 (B) preventive health services, including 

17 health screenings and follow-up health care, 

18 mental health and preventive health education; 

19 (C) enabling services, as defined in section 

20 3461(b); 

21 (D) referrals (including referrals regarding 

22 mental health and substance abuse) with follow23 up to ensure that needed services are received; 

24 (2) the applicant provides services rec25 ommended by the health provider, in consultation 
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1 with the local community partnership, and with the 

2 approval of the local education agency; 

3 (3) the applicant provides the services under 

4 this subsection to adolescents, and other school age 

5 children and their families as deemed appropriate by 

6 the local partnership; 

7 (4) the applicant maintains agreements with 

8 community-based health care providers with a his9 tory of providing services to such populations for the 

10 provision of health care services not otherwise pro11 vided directly or during the hours when school 

12 health services are unavailable; 

13 (5) the applicant establishes an affiliation with 

14 relevant health plans and will establish reimburse15 ment procedures and will make every reasonable ef16 fort to collect appropriate reimbursement for serv17 ices provided; and 

18 (6) the applicant agrees to supplement and not 

19 supplant the level of State or local funds under the 

20 direct control of the applying State or participating 

21 local education or health authority expended for 

22 school health services as defined by this Act; 

23 (7) services funded under this Act will be co24 ordinated with existing school health services pro25 vided at a participating school; and 
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1 (8) for applicants in rural areas, the assurances 

2 required under paragraph (4) shall be fulfilled to the 

3 maximum extent possible. 

4 (e) STATE LAWS.—Notwithstanding any other provi5 sion in this part, no school based health clinic may provide 

6 services, to any minor, when to do so is a violation of State 

7 laws or regulations pertaining to informed consent for 

8 medical services to minors. 

9 (f) LIMITATION ON ADMINISTRATIVE FUNDS.—In 

10 the case of a State applying on behalf of local educational 

11 partnerships, the applicant may retain not more than 5 

12 percent of grants awarded under this subpart for adminis13 trative costs. 

14 (g) DURATION OF GRANT.—A grant under this sec15 tion shall be for a period determined appropriate by the 

16 Secretary. 

17 (h) AMOUNT OF GRANT.—The annual amount of a 

18 grant awarded under this section shall not be more than 

19 $200,000 per school-based or school-linked health service 

20 site. 

21 (i) FEDERAL SHARE.— 

22 (1) IN GENERAL.—Subject to paragraph (3), a 

23 grant for services awarded under this section may 

24 not exceed— 
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1 (A) 90 percent of the non-reimbursed cost 

2 of the activities to be funded under the program 

3 for the first 2 fiscal years for which the pro4 gram receives assistance under this section; and 

5 (B) 75 percent of the non-reimbursed cost 

6 of such activities for subsequent years for which 

7 the program receives assistance under this sec8 tion. 

9 The remainder of such costs shall be made available 

10 as provided in paragraph (2). 

11 (2) FORM OF NON-FEDERAL SHARE.—The non12 Federal share required by paragraph (1) may be in 

13 cash or in-kind, fairly evaluated, including facilities, 

14 equipment, personnel, or services, but may not in15 clude amounts provided by the Federal Government. 

16 In-kind contributions may include space within a 

17 school facilities, school personnel, program use of 

18 school transportation systems, outposted health per19 sonnel, and extension of health provider medical li20 ability insurance. 

21 (3) WAIVER.—The Secretary may waive the re22 quirements of paragraph (1) for any year in accord23 ance with criteria established by regulation. Such 

24 criteria shall include a documented need for the 

25 services provided under this section and an inability 
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1 of the grantee to meet the requirements of para2 graph (1) despite a good faith effort. 

3 (j) TRAINING AND TECHNICAL ASSISTANCE.—Enti4 ties that receive assistance under this section may use not 

5 to exceed 10 percent of the amount of such assistance to 

6 provide staff training and to secure necessary technical as7 sistance. To the maximum extent feasible, technical assist8 ance should be sought through local community-based en9 tities. The limitation contained in this subsection shall 

10 apply to individuals employed to assist in obtaining funds 

11 under this part. Staff training should include the training 

12 of teachers and other school personnel necessary to ensure 

13 appropriate referral and utilization of services, and appro14 priate linkages between class-room activities and services 

15 offered. 

16 (k) REPORT AND MONITORING.—The Secretary will 

17 submit to the Committee on Labor and Human Resources 

18 in the Senate and the Committee on Energy and Com19 merce in the House of Representatives a biennial report 

20 on the activities funded under this Act, consistent with 

21 the ongoing monitoring activities of the Department. Such 

22 reports are intended to advise the relevant Committees of 

23 the availability and utilization of services, and other rel24 evant information about program activities. 
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1 Subpart B—Capital Costs of Developing Projects 

2 SEC. 3691. FUNDING. 

3 Amounts available to the Secretary under section 

4 3412 for the purpose of carrying out subparts B and C 

5 of part 2 of subtitle E are, in addition to such purpose, 

6 available to the Secretary for the purpose of carrying out 

7 this subpart. 

8 Subtitle H—Public Health Service 

9 Initiative 

10 SEC. 3695. PUBLIC HEALTH SERVICE INITIATIVE. 

11 (a) IN GENERAL.—Subject to subsection (c), the Sec12 retary of Health and Human Services shall pay, from 

13 funds in the Treasury not otherwise appropriated, individ14 uals and entities that are eligible to receive assistance pur15 suant to the provisions referred to in paragraphs (1) 

16 through (13) of subsection (b), to the extent of the 

17 amounts specified under subsection (b). 

18 (b) AMOUNTS SPECIFIED.—The amounts specified in 

19 subsection (a) with respect to a fiscal year shall be— 

20 (1) with respect to the core functions of public 

21 health programs authorized under part 2 of subtitle 

22 D of title III, $123,000,000 for fiscal year 1995, 

23 $184,500,000 for fiscal year 1996, $266,500,000 for 

24 fiscal year 1997, $348,500,000 for fiscal year 1998, 

25 $410,000,000 for fiscal year 1999, $512,500,000 for 
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1 fiscal year 2000, and $2,000,000 for each of the fis2 cal years 2001 through 2004; 

3 (2) with respect to the national initiatives re4 garding health promotion and disease prevention 

5 under part 3 of subtitle D of title III, $102,500,000 

6 for each of the fiscal years 1996 through 1998, 

7 $123,000,000 for each of the fiscal years 1999 and 

8 2000, and $2,000,000 for each of the fiscal years 

9 2001 through 2004; 

10 (3) with respect to occupational injury and ill11 ness prevention under section 3903, $92,250,000 for 

12 each of the fiscal years 1995 through 2000, and 

13 $2,000,000 for each of the fiscal years 2001 through 

14 2004; 

15 (4) with respect to activities for the develop16 ment of plans and networks under subpart B of part 

17 2 of subtitle E of title III— 

18 (A) $43,050,000 for fiscal year 1995, 

19 $100,450,000 for fiscal year 1996, 

20 $157,850,000 for fiscal year 1997, 

21 $129,150,000 for fiscal year 1998, 

22 $100,450,000 for fiscal year 1999, $43,050,000 

23 for fiscal year 2000, and $2,000,000 for each 

24 of the fiscal years 2001 through 2004; and 
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1 (B) with respect to awards to federally 

2 qualified health centers (as defined in section 

3 1861(aa)(4) of the Social Security Act) and 

4 rural health clinics under such subpart, 

5 $79,950,000 for fiscal year 1995, $186,550,000 

6 for fiscal year 1996, $293,150,000 for fiscal 

7 year 1997, $239,850,000 for fiscal year 1998, 

8 $186,550,000 for fiscal year 1999, $79,950,000 

9 for fiscal year 2000, and $2,000,000 for each 

10 of the fiscal years 2001 through 2004; 

11 (5) with respect to capital costs under subpart 

12 C of part 2 of subtitle E of title III, $41,000,000 

13 for each of the fiscal years 1995 through 2000, and 

14 $2,000,000 for each of the fiscal years 2001 through 

15 2004; 

16 (6) with respect to enabling services under sub17 part D of part 2 of subtitle E of title III— 

18 (A) $17,200,000 for fiscal year 1996, 

19 $68,900,000 for each of the fiscal years 1997 

20 through 1999, $68,900,000 for fiscal year 

21 2000, and $2,000,000 for each of the fiscal 

22 years 2001 through 2004; and 

23 (B) with respect to awards to federally 

24 qualified health centers (as defined in section 

25 1861(aa)(4) of the Social Security Act) and 
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1 rural health clinics under such subpart, 

2 $40,000,000 for fiscal year 1996, $161,000,000 

3 for each of the fiscal years 1997 through 1999, 

4 $201,000,000 for fiscal year 2000, and 

5 $2,000,000 for each of the fiscal years 2001 

6 through 2004; 

7 (7) with respect to supplemental services under 

8 subpart D of part 1 of subtitle E of title III— 

9 (A) $24,600,000 for fiscal year 1996, 

10 $36,900,000 for each of the fiscal years 1997 

11 through 1999, $61,500,000 for fiscal year 

12 2000, and $2,000,000 for each of the fiscal 

13 years 2001 through 2004; and 

14 (B) with respect to awards to federally 

15 qualified health centers (as defined in section 

16 1861(aa)(4) of the Social Security Act) and 

17 rural health clinics under such subpart, 

18 $57,400,000 for fiscal year 1996, $86,100,000 

19 for each of the fiscal years 1997 through 1999, 

20 and $143,500,000 for fiscal year 2000 and 

21 $2,000,000 for each of the fiscal years 2001 

22 through 2004; 

23 (8) with respect to the National Health Service 

24 Corps program referred to under section 3471, 

25 $123,000,000 for each of the fiscal years 1996 and 
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1 1997, and $201,000,000 for each of the fiscal years 

2 1998 through 2000, and $2,000,000 for each of the 

3 fiscal years 2001 through 2004; 

4 (9) with respect to school-related health service 

5 programs under subpart A of part 5 of subtitle G 

6 of title III, $82,000,000 for fiscal year 1995, 

7 $164,000,000 for fiscal year 1996, $266,500,000 for 

8 fiscal year 1997, and $369,000,000 for fiscal year 

9 1998, $471,500,000 for fiscal year 1999, 

10 $574,000,000 for fiscal year 2000, and $2,000,000 

11 for each of the fiscal years 2001 through 2004; 

12 (10) with respect to the development and oper13 ation of comprehensive managed mental health and 

14 substance abuse programs under section 3534, 

15 $82,000,000 for each of the fiscal years 1995 

16 through 2000, and $2,000,000 for each of the fiscal 

17 years 2001 through 2004; 

18 (11) with respect to programs of the Secretary 

19 of Health and Human Services under section 3081, 

20 $82,000,000 for each of the fiscal years 1995 and 

21 1996, $123,000,000 for each of the fiscal years 

22 1997 through 2000 and $2,000,000 for each of the 

23 fiscal years 2001 through 2004; 

24 (12) with respect to programs of the Secretary 

25 of Labor under section 3082, $164,000,000 for each 
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1 of the fiscal years 1995 through 2000 and 

2 $2,000,000 for each of the fiscal years 2001 through 

3 2004; and 

4 (13) with respect to programs of the Indian 

5 Health Service under subtitle D of title VIII, 

6 $164,000,000 for each of the fiscal years 1995 

7 through 2000 and $2,000,000 for each of the fiscal 

8 years 2001 through 2004. 

9 (c) AUTHORITY TO TRANSFER FUNDS.—The Com10 mittee on Appropriations of the House of Representatives 

11 and the Committee on Appropriations of the Senate, act12 ing through appropriations Acts, may transfer the 

13 amounts specified under subsection (b) in each fiscal year 

14 among the programs referred to in such subsection. 

15 (d) REPORT.—The Secretary shall review the effec16 tiveness of the programs included in the Public Health Ini17 tiative. Not later than October 1, 1998, the Secretary shall 

18 prepare and submit to Congress a report concerning such 

19 review. Such report shall include recommendations con20 cerning whether Congress should increase the program 

21 funding levels described in subsection (b) in fiscal years 

22 2001 through 2004 to a level equal to that of prior fiscal 

23 years. 
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1 Subtitle I—Additional Provisions 

2 Regarding Public Health 

3 SEC. 3901. CURRICULUM DEVELOPMENT AND IMPLEMEN4 TATION REGARDING DOMESTIC VIOLENCE 

5 AND WOMEN’S HEALTH. 

6 (a) IN GENERAL.—The Secretary shall make grants 

7 to eligible entities for the purpose of implementing and 

8 developing for trainees a curriculum that includes training 

9 in identification, treatment and referral of victims of do10 mestic violence and women’s health needs. 

11 (b) ELIGIBLE ENTITIES.—For purposes of sub12 section (a), eligible entities are any school of medicine, 

13 school of osteopathic medicine, school of public health, 

14 graduate program in mental health practice, school of 

15 nursing as defined in section 853 of the Public Health 

16 Service Act, a program to train physician assistants, a 

17 program for training allied health professionals, and a 

18 program for training of family medicine physicians, gen19 eral internists, general pediatricians, geriatricians, and ob20 stetrician/gynecologists. 

21 (c) CURRICULUM.—A curriculum developed under 

22 this section shall include— 

23 (1) identification of victims of domestic violence 

24 and maintaining complete medical records that in25 clude documentation of the examination, treatment 
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1 provided, and referral made and recording the loca2 tion and nature of the victim’s injuries; 

3 (2) examining and treating such victims within 

4 the scope of the health professional’s discipline, 

5 training, and practice, including at a minimum pro6 viding medical advice regarding the dynamics and 

7 nature of domestic violence; 

8 (3) referring the victims to public and nonprofit 

9 entities that provide support services for such vic10 tims; 

11 (4) training in the identification and diagnosis 

12 of diseases afflicting women and other medical dis13 orders as they affect women; 

14 (5) training in the treatment of such diseases 

15 and disorders with emphasis on the unique needs of 

16 women; and 

17 (6) research into the causes of such diseases 

18 and disorders, including determination of appro19 priate means of prevention. 

20 (d) ALLOCATION OF APPROPRIATIONS.—Of the 

21 amounts made available under section 3301(b) for a fiscal 

22 year, the Secretary shall reserve not to exceed 

23 $20,000,000 for a fiscal year for carrying out this section. 
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1 SEC. 3902. COMMUNITY SCHOLARSHIP PROGRAMS. 

2 Section 338L of the Public Health Service Act (42 

3 U.S.C. 254t) is amended— 

4 (1) in the section heading, by striking ‘‘DEM5 ONSTRATION’’; 

6 (2) in subsection (a)— 

7 (A) by striking ‘‘for the purpose of car8 rying out demonstration programs’’; and 

9 (B) by striking ‘‘health manpower shortage 

10 areas’’ and inserting ‘‘Federally-designated 

11 health professional shortage areas’’; 

12 (3) in subsection (c)— 

13 (A) by striking ‘‘health manpower shortage 

14 areas’’ and inserting ‘‘Federally-designated 

15 health professional shortage areas’’ in the mat16 ter preceding paragraph (1); and 

17 (B) by striking ‘‘in the health manpower 

18 shortage areas in which the community organi19 zations are located,’’ and inserting ‘‘in a Feder20 ally-designated health professional shortage 

21 area that is served by the community organiza22 tion awarding the scholarship,’’ in paragraph 

23 (2); 

24 (4) in subsection (e)(1)— 
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1 (A) by striking ‘‘health manpower shortage 

2 area’’ and inserting ‘‘a Federally-designated 

3 health professional shortage area’’; and 

4 (B) by striking ‘‘in which the community’’ 

5 and all that follows through ‘‘located’’; 

6 (5) in subsection (k)(2), by striking ‘‘internal 

7 medicine’’ and all that follows through the end 

8 thereof and inserting ‘‘general internal medicine, 

9 general pediatrics, obstetrics and gynecology, den10 tistry, or mental health, that are provided by physi11 cians or other health professionals.’’; and 

12 (6) in subsection (l)(1), by striking 

13 ‘‘$5,000,000’’ and all that follows through ‘‘1993’’ 

14 and inserting ‘‘$1,000,000 for fiscal year 1994, and 

15 such sums as may be necessary for each fiscal year 

16 thereafter’’. 

17 Subtitle J—Occupational Safety 

18 and Health 

19 SEC. 3903. OCCUPATIONAL INJURY AND ILLNESS PREVEN20 TION. 

21 (a) IN GENERAL.—The Secretary of Health and 

22 Human Services and the Secretary of Labor shall work 

23 together to develop and implement a comprehensive pro24 gram to expand and coordinate initiatives to prevent occu25 pational injuries and illnesses. 
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1 (b) SECRETARY OF LABOR.—The Secretary of Labor 

2 after consultation with the Secretary of Health and 

3 Human Services shall directly or by grants or contracts— 

4 (1) provide for training and education programs 

5 for employees and employers in the recognition and 

6 control of workplace hazards and methods and meas7 ures to prevent occupational injuries and illnesses; 

8 (2) develop model educational materials for 

9 training and educating employees and employers on 

10 the recognition and control of workplace hazards, in11 cluding a core curriculum for general safety and 

12 health training and materials related to specific safe13 ty and health hazards; and 

14 (3) provide programs and services for technical 

15 assistance to employers and employees on the rec16 ognition and control of workplace safety and health 

17 hazards including programs for onsite consultation. 

18 Technical assistance and consultative services under para19 graph (3) shall be provided in a manner that is separate 

20 from the enforcement programs conducted by the Sec21 retary of Labor. 

22 (c) SECRETARY OF HEALTH AND HUMAN SERV23 ICES.—The Secretary of Health and Human Services after 

24 consultation with the Secretary of Labor shall directly or 

25 by grants or contracts— 
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1 (1) provide education programs for training oc2 cupational safety and health professionals including 

3 professionals in the fields of occupational medicine, 

4 occupational health nursing, industrial hygiene, safe5 ty engineering, toxicology and epidemiology; 

6 (2) provide education programs for other health 

7 professionals and health care providers and the pub8 lic to improve the recognition, treatment and preven9 tion of occupationally related injuries and illnesses; 

10 (3) conduct surveillance programs to identify 

11 patterns and to determine the prevalence of occupa12 tional illnesses, injuries and deaths related to expo13 sure to particular safety and health hazards; 

14 (4) conduct investigations and evaluations to 

15 determine if workplace exposures to toxic chemicals, 

16 harmful physical agents or potentially hazardous 

17 conditions pose a risk to exposed employees; and 

18 (5) conduct research, demonstrations and ex19 periments relating to occupational safety and health 

20 to identify the causes of and major factors contrib21 uting to occupational illnesses and injuries. 

22 (d) NATIONAL ADVISORY BOARD.— 

23 (1) ESTABLISHMENT.—There is established a 

24 National Advisory Board for Occupational Injury 

25 and Illness Prevention to provide oversight, advice 
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1 and direction on the occupational injury and illness 

2 prevention programs and initiatives conducted by the 

3 Secretary of Labor and Secretary of Health and 

4 Human Services. 

5 (2) COMPOSITION.—The Board shall be com6 posed of 10 members appointed by the Secretary of 

7 Labor, 5 of whom are to be designated by the Sec8 retary of Health and Human Services. Such mem9 bers shall be composed of representatives of employ10 ers, employees, and occupational safety and health 

11 professionals. 

12 (e) DIRECTOR OF NIOSH.—The responsibilities of 

13 the Secretary of Health and Human Services established 

14 under this section shall be carried out by the Director of 

15 the National Institute for Occupational Safety and Health. 

16 (f) AUTHORIZATION OF APPROPRIATIONS.—For the 

17 purposes of carrying out this section there are authorized 

18 to be appropriated $92,250,000 for each of the fiscal years 

19 1995 through 2000, and $2,000,000 for each of the fiscal 

20 years 2001 through 2004. 

21 Subtitle K—Full Funding for WIC 

22 SEC. 3905. FULL FUNDING FOR WIC. 

23 Section 17 of the Child Nutrition Act of 1966 (42 

24 U.S.C. 1786) is amended— 

25 (1) in the second sentence of subsection (a)— 
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1 (A) by striking ‘‘authorized’’ and inserting 

2 ‘‘established’’; and 

3 (B) by striking ‘‘, up to the authorization 

4 levels set forth in subsection (g) of this sec5 tion,’’ and inserting ‘‘, up to the levels made 

6 available under this section,’’; 

7 (2) in subsection (c)— 

8 (A) in the first sentence of paragraph (1), 

9 by striking ‘‘may’’ and inserting ‘‘shall’’; 

10 (B) in paragraph (2), by striking ‘‘appro11 priated’’ and inserting ‘‘made available’’; 

12 (3) in subsection (g)— 

13 (A) by striking paragraph (1) and insert14 ing the following new paragraph: 

15 ‘‘(1)(A) There are authorized to be — 

16 ‘‘(i) appropriated to carry out this section such 

17 amounts as are necessary for each of fiscal years 

18 1995 through 2000; and 

19 ‘‘(ii) made available such amounts as are nec20 essary for the Secretary of the Treasury to fulfill the 

21 requirements of subparagraph (B). 

22 ‘‘(B)(i) Out of any money in the Treasury not other23 wise appropriated, the Secretary of the Treasury shall pro24 vide to the Secretary of Agriculture, on January 1 of each 

25 fiscal year, to carry out this subsection— 
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1 ‘‘(I) $444,000,000 for fiscal year 1996; 

2 ‘‘(II) $696,000,000 for fiscal year 1997; 

3 ‘‘(III) $775,000,000 for fiscal year 1998; 

4 ‘‘(IV) $924,000,000 for fiscal year 1999; and 

5 ‘‘(V) $1,077,000,000 for fiscal year 2000. 

6 ‘‘(ii) The Secretary of Agriculture shall be entitled 

7 to receive the funds and shall accept the funds. 

8 ‘‘(C) In lieu of obligating the funds made available 

9 under subparagraph (B) to carry out this subsection, if 

10 the amount appropriated (in addition to the amount ap11 propriated under subparagraph (B)(i)) to carry out this 

12 subsection for— 

13 ‘‘(i) fiscal year 1996 is less than 

14 $3,470,000,000, the amount referred to in subpara15 graph (B)(i)(I) shall be obligated by the Secretary, 

16 during the period beginning December 31, 1995, 

17 and ending June 30, 1996, to increase the special 

18 assistance factor prescribed under section 11(a) of 

19 the National School Lunch Act (42 U.S.C. 

20 1759a(a)) for free lunches served under the school 

21 lunch program (as established under section 4 of 

22 such Act (42 U.S.C. 1753)); 

23 ‘‘(ii) fiscal year 1997 is less than 

24 $3,470,000,000, the amount referred to in subpara25 graph (B)(i)(II) shall be obligated by the Secretary, 
715 

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1 during the period beginning December 31, 1996, 

2 and ending June 30, 1997, 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 ‘‘(iii) fiscal year 1998 is less than 

8 $3,470,000,000, the amount referred to in subpara9 graph (B)(i)(III) shall be obligated by the Secretary, 

10 during the period beginning December 31, 1997, 

11 and ending June 30, 1998, 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); 

16 ‘‘(iv) fiscal year 1999 is less than 

17 $3,470,000,000, the amount referred to in subpara18 graph (B)(i)(IV) shall be obligated by the Secretary, 

19 during the period beginning December 31, 1998, 

20 and ending June 30, 1999, 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); and 
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1 ‘‘(v) fiscal year 2000 is less than 

2 $3,470,000,000, the amount referred to in subpara3 graph (B)(i)(V) shall be obligated by the Secretary, 

4 during the period beginning December 31, 1999, 

5 and ending June 30, 2000, to increase the special 

6 assistance factor prescribed under section 11(a) of 

7 such Act for free lunches served under the school 

8 lunch program (as established under section 4 of 

9 such Act). 

10 ‘‘(D) Any increase in the special assistance factor 

11 prescribed under section 11(a) of such Act as a result of 

12 subparagraph (C) shall not affect any annual adjustment 

13 in the factor under section 11(a)(3) of such Act. 

14 ‘‘(E) Notwithstanding any other provision of law, no 

15 additional amounts shall be made available under this 

16 paragraph for any fiscal year after fiscal year 2000.’’; 

17 (B) in the first sentence of paragraph (4), 

18 by striking ‘‘appropriated’’ and inserting ‘‘made 

19 available’’; and 

20 (C) in paragraph (5), by striking ‘‘appro21 priated’’ and inserting ‘‘made available’’; 

22 (4) in subsection (h)— 

23 (A) in paragraph (1)— 
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1 (i) in subparagraph (A), by striking 

2 ‘‘appropriated’’ both places it appears and 

3 inserting ‘‘made available’’; and 

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

5 ‘‘appropriated’’ both places it appears and 

6 inserting ‘‘made available’’; and 

7 (B) in the first sentence of paragraph 

8 (2)(A), by striking ‘‘1990, 1991, 1992, 1993 

9 and 1994’’ and inserting ‘‘1990 through 2000’’; 

10 and 

11 (5) in subsection (l), by striking ‘‘funds appro12 priated’’ and inserting ‘‘funds made available’’. 

13 Subtitle L—Border Health 

14 Improvement 

15 SEC. 3908. BORDER HEALTH COMMISSION. 

16 (a) ESTABLISHMENT.—The President is authorized 

17 and encouraged to conclude an agreement with Mexico to 

18 establish a binational commission to be known as the 

19 United States-Mexico Border Health Commission. 

20 (b) DUTIES.—It should be the duty of the Commis21 sion— 

22 (1) to conduct a comprehensive needs assess23 ment in the United States-Mexico Border Area for 

24 the purposes of identifying, evaluating, preventing, 

25 and resolving health problems and potential health 
718 

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1 problems that affect the general population of the 

2 area; 

3 (2) to develop and implement a comprehensive 

4 plan for carrying out the actions recommended by 

5 the needs assessment through— 

6 (A) assisting in the coordination of public 

7 and private efforts to prevent potential health 

8 problems and resolve existing health problems, 

9 (B) assisting in the coordination of public 

10 and private efforts to educate the population, in 

11 a culturally competent manner, concerning such 

12 potential and existing health problems; and 

13 (C) developing and implementing culturally 

14 competent programs to prevent and resolve 

15 such health problems and to educate the popu16 lation, in a culturally competent manner, con17 cerning such health problems where a new pro18 gram is necessary to meet a need that is not 

19 being met through other public or private ef20 forts; and 

21 (3) to formulate recommendations to the Gov22 ernments of the United States and Mexico con23 cerning a fair and reasonable method by which the 

24 government of one country could reimburse a public 

25 or private person in the other country for the cost 
719 

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1 of a health care service that such person furnishes 

2 to a citizen or resident alien of the first country who 

3 is unable, through insurance or otherwise, to pay for 

4 the service. 

5 (c) OTHER AUTHORIZED FUNCTIONS.—In addition 

6 to the duties described in subsection (b), the Commission 

7 should be authorized to perform the following functions 

8 as the Commission determines to be appropriate— 

9 (1) to conduct or support investigations, re10 search, or studies designed to identify, study, and 

11 monitor, on an on-going basis, health problems that 

12 affect the general population in the United States13 Mexico Border Area; 

14 (2) to conduct or support a binational, public15 private effort to establish a comprehensive and co16 ordinated system, which uses advanced technologies 

17 to the maximum extent possible, for gathering 

18 health-related data and monitoring health problems 

19 in the United States-Mexico Border Area; and 

20 (3) to provide financial, technical, or adminis21 trative assistance to public or private persons who 

22 act to prevent or resolve such problems or who edu23 cate the population concerning such health problems. 

24 (d) MEMBERSHIP.— 
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1 (1) NUMBER AND APPOINTMENT OF UNITED

2 STATES SECTION.—The United States section of the 

3 Commission should be composed of 13 members. 

4 The section should consist of the following members: 

5 (A) The Secretary of Health and Human 

6 Services or the Secretary’s delegate. 

7 (B) The commissioners of health or chief 

8 health officer from the States of Texas, New 

9 Mexico, Arizona, and California or such com10 missioners’ delegates. 

11 (C) Two individuals residing in United 

12 States-Mexico Border Area in each of the 

13 States of Texas, New Mexico, Arizona, and 

14 California who are nominated by the chief exec15 utive officer of the respective States and ap16 pointed by the President from among individ17 uals— 

18 (i) who have a demonstrated interest 

19 or expertise in health issues of the United 

20 States-Mexico Border Area; and 

21 (ii) whose name appears on a list of 

22 6 nominees submitted to the President by 

23 the chief executive officer of the State 

24 where the nominees resides. 
721 

•S 2357 

1 (2) COMMISSIONER.—The Commissioner of the 

2 United States section of the Commission should be 

3 the Secretary of Health and Human Services or 

4 such individual’s delegate to the Commission. The 

5 Commissioner should be the leader of the section. 

6 (3) COMPENSATION.—Members of the United 

7 States section of the Commission who are not em8 ployees of the United States— 

9 (A) shall each receive compensation at a 

10 rate of not to exceed the daily equivalent of the 

11 annual rate of basic pay payable for positions 

12 at GS–15 of the General Schedule under sec13 tion 5332 of title 5, United States Code, for 

14 each day such member is engaged in the actual 

15 performance of the duties of the Commission; 

16 and 

17 (B) shall be allowed travel expenses, in18 cluding per diem in lieu of subsistence at rates 

19 authorized for employees of agencies under sub20 chapter I of chapter 57 of title 5, United States 

21 Code, while away from their homes or regular 

22 places of business in the performance of serv23 ices of the Commission. 

24 (e) REGIONAL OFFICES.—The Commission should 

25 designate or establish one border health office in each of 
722 

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1 the States of Texas, New Mexico, Arizona, and California. 

2 Such office should be located within the United States3 Mexico Border Area, and should be coordinated with— 

4 (1) State border health offices; and 

5 (2) local nonprofit organizations designated by 

6 the State’s governor and directly involved in border 

7 health issues. 

8 If feasible to avoid duplicative efforts, the Commission of9 fices should be located in existing State or local nonprofit 

10 offices. The Commission should provide adequate com11 pensation for cooperative efforts and resources. 

12 (f) REPORTS.—Not later than February 1 of each 

13 year that occurs more than 1 year after the date of the 

14 establishment of the Commission, the Commission should 

15 submit an annual report to both the United States Gov16 ernment and the Government of Mexico regarding all ac17 tivities of the Commission during the preceding calendar 

18 year. 

19 (g) DEFINITIONS.—As used in this section: 

20 (1) COMMISSION.—The term ‘‘Commission’’ 

21 means the United States-Mexico Border Health 

22 Commission. 

23 (2) HEALTH PROBLEM.—The term ‘‘health 

24 problem’’ means a disease or medical ailment or an 

25 environmental condition that poses the risk of dis-
723 

•S 2357 

1 ease or medical ailment. Such term includes dis2 eases, ailments, or risks of disease or ailment caused 

3 by or related to environmental factors, control of 

4 animals and rabies, control of insect and rodent vec5 tors, disposal of solid and hazardous waste, and con6 trol and monitoring of air quality. 

7 (3) RESIDENT ALIEN.—The term ‘‘resident 

8 alien’’, when used in reference to a country, means 

9 an alien lawfully admitted for permanent residence 

10 to the United States or otherwise permanently resid11 ing in the United States under color of law (includ12 ing residence as an asylee, refugee, or parolee). 

13 (4) SECRETARY.—The term ‘‘Secretary’’ means 

14 the Secretary of Health and Human Services. 

15 (5) UNITED STATES-MEXICO BORDER AREA.— 

16 The term ‘‘United States-Mexico Border Area’’ 

17 means the area located in the United States and 

18 Mexico within 100 kilometers of the border between 

19 the United States and Mexico. 

20 TITLE IV—MEDICARE AND 

21 MEDICAID 

22 SEC. 4000. REFERENCES IN TITLE. 

23 (a) AMENDMENTS TO SOCIAL SECURITY ACT.—Ex24 cept as otherwise specifically provided, whenever in this 

25 title an amendment is expressed in terms of an amend-
724 

•S 2357 

1 ment to or repeal of a section or other provision, the ref2 erence shall be considered to be made to that section or 

3 other provision of the Social Security Act. 

4 (b) REFERENCES TO OBRA.—In this title, the terms 

5 ‘‘OBRA–1986’’, ‘‘OBRA–1987’’, ‘‘OBRA–1989’’, 

6 ‘‘OBRA–1990’’, and ‘‘OBRA–1993’’ refer to the Omnibus 

7 Budget Reconciliation Act of 1986 (Public Law 99–509), 

8 the Omnibus Budget Reconciliation Act of 1987 (Public 

9 Law 100–203), the Omnibus Budget Reconciliation Act 

10 of 1989 (Public Law 101–239), the Omnibus Budget Rec11 onciliation Act of 1990 (Public Law 101–508), and the 

12 Omnibus Budget Reconciliation Act of 1993 (Public Law 

13 103–66), respectively. 

14 Subtitle A—Medicare 

15 PART 1—INTEGRATION OF MEDICARE 

16 BENEFICIARIES 

17 SEC. 4001. INDIVIDUAL ELECTION TO REMAIN IN CERTAIN 

18 HEALTH PLANS. 

19 (a) IN GENERAL.—Section 1876 (42 U.S.C. 

20 1395mm) is amended by adding at the end the following 

21 new subsection: 

22 ‘‘(k)(1) Notwithstanding any other provision of this 

23 section, each eligible organization with a risk-sharing con24 tract (or which is eligible to enter into such a contract, 

25 as determined by the Secretary) that is the sponsor of a 
725 

•S 2357 

1 standard health plan under subtitle B of title I of the 

2 Health Security Act shall provide each individual who 

3 meets the requirements of paragraph (2) with the oppor4 tunity to elect (by submitting an application at such time 

5 and in such manner as specified by the Secretary) to con6 tinue enrollment in such plan (for the same benefits as 

7 other individuals enrolled in the plan) and to have pay8 ments made by the Secretary to the plan on the individ9 ual’s behalf in accordance with paragraph (3). The pre10 mium imposed with respect to such an individual by the 

11 plan shall be in an amount (determined in accordance with 

12 rules of the Secretary and notwithstanding other provi13 sions of such Act) which reflects the difference between 

14 the premium otherwise established (adjusted by a factor 

15 to reflect the actuarial difference between medicare bene16 ficiaries and other plan enrollees) and the amount payable 

17 under paragraph (3). 

18 ‘‘(2) An individual meets the requirements of this 

19 paragraph if the individual is— 

20 ‘‘(A) enrolled in the health plan of an eligible 

21 organization in a month in which the individual is 

22 either not entitled to benefits under part A, or is an 

23 employee (as defined in the Health Security Act) or 

24 the spouse or dependent of an employee, 
726 

•S 2357 

1 ‘‘(B) entitled to benefits under part A and en2 rolled under part B in the succeeding month, 

3 ‘‘(C) a community-rated individual under the 

4 Health Security Act in that succeeding month, and 

5 ‘‘(D) not an experience-rated employee (as de6 fined in the Health Security Act) or the spouse or 

7 dependent of an experience-rated employee in that 

8 succeeding month. 

9 ‘‘(3) The Secretary shall make a payment to an eligi10 ble organization on behalf of each individual enrolled with 

11 the organization for whom an election is in effect under 

12 this subsection in an amount determined by the rate speci13 fied by subsection (a)(1)(C) (notwithstanding the second 

14 sentence of paragraph (1)). Such payment shall be made 

15 from the Federal Hospital Insurance Trust Fund and the 

16 Federal Supplementary Medical Insurance Trust Fund as 

17 provided under subsection (a)(5) (other than as provided 

18 under subparagraph (B) of that paragraph). 

19 ‘‘(4) The period for which payment may be made 

20 under paragraph (3)— 

21 ‘‘(A) begins with the first month for which the 

22 individual meets the requirements of paragraph (2) 

23 (or a later month, in the case of a late application, 

24 as may be specified by the Secretary); and 

25 ‘‘(B) ends with the earliest of— 
727 

•S 2357 

1 ‘‘(i) the month following the month— 

2 ‘‘(I) in which the individual notifies 

3 the Secretary that the individual no longer 

4 wishes to be enrolled in the health plan of 

5 the eligible organization and to have pay6 ment made on the individual’s behalf under 

7 this subsection; and 

8 ‘‘(II) which is a month specified by 

9 the Secretary as a uniform open enroll10 ment period under subsection (c)(3)(A)(i), 

11 or 

12 ‘‘(ii) the month in which the individual 

13 ceases to meet the requirements of paragraph 

14 (2). 

15 ‘‘(5) Notwithstanding any other provision of this title, 

16 payments to an eligible organization under this subsection 

17 on behalf of an individual shall be the sole payments made 

18 with respect to items and services furnished to the indi19 vidual during the period for which the individual’s election 

20 under this subsection is in effect.’’. 

21 (b) CONFORMING AMENDMENT.—Section 1838(b) 

22 (42 U.S.C. 1395q(b)) is amended by inserting after ‘‘sec23 tion 1843(e)’’ the following: ‘‘, 1876(c)(3)(B) or 

24 1876(k)(4)(B)’’. 
728 

•S 2357 

1 SEC. 4002. ENROLLMENT AND TERMINATION OF ENROLL2 MENT. 

3 (a) UNIFORM OPEN ENROLLMENT PERIODS.— 

4 (1) FOR CAPITATED PLANS.—The first sentence 

5 of section 1876(c)(3)(A)(i) (42 U.S.C. 

6 1395mm(c)(3)(A)(i)) is amended by inserting 

7 ‘‘(which may be specified by the Secretary)’’ after 

8 ‘‘open enrollment period’’. 

9 (2) FOR MEDIGAP PLANS.—Section 1882(s) (42 

10 U.S.C. 1395ss(s)) is amended— 

11 (A) in paragraph (3), by striking ‘‘para12 graphs (1) and (2)’’ and inserting ‘‘paragraph 

13 (1), (2), or (3)’’, 

14 (B) by redesignating paragraph (3) as 

15 paragraph (4), and 

16 (C) by inserting after paragraph (2) the 

17 following new paragraph: 

18 ‘‘(3) Each issuer of a medicare supplemental policy 

19 shall have an open enrollment period (which shall be the 

20 period specified by the Secretary under section 

21 1876(c)(3)(A)(i)), of at least 30 days duration every year, 

22 during which the issuer may not deny or condition the 

23 issuance or effectiveness of a medicare supplemental pol24 icy, or discriminate in the pricing of the policy, because 

25 of age, health status, claims experience, receipt of health 

26 care, or medical condition. The policy may not provide any 
729 

•S 2357 

1 time period applicable to pre-existing conditions, waiting 

2 periods, elimination periods, and probationary periods (ex3 cept as provided by paragraph (2)(B)). The Secretary may 

4 require enrollment through a third party designated under 

5 section 1876(c)(3)(B).’’. 

6 (b) ENROLLMENTS FOR NEW MEDICARE BENE7 FICIARIES AND THOSE WHO MOVE.—Section 

8 1876(c)(3)(A) (42 U.S.C. 1395mm(c)(3)(A)) is amend9 ed— 

10 (1) in clause (i), by striking ‘‘clause (ii)’’ and 

11 inserting ‘‘clauses (ii) through (iv)’’, and 

12 (2) by adding at the end the following: 

13 ‘‘(iii) Each eligible organization shall have an open 

14 enrollment period for each individual eligible to enroll 

15 under subsection (d) during any enrollment period speci16 fied by section 1837 that applies to that individual. Enroll17 ment under this clause shall be effective as specified by 

18 section 1838. 

19 ‘‘(iv) Each eligible organization shall have an open 

20 enrollment period for each individual eligible to enroll 

21 under subsection (d) who has previously resided outside 

22 the geographic area which the organization serves. The en23 rollment period shall begin with the beginning of the 

24 month that precedes the month in which the individual 

25 becomes a resident of that geographic area and shall end 
730 

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1 at the end of the following month. Enrollment under this 

2 clause shall be effective as of the first of the month fol3 lowing the month in which the individual enrolls.’’. 

4 (c) ENROLLMENT THROUGH THIRD PARTY; UNI5 FORM TERMINATION OF ENROLLMENT.—The first sen6 tence of section 1876(c)(3)(B) (42 U.S.C. 

7 1395mm(c)(3)(B)) is amended— 

8 (1) by inserting ‘‘(including enrollment through 

9 a third party)’’ after ‘‘regulations’’, and 

10 (2) by striking everything after ‘‘with the eligi11 ble organization’’ and inserting ‘‘during an annual 

12 period as prescribed by the Secretary, and as speci13 fied by the Secretary in the case of financial insol14 vency of the organization, if the individual moves 

15 from the geographic area served by the organization, 

16 or in other special circumstances that the Secretary 

17 may prescribe.’’. 

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

19 the previous subsections apply to enrollments and termi20 nations of enrollments occurring after 1995 (but only after 

21 the Secretary of Health and Human Services has pre22 scribed the relevant annual period), except that the 

23 amendments made by subsection (a)(2) apply to enroll24 ments for a medicare supplemental policy made after 

25 1995. 
731 

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1 PART 2—PROVISIONS RELATING TO PART A 

2 SEC. 4101. INPATIENT HOSPITAL SERVICES UPDATE FOR 

3 PPS HOSPITALS. 

4 Section 1886(b)(3)(B)(i) (42 U.S.C. 

5 1395ww(b)(3)(B)(i)) is amended— 

6 (1) by amending subclause (XII) to read as fol7 lows: 

8 ‘‘(XII) for fiscal years 1997 through 2000, the 

9 market basket percentage minus 2.0 percentage 

10 points for hospitals in all areas, and’’; and 

11 (2) in subclause (XIII), by striking ‘‘1998’’ and 

12 inserting ‘‘2001’’. 

13 SEC. 4102. REDUCTION IN PAYMENTS FOR CAPITAL-RE14 LATED COSTS FOR INPATIENT HOSPITAL 

15 SERVICES. 

16 (a) PPS HOSPITALS.— 

17 (1) REDUCTION IN BASE PAYMENT RATES FOR

18 PPS HOSPITALS.—Section 1886(g)(1)(A) (42 U.S.C. 

19 1395ww(g)(1)(A)) is amended by adding at the end 

20 the following new sentence: ‘‘In addition to the re21 duction described in the preceding sentence, for dis22 charges occurring after September 30, 1995, the 

23 Secretary shall reduce by 7.31 percent the 

24 unadjusted standard Federal capital payment rate 

25 (as described in 42 CFR 412.308(c), as in effect on 

26 the date of the enactment of the Health Security 
732 

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1 Act) and shall reduce by 10.41 percent the 

2 unadjusted hospital-specific rate (as described in 42 

3 CFR 412.328(e)(1), as in effect on the date of the 

4 enactment of the Health Security Act).’’. 

5 (2) REDUCTION IN UPDATE.—Section 

6 1886(g)(1) (42 U.S.C. 1395ww(g)(1)) is amended— 

7 (A) in subparagraph (B)(i)— 

8 (i) by striking ‘‘and (II)’’ and insert9 ing ‘‘(II)’’, and 

10 (ii) by striking the semicolon at the 

11 end and inserting the following: ‘‘, and 

12 (III) an annual update factor established 

13 for the prospective payment rates applica14 ble to discharges in a fiscal year which 

15 (subject to reduction under subparagraph 

16 (C)) will be based upon such factor as the 

17 Secretary determines appropriate to take 

18 into account amounts necessary for the ef19 ficient and effective delivery of medically 

20 appropriate and necessary care of high 

21 quality;’’; 

22 (B) by redesignating subparagraph (C) as 

23 subparagraph (D); and 

24 (C) by inserting after subparagraph (B) 

25 the following new subparagraph: 
733 

•S 2357 

1 ‘‘(C)(i) With respect to payments attributable 

2 to portions of cost reporting periods or discharges 

3 occurring during each of the fiscal years 1996 

4 through 2003, the Secretary shall include a reduc5 tion in the annual update factor established under 

6 subparagraph (B)(i)(III) for discharges in the year 

7 equal to the applicable update reduction described in 

8 clause (ii) to adjust for excessive increases in capital 

9 costs per discharge for fiscal years prior to fiscal 

10 year 1992 (but in no event may such reduction re11 sult in an annual update factor less than zero). 

12 ‘‘(ii) In clause (i), the term ‘applicable update 

13 reduction’ means, with respect to the update factor 

14 for a fiscal year— 

15 ‘‘(I) 4.9 percentage points; or 

16 ‘‘(II) if the annual update factor for the 

17 previous fiscal year was less than the applicable 

18 update reduction for the previous year, the sum 

19 of 4.9 percentage points and the difference be20 tween the annual update factor for the previous 

21 year and the applicable update reduction for the 

22 previous year.’’. 

23 (b) PPS-EXEMPT HOSPITALS.—Section 1861(v)(1) 

24 (42 U.S.C. 1395x(v)(1)) is further amended by adding at 

25 the end the following new subparagraph: 
734 

•S 2357 

1 ‘‘(T) Such regulations shall provide that, in deter2 mining the amount of the payments that may be made 

3 under this title with respect to the capital-related costs 

4 of inpatient hospital services furnished by a hospital that 

5 is not a subsection (d) hospital (as defined in section 

6 1886(d)(1)(B)) or a subsection (d) Puerto Rico hospital 

7 (as defined in section 1886(d)(9)(A)), the Secretary shall 

8 reduce the amounts of such payments otherwise estab9 lished under this title by 15 percent for payments attrib10 utable to portions of cost reporting periods occurring dur11 ing each of the fiscal years 1996 through 2003.’’. 

12 SEC. 4103. REDUCTIONS IN DISPROPORTIONATE SHARE 

13 PAYMENTS. 

14 (a) IN GENERAL.—Section 1886(d)(5)(F) (42 U.S.C. 

15 1395ww(d)(5)(F)) is amended— 

16 (1) in clause (ii), by striking ‘‘The amount’’ 

17 and inserting ‘‘Subject to clause (ix), the amount’’; 

18 (2) in clause (vi), by striking ‘‘In’’ and insert19 ing ‘‘Subject to clause (x), in’’; and 

20 (3) by adding at the end the following new 

21 clauses: 

22 ‘‘(ix) Notwithstanding any other provision of this 

23 subparagraph, the Secretary shall reduce the amount of 

24 any additional payment made to a hospital under this sub25 paragraph by an amount equal to the sum of— 
735 

•S 2357 

1 ‘‘(I) for discharges occurring on or after the 

2 date on which the State in which such hospital is lo3 cated becomes a participating State (as such term is 

4 defined in title I of the Health Security Act), 33 

5 percent of such additional payment.’’. 

6 SEC. 4104. EXTENSION OF FREEZE ON UPDATES TO ROU7 TINE SERVICE COST LIMITS FOR SKILLED 

8 NURSING FACILITIES. 

9 (a) PAYMENTS BASED ON COST LIMITS.—Section 

10 1888(a) (42 U.S.C. 1395yy(a)) is amended by striking 

11 ‘‘112 percent’’ each place it appears and inserting ‘‘100 

12 percent (adjusted by such amount as the Secretary deter13 mines to be necessary to preserve the savings resulting 

14 from the enactment of section 13503(a)(1) of the Omni15 bus Budget Reconciliation Act of 1993)’’. 

16 (b) ADJUSTMENTS TO LIMITS.—Section 1888(c) (42 

17 U.S.C. 1395yy(c)) is amended by inserting the following 

18 sentence at the end: ‘‘The effect of the amendment made 

19 by section 4104(a) of the Health Security Act shall not 

20 be considered by the Secretary in making adjustments 

21 pursuant to this subsection.’’ 

22 (c) PAYMENTS DETERMINED ON PROSPECTIVE

23 BASIS.—Section 1888(d)(2)(B) (42 U.S.C. 

24 1395yy(d)(2)(B)) is amended by striking ‘‘105 percent’’ 

25 and inserting ‘‘100 percent (adjusted by such amount as 
736 

•S 2357 

1 the Secretary determines to be necessary to preserve the 

2 savings resulting from the enactment of section 13503(b) 

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

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

5 subsections (a), (b), and (c) shall apply to cost reporting 

6 periods beginning on or after October 1, 1995. 

7 SEC. 4105. MEDICARE-DEPENDENT, SMALL RURAL HOS8 PITALS. 

9 (a) CLARIFICATION OF ADDITIONAL PAYMENT.— 

10 Section 1886(d)(5)(G)(ii)(I) (42 U.S.C. 

11 1395ww(d)(5)(G)(ii)(I)) is amended by striking ‘‘the first 

12 3 12-month cost reporting periods that begin’’ and insert13 ing ‘‘the 36-month period beginning with the first day of 

14 the cost reporting period that begins’’. 

15 (b) SPECIAL TREATMENT EXTENDED.—Section 

16 1886(d)(5)(G) (42 U.S.C. 1395ww(d)(5)(G)) is amend17 ed— 

18 (1) in clause (i), by striking ‘‘October 1, 1994’’ 

19 and inserting ‘‘October 1, 1999’’; and 

20 (2) in clause (ii)(II), by striking ‘‘October 1, 

21 1994’’ and inserting ‘‘October 1, 1999’’. 

22 (c) EXTENSION OF TARGET AMOUNT.—Section 

23 1886(b)(3)(D) (42 U.S.C. 1395ww(b)(3)(D)) is amend24 ed— 
737 

•S 2357 

1 (1) in the matter preceding clause (i), by strik2 ing ‘‘March 31, 1993’’ and inserting ‘‘September 30, 

3 1999’’; and 

4 (2) by amending clause (iii) to read as follows: 

5 ‘‘(iii) with respect to discharges occurring in fis6 cal years 1994 through 1999, the target amount for 

7 the cost reporting period beginning in the previous 

8 fiscal year increased by the applicable percentage in9 crease under subparagraph (B)(iv).’’. 

10 SEC. 4106. PROVISIONS RELATING TO RURAL HEALTH 

11 TRANSITION GRANT PROGRAM. 

12 (a) ELIGIBILITY OF RURAL PRIMARY CARE HOS13 PITALS FOR GRANTS.— 

14 (1) IN GENERAL.—Section 4005(e)(2) of the 

15 Omnibus Budget Reconciliation Act of 1987 is 

16 amended in the matter preceding subparagraph (A) 

17 by inserting ‘‘any rural primary care hospital as de18 fined in section 1861(mm)(1), or’’ after ‘‘means’’. 

19 (2) EFFECTIVE DATE.—The amendment made 

20 by paragraph (1) shall apply to grants made on or 

21 after October 1, 1993. 

22 (b) EXTENSION OF AUTHORIZATION OF APPROPRIA23 TIONS.—Section 4005(e)(9) of Omnibus Budget Reconcili24 ation Act of 1987 is amended— 
738 

•S 2357 

1 (1) by striking ‘‘1989 and’’ and inserting 

2 ‘‘1989,’’; and 

3 (2) by striking ‘‘1992’’ and inserting ‘‘1992 

4 and $30,000,000 for each of the fiscal years 1993 

5 through 1999’’. 

6 (c) FREQUENCY OF REQUIRED REPORTS.—Section 

7 4008(e)(8)(B) of the Omnibus Budget Reconciliation Act 

8 of 1987 is amended by striking ‘‘every 6 months’’ and in9 serting ‘‘every 12 months’’. 

10 SEC. 4107. PAYMENTS FOR SOLE COMMUNITY HOSPITALS 

11 WITH TEACHING PROGRAMS AND MULTIHOS12 PITAL CAMPUSES. 

13 (a) IN GENERAL.—Section 1886(d)(5)(D) (42 U.S.C. 

14 1395ww(d)(5)(D)) is amended by adding at the end the 

15 following new clause: 

16 ‘‘(vi) The Secretary shall determine payment under 

17 clause (i) for a sole-community hospital that is a part of 

18 a multi-campus hospital by making the determination 

19 under such clause for each facility of the multi-campus 

20 hospital if any facility of the hospital would have a value 

21 of ‘r’ greater than 0, as ‘r’ is defined in subparagraph 

22 (B)(ii). In making a determination for each such facility, 

23 the Secretary shall determine the DRG-specific rate appli24 cable to the facility based on its location in accordance 

25 with paragraph (3)(D).’’. 
739 

•S 2357 

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

2 subsection (a) shall apply to discharges occurring on or 

3 after October 1, 1993, from multi-campus hospitals that 

4 merged facilities on or after October 1, 1987. 

5 SEC. 4108. MORATORIUM ON DESIGNATION OF NEW LONG6 TERM HOSPITALS. 

7 Notwithstanding clause (iv) of section 1886(d)(1)(B) 

8 of the Social Security Act (42 U.S.C. 1395ww(d)(1)(B)), 

9 a hospital which has an average inpatient length of stay 

10 (as determined by the Secretary of Health and Human 

11 Services) of greater than 25 days shall not be treated as 

12 a hospital described in such clause for purposes of such 

13 title unless such hospital was treated as a hospital de14 scribed in such clause for purposes of such title as of the 

15 date of the enactment of this Act. 

16 SEC. 4109. REVISED PAYMENT METHODOLOGY FOR REHA17 BILITATION AND LONG-TERM CARE HOS18 PITALS. 

19 (a) REHABILITATION HOSPITALS AND DISTINCT

20 PART UNITS.— 

21 (1) DEFINITION.—Section 1886(d)(1)(B) (42 

22 U.S.C. 1395ww(d)(1)(B)) is amended by adding at 

23 the end the following new sentence: ‘‘In defining a 

24 rehabilitation hospital and a rehabilitation unit of a 

25 hospital which is a distinct part of a hospital, the 
740 

•S 2357 

1 Secretary shall take into account the impact of new 

2 technologies, survival rates, and changes in the prac3 tice of rehabilitation medicine.’’. 

4 (2) TARGET AMOUNT CALCULATION FOR REHA5 BILITATION HOSPITALS AND DISTINCT PART

6 UNITS.— 

7 (A) IN GENERAL.—Section 1886(b)(3) (42 

8 U.S.C. 1395ww(b)(3)) is amended— 

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

10 ‘‘(D), and (E)’’ and inserting ‘‘(D), (E), 

11 and (F)’’; 

12 (ii) in subparagraph (B)(ii), by strik13 ing ‘‘and (E)’’ and inserting ‘‘(E), and 

14 (F)’’; and 

15 (iii) by adding at the end the fol16 lowing new subparagraph: 

17 ‘‘(F)(i) Subject to clause (ii), for cost re18 porting periods beginning on or after October 1, 

19 1994, in the case of a hospital described in sub20 section (d)(1)(B)(ii) or a rehabilitation unit de21 scribed in such subparagraph, the term ‘target 

22 amount’ means— 

23 ‘‘(I) with respect to the first 12- 

24 month cost reporting period in which this 
741 

•S 2357 

1 subparagraph is applied to the hospital or 

2 unit— 

3 ‘‘(aa) the allowable operating 

4 costs of inpatient hospital services (as 

5 defined in subsection (a)(4)) recog6 nized under this title for the hospital 

7 or unit for the 12-month cost report8 ing period (in this subparagraph re9 ferred to as the ‘base cost reporting 

10 period’) preceding the first cost re11 porting period for which this subpara12 graph was in effect with respect to 

13 such hospital, increased (in a com14 pounded manner), by 

15 ‘‘(bb) the applicable percentage 

16 increases applied to such hospital or 

17 unit under this paragraph for cost re18 porting periods after the base cost re19 porting period and up to and includ20 ing such first 12-month cost reporting 

21 period, or 

22 ‘‘(II) with respect to a later cost re23 porting period, the target amount for the 

24 preceding 12-month cost reporting period, 
742 

•S 2357 

1 increased by the applicable percentage in2 crease under subparagraph (B). 

3 There shall be substituted for the allowable av4 erage costs of inpatient hospital services deter5 mined under subclause (I)(aa), the average of 

6 the allowable average costs of inpatient hospital 

7 services (as so defined) recognized under this 

8 title for the hospital or unit for cost reporting 

9 periods beginning during fiscal years 1990 and 

10 1991 (if any). 

11 ‘‘(ii)(I) Notwithstanding the provisions of 

12 clause (i), in the case of a hospital or unit to 

13 which the last sentence of clause (i) applies, the 

14 hospital or unit’s target amount under such 

15 clause for a cost reporting period shall be— 

16 ‘‘(aa) not less than 70 percent of the 

17 national weighted average of all target 

18 amounts calculated under such clause for 

19 all hospitals and units described in such 

20 clause (as determined by the Secretary), 

21 and 

22 ‘‘(bb) not less than the allowable oper23 ating costs of inpatient hospital services 

24 (as defined in subsection (a)(4) for such 

25 hospital or unit in the base cost reporting 
743 

•S 2357 

1 period (including any payments made to 

2 such hospital or unit pursuant to para3 graph (1)(A)), multiplied by the applicable 

4 percentage increase for such cost reporting 

5 period under subparagraph (B). 

6 ‘‘(II) Notwithstanding the provisions of 

7 clause (i), in the case of a hospital or unit that 

8 is not described in subclause (I), the hospital or 

9 unit’s target amount under such clause for a 

10 cost reporting period shall be— 

11 ‘‘(aa) not less than the amount de12 scribed in subclause (I)(aa), and 

13 ‘‘(bb) not greater than 110 percent of 

14 the national weighted average of all target 

15 amounts calculated under clause (i) for all 

16 hospitals and units described in such 

17 clause (as determined by the Secretary).’’. 

18 (B) EFFECTIVE DATE.—The amendments 

19 made by subparagraph (A) shall apply with re20 spect to cost reporting periods beginning on or 

21 after October 1, 1994. 

22 (3) DEVELOPMENT OF NATIONAL PROSPECTIVE

23 RATES FOR REHABILITATION HOSPITALS AND DIS24 TINCT PART UNITS.— 
744 

•S 2357 

1 (A) DEVELOPMENT OF PROPOSAL.—The 

2 Secretary of Health and Human Services (here3 after in this section referred to as the ‘‘Sec4 retary’’) shall develop a proposal to replace the 

5 current system under which rehabilitation hos6 pitals and rehabilitation units of a hospital 

7 which are a distinct part of a hospital (as de8 scribed in section 1886(d)(1)(B) of the Social 

9 Security Act (42 U.S.C. 1395ww(d)(1)(B))) re10 ceive payment for the operating and capital-re11 lated costs of inpatient hospital services under 

12 part A of title XVIII of such Act with a pro13 spective payment system. In developing any 

14 proposal under this paragraph to replace the 

15 current system with a prospective payment sys16 tem, the Secretary shall develop a system that 

17 provides for— 

18 (i) a payment on a per-discharge 

19 basis, and 

20 (ii) an appropriate weighting of such 

21 payment amount as it relates to the classi22 fication of the discharge. 

23 (B) REPORTS.—Not later than October 1, 

24 1996, the Secretary shall submit the proposal 
745 

•S 2357 

1 developed under subparagraph (A) to the Con2 gress. 

3 (b) ASSIGNMENT OF NEW BASE YEAR FOR CER4 TIFIED LONG-STAY HOSPITALS THAT ALSO SERVE A SIG5 NIFICANT PROPORTION OF LOW-INCOME PATIENTS.— 

6 (1) REBASING FOR LONG-TERM HOSPITALS.— 

7 (A) IN GENERAL.—Section 1886(b)(3) (42 

8 U.S.C. 1395ww(b)(3)), as amended by sub9 section (a), is further amended— 

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

11 ‘‘(E), and (F)’’ and inserting ‘‘(E), (F), 

12 and (G)’’; 

13 (ii) in subparagraph (B)(ii), by strik14 ing ‘‘(E), and (F)’’ and inserting ‘‘(E), 

15 (F), and (G)’’; and 

16 (iii) by inserting after subparagraph 

17 (F) the following new subparagraph: 

18 ‘‘(G)(i) For cost reporting periods begin19 ning on or after October 1, 1994, in the case 

20 of a hospital described in subsection 

21 (d)(1)(B)(iv) that— 

22 ‘‘(I) has not received the additional 

23 payment amount described in paragraph 

24 (1)(A) for at least the preceding 2 consecu25 tive 12-month cost reporting periods; and 
746 

•S 2357 

1 ‘‘(II) for which the sum of the 

2 amounts described in subclauses (I) and 

3 (II) of subsection (d)(5)(F)(vi) during the 

4 period described in clause (I) exceeds 25 

5 percent, 

6 the term ‘target amount’ has the meaning given 

7 such term by clause (ii). 

8 ‘‘(ii) In the case of a hospital described in 

9 clause (i), the term ‘target amount’ means— 

10 ‘‘(I) with respect to the first 12- 

11 month cost reporting period in which this 

12 subparagraph is applied to the hospital— 

13 ‘‘(aa) the average allowable oper14 ating costs of inpatient hospital serv15 ices (as defined in subsection (a)(4)) 

16 recognized under this title for the hos17 pital during cost reporting periods of 

18 the hospital beginning during fiscal 

19 years 1990 and 1991 for such hos20 pital (in this subparagraph referred to 

21 as the ‘base cost reporting period’), 

22 increased (in a compounded manner), 

23 by 

24 ‘‘(bb) the applicable percentage 

25 increases applied to such hospital or 
747 

•S 2357 

1 under this paragraph for cost report2 ing periods after the base cost report3 ing period and up to and including 

4 such first 12-month cost reporting pe5 riods, or 

6 ‘‘(II) with respect to a subsequent 12- 

7 month cost reporting period, the target 

8 amount for the preceding 12-month cost 

9 reporting period, increased by the applica10 ble percentage increase under subpara11 graph (B). 

12 ‘‘(iii) Notwithstanding clause (ii)(II), if, 

13 after 2 consecutive 12-month cost reporting pe14 riods, a hospital continues to be described in 

15 subclauses (I) and (II) of clause (i), there shall 

16 be substituted for the base cost reporting period 

17 described in clause (ii)(I)(aa) the most recent 

18 preceding 2 12-month cost reporting periods of 

19 the hospital for which data is available (as de20 termined by the Secretary), but only if such 

21 substituting results in an increase in the target 

22 amount for the hospital. The substitution under 

23 the preceding sentence may not occur more 

24 often than every 2 years. 
748 

•S 2357 

1 ‘‘(iv) Effective October 1, 1994, the Sec2 retary shall take into account the enactment of 

3 this subparagraph in making available to the 

4 hospital the payments described in section 

5 1815(e)(2), and, shall increase such payments 

6 as if the target amount of the hospital had been 

7 established pursuant to this subparagraph as of 

8 such date.’’. 

9 (2) EFFECTIVE DATE.—The amendments made 

10 by this subsection shall be effective with respect to 

11 cost reporting periods beginning on or after October 

12 1, 1994. 

13 SEC. 4110. TERMINATION OF INDIRECT MEDICAL EDU14 CATION PAYMENTS. 

15 (a) IN GENERAL.—Section 1886(d)(5)(B) (42 U.S.C. 

16 1395ww(d)(5)(B)) is amended in the matter preceding 

17 clause (i) by striking ‘‘The Secretary’’ and inserting ‘‘For 

18 discharges occurring before January 1, 1997, the Sec19 retary’’. 

20 (b) ADJUSTMENT TO STANDARDIZED AMOUNTS.— 

21 Section 1886(d)(2)(C)(i) (42 U.S.C. 1395ww(d)(2)(C)(i)) 

22 is amended by striking ‘‘excluding’’ and inserting ‘‘for dis23 charges occurring before January 1, 1997, excluding’’. 
749 

•S 2357 

1 SEC. 4111. LIMITED SERVICE HOSPITAL PROGRAM. 

2 (a) LIMITED SERVICE HOSPITAL PROGRAM.—Sec3 tion 1820 (42 U.S.C. 13951–4) is amended to read as fol4 lows: 

5 ‘‘LIMITED SERVICE HOSPITAL PROGRAM

6 ‘‘SEC. 1820. (a) PURPOSE.—The purpose of this sec7 tion is to— 

8 ‘‘(1) make available alternative hospital models 

9 to small rural or isolated rural communities in which 

10 facilities are relieved of the burden of selected regu11 latory requirements by limiting the scope of inpa12 tient acute services required to be offered; 

13 ‘‘(2) alter medicare reimbursement policy to 

14 support the financial viability of alternative facilities 

15 by limiting the financial risk faced by such small 

16 hospitals through the use of reasonable cost reim17 bursement; and 

18 ‘‘(3) promote linkages between facilities des19 ignated by the State under this section and broader 

20 programs supporting the development of and transi21 tion to integrated provider networks. 

22 ‘‘(b) IN GENERAL.—Any State that submits an appli23 cation in accordance with subsection (c) may establish a 

24 limited service hospital program described in subsection 

25 (d). 
750 

•S 2357 

1 ‘‘(c) APPLICATION.—A State may establish a limited 

2 service hospital program described in subsection (d) if the 

3 State submits to the Secretary at such time and in such 

4 form as the Secretary may require an application con5 taining— 

6 ‘‘(1) assurances that the State— 

7 ‘‘(A) has developed, or is in the process of 

8 developing, a State rural health care plan 

9 that— 

10 ‘‘(i) in the case of a State applying to 

11 establish a rural primary care hospital pro12 gram (described in subsection (d)(1)(A)), 

13 provides for the creation of one or more 

14 rural health networks (as defined in sub15 section (e)) in the State, 

16 ‘‘(ii) promotes regionalization of rural 

17 health services in the State, and 

18 ‘‘(iii) improves access to hospital and 

19 other health services for rural residents of 

20 the State; 

21 ‘‘(B) has developed the rural health care 

22 plan described in subparagraph (A) in consulta23 tion with the hospital association of the State, 

24 rural hospitals located in the State, and the 

25 State Office of Rural Health (or, in the case of 
751 

•S 2357 

1 a State in the process of developing such plan, 

2 that assures the Secretary that it will consult 

3 with its State hospital association, rural hos4 pitals located in the State, and the State Office 

5 of Rural Health in developing such plan); and 

6 ‘‘(2) assurances that the State has designated 

7 (consistent with the rural health care plan described 

8 in paragraph (1)(A)), or is in the process of desig9 nating, rural nonprofit or public hospitals or facili10 ties located in the State as rural primary care hos11 pitals facilities or medical assistance facilities; and 

12 ‘‘(3) such other information and assurances as 

13 the Secretary may require. 

14 ‘‘(d) LIMITED SERVICE HOSPITAL PROGRAM DE15 SCRIBED.— 

16 ‘‘(1) IN GENERAL.—A State that has submitted 

17 an application in accordance with subsection (c), 

18 may establish a limited service hospital program that 

19 includes— 

20 ‘‘(A) a rural primary care hospital pro21 gram under which— 

22 ‘‘(i) at least one facility in the State 

23 shall be designated as a rural primary care 

24 hospital in accordance with paragraph (2), 

25 and 
752 

•S 2357 

1 ‘‘(ii) the State shall develop at least 

2 one rural health network (as defined in 

3 subsection (e)) in the State; 

4 ‘‘(B) a medical assistance facility program 

5 under which at least one facility in the State 

6 shall be designated as a medical assistance fa7 cility in accordance with paragraph (2); or 

8 ‘‘(C) both. 

9 ‘‘(2) STATE DESIGNATION OF FACILITIES.—A 

10 State may designate one or more facilities as a rural 

11 primary care hospital or medical assistance facility 

12 in accordance with subparagraph (A) or (B). 

13 ‘‘(A) CRITERIA FOR DESIGNATION AS

14 RURAL PRIMARY CARE HOSPITAL.—A State 

15 may designate a facility as a rural primary care 

16 hospital only if the facility— 

17 ‘‘(i) is located in a rural area (as de18 fined in section 1886(d)(2)(D)), or is lo19 cated in a county whose geographic area is 

20 substantially larger than the average geo21 graphic area for urban counties in the 

22 United States and whose hospital service 

23 area is characteristic of service areas of 

24 hospitals located in rural areas; 
753 

•S 2357 

1 ‘‘(ii) at the time such facility applies 

2 to the State for designation as a rural pri3 mary care hospital, is a hospital (or, in the 

4 case of a facility that closed during the 12- 

5 month period that ends on the date the fa6 cility applies for such designation, at the 

7 time the facility closed), with a participa8 tion agreement in effect under section 

9 1866(a); 

10 ‘‘(iii) has in effect an agreement to 

11 participate with other hospitals and facili12 ties in a rural health network; 

13 ‘‘(iv) provides 24-hour emergency 

14 services to ill or injured persons prior to 

15 admission to the facility or prior to their 

16 transportation to a full-service hospital; 

17 ‘‘(v) provides not more than 15 inpa18 tient beds (meeting such conditions as the 

19 Secretary may establish) for providing 

20 acute inpatient care; 

21 ‘‘(vi) provides inpatient care for a pe22 riod not to exceed an average length of 96 

23 hours (unless a longer period is required 

24 because transfer to a hospital is precluded 
754 

•S 2357 

1 because of inclement weather or other 

2 emergency conditions); 

3 ‘‘(vii) meets such staffing require4 ments as would apply under section 

5 1861(e), to a hospital located in a rural 

6 area, except that— 

7 ‘‘(I) the facility need not meet 

8 hospital standards relating to the 

9 number of hours during a day, or 

10 days during a week, in which the fa11 cility must be open and fully staffed, 

12 except insofar as the facility is re13 quired to provide emergency care on a 

14 24-hour basis under clause (v) and 

15 must have nursing services available 

16 on a 24-hour basis, but need not oth17 erwise staff the facility except when 

18 an inpatient is present, 

19 ‘‘(II) the facility may provide any 

20 services otherwise required to be pro21 vided by a full-time, onsite dietician, 

22 pharmacist, laboratory technician, 

23 medical technologist, and radiological 

24 technologist on a part-time, offsite 
755 

•S 2357 

1 basis under arrangements as defined 

2 in section 1861(w)(1), and 

3 ‘‘(III) the inpatient care de4 scribed in clause (vii) may be provided 

5 by a physician’s assistant, nurse prac6 titioner, or clinical nurse specialist 

7 subject to the oversight of a physician 

8 who need not be present in the facil9 ity, and 

10 ‘‘(viii) meets the requirements of sub11 paragraphs (C) through (I) of paragraph 

12 (2) of section 1861(aa), and of clauses (ii) 

13 and (iv) of the second sentence of that 

14 paragraph, except that in determining 

15 whether a facility meets the requirements 

16 of this subparagraph, subparagraphs (E) 

17 and (F) of that paragraph shall be applied 

18 as if any reference to ‘physician’ is a ref19 erence to a physician as defined in section 

20 1861(r)(1). 

21 ‘‘(B) CRITERIA FOR DESIGNATION AS MED22 ICAL ASSISTANCE FACILITY.—A State may des23 ignate a facility as a medical assistance facility 

24 only if the facility— 
756 

•S 2357 

1 ‘‘(i) is located in a county (or equiva2 lent unit of local government)— 

3 ‘‘(I) with fewer than 6 residents 

4 per square mile; or 

5 ‘‘(II) in a rural area (as defined 

6 in section 1886(d)(2)(D)) that is lo7 cated more than a 35–mile or 45– 

8 minute drive from a hospital, a rural 

9 primary care hospital, or another fa10 cility described in this subsection; 

11 ‘‘(ii) at the time such facility applies 

12 to the State for designation as a medical 

13 assistance facility— 

14 ‘‘(I) is a hospital (or in the case 

15 of a facility that closed during the 12- 

16 month period that ends on the date 

17 the facility applies for such designa18 tion, at the time the facility closed), 

19 with a participation agreement in ef20 fect under section 1866(a); or 

21 ‘‘(II) is licensed in accordance 

22 with applicable State and local laws 

23 and regulations; 
757 

•S 2357 

1 ‘‘(iii) meets the requirements of 

2 clauses (iv), (vi), and (vii) of subparagraph 

3 (A); and 

4 ‘‘(iv) meets the requirements of sub5 paragraph (I) of paragraph (2) of section 

6 1861(aa). 

7 ‘‘(e) RURAL HEALTH NETWORK DEFINED.—For 

8 purposes of this section, the term ‘rural health network’ 

9 means, with respect to a State, an organization— 

10 ‘‘(1) consisting of— 

11 ‘‘(A) at least 1 facility that the State has 

12 designated or plans to designate as a rural pri13 mary care hospital, and 

14 ‘‘(B) at least 1 hospital that furnishes 

15 services that a rural primary care hospital can16 not furnish, and 

17 ‘‘(2) the members of which have entered into 

18 agreements regarding— 

19 ‘‘(A) patient referral and transfer, 

20 ‘‘(B) the development and use of commu21 nications systems, including (where feasible) te22 lemetry systems and systems for electronic 

23 sharing of patient data, 
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1 ‘‘(C) the provision of emergency and non2 emergency transportation among the members, 

3 and 

4 ‘‘(D) credentialing and quality assurance. 

5 ‘‘(f) CERTIFICATION BY THE SECRETARY.—The Sec6 retary shall certify a facility as a rural primary care hos7 pital or medical assistance facility (as the case may be) 

8 if the facility— 

9 ‘‘(1) is located in a State that has established 

10 a limited service hospital program in accordance 

11 with subsection (d); 

12 ‘‘(2) is designated as a rural primary care hos13 pital or medical assistance facility by the State in 

14 which it is located; and 

15 ‘‘(3) meets such other criteria as the Secretary 

16 may require. 

17 ‘‘(g) PERMITTING MAINTENANCE OF SWING BEDS.— 

18 Nothing in this section shall be construed to prohibit a 

19 State from designating or the Secretary from certifying 

20 a facility as a rural primary care hospital or medical as21 sistance facility solely because, at the time the facility ap22 plies to the State for designation as a rural primary care 

23 hospital or medical assistance facility, there is in effect 

24 an agreement between the facility and the Secretary under 

25 section 1883 under which the facility’s inpatient hospital 
759 

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1 facilities are used for the furnishing of extended care serv2 ices, except that the number of beds used for the fur3 nishing of such services may not exceed the total number 

4 of licensed inpatient beds at the time the facility applies 

5 to the State for such designation (minus the number of 

6 inpatient beds used for providing inpatient care in a rural 

7 primary care facility pursuant to subsection (d)(2)(A)(vi)). 

8 The Secretary may establish additional conditions of par9 ticipation for rural primary care hospitals with a substan10 tial number of such beds. For purposes of the first sen11 tence, the number of beds of the facility used for the fur12 nishing of extended care services shall not include any 

13 beds of a unit of the facility that is licensed as a distinct14 part skilled nursing facility at the time the facility applies 

15 to the State for designation as a rural primary care hos16 pital or medical assistance facility. 

17 ‘‘(h) GRANTS.— 

18 ‘‘(1) LIMITED SERVICE HOSPITAL PROGRAM.— 

19 The Secretary may award grants to States that have 

20 submitted applications in accordance with subsection 

21 (c) for— 

22 ‘‘(A) engaging in activities relating to plan23 ning and implementing a rural health care plan; 

24 ‘‘(B) in the case of a rural primary care 

25 hospital program described in subsection 
760 

•S 2357 

1 (d)(1)(A), engaging in activities relating to 

2 planning and implementing rural health net3 works; and 

4 ‘‘(C) designation of facilities as rural pri5 mary care hospitals or medical assistance facili6 ties. 

7 ‘‘(2) RURAL EMERGENCY MEDICAL SERVICES.— 

8 ‘‘(A) IN GENERAL.—The Secretary may 

9 award grants to States that have submitted ap10 plications in accordance with subparagraph (B) 

11 for the establishment or expansion of a pro12 gram for the provision of rural emergency med13 ical services. 

14 ‘‘(B) APPLICATION.—An application is in 

15 accordance with this subparagraph if the State 

16 submits to the Secretary at such time and in 

17 such form as the Secretary may require an ap18 plication containing the assurances described in 

19 subparagraphs (A)(ii), (A)(iii), and (B) of sub20 section (c)(1) and paragraph (3) of such sub21 section. 

22 ‘‘(i) STUDY ON CLINICALLY BASED ALTERNATIVE TO

23 96-HOUR RULE.—The Secretary shall conduct a study on 

24 the feasibility of admitting patients to rural primary care 

25 hospitals and medical assistance facilities on a limited 
761 

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1 DRG basis instead of using the 96-hour average length 

2 of stay criteria described in subsection (d)(2)(A)(vii). 

3 ‘‘(j) WAIVER OF CONFLICTING PART A PROVI4 SIONS.—The Secretary is authorized to waive such provi5 sions of this part and part C as are necessary to conduct 

6 the program established under this section. 

7 ‘‘(k) AUTHORIZATION OF APPROPRIATIONS.—There 

8 are authorized to be appropriated from the Federal Hos9 pital Insurance Trust Fund— 

10 ‘‘(1) for making grants under subsection (h)(1) 

11 to States that have established a rural primary care 

12 hospital program in the State under subsection 

13 (d)(1)(A), $15,000,000 for each of fiscal years 1993 

14 through 1995; and 

15 ‘‘(2) for making grants to all States under sub16 section (h), $25,000,000 in each of the fiscal years 

17 1996 through 1999.’’. 

18 (b) PART A AMENDMENTS RELATING TO RURAL PRI19 MARY CARE HOSPITALS AND MEDICAL ASSISTANCE FA20 CILITIES.— 

21 (1) DEFINITIONS.—Section 1861 (42 U.S.C. 

22 1395x) is amended by adding at the end the fol23 lowing new subsection: 
762 

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1 ‘‘MEDICAL ASSISTANCE FACILITY; MEDICAL ASSISTANCE

2 FACILITY SERVICES

3 ‘‘(oo)(1) The term ‘medical assistance facility’ means 

4 a facility certified by the Secretary as a medical assistance 

5 facility under section 1820(f). 

6 ‘‘(2) The term ‘medical assistance facility services’ 

7 means items and services, furnished to an inpatient for 

8 a medical assistance facility by such facility, that would 

9 be inpatient hospital services if furnished to an inpatient 

10 of a hospital by a hospital.’’. 

11 (2) COVERAGE AND PAYMENT.—(A)(i) Section 

12 1812(a)(1) (42 U.S.C. 1395d(a)(1)) is amended by 

13 striking ‘‘inpatient hospital services’’ the first place 

14 it appears and inserting ‘‘, inpatient hospital serv15 ices and inpatient medical assistance facility serv16 ices’’; and 

17 (ii) by striking ‘‘inpatient hospital services’’ the 

18 second place it appears and inserting ‘‘such serv19 ices’’. 

20 (B) Section 1814 (42 U.S.C. 1395f) is amend21 ed— 

22 (i) in subsection (b), by striking ‘‘inpatient 

23 rural primary care hospital services,’’ and in24 serting ‘‘inpatient rural primary care hospital 

25 services, other than a medical assistance facility 
763 

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1 providing inpatient medical assistance facility 

2 services,’’; and 

3 (ii) by amending subsection (l) to read as 

4 follows: 

5 ‘‘(l) PAYMENT FOR INPATIENT RURAL PRIMARY

6 CARE SERVICES AND INPATIENT MEDICAL ASSISTANCE

7 FACILITY SERVICES.—The amount of payment under this 

8 part for inpatient rural primary care services and inpa9 tient medical assistance facility services is the reasonable 

10 costs of the rural primary care hospital or medical assist11 ance facility in providing such services.’’. 

12 (3) TREATMENT OF MEDICAL ASSISTANCE FA13 CILITIES AS PROVIDERS OF SERVICES.—(A) Section 

14 1861(u) (42 U.S.C. 1395x(u)) is amended by insert15 ing ‘‘medical assistance facility,’’after ‘‘rural primary 

16 care hospital,’’. 

17 (B) The first sentence of section 1864(a) (42 

18 U.S.C. 1395aa(a)) is amended by inserting ‘‘a med19 ical assistance facility, as defined in section 

20 1861(oo)(1),’’ after ‘‘1861(mm)(1),’’. 

21 (C) The third sentence of section 1865(a) of 

22 such Act (42 U.S.C. 1395bb(a)) is amended by 

23 striking ‘‘or 1861(mm)(1)’’ and inserting 

24 ‘‘1861(mm)(1), or 1861(oo)(1),’’. 
764 

•S 2357 

1 (4) CONFORMING AMENDMENTS.—(A) Section 

2 1128A(b)(1) (42 U.S.C. 1320a–7a(b)(1)) is amend3 ed— 

4 (i) by striking ‘‘or a rural primary care 

5 hospital’’ the first place it appears and insert6 ing ‘‘, a rural primary care hospital, or a med7 ical assistance facility’’; and 

8 (ii) by striking ‘‘or a rural primary care 

9 hospital’’ the second place it appears and in10 serting ‘‘, the rural primary care hospital, or 

11 the medical assistance facility’’. 

12 (B) Section 1128B(c) (42 U.S.C. 1320a–7b(c)) 

13 is amended by inserting ‘‘medical assistance facil14 ity,’’ after ‘‘rural primary care hospital,’’. 

15 (C) Section 1134 (42 U.S.C. 1320b–4) is 

16 amended by striking ‘‘or rural primary care hos17 pitals’’ each place it appears and inserting ‘‘, rural 

18 primary care hospitals, or medical assistance facili19 ties’’. 

20 (D) Section 1138(a)(1) (42 U.S.C. 1320b– 

21 8(a)(1)) is amended— 

22 (i) in the matter preceding subparagraph 

23 (A), by striking ‘‘or rural primary care hos24 pital’’ and inserting ‘‘, rural primary care hos25 pital, or medical assistance facility’’, and 
765 

•S 2357 

1 (ii) in the matter preceding clause (i) of 

2 subparagraph (A), by striking ‘‘or rural pri3 mary care hospital’’ and inserting ‘‘, rural pri4 mary care hospital, or medical assistance facil5 ity’’. 

6 (E) Section 1164(e) (42 U.S.C. 1320c–13(e)) is 

7 amended by inserting ‘‘medical assistance facilities,’’ 

8 after ‘‘rural primary care hospitals,’’. 

9 (F) Section 1816(c)(2)(C) (42 U.S.C. 

10 1395h(c)(2)(C)) is amended by inserting ‘‘medical 

11 assistance facility,’’ after ‘‘rural primary care hos12 pital,’’. 

13 (G) Section 1833 (42 U.S.C. 1395l) is amend14 ed— 

15 (i) in subsection (h)(5)(A)(iii)— 

16 (I) by striking ‘‘or rural primary care 

17 hospital’’ and inserting ‘‘rural primary 

18 care hospital, or medical assistance facil19 ity’’; and 

20 (II) by striking ‘‘to the hospital’’ and 

21 inserting ‘‘to the hospital or the facility’’; 

22 (ii) in subsection (i)(1)(A), by inserting 

23 ‘‘medical assistance facility,’’ after ‘‘rural pri24 mary care hospital,’’; 
766 

•S 2357 

1 (iii) in subsection (i)(3)(A), by striking ‘‘or 

2 rural primary care hospital services’’ and in3 serting ‘‘rural primary care hospital services, or 

4 medical assistance facility services’’; 

5 (iv) in subsection (l)(5)(A), by inserting 

6 ‘‘medical assistance facility,’’ after ‘‘rural pri7 mary care hospital,’’ each place it appears; and 

8 (v) in subsection (l)(5)(C), by striking ‘‘or 

9 rural primary care hospital’’ each place it ap10 pears and inserting ‘‘, rural primary care hos11 pital, or medical assistance facility’’. 

12 (H) Section 1835(c) (42 U.S.C. 1395n(c)) is 

13 amended by adding at the end the following: ‘‘A 

14 medical assistance facility shall be considered a hos15 pital for purposes of this subsection.’’. 

16 (I) Section 1842(b)(6)(A)(ii) (42 U.S.C. 

17 1395u(b)(6)(A)(ii)) is amended by inserting ‘‘med18 ical assistance facility,’’ after ‘‘rural primary care 

19 hospital,’’. 

20 (J) Section 1861 (42 U.S.C. 1395x) is amend21 ed— 

22 (i) in the last sentence of subsection (e), by 

23 striking ‘‘1861(mm)(1))’’ and inserting 

24 ‘‘1861(mm)(1)) or a medical assistance facility 

25 (as defined in section 1861(oo)(1)).’’, 
767 

•S 2357 

1 (ii) in subsection (w)(1) by inserting ‘‘med2 ical assistance facility,’’ after ‘‘rural primary 

3 care hospital,’’, and 

4 (iii) in subsection (w)(2), by striking ‘‘or 

5 rural primary care hospital’’ each place it ap6 pears and inserting ‘‘, rural primary care hos7 pital, or medical assistance facility’’. 

8 (K) Section 1862(a)(14) (42 U.S.C. 

9 1395y(a)(14)) is amended by striking ‘‘or rural pri10 mary care hospital’’ each place it appears and in11 serting ‘‘, rural primary care hospital, or medical as12 sistance facility’’. 

13 (L) Section 1866(a)(1) (42 U.S.C 

14 1395cc(a)(1)) is amended— 

15 (i) in subparagraph (F)(ii), by inserting 

16 ‘‘medical assistance facilities,’’ after ‘‘rural pri17 mary care hospitals,’’; 

18 (ii) in subparagraph (H)— 

19 (I) in the matter preceding clause (i), 

20 by inserting ‘‘and in the case of medical 

21 assistance facilities which provide inpatient 

22 medical assistance facility services’’ after 

23 ‘‘rural primary care hospital services’’; and 
768 

•S 2357 

1 (II) in clauses (i) and (ii), by striking 

2 ‘‘hospital’’ each place it appears and in3 serting ‘‘hospital or facility’’; 

4 (iii) in subparagraph (I)— 

5 (I) in the matter preceding clause (i), 

6 by striking ‘‘or rural primary care hos7 pital’’ and inserting ‘‘, a rural primary 

8 care hospital, or a medical assistance facil9 ity’’; and 

10 (II) in clause (ii), by striking ‘‘the 

11 hospital’’ and inserting ‘‘the hospital or the 

12 facility’’; and 

13 (iv) in subparagraph (N)— 

14 (I) in the matter preceding clause (i), 

15 by striking ‘‘and rural primary hospitals’’ 

16 and inserting ‘‘, rural primary care hos17 pitals, and medical assistance facilities’’; 

18 (II) in clause (i), by striking ‘‘or rural 

19 primary care hospital,’’ and inserting ‘‘, 

20 rural primary care hospital, or medical as21 sistance facility,’’; and 

22 (III) in clause (ii), by striking ‘‘hos23 pital’’ and inserting ‘‘hospital or facility’’. 

24 (M) Section 1866(a)(3) (42 U.S.C 

25 1395cc(a)(3)) is amended— 
769 

•S 2357 

1 (i) by striking ‘‘rural primary care hos2 pital,’’ each place it appears in subparagraphs 

3 (A) and (B) and inserting ‘‘rural primary care 

4 hospital, medical assistance facility,’’, and 

5 (ii) in subparagraph (C)(ii)(II), by striking 

6 ‘‘rural primary care hospitals,’’ each place it 

7 appears and inserting ‘‘rural primary care hos8 pitals, medical assistance facilities’’. 

9 (N) Section 1867(e)(5) (42 U.S.C. 

10 1395dd(e)(5)) is amended by striking 

11 ‘‘1861(mm)(1))’’ and inserting ‘‘1861(mm)(1)) or a 

12 medical assistance facility (as defined in section 

13 1861(oo)(1)).’’. 

14 (c) PART B AMENDMENTS RELATING TO RURAL PRI15 MARY CARE HOSPITALS AND MEDICAL ASSISTANCE FA16 CILITIES.— 

17 (1) COVERAGE.—(A) Section 1861(oo) (42 

18 U.S.C. 1395x(oo)) as added by subsection (b)(1), is 

19 amended by adding at the end the following new 

20 paragraph: 

21 ‘‘(3) The term ‘outpatient medical assistance facility 

22 services’ means medical and other health services fur23 nished by a medical assistance facility on an outpatient 

24 basis.’’. 
770 

•S 2357 

1 (B) Section 1832(a)(2) (42 U.S.C. 

2 1395k(a)(2)) is amended— 

3 (i) in subparagraph (I), by striking ‘‘and’’ 

4 at the end; 

5 (ii) in subparagraph (J), by striking the 

6 period at the end and inserting ‘‘; and’’; and 

7 (iii) by adding at the end the following new 

8 subparagraph: 

9 ‘‘(K) outpatient medical assistance facility 

10 services (as defined in section 1861(oo)(3)).’’. 

11 (2) PAYMENT.—(A) Section 1833(a) (42 U.S.C. 

12 1395l(a)) is amended— 

13 (i) in paragraph (2), in the matter pre14 ceding subparagraph (A), by striking ‘‘and (I)’’ 

15 and inserting ‘‘(I), and (K)’’; 

16 (ii) in paragraph (6), by striking ‘‘and’’ at 

17 the end; 

18 (iii) in paragraph (7), by striking the pe19 riod at the end and inserting ‘‘; and’’; and 

20 (iv) by adding at the end the following new 

21 paragraph: 

22 ‘‘(8) in the case of outpatient medical assist23 ance facility services, the amounts described in sec24 tion 1834(g).’’. 
771 

•S 2357 

1 (B) Section 1834(g) (42 U.S.C. 1395m(g)) is 

2 amended— 

3 (i) in the subsection heading by inserting 

4 ‘‘AND OUTPATIENT MEDICAL ASSISTANCE FA5 CILITY SERVICES’’ after ‘‘SERVICES’’; 

6 (ii) in paragraph (1), by striking ‘‘provided 

7 during a year before 1993 in a rural primary 

8 care hospital under this part shall be deter9 mined by one of the following methods as elect10 ed by the rural primary care hospital’’ and in11 serting ‘‘in a rural primary care hospital or 

12 medical assistance facility under this part shall 

13 be determined by one of the following methods 

14 as elected by the rural primary care hospital or 

15 medical assistance facility’’; 

16 (iii) in paragraph (1)(A)(ii), by striking 

17 ‘‘outpatient rural primary care hospital serv18 ices’’ each place it appears and inserting ‘‘out19 patient rural primary care hospital services or 

20 outpatient medical assistance facility services’’; 

21 and 

22 (iv) in paragraph (1)(B), by striking ‘‘hos23 pital’’ and inserting ‘‘hospital or facility’’. 

24 (d) PAYMENT CONTINUED TO DESIGNATED

25 EACHS.— 
772 

•S 2357 

1 (1) TERMINATION OF EACH DESIGNATION.— 

2 Section 1820(i)(1)(A) (42 U.S.C. 1395l(4)(i)(1)(A)) 

3 is amended by inserting at the end the following new 

4 flush sentence: 

5 ‘‘The Secretary shall not designate any hospital as 

6 an essential access community hospital on or after 

7 July 1, 1994.’’. 

8 (2) PERMITTING PAYMENT TO PRIOR DES9 IGNATED EACHS.—Section 1886(d)(5)(D) (42 

10 U.S.C. 1395ww(d)(5)(D)) is amended— 

11 (A) in clause (iii)(III), by inserting ‘‘as 

12 such section was in effect as of July 1, 1994’’ 

13 before the period at the end; and 

14 (B) in clause (v), by inserting ‘‘as such 

15 section was in effect as of July 1, 1994’’ after 

16 ‘‘1820(i)(1).’’ 

17 (3) EFFECTIVE DATE.—The amendments made 

18 by this subsection shall take effect on July 1, 1994. 

19 (e) TECHNICAL AMENDMENT RELATING TO PART A 

20 DEDUCTIBLE, COINSURANCE AND SPELL OF ILLNESS.— 

21 (1) Section 1812(a)(1) (42 U.S.C. 1395d(a)(1)), as 

22 amended by subsection (b)(2)(A), is amended— 

23 (A) by striking ‘‘inpatient medical assistance fa24 cility services’’ and inserting ‘‘inpatient medical as25 sistance facility services, inpatient rural primary 
773 

•S 2357 

1 care hospital services, or inpatient medical assist2 ance facility services’’; and 

3 (B) by striking ‘‘and inpatient rural primary 

4 care hospital services’’. 

5 (2) Sections 1813(a) and 1813(b)(3)(A) (42 U.S.C. 

6 1395e(a), 1395e(b)(3)(A)) are each amended by striking 

7 ‘‘inpatient hospital services’’ each place it appears and in8 serting ‘‘inpatient hospital services, inpatient rural pri9 mary care hospital services, or inpatient medical assist10 ance facility services,’’. 

11 (3) Section 1813(b)(3)(B) (42 U.S.C. 

12 1395e(b)(3)(B)) is amended by striking ‘‘inpatient hos13 pital services’’ and inserting ‘‘inpatient hospital services, 

14 inpatient rural primary care hospital services, inpatient 

15 medical assistance facility services,’’. 

16 (4) Section 1861(a) (42 U.S.C. 1395x(a)) is amend17 ed— 

18 (A) in paragraph (1), by striking ‘‘inpatient 

19 hospital services’’ and inserting ‘‘inpatient hospital 

20 services, inpatient rural primary care hospital serv21 ices, inpatient medical assistance facility services,’’; 

22 and 

23 (B) in paragraph (2), by striking ‘‘hospital’’ 

24 and inserting ‘‘hospital, rural primary care hospital, 

25 or medical assistance facility’’. 
774 

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1 (f) REPEAL OF DEVELOPMENT OF PPS SYSTEM FOR

2 INPATIENT RURAL PRIMARY CARE HOSPITAL SERV3 ICES.— 

4 (1) IN GENERAL.—Section 1814(l) (42 U.S.C. 

5 1395f(l)) is amended by striking paragraph (2). 

6 (2) CONFORMING AMENDMENTS.—Section 

7 1814(l)(1) (42 U.S.C. 1395F(l)(1)) is amended— 

8 (A) by striking ‘‘(l)(1)’’ and inserting 

9 ‘‘(l)’’; 

10 (B) by redesignating subparagraphs (A) 

11 and (B) as paragraphs (1) and (2), respectively; 

12 (C) in paragraph (2), as redesignated, by 

13 striking ‘‘paragraph’’ and inserting ‘‘sub14 section’’; and 

15 (D) in the last sentence, by striking ‘‘para16 graph’’ and inserting ‘‘subsection’’. 

17 (g) REPEAL OF DEVELOPMENT AND IMPLEMENTA18 TION OF ALL INCLUSIVE PPS SYSTEM FOR OUTPATIENT

19 RURAL PRIMARY CARE SERVICES.— 

20 (1) IN GENERAL.—Section 1834(g) (42 U.S.C. 

21 1395m(g)), as amended by subsection (c)(2)(B), is 

22 amended by striking paragraph (2). 

23 (2) CONFORMING AMENDMENTS.—Section 

24 1834(g)(1) (42 U.S.C. 1395m(g)(1)) is amended— 

25 (A) by striking ‘‘(1) IN GENERAL.—’’ 
775 

•S 2357 

1 (B) by redesignating subparagraph (A) 

2 and clauses (i) and (ii) of such subparagraph as 

3 paragraph (1) and subparagraphs (A) and (B) 

4 of such paragraph, respectively; 

5 (C) by redesignating subparagraph (B) as 

6 paragraph (2); 

7 (D) in paragraph (1)(A), as redesignated, 

8 by striking ‘‘subparagraph (B)’’; and 

9 (E) in paragraph (1)(B), as so redesig10 nated, by striking ‘‘subparagraph’’ and insert11 ing ‘‘paragraph’’. 

12 (h) EFFECTIVE DATE.—Except as otherwise pro13 vided, the amendments made by this section shall apply 

14 to services furnished on or after October 1, 1994. 

15 SEC. 4112. SUBACUTE CARE STUDY. 

16 (a) STUDY.—The Secretary of Health and Human 

17 Services (hereafter in this section referred to as the ‘‘Sec18 retary’’) shall— 

19 (1) define the level and type of care that should 

20 constitute subacute care; 

21 (2) determine the appropriateness of furnishing 

22 subacute care in different settings by evaluating the 

23 quality of care and patient outcomes; 

24 (3) determine the cost and effectiveness of pro25 viding subacute care under the medicare program 
776 

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1 under title XVIII of such Act to individuals who are 

2 eligible for benefits under part A of such title; 

3 (4) determine the extent to which hospital DRG 

4 prospective payment rates under section 1886(d) of 

5 such Act (42 U.S.C. 1395ww(d)) are appropriate for 

6 the less restrictive institutional settings that provide 

7 subacute care; and 

8 (5) study the relationships between institutions 

9 and their payment methodologies in order to develop 

10 ways in which to maximize the continuity of care for 

11 each patient episode in which subacute care is fur12 nished. 

13 (b) REPORT.—Not later than October 1, 1996, the 

14 Secretary shall submit to the Congress a report on the 

15 matters studied under subsection (a). 

16 PART 3—PROVISIONS RELATING TO PART B 

17 SEC. 4201. UPDATES FOR PHYSICIANS’ SERVICES. 

18 Section 1848(d)(1) (42 U.S.C. 1395w–4(d)(1)) is 

19 amended— 

20 (1) in subparagraph (A), by inserting after 

21 ‘‘subparagraph (B)’’ the following: ‘‘and, in the case 

22 of 1995, specified in subparagraph (C)’’; 

23 (2) by redesignating subparagraph (C) as sub24 paragraph (D); and 
777 

•S 2357 

1 (3) by inserting after subparagraph (B) the fol2 lowing new subparagraph: 

3 ‘‘(C) SPECIAL PROVISION FOR 1995.—For 

4 purposes of subparagraph (A), the conversion 

5 factor specified in this subparagraph for 1995 

6 is— 

7 ‘‘(i) in the case of physicians’ services 

8 included in the category of primary care 

9 services (as defined for purposes of sub10 section (j)(1)), the conversion factor estab11 lished under this subsection for 1994 re12 duced by 1 percent and adjusted by the 

13 update established under paragraph (3) for 

14 1995; and 

15 ‘‘(ii) in the case of any other physi16 cians’ services, the conversion factor estab17 lished under this subsection for 1994 re18 duced by 4.0 percent and adjusted by the 

19 update established under paragraph (3) for 

20 1995.’’. 
778 

•S 2357 

1 SEC. 4202. SUBSTITUTION OF REAL GDP TO ADJUST FOR 

2 VOLUME AND INTENSITY; REPEAL OF RE3 STRICTION ON MAXIMUM REDUCTION PER4 MITTED IN DEFAULT UPDATE. 

5 (a) USE OF REAL GDP TO ADJUST FOR VOLUME

6 AND INTENSITY.—Section 1848(f)(2)(A)(iii) (42 U.S.C. 

7 1395w–4(f)(2)(A)(iii)) is amended to read as follows: 

8 ‘‘(iii) 1 plus the average per capita 

9 growth in the real gross domestic product 

10 (divided by 100) for the 5-fiscal-year pe11 riod ending with the previous fiscal year 

12 (increased by 1.5 percentage points for the 

13 category of services consisting of primary 

14 care services), and’’. 

15 (b) REPEAL OF RESTRICTION ON MAXIMUM REDUC16 TION.—Section 1848(d)(3)(B)(ii) (42 U.S.C. 1395w– 

17 4(d)(3)(B)(ii)) is amended— 

18 (1) in the heading, by inserting ‘‘IN CERTAIN

19 YEARS’’ after ‘‘ADJUSTMENT’’; 

20 (2) in the matter preceding subclause (I), by 

21 striking ‘‘for a year’’; 

22 (3) in subclause (I), by adding ‘‘and’’ at the 

23 end; 

24 (4) in subclause (II), by striking ‘‘, and’’ and 

25 inserting a period; and 

26 (5) by striking subclause (III). 
779 

•S 2357 

1 (c) REPEAL OF PERFORMANCE STANDARD FAC2 TOR.— 

3 (1) IN GENERAL.—Section 1848(f)(2) is 

4 amended by striking subparagraph (B) and redesig5 nating subparagraph (C) as subparagraph (B). 

6 (2) CONFORMING AMENDMENT.—Section 

7 1848(f)(2)(A) is amended in the matter following 

8 clause (iv) by striking ‘‘1, multiplied by 100’’ and all 

9 that follows through ‘‘subparagraph (B))’’ and in10 serting ‘‘1 and multiplied by 100’’. 

11 (d) EFFECTIVE DATE.— 

12 (1) VOLUME PERFORMANCE STANDARDS.—The 

13 amendments made by subsections (a) and (c) shall 

14 apply with respect to volume performance standards 

15 established beginning with fiscal year 1995. 

16 (2) REPEAL OF RESTRICTION ON MAXIMUM RE17 DUCTION.—The amendments made by subsection (b) 

18 shall apply to services furnished on or after January 

19 1, 1997. 

20 SEC. 4203. PAYMENT FOR PHYSICIANS’ SERVICES RELAT21 ING TO INPATIENT STAYS IN CERTAIN HOS22 PITALS. 

23 (a) IN GENERAL.— 
780 

•S 2357 

1 (1) LIMITATIONS DESCRIBED.—Part B of title 

2 XVIII (42 U.S.C. 1831 et seq.) is amended by in3 serting after section 1848 the following new section: 

4 ‘‘LIMITATIONS ON PAYMENT FOR PHYSICIANS’ SERVICES

5 RELATING TO INPATIENT STAYS IN CERTAIN HOSPITALS

6 ‘‘SEC. 1849. (a) DEFINITIONS.—In this section, the 

7 following definitions apply: 

8 ‘‘(1) HOSPITAL.—The term ‘hospital’ means a 

9 subsection (d) hospital as defined in section 

10 1886(d)(1)(B). 

11 ‘‘(2) MEDICAL STAFF.—An individual fur12 nishing a physician’s service is considered to be on 

13 the medical staff of a hospital— 

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

15 for hospitals established by the Joint Commis16 sion on Accreditation of Health Organiza17 tions)— 

18 ‘‘(i) the individual is subject to by19 laws, rules, and regulations established by 

20 the hospital to provide a framework for the 

21 self-governance of medical staff activities; 

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

23 regulations, the individual has clinical 

24 privileges granted by the hospital’s gov25 erning body; and 
781 

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1 ‘‘(iii) under such clinical privileges, 

2 the individual may provide physicians’ 

3 services independently within the scope of 

4 the individual’s clinical privileges, or 

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

6 service to a medicare beneficiary in such hos7 pital. 

8 ‘‘(3) RURAL AREA; URBAN AREA.—The terms 

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

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

11 ‘‘(4) TEACHING HOSPITAL.—The term ‘teaching 

12 hospital’ means a hospital which has a teaching pro13 gram approved as specified in section 1861(b)(6). 

14 ‘‘(b) SERVICES SUBJECT TO REDUCTION.— 

15 ‘‘(1) DETERMINATION OF HOSPITAL-SPECIFIC

16 PER ADMISSION RELATIVE VALUE.—Not later than 

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

18 Secretary shall determine for each hospital— 

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

20 relative value under subsection (c)(2) for the 

21 following year; and 

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

23 value is projected to exceed the allowable aver24 age per admission relative value applicable to 
782 

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1 the hospital for the following year under sub2 section (c)(1). 

3 ‘‘(2) REDUCTION FOR SERVICES AT HOSPITALS

4 EXCEEDING ALLOWABLE AVERAGE PER ADMISSION

5 RELATIVE VALUE.—If the Secretary determines 

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

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

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

12 amount of payment otherwise determined under this 

13 part for each physician’s service furnished during 

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

16 staff. 

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

18 HOSPITALS AND CARRIERS.—Not later than October 

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

20 shall notify the medical executive committee of each 

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

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

24 the medical staff of such hospital under paragraph 

25 (1). 
783 

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1 ‘‘(c) DETERMINATION OF ALLOWABLE AVERAGE PER

2 ADMISSION RELATIVE VALUE AND HOSPITAL-SPECIFIC

3 PER ADMISSION RELATIVE VALUES.— 

4 ‘‘(1) ALLOWABLE AVERAGE PER ADMISSION

5 RELATIVE VALUE.— 

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

7 hospital located in an urban area, the allowable 

8 average per admission relative value established 

9 under this subsection for a year is equal to 125 

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

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

13 (2) for all hospital medical staffs. 

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

15 hospital located in a rural area, the allowable 

16 average per admission relative value established 

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

20 relative values determined under paragraph (2) 

21 for all hospital medical staffs. 

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

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

25 per admission relative value projected for a hos-
784 

•S 2357 

1 pital (other than a teaching hospital) for a cal2 endar year shall be equal to the average per ad3 mission relative value (as determined under sec4 tion 1848(c)(2)) for physicians’ services fur5 nished to inpatients of the hospital by the hos6 pital’s medical staff (excluding interns and resi7 dents) during the second year preceding such 

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

10 hospitals (as determined by the Secretary under 

11 subparagraph (C)). 

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

14 relative value projected for a teaching hospital 

15 in a calendar year shall be equal to the sum 

16 of— 

17 ‘‘(i) the average per admission relative 

18 value (as determined under section 

19 1848(c)(2)) for physicians’ services fur20 nished to inpatients of the hospital by the 

21 hospital’s medical staff (excluding interns 

22 and residents) during the second year pre23 ceding such calendar year adjusted for 

24 variations in case-mix, disproportionate 

25 share status, and teaching status among 
785 

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1 hospitals (as determined by the Secretary 

2 under subparagraph (C)); and 

3 ‘‘(ii) the equivalent per admission rel4 ative value (as determined under section 

5 1848(c)(2)) for physicians’ services fur6 nished to inpatients of the hospital by in7 terns and residents of the hospital during 

8 the second calendar year preceding such 

9 calendar year, adjusted for variations in 

10 case-mix, disproportionate share status, 

11 and teaching status among hospitals (as 

12 determined by the Secretary under sub13 paragraph (C)). The Secretary shall deter14 mine such equivalent relative value unit 

15 per admission for interns and residents 

16 based on the best available data for teach17 ing hospitals and may make such adjust18 ment in the aggregate. 

19 ‘‘(C) ADJUSTMENT FOR TEACHING AND

20 DISPROPORTIONATE SHARE HOSPITALS.—The 

21 Secretary shall adjust the allowable per admis22 sion relative values otherwise determined under 

23 this paragraph to take into account the needs 

24 of teaching hospitals and hospitals receiving ad25 ditional payments under subparagraphs (F) and 
786 

•S 2357 

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

2 teaching status or disproportionate share shall 

3 not be less than zero. 

4 ‘‘(d) AMOUNT OF REDUCTION.—The amount of pay5 ment otherwise made under this part for a physician’s 

6 service that is subject to a reduction under subsection (b) 

7 during a year shall be reduced by 15 percent, in the case 

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

9 of the hospital for which the Secretary determines under 

10 subsection (b)(1) that the hospital medical staff’s pro11 jected relative value per admission exceeds the allowable 

12 average per admission relative value. 

13 ‘‘(e) RECONCILIATION OF REDUCTIONS BASED ON

14 HOSPITAL-SPECIFIC RELATIVE VALUE PER ADMISSION

15 WITH ACTUAL RELATIVE VALUES.— 

16 ‘‘(1) DETERMINATION OF ACTUAL AVERAGE

17 PER ADMISSION RELATIVE VALUE.—Not later than 

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

19 Secretary shall determine the actual average per ad20 mission relative value (as determined pursuant to 

21 section 1848(c)(2)) for the physicians’ services fur22 nished by members of a hospital’s medical staff to 

23 inpatients of the hospital during the previous year, 

24 on the basis of claims for payment for such services 

25 that are submitted to the Secretary not later than 
787 

•S 2357 

1 90 days after the last day of such previous year. The 

2 actual average per admission relative value shall be 

3 adjusted by the appropriate case-mix, dispropor4 tionate share factor, and teaching factor for the hos5 pital medical staff (as determined by the Secretary 

6 under subsection (c)(2)(C)). 

7 ‘‘(2) RECONCILIATION WITH REDUCTIONS

8 TAKEN.— 

9 ‘‘(A) REIMBURSEMENT.—In the case of a 

10 hospital for which the payment amounts for 

11 physicians’ services furnished by members of 

12 the hospital’s medical staff to inpatients of the 

13 hospital were reduced under this section for a 

14 year— 

15 ‘‘(i) if the actual average per admis16 sion relative value for such hospital’s med17 ical staff during the year (as determined 

18 by the Secretary under paragraph (1)) did 

19 not exceed the allowable average per ad20 mission relative value applicable to the hos21 pital’s medical staff under subsection 

22 (c)(1) for the year, the Secretary shall re23 imburse the fiduciary agent for the medical 

24 staff by the amount by which payments for 

25 such services were reduced for the year 
788 

•S 2357 

1 under subsection (d), including interest at 

2 an appropriate rate determined by the Sec3 retary; and 

4 ‘‘(ii) if the actual average per admis5 sion relative value for such hospital’s med6 ical staff during the year (as determined 

7 by the Secretary under paragraph (1)) ex8 ceeded the allowable average per admission 

9 relative value applicable to the hospital’s 

10 medical staff under subsection (c)(1) for 

11 the year, the Secretary shall reimburse the 

12 fiduciary agent for the medical staff, as a 

13 percent of the total amount of payment 

14 otherwise determined under this part for 

15 physicians’ services furnished during the 

16 year to inpatients of the hospital by the 

17 hospital’s medical staff (prior to the reduc18 tion under subsection (d)), the difference 

19 between 15 percentage points and the ac20 tual number of percentage points that the 

21 medical staff exceeded the allowable aver22 age per admission relative value, including 

23 interest at any appropriate rate determined 

24 by the Secretary. 
789 

•S 2357 

1 ‘‘(B) NO REIMBURSEMENT.—The Sec2 retary shall not pay the fiduciary agent for the 

3 medical staff of a hospital any amounts by 

4 which payments for physicians’ services pro5 vided by the medical staff were reduced for a 

6 year under this section if the actual average per 

7 admission relative value for such hospital’s 

8 medical staff during the year (as determined by 

9 the Secretary under paragraph (1)) exceeded 

10 the allowable average per admission relative 

11 value applicable to the hospital’s medical staff 

12 under subsection (c)(1) for the year by 15 per13 centage points or more. 

14 ‘‘(3) MEDICAL EXECUTIVE COMMITTEE OF A

15 HOSPITAL.—Each medical executive committee of a 

16 hospital whose medical staff is projected to exceed 

17 the allowable relative value per admission for a year, 

18 shall have 1 year from the date of notification that 

19 such medical staff is projected to exceed the allow20 able relative value per admission to designate a fidu21 ciary agent for the medical staff to receive and dis22 burse any appropriate amounts withheld made by 

23 the carrier. 

24 ‘‘(4) ALTERNATIVE REIMBURSEMENT TO MEM25 BERS OF STAFF.—At the request of a fiduciary 
790 

•S 2357 

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

2 the medical staff is owed the reimbursement de3 scribed in paragraph (2)(A)(ii) for excess reductions 

4 in payments during a year, the Secretary shall make 

5 such reimbursement to the members of the hospital’s 

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

7 proportion of physicians’ services furnished to inpa8 tients of the hospital during the year that were fur9 nished by each member of the medical staff. 

10 ‘‘(f) CLAIMS TO BE SUBMITTED NOT LATER THAN

11 90 DAYS AFTER END OF YEAR.—Notwithstanding any 

12 other provision of law, no payment may be made under 

13 this part for any physician’s service furnished by a mem14 ber of the medical staff of a hospital to an inpatient of 

15 the hospital during a year unless the hospital submits a 

16 claim to the Secretary for the payment for such service 

17 not later than 90 days after the last day of the year.’’. 

18 (2) CONFORMING AMENDMENTS.—(A) Section 

19 1833(a)(1)(N) (42 U.S.C. 1395l(a)(1)(N)) is 

20 amended by inserting ‘‘(subject to reduction under 

21 section 1849)’’ after ‘‘1848(a)(1)’’. 

22 (B) Section 1848(a)(1)(B) (42 U.S.C. 1395w– 

23 4(a)(1)(B)) is amended by striking ‘‘this sub24 section,’’ and inserting ‘‘this subsection and section 

25 1849,’’. 
791 

•S 2357 

1 (b) REQUIRING PHYSICIANS TO IDENTIFY HOSPITAL

2 AT WHICH SERVICE FURNISHED.—Section 

3 1848(g)(4)(A)(i) (42 U.S.C. 1395w–4(g)(4)(A)(i)) is 

4 amended by striking ‘‘beneficiary,’’ and inserting ‘‘bene5 ficiary (and, in the case of a service furnished to an inpa6 tient of a hospital, report the hospital identification num7 ber on such claim form),’’. 

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

9 this section shall apply to services furnished on or after 

10 January 1, 1998. 

11 SEC. 4204. CHANGES IN UNDERSERVED AREA BONUS PAY12 MENTS. 

13 (a) IN GENERAL.—Section 1833(m) (42 U.S.C. 

14 1395l(m)) is amended— 

15 (1) by inserting ‘‘(1)’’ after ‘‘(m)’’, 

16 (2) by inserting ‘‘described in paragraph (2)’’ 

17 after ‘‘physicians’ services’’, 

18 (3) by striking ‘‘10 percent’’ and inserting ‘‘the 

19 applicable percent’’, 

20 (4) by striking ‘‘service’’ the last place it ap21 pears and inserting ‘‘services’’, and 

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

23 paragraph: 

24 ‘‘(2)(A) The applicable percent referred to in para25 graph (1) is 20 percent in the case of primary care serv-
792 

•S 2357 

1 ices, as defined in section 1842(i)(4), and 10 percent for 

2 services other than primary care services furnished in 

3 health professional shortage areas located in rural areas 

4 as defined in section 1886(d)(2)(D). 

5 ‘‘(B) The Secretary shall reduce payments for all 

6 services (other than primary care services) for which pay7 ment may be made under this section by such percentage 

8 as the Secretary determines necessary so that, beginning 

9 on the date of the enactment of the Health Security Act, 

10 the amendments made by section 4204(e) of such Act 

11 would not result in expenditures under this section that 

12 exceed the amount of such expenditures that would have 

13 been made if such amendment had not been made.’’. 

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

15 paragraph (1) are effective for services furnished on or 

16 after January 1, 1995. 

17 SEC. 4205. CORRECTION OF MVPS UPWARD BIAS. 

18 (a) IN GENERAL.—Section 1848(f)(2)(A)(iv) (42 

19 U.S.C. 1395w–4(f)(2)(A)(iv)) is amended by striking ‘‘in20 cluding changes in law and regulations affecting the per21 centage increase described in clause (i)’’ and inserting ‘‘ex22 cluding anticipated responses to such changes’’. 

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

24 subsection (a) shall apply with respect to performance 
793 

•S 2357 

1 standard rates of increase determined for fiscal year 1995 

2 and succeeding fiscal years. 

3 SEC. 4206. DEMONSTRATION PROJECTS FOR MEDICARE 

4 STATE-BASED PERFORMANCE STANDARD 

5 RATE OF INCREASE. 

6 Section 1848(f) (42 U.S.C. 1395w–4(f)) is amended 

7 by adding at the end the following new paragraph: 

8 ‘‘(6) STATE-BASED PERFORMANCE STANDARD

9 RATES OF INCREASE DEMONSTRATION PROJECTS.— 

10 The Secretary shall establish demonstration projects 

11 in not more than 3 States under which a State 

12 elects State-based performance standard rates of in13 crease to substitute for the national performance 

14 standard rates of increase established for the year 

15 under paragraph (2). The Secretary shall develop 

16 criteria for the establishment of such demonstration 

17 projects which shall include the requirement of 

18 budget-neutrality for payments made under this part 

19 with respect to physicians’ services furnished in a 

20 State participating in the demonstration project.’’. 
794 

•S 2357 

1 SEC. 4207. ELIMINATION OF FORMULA-DRIVEN OVERPAY2 MENTS FOR CERTAIN OUTPATIENT HOSPITAL 

3 SERVICES. 

4 (a) AMBULATORY SURGICAL CENTER PROCE5 DURES.—Section 1833(i)(3)(B)(i)(II) (42 U.S.C. 

6 1395l(i)(3)(B)(i)(II)) is amended— 

7 (1) by striking ‘‘of 80 percent’’; and 

8 (2) by striking the period at the end and insert9 ing the following: ‘‘, less the amount a provider may 

10 charge as described in clause (ii) of section 

11 1866(a)(2)(A).’’. 

12 (b) RADIOLOGY SERVICES AND DIAGNOSTIC PROCE13 DURES.—Section 1833(n)(1)(B)(i)(II) (42 U.S.C. 

14 1395l(n)(1)(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 (c) EFFECTIVE DATE.—The amendments made by 

21 this section shall apply to services furnished during por22 tions of cost reporting periods occurring on or after July 

23 1, 1994. 
795 

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1 SEC. 4208. EYE OR EYE AND EAR HOSPITALS. 

2 Section 1833(i)(4)(A) (42 U.S.C. 1395l(i)(4)(A)) is 

3 amended in the matter following clause (iii) by striking 

4 ‘‘January 1, 1995’’ and inserting ‘‘September 30, 1997’’. 

5 SEC. 4209. IMPOSITION OF COINSURANCE ON LABORATORY 

6 SERVICES. 

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

8 section 1833(a) (42 U.S.C. 1395l(a)) are each amended— 

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

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

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

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

13 rate’’. 

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

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

16 January 1, 1995. 

17 SEC. 4210. APPLICATION OF COMPETITIVE ACQUISITION 

18 PROCESS FOR PART B ITEMS AND SERVICES. 

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

20 amended by inserting after section 1846 the following: 

21 ‘‘COMPETITION ACQUISITION FOR ITEMS AND SERVICES

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

23 AREAS.— 

24 ‘‘(1) IN GENERAL.—The Secretary shall estab25 lish competitive acquisition areas for the purpose of 

26 awarding a contract or contracts for the furnishing 
796 

•S 2357 

1 under this part of the items and services described 

2 in subsection (c) on or after January 1, 1995. The 

3 Secretary may establish different competitive acqui4 sition areas under this subsection for different class5 es of items and services under this part. 

6 ‘‘(2) CRITERIA FOR ESTABLISHMENT.—The 

7 competitive acquisition areas established under para8 graph (1) shall— 

9 ‘‘(A) initially be, or be within, metropolitan 

10 statistical areas; and 

11 ‘‘(B) be chosen based on the availability 

12 and accessibility of suppliers and the probable 

13 savings to be realized by the use of competitive 

14 bidding in the furnishing of items and services 

15 in the area. 

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

17 ‘‘(1) IN GENERAL.—The Secretary shall con18 duct a competition among individuals and entities 

19 supplying items and services under this part for 

20 each competitive acquisition area established under 

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

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

23 The Secretary may not award a contract to any indi24 vidual or entity under the competition conducted 

25 pursuant to paragraph (1) to furnish an item or 
797 

•S 2357 

1 service under this part unless the Secretary finds 

2 that the individual or entity meets quality standards 

3 specified by the Secretary for the furnishing of such 

4 item or service. 

5 ‘‘(3) CONTENTS OF CONTRACT.—A contract en6 tered into with an individual or entity under the 

7 competition conducted pursuant to paragraph (1) 

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

9 a class)— 

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

11 entity shall provide; and 

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

13 the Secretary may require. 

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

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

16 follows: 

17 ‘‘(1) Magnetic resonance imaging tests and 

18 computerized axial tomography scans, including a 

19 physician’s interpretation of the results of such tests 

20 and scans. 

21 ‘‘(2) Enteral and parenteral nutrients and sup22 plies.’’. 

23 (b) ITEMS AND SERVICES TO BE FURNISHED ONLY

24 THROUGH COMPETITIVE ACQUISITION.—Section 1862(a) 

25 (42 U.S.C. 1395y(a)) is amended— 
798 

•S 2357 

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

2 (15); 

3 (2) by striking the period at the end of para4 graph (16) and inserting ‘‘; or’’; and 

5 (3) by inserting after paragraph (16) the fol6 lowing new paragraph: 

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

8 service furnished in a competitive acquisition area 

9 (as established by the Secretary under section 

10 1847(a)) by an individual or entity other than the 

11 supplier with whom the Secretary has entered into 

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

13 of such item or service in that area, unless the Sec14 retary finds that such expenses were incurred in a 

15 case of urgent need.’’. 

16 (c) REDUCTION IN PAYMENT AMOUNTS IF COMPETI17 TIVE ACQUISITION FAILS TO ACHIEVE MINIMUM REDUC18 TION IN PAYMENTS.—Notwithstanding any other provi19 sion of title XVIII of the Social Security Act, if the estab20 lishment of competitive acquisition areas under section 

21 1847 of such Act (as added by subsection (a)) and the 

22 limitation of coverage for items and services under part 

23 B of such title to items and services furnished by providers 

24 with competitive acquisition contracts under such section 

25 during 1996 does not result in a reduction of at least 10 
799 

•S 2357 

1 percent in the projected payment amount that would have 

2 applied to the items or services under part B if the items 

3 or services had not been furnished through competitive ac4 quisition under such section in such year, the Secretary 

5 shall reduce for such year the payment amount for all such 

6 services by such percentage as the Secretary determines 

7 necessary to result in such a reduction for such year. 

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

9 this section shall apply to items and services furnished 

10 under part B of title XVIII of the Social Security Act on 

11 or after January 1, 1995. 

12 SEC. 4211. APPLICATION OF COMPETITIVE ACQUISITION 

13 PROCEDURES FOR LABORATORY SERVICES. 

14 (a) IN GENERAL.—Section 1847(c), as added by sec15 tion 4210, is amended by inserting after paragraph (2) 

16 the following new paragraph: 

17 ‘‘(3) Clinical diagnostic laboratory tests.’’. 

18 (b) REDUCTION IN FEE SCHEDULE AMOUNTS IF

19 COMPETITIVE ACQUISITION FAILS TO ACHIEVE SAV20 INGS.—Section 1833(h) (42 U.S.C. 1395l(h)) is amended 

21 by adding at the end the following new paragraph: 

22 ‘‘(7) Notwithstanding any other provision of this sub23 section, if the Secretary applies the authority provided 

24 under section 1847 to establish competitive acquisition 

25 areas for the furnishing of clinical diagnostic laboratory 
800 

•S 2357 

1 tests during 1996 and the application of such authority 

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

3 the projected payment amount that would have applied to 

4 such tests under this section in such year if the tests had 

5 not been furnished through competitive acquisition under 

6 section 1847, the Secretary shall reduce for such year each 

7 payment amount for all such tests otherwise determined 

8 under the fee schedules and negotiated rates established 

9 under this subsection by such percentage as the Secretary 

10 determines necessary to result in such a reduction for such 

11 year.’’. 

12 SEC. 4212. EXPANDED COVERAGE FOR PHYSICIAN ASSIST13 ANTS AND NURSE PRACTITIONERS. 

14 (a) COVERAGE IN OUTPATIENT SETTINGS.—Section 

15 1861(s)(2)(K) (42 U.S.C. 1395x(s)(2)(K)) is amended— 

16 (1) in clause (i)— 

17 (A) by striking ‘‘or’’ at the end of sub18 clause (II); and 

19 (B) by inserting ‘‘or (IV) in an outpatient 

20 setting as defined by the Secretary’’ following 

21 ‘‘shortage area,’’; and 

22 (2) in clause (ii), by striking ‘‘section 1919(a)’’ 

23 and inserting ‘‘section 1919(a) or in an outpatient 

24 setting as defined by the Secretary’’. 
801 

•S 2357 

1 (b) PAYMENT BASED ON PHYSICIAN FEE SCHED2 ULE.— 

3 (1) Section 1833(a)(1)(O) (42 U.S.C. 

4 1395l(a)(1)(O)) is amended— 

5 (A) by striking ‘‘section 1861(s)(2)(K)(iii) 

6 (relating to nurse practitioner and clinical nurse 

7 specialist services provided in a rural area)’’ 

8 and inserting ‘‘section 1861(s)(2)(K)’’; 

9 (B) by striking ‘‘for services furnished on 

10 or after January 1, 1992,’’ and inserting ‘‘for 

11 services described in section 1861(s)(2)(K)(iii) 

12 furnished on or after January 1, 1992, and for 

13 services described in clauses (i), (ii), and (iv) of 

14 section 1861(s)(2)(K) furnished on or after 

15 January 1, 1997,’’; and 

16 (C) by striking ‘‘subsection (r)(2)’’ and in17 serting ‘‘subsection (r)(2) or subparagraph (A) 

18 or (B) of section 1842(b)(12)’’. 

19 (2) Section 1842(b)(12)(A) (42 U.S.C. 

20 1395u(b)(12)(A)) is amended— 

21 (A) by striking ‘‘and’’ at the end of clause 

22 (i); 

23 (B) in clause (ii)(II), by inserting ‘‘and be24 fore January 1, 1997,’’ after ‘‘January 1, 

25 1992,’’; 
802 

•S 2357 

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

2 clause (ii)(II) and inserting ‘‘; and’’; and 

3 (D) by inserting at the end the following 

4 clause: 

5 ‘‘(iii) in the case of services furnished 

6 on or after January 1, 1997— 

7 ‘‘(I) in the case of services per8 formed as an assistant at surgery, 65 

9 percent of the amount that would oth10 erwise be recognized if performed by a 

11 physician who is serving as an assist12 ant at surgery, and 

13 ‘‘(II) in the case of other serv14 ices, 85 percent of the fee schedule 

15 amount provided under section 

16 1848.’’. 

17 (c) RURAL NURSE PRACTITIONERS AS ASSISTANTS

18 AT SURGERY IN URBAN AREAS.—Section 

19 1861(s)(2)(K)(ii) (42 U.S.C. 1395x(s)(2)(K)(ii)), as 

20 amended by subsection (a)(2), is further amended by add21 ing ‘‘or services as an assistant at surgery furnished by 

22 a nurse practitioner whose primary practice location (as 

23 defined by the Secretary) is in a rural area (as defined 

24 in section 1886(d)(2)(D)) to an individual who resides in 

25 a rural area when the service is furnished to such indi-
803 

•S 2357 

1 vidual in an urban area by such practitioner when such 

2 practitioner refers such individual to an urban area for 

3 the furnishing of services’’ after ‘‘as defined by the Sec4 retary’’. 

5 (d) CONFORMING AMENDMENTS.— 

6 (1) Section 1861(b)(4) (42 U.S.C. 1395x(b)(4)) 

7 is amended by striking ‘‘subsection (s)(2)(K)(i)’’ and 

8 inserting ‘‘subsection (s)(2)(K)’’. 

9 (2) Section 1862(a)(14) (42 U.S.C. 

10 1395y(a)(14)), as amended by section4108(b)(4)(K), 

11 is amended by striking ‘‘section 1861(s)(2)(K)(i)’’ 

12 and inserting ‘‘section 1861(s)(2)(K)’’. 

13 (3) Section 1866(a)(1)(H) (42 U.S.C. 

14 1395cc(a)(1)(H)), as amended by section 

15 4108(b)(4)(L)(ii), is further amended by striking 

16 ‘‘section 1861(s)(2)(K)(i)’’ and inserting ‘‘section 

17 1861(s)(2)(K)’’. 

18 (e) EFFECTIVE DATE.—The amendments made by 

19 this section shall apply to services furnished on or after 

20 January 1, 1997. 

21 SEC. 4213. ELIMINATION OF BALANCE BILLING. 

22 Effective January 1, 1996, notwithstanding any pro23 vision of title XVIII of the Social Security Act (42 U.S.C. 

24 1395 et seq.), a nonparticipating physician, or nonpartici25 pating supplier or other person (as such terms are defined 
804 

•S 2357 

1 in section 1842(i)(2) of such Act (42 U.S.C. 1395u(i)(2)) 

2 may not receive payment for services or items under such 

3 title. 

4 SEC. 4214. DEVELOPMENT AND IMPLEMENTATION OF RE5 SOURCE-BASED METHODOLOGY FOR PRAC6 TICE EXPENSES. 

7 (a) DEVELOPMENT.— 

8 (1) IN GENERAL.—The Secretary of Health and 

9 Human Services shall develop a methodology for im10 plementing in 1997 a resource-based system for de11 termining practice expense relative value units for 

12 each physician’s service. The methodology utilized 

13 shall recognize the staff, equipment, and supplies 

14 used in the provision of various medical and surgical 

15 services in various settings. 

16 (2) REPORT.—The Secretary shall transmit a 

17 report by January 1, 1996, on the methodology de18 veloped under paragraph (1) to the Committee on 

19 Ways and Means and the Committee on Energy and 

20 Commerce of the House of Representatives and the 

21 Committee on Finance of the Senate. The report 

22 shall include a presentation of data utilized in devel23 oping the methodology and an explanation of the 

24 methodology. 

25 (b) IMPLEMENTATION.— 
805 

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1 (1) IN GENERAL.—Section 1848(c)(2)(C)(ii) 

2 (42 U.S.C. 1395w–4(c)(2)(C)(ii)) is amended— 

3 (A) by inserting ‘‘for the service for years 

4 before 1997’’ before ‘‘equal to’’, 

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

6 subclause (II) and inserting a comma, and 

7 (C) by adding after and below subclause 

8 (II) the following: 

9 ‘‘and for years beginning with 1997 based 

10 on the relative practice expense resources 

11 involved in furnishing the service.’’. 

12 (2) CONFORMING AMENDMENT.—Section 

13 1848(c)(3)(C)(ii) (42 U.S.C. 1395w–4(c)(3)(C)(ii)) 

14 is amended by striking ‘‘The practice’’ and inserting 

15 ‘‘For years before 1997, the practice’’. 

16 (3) APPLICATION OF CERTAIN PROVISIONS.—In 

17 implementing the amendment made by paragraph 

18 (1)(C), the provisions of clauses (ii)(II) and (iii) of 

19 section 1848(c)(2)(B) of the Social Security Act 

20 shall apply in the same manner as they apply to ad21 justments under clause (ii)(I) of such section. 

22 SEC. 4215. PAYMENTS FOR DURABLE MEDICAL EQUIPMENT. 

23 (a) IN GENERAL.—Subparagraph (B) of section 

24 1834(a)(14) (42 U.S.C. 1395m(a)(14)) is amended by 
806 

•S 2357 

1 striking the period at the end and inserting ‘‘, except that 

2 such percentage increase shall— 

3 ‘‘(i) be reduced by 2 percentage points 

4 for each of years 1995 and 1996; 

5 ‘‘(ii) be reduced by 1.5 percentage 

6 points for 1997; 

7 ‘‘(iii) be reduced by 2 percentage 

8 points for 1998; and 

9 ‘‘(iv) be reduced by 1 percentage 

10 points for 1999.’’. 

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

12 this section shall be effective on the date of the enactment 

13 of this Act. 

14 SEC. 4216. GENERAL PART B PREMIUM. 

15 Section 1839(e) (42 U.S.C. 1395r(e)) is amended— 

16 (1) in paragraph (1)(A), by striking ‘‘and prior 

17 to January 1999’’; and 

18 (2) in paragraph (2), by striking ‘‘prior to Jan19 uary 1998’’. 

20 PART 4—PROVISIONS RELATING TO PARTS A 

21 AND B 

22 SEC. 4301. MEDICARE SECONDARY PAYER CHANGES. 

23 (a) EXTENSION OF DATA MATCH.— 

24 (1) Section 1862(b)(5)(C) (42 U.S.C. 

25 1395y(b)(5)(C)) is amended by striking clause (iii). 
807 

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1 (2) Section 6103(l)(12) of the Internal Revenue 

2 Code of 1986 is amended by striking subparagraph 

3 (F). 

4 (b) REPEAL OF SUNSET ON APPLICATION TO DIS5 ABLED EMPLOYEES OF EMPLOYERS WITH MORE THAN

6 100 EMPLOYEES.—Section 1862(b)(1)(B)(iii) (42 U.S.C. 

7 1395y(b)(1)(B)(iii)) is amended— 

8 (1) in the heading, by striking ‘‘SUNSET’’ and 

9 inserting ‘‘EFFECTIVE DATE’’; and 

10 (2) by striking ‘‘, and before October 1, 1998’’. 

11 (c) EXTENSION OF PERIOD FOR END STAGE RENAL

12 DISEASE BENEFICIARIES.—Section 1862(b)(1)(C) (42 

13 U.S.C. 1395y(b)(1)(C)) is amended in the second sentence 

14 by striking ‘‘and on or before October 1, 1998,’’. 

15 SEC. 4302. INCREASE IN MEDICARE SECONDARY PAYER 

16 COVERAGE FOR END STAGE RENAL DISEASE 

17 SERVICES TO 24 MONTHS. 

18 (a) IN GENERAL.—Section 1862(b)(1)(C) (42 U.S.C. 

19 1395y(b)(1)(C)), as amended by section 4301(c), is 

20 amended by striking the last sentence and inserting: ‘‘Ef21 fective for items and services furnished on or after Janu22 ary 1, 1996 (with respect to periods beginning on or after 

23 July 1, 1994), this subparagraph shall be applied by sub24 stituting ‘24-month’ for ‘12-month’ each place it ap25 pears.’’. 
808 

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

2 subsection (a) shall apply to items and services provided 

3 on or after January 1, 1996. 

4 SEC. 4303. EXPANSION OF CENTERS OF EXCELLENCE. 

5 (a) IN GENERAL.—The Secretary of Health and 

6 Human Services shall use a competitive process to con7 tract with centers of excellence for cataract surgery, coro8 nary artery by-pass surgery, and such other services as 

9 the Secretary determines to be appropriate. Payment 

10 under title XVIII of the Social Security Act will be made 

11 for services subject to such contracts on the basis of nego12 tiated or all-inclusive rates as follows: 

13 (1) The center shall cover services provided in 

14 an urban area (as defined in section 1886(d)(2)(D) 

15 of the Social Security Act) for years beginning with 

16 fiscal year 1995. 

17 (2) The amount of payment made by the Sec18 retary to the center under title XVIII of the Social 

19 Security Act for services covered under the contract 

20 shall be less than the aggregate amount of the pay21 ments that the Secretary would have made to the 

22 center for such services had the contract not been in 

23 effect. 

24 (3) The Secretary shall make payments to the 

25 center on such a basis for the following services fur-
809 

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1 nished to individuals entitled to benefits under such 

2 title: 

3 (A) Facility, professional, and related serv4 ices relating to cataract surgery. 

5 (B) Coronary artery bypass surgery and 

6 related services. 

7 (C) Such other services as the Secretary 

8 and the center may agree to cover under the 

9 contract. 

10 (b) REBATE OF PORTION OF SAVINGS.—In the case 

11 of any services provided under a contract conducted under 

12 subsection (a), the Secretary shall make a payment to 

13 each individual to whom such services are furnished (at 

14 such time and in such manner as the Secretary may pro15 vide) in an amount equal to 10 percent of the amount by 

16 which— 

17 (1) the amount of payment that would have 

18 been made by the Secretary under title XVIII of the 

19 Social Security Act to the center for such services if 

20 the services had not been provided under the con21 tract, exceeds 

22 (2) the amount of payment made by the Sec23 retary under such title to the center for such serv24 ices. 
810 

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1 SEC. 4304. REDUCTION IN ROUTINE COST LIMITS FOR 

2 HOME HEALTH SERVICES. 

3 (a) REDUCTION IN UPDATE TO MAINTAIN FREEZE

4 IN 1996.—Section 1861(v)(1)(L)(i) (42 U.S.C. 

5 1395x(v)(1)(L)(i)) is amended— 

6 (1) in subclause (II), by striking ‘‘or’’ at the 

7 end; 

8 (2) in subclause (III), by striking ‘‘112 per9 cent,’’ and inserting ‘‘and before July 1, 1996, 112 

10 percent, or’’; and 

11 (3) by inserting after subclause (III) the fol12 lowing new subclause: 

13 ‘‘(IV) July 1, 1996, 100 percent (adjusted by 

14 such amount as the Secretary determines to be nec15 essary to preserve the savings resulting from the en16 actment of section 13564(a)(1) of the Omnibus 

17 Budget Reconciliation Act of 1993),’’. 

18 (b) BASING LIMITS IN SUBSEQUENT YEARS ON ME19 DIAN OF COSTS.— 

20 (1) IN GENERAL.—Section 1861(v)(1)(L)(i) (42 

21 U.S.C. 1395x(v)(1)(L)(i)), as amended by subsection 

22 (a), is amended in the matter following subclause 

23 (IV) by striking ‘‘the mean’’ and inserting ‘‘the me24 dian’’. 

25 (2) ADJUSTMENT TO LIMITS.—Section 

26 1861(v)(1)(L)(ii) (42 U.S.C. 1395x(v)(1)(L)(ii)) is 
811 

•S 2357 

1 amended by adding at the end the following new 

2 sentence: ‘‘The effect of the amendments made by 

3 656(b) of the Health Security Act shall not be con4 sidered by the Secretary in making adjustments pur5 suant to this clause.’’. 

6 (3) EFFECTIVE DATE.—The amendments made 

7 by paragraphs (1) and (2) shall apply to cost report8 ing periods beginning on or after July 1, 1997. 

9 SEC. 4305. IMPOSITION OF 20 PERCENT COINSURANCE ON 

10 HOME HEALTH SERVICES UNDER MEDICARE. 

11 (a) PART A.—Section 1813(a) (42 U.S.C. 1395e(a)) 

12 is amended by adding at the end the following new para13 graph: 

14 ‘‘(5) The amount payable for a home health service 

15 furnished to an individual under this part shall be reduced 

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

17 of all the per visit costs for such service furnished under 

18 this title determined under section 1861(v)(1)(L) (as de19 termined by the Secretary on a prospective basis for serv20 ices furnished during a calendar year).’’. 

21 (b) PART B.—Section 1833(a)(2) (42 U.S.C. 

22 1395l(a)(2)), as amended by section 4108(c)(2), is amend23 ed— 
812 

•S 2357 

1 (1) in subparagraph (A), by striking ‘‘to home 

2 health services,’’ and by striking the comma after 

3 ‘‘opinion)’’; 

4 (2) in subparagraph (E), by striking ‘‘and’’ at 

5 the end; 

6 (3) in subparagraph (F), by striking the semi7 colon at the end and inserting ‘‘; and’’; and 

8 (4) by adding at the end the following new sub9 paragraph: 

10 ‘‘(G) with respect to any home health serv11 ice— 

12 ‘‘(i) the lesser of — 

13 ‘‘(I) the reasonable cost of such 

14 service, as determined under section 

15 1861(v), or 

16 ‘‘(II) the customary charges with 

17 respect to such service, 

18 less the amount a provider may charge as 

19 described in clause (ii) of section 

20 1866(a)(2)(A), or 

21 ‘‘(ii) if such service is furnished by a 

22 public provider of services, or by another 

23 provider which demonstrates to the satis24 faction of the Secretary that a significant 

25 portion of its patients are low-income (and 
813 

•S 2357 

1 requests that payment be made under this 

2 clause), free of charge or at nominal 

3 charges to the public, the amount deter4 mined in accordance with section 

5 1814(b)(2), 

6 less a copayment amount equal to 20 percent of 

7 the average of all per visit costs for such service 

8 furnished under this title determined under sec9 tion 1861(v)(1)(L) (as determined by the Sec10 retary on a prospective basis for services fur11 nished during a calendar year);’’. 

12 (c) PROVIDER CHARGES.—Section 1866(a)(2)(A)(i) 

13 (42 U.S.C. 1395cc(a)(2)(A)(i)) is amended— 

14 (1) by striking ‘‘deduction or coinsurance’’ and 

15 inserting ‘‘deduction, coinsurance, or copayment’’; 

16 and 

17 (2) by striking ‘‘or (a)(4)’’ and inserting 

18 ‘‘(a)(4), or (a)(5)’’. 

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

20 this section shall apply to services furnished on or after 

21 July 1, 1995. 
814 

•S 2357 

1 SEC. 4306. TERMINATION OF GRADUATE MEDICAL EDU2 CATION PAYMENTS. 

3 (a) IN GENERAL.—Section 1886(h) (42 U.S.C. 

4 1395ww(h)) is amended by adding at the end the following 

5 new paragraph: 

6 ‘‘(6) TERMINATION OF PAYMENTS ATTRIB7 UTABLE TO COSTS OF TRAINING PHYSICIANS.—Not8 withstanding any other provision of this section or 

9 section 1861(v), no payment may be made under 

10 this title for direct graduate medical education costs 

11 attributable to an approved medical residency train12 ing program for any cost reporting period (or por13 tion thereof) beginning on or after January 1, 

14 1997.’’. 

15 (b) PROHIBITION AGAINST RECOGNITION OF

16 COSTS.—Section 1861(v)(1) (42 U.S.C. 1395x(v)(1)), as 

17 amended by section 4102(b), is amended by adding at the 

18 end the following new subparagraph: 

19 ‘‘(U) Such regulations shall not include any provision 

20 for specific recognition of the costs of graduate medical 

21 education for hospitals for any cost reporting period (or 

22 portion thereof) beginning on or after January 1, 1997. 

23 Nothing in the previous sentence shall be construed to af24 fect in any way payments to hospitals for the costs of any 

25 approved educational activities that are not described in 

26 such sentence.’’. 
815 

•S 2357 

1 SEC. 4307. MEDICARE SELECT. 

2 (a) AMENDMENTS TO PROVISIONS RELATING TO

3 MEDICARE SELECT POLICIES.— 

4 (1) PERMITTING MEDICARE SELECT POLICIES

5 IN ALL STATES.—Subsection (c) of section 4358 of 

6 the Omnibus Budget Reconciliation Act of 1990 is 

7 hereby repealed. 

8 (2) REQUIREMENTS OF MEDICARE SELECT

9 POLICIES.—Section 1882(t)(1) (42 U.S.C. 

10 1395ss(t)(1)) is amended to read as follows: 

11 ‘‘(1)(A) If a medicare supplemental policy meets the 

12 requirements of the 1991 NAIC Model Regulation or 1991 

13 Federal Regulation and otherwise complies with the re14 quirements of this section except that— 

15 ‘‘(i) the benefits under such policy are re16 stricted to items and services furnished by certain 

17 entities (or reduced benefits are provided when items 

18 or services are furnished by other entities), and 

19 ‘‘(ii) in the case of a policy described in sub20 paragraph (C)(i)— 

21 ‘‘(I) the benefits under such policy are not 

22 one of the groups or packages of benefits de23 scribed in subsection (p)(2)(A), 

24 ‘‘(II) except for nominal copayments im25 posed for services covered under part B of this 

26 title, such benefits include at least the core 
816 

•S 2357 

1 group of basic benefits described in subsection 

2 (p)(2)(B), and 

3 ‘‘(III) an enrollee’s liability under such pol4 icy for physician’s services covered under part 

5 B of this title is limited to the nominal copay6 ments described in subclause (II), 

7 the policy shall nevertheless be treated as meeting 

8 those requirements if the policy meets the require9 ments of subparagraph (B). 

10 ‘‘(B) A policy meets the requirements of this sub11 paragraph if— 

12 ‘‘(i) full benefits are provided for items and 

13 services furnished through a network of entities 

14 which have entered into contracts or agreements 

15 with the issuer of the policy, 

16 ‘‘(ii) full benefits are provided for items and 

17 services furnished by other entities if the services are 

18 medically necessary and immediately required be19 cause of an unforeseen illness, injury, or condition 

20 and it is not reasonable given the circumstances to 

21 obtain the services through the network, 

22 ‘‘(iii) the network offers sufficient access, 

23 ‘‘(iv) the issuer of the policy has arrangements 

24 for an ongoing quality assurance program for items 

25 and services furnished through the network, 
817 

•S 2357 

1 ‘‘(v)(I) the issuer of the policy provides to each 

2 enrollee at the time of enrollment an explanation 

3 of— 

4 ‘‘(aa) the restrictions on payment under 

5 the policy for services furnished other than by 

6 or through the network, 

7 ‘‘(bb) out of area coverage under the pol8 icy, 

9 ‘‘(cc) the policy’s coverage of emergency 

10 services and urgently needed care, and 

11 ‘‘(dd) the availability of a policy through 

12 the entity that meets the 1991 Model NAIC 

13 Regulation or 1991 Federal Regulation without 

14 regard to this subsection and the premium 

15 charged for such policy, and 

16 ‘‘(II) each enrollee prior to enrollment acknowl17 edges receipt of the explanation provided under sub18 clause (I), and 

19 ‘‘(vi) the issuer of the policy makes available to 

20 individuals, in addition to the policy described in this 

21 subsection, any policy (otherwise offered by the 

22 issuer to individuals in the State) that meets the 

23 1991 Model NAIC Regulation or 1991 Federal Reg24 ulation and other requirements of this section with25 out regard to this subsection. 
818 

•S 2357 

1 ‘‘(C)(i) A policy described in this subparagraph— 

2 ‘‘(I) is offered by an eligible organization (as 

3 defined in section 1876(b)), 

4 ‘‘(II) is not a policy or plan providing benefits 

5 pursuant to a contract under section 1876 or an ap6 proved demonstration project described in section 

7 603(c) of the Social Security Amendments of 1983, 

8 section 2355 of the Deficit Reduction Act of 1984, 

9 or section 9412(b) of the Omnibus Budget Reconcili10 ation Act of 1986, and 

11 ‘‘(III) provides benefits which, when combined 

12 with benefits which are available under this title, are 

13 substantially similar to benefits under policies of14 fered to individuals who are not entitled to benefits 

15 under this title. 

16 ‘‘(ii) In making a determination under subclause (III) 

17 of clause (i) as to whether certain benefits are substan18 tially similar, there shall not be taken into account, except 

19 in the case of preventive services, benefits provided under 

20 policies offered to individuals who are not entitled to bene21 fits under this title which are in addition to the benefits 

22 covered by this title and which are benefits an entity must 

23 provide in order to meet the definition of an eligible orga24 nization under section 1876(b)(1).’’. 
819 

•S 2357 

1 (b) RENEWABILITY OF MEDICARE SELECT POLI2 CIES.—Section 1882(q)(1) (42 U.S.C. 1395ss(q)(1)) is 

3 amended— 

4 (1) by striking ‘‘(1) Each’’ and inserting 

5 ‘‘(1)(A) Except as provided in subparagraph (B), 

6 each’’; 

7 (2) by redesignating subparagraphs (A) and 

8 (B) as clauses (i) and (ii), respectively; and 

9 (3) by adding at the end the following new sub10 paragraph: 

11 ‘‘(B)(i) In the case of a policy that meets the 

12 requirements of subsection (t), an issuer may cancel 

13 or nonrenew such policy with respect to an indi14 vidual who leaves the service area of such policy; ex15 cept that, if such individual moves to a geographic 

16 area where such issuer, or where an affiliate of such 

17 issuer, is issuing medicare supplemental policies, 

18 such individual must be permitted to enroll in any 

19 medicare supplemental policy offered by such issuer 

20 or affiliate that provides benefits comparable to or 

21 less than the benefits provided in the policy being 

22 canceled or nonrenewed. An individual whose cov23 erage is canceled or nonrenewed under this subpara24 graph shall, as part of the notice of termination or 

25 nonrenewal, be notified of the right to enroll in other 
820 

•S 2357 

1 medicare supplemental policies offered by the issuer 

2 or its affiliates. 

3 ‘‘(ii) For purposes of this subparagraph, the 

4 term ‘affiliate’ shall have the meaning given such 

5 term by the 1991 NAIC Model Regulation.’’. 

6 (c) CIVIL PENALTY.—Section 1882(t)(2) (42 U.S.C. 

7 1395ss(t)(2)) is amended— 

8 (1) by striking ‘‘(2)’’ and inserting ‘‘(2)(A)’’; 

9 (2) by redesignating subparagraphs (A), (B), 

10 (C), and (D) as clauses (i), (ii), (iii), and (iv), re11 spectively; 

12 (3) in clause (iv), as redesignated— 

13 (A) by striking ‘‘paragraph (1)(E)(i)’’ and 

14 inserting ‘‘paragraph (1)(B)(v)(I); and 

15 (B) by striking ‘‘paragraph (1)(E)(ii)’’ and 

16 inserting ‘‘paragraph (1)(B)(v)(II)’’; 

17 (4) by striking ‘‘the previous sentence’’ and in18 serting ‘‘this subparagraph’’; and 

19 (5) by adding at the end the following new sub20 paragraph: 

21 ‘‘(B) If the Secretary determines that an issuer of 

22 a policy approved under paragraph (1) has made a mis23 representation to the Secretary or has provided the Sec24 retary with false information regarding such policy, the 

25 issuer is subject to a civil money penalty in an amount 
821 

•S 2357 

1 not to exceed $100,000 for each such determination. The 

2 provisions of section 1128A (other than the first sentence 

3 of subsection (a) and other than subsection (b)) shall 

4 apply to a civil money penalty under this subparagraph 

5 in the same manner as such provisions apply to a penalty 

6 or proceeding under section 1128A(a).’’. 

7 (d) EFFECTIVE DATES.— 

8 (1) NAIC STANDARDS.—If, within 9 months 

9 after the date of the enactment of this Act, the Na10 tional Association of Insurance Commissioners 

11 (hereafter in this subsection referred to as the 

12 ‘‘NAIC’’) makes changes in the 1991 NAIC Model 

13 Regulation (as defined in section 1882(p)(1)(A) of 

14 the Social Security Act) to incorporate the additional 

15 requirements imposed by the amendments made by 

16 this section, section 1882(g)(2)(A) of such Act shall 

17 be applied in each State, effective for policies issued 

18 to policyholders on and after the date specified in 

19 paragraph (3), as if the reference to the Model Reg20 ulation adopted on June 6, 1979, were a reference 

21 to the 1991 NAIC Model Regulation (as so defined) 

22 as changed under this paragraph (such changed 

23 Regulation referred to in this subsection as the 

24 ‘‘1995 NAIC Model Regulation’’). 
822 

•S 2357 

1 (2) SECRETARY STANDARDS.—If the NAIC 

2 does not make changes in the 1991 NAIC Model 

3 Regulation (as so defined) within the 9-month period 

4 specified in paragraph (1), the Secretary of Health 

5 and Human Services (hereafter in this subsection re6 ferred to as the ‘‘Secretary’’) shall promulgate a reg7 ulation and section 1882(g)(2)(A) of the Social Se8 curity Act shall be applied in each State, effective 

9 for policies issued to policyholders on and after the 

10 date specified in paragraph (3), as if the reference 

11 to the Model Regulation adopted on June 6, 1979, 

12 were a reference to the 1991 NAIC Model Regula13 tion (as so defined) as changed by the Secretary 

14 under this paragraph (such changed Regulation re15 ferred to in this subsection as the ‘‘1995 Federal 

16 Regulation’’). 

17 (3) DATE SPECIFIED.— 

18 (A) IN GENERAL.—Subject to subpara19 graph (B), the date specified in this paragraph 

20 for a State is the earlier of— 

21 (i) the date the State adopts the 1995 

22 NAIC Model Regulation or the 1995 Fed23 eral Regulation, or 

24 (ii) 1 year after the date the NAIC or 

25 the Secretary first adopts such regulations. 
823 

•S 2357 

1 (B) ADDITIONAL LEGISLATIVE ACTION RE2 QUIRED.—In the case of a State which the Sec3 retary identifies, in consultation with the NAIC, 

4 as— 

5 (i) requiring State legislation (other 

6 than legislation appropriating funds) in 

7 order for medicare supplemental policies to 

8 meet the 1995 NAIC Model Regulation or 

9 the 1995 Federal Regulation, but 

10 (ii) having a legislature which is not 

11 scheduled to meet in 1995 in a legislative 

12 session in which such legislation may be 

13 considered, 

14 the date specified in this paragraph is the first 

15 day of the first calendar quarter beginning after 

16 the close of the first legislative session of the 

17 State legislature that begins on or after Janu18 ary 1, 1996. For purposes of the previous sen19 tence, in the case of a State that has a 2-year 

20 legislative session, each year of such session 

21 shall be deemed to be a separate regular session 

22 of the State legislature. 
824 

•S 2357 

1 Subtitle B—Medicaid Program 

2 PART 1—INTEGRATION OF CERTAIN MEDICAID 

3 ELIGIBLES INTO REFORMED HEALTH CARE 

4 SYSTEM 

5 SEC. 4601. LIMITING COVERAGE UNDER MEDICAID OF 

6 ITEMS AND SERVICES COVERED UNDER 

7 STANDARD BENEFIT PACKAGE. 

8 (a) IN GENERAL.—Title XIX (42 U.S.C. 1396 et 

9 seq.) is amended by redesignating section 1931 as section 

10 1932 and by inserting after section 1930 the following new 

11 section: 

12 ‘‘TREATMENT OF ITEMS AND SERVICES IN THE

13 STANDARD BENEFIT PACKAGE

14 ‘‘SEC. 1931. (a) ITEMS AND SERVICES COVERED

15 UNDER STANDARD BENEFIT PACKAGE.—Except as pro16 vided in subsection (c), a State plan under this part shall 

17 not provide medical assistance consisting of payment for 

18 items and services in the standard benefit package de19 scribed in section 1201(a) of the Health Security Act. 

20 ‘‘(b) MEDICAL ASSISTANCE NOT AFFECTED.—Sub21 section (a) shall not be construed as— 

22 ‘‘(1) affecting the eligibility of any individual 

23 for medical assistance consisting of payment for 

24 items and services not covered under the standard 

25 benefits package; 
825 

•S 2357 

1 ‘‘(2) affecting the amount, duration, and scope 

2 of any medical assistance consisting of payment for 

3 the items and services described in paragraph (1); or 

4 ‘‘(3) prohibiting payment of medical assistance 

5 for items and services covered under the standard 

6 benefits package to the extent that the items and 

7 services under this part exceed the items and serv8 ices covered under such package with respect to 

9 amount, duration, and scope. 

10 ‘‘(c) EXCEPTIONS.—Subsection (a) shall not affect 

11 the provision of medical assistance consisting of payment 

12 for items and services in the standard benefits package— 

13 ‘‘(1) which are provided to— 

14 ‘‘(A) an individual eligible for medical as15 sistance under the State plan who is not a pre16 mium subsidy eligible individual (as defined in 

17 6002(a)(2) of the Health Security Act); 

18 ‘‘(B) an individual with respect to whom 

19 supplemental security income benefits are being 

20 paid under title XVI; and 

21 ‘‘(C) an individual who is eligible for bene22 fits under part A of title XVIII; or 

23 ‘‘(2) which consist of emergency services to cer24 tain aliens under section 1903(v)(2). 

25 ‘‘(d) STATE MAINTENANCE OF EFFORT.— 
826 

•S 2357 

1 ‘‘(1) IN GENERAL.— 

2 ‘‘(A) REDUCTION IN QUARTERLY PAY3 MENTS.—For any calendar quarter in an appli4 cable year (as defined in subparagraph (B)), 

5 the amount otherwise payable to a State under 

6 section 1903 for the quarter shall be reduced by 

7 the State maintenance of effort amount for the 

8 quarter determined under paragraph (2). 

9 ‘‘(B) APPLICABLE YEAR.—For purposes of 

10 this paragraph, the term ‘applicable year’ 

11 means 1997 and any succeeding year. 

12 ‘‘(2) MAINTENANCE OF EFFORT AMOUNT.— 

13 ‘‘(A) IN GENERAL.—The maintenance of 

14 effort amount for a State for a calendar quarter 

15 in an applicable year shall be equal to 25 per16 cent of the sum of— 

17 ‘‘(i) the State’s AFDC eligibles pay18 ment amount for the year determined 

19 under paragraph (3); and 

20 ‘‘(ii) the State’s non-cash eligibles 

21 payment amount for the year determined 

22 under paragraph (4). 

23 ‘‘(3) STATE AFDC ELIGIBLES PAYMENT

24 AMOUNT.— 
827 

•S 2357 

1 ‘‘(A) IN GENERAL.—The AFDC eligibles 

2 payment amount for a State for a year is an 

3 amount equal to the product of— 

4 ‘‘(i) the adjusted State per capita 

5 amount for the year determined under sub6 paragraph (B); multiplied by 

7 ‘‘(ii) the number of AFDC eligible in8 dividuals receiving premium assistance 

9 under section 6002 of the Health Security 

10 Act during the year (as estimated by the 

11 Secretary). 

12 ‘‘(B) ADJUSTED STATE PER CAPITA

13 AMOUNT.— 

14 ‘‘(i) IN GENERAL.—The adjusted 

15 State per capita amount for a year is the 

16 base State per capita amount determined 

17 under clause (ii) updated by the percentage 

18 change in per capita health expenditures 

19 index (as described in paragraph (5)(B)) 

20 during the period beginning on October 1, 

21 1994, and ending on December 31 of the 

22 year preceding the applicable year (as de23 termined by the Secretary). 

24 ‘‘(ii) BASE STATE PER CAPITA

25 AMOUNT.—The base per capita amount for 
828 

•S 2357 

1 a State shall be an amount, as determined 

2 by the Secretary, equal to the quotient 

3 of— 

4 ‘‘(I) the total expenditures from 

5 State funds made under the State 

6 plan during fiscal year 1994 with re7 spect to medical assistance consisting 

8 of items and services of the type in9 cluded in the standard benefit pack10 age for AFDC eligible individuals; di11 vided by 

12 ‘‘(II) the average total number of 

13 AFDC eligible individuals who re14 ceived such medical assistance under 

15 the State plan in any month during 

16 fiscal year 1994. 

17 ‘‘(iii) DISPROPORTIONATE SHARE PAY18 MENTS NOT INCLUDED.—In applying 

19 clause (ii), payments made under section 

20 1923 shall not be counted in the gross 

21 amount of payments. 

22 ‘‘(C) AFDC ELIGIBLE DEFINED.—For 

23 purposes of this paragraph, the term ‘AFDC el24 igible’ means an individual who receives aid or 
829 

•S 2357 

1 assistance under any plan of the State approved 

2 under part A or part E of title IV. 

3 ‘‘(4) NON-CASH ELIGIBLES PAYMENT

4 AMOUNT.— 

5 ‘‘(A) IN GENERAL.—The non-cash eligibles 

6 payment amount for a State for a year is an 

7 amount equal to the State’s base payment 

8 amount (determined under subparagraph (B)) 

9 for the applicable year updated by the percent10 age change in the health expenditures index (as 

11 described in paragraph (5)(A)) and the State 

12 population index (as described in paragraph 

13 (5)(C)) during the period beginning on October 

14 1, 1994, and ending on December 31 of the 

15 year preceding the applicable year (as deter16 mined by the Secretary). 

17 ‘‘(B) STATE BASE PAYMENT AMOUNT.— 

18 ‘‘(i) IN GENERAL.—The base payment 

19 amount for a State for an applicable year 

20 shall be an amount, as determined by the 

21 Secretary, equal to the total expenditures 

22 from State funds made under the State 

23 plan during fiscal year 1994 with respect 

24 to medical assistance consisting of items 

25 and services of the type included in the 
830 

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1 standard benefit package for non-cash eli2 gible individuals who would not have re3 ceived such medical assistance if the provi4 sions of this section and subtitle A of title 

5 VI of the Health Security Act had been in 

6 effect in fiscal year 1994. 

7 ‘‘(ii) DISPROPORTIONATE SHARE PAY8 MENTS INCLUDED.—In applying clause (i), 

9 payments made under section 1923 shall 

10 be counted in the gross amount of pay11 ments. 

12 ‘‘(C) NON-CASH ELIGIBLE DEFINED.—For 

13 purposes of this paragraph, the term ‘non-cash 

14 eligible’ means any individual who received 

15 medical assistance under the State plan during 

16 fiscal year 1994 other than an AFDC eligible 

17 individual or an individual described in sub18 section (b). 

19 ‘‘(5) INDEXES.— 

20 ‘‘(A) HEALTH EXPENDITURES INDEX.— 

21 The Secretary shall establish a health expendi22 tures index which measures the change in na23 tional health expenditures from year to year. 

24 ‘‘(B) PER CAPITA HEALTH EXPENDITURES

25 INDEX.—The Secretary shall establish a per 
831 

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1 capita health expenditures index which meas2 ures the change in national per capita health 

3 expenditures from year to year. 

4 ‘‘(C) STATE POPULATION INDEX.—The 

5 Secretary shall establish a State population 

6 index which measures the change in the number 

7 of individuals residing in a State from year to 

8 year.’’. 

9 (b) NO FEDERAL FINANCIAL PARTICIPATION.—Sec10 tion 1903(i) (42 U.S.C. 1396b(i)) is amended— 

11 (1) by striking ‘‘or’’ at the end of paragraph 

12 (14), 

13 (2) by striking the period at the end of para14 graph (15) and inserting ‘‘; or’’, and 

15 (3) by inserting after paragraph (15) the fol16 lowing new paragraph: 

17 ‘‘(16) with respect to items and services covered 

18 under the standard benefit package described in sec19 tion 1201(a) of the Health Security Act for individ20 uals to whom section 1931(a) applies.’’. 

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

22 this section shall apply with respect to items or services 

23 furnished in a State on or after January 1, 1997. 
832 

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1 PART 2—COORDINATED CARE SERVICES FOR 

2 DISABLED MEDICAID ELIGIBLES 

3 SEC. 4605. COORDINATED CARE SERVICES FOR DISABLED 

4 MEDICAID ELIGIBLES. 

5 (a) STATE EXPENDITURES LIMITED TO CERTIFIED

6 HEALTH PLANS.—Section 1903(m) (42 U.S.C. 1396b) is 

7 amended by adding at the end the following new para8 graph: 

9 ‘‘(7) No payment shall be made under this part 

10 to a State with respect to expenditures incurred by 

11 the State for payment for services provided by an 

12 entity with a contract under this subsection unless 

13 such entity is a standard health plan (as defined in 

14 section 1011(2)(B) of the Health Security Act).’’. 

15 (b) MODIFICATION TO 75/25 RULE.—Section 

16 1903(m)(2)(A)(ii) (42 U.S.C. 1396b(m)(2)(A)(ii)) is 

17 amended by striking ‘‘75 percent’’ and inserting ‘‘50 per18 cent’’. 

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

20 this section shall become effective with respect to pay21 ments for calendar quarters beginning on or after January 

22 1, 1997. 
833 

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1 PART 3—PAYMENTS TO HOSPITALS SERVING 

2 VULNERABLE POPULATIONS 

3 SEC. 4611. REPLACEMENT OF DSH PAYMENT PROVISIONS 

4 WITH PROVISIONS RELATING TO PAYMENTS 

5 TO HOSPITALS SERVING VULNERABLE POPU6 LATIONS. 

7 (a) AMENDMENTS TO PROVISIONS REQUIRING

8 STATES TO MAKE DSH PAYMENT ADJUSTMENTS.— 

9 (1) ADJUSTMENTS TO NATIONAL DSH PAYMENT

10 LIMIT.—Section 1923(f)(1)(B) (42 U.S.C. 1396r– 

11 4(f)(1)(B)) is amended to read as follows: 

12 ‘‘(B) NATIONAL DSH PAYMENT LIMIT.— 

13 ‘‘(i) IN GENERAL.—Except as pro14 vided in clause (ii), the national DSH pay15 ment limit for a fiscal year is equal to 12 

16 percent of the total amount of expenditures 

17 under the State plans under this part for 

18 medical assistance during the fiscal year. 

19 ‘‘(ii) REDUCTION IN LIMIT.—For fis20 cal years ending in a calendar year during 

21 which the percentage of individuals covered 

22 by insurance, as determined by the Na23 tional Health Care Cost and Coverage 

24 Commission established under section 

25 10001 of the Health Security Act— 
834 

•S 2357 

1 ‘‘(I) equals or exceeds 85 percent 

2 but is less than 88 percent, ‘10 per3 cent’ shall be substituted for ‘12 per4 cent’ in clause (i); 

5 ‘‘(II) equals or exceeds 88 per6 cent but is less than 90 percent, ‘8 

7 percent’ shall be substituted for ‘12 

8 percent’ in clause (i); 

9 ‘‘(III) equals or exceeds 90 per10 cent but is less than 92 percent, ‘6 

11 percent’ shall be substituted for ‘12 

12 percent’ in clause (i); and 

13 ‘‘(IV) equals or exceeds 92 per14 cent, ‘4 percent’ shall be substituted 

15 for ‘12 percent’ in clause (i). 

16 (2) ADJUSTMENTS TO STATE ALLOTMENT LIM17 ITS.—Section 1923(f)(2)(B) (42 U.S.C. 1396r– 

18 4(f)(2)(B)) is amended to read as follows: 

19 ‘‘(B) EXCEPTIONS.— 

20 ‘‘(i) IN GENERAL.—Except as pro21 vided in clause (ii), a State DSH allotment 

22 under subparagraph (A) for a fiscal year 

23 shall not exceed 12 percent of the total 

24 amount of expenditures under the State 
835 

•S 2357 

1 plan for medical assistance during the fis2 cal year. 

3 ‘‘(ii) REDUCTION IN LIMIT.—For fis4 cal years ending in a calendar year during 

5 which the percentage of individuals covered 

6 by insurance, as determined by the Na7 tional Health Care Cost and Coverage 

8 Commission established under section 

9 10001 of the Health Security Act— 

10 ‘‘(I) equals or exceeds 85 percent 

11 but is less than 88 percent, ‘10 per12 cent’ shall be substituted for ‘12 per13 cent’ in clause (i); 

14 ‘‘(II) equals or exceeds 88 per15 cent but is less than 90 percent, ‘8 

16 percent’ shall be substituted for ‘12 

17 percent’ in clause (i); 

18 ‘‘(III) equals or exceeds 90 per19 cent but is less than 92 percent, ‘6 

20 percent’ shall be substituted for ‘12 

21 percent’ in clause (i); and 

22 ‘‘(IV) equals or exceeds 92 per23 cent, ‘4 percent’ shall be substituted 

24 for ‘12 percent’ in clause (i). 
836 

•S 2357 

1 (3) ELIMINATION OF HIGH DSH STATES AND

2 STATE SUPPLEMENTAL AMOUNTS.— 

3 (A) IN GENERAL.—Section 1923(f)(2)(A) 

4 (42 U.S.C. 1396r–4(f)(2)(A)) is amended to 

5 read as follows: 

6 ‘‘(A) IN GENERAL.—Subject to subpara7 graph (B), the State DSH allotment for a fiscal 

8 year is equal to the State DSH allotment for 

9 the previous fiscal year increased by the State 

10 growth factor (as defined in paragraph (3)(B)) 

11 for the fiscal year.’’. 

12 (B) CONFORMING AMENDMENTS.—(i) Sec13 tion 1923(f) (42 U.S.C. 1396r–4(f)) is amended 

14 by striking paragraph (3) and redesignating 

15 paragraph (4) as paragraph (3). 

16 (ii) Section 1923(f)(3) (42 U.S.C. 1396r– 

17 4(f)(3)), as redesignated by clause (i), is 

18 amended by striking subparagraphs (A) and 

19 (C) and redesignating subparagraphs (B), (D), 

20 and (E) as subparagraphs (A), (B), and (C). 

21 (iii) Section 1923(f)(3)(B) (42 U.S.C. 

22 1396r–4(f)(3)(B)), as redesignated by clauses 

23 (i) and (ii), is amended to read as follows: 

24 ‘‘(B) STATE GROWTH AMOUNT.—The term 

25 ‘State growth amount’ means, with respect to a 
837 

•S 2357 

1 State for a fiscal year, the product of the State 

2 growth factor and the State DSH payment 

3 limit for the previous fiscal year.’’. 

4 (iv) Section 1923(f)(1)(A) (42 U.S.C. 

5 1396r–4(f)(1)(A) is amended by striking ‘‘(as 

6 defined in paragraph (4)(B))’’ and inserting 

7 ‘‘(as defined in paragraph (3)(A))’’. 

8 (3) TERMINATION OF REQUIREMENT ON

9 STATES TO MAKE DSH PAYMENT ADJUSTMENTS.— 

10 Section 1923 (42 U.S.C. 1396r–4) is amended by 

11 adding at the end the following new subsection: 

12 ‘‘(h) TERMINATION OF REQUIREMENT TO MAKE

13 PAYMENT ADJUSTMENTS.— 

14 ‘‘(1) IN GENERAL.—Any requirement imposed 

15 by this section on a State to increase the rate or 

16 amount of payment for inpatient hospital services 

17 provided by a hospital which serves a dispropor18 tionate number of low income patients with special 

19 needs shall terminate in the year described in para20 graph (2). 

21 ‘‘(2) YEAR DESCRIBED.—The year described in 

22 this paragraph is the first year beginning after the 

23 year during which the percentage of individuals cov24 ered by insurance, as determined by the National 

25 Health Care Cost and Coverage Commission estab-
838 

•S 2357 

1 lished under section 100001 of the Health Security 

2 Act, equals or exceeds 92 percent.’’. 

3 (4) NO FEDERAL FINANCIAL PARTICIPATION.— 

4 Section 1903(i) (42 U.S.C. 1396b(i)), as amended 

5 by section 4601(b), is amended— 

6 (A) by striking ‘‘or’’ at the end of para7 graph (15), 

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

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

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

11 following new paragraph: 

12 ‘‘(17) during or after the year described in sec13 tion 1923(h)(2) with respect to any payment made 

14 by a State to a hospital which serves a dispropor15 tionate number of low income patients with special 

16 needs that is in excess of the payment otherwise re17 quired under this part.’’. 

18 (5) EFFECTIVE DATE.—The amendments made 

19 by this section shall be effective for calendar quar20 ters beginning on or after January 1, 1997. 

21 (b) PAYMENTS TO HOSPITALS SERVING VULNER22 ABLE POPULATIONS.—Title XIX (42 U.S.C. 1396 et seq.) 

23 is amended by adding at the end the following new part: 
839 

•S 2357 

1 ‘‘PART B—PAYMENTS TO HOSPITALS SERVING 

2 VULNERABLE POPULATIONS 

3 ‘‘SEC. 1951. PAYMENTS TO HOSPITALS. 

4 ‘‘(a) ENTITLEMENT STATUS.—The Secretary shall 

5 make payments in accordance with this part to eligible 

6 hospitals described in section 1952. The preceding sen7 tence constitutes budget authority in advance of appro8 priations Acts and represents the obligation of the Federal 

9 Government to provide funding for such payments in the 

10 amounts, and for the fiscal years, specified in subsection 

11 (b). 

12 ‘‘(b) AMOUNT OF ENTITLEMENT.—For purposes of 

13 subsection (a), the amounts and fiscal years specified in 

14 this subsection are (in the aggregate for all eligible hos15 pitals) $2,500,000,000 for the first applicable fiscal year 

16 (as defined in section 1954) and for each subsequent fiscal 

17 year. 

18 ‘‘(c) PAYMENTS MADE ON QUARTERLY BASIS.—Pay19 ments to an eligible hospital under this section for a year 

20 shall be made on a quarterly basis during the year. 

21 ‘‘SEC. 1952. IDENTIFICATION OF ELIGIBLE HOSPITALS. 

22 ‘‘(a) HOSPITALS IN PARTICIPATING STATES.—In 

23 order to be an eligible hospital under this part, a hospital 

24 must be located in a State that is a participating State 

25 under title I of the Health Security Act. 
840 

•S 2357 

1 ‘‘(b) STATE IDENTIFICATION.—In accordance with 

2 the criteria described in subsection (c) and such proce3 dures as the Secretary may require, each State shall iden4 tify the hospitals in the State that meet such criteria and 

5 provide the Secretary with a list of such hospitals. 

6 ‘‘(c) CRITERIA FOR ELIGIBILITY.—A hospital meets 

7 the criteria described in this subsection if the hospital’s 

8 low-income utilization rate for the base year under section 

9 1923(b)(3) (as such section is in effect on the day before 

10 the date of the enactment of this part) is not less than 

11 25 percent. 

12 ‘‘SEC. 1953. AMOUNT OF PAYMENTS. 

13 ‘‘(a) IN GENERAL.—The total amount available for 

14 payments under this part in a year shall be allocated to 

15 hospitals for low-income assistance in accordance with this 

16 subsection. 

17 ‘‘(b) DETERMINATION OF HOSPITAL PAYMENT

18 AMOUNT.—The amount of payment to an eligible hospital 

19 during a year shall be the equal to the hospital’s low-in20 come percentage (as defined in subsection (c)) of the total 

21 amount available for payments under this part for the 

22 year. 

23 ‘‘(c) LOW-INCOME PERCENTAGE DEFINED.— 

24 ‘‘(1) IN GENERAL.—For purposes of this sec25 tion, an eligible hospital’s ‘low-income percentage’ 
841 

•S 2357 

1 for a year is equal to the amount (expressed as a 

2 percentage) of the total low-income days for all eligi3 ble hospitals for the year that are attributable to the 

4 hospital. 

5 ‘‘(2) LOW-INCOME DAYS DESCRIBED.—For pur6 poses of paragraph (1), an eligible hospital’s low-in7 come days for a year shall be equal to the product 

8 of— 

9 ‘‘(A) the total number of inpatient days for 

10 the hospital for the year (as reported to the 

11 Secretary by the State in which the hospital is 

12 located, in accordance with a reporting schedule 

13 and procedures established by the Secretary); 

14 and 

15 ‘‘(B) the hospital’s low-income utilization 

16 rate for the base year under section 1923(b)(3) 

17 (as such section is in effect on the day before 

18 the date of the enactment of this part). 

19 ‘‘SEC. 1954. DEFINITIONS. 

20 ‘‘For purposes of this part: 

21 ‘‘(1) BASE YEAR.—The term ‘base year’ means 

22 1996. 

23 ‘‘(2) FIRST APPLICABLE FISCAL YEAR—The 

24 term ‘first applicable fiscal year’ means first fiscal 

25 year that begins after the fiscal year ending in the 
842 

•S 2357 

1 calendar year during which the percentage of indi2 viduals covered by insurance, as determined by the 

3 National Health Care Cost and Coverage Commis4 sion established under section 10001 of the Health 

5 Security Act, equals or exceeds 92 percent.’’. 

6 (c) CONFORMING AMENDMENTS.—(1) Title XIX (42 

7 U.S.C. 1396 et seq.) is amended by striking the title and 

8 inserting the following: 

9 ‘‘TITLE XIX—MEDICAL ASSIST10 ANCE PROGRAMS AND PAY11 MENTS TO HOSPITALS SERV12 ING VULNERABLE POPU13 LATIONS’’ 

14 ‘‘PART A—GRANTS TO STATES FOR MEDICAL 

15 ASSISTANCE PROGRAMS’’. 

16 (2) Title XIX (42 U.S.C. 1396 et seq.) is amended 

17 by striking each reference to ‘‘this title’’ and inserting 

18 ‘‘this part’’. 

19 PART 4—MEDICAID LONG-TERM CARE 

20 PROVISIONS 

21 SEC. 4615. INCREASED RESOURCE DISREGARD FOR INDI22 VIDUALS RECEIVING CERTAIN SERVICES. 

23 (a) IN GENERAL.—Section 1902(a)(10) (42 U.S.C. 

24 1396a(a)(10)) is amended— 
843 

•S 2357 

1 (1) by striking ‘‘and’’ at the end of subpara2 graph (E); 

3 (2) by adding ‘‘and’’ at the end of subpara4 graph (F); and 

5 (3) by adding at the end the following new sub6 paragraph: 

7 ‘‘(G) provide that, in determining the eligi8 bility of any unmarried individual who has ap9 plied for or is receiving medical assistance con10 sisting of community-based services furnished 

11 under a waiver under subsection (c) or (d) of 

12 section 1915, personal care services described in 

13 section 1905(a)(24), or home and community 

14 care for functionally disabled elderly individuals 

15 under section 1929, the first $4,000 of re16 sources may, at the option of the State, be dis17 regarded.’’. 

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

19 subsection (a) shall apply to payments for medical assist20 ance for calendar quarters beginning on or after January 

21 1, 1995. 
844 

•S 2357 

1 SEC. 4616. FRAIL ELDERLY DEMONSTRATION PROJECT 

2 WAIVERS. 

3 (a) EXPANSION OF NUMBER OF WAIVERS.—Section 

4 9412(b)(1) of the Omnibus Budget Reconciliation Act of 

5 1986 is amended by striking ‘‘15’’ and inserting ‘‘40’’. 

6 (b) DEVELOPMENT OF PROTOCOLS AND MODEL

7 CERTIFICATION GUIDELINES.—Section 9412(b) of the 

8 Omnibus Budget Reconciliation Act of 1986 is amended 

9 by adding at the end the following new paragraphs: 

10 ‘‘(5) The Secretary, in consultation with the 

11 States and organizations operating projects in ac12 cordance with waivers under this subsection shall de13 velop and publish a waiver protocol that will estab14 lish minimum standard requirements that an organi15 zation must meet to be eligible for a waiver under 

16 this subsection. In developing the protocol under the 

17 preceding sentence, the Secretary shall incorporate 

18 standards for organizations to deliver integrated 

19 acute and long-term care services for the elderly, 

20 children, and young adults. 

21 ‘‘(6) The Secretary shall develop model guide22 lines that shall be available to States that choose to 

23 establish a comprehensive procedure for the licen24 sure and certification of an organization operating a 

25 demonstration project under a waiver granted pursu26 ant to this subsection. Such guidelines shall encom-
845 

•S 2357 

1 pass the range of services provided by such an orga2 nization.’’. 

3 (c) EVALUATIONS AND REPORTS.—Section 9412(b) 

4 of the Omnibus Budget Reconciliation Act of 1986, as 

5 amended by subsection (b), is amended by adding at the 

6 end the following new paragraph: 

7 ‘‘(7)(A) The Secretary shall develop standard 

8 evaluation protocols to assess the cost-effectiveness 

9 and quality of service provided under— 

10 ‘‘(i) demonstration projects operating on 

11 the date of the enactment of this paragraph 

12 under waivers granted pursuant to this sub13 section; and 

14 ‘‘(ii) demonstration projects granted waiv15 ers after the date of the enactment of this para16 graph. 

17 ‘‘(B) The Secretary shall conduct evaluations of 

18 the demonstration projects in accordance with the 

19 protocols developed under subparagraph (A) and 

20 based on the results of such evaluations, report to 

21 the Committee on Finance of the Senate, the Com22 mittee on Ways and Means of the House of Rep23 resentatives, and the Subcommittee on Health and 

24 the Environment of the Committee on Energy and 

25 Commerce of the House of Representatives by— 
846 

•S 2357 

1 ‘‘(i) not later than January 1, 1998, with 

2 respect to demonstration projects described in 

3 subparagraph (A)(i); and 

4 ‘‘(ii) not later than January 1, 2003, with 

5 respect to demonstration projects described in 

6 subparagraph (A)(ii); 

7 on the desirability of granting permanent status 

8 under titles XVIII and XIX of the Social Security 

9 Act to such demonstration projects that the Sec10 retary has determined to be successful.’’. 

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

12 this section shall take effect on the date of the enactment 

13 of this Act. 

14 SEC. 4617. ELIMINATION OF REQUIREMENT OF PRIOR IN15 STITUTIONALIZATION WITH RESPECT TO HA16 BILITATION SERVICES FURNISHED UNDER A 

17 WAIVER FOR HOME OR COMMUNITY-BASED 

18 SERVICES. 

19 (a) IN GENERAL.—Section 1915(c)(5) (42 U.S.C. 

20 1396n(c)(5)) is amended in the matter preceding subpara21 graph (A) by striking ‘‘, with respect to individuals who 

22 receive such services after discharge from a nursing facil23 ity or intermediate care facility for the mentally retarded’’. 
847 

•S 2357 

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

2 this section shall apply to services furnished on or after 

3 January 1, 1995. 

4 SEC. 4618. ELIMINATION OF RULE REGARDING AVAIL5 ABILITY OF BEDS IN CERTAIN INSTITUTIONS. 

6 (a) IN GENERAL.—The first sentence of section 

7 1915(c)(1) (42 U.S.C. 1396n(c)(1)) is amended by insert8 ing the following before the end period: ‘‘(at the option 

9 of the State, such determination may be made without re10 gard to the availability of beds in such a hospital, nursing 

11 facility, or intermediate care facility for the mentally re12 tarded located in the State)’’. 

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

14 subsection (a) shall be effective with respect to waivers 

15 granted or renewed on or after January 1, 1995. 

16 SEC. 4619. PREADMISSION SCREENING FOR MENTALLY RE17 TARDED INDIVIDUALS. 

18 (a) IN GENERAL.—Section 1919(b)(3)(F)(ii) (42 

19 U.S.C. 1396r(b)(3)(F)(ii)) is amended by striking ‘‘that, 

20 because’’ and all that follows through the period at the 

21 end and inserting ‘‘that the individual’s primary need is 

22 for medical services that are at the level provided by the 

23 nursing facility and that the nursing facility has the capa24 bility to provide any specialized services necessary for ha25 bilitation of the individual.’’. 
848 

•S 2357 

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

2 subsection (a) shall apply to admissions on or after July 

3 1, 1995. 

4 PART 5—MISCELLANEOUS 

5 SEC. 4621. MEDICAID COVERAGE OF ALL CERTIFIED NURSE 

6 PRACTITIONER AND CLINICAL NURSE SPE7 CIALIST SERVICES. 

8 (a) IN GENERAL.—Paragraph (21) of section 

9 1905(a) (42 U.S.C. 1396d(a)) is amended to read as fol10 lows: 

11 ‘‘(21) services furnished by all certified nurse 

12 practitioners (as defined by the Secretary) or clinical 

13 nurse specialists (as defined in subsection (t)) which 

14 the certified nurse practitioner or clinical nurse spe15 cialist is legally authorized to perform under State 

16 law (or the State regulatory mechanism provided by 

17 State law), whether or not the certified nurse practi18 tioner or clinical nurse specialist is under the super19 vision of, or associated with, a physician or other 

20 health care provider;’’. 

21 (b) CLINICAL NURSE SPECIALIST DEFINED.—Sec22 tion 1905 (42 U.S.C. 1396) is amended by adding at the 

23 end the following new subsection: 

24 ‘‘(t) The term ‘clinical nurse specialist’ means an in25 dividual who— 
849 

•S 2357 

1 ‘‘(1) is a registered nurse and is licensed to 

2 practice nursing in the State in which the clinical 

3 nurse specialist services are performed; and 

4 ‘‘(2) holds a master’s degree in a defined clin5 ical area of nursing from an accredited educational 

6 institution.’’. 

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

8 this section shall become effective with respect to pay9 ments for calendar quarters beginning on or after January 

10 1, 1995. 

11 SEC. 4622. RELIEF FROM THIRD PARTY LIABILITY RE12 QUIREMENTS WHEN COST-EFFECTIVE. 

13 (a) IN GENERAL.—Section 1902(a)(25)(B) (42 

14 U.S.C. 1396a(a)(25)(B)) is amended to read as follows— 

15 ‘‘(B) that in any case where such a legal liabil16 ity is found to exist after medical assistance has 

17 been made available, the State or local agency will 

18 seek reimbursement for such assistance to the extent 

19 of such legal liability, unless— 

20 ‘‘(i) the amount of reimbursement the 

21 State can reasonably expect to recover for med22 ical assistance furnished to an individual does 

23 not exceed the costs of such recovery, or 

24 ‘‘(ii) with respect to case management 

25 services (as defined in section 1915(g)(2)), the 
850 

•S 2357 

1 State demonstrates to the satisfaction of the 

2 Secretary (using the methods specified by the 

3 Secretary under subsection (aa)) that it is not 

4 cost-effective in the aggregate to seek such re5 covery with respect to such services furnished to 

6 individuals covered under the State plan;’’. 

7 (b) METHODS FOR DEMONSTRATION.—Section 

8 1902(a) (42 U.S.C. 1396a(a)) is amended by adding at 

9 the end the following new subsection: 

10 ‘‘(aa) The Secretary shall specify in regulations the 

11 methods by which a State may demonstrate that it is not 

12 cost-effective in the aggregate to seek reimbursement for 

13 medical assistance paid for case management services 

14 under subsection (a)(25)(B)(ii). The methods specified by 

15 the Secretary under the preceding sentence shall include 

16 allowing a State to demonstrate that case management 

17 services are not generally covered by health insurers in the 

18 State.’’. 

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

20 this section shall apply to payments for medical assistance 

21 for calendar quarters beginning on or after January 1, 

22 1995. 
851 

•S 2357 

1 TITLE V—QUALITY AND 

2 CONSUMER PROTECTION 

3 Subtitle A—Quality Management 

4 and Improvement 

5 SEC. 5001. NATIONAL QUALITY COUNCIL. 

6 (a) ESTABLISHMENT.—Not later than 1 year after 

7 the date of enactment of this Act, the Secretary of Health 

8 and Human Services shall establish a council to be known 

9 as the National Quality Council to oversee a program of 

10 quality management and improvement designed to en11 hance the quality, appropriateness, and effectiveness of 

12 health care services and access to such services. 

13 (b) APPOINTMENT.—The National Quality Council 

14 shall consist of 15 members appointed by the President, 

15 with the advice and consent of the Senate, who are broadly 

16 representative of the population of the United States and 

17 shall include the following: 

18 (1) Individuals and health care providers distin19 guished in the fields of medicine, public health, 

20 health care quality, and related fields of health serv21 ices research. Such members shall constitute at least 

22 one-third of the Council’s membership. 

23 (2) Individuals representing consumers of 

24 health care services. Such members shall constitute 

25 at least one-third of the Council’s membership. 
852 

•S 2357 

1 (3) Other individuals representing purchasers of 

2 health care, health plans, States, and nationally rec3 ognized health care accreditation organizations. 

4 (c) DUTIES.—The National Quality Council shall— 

5 (1) develop national goals and performance 

6 measures of quality; 

7 (2) develop uniform quality goals and perform8 ance measures for plans; 

9 (3) oversee the design and implementation of a 

10 program of national surveys of plans and consumers; 

11 (4) oversee the design and production of Con12 sumer Report Cards; 

13 (5) oversee Quality Improvement Foundations; 

14 (6) oversee National and State-based Consumer 

15 Information and Advocacy Centers; and 

16 (7) oversee the evaluation of the impact of the 

17 implementation of this Act on the quality of health 

18 care services in the United States and the access of 

19 consumers to such services. 

20 (d) CONSULTATION.—In carrying out these duties, 

21 the National Quality Council shall establish a process of 

22 consultation with appropriate interested parties. 

23 (e) TERMS.— 
853 

•S 2357 

1 (1) IN GENERAL.—Except as provided in para2 graph (2), members of the Council shall serve for a 

3 term of 4 years. 

4 (2) STAGGERED ROTATION.—Of the members 

5 first appointed to the Council under subsection (b), 

6 the President shall appoint members to serve for a 

7 term of between 1 and 4 years so that no more than 

8 one third of the Council seats are vacated each year. 

9 (3) SERVICE BEYOND TERM.—A member of the 

10 Council may continue to serve after the expiration of 

11 the term of the member until a successor is ap12 pointed. 

13 (f) VACANCIES.—If a member of the Council does not 

14 serve the full term applicable under subsection (e), the in15 dividual appointed to fill the resulting vacancy shall be ap16 pointed for the remainder of the term of the predecessor 

17 of the individual. 

18 (g) CHAIR.—The President shall designate an indi19 vidual to serve as the chair of the Council. 

20 (h) MEETINGS.—The Council shall meet not less than 

21 once during each 4-month period and shall otherwise meet 

22 at the call of the President or the chair. 

23 (i) COMPENSATION AND REIMBURSEMENT OF EX24 PENSES.—Members of the Council shall receive compensa25 tion for each day (including travel time) engaged in car-
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1 rying out the duties of the Council. Such compensation 

2 may not be in an amount in excess of the maximum rate 

3 of basic pay payable for level IV of the Executive Schedule 

4 under section 5315 of title 5, United States Code. 

5 (j) CONFLICTS OF INTEREST.—Members of the 

6 Council shall disclose upon appointment to the Council or 

7 at any subsequent time that it may occur, conflicts of in8 terest. 

9 (k) EXECUTIVE DIRECTOR; STAFF.— 

10 (1) EXECUTIVE DIRECTOR.— 

11 (A) IN GENERAL.—The Council shall, 

12 without regard to section 5311(b) of title 5, 

13 United States Code, appoint an Executive Di14 rector. 

15 (B) PAY.—The Executive Director shall be 

16 paid at a rate equivalent to a rate for the Sen17 ior Executive Service. 

18 (2) STAFF.— 

19 (A) IN GENERAL.—Subject to subpara20 graphs (B) and (C), the Executive Director, 

21 with the approval of the Council, may appoint 

22 and fix the pay of additional personnel. 

23 (B) PAY.—The Executive Director may 

24 make such appointments without regard to the 

25 provisions of title 5, United States Code, gov-
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1 erning appointments in the competitive service, 

2 and any personnel so appointed may be paid 

3 without regard to the provisions of chapter 51 

4 and subchapter III of chapter 53 of such title, 

5 relating to classification and General Schedule 

6 pay rates, except that an individual so ap7 pointed may not receive pay in excess of 120 

8 percent of the annual rate of basic pay payable 

9 for GS–15 of the General Schedule. 

10 (C) DETAILED PERSONNEL.—Upon re11 quest of the Executive Director, the head of any 

12 Federal department or agency may detail any 

13 of the personnel of that department or agency 

14 to the Council to assist the Council in carrying 

15 out its duties under this Act. 

16 (l) CONTRACT AUTHORITY.—To the extent provided 

17 in advance in appropriations Acts, the Council may con18 tract with any person (including an agency of the Federal 

19 Government) for studies and analysis as required to exe20 cute its functions. Any employee of the Executive Branch 

21 may be detailed to the Council to assist the Council in 

22 carrying out its duties. 

23 (m) CONSULTATIONS WITH EXPERTS.—The Council 

24 may consult with any outside expert individuals or groups 

25 that the Council determines appropriate in performing its 
856 

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1 duties under this section. The Council may establish advi2 sory committees. 

3 (n) ACCESS TO INFORMATION.—The Council may se4 cure directly from any department or agency of the United 

5 States information necessary to enable it to carry out its 

6 functions, to the extent such information is otherwise 

7 available to a department or agency of the United States. 

8 Upon request of the chair, the head of that department 

9 or agency shall furnish that information to the Council. 

10 (o) DELEGATION OF AUTHORITY.—Except as other11 wise provided, the Council may delegate any function to 

12 such officers and employees as the Council may designate 

13 and may authorize such successive redelegations of such 

14 functions with the Council as the Council deems to be nec15 essary or appropriate. No delegation of functions by the 

16 Council shall relieve the Council of responsibility for the 

17 administration of such functions. 

18 (p) RULEMAKING.—The Council is authorized to es19 tablish such rules as may be necessary to carry out this 

20 section. 

21 (q) HEALTH CARE PROVIDER.—For purposes of this 

22 subtitle, the term ‘‘health care provider’’ means an indi23 vidual who, or entity that, provides an item or service to 

24 an individual that is covered under the health plan (as 
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1 defined in section 1111) in which the individual is en2 rolled. 

3 SEC. 5002. NATIONAL GOALS AND PERFORMANCE MEAS4 URES OF QUALITY. 

5 (a) IN GENERAL.—The National Quality Council 

6 shall develop a set of national quality goals and perform7 ance measures of quality for both the general population 

8 and for population subgroups defined by demographic 

9 characteristics and health status. The goals and measures 

10 shall incorporate goals identified by the Secretary of 

11 Health and Human Services for meeting public health ob12 jectives utilizing, but not limited to, goals delineated in 

13 Healthy People 2000. 

14 (b) SUBJECT OF MEASURES.—National measures of 

15 quality performance shall be developed under subsection 

16 (a) in a manner that provides statistical and other infor17 mation on at least the following subjects: 

18 (1) Outcomes of health care services and proce19 dures. 

20 (2) Population health status. 

21 (3) Health promotion. 

22 (4) Prevention of diseases, disorders, disabil23 ities, injuries, and other health conditions. 

24 (5) Access to care and appropriateness of care. 

25 (6) Consumer satisfaction. 
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1 SEC. 5003. STANDARDS AND PERFORMANCE MEASURES 

2 FOR HEALTH PLANS. 

3 (a) DEVELOPMENT.— 

4 (1) IN GENERAL.—The National Quality Coun5 cil shall establish national standards and perform6 ance measures for health plans, which may be used 

7 to assess the provision of health care services and 

8 access to such services, both for the general popu9 lation and population subgroups defined by demo10 graphic characteristics and health status. In subject 

11 matter areas with which the National Quality Coun12 cil determines that sufficient information and con13 sensus exist, the Council shall establish goals for 

14 performance by health plans consistent with the na15 tional goals and performance measures established 

16 under section 5002. 

17 (2) MEASURES AND STANDARDS.— 

18 (A) MEASURES.—Quality measures under 

19 this section shall relate, at a minimum, to: 

20 (i) Access by consumers to health care 

21 services and providers. 

22 (ii) Appropriateness of health care 

23 services. 

24 (iii) Consumer satisfaction. 

25 (iv) Outcomes of care. 
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1 (v) Disease prevention and health pro2 motion. 

3 (B) STANDARDS.—Quality standards 

4 under this section at a minimum shall relate to: 

5 (i) Health plan compliance with mem6 bers’ rights under this Act. 

7 (ii) Quality improvement and account8 ability. 

9 (iii) Documentation and review of pro10 vider credentialing and competency. 

11 (iv) Management of clinical, and ad12 ministrative and financial information. 

13 (b) CERTIFICATION OF PLANS.—The National Qual14 ity Council shall provide information and technical assist15 ance to the Secretary and the States concerning the use 

16 of national standards and performance measures devel17 oped under this section for State certification of health 

18 plans. 

19 SEC. 5004. PLAN DATA ANALYSIS AND CONSUMER SURVEYS. 

20 (a) IN GENERAL.—The National Quality Council 

21 shall oversee the design and conduct of periodic surveys 

22 of health care consumers and plans to gather information 

23 concerning the quality measures established under sec24 tions 5002 and 5003. The surveys shall monitor consumer 

25 reaction to the implementation of this Act and, in coordi-
860 

•S 2357 

1 nation with relevant data from health plans and other 

2 sources, be designed to assess the impact of this Act both

3 for the general population of the United States and for 

4 populations vulnerable to discrimination or to receiving in5 adequate care due to health status, demographic charac6 teristics, or geographic location. 

7 (b) SURVEY ADMINISTRATION AND DATA ANAL8 YSIS.—The National Quality Council shall approve a 

9 standard design for the consumer surveys and sampling 

10 of relevant plan data described in subsection (a) which 

11 shall be administered by the Administrator of the Agency 

12 for Health Care Policy and Research or such other appro13 priate entity as the Council shall designate on a plan-by14 plan and State-by-State basis. Sufficient consumer survey 

15 and plan data shall be collected and verified to provide 

16 for reliable and valid analysis. A State may add survey 

17 questions on quality measures of local interest to surveys 

18 conducted in the State. The plan-level survey shall include 

19 a subset of consumer survey questions related to consumer 

20 satisfaction, perceived health status, access, and such 

21 other survey items designated by the Council. 

22 (c) SAMPLING STRATEGIES.—The National Quality 

23 Council shall approve sampling strategies under sub24 section (a) that ensure that appropriate survey samples 

25 adequately measure populations that are considered to be 
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1 at risk of receiving inadequate health care or may be dif2 ficult to reach through consumer-sampling methods, in3 cluding individuals who— 

4 (1) fail to enroll in a health plan; 

5 (2) resign from a plan; or 

6 (3) are vulnerable to discrimination or to receiv7 ing inadequate care due to health status, demo8 graphic characteristics, or geographic location. 

9 (d) SURVEY INTEGRATION.—To the extent feasible, 

10 the consumer and plan surveys developed under this sec11 tion shall be integrated with existing Federal surveys. 

12 SEC. 5005. EVALUATION AND REPORTING OF QUALITY PER13 FORMANCE. 

14 (a) HEALTH PLAN REPORTS.—Each State annually 

15 shall publish and make available to the public and Con16 sumer Information and Advocacy Centers a performance 

17 report, in a standard format designated by the National 

18 Quality Council, outlining the performance of each health 

19 plan offered in the State with respect to the set of national 

20 measures of quality performance developed under sections 

21 5002 and 5003. The report shall include— 

22 (1) the results of a smaller number of such 

23 measures for health care providers if the available 

24 information is statistically meaningful; and 
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1 (2) the results of consumer surveys and an 

2 analysis of the plan data collected in section 5004. 

3 (b) CONSUMER REPORT CARDS.—The health plan re4 ports under subsection (a) shall be summarized in a con5 sumer report card as specified by the National Quality 

6 Council and made available by the State through the Con7 sumer Information and Advocacy Centers to all individuals 

8 in the State. 

9 (c) QUALITY REPORTS.—The National Quality Coun10 cil annually shall provide recommendations to the Con11 gress, the National Health Benefits Board, and the Sec12 retary in the form of a summary report that— 

13 (1) outlines in a standard format the perform14 ance of each State; 

15 (2) discusses State-level and national trends re16 lating to health care quality; and 

17 (3) presents data for each State from health 

18 plan reports and consumer surveys that were con19 ducted during the year. 

20 SEC. 5006. DEVELOPMENT AND DISSEMINATION OF PRAC21 TICE GUIDELINES. 

22 The National Quality Council may advise the Sec23 retary and the Administrator of the Agency for Health 

24 Care Policy and Research concerning priorities for the de25 velopment and periodic review and updating of clinically 
863 

•S 2357 

1 relevant guidelines established under section 912 of the 

2 Public Health Service Act. 

3 SEC. 5007. RESEARCH ON HEALTH CARE QUALITY. 

4 The National Quality Council may make rec5 ommendations to the Secretary and the Administrator of 

6 the Agency for Health Care Policy and Research con7 cerning priorities for research with respect to the quality, 

8 appropriateness, and effectiveness of health care. 

9 SEC. 5008. QUALITY IMPROVEMENT FOUNDATIONS. 

10 (a) ESTABLISHMENT.—The National Quality Council 

11 shall oversee the operation of quality improvement founda12 tions in performing the duties specified in subsection (c). 

13 (b) STRUCTURE AND MEMBERSHIP.— 

14 (1) GRANT PROCESS.—The Secretary, in con15 sultation with the Council, shall, through a competi16 tive grantmaking process, award grants for the es17 tablishment and operation of a quality improvement 

18 foundation in each State or region (as defined in 

19 paragraph (2)(B)). 

20 (2) ESTABLISHMENT OF GEOGRAPHIC AREAS.— 

21 The Secretary shall establish throughout the United 

22 States geographic areas with respect to which grants 

23 under this section will be made. In establishing such 

24 areas, the Secretary shall take into account the fol25 lowing criteria: 
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•S 2357 

1 (A) STATE AREAS.—Each State shall gen2 erally be designated as a geographic area for 

3 purposes of this paragraph. 

4 (B) MULTI-STATE AREAS.—The Secretary 

5 may establish geographic areas comprised of 

6 multiple contiguous States only where the Sec7 retary determines that volume of activity or 

8 other relevant factors justifies such an estab9 lishment. 

10 (3) ELIGIBLE APPLICANTS.—To be eligible to 

11 receive a grant for the establishment of a quality im12 provement foundation under paragraph (1), an ap13 plicant entity shall meet the following conditions: 

14 (A) NOT-FOR-PROFIT.—The entity shall be 

15 a not-for-profit entity operating within the 

16 State or region involved. 

17 (B) BOARD.—The entity shall have a 

18 board which includes— 

19 (i) representatives of health care pro20 viders from throughout the State or region 

21 involved, including both practicing pro22 viders and experts in the field of quality 

23 measurement and improvement, which to24 gether shall comprise at least one-fourth of 

25 the advisory board’s membership; 
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•S 2357 

1 (ii) at least one representative of Aca2 demic Health Centers or Schools of Public 

3 Health as defined in section 799 of the 

4 Public Health Service Act operating within 

5 the State or region involved (or operating 

6 outside of the State or region if no such 

7 Centers or schools operate within the State 

8 or region), which shall comprise up to one9 fourth of the membership; 

10 (iii) representatives of consumers re11 siding within the State or region involved, 

12 who shall comprise one-fourth of the mem13 bership; and 

14 (iv) representatives of purchasers of 

15 health care, health plans, and other inter16 ested parties residing within the State or 

17 region involved, and representatives of the 

18 State or States within a region. 

19 (C) STAFFING.—Each entity shall have 

20 sufficient, competent staff of experts possessing 

21 the skills and knowledge necessary to enable the 

22 foundation to perform its duties. 

23 (c) DUTIES.— 

24 (1) IN GENERAL.—Each quality improvement 

25 foundation shall carry out the duties described in 
866 

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1 paragraph (2) for the State or region in which the 

2 foundation is located. The foundation shall establish 

3 a program of activities incorporating such duties and 

4 shall be able to demonstrate the involvement of a 

5 broad cross-section of the providers and health care 

6 institutions throughout the State or region. A foun7 dation may apply for and conduct research described 

8 in section 5007. 

9 (2) DUTIES DESCRIBED.—The duties described 

10 in this paragraph include the following: 

11 (A) Collaboration with and technical assist12 ance to providers and health plans in ongoing 

13 efforts to improve the quality of health care 

14 provided to individuals in the State. 

15 (B) Population-based monitoring of prac16 tice patterns and patient outcomes,on an other 

17 than a case-by-case basis. 

18 (C) Developing programs in lifetime learn19 ing for health professionals to improve the qual20 ity of health care by ensuring that health pro21 fessionals remain informed about new knowl22 edge, acquire new skills, and adopt new roles as 

23 technology and societal demands change. 

24 (D) Disseminating information about suc25 cessful quality improvement programs, practice 
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1 guidelines, and research findings, including in2 formation on innovative staffing of health pro3 fessionals. 

4 (E) Assist in developing innovative patient 

5 education systems that enhance patient involve6 ment in decisions relating to their health care, 

7 including an emphasis on shared decision8 making between patients and health care pro9 viders. 

10 (F) Issuing a report to the public regard11 ing the foundation’s activities for the previous 

12 year including areas of success during the pre13 vious year and areas for opportunities in im14 proving health outcomes for the community, 

15 and the adoption of guidelines. 

16 (G) Providing notice to the State or appro17 priate entity if the foundation determines, after 

18 reasonable opportunities for improvement, that 

19 the quality of a provider or plan remains so in20 adequate that the patients or enrollees of such 

21 a provider or plan are subject to potential harm 

22 in utilizing the services of such provider or serv23 ices under such plan. 

24 (d) RESTRICTIONS ON DISCLOSURE.—The restric25 tions on disclosure of information under section 1160 of 
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1 the Social Security Act shall apply to quality improvement 

2 foundations under this section, except that— 

3 (1) such foundations shall make data available 

4 to qualified organizations and individuals for re5 search for public benefit; 

6 (2) individuals and qualified organizations shall 

7 meet standards consistent with the Public Health 

8 Service Act and policies regarding the conduct of 

9 scientific research, including provisions related to 

10 confidentiality, privacy, protection of humans and 

11 shall pay reasonable costs for data; and 

12 (3) such foundations may exchange information 

13 with other quality improvement foundations. 

14 SEC. 5009. CONSUMER INFORMATION AND ADVOCACY. 

15 (a) ESTABLISHMENT.— 

16 (1) IN GENERAL.—The Secretary shall establish 

17 (by grant or contract) and oversee a National Center 

18 of Consumer Information and Advocacy to provide 

19 technical assistance, adequate training and support 

20 to States and Consumer Information and Advocacy 

21 Centers in each State (hereafter referred to in this 

22 section as the ‘‘Center’’) to carry out the duties of 

23 this section, including providing public education to 

24 consumers concerning this Act. 
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•S 2357 

1 (2) REQUIREMENTS FOR NATIONAL CENTER.— 

2 The National Center of Consumer Information and 

3 Advocacy shall be a national non-profit organization 

4 with public education and health policy expertise and 

5 shall have sufficient staff to carry out its duties and 

6 a demonstrated ability to represent and work with a 

7 broad spectrum of consumers, including vulnerable 

8 and underserved populations. 

9 (3) STATE-BASED CENTERS.—The Consumer 

10 Information and Advocacy Center in each State shall 

11 disseminate State reports on quality performance (as 

12 defined in section 5005(4)) and health plan con13 sumer report cards (as defined in section 5005(2)) 

14 in order to facilitate consumer choice of health 

15 plans, perform public outreach and provide edu16 cation and assistance regarding consumer rights and 

17 responsibilities under this Act, and assist consumers 

18 in dealing with problems that arise with consumer 

19 purchasing cooperatives, large group purchasers, 

20 health plans, insurance agencies, and health care 

21 providers operating in such State. 

22 (b) CONTRACTS.— 

23 (1) SOLICITATION.—The Secretary shall solicit 

24 contracts from private non-profit organizations 

25 based in each State to fulfill the duties of the Center 
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1 in the State. The Secretary may develop such regu2 lations and guidelines as necessary to oversee the 

3 process of considering and awarding competitive con4 tracts under this section. In awarding such con5 tracts, the Secretary shall consult with the National 

6 Center of Consumer Information and Advocacy and 

7 shall, at a minimum, consider the demonstrated abil8 ity of the organization to represent and work with 

9 a broad spectrum of consumers, including vulnerable 

10 and underserved populations. 

11 (2) CONTRACT PERIOD.—The contract period 

12 for the State-based Consumer Information and Ad13 vocacy Centers and the National Center of Con14 sumer Information and Advocacy under this section 

15 shall be not less than 4 years and not more than 7 

16 years. 

17 (c) FUNCTIONS AND RESPONSIBILITIES.— 

18 (1) DISSEMINATION OF REPORTS.—Each Cen19 ter shall disseminate State reports on quality per20 formance (as defined in section 5005(2)) and health 

21 plan consumer report cards (as defined in section 

22 5005(2)) in order to facilitate consumer choice of 

23 health plans. 

24 (2) STAFF, OFFICES AND HOTLINES.—Each 

25 Center shall have sufficient staff, local offices 
871 

•S 2357 

1 throughout the State, and a State-wide toll-free hot2 line to carry out the advocacy duties of this section. 

3 Through direct contact and the hotline, the Center 

4 shall provide the following services in the State, in5 cluding appropriate assistance to individuals with 

6 limited English language ability— 

7 (A) outreach and education relating to con8 sumer rights and responsibilities under this Act, 

9 including such rights and services available 

10 through the Center; 

11 (B) assistance with enrollment in health 

12 plans, or obtaining services or reimbursement 

13 from health plans; 

14 (C) assistance with filing an application for 

15 premium or cost sharing subsidies; 

16 (D) information to enrollees about existing 

17 grievance procedures and coordination with 

18 other entities to assist in identifying, inves19 tigating, and resolving enrollee grievances under 

20 this Act (including grievances before State med21 ical boards); 

22 (E) referrals to appropriate local providers 

23 of legal assistance and to appropriate State and 

24 Federal agencies which may be of assistance to 

25 aggrieved individuals in the area; and 
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1 (F) conduct public hearings no less fre2 quently than once a year to identify and ad3 dress community health care needs. 

4 (d) ACCESS TO INFORMATION.—The Secretary and 

5 the States shall ensure that, for purposes of carrying out 

6 the Center’s duties under this section, the Center (and of7 ficers and employees of the Center in local offices) have 

8 appropriate access to necessary information subject to 

9 protections for confidentiality of enrollee information. 

10 Each Center shall have the capability to accept electronic 

11 quality data from plans as required under subtitle B. 

12 (e) EVALUATION AND REPORT.—The Secretary shall 

13 have the right to evaluate the quality and effectiveness of 

14 the organization in carrying out the functions specified in 

15 the contract. The Center shall report to the Secretary and 

16 the State annually on the nature and patterns of consumer 

17 complaints received in the Center and its local offices dur18 ing each year and any policy, regulatory, and legislative 

19 recommendations for needed improvements together with 

20 a record of the activities of the Center. 

21 (f) CONFLICTS OF INTEREST.—The Secretary shall 

22 ensure that no individual involved in the designation of 

23 a State Center, the Center itself, or of any delegate thereof 

24 is subject to a conflict of interest, including affiliation with 

25 (through ownership or common control) a health care fa-
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•S 2357 

1 cility, managed care organization, health insurance com2 pany or association of health care facilities or providers. 

3 No grantee under this section may have a direct involve4 ment with the licensing, certification, or accreditation of 

5 a health care facility, a health care plan, or a provider 

6 of health care services . 

7 (g) LEGAL COUNSEL.—The Secretary shall ensure 

8 that adequate legal counsel is available, and is able, with9 out conflict of interest, to assist the Center, and the local 

10 offices thereof in the performance of their official duties. 

11 (h) COORDINATION.—The Center shall coordinate its 

12 activities with all appropriate entities including Quality 

13 Improvement Foundations (established under section 

14 5008) and the State agencies designated to carry out cli15 ent advocacy activities pursuant to section 2106. 

16 (i) CONSTRUCTION.—Nothing in this section shall re17 place grievance procedures established or otherwise re18 quired under this Act. 

19 SEC. 5010. AUTHORIZATION OF APPROPRIATIONS. 

20 (a) NATIONAL QUALITY COUNCIL.—For the purpose 

21 of carrying out this subtitle with respect to the establish22 ment and activities of the National Quality Council, there 

23 are authorized to be appropriated $4,000,000 for each of 

24 the fiscal years 1995 through 2000. 
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1 (b) QUALITY IMPROVEMENT FOUNDATIONS.—For 

2 the purpose of carrying out section 5008, the are author3 ized to be appropriated $100,000,000 for fiscal year 1996, 

4 $200,000,000 for fiscal year 1997, and $300,000,000 for 

5 each of the fiscal years 1998 through 2000. 

6 (c) CONSUMER INFORMATION AND ADVOCACY CEN7 TERS.—For the purpose of carrying out section 5009, the 

8 are authorized to be appropriated $100,000,000 for fiscal 

9 year 1996, $200,000,000 for fiscal year 1997, 

10 $300,000,000 for each of the fiscal years 1998 through 

11 2000, of which $4,000,000 for each fiscal year shall be 

12 made available to the National Center of Consumer Infor13 mation and Advocacy. 

14 SEC. 5011. ROLE OF HEALTH PLANS IN QUALITY MANAGE15 MENT. 

16 Each health plan shall— 

17 (1) measure and disclose performance on qual18 ity measures as designated by this Act; 

19 (2) furnish information required under subtitles 

20 B and of this title and provide such other reports 

21 and information on the quality of care delivered by 

22 health care providers who are members of a provider 

23 network of the plan as may be required under this 

24 Act; and 
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1 (3) maintain quality management systems 

2 that— 

3 (A) use the national measures of quality 

4 performance developed by the National Quality 

5 Council under section 5003; and 

6 (B) measure the quality of health care fur7 nished to enrollees under the plan by all health 

8 care providers of the plan where practical. 

9 SEC. 5012. INFORMATION ON HEALTH CARE PROVIDERS. 

10 (a) STATE OBLIGATIONS.—Each State shall make 

11 available to consumers, upon request, information con12 cerning providers of health care services or supplies. Such 

13 information shall include— 

14 (1) the identity of any provider that has been 

15 convicted, under Federal or State law, of a criminal 

16 offense relating to fraud, corruption, breach of fidu17 ciary responsibility, or other financial misconduct in 

18 connection with the delivery of a health care service 

19 or supply; 

20 (2) the identity of any provider that has been 

21 convicted, under Federal or State law, of a criminal 

22 offense relating to neglect or abuse of patients in 

23 connection with the delivery of a health care service 

24 or supply; 
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1 (3) the identity of any provider that has been 

2 convicted, under Federal or State law, of a criminal 

3 offense relating to the unlawful manufacture, dis4 tribution, prescription, or dispensing of a controlled 

5 substance; and 

6 (4) the identity of any provider whose license to 

7 provide health care services or supplies has been re8 voked, suspended, restricted, or not renewed, by a 

9 State licensing authority for reasons relating to the 

10 provider’s professional competence, professional per11 formance, or financial integrity, or any provider who 

12 surrendered such a license while a formal discipli13 nary proceeding was pending before such an author14 ity, if the proceeding concerned the provider’s pro15 fessional competence, professional performance, or 

16 financial integrity. 

17 (b) PUBLIC AVAILABILITY OF INFORMATION IN NA18 TIONAL PRACTITIONER DATA BANK ON DEFENDANTS, 

19 AWARDS, AND SETTLEMENTS.— 

20 (1) IN GENERAL.—Section 427(a) of the Health 

21 Care Quality Improvement Act (42 U.S.C. 11137 

22 (a)) is amended by adding at the end the following 

23 new sentence: ‘‘Not later the January 1, 1996, the 

24 Secretary shall promulgate regulations under which 

25 individuals seeking to enroll in health plans under 
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•S 2357 

1 the Health Security Act shall be able to obtain infor2 mation reported under this part with respect to phy3 sicians and other licensed health practitioners par4 ticipating in such plans for whom information has 

5 been reported under this part on repeated occa6 sions.’’. 

7 (2) ACCESS TO DATA BANK FOR POINT-OF8 SERVICE CONTRACTORS UNDER MEDICARE.—Section 

9 427(a) of such Act (42 U.S.C. 11137(a)) is amend10 ed— 

11 (A) by inserting ‘‘to sponsors of point-of12 service networks under section 1990 of the So13 cial Security Act,’’, and 

14 (B) in the heading, by inserting ‘‘RE15 LATED’’ after ‘‘CARE’’. 

16 SEC. 5013. CONFORMING AMENDMENTS TO PUBLIC 

17 HEALTH SERVICE ACT. 

18 Title IX of the Public Health Service Act is amend19 ed— 

20 (1) in section 903(a)(4) (42 U.S.C. 299a– 

21 1(a)(4)), by inserting ‘‘and Quality Improvement 

22 Foundations’’ after ‘‘health agencies’’; 

23 (2) in section 904(c)(1) (42 U.S.C. 299a– 

24 2(c)(1)), by inserting ‘‘the National Quality Council 

25 and’’ after ‘‘in consultation with’’; 
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1 (3) in section 912(b)(4) (42 U.S.C. 299b– 

2 1(b)(4))— 

3 (A) by inserting ‘‘outcomes,’’ before 

4 ‘‘risks’’; and 

5 (B) by inserting before the semicolon ‘‘to 

6 the extent feasible given the availability of unbi7 ased, reliable, and valid data’’; 

8 (4) in section 914 (42 U.S.C. 299b–3)— 

9 (A) in subsection (a)(2)(B)— 

10 (i) by inserting ‘‘the National Quality 

11 Council,’’ after ‘‘shall consult with’’; and 

12 (ii) by inserting before the period 

13 ‘‘and relevant sections of the Health Secu14 rity Act’’; 

15 (B) in subsection (c), by inserting ‘‘Quality 

16 Improvement Foundations and other’’ after 

17 ‘‘carried out through’’; and 

18 (C) in subsection (f)— 

19 (i) by striking ‘‘TO ADMINISTRATOR’’ 

20 in the subsection heading; 

21 (ii) by striking ‘‘Administrator’’ and 

22 inserting ‘‘National Quality Council and 

23 the’’; and 

24 (5) in section 927 (42 U.S.C. 299c–6), by add25 ing at the end thereof the following new paragraphs: 
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1 ‘‘(5) The term ‘National Quality Council’ means 

2 the Council established under section 5001 of the 

3 Health Security Act. 

4 ‘‘(6) The term ‘‘Quality Improvement Founda5 tions’’ means the Foundations established under sec6 tion 5008 of the Health Security Act.’’. 

7 Subtitle B—Administrative 

8 Simplification 

9 PART 1—PURPOSE AND DEFINITIONS 

10 SEC. 5101. PURPOSE. 

11 It is the purpose of this subtitle to improve the effi12 ciency and effectiveness of the health care system, includ13 ing the medicare program under title XVIII of the Social 

14 Security Act and the medicaid program under title XIX 

15 of such Act, by encouraging the development of a health 

16 information network through the establishment of stand17 ards and requirements for the electronic transmission of 

18 certain health information. 

19 SEC. 5102. DEFINITIONS. 

20 For purposes of this subtitle: 

21 (1) CODE SET.—The term ‘‘code set’’ means 

22 any set of codes used for encoding data elements, 

23 such as tables of terms, medical concepts, medical 

24 diagnostic codes, or medical procedure codes. 
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1 (2) COORDINATION OF BENEFITS.—The term 

2 ‘‘coordination of benefits’’ means determining and 

3 coordinating the financial obligations of health plans 

4 when health care benefits are payable under 2 or 

5 more health plans. 

6 (3) HEALTH CARE PROVIDER.—The term 

7 ‘‘health care provider’’ includes a provider of services 

8 (as defined in section 1861(u) of the Social Security 

9 Act), a provider of medical or other health services 

10 (as defined in section 1861(s) of the Social Security 

11 Act), and any other person furnishing health care 

12 services or supplies. 

13 (4) HEALTH INFORMATION.—The term ‘‘health 

14 information’’ means any information, whether oral 

15 or recorded in any form or medium that— 

16 (A) is created or received by a health care 

17 provider, health plan, health oversight agency 

18 (as defined in section 5202), health researcher, 

19 public health authority (as defined in section 

20 5202), employer, life insurer, school or univer21 sity, or health information network service cer22 tified under section 5141; and 

23 (B) relates to the past, present, or future 

24 physical or mental health or condition of an in25 dividual, the provision of health care to an indi-
881 

•S 2357 

1 vidual, or the past, present, or future payment 

2 for the provision of health care to an individual. 

3 (5) HEALTH INFORMATION NETWORK.—The 

4 term ‘‘health information network’’ means the health 

5 information system that is formed through the appli6 cation of the requirements and standards established 

7 under this subtitle. 

8 (6) HEALTH INFORMATION PROTECTION ORGA9 NIZATION.—The term ‘‘health information protection 

10 organization’’ means a private entity or an entity op11 erated by a State that accesses standard data ele12 ments of health information through the health in13 formation network, processes such information into 

14 non-identifiable health information, and may store 

15 such information. 

16 (7) HEALTH INFORMATION NETWORK SERV17 ICE.—The term ‘‘health information network serv18 ice’’— 

19 (A) means a private entity or an entity op20 erated by a State that enters into contracts 

21 to— 

22 (i) process or facilitate the processing 

23 of nonstandard data elements of health in24 formation into standard data elements; 
882 

•S 2357 

1 (ii) provide the means by which per2 sons are connected to the health informa3 tion network for purposes of meeting the 

4 requirements of this subtitle, including the 

5 holding of standard data elements of 

6 health information; 

7 (iii) provide authorized access to 

8 health information through the health in9 formation network; or 

10 (iv) provide specific information proc11 essing services, such as automated coordi12 nation of benefits and claims transaction 

13 routing; and 

14 (B) includes a health information protec15 tion organization. 

16 (8) HEALTH PLAN.—The term ‘‘health plan’’ 

17 has the meaning given such term in section 

18 1011(1)(A) except that such term shall include 

19 clauses (iii), (iv), (v), (vi), and (viii) of such section. 

20 (9) NON-IDENTIFIABLE HEALTH INFORMA21 TION.—The term ‘‘non-identifiable health informa22 tion’’ means health information that is not protected 

23 health information as defined in section 5202. 
883 

•S 2357 

1 (10) HEALTH RESEARCHER.—The term ‘‘health 

2 researcher’’ shall have the meaning given such term 

3 under section 5202. 

4 (11) PATIENT MEDICAL RECORD INFORMA5 TION.—The term ‘‘patient medical record informa6 tion’’ means health information derived from a clin7 ical encounter that relates to the physical or mental 

8 condition of an individual. 

9 (12) STANDARD.—The term ‘‘standard’’ when 

10 referring to an information transaction or to data 

11 elements of health information means the trans12 action or data elements meet any standard adopted 

13 by the Secretary under part 2 that applies to such 

14 information transaction or data elements. 

15 PART 2—STANDARDS FOR DATA ELEMENTS AND 

16 INFORMATION TRANSACTIONS 

17 SEC. 5111. GENERAL REQUIREMENTS ON SECRETARY. 

18 (a) IN GENERAL.—The Secretary shall adopt stand19 ards and modifications to standards under this subtitle 

20 that are— 

21 (1) consistent with the objective of reducing the 

22 costs of providing and paying for health care; and 

23 (2) in use and generally accepted or developed 

24 or modified by the standards setting organizations 
884 

•S 2357 

1 accredited by the American National Standard Insti2 tute (ANSI). 

3 (b) INITIAL STANDARDS.—The Secretary may de4 velop an expedited process for the adoption of initial 

5 standards under this subtitle. 

6 (c) FAILSAFE.—If the Secretary is unable to adopt 

7 standards or modified standards in accordance with sub8 section (a) that meet the requirements of this subtitle— 

9 (1) the Secretary may develop or modify such 

10 standards and, after providing public notice and 

11 after an adequate period for public comment, adopt 

12 such standards; and 

13 (2) if the Secretary adopts standards under 

14 paragraph (1), the Secretary shall submit a report 

15 to the appropriate committees of Congress on the 

16 actions taken by the Secretary under this subsection. 

17 (d) PAPER FORMATS.—The Secretary may develop 

18 methods by which a person may use the standards adopted 

19 by the Secretary under this subtitle with respect to health 

20 information that is in written rather than electronic form. 

21 SEC. 5112. STANDARDS FOR DATA ELEMENTS OF HEALTH 

22 INFORMATION. 

23 (a) IN GENERAL.—The Secretary shall adopt stand24 ards necessary to make data elements of the following 
885 

•S 2357 

1 health information uniform and compatible for electronic 

2 transmission through the health information network: 

3 (1) the health information that is appropriate 

4 for transmission in connection with transactions de5 scribed in subsections (a), (b), and (d) of section 

6 5121; 

7 (2) the quality information required to be sub8 mitted by a health plan under title I and subtitle A 

9 of this title; and 

10 (3) patient medical record information. 

11 (b) ADDITIONS.—The Secretary may make additions 

12 to the sets of data elements adopted under subsection (a) 

13 as the Secretary determines appropriate in a manner that 

14 minimizes the disruption and cost of compliance with such 

15 additions. 

16 (c) CERTAIN DATA ELEMENTS.— 

17 (1) UNIQUE HEALTH IDENTIFIERS.—The Sec18 retary shall establish a system to provide for a 

19 standard unique health identifier for each individual, 

20 employer, health plan, and health care provider for 

21 use in the health care system. The personal health 

22 identifier for an individual shall be an encrypted 

23 form of the social security account number assigned 

24 to the individual by the Secretary under section 

25 205(c)(2) of the Social Security Act. 
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•S 2357 

1 (2) CODE SETS.— 

2 (A) IN GENERAL.—The Secretary, in con3 sultation with experts from the private sector 

4 and Federal agencies, shall— 

5 (i) select code sets for appropriate 

6 data elements from among the code sets 

7 that have been developed by private and 

8 public entities; or 

9 (ii) establish code sets for such data 

10 elements if no code sets for the data ele11 ments have been developed. 

12 (B) DISTRIBUTION.—The Secretary shall 

13 establish efficient and low-cost procedures for 

14 distribution of code sets and modifications to 

15 such code sets under section 5115(c). 

16 SEC. 5113. INFORMATION TRANSACTION STANDARDS. 

17 (a) IN GENERAL.—The Secretary shall adopt tech18 nical standards relating to the method by which data ele19 ments of health information that have been standardized 

20 under section 5112 may be transmitted electronically, in21 cluding standards with respect to the format in which such 

22 data elements shall be transmitted. 

23 (b) SPECIAL RULE FOR COORDINATION OF BENE24 FITS.—Any standards adopted by the Secretary under 

25 paragraph (1) that relate to coordination of benefits shall 
887 

•S 2357 

1 provide that a claim for reimbursement for medical serv2 ices furnished is tested by an algorithm specified by the 

3 Secretary against all records of enrollment and eligibility 

4 for the individual who received such services to determine 

5 any primary and secondary obligors for payment. 

6 (c) ELECTRONIC SIGNATURE.—The Secretary, in co7 ordination with the Secretary of Commerce, shall promul8 gate regulations specifying procedures for the electronic 

9 transmission and authentication of signatures, compliance 

10 with which will be deemed to satisfy State and Federal 

11 statutory requirements for written signatures with respect 

12 to information transactions required by this Act and writ13 ten signatures on medical records and prescriptions. 

14 SEC. 5114. STANDARDS RELATING TO WRITTEN CLAIMS 

15 SUBMITTED BY INDIVIDUALS AND WRITTEN 

16 EXPLANATIONS OF BENEFITS. 

17 The Secretary shall adopt standard methods and for18 mats which— 

19 (1) may be used by an individual to submit a 

20 written claim when the individual’s health care pro21 vider does not submit the claim; and 

22 (2) shall be used by health plans to submit a 

23 written explanation of benefits to an enrollee. 
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1 SEC. 5115. TIMETABLES FOR ADOPTION OF STANDARDS. 

2 (a) INITIAL STANDARDS FOR DATA ELEMENTS.— 

3 The Secretary shall adopt standards relating to— 

4 (1) the data elements for the information de5 scribed in section 5112(a)(1) not later than 9 

6 months after the date of the enactment of this sub7 title (except in the case of standards with respect to 

8 data elements for claims attachments which shall be 

9 adopted not later than 24 months after the date of 

10 the enactment of this subtitle); 

11 (2) the data elements for the information de12 scribed in section 5112(a)(2) not later than 9 

13 months after the date of the enactment of this sub14 title; 

15 (3) data elements for patient medical record in16 formation not earlier than 24 months and not later 

17 than 7 years after the date of the enactment of this 

18 subtitle; and 

19 (4) any addition to a set of data elements, in 

20 conjunction with making such an addition. 

21 (b) INITIAL STANDARDS FOR INFORMATION TRANS22 ACTIONS.—The Secretary shall adopt standards relating 

23 to information transactions under section 5113 not later 

24 than 9 months after the date of the enactment of this sub25 title (except in the case of standards for claims attach-
889 

•S 2357 

1 ments which shall be adopted not later than 24 months 

2 after the date of the enactment of this subtitle). 

3 (c) STANDARDS FOR WRITTEN CLAIMS AND EXPLA4 NATIONS OF BENEFITS.—The Secretary shall adopt 

5 standard methods and formats described in section 5114 

6 not later than 9 months after the date of the enactment 

7 of this subtitle. 

8 (d) MODIFICATIONS TO STANDARDS.— 

9 (1) IN GENERAL.—Except as provided in para10 graph (2), the Secretary shall review the standards 

11 adopted under this subtitle and shall adopt modified 

12 standards as determined appropriate, but no more 

13 frequently than once every 6 months. Any modifica14 tion to standards shall be completed in a manner 

15 which minimizes the disruption and cost of compli16 ance. 

17 (2) SPECIAL RULES.— 

18 (A) MODIFICATIONS DURING FIRST 12- 

19 MONTH PERIOD.—Except with respect to addi20 tions and modifications to code sets under sub21 paragraph (B), the Secretary shall not adopt 

22 any modifications to standards adopted under 

23 this subtitle during the 12-month period begin24 ning on the date such standards are adopted 

25 unless the Secretary determines that a modi-
890 

•S 2357 

1 fication is necessary in order to permit compli2 ance with requirements relating to the stand3 ards. 

4 (B) ADDITIONS AND MODIFICATIONS TO

5 CODE SETS.— 

6 (i) IN GENERAL.—The Secretary shall 

7 ensure that procedures exist for the rou8 tine maintenance, testing, enhancement, 

9 and expansion of code sets to accommodate 

10 changes in biomedical science and health 

11 care delivery. 

12 (ii) ADDITIONAL RULES.—If a code 

13 set is modified under this subsection, the 

14 modified code set shall include instructions 

15 on how data elements that were encoded 

16 prior to the modification are to be con17 verted or translated so as to preserve the 

18 value of the data elements. Any modifica19 tion to a code set under this subsection 

20 shall be implemented in a manner that 

21 minimizes the disruption and cost of com22 plying with such modification. 

23 (e) EVALUATION OF STANDARDS.—The Secretary 

24 may establish a process to measure or verify the consist25 ency of standards adopted or modified under this subtitle. 
891 

•S 2357 

1 Such process may include demonstration projects and 

2 analysis of the cost of implementing such standards and 

3 modifications. 

4 PART 3—REQUIREMENTS WITH RESPECT TO 

5 CERTAIN TRANSACTIONS AND INFORMATION 

6 SEC. 5121. REQUIREMENTS WITH RESPECT TO CERTAIN 

7 TRANSACTIONS AND INFORMATION. 

8 (a) REQUIREMENTS ON PLANS AND PROVIDERS RE9 LATING TO FINANCIAL AND ADMINISTRATIVE TRANS10 ACTIONS.—If a health care provider or a health plan con11 ducts any of the following transactions, such transactions 

12 shall be standard transactions and the information trans13 mitted or received in connection with such transaction 

14 shall be in the form of standard data elements: 

15 (1) Claims (including coordination of benefits). 

16 (2) Claims attachments. 

17 (3) Responses to research inquiries by a health 

18 researcher. 

19 (4) Other transactions determined appropriate 

20 by the Secretary consistent with the goal of reducing 

21 administrative costs. 

22 (b) REQUIREMENT ONLY ON PLANS RELATING TO

23 FINANCIAL AND ADMINISTRATIVE TRANSACTIONS.—If a 

24 person desires to conduct any of the following transactions 

25 with a health plan as a standard transaction, the health 
892 

•S 2357 

1 plan shall conduct such standard transaction and the in2 formation transmitted or received in connection with such 

3 transaction shall be in the form of standard data elements: 

4 (1) Enrollment and disenrollment. 

5 (2) Eligibility. 

6 (3) Payment and remittance advice. 

7 (4) Premium payments. 

8 (5) First report of injury. 

9 (6) Claims status. 

10 (7) Referral certification and authorization. 

11 (8) Other transactions determined appropriate 

12 by the Secretary consistent with the goal of reducing 

13 administrative costs. 

14 (c) REQUIREMENT ON PLANS RELATING TO QUALITY

15 INFORMATION.—Any quality information required to be 

16 submitted by a health plan under title I or subtitle A of 

17 this title shall be in the form of standard data elements 

18 and the transmission of such data shall be in the form 

19 of a standard transaction. 

20 (d) REQUIREMENT ONLY ON PURCHASING COOPERA21 TIVES.—If a person desires to conduct any of the following 

22 transactions with a purchasing cooperative (as defined in 

23 section 1013(12)) as a standard transaction, the coopera24 tive shall conduct such standard transaction and the infor-
893 

•S 2357 

1 mation transmitted or received in connection with such 

2 transaction shall be in the form of standard data elements: 

3 (1) Enrollment and disenrollment. 

4 (2) Premium payments. 

5 (e) REQUIREMENT WITH RESPECT TO DISCLOSURE

6 OF INFORMATION.— 

7 (1) IN GENERAL.—A health plan or health care 

8 provider shall make the standard data elements 

9 transmitted or received by such plan or provider in 

10 connection with the transactions described in sub11 sections (a), (b), and (c) or acquired under section 

12 5164(a) available for disclosure as authorized by this 

13 subtitle. 

14 (2) SPECIAL RULE.—In the case of a health 

15 care provider that does not file claims, such provider 

16 shall be responsible for making standard data ele17 ments for encounter information available for disclo18 sure as authorized by this subtitle. 

19 (f) SATISFACTION OF REQUIREMENTS.—A health 

20 care provider, health plan, or consumer purchasing cooper21 ative may satisfy the requirement imposed on such pro22 vider, plan, or cooperative under subsection (a), (b), (c), 

23 (d), or (e) by— 

24 (1) directly transmitting standard data ele25 ments; 
894 

•S 2357 

1 (2) submitting nonstandard data elements to a 

2 health information network service certified under 

3 section 5141 for processing into standard data ele4 ments and transmission; or 

5 (3) in the case of a provider, submitting data 

6 elements to a plan which satisfies the requirements 

7 imposed on such provider on the provider’s behalf. 

8 (g) TIMELINESS.—A health care provider or health 

9 plan shall be determined to have satisfied a requirement 

10 imposed under this section only if the action required is 

11 completed in a timely manner, as determined by the Sec12 retary. In setting standards for timeliness, the Secretary 

13 shall take into consideration the age and the amount of 

14 information being requested. 

15 SEC. 5122. TIMETABLES FOR COMPLIANCE WITH REQUIRE16 MENTS. 

17 (a) INITIAL COMPLIANCE.— 

18 (1) IN GENERAL.—Not later than 12 months 

19 after the date on which standards are adopted under 

20 part 2 with respect to a type of transaction or data 

21 elements for a type of health information, a health 

22 plan, health care provider, or purchasing cooperative 

23 shall comply with the requirements of this subtitle 

24 with respect to such transaction or information. 
895 

•S 2357 

1 (2) ADDITIONAL DATA ELEMENTS.—Not later 

2 than 12 months after the date on which the Sec3 retary adopts an addition to a set of data elements 

4 for health information under part 2, a health plan, 

5 health care provider, or purchasing cooperative shall 

6 comply with the requirements of this subtitle using 

7 such data elements. 

8 (b) COMPLIANCE WITH MODIFIED STANDARDS.— 

9 (1) IN GENERAL.—If the Secretary adopts a 

10 modified standard under part 2, a health plan, 

11 health care provider, or purchasing cooperative shall 

12 be required to comply with the modified standard at 

13 such time as the Secretary determines appropriate 

14 taking into account the time needed to comply due 

15 to the nature and extent of the modification. 

16 (2) SPECIAL RULE.—In the case of modifica17 tions to standards that do not occur within the 12- 

18 month period beginning on the date such standards 

19 are adopted, the time determined appropriate by the 

20 Secretary under paragraph (1) shall be no sooner 

21 than the last day of the 90-day period beginning on 

22 the date such modified standard is adopted and no 

23 later than the last day of the 12 month period begin24 ning on the date such modified standard is adopted. 
896 

•S 2357 

1 PART 4—ACCESSING HEALTH INFORMATION 

2 SEC. 5131. ACCESSING HEALTH INFORMATION FOR AU3 THORIZED PURPOSES. 

4 (a) IN GENERAL.—The Secretary shall adopt tech5 nical standards for appropriate persons, including health 

6 plans, health care providers, health information network 

7 services certified under section 5141, health researchers, 

8 and Federal and State agencies, to locate and access the 

9 health information that is available through the health in10 formation network due to the requirements of this subtitle. 

11 Such technical standards shall ensure that any request to 

12 locate or access information shall be authorized under sub13 title C. 

14 (b) PROCUREMENT RULE FOR GOVERNMENT AGEN15 CIES.— 

16 (1) IN GENERAL.—Health information protec17 tion organizations certified under section 5141 shall 

18 make available to a Federal or State agency pursu19 ant to a Federal Acquisition Regulation (or an 

20 equivalent State system), any non-identifiable health 

21 information that is requested by such agency. 

22 (2) CERTAIN INFORMATION AVAILABLE AT LOW

23 COST.—If a health information protection organiza24 tion described in paragraph (1) needs information 

25 from a health plan or health care provider in order 

26 to comply with a request of a Federal or State agen-
897 

•S 2357 

1 cy that is necessary to comply with a requirement 

2 under this Act, such plan or provider shall make 

3 such information available to such organization for 

4 a charge that does not exceed the reasonable cost of 

5 transmitting the information. If requested, a health 

6 information protection organization that receives in7 formation under the preceding sentence must make 

8 such information available to any other such organi9 zation that is certified under section 5141 for a 

10 charge that does not exceed the reasonable cost of 

11 transmitting the information. 

12 (c) FUNCTIONAL SEPARATION.—The standards 

13 adopted by the Secretary under subsection (a) shall ensure 

14 that any health information disclosed under such sub15 section shall not, after such disclosure, be used or released 

16 for an administrative, regulatory, or law enforcement pur17 pose unless such disclosure was made for such purpose. 

18 (d) PUBLIC USE FUNCTIONS.—Nothing in this sub19 title shall be construed to limit the authority of a Federal 

20 or State agency to make non-identifiable health informa21 tion available for public use functions. 

22 SEC. 5132. RESPONDING TO ACCESS REQUESTS. 

23 (a) IN GENERAL.—The Secretary may adopt, and 

24 modify as appropriate, standards under which a health 

25 care provider or health plan shall respond to requests for 
898 

•S 2357 

1 access to health information consistent with this subtitle 

2 and subtitle C. 

3 (b) STANDARDS DESCRIBED.—The standards under 

4 subsection (a) shall provide— 

5 (1) for a standard format under which a pro6 vider or plan will respond to each request either by 

7 satisfying the request or responding with an expla8 nation of the specific restriction which results in a 

9 failure to satisfy the request; and 

10 (2) that any restrictions will not prevent a plan 

11 or provider from responding to a request in a timely 

12 manner taking into account the age and amount of 

13 the information being requested. 

14 (c) CONSTRUCTION.—Nothing in this section shall be 

15 construed as permitting a health care provider or health 

16 plan to refuse to disclose any health information that is 

17 required to be disclosed by law. 

18 SEC. 5133. LENGTH OF TIME INFORMATION SHOULD BE AC19 CESSIBLE. 

20 The Secretary shall adopt standards with respect to 

21 the length of time any standard data elements for a type 

22 of health information should be accessible through the 

23 health information network. 
899 

•S 2357 

1 SEC. 5134. TIMETABLES FOR ADOPTION OF STANDARDS 

2 AND COMPLIANCE. 

3 (a) INITIAL STANDARDS.—The Secretary shall adopt 

4 standards under this part not later than 9 months after 

5 the date of the enactment of this subtitle and such stand6 ards shall be effective upon adoption. 

7 (b) MODIFICATIONS TO STANDARDS.— 

8 (1) IN GENERAL.—Except as provided in para9 graph (2), the Secretary shall review the standards 

10 adopted under this part and shall adopt modified 

11 standards as determined appropriate, but no more 

12 frequently than once every 6 months. Any modifica13 tion to standards shall be completed in a manner 

14 which minimizes the disruption and cost of compli15 ance. Any modifications to standards adopted under 

16 this part shall be effective upon adoption. 

17 (2) SPECIAL RULE.—The Secretary shall not 

18 adopt modifications to any standards adopted under 

19 this part during the 12-month period beginning on 

20 the date such standards are adopted unless the Sec21 retary determines that a modification is necessary in 

22 order to permit compliance with the requirements of 

23 this part. 
900 

•S 2357 

1 PART 5—STANDARDS AND CERTIFICATION FOR 

2 HEALTH INFORMATION NETWORK 

3 SEC. 5141. STANDARDS AND CERTIFICATION FOR HEALTH 

4 INFORMATION NETWORK SERVICES. 

5 (a) STANDARDS FOR OPERATION.—The Secretary 

6 shall establish standards with respect to the operation of 

7 health information network services, including standards 

8 ensuring that— 

9 (1) such services develop, operate, and cooper10 ate with one another to form the health information 

11 network; 

12 (2) such services meet all of the requirements 

13 under subtitle C that are applicable to such services; 

14 (3) such services make public information con15 cerning their performance, as measured by uniform 

16 indicators such as accessibility, transaction respon17 siveness, administrative efficiency, reliability, de18 pendability, and any other indicator determined ap19 propriate by the Secretary; 

20 (4) such services have security procedures that 

21 are consistent with the privacy requirements under 

22 subtitle C, including secure methods of access to and 

23 transmission of data; 

24 (5) such services, if they are part of a larger or25 ganization, have policies and procedures in place 

26 which isolate their activities with respect to proc-
901 

•S 2357 

1 essing information in a manner that prevents access 

2 to such information by such larger organization. 

3 (b) CERTIFICATION BY THE SECRETARY.— 

4 (1) ESTABLISHMENT.—Not later than 12 

5 months after the date of the enactment of this sub6 title, the Secretary shall establish a certification pro7 cedure for health information network services which 

8 ensures that certified services are qualified to meet 

9 the requirements of this subtitle and the standards 

10 established by the Secretary under this section. Such 

11 certification procedure shall be implemented in a 

12 manner that minimizes the costs and delays of oper13 ations for such services. 

14 (2) APPLICATION.—Each entity desiring to be 

15 certified as a health information network service 

16 shall apply to the Secretary for certification in a 

17 form and manner determined appropriate by the 

18 Secretary. 

19 (3) AUDITS AND REPORTS.—The procedure es20 tablished under paragraph (1) shall provide for au21 dits by the Secretary and reports by an entity cer22 tified under this section as the Secretary determines 

23 appropriate in order to monitor such entity’s compli24 ance with the requirements of this subtitle, subtitle 
902 

•S 2357 

1 C, and the standards established by the Secretary 

2 under this section. 

3 (4) RECERTIFICATION.—A health information 

4 network service must be recertified under this sub5 section at least every 3 years. 

6 (c) LOSS OF CERTIFICATION.— 

7 (1) MANDATORY TERMINATION.—Except as 

8 provided in paragraph (3), if a health information 

9 network service violates a requirement imposed on 

10 such service under subtitle C, its certification under 

11 this section shall be terminated unless the Secretary 

12 determines that appropriate corrective action has 

13 been taken. 

14 (2) DISCRETIONARY TERMINATION.—If a health 

15 information network service violates a requirement 

16 or standard imposed under this subtitle and a pen17 alty has been imposed under section 5151, the Sec18 retary shall review the certification of such service 

19 and may terminate such certification. 

20 (3) CONDITIONAL CERTIFICATION—The Sec21 retary may establish a procedure under which a 

22 health information network service may remain cer23 tified on a conditional basis if the service is oper24 ating consistently with a plan intended to correct 

25 any violations described in paragraphs (1) or (2). 
903 

•S 2357 

1 Such procedure may provide for the appointment of 

2 a trustee to continue operation of the service until 

3 the requirements for full certification are met. 

4 (d) CERTIFICATION BY PRIVATE ENTITIES.—The 

5 Secretary may designate private entities to conduct the 

6 certification procedures established by the Secretary under 

7 this section. A health information network service certified 

8 by such an entity in accordance with such designation 

9 shall be considered to be certified by the Secretary. 

10 SEC. 5142. ENSURING AVAILABILITY OF INFORMATION. 

11 The Secretary shall establish a procedure under 

12 which a health plan or health care provider which does 

13 not have the ability to transmit standard data elements 

14 directly or does not have access to a health information 

15 network service certified under section 5141 shall be able 

16 to make health information available for disclosure as au17 thorized by this subtitle. 

18 PART 6—PENALTIES 

19 SEC. 5151. GENERAL PENALTY FOR FAILURE TO COMPLY 

20 WITH REQUIREMENTS AND STANDARDS. 

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

22 (b), the Secretary shall impose on any person that violates 

23 a requirement or standard imposed under this subtitle a 

24 penalty of not more than $1,000 for each violation. The 

25 provisions of section 1128A of the Social Security Act 
904 

•S 2357 

1 (other than subsections (a) and (b) and the second sen2 tence of subsection (f)) shall apply to the imposition of 

3 a civil money penalty under this subsection in the same 

4 manner as such provisions apply to the imposition of a 

5 penalty under section 1128A of such Act. 

6 (b) LIMITATIONS.— 

7 (1) NONCOMPLIANCE NOT DISCOVERED EXER8 CISING REASONABLE DILIGENCE.—A penalty may 

9 not be imposed under subsection (a) if it is estab10 lished to the satisfaction of the Secretary that the 

11 person liable for the penalty did not know, and by 

12 exercising reasonable diligence would not have 

13 known, that such person failed to comply with the 

14 requirement or standard described in subsection (a). 

15 (2) FAILURES DUE TO REASONABLE CAUSE.— 

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

17 subparagraphs (B) and (C), a penalty may not 

18 be imposed under subsection (a) if— 

19 (i) the failure to comply was due to 

20 reasonable cause and not to willful neglect; 

21 and 

22 (ii) the failure to comply is corrected 

23 during the 30-day period beginning on the 

24 1st date the person liable for the penalty 

25 knew, or by exercising reasonable diligence 
905 

•S 2357 

1 would have known, that the failure to com2 ply occurred. 

3 (B) EXTENSION OF PERIOD.— 

4 (i) NO PENALTY.—The period re5 ferred to in subparagraph (A)(ii) may be 

6 extended as determined appropriate by the 

7 Secretary based on the nature and extent 

8 of the failure to comply. 

9 (ii) ASSISTANCE.—If the Secretary 

10 determines that a health plan, health care 

11 provider, or purchasing cooperative failed 

12 to comply because such person was unable 

13 to comply, the Secretary may provide tech14 nical assistance to such person. Such as15 sistance shall be provided in any manner 

16 determined appropriate by the Secretary. 

17 (3) REDUCTION.—In the case of a failure to 

18 comply which is due to reasonable cause and not to 

19 willful neglect, any penalty under subsection (a) that 

20 is not entirely waived under paragraph (2) may be 

21 waived to the extent that the payment of such pen22 alty would be excessive relative to the compliance 

23 failure involved. 
906 

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1 PART 7—MISCELLANEOUS PROVISIONS 

2 SEC. 5161. IMPOSITION OF ADDITIONAL REQUIREMENTS. 

3 (a) DATA ELEMENT STANDARDS.—A person may not 

4 impose a standard on another person that is in addition 

5 to the standards adopted by the Secretary under section 

6 5112 unless— 

7 (1) such person voluntarily agrees to such 

8 standard; or 

9 (2) a waiver is granted under subsection (c) to 

10 impose such standard. 

11 (b) TRANSACTIONS AND ACCESS STANDARDS.—A 

12 person may not impose a standard on another person that 

13 is in addition to the standards adopted by the Secretary 

14 under section 5113 or 5131 unless such person voluntarily 

15 agrees to such standard. 

16 (c) CONDITIONS FOR WAIVERS.— 

17 (1) IN GENERAL.—A person may request a 

18 waiver from the Secretary in order to require an19 other person to comply with a standard that is in 

20 addition to the standards adopted by the Secretary 

21 under section 5112. 

22 (2) CONSIDERATION OF WAIVER REQUESTS.— 

23 No waiver may be granted unless the Secretary de24 termines that the value of the data to be exchanged 

25 for research or other purposes significantly out26 weighs the administrative cost of the additional 
907 

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1 standard taking into consideration the burden of the 

2 timing of the imposition of the additional standard. 

3 (3) ANONYMOUS REPORTING.—If a person at4 tempts to impose a standard in addition to the 

5 standards adopted by the Secretary under section 

6 5112, the person on whom such additional standard 

7 is being imposed may contact the Secretary. The 

8 Secretary shall develop a procedure under which the 

9 contacting person shall remain anonymous. The Sec10 retary shall notify the person imposing the addi11 tional standard that the additional standard may not 

12 be imposed unless the other person voluntarily 

13 agrees to such standard or a waiver is obtained 

14 under this subsection. 

15 SEC. 5162. EFFECT ON STATE LAW. 

16 (a) IN GENERAL.—A provision, requirement, or 

17 standard under this subtitle shall supersede any contrary 

18 provision of State law, including— 

19 (1) a provision of State law that requires med20 ical or health plan records (including billing informa21 tion) to be maintained or transmitted in written 

22 rather than electronic form, and 

23 (2) a provision of State law which provides for 

24 requirements or standards that are more stringent 
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1 than the requirements or standards under this sub2 title; 

3 except where the Secretary determines that the provision 

4 is necessary to prevent fraud and abuse, with respect to 

5 controlled substances, or for other purposes. 

6 (b) PUBLIC HEALTH REPORTING.—Nothing in this 

7 subtitle shall be construed to invalidate or limit the au8 thority, power, or procedures established under any law 

9 providing for the reporting of disease or injury, child 

10 abuse, birth, or death, public health surveillance, or public 

11 health investigation or intervention. 

12 SEC. 5164. HEALTH INFORMATION CONTINUITY. 

13 (a) INFORMATION HELD BY HEALTH PLANS AND

14 PROVIDERS.—If a health plan or health care provider 

15 takes any action that would threaten the continued avail16 ability of the standard data elements of health information 

17 held by such plan or provider, such data elements shall 

18 be obtained by the State in which such plan or provider 

19 is located. The State shall ensure that such data elements 

20 are transferred to a health plan or health care provider 

21 in accordance with procedures established by the Sec22 retary. 

23 (b) INFORMATION HELD BY HEALTH INFORMATION

24 NETWORK SERVICES.—If a health information network 

25 service certified under section 5141 loses its certified sta-
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1 tus or takes any action that would threaten the continued 

2 availability of the standard data elements of health infor3 mation held by such service, such data elements shall be 

4 transferred to another health information network service 

5 certified under section 5141, as designated by the Sec6 retary. 

7 SEC. 5165. PROTECTION OF COMMERCIAL INFORMATION. 

8 In adopting standards under this subtitle, the Sec9 retary shall not require disclosure of trade secrets and 

10 confidential commercial information by entities operating 

11 in the health information network except as required by 

12 law. 

13 SEC. 5166. PAYMENT FOR HEALTH CARE SERVICES OR 

14 HEALTH PLAN PREMIUMS. 

15 Nothing in this subtitle shall be construed to prohibit 

16 payments for health care services or health plan premiums 

17 from being made by debit, credit, or other payment cards 

18 or numbers or other electronic payment means. 

19 SEC. 5167. HEALTH SECURITY CARDS. 

20 (a) IN GENERAL.—The Secretary shall establish 

21 standards relating to the form of health security cards 

22 issued by health plans and the information to be encoded 

23 electronically on such cards. 

24 (b) FORM DESCRIBED.—The standard form for a 

25 health security card shall be a card which— 
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1 (1) is made of plastic or a similar durable ma2 terial with a useful life of at least 5 years; 

3 (2) is resistant to counterfeiting; 

4 (3) can store information that can be encoded 

5 and retrieved electronically; 

6 (4) can be produced in a cost-effective manner 

7 and used in all types of health care locations; and 

8 (5) specifies on its face the social security ac9 count number assigned to the individual who is the 

10 cardholder by the Secretary under section 205(c)(2) 

11 of the Social Security Act. 

12 (b) INFORMATION DESCRIBED.—The information 

13 electronically encoded on a health security card shall in14 clude the identity of the individual to whom the card was 

15 issued, including such individual’s personal health identi16 fier specified under section 5112(c)(1), and may include 

17 any other information that the Secretary determines may 

18 be useful in order for the card to serve the purpose of 

19 easing access to and paying for health care services. A 

20 health plan shall make available to an individual card21 holder, upon demand by such individual, a printed copy 

22 of all information electronically encoded on such individ23 ual’s health security card. 
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1 SEC. 5168. MISUSE OF HEALTH SECURITY CARD OR PER2 SONAL HEALTH IDENTIFIER. 

3 (a) HEALTH SECURITY CARD.—A person who— 

4 (1) requires the display of, requires the use of, 

5 or uses a health security card for any purpose other 

6 than obtaining or paying for health care; 

7 (2) falsely makes, forges, counterfeits or alters 

8 a health security card; 

9 (3) without lawful authority prints, photo10 graphs, or makes any impression in the likeness of 

11 any health security card; or 

12 (4) sells, transfers, or otherwise delivers a false, 

13 forged, counterfeited, or altered health security card 

14 knowing that the card is false, forged, counterfeited, 

15 or altered; 

16 shall be fined not more than $25,000, imprisoned not 

17 more than 2 years, or both. 

18 (b) PERSONAL HEALTH IDENTIFIER.—A person who 

19 requires the disclosure of, requires the use of, or uses an 

20 individual’s personal health identifier for any purpose that 

21 is not authorized by the Secretary, shall be fined not more 

22 than $25,000, imprisoned not more than 2 years, or both. 

23 SEC. 5169. DIRECT BILLING FOR CLINICAL LABORATORY 

24 SERVICES. 

25 (a) IN GENERAL.— 
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1 (1) REQUIREMENT.—Except as provided in 

2 paragraph (2), in the case of a claim for payment 

3 for a clinical diagnostic laboratory test for which 

4 payment may otherwise be made, payment may be 

5 made only to the person who, or entity which, per6 formed or supervised the test. 

7 (2) EXCEPTION.—Payment for a clinical diag8 nostic laboratory test may be made to a physician 

9 with whom the physician who performed the test 

10 shares a practice. 

11 (b) ADDITIONAL EXCEPTIONS.—The Secretary may, 

12 by regulation, establish exceptions to the requirement 

13 under subsection (a)(1) that are in addition to the excep14 tion under subsection (a)(2). In establishing such excep15 tions the Secretary shall take into account— 

16 (1) circumstances in which an individual’s pri17 vacy might be violated; or 

18 (2) the need for confidentiality on the part of 

19 the person furnishing the test. 

20 SEC. 5170. AUTHORIZATION OF APPROPRIATIONS. 

21 There are authorized to be appropriated such sums 

22 as may be necessary to carry out the purposes of this sub23 title. 
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1 PART 8—ASSISTANCE TO THE SECRETARY 

2 SEC. 5171. GENERAL REQUIREMENT ON SECRETARY. 

3 In complying with any requirements imposed under 

4 this subtitle, the Secretary shall rely on recommendations 

5 of the Health Information Advisory Committee established 

6 under section 5172 and shall consult with appropriate 

7 Federal agencies. 

8 SEC. 5172. HEALTH INFORMATION ADVISORY COMMITTEE. 

9 (a) ESTABLISHMENT.—There is established a com10 mittee to be known as the Health Care Information Advi11 sory Committee. 

12 (b) DUTY.— 

13 (1) IN GENERAL.—The committee shall— 

14 (A) provide assistance to the Secretary in 

15 complying with the requirements imposed on 

16 the Secretary under this subtitle and subtitle C; 

17 (B) be generally responsible for advising 

18 the Secretary and the Congress on the status of 

19 the health information network; and 

20 (C) make recommendations to correct any 

21 problems that may occur in the network’s im22 plementation and ongoing operations and to re23 fine and improve the network. 

24 (2) TECHNICAL ASSISTANCE.—In performing 

25 its duties under this subsection, the committee shall 
914 

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1 receive technical assistance from appropriate Federal 

2 agencies. 

3 (c) MEMBERSHIP.— 

4 (1) IN GENERAL.—The committee shall consist 

5 of 15 members to be appointed by the President not 

6 later than 60 days after the date of the enactment 

7 of this subtitle. The President shall designate 1 

8 member as the Chair. 

9 (2) EXPERTISE.—The membership of the com10 mittee shall consist of individuals who are of recog11 nized standing and distinction and who possess the 

12 demonstrated capacity to discharge the duties im13 posed on the committee. 

14 (3) TERMS.—Each member of the committee 

15 shall be appointed for a term of 5 years, except that 

16 the members first appointed shall serve staggered 

17 terms such that the terms of no more than 3 mem18 bers expire at one time. 

19 (4) VACANCIES.— 

20 (A) IN GENERAL.—A vacancy on the com21 mittee shall be filled in the manner in which the 

22 original appointment was made and shall be 

23 subject to any conditions which applied with re24 spect to the original appointment. 
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1 (B) FILLING UNEXPIRED TERM.—An indi2 vidual chosen to fill a vacancy shall be ap3 pointed for the unexpired term of the member 

4 replaced. 

5 (C) EXPIRATION OF TERMS.—The term of 

6 any member shall not expire before the date on 

7 which the member’s successor takes office. 

8 (5) CONFLICTS OF INTEREST.—Members of the 

9 committee shall disclose upon appointment to the 

10 committee or at any subsequent time that it may 

11 occur, conflicts of interest. 

12 (d) MEETINGS.— 

13 (1) IN GENERAL.—Except as provided in para14 graph (2), the committee shall meet at the call of 

15 the Chair. 

16 (2) INITIAL MEETING.—Not later than 30 days 

17 after the date on which all members of the com18 mittee have been appointed, the committee shall hold 

19 its first meeting. 

20 (3) QUORUM.—A majority of the members of 

21 the committee shall constitute a quorum, but a less22 er number of members may hold hearings. 

23 (e) POWER TO HOLD HEARINGS.—The committee 

24 may hold such hearings, sit and act at such times and 

25 places, take such testimony, and receive such evidence as 
916 

•S 2357 

1 the committee considers advisable to carry out the pur2 poses of this section. 

3 (f) OTHER ADMINISTRATIVE PROVISIONS.—Subpara4 graphs (C), (D), and (H) of section 1886(e)(6) of the So5 cial Security Act shall apply to the committee in the same 

6 manner as they apply to the Prospective Payment Assess7 ment Commission. 

8 (g) REPORTS.— 

9 (1) IN GENERAL.—The committee shall annu10 ally prepare and submit to Congress and the Sec11 retary a report including at least an analysis of— 

12 (A) the status of the health information 

13 network established under this subtitle, includ14 ing whether the network is fulfilling the pur15 pose described in section 5101; 

16 (B) the savings and costs of the network; 

17 (C) the activities of health information net18 work services certified under section 5141, 

19 health care providers, health plans, and other 

20 entities using the network to exchange health 

21 information; 

22 (D) the extent to which entities described 

23 in subparagraph (C) are meeting the standards 

24 adopted under this subtitle and working to-
917 

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1 gether to form an integrated network that 

2 meets the needs of its users; 

3 (E) the extent to which entities described 

4 in subparagraph (C) are meeting the privacy 

5 and security protections of subtitle C; 

6 (F) the number and types of penalties as7 sessed for noncompliance with the standards 

8 adopted under this subtitle; 

9 (G) whether the Federal Government and 

10 State Governments are receiving information of 

11 sufficient quality to meet their responsibilities 

12 under the Health Security Act; 

13 (H) any problems with respect to imple14 mentation of the network; 

15 (I) the extent to which timetables under 

16 this subtitle for the adoption and implementa17 tion of standards are being met; and 

18 (J) any legislative recommendations re19 lated to the health information network. 

20 (2) AVAILABILITY TO THE PUBLIC.—Any infor21 mation in the report submitted to Congress under 

22 paragraph (1) shall be made available to the public 

23 unless such information may not be disclosed by law. 
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1 (h) DURATION.—Notwithstanding section 14(a) of 

2 the Federal Advisory Committee Act, the committee shall 

3 continue in existence until otherwise provided by law. 

4 (i) AUTHORIZATION OF APPROPRIATIONS.— 

5 (1) IN GENERAL.—There are authorized to be 

6 appropriated such sums as may be necessary to 

7 carry out the purposes of this section. 

8 (2) AVAILABILITY.—Any sums appropriated 

9 under the authorization contained in this subsection 

10 shall remain available, without fiscal year limitation, 

11 until expended. 

12 PART 9—DEMONSTRATION PROJECTS FOR COM13 MUNITY-BASED CLINICAL INFORMATION 

14 SYSTEMS 

15 SEC. 5181. GRANTS FOR DEMONSTRATION PROJECTS. 

16 (a) IN GENERAL.—The Secretary may make grants 

17 for demonstration projects to promote the development 

18 and use of electronically integrated community-based clin19 ical information systems and computerized patient medical 

20 records. 

21 (b) APPLICATIONS.— 

22 (1) SUBMISSION.—To apply for a grant under 

23 this part for any fiscal year, an applicant shall sub24 mit an application to the Secretary in accordance 

25 with the procedures established by the Secretary. 
919 

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1 (2) CRITERIA FOR APPROVAL.—The Secretary 

2 may not approve an application submitted under 

3 paragraph (1) unless the application includes assur4 ances satisfactory to the Secretary regarding the fol5 lowing: 

6 (A) USE OF EXISTING TECHNOLOGY.— 

7 Funds received under this part will be used to 

8 apply telecommunications and information sys9 tems technology that is in existence on the date 

10 the application is submitted in a manner that 

11 improves the quality of health care, reduces the 

12 costs of such care, and protects the privacy and 

13 confidentiality of information relating to the 

14 physical or mental condition of an individual. 

15 (B) USE OF EXISTING INFORMATION SYS16 TEMS.—Funds received under this part will be 

17 used— 

18 (i) to enhance telecommunications or 

19 information systems that are operating on 

20 the date the application is submitted; 

21 (ii) to integrate telecommunications or 

22 information systems that are operating on 

23 the date the application is submitted; or 

24 (iii) to connect additional users to 

25 telecommunications or information net-
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1 works or systems that are operating on the 

2 date the application is submitted. 

3 (C) MATCHING FUNDS.—The applicant 

4 shall make available funds for the demonstra5 tion project in an amount that equals at least 

6 20 percent of the cost of the project. 

7 (c) GEOGRAPHIC DIVERSITY.—In making any grants 

8 under this part, the Secretary shall, to the extent prac9 ticable, make grants to persons representing different geo10 graphic areas of the United States, including urban and 

11 rural areas. 

12 (d) REVIEW AND SANCTIONS.—The Secretary shall 

13 review at least annually the compliance of a person receiv14 ing a grant under this part with the provisions of this 

15 part. The Secretary shall establish a procedure for deter16 mining whether such a person has failed to comply sub17 stantially within the provisions of this part and the sanc18 tions to be imposed for any such noncompliance. 

19 (e) ANNUAL REPORT.—The Secretary shall submit 

20 an annual report to the President for transmittal to Con21 gress containing a description of the activities carried out 

22 under this part. 

23 (g) AUTHORIZATION OF APPROPRIATIONS.—There 

24 are authorized to be appropriated such sums as may be 

25 necessary to carry out the purposes of this section. 
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1 PART 10—MEDICARE AND MEDICAID COVERAGE 

2 DATA BANK 

3 SEC. 5191. REPEAL OF MEDICARE AND MEDICAID COV4 ERAGE DATA BANK. 

5 (a) REPEAL OF DATA BANK.—Section 1144 of the 

6 Social Security Act (42 U.S.C. 1320b–14), as added by 

7 section 13581 of the Omnibus Budget Reconciliation Act 

8 of 1993, is repealed. 

9 (b) CONFORMING AMENDMENTS.— 

10 (1) MEDICARE.—Section 1862(b)(5) of such 

11 Act (42 U.S.C. 1395y(b)(5)) is amended— 

12 (A) in subparagraph (B), by striking ‘‘the 

13 information received under’’ and all that follows 

14 and inserting ‘‘the information received under 

15 subparagraph (A) for the purposes of carrying 

16 out this subsection.’’; and 

17 (B) in subparagraph (C)(i), by striking 

18 ‘‘subparagraph (B)(i)’’ and inserting ‘‘subpara19 graph (B)’’. 

20 (2) MEDICAID.—Section 1902(a)(25)(A)(i) of 

21 such Act (42 U.S.C. 1396(a)(25)(A)(i)) is amended 

22 by striking ‘‘(including the use of information col23 lected by the Medicare and Medicaid Coverage Data 

24 Bank under section 1144 and any additional meas25 ures as specified’’ and inserting ‘‘(as specified’’. 
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1 (3) CONFORMING AMENDMENT RELATED TO

2 DATA MATCHES.—Subsection (a)(8)(B) of section 

3 552a of title 5, United States Code, is amended— 

4 (A) in clause (v), by adding ‘‘; or’’ at the 

5 end; 

6 (B) in clause (vi), by striking ‘‘; or’’ and 

7 inserting a semicolon; and 

8 (C) by striking clause (vii). 

9 (4) CONFORMING AMENDMENT TO ERISA.— 

10 (A) Section 101 of the Employee Retire11 ment Income Security Act of 1974 (29 U.S.C. 

12 1031) is amended— 

13 (i) by striking subsection (f); and 

14 (ii) by redesignating subsection (g) as 

15 subsection (f). 

16 (B) Section 502(a) of such Act (29 U.S.C. 

17 1132(a)) is amended— 

18 (i) in paragraph (6), by striking the 

19 semicolon at the end and inserting ‘‘; or’’; 

20 (ii) in paragraph (7), by striking ‘‘; 

21 or’’ and inserting a period; and 

22 (iii) by striking paragraph (8). 

23 (C) Section 502(c) of such Act (29 U.S.C. 

24 1132(c)) is amended by striking paragraph (4). 
923 

•S 2357 

1 (D) Section 502(e)(1) of such Act (29 

2 U.S.C. 1132(e)(1)) is amended by striking ‘‘fi3 duciary, or any person referred to in section 

4 101(f)(1)’’ and inserting ‘‘or fiduciary’’. 

5 Subtitle C—Privacy of Health 

6 Information 

7 PART 1—FINDINGS AND DEFINITIONS 

8 SEC. 5201. FINDINGS AND PURPOSES. 

9 (a) FINDINGS.—The Congress finds as follows: 

10 (1) The improper disclosure of individually 

11 identifiable health care information may cause sig12 nificant harm to an individual’s interests in privacy, 

13 health care, and reputation and may unfairly affect 

14 the ability of an individual to obtain employment, 

15 education, insurance, and credit. 

16 (2) The movement of people and health care re17 lated information across State lines, the availability 

18 of, access to, and exchange of health care related in19 formation with Federally funded health care sys20 tems, the medicare program under title XVIII of the 

21 Social Security Act, and the medicaid program 

22 under title XIX of such Act, through automated 

23 data banks and networks, and the emergence of 

24 other multistate health care providers and payors 
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1 create a need for a uniform Federal law governing 

2 the disclosure of health care information. 

3 (b) PURPOSE.—The purpose of this subtitle is to es4 tablish effective mechanisms to protect the privacy of indi5 viduals with respect to individually identifiable health care 

6 information that is created or maintained as part of health 

7 treatment, enrollment, payment, testing, or research proc8 esses. 

9 SEC. 5202. DEFINITIONS. 

10 (a) TERMS RELATING TO PROTECTED HEALTH IN11 FORMATION.—In this subtitle: 

12 (1) PROTECTED HEALTH INFORMATION.—The 

13 term ‘‘protected health information’’ means any in14 formation, including demographic information col15 lected from an individual, whether oral or recorded 

16 in any form or medium, that— 

17 (A) is created or received by a health care 

18 provider, health plan, health oversight agency, 

19 health researcher, public health authority, em20 ployer, life insurer, school or university, or cer21 tified health information network service; and 

22 (B) relates to the past, present, or future 

23 physical or mental health or condition of an in24 dividual, the provision of health care to an indi25 vidual, or the past, present, or future payment 
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•S 2357 

1 for the provision of health care to an individual, 

2 and— 

3 (i) identifies an individual; or 

4 (ii) with respect to which there is a 

5 reasonable basis to believe that the infor6 mation can be used to identify an indi7 vidual. 

8 (2) DISCLOSE.—The term ‘‘disclose’’, when 

9 used with respect to protected health information, 

10 means to provide access to the information, but only 

11 if such access is provided to a person other than the 

12 individual who is the subject of the information. 

13 (b) TERMS RELATING TO HEALTH CARE SYSTEM

14 PARTICIPANTS.—In this subtitle: 

15 (1) HEALTH INFORMATION TRUSTEE.—The 

16 term ‘‘health information trustee’’ means— 

17 (A) a health care provider, health plan, 

18 health oversight agency, certified health infor19 mation network service, employer, life insurer, 

20 or school or university insofar as it creates, re21 ceives, maintains, uses, or transmits protected 

22 health information; 

23 (B) any person who obtains protected 

24 health information under section 5213, 5217, 

25 5218, 5221, 5222, 5226, or 5231; and 
926 

•S 2357 

1 (C) any employee or agent of a person cov2 ered under subparagraph (A) or (B). 

3 (2) HEALTH CARE.—The term ‘‘health care’’— 

4 (A) means— 

5 (i) a preventative, diagnostic, thera6 peutic, rehabilitative, maintenance, or pal7 liative care, counseling, service, or proce8 dure— 

9 (I) with respect to the physical or 

10 mental condition of an individual; or 

11 (II) affecting the structure or 

12 function of the human body or any 

13 part of the human body; or 

14 (ii) any sale or dispensing of a drug, 

15 device, equipment, or other item to an indi16 vidual, or for the use of an individual, pur17 suant to a prescription; but 

18 (B) does not include any item or service 

19 that is not furnished for the purpose of exam20 ining, maintaining, or improving the health of 

21 an individual. 

22 (3) HEALTH CARE PROVIDER.—The term 

23 ‘‘health care provider’’ means a person who is li24 censed, certified, registered, or otherwise authorized 

25 by law to provide an item or service that constitutes 
927 

•S 2357 

1 health care in the ordinary course of business or 

2 practice of a profession. 

3 (4) HEALTH OVERSIGHT AGENCY.—The term 

4 ‘‘health oversight agency’’ means a person who— 

5 (A) performs or oversees the performance 

6 of an assessment, evaluation, determination, or 

7 investigation relating to the licensing, accredita8 tion, or certification of health care 

9 providers; or 

10 (B)(i) performs or oversees the perform11 ance of an assessment, evaluation, determina12 tion, or investigation relating to the effective13 ness of, compliance with, or applicability of 

14 legal, fiscal, medical, or scientific standards or 

15 aspects of performance related to the delivery 

16 of, or payment for, health care or relating to 

17 health care fraud or fraudulent claims for pay18 ment regarding health; and 

19 (ii) is a public agency, acting on behalf of 

20 a public agency, acting pursuant to a require21 ment of a public agency, or carrying out activi22 ties under a Federal or State law governing the 

23 assessment, evaluation, determination, or inves24 tigation described in clause (i). 
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1 (5) HEALTH PLAN.—The term ‘‘health plan’’ 

2 shall have the meaning given such term under sec3 tion 5102. 

4 (6) HEALTH RESEARCHER.—The term ‘‘health 

5 researcher’’ means a person who conducts a bio6 medical, public health, epidemiological, health serv7 ices, or health statistics research project or a re8 search project on social and behavioral factors relat9 ing to health. 

10 (7) INSTITUTIONAL REVIEW BOARD.—The term 

11 ‘‘institutional review board’’ means— 

12 (A) a board established in accordance with 

13 regulations of the Secretary under section 

14 491(a) of the Public Health Service Act; 

15 (B) a similar board established by the Sec16 retary for the protection of human subjects in 

17 research conducted by the Secretary; or 

18 (C) a similar board established under regu19 lations of a Federal Government authority other 

20 than the Secretary. 

21 (8) PUBLIC HEALTH AUTHORITY.—The term 

22 ‘‘public health authority’’ means an authority or in23 strumentality of the United States, a State, or a po24 litical subdivision of a State that is (A) responsible 

25 for public health matters; and (B) engaged in such 
929 

•S 2357 

1 activities as injury reporting, public health surveil2 lance, and public health investigation or interven3 tion. 

4 (c) REFERENCES TO CERTIFIED ENTITIES.—In this 

5 subtitle: 

6 (1) CERTIFIED HEALTH INFORMATION NET7 WORK SERVICE.—The term ‘‘certified health infor8 mation network service’’ means a health information 

9 service (as defined under section 5102) that is cer10 tified under section 5141. 

11 (2) CERTIFIED HEALTH INFORMATION PROTEC12 TION ORGANIZATION.—The term ‘‘certified health 

13 information protection organization’’ means a health 

14 information protection organization (as defined in 

15 section 5102) that is certified under section 5141. 

16 (d) OTHER TERMS.—In this subtitle: 

17 (1) INDIVIDUAL REPRESENTATIVE.—The term 

18 ‘‘individual representative’’ means any individual le19 gally empowered to make decisions concerning the 

20 provision of health care to an individual (where the 

21 individual lacks the legal capacity under State law to 

22 make such decisions) or the administrator or execu23 tor of the estate of a deceased individual. 

24 (2) LAW ENFORCEMENT INQUIRY.—The term 

25 ‘‘law enforcement inquiry’’ means an investigation or 
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•S 2357 

1 official proceeding inquiring into whether there is a 

2 violation of, or failure to comply with, any criminal 

3 or civil statute or any regulation, rule, or order 

4 issued pursuant to such a statute. 

5 (3) PERSON.—The term ‘‘person’’ includes an 

6 authority of the United States, a State, or a political 

7 subdivision of a State. 

8 PART 2—AUTHORIZED DISCLOSURES 

9 Subpart A—General Provisions 

10 SEC. 5206. GENERAL RULES REGARDING DISCLOSURE. 

11 (a) GENERAL RULE.—A health information trustee 

12 may disclose protected health information only for a pur13 pose that is authorized under this subtitle. 

14 (b) DISCLOSURE WITHIN A TRUSTEE.—A health in15 formation trustee may disclose protected health informa16 tion to an officer, employee, or agent of the trustee, but 

17 only for a purpose that is compatible with and related to 

18 the purpose for which the information was collected or re19 ceived by that trustee. 

20 (c) SCOPE OF DISCLOSURE.— 

21 (1) IN GENERAL.—Every disclosure of protected 

22 health information by a health information trustee 

23 shall be limited to the minimum amount of informa24 tion necessary to accomplish the purpose for which 

25 the information is disclosed. 
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1 (2) REGULATIONS.—The Secretary, after notice 

2 and opportunity for public comment, may issue reg3 ulations under paragraph (1), which shall take into 

4 account the technical capabilities of the record sys5 tems used to maintain protected health information 

6 and the costs of limiting disclosure. 

7 (d) NO GENERAL REQUIREMENT TO DISCLOSE.— 

8 Nothing in this subtitle that permits a disclosure of health 

9 information shall be construed to require such disclosure. 

10 (e) USE AND REDISCLOSURE OF INFORMATION.— 

11 The protected health information received under a disclo12 sure permitted by the subtitle may not be used or disclosed 

13 unless the use or disclosure is necessary to fulfill the pur14 pose for which the information was obtained and is not 

15 otherwise prohibited by law. Protected health information 

16 about an individual that is disclosed under this subtitle 

17 may not be used in, or disclosed to any person for use 

18 in, any administrative, civil, or criminal action or inves19 tigation directed against the individual unless specifically 

20 permitted by this subtitle. 

21 (f) IDENTIFICATION OF DISCLOSED INFORMATION AS

22 PROTECTED INFORMATION.— 

23 (1) IN GENERAL.—Except with respect to pro24 tected health information that is disclosed under sec25 tion 5213 and except as provided in paragraph (2), 
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1 a health information trustee may not disclose pro2 tected health information unless such information is 

3 clearly identified as protected health information 

4 that is subject to this subtitle. 

5 (2) ROUTINE DISCLOSURES SUBJECT TO WRIT6 TEN AGREEMENT.—A health information trustee 

7 who routinely discloses protected health information 

8 to a person may satisfy the identification require9 ment in paragraph (1) through a written agreement 

10 between the trustee and the person with respect to 

11 the protected health information. 

12 (g) CONSTRUCTION.—Nothing in this subtitle shall 

13 be construed to limit the ability of a health information 

14 trustee to charge a reasonable fee for the disclosure or 

15 reproduction of health information. 

16 (h) INFORMATION IN WHICH PROVIDERS ARE IDEN17 TIFIED.—The Secretary, after notice and opportunity for 

18 public comment, may issue regulations protecting informa19 tion identifying providers in order to promote the avail20 ability of health care services. 

21 SEC. 5207. AUTHORIZATIONS FOR DISCLOSURE OF PRO22 TECTED HEALTH INFORMATION. 

23 (a) WRITTEN AUTHORIZATIONS.—A health informa24 tion trustee may disclose protected health information 

25 pursuant to an authorization executed by the individual 
933 

•S 2357 

1 who is the subject of the information, if each of the fol2 lowing requirements is met: 

3 (1) WRITING.—The authorization is in writing, 

4 signed by the individual who is the subject of the in5 formation, and dated on the date of such signature. 

6 (2) SEPARATE FORM.—The authorization is not 

7 on a form used to authorize or facilitate the provi8 sion of, or payment for, health care. 

9 (3) TRUSTEE DESCRIBED.—The trustee is spe10 cifically named or generically described in the au11 thorization as authorized to disclose such informa12 tion. 

13 (4) RECIPIENT DESCRIBED.—The person to 

14 whom the information is to be disclosed is specifi15 cally named or generically described in the author16 ization as a person to whom such information may 

17 be disclosed. 

18 (5) STATEMENT OF INTENDED DISCLOSURES.— 

19 The authorization contains an acknowledgment that 

20 the individual who is the subject of the information 

21 has read a statement of the disclosures that the per22 son to receive the protected health information in23 tends to make, which statement shall be in writing, 

24 on a form that is distinct from the authorization for 

25 disclosure, and which statement must be received by 
934 

•S 2357 

1 the individual authorizing the disclosure on or before 

2 such authorization is executed. 

3 (6) INFORMATION DESCRIBED.—The informa4 tion to be disclosed is described in the authorization. 

5 (7) EXPIRATION DATE SPECIFIED.—The au6 thorization specifies a date or event upon which the 

7 authorization expires, which shall not exceed 2 years 

8 from the date of the execution of the authorization. 

9 (8) AUTHORIZATION TIMELY RECEIVED.—The 

10 authorization is received by the trustee during a pe11 riod described in subsection (c)(1). 

12 (9) DISCLOSURE TIMELY MADE.—The disclo13 sure occurs during a period described in subsection 

14 (c)(2). 

15 (b) AUTHORIZATIONS REQUESTED IN CONNECTION

16 WITH PROVISION OF HEALTH CARE.— 

17 (1) IN GENERAL.—A health information trustee 

18 may not request that an individual provide to any 

19 other person an authorization described in sub20 section (a) on a day on which— 

21 (A) the trustee provides health care to the 

22 individual requested to provide the authoriza23 tion; or 

24 (B) in the case of a trustee that is a health 

25 facility, the individual is admitted into the facil-
935 

•S 2357 

1 ity as a resident or inpatient in order to receive 

2 health care. 

3 (2) EXCEPTION.—Paragraph (1) does not apply 

4 if a health information trustee requests that an indi5 vidual provide an authorization described in sub6 section (a) for the purpose of assisting the individual 

7 in obtaining counseling or social services from a per8 son other than the trustee. 

9 (c) TIME LIMITATIONS ON AUTHORIZATIONS.— 

10 (1) RECEIPT BY TRUSTEE.—For purposes of 

11 subsection (a)(8), an authorization is timely received 

12 if it is received by the trustee during— 

13 (A) the 1-year period beginning on the 

14 date on which the authorization is signed under 

15 subsection (a)(1), if the authorization permits 

16 the disclosure of protected health information to 

17 a person who provides health counseling or so18 cial services to individuals; or 

19 (B) the 30-day period beginning on the 

20 date on which the authorization is signed under 

21 subsection (a)(1), if the authorization permits 

22 the disclosure of protected health information to 

23 a person other than a person described in sub24 paragraph (A). 
936 

•S 2357 

1 (2) DISCLOSURE BY TRUSTEE.—For purposes 

2 of subsection (a)(9), a disclosure is timely made if 

3 it occurs before the date or event specified in the au4 thorization upon which the authorization expires. 

5 (d) REVOCATION OR AMENDMENT OF AUTHORIZA6 TION.— 

7 (1) IN GENERAL.—An individual may in writing 

8 revoke or amend an authorization described in sub9 section (a), in whole or in part, at any time, except 

10 when— 

11 (A) disclosure of protected health informa12 tion has been authorized to permit validation of 

13 expenditures for health care; or 

14 (B) action has been taken in reliance on 

15 the authorization. 

16 (2) NOTICE OF REVOCATION.—A health infor17 mation trustee who discloses protected health infor18 mation pursuant to an authorization that has been 

19 revoked shall not be subject to any liability or pen20 alty under this subtitle if— 

21 (A) the reliance was in good faith; 

22 (B) the trustee had no notice of the rev23 ocation; and 

24 (C) the disclosure was otherwise in accord25 ance with the requirements of this subtitle. 
937 

•S 2357 

1 (e) DECEASED INDIVIDUAL.—The Secretary shall de2 velop and establish through regulation a procedure for ob3 taining protected health information relating to a deceased 

4 individual when there is no individual representative for 

5 such individual. 

6 (f) MODEL AUTHORIZATIONS.—The Secretary, after 

7 notice and opportunity for public comment, shall develop 

8 and disseminate model written authorizations of the type 

9 described in subsection (a) and model statements of in10 tended disclosures of the type described in subsection 

11 (a)(5). 

12 (g) COPY.—A health information trustee who dis13 closes protected health information pursuant to an author14 ization under this section shall maintain a copy of the au15 thorization. 

16 SEC. 5208. CERTIFIED HEALTH INFORMATION NETWORK 

17 SERVICES. 

18 (a) IN GENERAL.—A health information trustee may 

19 disclose protected health information to a certified health 

20 information network service acting as an agent of the 

21 trustee for any purpose permitted by this subtitle. Such 

22 a service, acting as an agent of a trustee, may disclose 

23 protected health information to another person as per24 mitted under this subtitle to facilitate the completion of 
938 

•S 2357 

1 the purpose for which such information was disclosed to 

2 the service. 

3 (b) CERTIFIED HEALTH INFORMATION PROTECTION

4 ORGANIZATIONS.—A health information trustee may dis5 close protected health information to a certified health in6 formation protection organization for the purpose of cre7 ating non-identifiable health information (as defined in 

8 section 5102). 

9 Subpart B—Specific Disclosures Relating to Patient 

10 SEC. 5211. DISCLOSURES FOR TREATMENT AND FINANCIAL 

11 AND ADMINISTRATIVE TRANSACTIONS. 

12 (a) HEALTH CARE TREATMENT.—A health care pro13 vider, health plan, employer, or person who receives pro14 tected health information under section 5213, may dis15 close protected health information to a health care pro16 vider for the purpose of providing health care to an indi17 vidual if the individual who is the subject of the informa18 tion has not previously objected in writing to the disclo19 sure. 

20 (b) DISCLOSURE TO HEALTH PLANS FOR FINANCIAL

21 AND ADMINISTRATIVE PURPOSES.—A health care pro22 vider or employer may disclose protected health informa23 tion to a health plan for the purpose of providing for the 

24 payment for, or reviewing the payment of, health care fur25 nished to an individual. 
939 

•S 2357 

1 (c) DISCLOSURE BY HEALTH PLANS FOR FINANCIAL

2 AND ADMINISTRATIVE PURPOSES.—A health plan may 

3 disclose protected health information to a health care pro4 vider or a health plan for the purpose of providing for 

5 the payment for, or reviewing the payment of, health care 

6 furnished to an individual. 

7 SEC. 5212. NEXT OF KIN AND DIRECTORY INFORMATION. 

8 (a) NEXT OF KIN.—A health care provider or person 

9 who receives protected health information under section 

10 5213 may disclose protected health information to the 

11 next of kin, an individual representative of the individual 

12 who is the subject of the information, or an individual with 

13 whom that individual has a close personal relationship if— 

14 (1) the individual who is the subject of the in15 formation— 

16 (A) has been notified of the individual’s 

17 right to object and has not objected to the dis18 closure; 

19 (B) is not competent to be notified about 

20 the right to object; or 

21 (C) exigent circumstances exist such that 

22 it would not be practicable to notify the indi23 vidual of the right to object; and 

24 (2) the information disclosed relates to health 

25 care currently being provided to that individual. 
940 

•S 2357 

1 (b) DIRECTORY INFORMATION.—A health care pro2 vider and a person receiving protected health information 

3 under section 5213 may disclose protected health informa4 tion to any person if— 

5 (1) the information does not reveal specific in6 formation about the physical or mental condition of 

7 the individual who is the subject of the information 

8 or health care provided to that person; 

9 (2) the individual who is the subject of the in10 formation— 

11 (A) has been notified of the individual’s 

12 right to object and has not objected to the dis13 closure; 

14 (B) is not competent to be notified about 

15 the right to object; or 

16 (C) exigent circumstances exist such that 

17 it would not be practicable to notify the indi18 vidual of the right to object; and 

19 (3) the information consists only of 1 or more 

20 of the following items: 

21 (A) The name of the individual who is the 

22 subject of the information. 

23 (B) If the individual who is the subject of 

24 the information is receiving health care from a 
941 

•S 2357 

1 health care provider on a premises controlled by 

2 the provider— 

3 (i) the location of the individual on 

4 the premises; and 

5 (ii) the general health status of the in6 dividual, described as critical, poor, fair, 

7 stable, or satisfactory or in terms denoting 

8 similar conditions. 

9 (d) IDENTIFICATION OF DECEASED INDIVIDUAL.—A 

10 health care provider, health plan, employer, or life insurer, 

11 may disclose protected health information if necessary to 

12 assist in the identification of a deceased individual. 

13 SEC. 5213. EMERGENCY CIRCUMSTANCES. 

14 (a) IN GENERAL.—A health care provider, health 

15 plan, employer, or person who receives protected health 

16 information under this section may disclose protected 

17 health information in emergency circumstances when nec18 essary to protect the health or safety of an individual from 

19 imminent harm. 

20 (b) SCOPE OF DISCLOSURE.—The disclosure of pro21 tected health information under this section shall be lim22 ited to persons who need the information to take action 

23 to protect the health or safety of the individual. 
942 

•S 2357 

1 Subpart C—Disclosure for Oversight, Public Health, 

2 and Research Purposes 

3 SEC. 5216. OVERSIGHT. 

4 (a) IN GENERAL.—A health information trustee may 

5 disclose protected health information to a health oversight 

6 agency for an oversight function authorized by law. 

7 (b) USE IN ACTION AGAINST INDIVIDUALS.—Not8 withstanding section 5206(e), protected health informa9 tion about an individual that is disclosed under this sec10 tion may be used in, or disclosed to any person for use 

11 in, any administrative, civil, or criminal action or inves12 tigation directed against the individual who is the subject 

13 of the information if the action or investigation arises out 

14 of and is directly related to receipt of health care or pay15 ment for health care or an action involving a fraudulent 

16 claim related to health. 

17 SEC. 5217. PUBLIC HEALTH. 

18 A health care provider, health plan, public health au19 thority, employer, or person who receives protected health 

20 information under section 5213 may disclose protected 

21 health information to a public health authority or other 

22 person authorized by law for use in a legally authorized— 

23 (1) disease or injury reporting; 

24 (2) public health surveillance; or 

25 (3) public health investigation or intervention. 
943 

•S 2357 

1 SEC. 5218. HEALTH RESEARCH. 

2 (a) IN GENERAL.—A health information trustee may 

3 disclose protected health information to a health re4 searcher if an institutional review board determines that 

5 the research project engaged in by the health researcher— 

6 (1) requires use of the protected health infor7 mation for the effectiveness of the project; and 

8 (2) is of sufficient importance to outweigh the 

9 intrusion into the privacy of the individual who is 

10 the subject of the information that would result from 

11 the disclosure. 

12 (b) RESEARCH REQUIRING DIRECT CONTACT.—A 

13 health information trustee may disclose protected health 

14 information to a health researcher for a research project 

15 that includes direct contact with an individual who is the 

16 subject of protected health information if an institutional 

17 review board determines that— 

18 (1) the research project meets the requirements 

19 of paragraphs (1) and (2) of subsection (a); 

20 (2) direct contact is necessary to accomplish the 

21 research purpose; and 

22 (3) the direct contact will be made in a manner 

23 that minimizes the risk of harm, embarrassment, or 

24 other adverse consequences to the individual. 

25 (c) USE OF HEALTH INFORMATION NETWORK.— 
944 

•S 2357 

1 (1) IN GENERAL.—A health information trustee 

2 may disclose protected health information to a 

3 health researcher using the health information net4 work (as defined in section 5102) only if an institu5 tional review board certified by the Secretary under 

6 paragraph (2) determines that the research project 

7 engaged in by the health researcher meets the re8 quirements of this section. 

9 (2) CERTIFICATION OF INSTITUTIONAL REVIEW

10 BOARDS.— 

11 (A) REGULATIONS.—The Secretary, after 

12 notice and opportunity for public comment, 

13 shall issue regulations establishing certification 

14 requirements for institutional review boards 

15 under this subtitle. Such regulations shall be 

16 based on regulations issued under section 

17 491(a) of the Public Health Service Act and 

18 shall ensure that institutional review boards 

19 certified under this paragraph have the quali20 fications to access and protect the confiden21 tiality of research subjects. 

22 (B) CERTIFICATION.—The Secretary shall 

23 certify an institutional review board that meets 

24 the certification requirements established by the 

25 Secretary under subparagraph (A). 
945 

•S 2357 

1 (d) OBLIGATIONS OF RECIPIENT.—A person who re2 ceives protected health information pursuant to subsection 

3 (a)— 

4 (1) shall remove or destroy, at the earliest op5 portunity consistent with the purposes of the project, 

6 information that would enable an individual to be 

7 identified, unless— 

8 (A) an institutional review board has de9 termined that there is a health or research jus10 tification for retention of such identifiers; and 

11 (B) there is an adequate plan to protect 

12 the identifiers from disclosure that is incon13 sistent with this section; and 

14 (2) shall use protected health information solely 

15 for purposes of the health research project for which 

16 disclosure was authorized under this section. 

17 Subpart D—Disclosure For Judicial, Administrative, 

18 and Law Enforcement Purposes 

19 SEC. 5221. JUDICIAL AND ADMINISTRATIVE PURPOSES. 

20 A health care provider, health plan, health oversight 

21 agency, or employer may disclose protected health infor22 mation— 

23 (1) pursuant to the Federal Rules of Civil Pro24 cedure, the Federal Rules of Criminal Procedure, or 

25 comparable rules of other courts or administrative 
946 

•S 2357 

1 agencies in connection with litigation or proceedings 

2 to which the individual who is the subject of the in3 formation is a party and in which the individual has 

4 placed the individual’s physical or mental condition 

5 in issue; 

6 (2) to a court, and to others ordered by a court, 

7 if the protected health information is developed in 

8 response to a court-ordered physical or mental exam9 ination; or 

10 (3) pursuant to a law requiring the reporting of 

11 specific medical information to law enforcement au12 thorities. 

13 SEC. 5222. LAW ENFORCEMENT. 

14 (a) IN GENERAL.—A health care provider, health 

15 plan, health oversight agency, employer, or person who re16 ceives protected health information under section 5213 

17 may disclose protected health information to a law en18 forcement agency (other than a health oversight agency 

19 governed by section 5216) if the information is requested 

20 for use— 

21 (1) in an investigation or prosecution of a 

22 health information trustee; 

23 (2) in the identification of a victim or witness 

24 in a law enforcement inquiry; or 
947 

•S 2357 

1 (3) in connection with the investigation of 

2 criminal activity committed against the trustee or on 

3 premises controlled by the trustee. 

4 (b) CERTIFICATION.—When a law enforcement agen5 cy (other than a health oversight agency) requests that 

6 a health information trustee disclose protected health in7 formation under this section, the law enforcement agency 

8 shall provide the trustee with a written certification that— 

9 (1) specifies the information requested; 

10 (2) states that the information is needed for a 

11 lawful purpose under this section; and 

12 (3) is signed by a supervisory official of a rank 

13 designated by the head of the agency. 

14 (c) RESTRICTIONS ON ADDITIONAL DISCLOSURE.— 

15 Notwithstanding section 5206(e), protected health infor16 mation about an individual that is disclosed to a law en17 forcement agency under this section may be used in, or 

18 disclosed for, an administrative, civil, or criminal action 

19 or investigation against the individual if the action or in20 vestigation arises out of and is directly related to the ac21 tion or investigation for which the information was ob22 tained. 
948 

•S 2357 

1 Subpart E—Disclosure Pursuant to Government 

2 Subpoena or Warrant 

3 SEC. 5226. GOVERNMENT SUBPOENAS AND WARRANTS. 

4 (a) IN GENERAL.—A health care provider, health 

5 plan, health oversight agency, employer, or person who re6 ceives protected health information under section 5213 

7 may disclose protected health information under this sec8 tion if the disclosure is pursuant to— 

9 (1) a subpoena issued under the authority of a 

10 grand jury, and the trustee is provided a written cer11 tification by the grand jury seeking the information 

12 that the grand jury has complied with the applicable 

13 access provisions of section 5227; 

14 (2) an administrative subpoena or a judicial 

15 subpoena or warrant, and the trustee is provided a 

16 written certification by the person seeking the infor17 mation that the person has complied with the appli18 cable access provisions of section 5227; or 

19 (3) an administrative subpoena or a judicial 

20 subpoena or warrant, and the disclosure otherwise 

21 meets the conditions of section 5216, 5217, 5221, or 

22 5222. 

23 (b) RESTRICTIONS ON ADDITIONAL DISCLOSURE.— 

24 (1) ACTIONS OR INVESTIGATIONS.—Notwith25 standing section 5206(c), protected health informa26 tion about an individual that is received under sub-
949 

•S 2357 

1 section (a) may be disclosed for, or used in, any ad2 ministrative, civil, or criminal action or investigation 

3 against the individual if the action or investigation 

4 arises out of and is directly related to the inquiry for 

5 which the information was obtained. 

6 (2) SPECIAL RULE.—Protected health informa7 tion about an individual that is received under sub8 section (a)(3) may not be disclosed by the recipient 

9 unless the recipient complies with the conditions and 

10 restrictions on disclosure with which the recipient 

11 would have been required to comply if the disclosure 

12 had been made under section 5216, 5217, 5221, or 

13 5222. 

14 SEC. 5227. ACCESS PROCEDURES FOR LAW ENFORCEMENT 

15 SUBPOENAS AND WARRANTS. 

16 (a) PROBABLE CAUSE REQUIREMENT.—A govern17 ment authority may not obtain protected health informa18 tion about an individual under paragraph (1) or (2) of 

19 section 5226(a) for use in a law enforcement inquiry un20 less there is probable cause to believe that the information 

21 is relevant to a legitimate law enforcement inquiry being 

22 conducted by the government authority. 

23 (b) WARRANTS.—A government authority that ob24 tains protected health information about an individual 

25 under circumstances described in subsection (a) and pur-
950 

•S 2357 

1 suant to a warrant shall, not later than 30 days after the 

2 date the warrant was executed, serve the individual with, 

3 or mail to the last known address of the individual, a no4 tice that protected health information about the individual 

5 was so obtained, together with a notice of the individual’s 

6 right to challenge the warrant in accordance with section 

7 5228. 

8 (c) SUBPOENAS.—Except as provided in subsection 

9 (d), a government authority may not obtain protected 

10 health information about an individual under cir11 cumstances described in subsection (a) and pursuant to 

12 a subpoena unless a copy of the subpoena has been served 

13 on the individual on or before the date of return of the 

14 subpoena, together with a notice of the individual’s right 

15 to challenge the subpoena in accordance with section 

16 5228, and— 

17 (1) 15 days have passed since the date of serv18 ice on the individual and within that time period the 

19 individual has not initiated a challenge in accordance 

20 with section 5228; or 

21 (2) disclosure is ordered by a court after chal22 lenge under section 5228. 

23 (d) APPLICATION FOR DELAY.— 

24 (1) IN GENERAL.—A government authority may 

25 apply ex parte and under seal to an appropriate 
951 

•S 2357 

1 court to delay (for an initial period of not longer 

2 than 90 days) serving a notice or copy of a subpoena 

3 required under subsection (b) or (c) with respect to 

4 a law enforcement inquiry. The government author5 ity may apply to the court for extensions of the 

6 delay. 

7 (2) REASONS FOR DELAY.—An application for 

8 a delay, or extension of a delay, under this sub9 section shall state, with reasonable specificity, the 

10 reasons why the delay or extension is being sought. 

11 (3) EX PARTE ORDER.—The court shall enter 

12 an ex parte order delaying or extending the delay of 

13 notice, an order prohibiting the disclosure of the re14 quest for, or disclosure of, the protected health in15 formation, and an order requiring the disclosure of 

16 the protected health information if the court finds 

17 that— 

18 (A) the inquiry being conducted is within 

19 the lawful jurisdiction of the government au20 thority seeking the protected health informa21 tion; 

22 (B) there is probable cause to believe that 

23 the protected health information being sought is 

24 relevant to a legitimate law enforcement in25 quiry; 
952 

•S 2357 

1 (C) the government authority’s need for 

2 the information outweighs the privacy interest 

3 of the individual who is the subject of the infor4 mation; and 

5 (D) there is reasonable ground to believe 

6 that receipt of notice by the individual will re7 sult in— 

8 (i) endangering the life or physical 

9 safety of any individual; 

10 (ii) flight from prosecution; 

11 (iii) destruction of or tampering with 

12 evidence or the information being sought; 

13 or 

14 (iv) intimidation of potential wit15 nesses. 

16 SEC. 5228. CHALLENGE PROCEDURES FOR LAW ENFORCE17 MENT WARRANTS AND SUBPOENAS. 

18 (a) MOTION TO QUASH.—Within 15 days after the 

19 date of service of a notice of execution or a copy of a sub20 poena of a government authority seeking protected health 

21 information about an individual under paragraph (1) or 

22 (2) of section 5226(a), the individual may file a motion 

23 to quash— 
953 

•S 2357 

1 (1) in the case of a State judicial warrant or 

2 subpoena, in the court which issued the warrant or 

3 subpoena; 

4 (2) in the case of a warrant or subpoena issued 

5 under the authority of a State that is not a State 

6 judicial warrant or subpoena, in a court of com7 petent jurisdiction; or 

8 (3) in the case of any other warrant or sub9 poena issued under the authority of a Federal court 

10 or the United States, in the United States district 

11 court for the district in which the individual resides 

12 or in which the warrant or subpoena was issued. 

13 (b) COPY.—A copy of the motion shall be served by 

14 the individual upon the government authority by reg15 istered or certified mail. 

16 (c) PROCEEDINGS.—The government authority may 

17 file with the court such papers, including affidavits and 

18 other sworn documents, as sustain the validity of the war19 rant or subpoena. The individual may file with the court 

20 reply papers in response to the government authority’s fil21 ing. The court, upon the request of the individual or the 

22 government authority or both, may proceed in camera. 

23 The court may conduct such proceedings as it deems ap24 propriate to rule on the motion, but shall endeavor to ex25 pedite its determination. 
954 

•S 2357 

1 (d) STANDARD FOR DECISION.—A court may deny 

2 a motion under subsection (a) if it finds there is probable 

3 cause to believe the protected health information is rel4 evant to a legitimate law enforcement inquiry being con5 ducted by the government authority, unless the court finds 

6 the individual’s privacy interest outweighs the government 

7 authority’s need for the information. The individual shall 

8 have the burden of demonstrating that the individual’s pri9 vacy interest outweighs the need by the government au10 thority for the information. 

11 (e) SPECIFIC CONSIDERATIONS WITH RESPECT TO

12 PRIVACY INTEREST.—In reaching its determination, the 

13 court shall consider— 

14 (1) the particular purpose for which the infor15 mation was collected; 

16 (2) the degree to which disclosure of the infor17 mation will embarrass, injure, or invade the privacy 

18 of the individual; 

19 (3) the effect of the disclosure on the individ20 ual’s future health care; 

21 (4) the importance of the inquiry being con22 ducted by the government authority, and the impor23 tance of the information to that inquiry; and 

24 (5) any other factor deemed relevant by the 

25 court. 
955 

•S 2357 

1 (f) ATTORNEY’S FEES.—In the case of a motion 

2 brought under subsection (a) in which the individual has 

3 substantially prevailed, the court may assess against the 

4 government authority a reasonable attorney’s fee and 

5 other litigation costs (including expert’s fees) reasonably 

6 incurred. 

7 (g) NO INTERLOCUTORY APPEAL.—A ruling denying 

8 a motion to quash under this section shall not be deemed 

9 to be a final order, and no interlocutory appeal may be 

10 taken therefrom by the individual. An appeal of such a 

11 ruling may be taken by the individual within such period 

12 of time as is provided by law as part of any appeal from 

13 a final order in any legal proceeding initiated against the 

14 individual arising out of or based upon the protected 

15 health information disclosed. 

16 Subpart F—Disclosure Pursuant to Private Party 

17 Subpoena 

18 SEC. 5231. PRIVATE PARTY SUBPOENAS. 

19 A health care provider, health plan, employer, or per20 son who receives protected health information under sec21 tion 5213 may disclose protected health information under 

22 this section if the disclosure is pursuant to a subpoena 

23 issued on behalf of a private party who has complied with 

24 the access provisions of section 5232. 
956 

•S 2357 

1 SEC. 5232. ACCESS PROCEDURES FOR PRIVATE PARTY SUB2 POENAS. 

3 A private party may not obtain protected health in4 formation about an individual pursuant to a subpoena un5 less a copy of the subpoena together with a notice of the 

6 individual’s right to challenge the subpoena in accordance 

7 with section 5233 has been served upon the individual on 

8 or before the date of return of the subpoena, and— 

9 (1) 15 days have passed since the date of serv10 ice on the individual, and within that time period the 

11 individual has not initiated a challenge in accordance 

12 with section 5233; or 

13 (2) disclosure is ordered by a court under sec14 tion 5233. 

15 SEC. 5233. CHALLENGE PROCEDURES FOR PRIVATE PARTY 

16 SUBPOENAS. 

17 (a) MOTION TO QUASH SUBPOENA.—Within 15 days 

18 after service of a copy of the subpoena seeking protected 

19 health information under section 5231, the individual who 

20 is the subject of the protected health information may file 

21 in any court of competent jurisdiction a motion to quash 

22 the subpoena and serve a copy of the motion on the person 

23 seeking the information. 

24 (b) STANDARD FOR DECISION.—The court shall 

25 grant a motion under subsection (a) unless the respondent 

26 demonstrates that— 
957 

•S 2357 

1 (1) there is reasonable ground to believe the in2 formation is relevant to a lawsuit or other judicial 

3 or administrative proceeding; and 

4 (2) the need of the respondent for the informa5 tion outweighs the privacy interest of the individual. 

6 (c) SPECIFIC CONSIDERATIONS WITH RESPECT TO

7 PRIVACY INTEREST.—In determining under subsection 

8 (b) whether the need of the respondent for the information 

9 outweighs the privacy interest of the individual, the court 

10 shall consider— 

11 (1) the particular purpose for which the infor12 mation was collected; 

13 (2) the degree to which disclosure of the infor14 mation would embarrass, injure, or invade the pri15 vacy of the individual; 

16 (3) the effect of the disclosure on the individ17 ual’s future health care; 

18 (4) the importance of the information to the 

19 lawsuit or proceeding; and 

20 (5) any other relevant factor. 

21 (d) ATTORNEY’S FEES.—In the case of a motion 

22 brought under subsection (a) in which the individual has 

23 substantially prevailed, the court may assess against the 

24 respondent a reasonable attorney’s fee and other litigation 
958 

•S 2357 

1 costs and expenses (including expert’s fees) reasonably in2 curred. 

3 PART 3—PROCEDURES FOR ENSURING SECURITY 

4 OF PROTECTED HEALTH INFORMATION 

5 Subpart A—Establishment of Safeguards 

6 SEC. 5236. ESTABLISHMENT OF SAFEGUARDS. 

7 (a) IN GENERAL.—A health information trustee shall 

8 establish and maintain appropriate administrative, tech9 nical, and physical safeguards— 

10 (1) to ensure the integrity and confidentiality of 

11 protected health information created or received by 

12 the trustee; and 

13 (2) to protect against any anticipated threats or 

14 hazards to the security or integrity of such informa15 tion. 

16 (b) REGULATIONS.—The Secretary shall promulgate 

17 regulations regarding security measures for protected 

18 health information. 

19 SEC. 5237. ACCOUNTING FOR DISCLOSURES. 

20 (a) IN GENERAL.— 

21 (1) REQUIREMENT TO CREATE OR MAINTAIN

22 RECORD.—A health information trustee shall create 

23 and maintain, with respect to any protected health 

24 information disclosed in exceptional circumstances 

25 (as described in paragraph (2)), a record of— 
959 

•S 2357 

1 (A) the date and purpose of the disclosure; 

2 (B) the name of the person to whom or to 

3 which the disclosure was made; 

4 (C) the address of the person to whom or 

5 to which the disclosure was made or the loca6 tion to which the disclosure was made; and 

7 (D) the information disclosed, if the re8 cording of the information disclosed is prac9 ticable, taking into account the technical capa10 bilities of the system used to maintain the 

11 record and the costs of such maintenance. 

12 (2) EXCEPTIONAL CIRCUMSTANCES DE13 SCRIBED.—For purposes of paragraph (1) protected 

14 health information is disclosed in exceptional cir15 cumstances if the disclosure— 

16 (A) is not a routine part of doing business, 

17 as determined in accordance with guidelines 

18 promulgated by the Secretary; or 

19 (B) is permitted under sections 5213 and 

20 5217. 

21 (b) DISCLOSURE RECORD PART OF INFORMATION.— 

22 A record created and maintained under paragraph (a) 

23 shall be maintained as part of the protected health infor24 mation to which the record pertains. 
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1 Subpart B—Review of Protected Health Information 

2 By Subjects of the Information 

3 SEC. 5241. INSPECTION OF PROTECTED HEALTH INFORMA4 TION. 

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

6 (c), a health care provider or health plan— 

7 (1) shall permit an individual who is the subject 

8 of protected health information to inspect any such 

9 information that the provider or plan maintains; 

10 (2) shall permit the individual to have a copy 

11 of the information; 

12 (3) shall permit a person who has been des13 ignated in writing by the individual who is the sub14 ject of the information to inspect, or to have a copy 

15 of, the information on behalf of the individual or to 

16 accompany the individual during the inspection; and 

17 (4) may offer to explain or interpret informa18 tion that is inspected or copied under this sub19 section. 

20 (b) ADDITIONAL REQUESTS.—Except as provided in 

21 subsection (c), a health plan or health care provider shall, 

22 upon written request of an individual— 

23 (1) determine the identity of previous providers 

24 to the individual; and 

25 (2) obtain protected health information regard26 ing the individual. 
961 

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1 (c) EXCEPTIONS.—A health care provider or health 

2 plan is not required by this section to permit inspection 

3 or copying of protected health information if any of the 

4 following conditions apply: 

5 (1) MENTAL HEALTH TREATMENT NOTES.— 

6 The information consists of psychiatric, psycho7 logical, or mental health treatment notes, and the 

8 provider or plan determines, based on reasonable 

9 medical judgment, that inspection or copying of the 

10 notes would cause sufficient harm to the individual 

11 who is the subject of the notes so as to outweigh the 

12 desirability of permitting access, and the provider or 

13 plan has not disclosed the notes to any person not 

14 directly engaged in treating the individual, except 

15 with the authorization of the individual or under 

16 compulsion of law. 

17 (2) INFORMATION ABOUT OTHERS.—The infor18 mation relates to an individual other than the indi19 vidual seeking to inspect or have a copy of the infor20 mation and the provider or plan determines, based 

21 on reasonable medical judgment, that inspection or 

22 copying of the information would cause sufficient 

23 harm to 1 or both of the individuals so as to out24 weigh the desirability of permitting access. 
962 

•S 2357 

1 (3) ENDANGERMENT TO LIFE OR SAFETY.— 

2 The provider or plan determines that disclosure of 

3 the information could reasonably be expected to en4 danger the life or physical safety of any individual. 

5 (4) CONFIDENTIAL SOURCE.—The information 

6 identifies or could reasonably lead to the identifica7 tion of a person (other than a health care provider) 

8 who provided information under a promise of con9 fidentiality to a health care provider concerning the 

10 individual who is the subject of the information. 

11 (5) ADMINISTRATIVE PURPOSES.—The informa12 tion— 

13 (A) is used by the provider or plan solely 

14 for administrative purposes and not in the pro15 vision of health care to the individual who is the 

16 subject of the information; and 

17 (B) has not been disclosed by the provider 

18 or plan to any other person. 

19 (d) INSPECTION AND COPYING OF SEGREGABLE POR20 TION.—A health care provider or health plan shall permit 

21 inspection and copying under subsection (a) of any reason22 ably segregable portion of a record after deletion of any 

23 portion that is exempt under subsection (c). 

24 (e) CONDITIONS.—A health care provider or health 

25 plan may require a written request for the inspection and 
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1 copying of protected health information under this sub2 section. The health care provider or health plan may re3 quire a cost reimbursement for such inspection and copy4 ing. 

5 (f) STATEMENT OF REASONS FOR DENIAL.—If a 

6 health care provider or health plan denies a request for 

7 inspection or copying under this section, the provider or 

8 plan shall provide the individual who made the request (or 

9 the individual’s designated representative) with a written 

10 statement of the reasons for the denial. 

11 (g) DEADLINE.—A health care provider or health 

12 plan shall comply with or deny a request for inspection 

13 or copying of protected health information under this sec14 tion within the 30-day period beginning on the date on 

15 which the provider or plan receives the request. 

16 SEC. 5242. AMENDMENT OF PROTECTED HEALTH INFORMA17 TION. 

18 (a) IN GENERAL.—A health care provider or health 

19 plan shall, within the 45-day period beginning on the date 

20 on which the provider or plan receives from an individual 

21 a written request that the provider or plan correct or 

22 amend the information— 

23 (1) make the correction or amendment re24 quested; 
964 

•S 2357 

1 (2) inform the individual of the correction or 

2 amendment that has been made; and 

3 (3) inform any person who is identified by the 

4 individual, who is not an officer, employee or agent 

5 of the provider or plan, and to whom the uncor6 rected or unamended portion of the information was 

7 previously disclosed, of the correction or amendment 

8 that has been made. 

9 (b) REFUSAL TO CORRECT.—If the provider or plan 

10 refuses to make the corrections, the provider or plan shall 

11 inform the individual of— 

12 (1) the reasons for the refusal of the provider 

13 or plan to make the correction or amendment; 

14 (2) any procedures for further review of the re15 fusal; and 

16 (3) the individual’s right to file with the pro17 vider or plan a concise statement setting forth the 

18 requested correction or amendment and the individ19 ual’s reasons for disagreeing with the refusal of the 

20 provider or plan. 

21 (c) BASES FOR REQUEST TO CORRECT OR AMEND.— 

22 An individual may request correction or amendment of 

23 protected health information about the individual under 

24 paragraph (a) if the information is not timely, accurate, 

25 relevant to the system of records, or complete. 
965 

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1 (d) STATEMENT OF DISAGREEMENT.—After an indi2 vidual has filed a statement of disagreement under para3 graph (b)(3), the provider or plan, in any subsequent dis4 closure of the disputed portion of the information— 

5 (1) shall include a copy of the individual’s 

6 statement; and 

7 (2) may include a concise statement of the rea8 sons of the provider or plan for not making the re9 quested correction or amendment. 

10 (e) RULE OF CONSTRUCTION.—This section shall not 

11 be construed to require a health care provider or health 

12 plan to conduct a formal, informal, or other hearing or 

13 proceeding concerning a request for a correction or 

14 amendment to protected health information the provider 

15 or plan maintains. 

16 (f) CORRECTION.—For purposes of paragraph (a), a 

17 correction is deemed to have been made to protected 

18 health information when information that is not timely, 

19 accurate, relevant to the system of records, or complete 

20 is clearly marked as incorrect or when supplementary cor21 rect information is made part of the information. 

22 SEC. 5243. NOTICE OF INFORMATION PRACTICES. 

23 (a) PREPARATION OF WRITTEN NOTICE.—A health 

24 care provider or health plan shall prepare a written notice 

25 of information practices describing the following: 
966 

•S 2357 

1 (1) PERSONAL RIGHTS OF AN INDIVIDUAL.— 

2 The rights under this subpart of an individual who 

3 is the subject of protected health information, in4 cluding the right to inspect and copy such informa5 tion and the right to seek amendments to such infor6 mation, and the procedures for authorizing disclo7 sures of protected health information and for revok8 ing such authorizations. 

9 (2) PROCEDURES OF PROVIDER OR PLAN.—The 

10 procedures established by the provider or plan for 

11 the exercise of the rights of individuals about whom 

12 protected health information is maintained. 

13 (3) AUTHORIZED DISCLOSURES.—The disclo14 sures of protected health information that are au15 thorized. 

16 (b) DISSEMINATION OF NOTICE.—A health care pro17 vider or health plan— 

18 (1) shall, upon request, provide any individual 

19 with a copy of the notice of information practices de20 scribed in subsection (a); and 

21 (2) shall make reasonable efforts to inform indi22 viduals in a clear and conspicuous manner of the ex23 istence and availability of the notice. 

24 (c) MODEL NOTICE.—The Secretary, after notice and 

25 opportunity for public comment, shall develop and dissemi-
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•S 2357 

1 nate a model notice of information practices for use by 

2 health care providers and health plans under this section. 

3 Subpart C—Standards for Electronic Disclosures 

4 SEC. 5246. STANDARDS FOR ELECTRONIC DISCLOSURES. 

5 The Secretary shall promulgate standards for dis6 closing protected health information in accordance with 

7 this subtitle in electronic form. Such standards shall in8 clude standards relating to the creation, transmission, re9 ceipt, and maintenance, of any written document required 

10 or authorized under this subtitle. 

11 PART 4—SANCTIONS 

12 Subpart A—No Sanctions for Permissible Actions 

13 SEC. 5251. NO LIABILITY FOR PERMISSIBLE DISCLOSURES. 

14 A health information trustee who makes a disclosure 

15 of protected health information about an individual that 

16 is permitted by this subtitle shall not be liable to the indi17 vidual for the disclosure under common law. 

18 SEC. 5252. NO LIABILITY FOR INSTITUTIONAL REVIEW 

19 BOARD DETERMINATIONS. 

20 If the members of an institutional review board make 

21 a determination in good faith that— 

22 (1) a health research project is of sufficient im23 portance to outweigh the intrusion into the privacy 

24 of an individual; and 
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•S 2357 

1 (2) the effectiveness of the project requires use 

2 of protected health information, 

3 the members, the board, and the parent institution of the 

4 board shall not be liable to the individual as a result of 

5 the determination. 

6 SEC. 5253. RELIANCE ON CERTIFIED ENTITY. 

7 If a health information trustee contracts with a cer8 tified health information network service to make a disclo9 sure of any protected health information on behalf of such 

10 trustee in accordance with this subtitle and such service 

11 makes a disclosure of such information that is in violation 

12 of this subtitle, the trustee shall not be liable to the indi13 vidual who is the subject of the information for such un14 lawful disclosure. 

15 Subpart B—Civil Sanctions 

16 SEC. 5256. CIVIL PENALTY. 

17 (a) VIOLATION.—Any health information trustee who 

18 the Secretary determines has substantially failed to com19 ply with this subtitle shall be subject, in addition to any 

20 other penalties that may be prescribed by law, to a civil 

21 penalty of not more than $10,000 for each such violation. 

22 (b) PROCEDURES FOR IMPOSITION OF PENALTIES.— 

23 Section 1128A of the Social Security Act, other than sub24 sections (a) and (b) and the second sentence of subsection 

25 (f) of that section, shall apply to the imposition of a civil 
969 

•S 2357 

1 monetary penalty under this section in the same manner 

2 as such provisions apply with respect to the imposition of 

3 a penalty under section 1128A of such Act. 

4 SEC. 5257. CIVIL ACTION. 

5 (a) IN GENERAL.—An individual who is aggrieved by 

6 conduct in violation of this subtitle may bring a civil action 

7 to recover— 

8 (1) the greater of actual damages or liquidated 

9 damages of $5,000; 

10 (2) punitive damages; 

11 (3) a reasonable attorney’s fee and expenses of 

12 litigation; 

13 (4) costs of litigation; and 

14 (5) such preliminary and equitable relief as the 

15 court determines to be appropriate. 

16 (b) LIMITATION.—No action may be commenced 

17 under this section more than 3 years after the date on 

18 which the violation was or should reasonably have been 

19 discovered. 

20 Subpart C—Criminal Sanctions 

21 SEC. 5261. WRONGFUL DISCLOSURE OF PROTECTED 

22 HEALTH INFORMATION. 

23 (a) OFFENSE.—A person who knowingly— 

24 (1) obtains protected health information relat25 ing to an individual in violation of this subtitle; or 
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1 (2) discloses protected health information to an2 other person in violation of this subtitle, 

3 shall be punished as provided in subsection (b). 

4 (b) PENALTIES.—A person described in subsection 

5 (a) shall— 

6 (1) be fined not more than $50,000, imprisoned 

7 not more than 1 year, or both; 

8 (2) if the offense is committed under false pre9 tenses, be fined not more than $100,000, imprisoned 

10 not more than 5 years, or both; and 

11 (3) if the offense is committed with intent to 

12 sell, transfer, or use protected health information for 

13 commercial advantage, personal gain, or malicious 

14 harm, fined not more than $250,000, imprisoned not 

15 more than 10 years, or both. 

16 PART 5—ADMINISTRATIVE PROVISIONS 

17 SEC. 5266. RELATIONSHIP TO OTHER LAWS. 

18 (a) STATE LAW.—Except as provided in subsections 

19 (b), (c), and (d), this subtitle preempts State law. 

20 (b) LAWS RELATING TO PUBLIC OR MENTAL

21 HEALTH.—Nothing in this subtitle shall be construed to 

22 preempt or operate to the exclusion of any State law relat23 ing to public health or mental health that prevents or reg24 ulates disclosure of protected health information otherwise 

25 allowed under this subtitle. 
971 

•S 2357 

1 (c) PRIVILEGES.—Nothing in this subtitle is intended 

2 to preempt or modify State common or statutory law to 

3 the extent such law concerns a privilege of a witness or 

4 person in a court of the State. This subtitle does not su5 persede or modify Federal common or statutory law to the 

6 extent such law concerns a privilege of a witness or person 

7 in a court of the United States. Authorizations pursuant 

8 to section 5207 shall not be construed as a waiver of any 

9 such privilege. 

10 (d) CERTAIN DUTIES UNDER STATE OR FEDERAL

11 LAW.—This subtitle shall not be construed to preempt, 

12 supersede, or modify the operation of— 

13 (1) any law that provides for the reporting of 

14 vital statistics such as birth or death information; 

15 (2) any law requiring the reporting of abuse or 

16 neglect information about any individual; 

17 (3) subpart II of part E of title XXVI of the 

18 Public Health Service Act (relating to notifications 

19 of emergency response employees of possible expo20 sure to infectious diseases); or 

21 (4) any Federal law or regulation governing 

22 confidentiality of alcohol and drug patient records. 

23 SEC. 5267. RIGHTS OF INCOMPETENTS. 

24 (a) EFFECT OF DECLARATION OF INCOMPETENCE.— 

25 Except as provided in section 5268, if an individual has 
972 

•S 2357 

1 been declared to be incompetent by a court of competent 

2 jurisdiction, the rights of the individual under this subtitle 

3 shall be exercised and discharged in the best interests of 

4 the individual through the individual’s representative. 

5 (b) NO COURT DECLARATION.—Except as provided 

6 in section 5268, if a health care provider determines that 

7 an individual, who has not been declared to be incom8 petent by a court of competent jurisdiction, suffers from 

9 a medical condition that prevents the individual from act10 ing knowingly or effectively on the individual’s own behalf, 

11 the right of the individual to authorize disclosure may be 

12 exercised and discharged in the best interest of the indi13 vidual by the individual’s representative. 

14 SEC. 5268. EXERCISE OF RIGHTS. 

15 (a) INDIVIDUALS WHO ARE 18 OR LEGALLY CAPA16 BLE.—In the case of an individual— 

17 (1) who is 18 years of age or older, all rights 

18 of the individual shall be exercised by the individual; 

19 or 

20 (2) who, acting alone, has the legal right, as de21 termined by State law, to apply for and obtain a 

22 type of medical examination, care, or treatment and 

23 who has sought such examination, care, or treat24 ment, the individual shall exercise all rights of an in25 dividual under this subtitle with respect to protected 
973 

•S 2357 

1 health information relating to such examination, 

2 care, or treatment. 

3 (b) INDIVIDUALS UNDER 18.—Except as provided in 

4 subsection (a)(2), in the case of an individual who is— 

5 (1) under 14 years of age, all the individual’s 

6 rights under this subtitle shall be exercised through 

7 the parent or legal guardian of the individual; or 

8 (2) 14, 15, 16, or 17 years of age, the rights 

9 of inspection and amendment, and the right to au10 thorize disclosure of protected health information of 

11 the individual may be exercised either by the indi12 vidual or by the parent or legal guardian of the indi13 vidual. 

14 Subtitle D—Expanded Efforts To 

15 Combat Health Care Fraud and 

16 Abuse Affecting Federal Outlay 

17 Programs 

18 PART 1—IMPROVED ENFORCEMENT 

19 SEC. 5301. HEALTH CARE FRAUD AND ABUSE AFFECTING 

20 FEDERAL OUTLAY PROGRAMS. 

21 (a) IN GENERAL.—Not later than January 1, 1995, 

22 the Secretary and the Attorney General of the United 

23 States shall establish a joint program— 
974 

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1 (1) to coordinate Federal, State, and local law 

2 enforcement programs to control fraud and abuse af3 fecting Federal outlay programs, 

4 (2) to conduct investigations (including con5 sumer complaint investigations), audits, evaluations, 

6 and inspections relating to the delivery of and pay7 ment for health care in the United States, and 

8 (3) to facilitate the enforcement of this subtitle 

9 and other statutes applicable to health care fraud 

10 and abuse. 

11 (b) COORDINATION WITH LAW ENFORCEMENT

12 AGENCIES.—In carrying out the program under sub13 section (a), the Secretary and the Attorney General shall 

14 consult with, and arrange for the sharing of data and re15 sources with Federal, State and local law enforcement 

16 agencies, State Medicaid Fraud Control Units, and State 

17 agencies responsible for the licensing and certification of 

18 health care providers. 

19 (c) COORDINATION WITH PURCHASING COOPERA20 TIVES AND CERTIFIED HEALTH PLANS.—In carrying out 

21 the program under subsection (a), the Secretary and the 

22 Attorney General shall consult with, and arrange for the 

23 sharing of data with representatives of purchasing co24 operatives and certified standard health plans. 
975 

•S 2357 

1 (d) AUTHORITIES OF ATTORNEY GENERAL AND SEC2 RETARY.—In carrying out duties under subsection (a), the 

3 Attorney General and the Secretary shall— 

4 (1) conduct, supervise, and coordinate audits, 

5 civil and criminal investigations, inspections, and 

6 evaluations relating to the program established 

7 under such subsection; 

8 (2) have access (including on-line access as re9 quested and available) to all records available to pur10 chasing cooperatives and certified standard health 

11 plans relating to the activities described in para12 graph (1) (subject to restrictions based on the con13 fidentiality of certain information under subtitles B 

14 and C of this title); and 

15 (3) issue advisory opinions, fraud alerts, and 

16 other appropriate educational material to assist in 

17 compliance with the provisions of this subtitle. 

18 (e) QUALIFIED IMMUNITY FOR PROVIDING INFORMA19 TION.—The provisions of section 1157(a) of the Social Se20 curity Act (relating to limitation on liability) shall apply 

21 to a person providing information or communications to 

22 the Secretary or the Attorney General in conjunction with 

23 their performance of duties under this section, in the same 

24 manner as such section applies to information provided 

25 to organizations with a contract under part 2. 
976 

•S 2357 

1 (f) USE OF POWERS UNDER INSPECTOR GENERAL

2 ACT OF 1978.—In carrying out duties and responsibilities 

3 under the program established under subsection (a), the 

4 Inspector General is authorized to exercise all powers 

5 granted under the Inspector General Act of 1978 to the 

6 same manner and extent as provided in that Act. 

7 (g) DEFINITIONS.—In this subtitle: 

8 (1) CERTIFIED STANDARD HEALTH PLANS; 

9 PURCHASING COOPERATIVES.—The terms ‘‘certified 

10 standard health plan’’ and ‘‘purchasing cooperative’’ 

11 have the meanings given such terms by sections 

12 1011(2) and 1013(16), respectively. 

13 (2) FEDERAL OUTLAY PROGRAMS.—The term 

14 ‘‘Federal outlay programs’’ means— 

15 (A) any program under title XVIII of the 

16 Social Security Act, 

17 (B) any State health care program (as de18 fined in section 1128(h) of the Social Security 

19 Act), 

20 (C) any program under the Public Health 

21 Service Act, and 

22 (D) any program under this Act, including 

23 any State program approved under title I which 

24 certifies standard health plans, supplemental 
977 

•S 2357 

1 health benefits plans, and long-term care poli2 cies. 

3 (3) INSPECTOR GENERAL.—The term ‘‘Inspec4 tor General’’ means the Inspector General of the De5 partment of Health and Human Services. 

6 SEC. 5302. ESTABLISHMENT OF FEDERAL OUTLAY PRO7 GRAM FRAUD AND ABUSE CONTROL AC8 COUNT. 

9 (a) ESTABLISHMENT.— 

10 (1) IN GENERAL.—There is hereby established 

11 an account to be known as the ‘‘Federal Outlay Pro12 gram Fraud and Abuse Control Account’’ (in this 

13 section referred to as the ‘‘Anti-Fraud Account’’). 

14 The Anti-Fraud Account shall consist of— 

15 (A) such gifts and bequests as may be 

16 made as provided in paragraph (2); 

17 (B) such amounts as may be deposited in 

18 the Anti-Fraud Account as provided in section 

19 5311(d)(2) and title IX of the Social Security 

20 Act; and 

21 (C) such amounts as are transferred to the 

22 Anti-Fraud Account under paragraph (3). 

23 (2) AUTHORIZATION TO ACCEPT GIFTS.—The 

24 Anti-Fraud Account is authorized to accept on be25 half of the United States money gifts and bequests 
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•S 2357 

1 made unconditionally to the Anti-Fraud Account, for 

2 the benefit of the Anti-Fraud Account or any activ3 ity financed through the Anti-Fraud Account. 

4 (3) TRANSFER OF AMOUNTS.— 

5 (A) IN GENERAL.—Subject to the limita6 tion in subparagraph (B), the Secretary of the 

7 Treasury shall transfer to the Anti-Fraud Ac8 count an amount equal to the sum of the fol9 lowing: 

10 (i) Criminal fines imposed in cases in11 volving a Federal health care offense (as 

12 defined in subsection (d)). 

13 (ii) Penalties and damages imposed 

14 under the False Claims Act (31 U.S.C. 

15 3729 et seq.), in cases involving claims re16 lated to the provision of health care items 

17 and services (other than funds awarded to 

18 a relator or for restitution). 

19 (iii) Administrative penalties and as20 sessments imposed under section 5311 (ex21 cept as otherwise provided by law). 

22 (iv) Amounts resulting from the for23 feiture of property by reason of a Federal 

24 health care offense. 
979 

•S 2357 

1 (B) LIMITATION.—The Secretary of the 

2 Treasury shall not transfer more than the 

3 $75,000,000, plus 50 percent of the excess (if 

4 any) of the amount described in subparagraph 

5 (A) for any fiscal year (beginning in fiscal year 

6 1995). 

7 (b) USE OF FUNDS.— 

8 (1) IN GENERAL.—Amounts in the Anti-Fraud 

9 Account shall be available without appropriation and 

10 until expended as determined jointly by the Sec11 retary and the Attorney General of the United 

12 States in carrying out the Federal Outlay Program 

13 Fraud and Abuse Control Program established 

14 under section 5301 (including the administration of 

15 the Program), and may be used to cover costs in16 curred in operating the Program, including costs 

17 of— 

18 (A) prosecuting health care matters 

19 (through criminal, civil, and administrative pro20 ceedings); 

21 (B) investigations; 

22 (C) financial and performance audits of 

23 health care programs and operations; 

24 (D) inspections and other evaluations; 

25 (E) rewards paid under section 5304; and 
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•S 2357 

1 (F) provider and consumer education (in2 cluding the provision of advisory opinions) re3 garding compliance with the provisions of this 

4 subtitle. 

5 Twenty percent of the amounts available in the Anti6 Fraud Account for any fiscal year shall be used for 

7 costs described in subparagraph (F). 

8 (2) FUNDS USED TO SUPPLEMENT AGENCY AP9 PROPRIATIONS.—It is intended that disbursements 

10 made from the Anti-Fraud Account to any Federal 

11 agency be used to increase and not supplant the re12 cipient agency’s appropriated operating budget. 

13 (c) ANNUAL REPORT.—The Secretary and the Attor14 ney General shall submit jointly an annual report to Con15 gress on the amount of revenue which is generated and 

16 disbursed by the Anti-Fraud Account in each fiscal year. 

17 (d) FEDERAL HEALTH CARE OFFENSE DEFINED.— 

18 For purposes of subsection (a)(3)(A)(i), the term ‘‘Federal 

19 health care offense’’ means a violation of, or a criminal 

20 conspiracy to violate— 

21 (1) sections 226, 668, 1033, or 1347 of title 

22 18, United States Code; 

23 (2) section 1128B of the Social Security Act; 

24 (3) sections 287, 371, 664, 666, 1001, 1027, 

25 1341, 1343, or 1954 of title 18, United States Code, 
981 

•S 2357 

1 if the violation or conspiracy relates to health care 

2 fraud; 

3 (4) sections 501 or 511 of the Employee Retire4 ment Income Security Act of 1974, if the violation 

5 or conspiracy relates to health care fraud; or 

6 (5) sections 301, 303(a)(2), or 303 (b) or (e) 

7 of the Federal Food Drug and Cosmetic Act, if the 

8 violation or conspiracy relates to health care fraud. 

9 SEC. 5303. USE OF FUNDS BY INSPECTOR GENERAL. 

10 (a) REIMBURSEMENTS FOR INVESTIGATIONS.— 

11 (1) IN GENERAL.—The Inspector General is au12 thorized to receive and retain for current use reim13 bursement for the costs of conducting investigations, 

14 when such restitution is ordered by a court, volun15 tarily agreed to by the payer, or otherwise. 

16 (2) CREDITING.—Funds received by the Inspec17 tor General as reimbursement for costs of con18 ducting investigations shall be deposited to the cred19 it of the appropriation from which initially paid, or 

20 to appropriations for similar purposes currently 

21 available at the time of deposit, and shall remain 

22 available for obligation for 1 year from the date of 

23 their deposit. 

24 (3) EXCEPTION FOR FORFEITURES.—This sub25 section does not apply to investigative costs paid to 
982 

•S 2357 

1 the Inspector General from the Department of Jus2 tice Asset Forfeiture Fund, which monies shall be 

3 deposited and expended in accordance with sub4 section (b). 

5 (b) HHS OFFICE OF INSPECTOR GENERAL ASSET

6 FORFEITURE PROCEEDS FUND.— 

7 (1) IN GENERAL.—There is hereby established 

8 the ‘‘HHS Office of Inspector General Asset For9 feiture Proceeds Fund’’, to be administered by the 

10 Inspector General, which shall be available to the In11 spector General without fiscal year limitation for ex12 penses relating to the investigation of matters within 

13 the jurisdiction of the Inspector General. 

14 (2) DEPOSITS.—There shall be deposited in the 

15 Fund all proceeds from forfeitures that have been 

16 transferred to the Inspector General from the De17 partment of Justice Asset Forfeiture Fund under 

18 section 524 of title 28, United States Code. 

19 SEC. 5304. REWARDS FOR INFORMATION LEADING TO 

20 PROSECUTION AND CONVICTION. 

21 (a) IN GENERAL.—In special circumstances, the Sec22 retary and the Attorney General of the United States may 

23 jointly make a payment of up to $10,000 to a person who 

24 furnishes information unknown to the Government relat-
983 

•S 2357 

1 ing to a possible prosecution of a Federal health care of2 fense (as defined in section 5302(d)). 

3 (b) INELIGIBLE PERSONS.—A person is not eligible 

4 for a payment under subsection (a) if— 

5 (1) the person is a current or former officer or 

6 employee of a Federal or State government agency 

7 or instrumentality who furnishes information discov8 ered or gathered in the course of government em9 ployment; 

10 (2) the person knowingly participated in the of11 fense; 

12 (3) the information furnished by the person 

13 consists of allegations or transactions that have been 

14 disclosed to the public— 

15 (A) in a criminal, civil, or administrative 

16 proceeding; 

17 (B) in a congressional, administrative, or 

18 General Accounting Office report, hearing, 

19 audit, or investigation; or 

20 (C) by the news media, unless the person 

21 is the original source of the information; or 

22 (4) when, in the judgment of the Attorney Gen23 eral, it appears that a person whose illegal activities 

24 are being prosecuted or investigated could benefit 

25 from the award. 
984 

•S 2357 

1 (c) DEFINITION.—For the purposes of subsection 

2 (b)(3)(C), the term ‘‘original source’’ means a person who 

3 has direct and independent knowledge of the information 

4 that is furnished and has voluntarily provided the informa5 tion to the government prior to disclosure by the news 

6 media. 

7 (d) NO JUDICIAL REVIEW.—Neither the failure of 

8 the Secretary and the Attorney General to authorize a 

9 payment under subsection (a) nor the amount authorized 

10 shall be subject to judicial review. 

11 PART 2—CIVIL PENALTIES AND RIGHTS OF 

12 ACTION 

13 SEC. 5311. CIVIL MONETARY PENALTIES. 

14 (a) ACTIONS SUBJECT TO PENALTY.— 

15 (1) IN GENERAL.—Any person who is deter16 mined by the Secretary to have committed any ac17 tion with respect to a certified standard health plan 

18 or certified long-term care plan or long-term care 

19 services provided under this Act that would subject 

20 the person to a penalty under paragraphs (1) 

21 through (11) of section 1128A of the Social Security 

22 Act if the action was taken with respect to title V, 

23 XVIII, XIX, or XX of such Act, shall be subject to 

24 a penalty in accordance with subsection (b). 
985 

•S 2357 

1 (2) TREATMENT OF AMOUNTS RECOVERED.— 

2 Any amounts recovered under the preceding sen3 tence shall be paid to the Secretary and such por4 tions of the amounts recovered as is determined to 

5 have been improperly paid from a certified standard 

6 health plan or certified long-term care policy for the 

7 delivery of or payment for health care items or serv8 ices shall be repaid to such plan or policy (and en9 rollees of such plan or policy as appropriate) and the 

10 remainder of the amounts recovered shall be depos11 ited in the Federal Outlays Program Fraud and 

12 Abuse Control Account established under section 

13 5302. 

14 (b) PENALTIES.— 

15 (1) GENERAL RULE.—In the case of a person 

16 who the Secretary determines has committed an ac17 tion described in subsection (a), the person shall be 

18 subject to the civil monetary penalty (together with 

19 any additional assessment) to which the person 

20 would be subject to under section 1128A of the So21 cial Security Act if the action was taken with respect 

22 to title V, XVIII, XIX, or XX of such Act. 

23 (2) PENALTIES DESCRIBED.—Section 1128A(a) 

24 of the Social Security Act (42 U.S.C. 1320a-7a(a)) 

25 is amended— 
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1 (A) by striking ‘‘$2,000’’ and inserting 

2 ‘‘$10,000’’; and 

3 (B) by striking ‘‘twice the amount 

4 claimed’’ and inserting ‘‘3 times the amount 

5 claimed’’. 

6 (3) INTEREST ON PENALTIES.—Section 

7 1128A(f) of such Act (42 U.S.C. 1320a-7a(f)) is 

8 amended by adding after the first sentence the fol9 lowing: ‘‘Interest shall accrue on the penalties and 

10 assessments imposed by a final determination of the 

11 Secretary in accordance with an annual rate estab12 lished by the Secretary under the Federal Claims 

13 Collection Act. The rate of interest charged shall be 

14 the rate in effect on the date the determination be15 comes final and shall remain fixed at that rate until 

16 the entire amount due is paid. In addition, the Sec17 retary is authorized to recover the costs of collection 

18 in any case where such penalties and assessments 

19 are not paid within 30 days after the determination 

20 becomes final, or in the case of a compromised 

21 amount, where payments are more than 90 days 

22 past due. In lieu of actual costs, the Secretary is au23 thorized to impose a charge of up to 10 percent of 

24 the amount of such penalties and assessments owed 

25 to cover the costs of collection.’’. 
987 

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1 (c) ADDITIONAL OFFENSES.— 

2 (1) IN GENERAL.—Section 1128A(a) of the So3 cial Security Act (42 U.S.C. 1320a–7a(a)) is amend4 ed— 

5 (A) by striking ‘‘or’’ at the end of para6 graphs (1) and (2); 

7 (B) by striking the comma at the end of 

8 paragraph (2) and inserting a semicolon; and 

9 (C) by inserting after paragraph (3) the 

10 following new paragraphs: 

11 ‘‘(4) offers, pays, or transfers remuneration to 

12 any individual eligible for benefits under title XVIII 

13 of this Act, or under a Federal outlay program (as 

14 defined in section 5301(g)(1) of the Health Security 

15 Act) that such person knows or should know is likely 

16 to influence such individual to order or receive from 

17 a particular provider, practitioner, or supplier any 

18 item or service for which payment may be made, in 

19 whole or in part, under title XVIII, or a Federal 

20 outlay program; 

21 ‘‘(5) in the case of a person who is not an orga22 nization, agency, or other entity, who is excluded 

23 from participating in a program under title XVIII or 

24 a Federal outlay program in accordance with this 

25 section, section 1128, or section 1156 and who, dur-
988 

•S 2357 

1 ing the period of exclusion, retains either a direct or 

2 indirect ownership or control interest of 5 percent or 

3 more in, or an ownership or control interest (as de4 fined in section 1124(a)(3)) in, or who is an officer, 

5 director, agent, or managing employee (as defined in 

6 section 1126(b)) of, an entity that is participating in 

7 a program under title XVIII; 

8 ‘‘(6) engages in a practice that circumvents a 

9 payment methodology intended to reimburse for two 

10 or more discreet medical items or services at a single 

11 or fixed amount, including but not limited to, mul12 tiple admissions or readmission to hospitals and 

13 other institutions reimbursed on a diagnosis reim14 bursement grouping basis; 

15 ‘‘(7) engages in a practice which has the effect 

16 of limiting (as compared to other plan enrollees) the 

17 appropriate utilization of health care services cov18 ered by law or under the service contract by title 

19 XIX or other publicly subsidized patients, including 

20 but not limited to differential standards for the loca21 tion and hours of service offered by providers par22 ticipating in the plan; 

23 ‘‘(8) fails to comply with a quality assurance 

24 program or a utilization review activity; 
989 

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1 ‘‘(9) employs or contracts with any individual 

2 or entity who is excluded from participating in a 

3 program under title XVIII or a Federal outlay pro4 gram in accordance with this section, section 1128, 

5 or section 1156, for the provision of any services (in6 cluding but not limited to health care, utilization re7 view, medical social work, or administrative), or em8 ploys or contracts with any entity for the direct or 

9 indirect provision of such services, through such an 

10 excluded individual or entity; or 

11 ‘‘(10) submits false or fraudulent statements, 

12 data or information, or claims to the Secretary, the 

13 Secretary of Labor,any other Federal agency, a 

14 State health care agency, a purchasing cooperative 

15 (under subtitle ll of title ll of the Health Se16 curity Act), or any other Federal, State or local 

17 agency charged with implementation or oversight of 

18 a certified health plan under this Act or a public 

19 program that the person knows or should know is 

20 fraudulent;’’. 

21 (2) REMUNERATION DEFINED.—Section 

22 1128A(i) of such Act (42 U.S.C. 1320a–7a(i)) is 

23 amended by adding at the end the following new 

24 paragraph: 
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1 ‘‘(6) The term ‘remuneration’ includes the waiv2 er of coinsurance and deductible amounts (or any 

3 part thereof), and transfers of items or services for 

4 free or for other than fair market value, except that 

5 such term does not include the waiver of coinsurance 

6 or deductible amounts by a person or entity, if— 

7 ‘‘(A) the waiver is not offered as part of 

8 any advertisement or solicitation; 

9 ‘‘(B) the person does not routinely waive 

10 coinsurance or deductible amounts; and 

11 ‘‘(C) the person— 

12 ‘‘(i) waives the coinsurance and de13 ductible amounts after determining in good 

14 faith that the individual is indigent; 

15 ‘‘(ii) fails to collect coinsurance or de16 ductible amounts after making reasonable 

17 collection efforts; or 

18 ‘‘(iii) provides for any permissible 

19 waiver as specified in section 1128B(b)(3) 

20 or in regulations issued by the Secretary.’’. 

21 (3) CLAIM FOR ITEM OR SERVICE BASED ON IN22 CORRECT CODING OR MEDICALLY UNNECESSARY

23 SERVICES.—Section 1128A(a)(1) of such Act (42 

24 U.S.C. 1320a–7a(a)(1)) is amended— 
991 

•S 2357 

1 (A) in subparagraph (A), by striking 

2 ‘‘claimed,’’ and inserting the following: 

3 ‘‘claimed, including any person who presents or 

4 causes to be presented a claim for an item or 

5 service which includes a procedure or diagnosis 

6 code that the person knows or should know will 

7 result in a greater payment to the person than 

8 the code applicable to the item or service actu9 ally provided or actual patient medical condi10 tion,’’; 

11 (B) in subparagraph (C), by striking ‘‘or’’ 

12 at the end; 

13 (C) in subparagraph (D), by striking ‘‘; 

14 or’’ and inserting ‘‘, or’’; and 

15 (D) by inserting after subparagraph (D) 

16 the following new subparagraph: 

17 ‘‘(E) is for a medical or other item or serv18 ice that a person knows or should know is not 

19 medically necessary; or’’. 

20 (c) PROCEDURES FOR IMPOSITION OF PENALTIES.— 

21 (1) APPLICABILITY OF PROCEDURES UNDER SO22 CIAL SECURITY ACT.—Except as otherwise provided 

23 in paragraph (2), the provisions of section 1128A of 

24 the Social Security Act (other than subsections (a) 

25 and (b) and the second sentence of subsection (f)) 
992 

•S 2357 

1 shall apply to the imposition of a civil monetary pen2 alty, assessment, or exclusion under this section in 

3 the same manner as such provisions apply with re4 spect to the imposition of a penalty, assessment, or 

5 exclusion under section 1128A of such Act. 

6 (4) AUTHORITY OF SECRETARY OF LABOR TO

7 IMPOSE PENALTIES, ASSESSMENTS, AND EXCLU8 SIONS.— 

9 (A) IN GENERAL.—The Secretary of Labor 

10 may initiate an action to impose a civil mone11 tary penalty, assessment, or exclusion under 

12 this section with respect to actions relating to 

13 a certified multistate self-insured health plan if 

14 authorized by the Attorney General of the 

15 United States and the Secretary pursuant to 

16 regulations promulgated by the Secretary in 

17 consultation with the Attorney General. 

18 (B) REGULATIONS DESCRIBED.—Under 

19 the regulations promulgated under subpara20 graph (A), the Attorney General and the Sec21 retary shall review an action proposed by the 

22 Secretary of Labor, and not later than 60 days 

23 after receiving notice of the proposed action 

24 from the Secretary of Labor, shall— 
993 

•S 2357 

1 (i) approve the proposed action to be 

2 taken by the Secretary of Labor; 

3 (ii) disapprove the proposed action; or 

4 (iii) assume responsibility for initi5 ating a criminal, civil, or administrative ac6 tion based on the information provided in 

7 the notice. 

8 (C) ACTION DEEMED APPROVED.—If the 

9 Attorney General and the Secretary fail to re10 spond to a proposed action by the Secretary of 

11 Labor within the period described in paragraph 

12 (2), the Attorney General and the Secretary 

13 shall be deemed to have approved the proposed 

14 action to be taken by the Secretary of Labor. 

15 (e) NOTIFICATION OF LICENSING AUTHORITIES.— 

16 Whenever the Secretary’s determination to impose a pen17 alty, assessment, or exclusion under this section becomes 

18 final, the Secretary shall notify the appropriate State or 

19 local licensing agency or organization (including the agen20 cy specified in section 1864(a) and 1902(a)(33) of the So21 cial Security Act) that such a penalty, assessment, or ex22 clusion has become final and the reasons therefore. 
994 

•S 2357 

1 SEC. 5312. PERMITTING PARTIES TO BRING ACTIONS ON 

2 OWN BEHALF. 

3 (a) IN GENERAL.—Subject to subsections (b) and (c), 

4 a certified standard health plan (as defined in section 

5 1011(2)) or an experience-rated employer (as defined in 

6 section 1011(5)(E)) that suffers harm or monetary loss 

7 exceeding the sum or value of $10,000 (excluding interest) 

8 as a result of any activity of an individual or entity which 

9 makes the individual or entity subject to a civil monetary 

10 penalty under section 5311 may, in a civil action against 

11 the individual or entity in the United States District 

12 Court, obtain treble damages and costs including attor13 neys’ fees against the individual or entity and such equi14 table relief as is appropriate. 

15 (b) REQUIREMENTS FOR BRINGING ACTION.—A per16 son may bring a civil action under this section only if— 

17 (1) the person provides the Secretary with writ18 ten notice of— 

19 (A) the person’s intent to bring an action 

20 under this section, 

21 (B) the identities of the individuals or enti22 ties the person intends to name as defendants 

23 to the action, and 

24 (C) all information the person possesses 

25 regarding the activity that is the subject of the 

26 action that may materially affect the Sec-
995 

•S 2357 

1 retary’s decision to initiate a proceeding to im2 pose a civil monetary penalty under section 

3 5311 against the defendants, and 

4 (2) one of the following conditions is met: 

5 (A) During the 60-day period that begins 

6 on the date the Secretary receives the written 

7 notice described in paragraph (1), the Secretary 

8 does not notify the person that the Secretary 

9 intends to initiate an investigation to determine 

10 whether to impose a civil monetary penalty 

11 under section 5311 against the defendants. 

12 (B) The Secretary notifies the person dur13 ing the 60-day period described in subpara14 graph (A) that the Secretary intends to initiate 

15 an investigation to determine whether to impose 

16 a civil monetary penalty under such section 

17 against the defendants, and the Secretary sub18 sequently notifies the person that the Secretary 

19 no longer intends to initiate an investigation or 

20 proceeding to impose a civil monetary penalty 

21 against the defendants. 

22 (C) After the expiration of the 1-year pe23 riod that begins on the date written notice is 

24 provided to the Secretary, the Secretary has not 
996 

•S 2357 

1 initiated a proceeding to impose a civil mone2 tary penalty against the defendants. 

3 (c) TREATMENT OF EXCESS AWARDS.—If a person 

4 is awarded any amounts in an action brought under this 

5 section that are in excess of the damages suffered by the 

6 person as a result of the defendant’s activities, 20 percent 

7 of such amounts shall be withheld from the person for pay8 ment into the Federal Outlays Program Fraud and Abuse 

9 Control Account established under section 5302. 

10 (d) STATUTE OF LIMITATIONS.—No action may be 

11 brought under this section more than 6 years after the 

12 date of the activity with respect to which the action is 

13 brought. 

14 (e) NO LIMITATION ON OTHER ACTIONS.—Nothing 

15 in this section shall limit the right of any person to pursue 

16 any other right of action or remedy available under the 

17 law. 

18 (f) PENDANT JURISDICTION.—Nothing in this sec19 tion shall be construed, by reason of a claim arising under 

20 this section, to confer on the Courts of the United States 

21 jurisdiction over any State law claim. 

22 SEC. 5313. EXCLUSION FROM PROGRAM PARTICIPATION. 

23 (a) MANDATORY EXCLUSION.— 

24 (1) IN GENERAL.—Except as provided in para25 graph (2), the Secretary shall exclude an individual 
997 

•S 2357 

1 or entity from participating in any applicable health 

2 plan if the individual or entity— 

3 (A) is excluded from participation in a 

4 public program under, or is otherwise described 

5 in, section 1128(a) of the Social Security Act 

6 (relating to individuals and entities convicted of 

7 health care-related crimes or patient abuse); 

8 (B) has been convicted after the date of 

9 the enactment of this section, under Federal or 

10 State law, in connection with the delivery of a 

11 health care item or service of a criminal offense 

12 consisting of a felony relating to fraud, theft, 

13 embezzlement, breach of fiduciary responsi14 bility, or other financial misconduct; or 

15 (C) has been convicted after such date, 

16 under Federal or State law, of a criminal of17 fense consisting of a felony relating to the un18 lawful manufacture, distribution, prescription, 

19 or dispensing of a controlled substance. 

20 (2) WAIVER PERMITTED.— 

21 (A) IN GENERAL.—When, in the opinion of the 

22 Secretary, mandatory exclusion under paragraph (1) 

23 of an individual or entity would significantly harm 

24 the public health or pose a significant risk to the 

25 public health, the Secretary may waive such exclu-
998 

•S 2357 

1 sion and shall apply such other appropriate penalties 

2 as authorized under this subtitle. 

3 (B) APPLICATION FOR WAIVER OF EXCLU4 SION.— 

5 (i) IN GENERAL.—An individual or entity 

6 subject to mandatory exclusion under this sub7 section may apply to the Secretary, in a manner 

8 specified by the Secretary in regulations, for 

9 waiver of the exclusion. 

10 (ii) SECRETARIAL RESPONSE.—The Sec11 retary may waive the exclusion for the reasons 

12 described in subparagraph (A). 

13 (b) PERMISSIVE EXCLUSION.—The Secretary may 

14 exclude and individual or entity from participating in any 

15 applicable health plan if the individual or entity— 

16 (1) is excluded from participation in a public 

17 program under, or is otherwise described in, section 

18 1128(b) of the Social Security Act (other than para19 graphs (3), (6)(A), (6)(C), (6)(D), (10), or (13) of 

20 such section); 

21 (2) has been convicted after the date of the en22 actment of this section, under Federal or State law, 

23 in connection with the delivery of a health care item 

24 or service of a criminal offense consisting of a mis25 demeanor relating to fraud, theft, embezzlement, 
999 

•S 2357 

1 breach of fiduciary responsibility, or other financial 

2 misconduct; or 

3 (3) has been convicted after the date of the en4 actment of this section, under Federal or State law, 

5 of a criminal offense consisting of a misdemeanor re6 lating to the unlawful manufacture, distribution, 

7 prescription, or dispensing of a controlled substance. 

8 (c) PERIOD OF EXCLUSION.— 

9 (1) NOTICE OF EXCLUSION.—An exclusion 

10 under this section shall be effective at such time and 

11 upon such reasonable notice to the public and to the 

12 individual or entity excluded as may be specified in 

13 regulations consistent with paragraph (2). 

14 (2) EFFECTIVE DATE OF EXCLUSION.—Such an 

15 exclusion shall be effective with respect to services 

16 furnished to an individual on or after the effective 

17 date of the exclusion. 

18 (3) PERIOD OF EXCLUSION.— 

19 (A) IN GENERAL.—The Secretary shall 

20 specify, in the notice of exclusion under para21 graph (1), the minimum period (or, in the case 

22 of an exclusion of an individual excluded from 

23 participation in a public program under, or is 

24 otherwise described in, section 1128(b)(12) of 
1000 

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1 the Social Security Act, the period) of the ex2 clusion. 

3 (B) MINIMUM PERIOD FOR MANDATORY

4 EXCLUSIONS.—In the case of a mandatory ex5 clusion under subsection (a), the minimum pe6 riod of exclusion shall be not less than 2 years. 

7 (C) MINIMUM PERIOD FOR CERTAIN PER8 MISSIVE EXCLUSIONS.— 

9 (i) FRAUD, OBSTRUCTION OF INVES10 TIGATION, AND CONTROLLED SUBSTANCE

11 CONVICTION.—In the case of an exclusion 

12 of an individual excluded from participa13 tion in a public program under, or is other14 wise described in, paragraph (1) or (2) of 

15 section 1128(b) of the Social Security Act 

16 or paragraph (1), (2), or (3) of subsection 

17 (b) of this section, the period of exclusion 

18 shall be a minimum of 1 year, unless the 

19 Secretary determines that a longer period 

20 is necessary because of aggravating cir21 cumstances. 

22 (ii) SUSPENSIONS.—In the case of an 

23 exclusion of an individual or entity ex24 cluded from participation in a public pro25 gram under, or is otherwise described in, 
1001 

•S 2357 

1 paragraph (4), (5)(A), or (5)(B) of section 

2 1128(b) of the Social Security Act, the pe3 riod of the exclusion shall not be less than 

4 the period during which the individual’s or 

5 entity’s license to provide health care is re6 voked, suspended or surrendered, or the in7 dividual or the entity is excluded or sus8 pended from a Federal or State health 

9 care program. 

10 (iii) UNNECESSARY SERVICES.—In the 

11 case of an exclusion of an individual or en12 tity described in paragraph (6)(B) of sec13 tion 1128(b) of the Social Security Act, 

14 the period of the exclusion shall be not less 

15 than 1 year. 

16 (d) NOTICE TO ENTITIES ADMINISTERING PUBLIC

17 PROGRAMS FOR THE DELIVERY OF OR PAYMENT FOR

18 HEALTH CARE ITEMS OR SERVICES.— 

19 (1) IN GENERAL.—The Secretary shall exercise 

20 the authority under this section in a manner that re21 sults in an individual’s or entity’s exclusion from all 

22 certified standard health plans under such program 

23 for the delivery of or payment for health care items 

24 or services. 
1002 

•S 2357 

1 (2) NOTIFICATION.—The Secretary shall 

2 promptly notify each sponsor of an applicable health 

3 plan and each entity that administers a State health 

4 care program described in section 1128(h) of the So5 cial Security Act of the fact and circumstances of 

6 each exclusion (together with the period thereof) ef7 fected against an individual or entity under this sec8 tion or under section 5311(b)(3). 

9 (e) NOTICE TO STATE LICENSING AGENCIES.—The 

10 provisions of section 1128(e) of the Social Security Act 

11 shall apply to this section in the same manner as such 

12 provisions apply to sections 1128 and 1128A of such Act. 

13 (f) NOTICE, HEARING, AND JUDICIAL REVIEW.— 

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

15 any individual or entity that is excluded (or directed 

16 to be excluded) from participation under this section 

17 is entitled to reasonable notice and opportunity for 

18 a hearing thereon by the Secretary to the same ex19 tent as is provided in section 205(b) of the Social 

20 Security Act, and to judicial review of the Sec21 retary’s final decision after such hearing as is pro22 vided in section 205(g) of such Act, except that such 

23 action shall be brought in the Court of Appeals of 

24 the United States for the judicial circuit in which 

25 the individual or entity resides, or has a principal 
1003 

•S 2357 

1 place of business, or, if the individual or entity does 

2 not reside or have a principal place of business with3 in any such judicial circuit, in the United States 

4 Court of Appeals for the District of Columbia Cir5 cuit. 

6 (2) ADMINISTRATIVE HEARING.—Unless the 

7 Secretary determines that the health or safety of in8 dividuals receiving services warrants the exclusion 

9 taking effect earlier, any individual or entity that is 

10 the subject of an adverse determination based on 

11 paragraphs (6)(B), (7), (8), (9), (11), (12), (14), or 

12 (15) of section 1128(b) of the Social Security Act, 

13 shall be entitled to a hearing by an administrative 

14 law judge (as provided under section 205(b) of the 

15 Social Security Act) on the determination before any 

16 exclusion based upon the determination takes effect. 

17 If a hearing is requested, the exclusion shall be ef18 fective upon the issuance of an order by the adminis19 trative law judge upholding the determination of the 

20 Secretary to exclude. 

21 (g) CONVICTED DEFINED.—In this section, the term 

22 ‘‘convicted’’ has the meaning given such term in section 

23 1128(i) of the Social Security Act. 

24 (h) REQUEST FOR EXCLUSION.— 
1004 

•S 2357 

1 (1) IN GENERAL.—The sponsor of any standard 

2 health plan, the board of any purchasing coopera3 tive, and the Secretary of Labor in the case of a 

4 multistate self-insured health plan may request that 

5 the Secretary of Health and Human Services exclude 

6 an individual or entity with respect to actions under 

7 a certified health plan in accordance with this sec8 tion. 

9 (2) RESPONSE BY SECRETARY.— 

10 (A) IN GENERAL.—An individual or entity 

11 excluded (or directed to be excluded) from par12 ticipation under this section or section 

13 5411(b)(3) may apply to the Secretary, in a 

14 manner specified by the Secretary in regula15 tions and at the end of the minimum period of 

16 exclusion (or, in the case of an individual or en17 tity described in section 1128(b)(12) of the So18 cial Security Act, the period of exclusion) pro19 vided under this section or section 5411(b)(3) 

20 and at such other times as the Secretary may 

21 provide, for termination of the exclusion. 

22 (B) SECRETARIAL RESPONSE.—The Sec23 retary may terminate the exclusion if the Sec24 retary determines, on the basis of the conduct 

25 of the applicant which occurred after the date 
1005 

•S 2357 

1 of the notice of exclusion or which was un2 known to the Secretary at the time of the exclu3 sion, that— 

4 (i) there is no basis under this section 

5 or section 5411(b)(3) for a continuation of 

6 the exclusion, and 

7 (ii) there are reasonable assurances 

8 that the types of actions which formed the 

9 basis for the original exclusion have not re10 curred and will not recur. 

11 (C) NOTIFICATION OF TERMINATION.— 

12 The Secretary shall promptly notify each spon13 sor of an applicable health plan and each entity 

14 that administers a State health care program 

15 described in section 1128(h) of the Social Secu16 rity Act of each termination of exclusion made 

17 under this paragraph. 

18 (i) EFFECT OF EXCLUSION.—Notwithstanding any 

19 other provision of this Act, no payment may be made 

20 under a certified standard health plan for the delivery of 

21 or payment for any item or service (other than an emer22 gency item or service, not including items or services fur23 nished in an emergency room of a hospital) furnished— 

24 (1) by an individual or entity during the period 

25 when such individual or entity is excluded pursuant 
1006 

•S 2357 

1 to this section from participation in a certified 

2 standard health plan; or 

3 (2) at the medical direction or on the prescrip4 tion of a physician during the period when the physi5 cian is excluded pursuant to this section from par6 ticipation in a certified health plan and the person 

7 furnishing the item or service knew or had reason to 

8 know of the exclusion (after a reasonable time period 

9 after reasonable notice has been furnished to the 

10 person). 

11 PART 3—AMENDMENTS TO CRIMINAL LAW 

12 SEC. 5321. HEALTH CARE FRAUD. 

13 (a) IN GENERAL.—Chapter 63 of title 18, United 

14 States Code, is amended by adding at the end the fol15 lowing: 

16 ‘‘§ 1347. Health care fraud 

17 ‘‘(a) Whoever knowingly executes, or attempts to exe18 cute, a scheme or artifice— 

19 ‘‘(1) to defraud any purchasing cooperative, 

20 certified standard health plan, certified long-term 

21 care insurance policy, or other person, in connection 

22 with the delivery of or payment for health care bene23 fits, items, or services; or 

24 ‘‘(2) to obtain, by means of false or fraudulent 

25 pretenses, representations, or promises, any of the 
1007 

•S 2357 

1 money or property owned by, or under the custody 

2 or control of, any purchasing cooperative, certified 

3 standard health plan, certified long-term care insur4 ance policy, or person in connection with the delivery 

5 of or payment for health care benefits, items, or 

6 services; 

7 shall be fined under this title or imprisoned not more than 

8 10 years, or both. If the violation results in serious bodily 

9 injury (as defined in section 1365 of this title) such person 

10 shall be imprisoned for any term of years. 

11 ‘‘(b) As used in this section the terms ‘purchasing 

12 cooperative’, ‘certified standard health plan’, and ‘certified 

13 long-term care insurance policy’ have the meanings given 

14 those terms in sections 1013(16), 1011(2), and 1011(4) 

15 of the Health Security Act, respectively.’’. 

16 (b) CLERICAL AMENDMENT.—The table of sections 

17 at the beginning of chapter 63 of title 18, United States 

18 Code, is amended by adding at the end the following: 

‘‘1347. Health care fraud.’’. 

19 SEC. 5322. THEFT OR EMBEZZLEMENT. 

20 (a) IN GENERAL.—Chapter 31 of title 18, United 

21 States Code, is amended by adding at the end the fol22 lowing: 
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1 ‘‘§ 668. Theft or embezzlement in connection with 

2 health care 

3 ‘‘(a) Whoever embezzles, steals, willfully and unlaw4 fully converts to the use of any person other than the 

5 rightful owner, or intentionally misapplies any of the mon6 eys, securities, premiums, credits, property, or other assets 

7 of a purchasing cooperative, certified standard health 

8 plan, certified long-term care insurance policy, or of any 

9 fund connected with such a cooperative, plan, or policy, 

10 shall be fined under this title or imprisoned not more than 

11 10 years, or both. 

12 ‘‘(b) As used in this section, the terms ‘purchasing 

13 cooperative’, ‘certified standard health plan’, and ‘certified 

14 long-term care insurance policy’ have the meanings given 

15 those terms in sections 1013(16), 1011(2), and 1011(4) 

16 of the Health Security Act, respectively.’’. 

17 (b) CLERICAL AMENDMENT.—The table of sections 

18 at the beginning of chapter 31 of title 18, United States 

19 Code, is amended by adding at the end the following: 

‘‘668. Theft or embezzlement in connection with health care.’’. 

20 SEC. 5323. FALSE STATEMENTS. 

21 (a) IN GENERAL.—Chapter 47 of title 18, United 

22 States Code, is amended by adding at the end the fol23 lowing: 
1009 

•S 2357 

1 ‘‘§ 1033. False statements relating to health care mat2 ters 

3 ‘‘(a) Whoever, in any matter involving a purchasing 

4 cooperative, certified standard health plan, or certified 

5 long-term care insurance policy, knowingly and willfully 

6 falsifies, conceals, or covers up by any trick, scheme, or 

7 device a material fact, or makes any false, fictitious, or 

8 fraudulent statements or representations, or makes or 

9 uses any false writing or document knowing the same to 

10 contain any false, fictitious, or fraudulent statement or 

11 entry, shall be fined under this title or imprisoned not 

12 more than 5 years, or both. 

13 ‘‘(b) As used in this section, the terms ‘purchasing 

14 cooperative’, ‘certified standard health plan’, and ‘certified 

15 long-term care insurance policy’ have the meanings given 

16 those terms in sections 1013(16), 1011(2), and 1011(4) 

17 of the Health Security Act, respectively.’’. 

18 (b) CLERICAL AMENDMENT.—The table of sections 

19 at the beginning of chapter 47 of title 18, United States 

20 Code, is amended by adding at the end the following: 

‘‘1033. False statements relating to health care matters.’’. 

21 SEC. 5324. BRIBERY AND GRAFT. 

22 (a) IN GENERAL.—Chapter 11 of title 18, United 

23 States Code, is amended by adding at the end the fol24 lowing: 
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1 ‘‘§ 226. Bribery and graft in connection with health 

2 care 

3 ‘‘(a) Whoever— 

4 ‘‘(1) directly or indirectly, corruptly gives, of5 fers, or promises anything of value to a health care 

6 official, or offers or promises a health care official 

7 to give anything of value to any other person, with 

8 intent— 

9 ‘‘(A) to influence any of the health care of10 ficial’s actions, decisions, or duties relating to a 

11 purchasing cooperative, certified standard 

12 health plan, or certified long-term care insur13 ance policy; 

14 ‘‘(B) to influence such an official to com15 mit or aid in the committing, or collude in or 

16 allow, any fraud, or make opportunity for the 

17 commission of any fraud, on a purchasing coop18 erative, certified standard health plan, or cer19 tified long-term care insurance policy; or 

20 ‘‘(C) to induce such an official to engage 

21 in any conduct in violation of the lawful duty of 

22 such official; or 

23 ‘‘(2) being a health care official, directly or in24 directly, corruptly demands, seeks, receives, accepts, 

25 or agrees to accept anything of value personally or 
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1 for any other person or entity, the giving of which 

2 violates paragraph (1) of this subsection; 

3 shall be fined under this title or imprisoned not more than 

4 15 years, or both. 

5 ‘‘(b) Whoever, otherwise than as provided by law for 

6 the proper discharge of any duty, directly or indirectly 

7 gives, offers, or promises anything of value to a health 

8 care official, for or because of any of the health care offi9 cial’s actions, decisions, or duties relating to a purchasing 

10 cooperative, certified standard health plan, or certified 

11 long-term care insurance policy, shall be fined under this 

12 title or imprisoned not more than two years, or both. 

13 ‘‘(c) As used in this section— 

14 ‘‘(1) the term ‘health care official’ means— 

15 ‘‘(A) an administrator, officer, trustee, fi16 duciary, custodian, counsel, agent, or employee 

17 of any purchasing cooperative, certified stand18 ard health plan, or certified long-term care in19 surance policy; 

20 ‘‘(B) an officer, counsel, agent, or em21 ployee, of an organization that provides services 

22 under contract to any purchasing cooperative, 

23 certified standard health plan, or certified long24 term care insurance policy; 
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1 ‘‘(C) an official or employee of a State 

2 agency having regulatory authority over any 

3 purchasing cooperative, certified standard 

4 health plan, or certified long-term care insur5 ance policy; 

6 ‘‘(D) an officer, counsel, agent, or em7 ployee of a health care sponsor; 

8 ‘‘(2) the term ‘health care sponsor’ means any 

9 individual or entity serving as the sponsor of a cer10 tified health plan for purposes of the Health Secu11 rity Act, and includes the joint board of trustees or 

12 other similar body used by two or more employers 

13 to administer a certified standard health plan for 

14 purposes of such Act; and 

15 ‘‘(3) the terms ‘purchasing cooperative’, ‘cer16 tified standard health plan’, and ‘certified long-term 

17 care insurance policy’ have the meanings given those 

18 terms in sections 1013(16), 1011(2), and 1011(4) of 

19 the Health Security Act, respectively.’’. 

20 (b) CLERICAL AMENDMENT.—The table of chapters 

21 at the beginning of chapter 11 of title 18, United States 

22 Code, is amended by adding at the end the following: 

‘‘226. Bribery and graft in connection with health care.’’. 
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1 SEC. 5325. INJUNCTIVE RELIEF RELATING TO HEALTH 

2 CARE OFFENSES. 

3 Section 1345(a)(1) of title 18, United States Code, 

4 is amended— 

5 (1) by striking ‘‘or’’ at the end of subparagraph 

6 (A); 

7 (2) by inserting ‘‘or’’ at the end of subpara8 graph (B); and 

9 (3) by adding at the end the following: 

10 ‘‘(C) committing or about to commit a Federal 

11 health care offense (as defined in section 5302(d) of 

12 the Health Security Act);’’. 

13 SEC. 5326. GRAND JURY DISCLOSURE. 

14 Section 3322 of title 18, United States Code, is 

15 amended— 

16 (1) by redesignating subsections (c) and (d) as 

17 subsections (d) and (e), respectively; and 

18 (2) by inserting after subsection (b) the fol19 lowing: 

20 ‘‘(c) A person who is privy to grand jury information 

21 concerning a health law violation— 

22 ‘‘(1) received in the course of duty as an attor23 ney for the Government; or 

24 ‘‘(2) disclosed under rule 6(e)(3)(A)(ii) of the 

25 Federal Rules of Criminal Procedure; 
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1 may disclose that information to an attorney for the Gov2 ernment to use in any civil proceeding related to a Federal 

3 health care offense (as defined in section 5302(d) of the 

4 Health Security Act).’’. 

5 SEC. 5327. FORFEITURES FOR VIOLATIONS OF FRAUD STAT6 UTES. 

7 Section 982(a) of title 18, United States Code, is 

8 amended by inserting after paragraph (5) the following: 

9 ‘‘(6) The court, in imposing sentence on a person con10 victed of a Federal health care offense (as defined in sec11 tion 5302(d) of the Health Security Act), shall order such 

12 person to forfeit to the United States any property, real 

13 or personal, constituting or traceable to the gross proceeds 

14 obtained, directly or indirectly, as a result of the commis15 sion of the offense.’’. 

16 PART 4—AMENDMENTS TO CIVIL FALSE CLAIMS 

17 ACT 

18 SEC. 5331. AMENDMENTS TO CIVIL FALSE CLAIMS ACT. 

19 Section 3729 of title 31, United States Code, is 

20 amended— 

21 (1) in subsection (a)(7), by inserting ‘‘or to a 

22 certified standard health plan or certified long-term 

23 care insurance policy’’ after ‘‘property to the Gov24 ernment’’; 
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•S 2357 

1 (2) in the matter following subsection (a)(7), by 

2 inserting ‘‘or certified standard health plan or cer3 tified long-term care insurance policy’’ before ‘‘sus4 tains because of the act of that person,’’; 

5 (3) at the end of the first sentence of sub6 section (a), by inserting ‘‘or certified standard 

7 health plan or certified long-term care insurance pol8 icy’’ before ‘‘sustains because of the act of the per9 son.’’; 

10 (4) in subsection (c)— 

11 (A) by inserting ‘‘the term’’ after ‘‘sec12 tion,’’; and 

13 (B) by adding at the end the following: 

14 ‘‘The term also includes any request or demand, 

15 whether under contract of otherwise, for money 

16 or property which is made or presented to a 

17 certified standard health plan or certified long18 term care insurance policy.’’; and 

19 (5) by adding at the end the following: 

20 ‘‘(f) CERTIFIED STANDARD HEALTH PLAN AND CER21 TIFIED LONG-TERM CARE INSURANCE POLICY DE22 FINED.—For purposes of this section, the terms ‘pur23 chasing cooperative’, ‘certified standard health plan’, and 

24 ‘certified long-term care insurance policy’ have the mean-
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•S 2357 

1 ings given those terms in sections 1013(16), 1011(2), and 

2 1011(4) of the Health Security Act, respectively.’’. 

3 PART 5—EFFECTIVE DATE 

4 SEC. 5341. EFFECTIVE DATE. 

5 Except as otherwise provided in this subtitle, the pro6 visions of, and amendments made by, this subtitle shall 

7 be effective on and after January 1, 1996. 

8 Subtitle E—Medical Liability 

9 Reform 

10 PART 1—SYSTEM REFORMS 

11 SEC. 5401. FEDERAL TORT REFORM. 

12 (a) APPLICABILITY.— 

13 (1) IN GENERAL.—Except as provided in sec14 tion 5402, this subtitle shall apply with respect to 

15 any medical malpractice liability action brought in 

16 any State or Federal court, except that this subtitle 

17 shall not apply to a claim or action for damages 

18 arising from a vaccine-related injury or death to the 

19 extent that title XXI of the Public Health Service 

20 Act applies to the claim or action. 

21 (2) PREEMPTION.—The provisions of this sub22 title shall preempt any State law to the extent that 

23 such law is inconsistent with the limitations con24 tained in such provisions. 
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1 (3) EFFECT ON SOVEREIGN IMMUNITY AND

2 CHOICE OF LAW OR VENUE.—Nothing in this sub3 title shall be construed to— 

4 (A) waive or affect any defense of sov5 ereign immunity asserted by any State under 

6 any provision of law; 

7 (B) waive or affect any defense of sov8 ereign immunity asserted by the United States; 

9 (C) affect the applicability of any provision 

10 of the Foreign Sovereign Immunities Act of 

11 1976; 

12 (D) preempt State choice-of-law rules with 

13 respect to claims brought by a foreign nation or 

14 a citizen of a foreign nation; or 

15 (E) affect the right of any court to trans16 fer venue or to apply the law of a foreign nation 

17 or to dismiss a claim of a foreign nation or of 

18 a citizen of a foreign nation on the ground of 

19 inconvenient forum. 

20 (4) FEDERAL COURT JURISDICTION NOT ES21 TABLISHED ON FEDERAL QUESTION GROUNDS.— 

22 Nothing in this subtitle shall be construed to estab23 lish any jurisdiction in the district courts of the 

24 United States over medical malpractice liability ac-
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•S 2357 

1 tions on the basis of section 1331 or 1337 of title 

2 28, United States Code. 

3 (b) DEFINITIONS.—In this subtitle, the following 

4 definitions apply: 

5 (1) ALTERNATIVE DISPUTE RESOLUTION SYS6 TEM; ADR.—The term ‘‘alternative dispute resolu7 tion system’’ or ‘‘ADR’’ means a system that pro8 vides for the resolution of medical malpractice claims 

9 in a manner other than through medical malpractice 

10 liability actions. 

11 (2) CLAIMANT.—The term ‘‘claimant’’ means 

12 any person who alleges a medical malpractice claim, 

13 and any person on whose behalf such a claim is al14 leged, including the decedent in the case of an action 

15 brought through or on behalf of an estate. 

16 (3) HEALTH CARE PROFESSIONAL.—The term 

17 ‘‘health care professional’’ means any individual who 

18 provides health care services in a State and who is 

19 required by the laws or regulations of the State to 

20 be licensed or certified by the State to provide such 

21 services in the State. 

22 (4) HEALTH CARE PROVIDER.—The term 

23 ‘‘health care provider’’ means any organization or 

24 institution that is engaged in the delivery of health 

25 care services in a State and that is required by the 
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•S 2357 

1 laws or regulations of the State to be licensed or cer2 tified by the State to engage in the delivery of such 

3 services in the State. 

4 (5) INJURY.—The term ‘‘injury’’ means any ill5 ness, disease, or other harm that is the subject of 

6 a medical malpractice liability action or a medical 

7 malpractice claim. 

8 (6) MEDICAL MALPRACTICE LIABILITY AC9 TION.—The term ‘‘medical malpractice liability ac10 tion’’ means a cause of action brought in a State or 

11 Federal court against a health care provider or 

12 health care professional by which the plaintiff brings 

13 a medical malpractice claim. 

14 (7) MEDICAL MALPRACTICE CLAIM.—The term 

15 ‘‘medical malpractice claim’’ means a claim brought 

16 against a health care provider or health care profes17 sional in which a claimant alleges that injury was 

18 caused by the provision of (or the failure to provide) 

19 health care services, except that such term does not 

20 include— 

21 (A) any claim based on an allegation of an 

22 intentional tort; 

23 (B) any claim based on an allegation that 

24 a product is defective that is brought against 
1020 

•S 2357 

1 any individual or entity that is not a health 

2 care professional or health care provider; or 

3 (C) any claim brought pursuant to subtitle 

4 F. 

5 SEC. 5402. STATE-BASED ALTERNATIVE DISPUTE RESOLU6 TION MECHANISMS. 

7 (a) APPLICATION TO MALPRACTICE CLAIMS UNDER

8 PLANS.—Prior to or immediately following the commence9 ment of any medical malpractice action, the parties shall 

10 participate in the alternative dispute resolution system ad11 ministered by the State under subsection (b). Such partici12 pation shall be in lieu of any other provision of Federal 

13 or State law or any contractual agreement made by or on 

14 behalf of the parties prior to the commencement of the 

15 medical malpractice action. 

16 (b) ADOPTION OF MECHANISM BY STATE.—Each 

17 State shall— 

18 (1) maintain or adopt at least one of the alter19 native dispute resolution methods satisfying the re20 quirements specified under subsection (c) and (d) for 

21 the resolution of medical malpractice claims arising 

22 from the provision of (or failure to provide) health 

23 care services to individuals enrolled in a standard 

24 health plan; and 
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•S 2357 

1 (2) clearly disclose to enrollees (and potential 

2 enrollees) the availability and procedures for con3 sumer grievances, including a description of the al4 ternative dispute resolution method or methods 

5 adopted under this subsection. 

6 (c) SPECIFICATION OF PERMISSIBLE ALTERNATIVE

7 DISPUTE RESOLUTION METHODS.— 

8 (1) IN GENERAL.—The Attorney General, in 

9 consultation with the Secretary, shall, by regulation, 

10 develop alternative dispute resolution methods for 

11 the use by States in resolving medical malpractice 

12 claims under subsection (a). Such methods shall in13 clude at least the following: 

14 (A) ARBITRATION.—The use of arbitra15 tion, a nonjury adversarial dispute resolution 

16 process which may, subject to subsection (d), 

17 result in a final decision as to facts, law, liabil18 ity or damages. 

19 (B) CLAIMANT-REQUESTED BINDING ARBI20 TRATION.—For claims involving a sum of 

21 money that falls below a threshold amount set 

22 by the Secretary, the use of arbitration not sub23 ject to subsection (d). Such binding arbitration 

24 shall be at the sole discretion of the claimant. 
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•S 2357 

1 (C) MEDIATION.—The use of mediation, a 

2 settlement process coordinated by a neutral 

3 third party without the ultimate rendering of a 

4 formal opinion as to factual or legal findings. 

5 (D) EARLY NEUTRAL EVALUATION.—The 

6 use of early neutral evaluation, in which the 

7 parties make a presentation to a neutral attor8 ney or other neutral evaluator for an assess9 ment of the merits, to encourage settlement. If 

10 the parties do not settle as a result of assess11 ment and proceed to trial, the neutral eval12 uator’s opinion shall be kept confidential. 

13 (2) STANDARDS FOR ESTABLISHING METH14 ODS.—In developing alternative dispute resolution 

15 methods under paragraph (1), the Attorney General 

16 shall assure that the methods promote the resolution 

17 of medical malpractice claims in a manner that— 

18 (A) is affordable for the parties involved; 

19 (B) provides for timely resolution of 

20 claims; 

21 (C) provides for the consistent and fair 

22 resolution of claims; and 

23 (D) provides for reasonably convenient ac24 cess to dispute resolution for individuals en25 rolled in plans. 
1023 

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1 (3) WAIVER AUTHORITY.—Upon application of 

2 a State, the Attorney General, in consultation with 

3 the Secretary, may grant the State the authority to 

4 fulfill the requirement of subsection (b) by adopting 

5 a mechanism other than a mechanism established by 

6 the Attorney General pursuant to this subsection, 

7 except that such mechanism must meet the stand8 ards set forth in paragraph (2). 

9 (d) FURTHER REDRESS.—Except with respect to the 

10 claimant-requested binding arbitration method set forth in 

11 subsection (c)(1)(B), and notwithstanding any other provi12 sion of a law or contractual agreement, a plan enrollee 

13 dissatisfied with the determination reached as a result of 

14 an alternative dispute resolution method applied under 

15 this section may, after the final resolution of the enrollee’s 

16 claim under the method, initiate or resume a cause of ac17 tion to seek damages or other redress with respect to the 

18 claim to the extent otherwise permitted under State law. 

19 The results of any alternative dispute resolution procedure 

20 are inadmissible at any subsequent trial, as are all state21 ments, offers, and other communications made during 

22 such procedures, unless otherwise admissible under State 

23 law. 
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1 SEC. 5403. REQUIREMENT OF CERTIFICATE OF MERIT. 

2 (a) REQUIRING SUBMISSION WITH COMPLAINT.— 

3 Except as provided in subsection (c) and subject to the 

4 penalties of subsection (e), no medical malpractice liability 

5 action may be brought by any individual unless, at the 

6 time the individual commences such action, the individual 

7 or the individual’s attorney submits an affidavit declaring 

8 that— 

9 (1) the individual (or the individual’s attorney) 

10 has consulted and reviewed the facts of the claim 

11 with a qualified specialist (as defined in subsection 

12 (d)); 

13 (2) the individual or the individual’s attorney 

14 has obtained a written report by a qualified spe15 cialist that clearly identifies the individual and that 

16 includes the specialist’s determination that, based 

17 upon a review of the available medical record and 

18 other relevant material, a reasonable medical inter19 pretation of the facts supports a finding that the 

20 claim against the defendant is meritorious and based 

21 on good cause; and 

22 (3) on the basis of the qualified specialist’s re23 view and consultation, the individual (or the individ24 ual’s attorney) has concluded that the claim is meri25 torious and based on good cause. 
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•S 2357 

1 (b) IDENTITY OF SPECIALIST.—Only upon a showing 

2 of good cause may a court order that the identity of the 

3 specialist used for purposes of subsection (a) be revealed. 

4 In such an event, such identity shall be reviewed by the 

5 court on an in camera basis only. 

6 (c) EXTENSION IN CERTAIN INSTANCES.— 

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

8 subsection (a) shall not apply with respect to an in9 dividual who brings a medical malpractice liability 

10 action without submitting an affidavit described in 

11 such subsection if— 

12 (A) despite good faith efforts, the indi13 vidual is unable to obtain the written report be14 fore the expiration of the applicable statute of 

15 limitations; 

16 (B) despite good faith efforts, at the time 

17 the individual commences the action, the indi18 vidual has been unable to obtain medical 

19 records or other information necessary, pursu20 ant to any applicable law, to prepare the writ21 ten report requested; or 

22 (C) the court of competent jurisdiction de23 termines that the affidavit requirement shall be 

24 extended upon a showing of good cause. 
1026 

•S 2357 

1 (2) DEADLINE FOR SUBMISSION WHERE EX2 TENSION APPLIES.—In the case of an individual who 

3 brings an action to which paragraph (1) applies, the 

4 action shall be dismissed unless the individual sub5 mits the affidavit described in subsection (a) not 

6 later than— 

7 (A) in the case of an action to which sub8 paragraph (A) of paragraph (1) applies, 90 

9 days after commencing the action; or 

10 (B) in the case of an action to which sub11 paragraph (B) of paragraph (1) applies, 90 

12 days after obtaining the information described 

13 in such subparagraph or when good cause for 

14 an extension no longer exists. 

15 (d) QUALIFIED SPECIALIST DEFINED.— 

16 (1) IN GENERAL.—As used in subsection (a), 

17 the term ‘‘qualified specialist’’ means, with respect 

18 to a medical malpractice liability action, a health 

19 care professional who is reasonably believed by the 

20 individual bringing the action (or the individual’s at21 torney) to have expertise in the same or substan22 tially similar area of practice to that involved in the 

23 action. 
1027 

•S 2357 

1 (2) EVIDENCE OF EXPERTISE.—For purposes 

2 of paragraph (1), evidence of required expertise may 

3 include evidence that the individual— 

4 (A) practices (or has practiced) or teaches 

5 (or has taught) in the same or substantially 

6 similar area of health care or medicine to that 

7 involved in the action; or 

8 (B) is otherwise qualified by experience or 

9 demonstrated competence in the relevant prac10 tice area. 

11 (e) SANCTIONS FOR SUBMITTING FALSE AFFI12 DAVIT.—Upon the motion of any party or on its own ini13 tiative, the court in a medical malpractice liability action 

14 may impose a sanction on a party, the party’s attorney, 

15 or both, for— 

16 (1) any knowingly false statement made in an 

17 affidavit described in subsection (a); 

18 (2) making any false representations in order to 

19 obtain a qualified specialist’s report; or 

20 (3) failing to have the qualified specialist’s writ21 ten report in his or her custody and control; 

22 and may require that the sanctioned party reimburse the 

23 other party to the action for costs and reasonable attor24 ney’s fees. 
1028 

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1 SEC. 5404. LIMITATION ON AMOUNT OF ATTORNEY’S CON2 TINGENCY FEES. 

3 (a) IN GENERAL.—An attorney who represents, on 

4 a contingency fee basis, a plaintiff in a medical mal5 practice liability action may not charge, demand, receive, 

6 or collect for services rendered in connection with such ac7 tion (including the resolution of the claim that is the sub8 ject of the action under any alternative dispute resolution 

9 system) in excess of— 

(1) 331 10 ⁄3 percent of the first $150,000 of the 

11 total amount recovered by judgment or settlement in 

12 such action; plus 

13 (2) 25 percent of any amount recovered above 

14 the amount described in paragraph (1); 

15 unless otherwise determined under State law. Such 

16 amount shall be computed after deductions are made for 

17 all the expenses associated with the claim other than those 

18 attributable to the normal operating expenses of the attor19 ney. 

20 (b) CALCULATION OF PERIODIC PAYMENTS.—In the 

21 event that a judgment or settlement includes periodic or 

22 future payments of damages, the amount recovered for 

23 purposes of computing the limitation on the contingency 

24 fee under subsection (a) may, in the discretion of the 

25 court, be based on the cost of the annuity or trust estab26 lished to make the payments. In any case in which an an-
1029 

•S 2357 

1 nuity or trust is not established to make such payments, 

2 such amount shall be based on the present value of the 

3 payments. 

4 (c) CONTINGENCY FEE DEFINED.—As used in this 

5 section, the term ‘‘contingency fee’’ means any fee for pro6 fessional legal services which is, in whole or in part, con7 tingent upon the recovery of any amount of damages, 

8 whether through judgment or settlement. 

9 SEC. 5405. PERIODIC PAYMENT OF AWARDS. 

10 (a) IN GENERAL.—A party to a medical malpractice 

11 liability action may petition the court to instruct the trier 

12 of fact to award any future damages on an appropriate 

13 periodic basis. If the court, in its discretion, so instructs 

14 the trier of fact, and damages are awarded on a periodic 

15 basis, the court may require the defendant to purchase 

16 an annuity or other security instrument (typically based 

17 on future damages discounted to present value) adequate 

18 to assure payments of future damages. 

19 (b) FAILURE OR INABILITY TO PAY.—With respect 

20 to an award of damages described in subsection (a), if a 

21 defendant fails to make payments in a timely fashion, or 

22 if the defendant becomes or is at risk of becoming insol23 vent, upon such a showing the claimant may petition the 

24 court for an order requiring that remaining balance be dis-
1030 

•S 2357 

1 counted to present value and paid to the claimant in a 

2 lump-sum. 

3 (c) MODIFICATION OF PAYMENT SCHEDULE.—The 

4 court shall retain authority to modify the payment sched5 ule based on changed circumstances. 

6 (d) FUTURE DAMAGES DEFINED.—As used in this 

7 section, the term ‘‘future damages’’ means any economic 

8 or noneconomic loss other than that incurred or accrued 

9 as of the time of judgment. 

10 SEC. 5406. FEDERAL STUDY ON MEDICAL NEGLIGENCE. 

11 (a) STUDY.—To improve the level of empirical data 

12 on the incidence and effect of medical negligence in the 

13 United States, the Secretary of Health and Human Serv14 ices shall commission and oversee a nationwide inter15 disciplinary study to evaluate— 

16 (1) the incidence of injuries resulting from med17 ical treatment, including a determination of the per18 centage of such injuries that resulted from the neg19 ligence of a physician, other health care provider or 

20 health care institution; 

21 (2) the costs of medical expenses and lost wages 

22 to the victims of medical negligence and their fami23 lies, and their compensation for such losses under 

24 the current malpractice system; 
1031 

•S 2357 

1 (3) methods to reduce the incidence and costs 

2 of medical negligence; and 

3 (4) methods to promote the efficient and fair 

4 resolution of legal claims stemming from the inci5 dence of medical negligence. 

6 (b) ACCESS TO RECORDS.—For the purposes of the 

7 study conducted under subsection (a), the Secretary of 

8 Health and Human Services shall have the powers nec9 essary to access hospital patients’ records while maintain10 ing patient confidentiality. 

11 (c) REPORT TO CONGRESS.—Not later than 3 years 

12 after the commission of the study under subsection (a), 

13 the study shall be completed and the Secretary of Health 

14 and Human Services shall prepare and submit to Congress 

15 a report describing the findings of the study. 

16 PART 2—DEMONSTRATION PROJECT RELATING 

17 TO MEDICAL MALPRACTICE LIABILITY 

18 SEC. 5411. PILOT PROGRAM APPLYING PRACTICE GUIDE19 LINES TO MEDICAL MALPRACTICE LIABILITY 

20 ACTIONS. 

21 (a) ESTABLISHMENT.—Not later than 1 year after 

22 the Secretary of Health and Human Services determines 

23 that appropriate practice guidelines are available and were 

24 developed with the input of health care providers, legal 

25 professionals and consumer representatives, the Secretary 
1032 

•S 2357 

1 shall establish pilot programs under which the Secretary 

2 shall provide funds (in such amounts as the Secretary de3 termines appropriate) to one or more eligible States to de4 termine the effect of applying practice guidelines in the 

5 resolution of medical malpractice liability actions. 

6 (b) ELIGIBILITY OF STATE.—To be eligible to partici7 pate in a pilot program under subsection (a), a State shall 

8 prepare and submit to the Secretary an application at 

9 such time, in such manner, and containing such informa10 tion as the Secretary may require, including— 

11 (1) assurances that, under the law of the State, 

12 in the resolution of any medical malpractice liability 

13 action, compliance or noncompliance with an appro14 priate practice guideline shall be admissible by either 

15 party at trial as presumptive evidence-of nonliability 

16 or liability for medical negligence; and 

17 (2) such other information and assurances as 

18 the Secretary may require. 

19 (c) REPORTS TO CONGRESS.—Not later than 3 

20 months after the last day of each year for which a pilot 

21 program established under subsection (a) is in effect, the 

22 Secretary of Health and Human Services shall prepare 

23 and submit to Congress a report describing the operation 

24 of the program during the year for which the report is 

25 submitted. Such report shall contain such recommenda-
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•S 2357 

1 tions as the Secretary considers appropriate, include rec2 ommendations relating to revisions to the laws governing 

3 medical practice liability. 

4 SEC. 5412. ENTERPRISE LIABILITY DEMONSTRATION 

5 PROJECT. 

6 (a) ESTABLISHMENT.—The Secretary of Health and 

7 Human Services shall establish a demonstration project 

8 under which the Secretary shall provide funds (in such 

9 amount as the Secretary considers appropriate) to one or 

10 more eligible States to demonstrate whether substituting 

11 liability for medical malpractice on the part of the health 

12 plan in which a physician participates for the personal li13 ability of the physician will result in improvements in the 

14 quality of care provided under the plan, reductions in de15 fensive medical practices, and better risk management. 

16 (b) ELIGIBILITY OF STATE.—A State is eligible to 

17 participate in the demonstration project established under 

18 subsection (a) if the State submits an application to the 

19 Secretary (at such time and in such form as the Secretary 

20 may require) containing such information and assurances 

21 as the Secretary may require, including assurances that 

22 the State— 

23 (1) has entered into an agreement with a health 

24 plan (other than a fee-for-service plan) operating in 

25 the State under which the plan assumes legal liabil-
1034 

•S 2357 

1 ity with respect to any medical malpractice claim 

2 arising from the provision of (or failure to provide) 

3 services under the plan by any physician partici4 pating in the plan; 

5 (2) has provided that, under the law of the 

6 State, a physician participating in a plan that has 

7 entered into an agreement with the State under 

8 paragraph (1) may not be liable in damages or oth9 erwise for such a claim and the plan may not require 

10 such physician to indemnify the plan for any such li11 ability; and 

12 (3) will provide the Secretary with such reports 

13 on the operation of the project as the Secretary may 

14 require. 

15 (c) AUTHORIZATION OF APPROPRIATIONS.—There 

16 are authorized to be appropriated such sums as may be 

17 necessary to carry out demonstration projects under this 

18 section. 

19 Subtitle F—Remedies and 

20 Enforcement 

21 PART 1—REVIEW OF BENEFIT DETERMINATIONS 

22 FOR ENROLLED INDIVIDUALS 

23 Subpart A—General Rules 

24 SEC. 5501. HEALTH PLAN CLAIMS PROCEDURE. 

25 (a) DEFINITIONS.—For purposes of this section— 
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1 (1) CLAIM.—The term ‘‘claim’’ means a claim 

2 for payment or provision of benefits under a health 

3 plan, a request for preauthorization of items or serv4 ices which is submitted to a health plan prior to re5 ceipt of the items or services, or the denial, reduc6 tion or termination of any service or request for a 

7 referral or reimbursement. 

8 (2) INDIVIDUAL CLAIMANT.—The term ‘‘indi9 vidual claimant’’ with respect to a claim means any 

10 individual who submits the claim to a health plan in 

11 connection with the individual’s enrollment under 

12 the plan, or on whose behalf the claim is submitted 

13 to the plan by a provider. 

14 (3) PROVIDER CLAIMANT.—The term ‘‘provider 

15 claimant’’ with respect to a claim means any pro16 vider who submits the claim to a health plan with 

17 respect to items or services provided to an individual 

18 enrolled under the plan. 

19 (b) GENERAL RULES GOVERNING TREATMENT OF

20 CLAIMS.— 

21 (1) ADEQUATE NOTICE OF DISPOSITION OF

22 CLAIM.—In any case in which a claim is submitted 

23 in complete form to a health plan, the plan shall 

24 provide to the individual claimant and any provider 

25 claimant with respect to the claim a written notice 
1036 

•S 2357 

1 of the plan’s approval or denial of the claim within 

2 15 days after the date of the submission of the 

3 claim. The notice to the individual claimant shall be 

4 written in language calculated to be understood by 

5 the typical individual enrolled under the plan and in 

6 a form which takes into account accessibility to the 

7 information by individuals whose primary language 

8 is not English. In the case of a denial of the claim, 

9 the notice shall be provided within 5 days after the 

10 date of the determination to deny the claim, and 

11 shall set forth the specific reasons for the denial. 

12 Such notice shall include an explanation of the spe13 cific reasons and facts underlying the decision to re14 duce or fail to provide services or pay the claim. The 

15 notice of a denial shall clearly explain the right to 

16 appeal the denial under paragraph (2) and a de17 scription of the process for appealing such decision 

18 sufficient to allow the claimant to initiate an appeal 

19 and submit evidence to the decision maker in sup20 port of the position of the claimant. Failure by any 

21 plan to comply with the requirements of this para22 graph with respect to any claim submitted to the 

23 plan shall be treated as approval by the plan of the 

24 claim. 
1037 

•S 2357 

1 (2) PLAN’S DUTY TO REVIEW DENIALS UPON

2 TIMELY REQUEST.—The plan shall review its denial 

3 of the claim if an individual claimant or provider 

4 claimant with respect to the claim submits to the 

5 plan a written request for reconsideration of the 

6 claim after receipt of written notice from the plan of 

7 the denial. The plan shall allow any such claimant 

8 not less than 60 days, after receipt of written notice 

9 from the plan of the denial, to submit the claimant’s 

10 request for reconsideration of the claim. 

11 (3) TIME LIMIT FOR REVIEW.—The plan shall 

12 complete any review required under paragraph (2), 

13 and shall provide the individual claimant and any 

14 provider claimant with respect to the claim written 

15 notice of the plan’s decision on the claim after re16 consideration pursuant to the review, within 30 days 

17 after the date of the receipt of the request for recon18 sideration. 

19 (4) DE NOVO REVIEWS.—Any review required 

20 under paragraph (2)— 

21 (A) shall be de novo, 

22 (B) shall be conducted by an individual 

23 who did not make the initial decision denying 

24 the claim and who is authorized to approve the 

25 claim, and 
1038 

•S 2357 

1 (C) shall include review by a qualified phy2 sician in the same speciality as the treating 

3 physician if the resolution of any issues involved 

4 requires medical expertise. 

5 (c) TREATMENT OF URGENT REQUESTS TO PLANS

6 FOR PREAUTHORIZATION.— 

7 (1) IN GENERAL.—This subsection applies in 

8 the case of any claim submitted by an individual 

9 claimant or a provider claimant consisting of a re10 quest for preauthorization of items or services which 

11 is accompanied by an attestation that— 

12 (A) failure to immediately provide the 

13 items or services could reasonably be expected 

14 to result in— 

15 (i) placing the health of the individual 

16 claimant (or, with respect to an individual 

17 claimant who is a pregnant woman, the 

18 health of the woman or her unborn child) 

19 in serious jeopardy, 

20 (ii) serious impairment to bodily func21 tions, or 

22 (iii) serious dysfunction of any bodily 

23 organ or part, 

24 or 
1039 

•S 2357 

1 (B) immediate provision of the items or 

2 services is necessary because the individual 

3 claimant has made or is at serious risk of mak4 ing an attempt to harm such individual claim5 ant or another individual. 

6 (2) SHORTENED TIME LIMIT FOR CONSIDER7 ATION OF REQUESTS FOR PREAUTHORIZATION.— 

8 Notwithstanding subsection (b)(1), a health plan 

9 shall approve or deny any claim described in para10 graph (1) within 12 hours after submission of the 

11 claim to the plan. Failure by the plan to comply with 

12 the requirements of this paragraph with respect to 

13 the claim shall be treated as approval by the plan of 

14 the claim. 

15 (3) EXPEDITED EXHAUSTION OF PLAN REM16 EDIES.—Any claim described in paragraph (1) which 

17 is denied by the plan shall be treated as a claim with 

18 respect to which all remedies under the plan pro19 vided pursuant to this section are exhausted, irre20 spective of any review provided under subsection 

21 (b)(2). 

22 (4) DENIAL OF PREVIOUSLY AUTHORIZED

23 CLAIMS NOT PERMITTED.—In any case in which a 

24 health plan approves a claim described in paragraph 

25 (1)— 
1040 

•S 2357 

1 (A) the plan may not subsequently deny 

2 payment or provision of benefits pursuant to 

3 the claim, unless the plan makes a showing of 

4 an intentional misrepresentation of a material 

5 fact by the individual claimant, and 

6 (B) in the case of a violation of subpara7 graph (A) in connection with the claim, all rem8 edies under the plan provided pursuant to this 

9 section with respect to the claim shall be treat10 ed as exhausted. 

11 (d) TIME LIMIT FOR DETERMINATION OF INCOM12 PLETENESS OF CLAIM.—For purposes of this section— 

13 (1) any claim submitted by an individual claim14 ant and accepted by a provider serving under con15 tract with a health plan and any claim described in 

16 subsection (b)(1) shall be treated with respect to the 

17 individual claimant as submitted in complete form, 

18 and 

19 (2) any other claim for benefits under the plan 

20 shall be treated as filed in complete form as of 10 

21 days after the date of the submission of the claim, 

22 unless the plan provides to the individual claimant 

23 and any provider claimant, within such period, a 

24 written notice of any required matter remaining to 

25 be filed in order to complete the claim. 
1041 

•S 2357 

1 Any filing by the individual claimant or the provider claim2 ant of additional matter requested by the plan pursuant 

3 to paragraph (2) shall be treated for purposes of this sec4 tion as an initial filing of the claim. 

5 (e) ADDITIONAL NOTICE AND DISCLOSURE RE6 QUIREMENTS FOR HEALTH PLANS.—In the case of a de7 nial of a claim for benefits under a health plan, the plan 

8 shall include, together with the specific reasons provided 

9 to the individual claimant and any provider claimant 

10 under subsection (b)(1)— 

11 (1) if the denial is based in whole or in part on 

12 a determination that the claim is for an item or 

13 service which is not covered by the comprehensive 

14 benefit package or exceeds payment rates under the 

15 applicable fee schedule, the factual basis for the de16 termination, 

17 (2) if the denial is based in whole or in part on 

18 exclusion of coverage with respect to services be19 cause the services are determined to comprise an ex20 perimental treatment or investigatory procedure, the 

21 medical basis for the determination and a descrip22 tion of the process used in making the determina23 tion, and 

24 (3) if the denial is based in whole or in part on 

25 a determination that the treatment is not medically 
1042 

•S 2357 

1 necessary or appropriate or is inconsistent with the 

2 plan’s practice guidelines, the medical basis for the 

3 determination, the guidelines used in making the de4 termination, and a description of the process used in 

5 making the determination. 

6 (f) WAIVER OF RIGHTS PROHIBITED.—A health plan 

7 may not require any party to waive any right under the 

8 plan or this Act as a condition for approval of any claim 

9 under the plan, except to the extent otherwise specified 

10 in a formal settlement agreement. 

11 SEC. 5502. REVIEW IN AREA COMPLAINT REVIEW OFFICES 

12 OF GRIEVANCES BASED ON ACTS OR PRAC13 TICES BY HEALTH PLANS. 

14 (a) COMPLAINT REVIEW OFFICES.— 

15 (1) IN GENERAL.—In accordance with rules 

16 which shall be prescribed by the Secretary of Labor, 

17 each State shall establish and maintain a complaint 

18 review office for each community rating area estab19 lished by such State. According to designations 

20 which shall be made by each State under regulations 

21 of the Secretary of Labor, the complaint review of22 fice for a community rating area established by such 

23 State shall also serve as the complaint review office 

24 for large group sponsors operating in the State with 

25 respect to individuals who are enrolled under health 
1043 

•S 2357 

1 plans maintained by such sponsors and who reside 

2 within the area of the community rating area. 

3 (2) HEALTH SYSTEMS NOT ESTABLISHED BY

4 STATES.—In the case of any health care system es5 tablished in any State by the Secretary of Health 

6 and Human Services, the Secretary of Health and 

7 Human Services shall assume all duties and obliga8 tions of such State under this part in accordance 

9 with the applicable regulations of the Secretary of 

10 Labor under this part. 

11 (b) FILINGS OF COMPLAINTS BY AGGRIEVED PER12 SONS.—In the case of any person who is aggrieved by— 

13 (1) any act or practice engaged in by any 

14 health plan which consists of or results in denial of 

15 payment or provision of benefits under the plan or 

16 delay in the payment or provision of benefits, or 

17 (2) any act or practice engaged in by any other 

18 plan maintained in a community rating area or by 

19 a large group sponsor which consists of or results in 

20 denial of payment or provision of benefits under a 

21 supplemental benefit policy or a cost sharing policy 

22 or delay in the payment or provision of the benefits, 

23 if the claimant alleges that the denial or delay consists 

24 of a failure to comply with the terms of the plan (including 

25 the provision of benefits in full when due in accordance 
1044 

•S 2357 

1 with the terms of the plan), or with the applicable require2 ments of this Act, such person may file a complaint with 

3 the appropriate complaint review office. 

4 (c) EXHAUSTION OF PLAN REMEDIES.—Any com5 plaint including a claim to which section 5501 applies may 

6 not be filed until the complainant has exhausted all rem7 edies provided under the plan with respect to the claim 

8 in accordance with such section. 

9 (d) FORM OF COMPLAINT.—The complaint shall be 

10 in writing under oath or affirmation, shall set forth the 

11 complaint in a manner calculated to give notice of the na12 ture of the complaint, and shall contain such information 

13 as may be prescribed in regulations of the Secretary of 

14 Labor. 

15 (e) NOTICE OF FILING.—The complaint review office 

16 shall serve by certified mail a notice of the complaint (in17 cluding the date, place, and circumstances of the alleged 

18 violation) on the person or persons alleged in the com19 plaint to have committed the violation within 10 days after 

20 the filing of the complaint. 

21 (f) TIME LIMITATION.—Complaints may not be 

22 brought under this section with respect to any violation 

23 later than one year after the date on which the com24 plaining party knows or should have reasonably known 
1045 

•S 2357 

1 that a violation has occurred. This subsection shall not 

2 prevent the subsequent amending of a complaint. 

3 SEC. 5503. INITIAL PROCEEDINGS IN COMPLAINT REVIEW 

4 OFFICES. 

5 (a) ELECTIONS.—Whenever a complaint is brought 

6 to the complaint review office under section 5502(b), the 

7 complaint review office shall provide the complainant with 

8 an opportunity, in such form and manner as shall be pre9 scribed in regulations of the Secretary of Labor, to elect 

10 one of the following: 

11 (1) To forego further proceedings in the com12 plaint review office and rely on remedies available in 

13 a court of competent jurisdiction. 

14 (2) To submit the complaint as a dispute under 

15 the Early Resolution Program established under 

16 subpart B and thereby suspend further review pro17 ceedings under this section pending termination of 

18 proceedings under the Program. 

19 (3) In any case in which an election under 

20 paragraph (1) or (2) is not made, or an election 

21 under paragraph (2) was made but resolution of all 

22 matters in the complaint was not obtained upon ter23 mination of proceedings pursuant to the election by 

24 settlement agreement or otherwise, to proceed with 

25 the complaint to a hearing in the complaint review 
1046 

•S 2357 

1 office under section 5504 regarding the unresolved 

2 matters. 

3 (b) DUTY OF COMPLAINT REVIEW OFFICE.—The 

4 complaint review office shall provide (in a linguistically ap5 propriate manner) an explanation to complainants bring6 ing complaints to the office concerning the legal and other 

7 ramifications of each option available under this section. 

8 (c) EFFECT OF PARTICIPATION IN EARLY RESOLU9 TION PROGRAM.—Any matter in a complaint brought to 

10 the complaint review office which is included in a dispute 

11 which is timely submitted to the Early Resolution Pro12 gram established under subpart B shall not be assigned 

13 to a hearing under section 5504 unless the proceedings 

14 under the Program with respect to the dispute are termi15 nated without settlement or resolution of the dispute with 

16 respect to such matter. Upon termination of any pro17 ceedings regarding a dispute submitted to the Program, 

18 the applicability of this section to any matter in a com19 plaint which was included in the dispute shall not be af20 fected by participation in the proceedings, except to the 

21 extent otherwise required under the terms of any settle22 ment agreement or other formal resolution obtained in the 

23 proceedings. 
1047 

•S 2357 

1 SEC. 5504. HEARINGS BEFORE HEARING OFFICERS IN COM2 PLAINT REVIEW OFFICES. 

3 (a) HEARING PROCESS.— 

4 (1) ASSIGNMENT OF COMPLAINTS TO HEARING

5 OFFICERS AND NOTICE TO PARTIES.— 

6 (A) IN GENERAL.—In the case of an elec7 tion under section 5503(a)(3)— 

8 (i) the complaint review office shall 

9 assign the complaint, and each motion in 

10 connection with the complaint, to a hearing 

11 officer employed by the State in the office; 

12 and 

13 (ii) the hearing officer shall have the 

14 power to issue and cause to be served upon 

15 the plan named in the complaint a copy of 

16 the complaint and a notice of hearing be17 fore the hearing officer at a place fixed in 

18 the notice, not less than 5 days after the 

19 serving of the complaint. 

20 (B) QUALIFICATIONS FOR HEARING OFFI21 CERS.—No individual may serve in a complaint 

22 review office as a hearing officer unless the in23 dividual meets standards which shall be pre24 scribed by the Secretary of Labor. Such stand25 ards shall include experience, training, ability to 

26 communicate with the enrollee, affiliations, dili-
1048 

•S 2357 

1 gence, absence of actual or potential conflicts of 

2 interest, and other qualifications deemed rel3 evant by the Secretary of Labor. At no time 

4 shall a hearing officer have any official, finan5 cial, or personal conflict of interest with respect 

6 to issues in controversy before the hearing offi7 cer. 

8 (2) AMENDMENT OF COMPLAINTS.—Any such 

9 complaint may be amended by the hearing officer 

10 conducting the hearing, upon the motion of the com11 plainant, in the hearing officer’s discretion at any 

12 time prior to the issuance of an order based thereon. 

13 (3) ANSWERS.—The party against whom the 

14 complaint is filed shall have the right to file an an15 swer to the original or amended complaint and to 

16 appear in person or otherwise and give testimony at 

17 the place and time fixed in the complaint. 

18 (b) ADDITIONAL PARTIES.—In the discretion of the 

19 hearing officer conducting the hearing, any other person 

20 may be allowed to intervene in the proceeding and to 

21 present testimony. 

22 (c) HEARINGS.— 

23 (1) DE NOVO HEARING.—Each hearing officer 

24 shall hear complaints and motions de novo. 
1049 

•S 2357 

1 (2) TESTIMONY.—The testimony taken by the 

2 hearing officer shall be reduced to writing. There3 after, the hearing officer, in his or her discretion, 

4 upon notice may provide for the taking of further 

5 testimony or hear argument. 

6 (3) AUTHORITY OF HEARING OFFICERS.—The 

7 hearing officer may compel by subpoena the attend8 ance of witnesses and the production of evidence at 

9 any designated place or hearing. In case of contu10 macy or refusal to obey a subpoena lawfully issued 

11 under this paragraph and upon application of the 

12 hearing officer, an appropriate district court of the 

13 United States may issue an order requiring compli14 ance with the subpoena and any failure to obey the 

15 order may be punished by the court as a contempt 

16 thereof. The hearing officer may also seek enforce17 ment of the subpoena in a State court of competent 

18 jurisdiction. 

19 (4) EXPEDITED HEARINGS.—Notwithstanding 

20 section 5503 and the preceding provisions of this 

21 section, upon receipt of a complaint containing a 

22 claim described in section 5501(c)(1), the complaint 

23 review office shall promptly provide the complainant 

24 with the opportunity to make an election under sec25 tion 5503(a)(3) and assignment to a hearing on the 
1050 

•S 2357 

1 complaint before a hearing officer. The complaint re2 view office shall ensure that such a hearing com3 mences not later than 24 hours after receipt of the 

4 complaint by the complaint hearing office and not 

5 later than 3 days after the receipt of a complaint, 

6 the Complaint Review Office shall provide a decision. 

7 (d) DECISION OF HEARING OFFICER.— 

8 (1) IN GENERAL.—Not later than 120 days 

9 after the date on which a complaint is assigned 

10 under this section, the hearing officer shall decide if 

11 the preponderance of the evidence justifies the denial 

12 of services and whether to decide in favor of the 

13 complainant with respect to each alleged act or prac14 tice. Each such decision— 

15 (A) shall include the hearing officer’s find16 ings of fact, and 

17 (B) shall constitute the hearing officer’s 

18 final disposition of the proceedings. 

19 (2) DECISIONS FINDING IN FAVOR OF COM20 PLAINANT.—If the hearing officer’s decision includes 

21 a determination that any party named in the com22 plaint has engaged in or is engaged in an act or 

23 practice described in section 5502(b), the hearing of24 ficer shall issue and cause to be served on such 

25 party an order which requires such party— 
1051 

•S 2357 

1 (A) to cease and desist from such act or 

2 practice, 

3 (B) to provide the benefits due under the 

4 terms of the plan and to otherwise comply with 

5 the terms of the plan and the applicable re6 quirements of this Act, 

7 (C) to pay to the complainant prejudgment 

8 interest on the actual costs incurred in obtain9 ing the items and services at issue in the com10 plaint, 

11 (D) to pay to the prevailing complainant a 

12 reasonable attorney’s fee, reasonable expert wit13 ness fees, and other reasonable costs relating to 

14 the hearing on the charges on which the com15 plainant prevails, and 

16 (E) to provide other appropriate relief. 

17 (3) DECISIONS NOT IN FAVOR OF COMPLAIN18 ANT.—If the hearing officer’s decision includes a de19 termination that the party named in the complaint 

20 has not engaged in or is not engaged in an act or 

21 practice referred to in section 5502(b), the hearing 

22 officer— 

23 (A) shall include in the decision a dismissal 

24 of the charge in the complaint relating to the 

25 act or practice, and 
1052 

•S 2357 

1 (B) upon a finding that such charge is 

2 frivolous, shall issue and cause to be served on 

3 the complainant an order which requires the 

4 complainant to pay to such party a reasonable 

5 attorney’s fee, reasonable expert witness fees, 

6 and other reasonable costs relating to the pro7 ceedings on such charge. 

8 (4) SUBMISSION AND SERVICE OF DECISIONS.— 

9 The hearing officer shall submit each decision to the 

10 complaint review office at the conclusion of the pro11 ceedings and the office shall cause a copy of the de12 cision to be served on the parties to the proceedings. 

13 (e) FINAL DECISION.—The decision of the hearing 

14 officer shall be final and binding upon all parties. 

15 (f) COURT ENFORCEMENT OF ORDERS.— 

16 (1) IN GENERAL.—The complainant may peti17 tion any court of competent jurisdiction for enforce18 ment of the order. In any such proceeding, the order 

19 of the hearing officer shall not be subject to review. 

20 (2) AWARDING OF COSTS.—In any action for 

21 court enforcement under this subsection, a prevailing 

22 complainant shall be entitled to a reasonable attor23 ney’s fee, reasonable expert witness fees, and other 

24 reasonable costs relating to such action. 
1053 

•S 2357 

1 SEC. 5505. CIVIL MONEY PENALTIES. 

2 (a) DENIAL OR DELAY IN PAYMENT OR PROVISION

3 OF BENEFITS.— 

4 (1) IN GENERAL.—The Secretary of Labor may 

5 assess a civil penalty against any health plan, or 

6 against any other plan in connection with benefits 

7 provided thereunder under a supplemental benefit 

8 policy or a cost sharing policy, for unreasonable de9 nial or delay in the payment or provision of benefits 

10 thereunder, in an amount not to exceed— 

11 (A) $25,000 per violation, or $75,000 per 

12 violation in the case of a finding of bad faith 

13 on the part of the plan, and 

14 (B) in the case of a finding of a pattern 

15 or practice of such violations engaged in by the 

16 plan, $1,000,000 in addition to the total 

17 amount of penalties assessed under subpara18 graph (A) with respect to such violations. 

19 For purposes of subparagraph (A), each violation 

20 with respect to any single individual shall be treated 

21 as a separate violation. 

22 (2) CIVIL ACTION TO ENFORCE CIVIL PEN23 ALTY.—The Secretary of Labor may commence a 

24 civil action in any court of competent jurisdiction to 

25 enforce a civil penalty assessed under paragraph (1). 
1054 

•S 2357 

1 (3) SUPPLEMENTAL PLANS.—Nothing in this 

2 section shall be construed to limit the rights and 

3 remedies available under State law with respect to 

4 supplemental benefit plans. 

5 (b) CIVIL PENALTIES FOR CERTAIN OTHER AC6 TIONS.—The Secretary of Labor may assess a civil penalty 

7 described in section 5505(b)(1) against any experience8 rated health plan, or against any other plan sponsored by 

9 a large employer group purchaser in connection with bene10 fits provided thereunder under a cost sharing policy, for 

11 any action described in section 5505(a). The Secretary of 

12 Labor may initiate proceedings to impose such penalty in 

13 the same manner as the Secretary of Health and Human 

14 Services may initiate proceedings under section 5505 with 

15 respect to actions described in section 5505(a). 

16 Subpart B—Early Resolution Programs 

17 SEC. 5511. ESTABLISHMENT OF EARLY RESOLUTION PRO18 GRAMS IN COMPLAINT REVIEW OFFICES. 

19 (a) ESTABLISHMENT OF PROGRAMS.—Each State 

20 shall establish and maintain an Early Resolution Program 

21 in each complaint review office in such State. The Pro22 gram shall include— 

23 (1) the establishment and maintenance of fo24 rums for mediation of disputes in accordance with 

25 this subpart, and 
1055 

•S 2357 

1 (2) the establishment and maintenance of such 

2 forums for other forms of alternative dispute resolu3 tion (including binding arbitration) as may be pre4 scribed in regulations of the Secretary of Labor. 

5 Each State shall ensure that the standards applied in 

6 Early Resolution Programs administered in such State 

7 which apply to any form of alternative dispute resolution 

8 described in paragraph (2) and which relate to time re9 quirements, qualifications of facilitators, arbitrators, or 

10 other mediators, and confidentiality are at least equivalent 

11 to the standards which apply to mediation proceedings 

12 under this subpart. 

13 (b) DUTIES OF COMPLAINT REVIEW OFFICES.— 

14 Each complaint review office in a State— 

15 (1) shall administer its Early Resolution Pro16 gram in accordance with regulations of the Secretary 

17 of Labor, 

18 (2) shall, pursuant to subsection (a)(1)— 

19 (A) recruit and train individuals to serve 

20 as facilitators for mediation proceedings under 

21 the Early Resolution Program from attorneys 

22 who have the requisite expertise for such serv23 ice, which shall be specified in regulations of 

24 the Secretary of Labor, 
1056 

•S 2357 

1 (B) provide meeting sites, maintain 

2 records, and provide facilitators with adminis3 trative support staff, and 

4 (C) establish and maintain attorney refer5 ral panels, 

6 (3) shall ensure that, upon the filing of a com7 plaint with the office, the complainant is adequately 

8 apprised of the complainant’s options for review 

9 under this part, and 

10 (4) shall monitor and evaluate the Program on 

11 an ongoing basis. 

12 SEC. 5512. INITIATION OF PARTICIPATION IN MEDIATION 

13 PROCEEDINGS. 

14 (a) ELIGIBILITY OF CASES FOR SUBMISSION TO

15 EARLY RESOLUTION PROGRAM.—A dispute may be sub16 mitted to the Early Resolution Program only if the fol17 lowing requirements are met with respect to the dispute: 

18 (1) NATURE OF DISPUTE.—The dispute con19 sists of— 

20 (A) an assertion by an individual enrolled 

21 under a health plan of one or more claims 

22 against the health plan for payment or provi23 sion of benefits, or against any other health 

24 plan with respect to benefits provided under a 

25 supplemental benefit policy or a cost sharing 
1057 

•S 2357 

1 policy, based on alleged coverage under the 

2 plan; and 

3 (B) a denial by the plan of the claims, or 

4 a denial of appropriate reimbursement based on 

5 the claims, by the plan. 

6 (2) NATURE OF DISPUTED CLAIM.—Each claim 

7 consists of— 

8 (A) a claim for payment or provision of 

9 benefits under the plan; or 

10 (B) a request for information or docu11 ments the disclosure of which is required under 

12 this Act (including claims of entitlement to dis13 closure based on colorable claims to rights to 

14 benefits under the plan). 

15 (b) FILING OF ELECTION.—A complainant with a 

16 dispute which is eligible for submission to the Early Reso17 lution Program may make the election under section 

18 5503(a)(2) to submit the dispute to mediation proceedings 

19 under the Program not later than 15 days after the date 

20 the complaint is filed with the complaint review office 

21 under section 5502(b). 

22 (c) AGREEMENT TO PARTICIPATE.— 

23 (1) ELECTION BY CLAIMANT.—A complainant 

24 may elect participation in the mediation proceedings 

25 only by entering into a written participation agree-
1058 

•S 2357 

1 ment (including an agreement to comply with the 

2 rules of the Program and consent for the complaint 

3 review office to contact the health plan regarding the 

4 agreement), and by releasing plan records to the 

5 Program for the exclusive use of the facilitator as6 signed to the dispute. 

7 (2) PARTICIPATION BY PLANS OR HEALTH BEN8 EFITS CONTRACTORS.—Each party whose participa9 tion in the mediation proceedings has been elected 

10 by a claimant pursuant to paragraph (1) shall par11 ticipate in, and cooperate fully with, the proceedings. 

12 The claims review office shall provide such party 

13 with a copy of the participation agreement described 

14 in paragraph (1), together with a written description 

15 of the Program. Such party shall submit the copy of 

16 the agreement, together with its authorized signa17 ture signifying receipt of notice of the agreement, to 

18 the claims review office, and shall include in the sub19 mission to the claims review office a copy of the 

20 written record of the plan claims procedure com21 pleted pursuant to section 5501 with respect to the 

22 dispute and all relevant plan documents. The rel23 evant documents shall include all documents under 

24 which the plan is or was administered or operated, 

25 including copies of any insurance contracts under 
1059 

•S 2357 

1 which benefits are or were provided and any fee or 

2 reimbursement schedules for health care providers. 

3 SEC. 5513. MEDIATION PROCEEDINGS. 

4 (a) ROLE OF FACILITATOR.—In the course of medi5 ation proceedings under the Early Resolution Program, 

6 the facilitator assigned to the dispute shall prepare the 

7 parties for a conference regarding the dispute and serve 

8 as a neutral mediator at such conference, with the goal 

9 of achieving settlement of the dispute. 

10 (b) PREPARATIONS FOR CONFERENCE.—In advance 

11 of convening the conference, after identifying the nec12 essary parties and confirming that the case is eligible for 

13 the Program, the facilitator shall analyze the record of the 

14 claims procedure conducted pursuant to section 5501 and 

15 any position papers submitted by the parties to determine 

16 if further case development is needed to clarify the legal 

17 and factual issues in dispute, and whether there is any 

18 need for additional information and documents. 

19 (c) CONFERENCE.—Upon convening the conference, 

20 the facilitator shall assist the parties in identifying undis21 puted issues and exploring settlement. If settlement is 

22 reached, the facilitator shall assist in the preparation of 

23 a written settlement agreement. If no settlement is 

24 reached, the facilitator shall present the facilitator’s eval25 uation, including an assessment of the parties’ positions, 
1060 

•S 2357 

1 the likely outcome of further administrative action or liti2 gation, and suggestions for narrowing the issues in dis3 pute. 

4 (d) TIME LIMIT.—The facilitator shall ensure that 

5 mediation proceedings with respect to any dispute under 

6 the Early Resolution Program shall be completed within 

7 120 days after the election to participate. The parties may 

8 agree to one extension of the proceedings by not more than 

9 30 days if the proceedings are suspended to obtain an 

10 agency ruling or to reconvene the conference in a subse11 quent session. 

12 (e) INAPPLICABILITY OF FORMAL RULES.—Formal 

13 rules of evidence shall not apply to mediation proceedings 

14 under the Early Resolution Program. All statements made 

15 and evidence presented in the proceedings shall be admis16 sible in the proceedings. The facilitator shall be the sole 

17 judge of the proper weight to be afforded to each submis18 sion. The parties to mediation proceedings under the Pro19 gram shall not be required to make statements or present 

20 evidence under oath. 

21 (f) REPRESENTATION.—Parties may participate pro 

22 se or be represented by attorneys throughout the pro23 ceedings of the Early Resolution Program. 

24 (g) CONFIDENTIALITY.— 
1061 

•S 2357 

1 (1) IN GENERAL.—Under regulations of the 

2 Secretary of Labor, rules similar to the rules under 

3 section 574 of title 5, United States Code (relating 

4 to confidentiality in dispute resolution proceedings) 

5 shall apply to the mediation proceedings under the 

6 Early Resolution Program. 

7 (2) CIVIL REMEDIES.—The Secretary of Labor 

8 may assess a civil penalty against any person who 

9 discloses information in violation of the regulations 

10 prescribed pursuant to paragraph (1) in the amount 

11 of three times the amount of the claim involved. The 

12 Secretary of Labor may bring a civil action to en13 force such civil penalty in any court of competent ju14 risdiction. 

15 SEC. 5514. LEGAL EFFECT OF PARTICIPATION IN MEDI16 ATION PROCEEDINGS. 

17 (a) PROCESS NONBINDING.—Findings and conclu18 sions made in the mediation proceedings of the Early Res19 olution Program shall be treated as advisory in nature and 

20 nonbinding. Except as provided in subsection (b), the 

21 rights of the parties under subpart A shall not be affected 

22 by participation in the Program. 

23 (b) RESOLUTION THROUGH SETTLEMENT AGREE24 MENT.—If a case is settled through participation in medi25 ation proceedings under the Program, the facilitator shall 
1062 

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1 assist the parties in drawing up an agreement which shall 

2 constitute, upon signature of the parties, a binding con3 tract between the parties, which shall be enforceable under 

4 section 5515. 

5 (c) PRESERVATION OF RIGHTS OF NON-PARTIES.— 

6 The settlement agreement shall not have the effect of 

7 waiving or otherwise affecting any rights to review under 

8 subpart A, or any other right under this Act or the plan, 

9 with respect to any person who is not a party to the settle10 ment agreement. 

11 SEC. 5515. ENFORCEMENT OF SETTLEMENT AGREEMENTS. 

12 (a) ENFORCEMENT.—Any party to a settlement 

13 agreement entered pursuant to mediation proceedings 

14 under this subpart may petition any court of competent 

15 jurisdiction for the enforcement of the agreement, by filing 

16 in the court a written petition praying that the agreement 

17 be enforced. In such a proceeding, the order of the hearing 

18 officer shall not be subject to review. 

19 (b) COURT REVIEW.—It shall be the duty of the court 

20 to advance on the docket and to expedite to the greatest 

21 possible extent the disposition of any petition filed under 

22 this section, with due deference to the role of settlement 

23 agreements under this part in achieving prompt resolution 

24 of disputes involving health plans. 
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1 (c) AWARDING OF ATTORNEY’S FEES AND OTHER

2 COSTS AND EXPENSES.—In any action by an individual 

3 enrolled under a health plan for court enforcement under 

4 this section, a prevailing plaintiff shall be entitled to rea5 sonable costs and expenses (including a reasonable attor6 ney’s fee and reasonable expert witness fees) on the 

7 charges on which the plaintiff prevails. 

8 SEC. 5516. DUE PROCESS FOR HEALTH CARE PROVIDERS. 

9 (a) PUBLICLY AVAILABLE STANDARDS AND PROC10 ESS.—Each health plan shall establish and utilize— 

11 (1) publicly available standards for contracting 

12 with health care providers; and 

13 (2) a publicly available process for dismissing 

14 such providers or failing to renew contracts with 

15 such providers. 

16 (b) NOTICE REQUIREMENT.— 

17 (1) IN GENERAL.—The process established by a 

18 health plan under subsection (a) shall include rea19 sonable notification to a health care provider of a 

20 decision to dismiss such provider or not to renew a 

21 contract with such provider before such decision 

22 takes effect. 

23 (2) EXCEPTION.—The notice required under 

24 paragraph (1) shall not apply if failure to dismiss a 
1064 

•S 2357 

1 provider or renewing a provider’s contract would ad2 versely affect the health or safety of a patient. 

3 (3) CONTENTS OF NOTICE.—Each notice to a 

4 health care provider under paragraph (1) shall con5 tain the reasons for the dismissal or failure to 

6 renew. Such reasons shall be consistent with the 

7 standards established under subsection (a). 

8 (c) REVIEW.—The process established by a health 

9 plan under subsection (a) shall include an opportunity for 

10 review of the health plan’s action by a health care provider 

11 who is dismissed by a health plan or with respect to whom 

12 a health plan fails to renew a contract. Such review shall 

13 be conducted by— 

14 (1) the provider’s peers who have contracts 

15 with, or are employed by, the health plan; and 

16 (2) if there is mutual consent of the provider 

17 and the health plan, one or more enrollees in the 

18 health plan. 

19 A health care provider may have an attorney present in 

20 connection with any review under this subsection if the 

21 provider notifies the health plan that an attorney will be 

22 present in advance of the review proceeding. 

23 (d) EFFECT ON OTHER LAWS.—The provisions of 

24 this section shall not supersede any other provision of Fed25 eral or State law. 
1065 

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1 PART 2—ADDITIONAL REMEDIES AND 

2 ENFORCEMENT PROVISIONS 

3 SEC. 5531. JUDICIAL REVIEW OF FEDERAL ACTION ON 

4 STATE SYSTEMS. 

5 (a) IN GENERAL.—Any State that is aggrieved by a 

6 determination by the Secretary under subpart B of part 

7 1 of subtitle E of title I shall be entitled to judicial review 

8 of such determination in accordance with this section. 

9 (b) JUDICIAL REVIEW.— 

10 (1) JURISDICTION.—The courts of appeals of 

11 the United States (other than the United States 

12 Court of Appeals for the Federal Circuit) shall have 

13 jurisdiction to review a determination described in 

14 subsection (a), to affirm the determination, or to set 

15 it aside, in whole or in part. A judgment of a court 

16 of appeals in such an action shall be subject to re17 view by the Supreme Court of the United States 

18 upon certiorari or certification as provided in section 

19 1254 of title 28, United States Code. 

20 (2) PETITION FOR REVIEW.—A State that de21 sires judicial review of a determination described in 

22 subsection (a) shall, within 30 days after it has been 

23 notified of such determination, file with the United 

24 States court of appeals for the circuit in which the 

25 State is located a petition for review of such deter26 mination. A copy of the petition shall be transmitted 
1066 

•S 2357 

1 by the clerk of the court to the Secretary, and the 

2 Secretary shall file in the court the record of the 

3 proceedings on which the determination or action 

4 was based, as provided in section 2112 of title 28, 

5 United States Code. 

6 (3) SCOPE OF REVIEW.—The findings of fact of 

7 the Secretary, if supported by substantial evidence, 

8 shall be conclusive; but the court, for good cause 

9 shown, may remand the case to the Secretary to 

10 take further evidence, and the Secretary may make 

11 new or modified findings of fact and may modify its 

12 previous action, and shall certify to the court the 

13 record of the further proceedings. Such new or modi14 fied findings of fact shall likewise be conclusive if 

15 supported by substantial evidence. 

16 SEC. 5532. CIVIL ENFORCEMENT. 

17 Unless otherwise provided in this Act, the district 

18 courts of the United States shall have jurisdiction of civil 

19 actions brought by— 

20 (1) the Secretary of Labor to enforce any final 

21 order of such Secretary or to collect any civil mone22 tary penalty assessed by such Secretary under this 

23 Act; and 

24 (2) the Secretary of Health and Human Serv25 ices to enforce any final order of such Secretary or 
1067 

•S 2357 

1 to collect any civil monetary penalty assessed by 

2 such Secretary under this Act. 

3 SEC. 5533. PRIORITY OF CERTAIN BANKRUPTCY CLAIMS. 

4 Section 507(a)(8) of title 11, United States Code, is 

5 amended to read as follows: 

6 ‘‘(8) Eighth, allowed unsecured claims— 

7 ‘‘(A) based upon any commitment by the 

8 debtor to the Federal Deposit Insurance Cor9 poration, the Resolution Trust Corporation, the 

10 Director of the Office of Thrift Supervision, the 

11 Comptroller of the Currency, or the Board of 

12 Governors of the Federal Reserve System, or 

13 their predecessors or successors, to maintain 

14 the capital of an insured depository institution; 

15 or 

16 ‘‘(B) for payments under title X of the 

17 Health Security Act owed to a State.’’. 

18 SEC. 5534. PRIVATE RIGHT TO ENFORCE STATE RESPON19 SIBILITIES. 

20 The failure of a participating State to carry out a 

21 responsibility applicable to participating States under this 

22 Act constitutes a deprivation of rights secured by this Act 

23 for the purposes of section 1977 of the Revised Statutes 

24 of the United States (42 U.S.C. 1983). In an action 

25 brought under such section, the court shall exercise juris-
1068 

•S 2357 

1 diction without regard to whether the aggrieved person 

2 has exhausted any administrative or other remedies that 

3 may be provided by law. 

4 SEC. 5535. PRIVATE RIGHT TO ENFORCE FEDERAL RESPON5 SIBILITIES IN OPERATING A SYSTEM IN A 

6 STATE. 

7 (a) IN GENERAL.—The failure of the Secretary of 

8 Health and Human Services to carry out a responsibility 

9 under subpart C of part 1 of subtitle E of title I, confers 

10 an enforceable right of action on any person who is ag11 grieved by such failure. Such a person may commence a 

12 civil action against the Secretary in an appropriate State 

13 court or district court of the United States. 

14 (b) EXHAUSTION OF REMEDIES.—In an action under 

15 subsection (a), the court shall exercise jurisdiction without 

16 regard to whether the aggrieved person has exhausted any 

17 administrative or other remedies that may be provided by 

18 law. 

19 (c) RELIEF.—In an action under subsection (a), if 

20 the court finds that a failure described in such subsection 

21 has occurred, the aggrieved person may recover compen22 satory damages and the court may award any other appro23 priate relief. 

24 (d) ATTORNEY’S FEES.—In an action under sub25 section (a), the court, in its discretion, may allow the pre-
1069 

•S 2357 

1 vailing party, other than the United States, a reasonable 

2 attorney’s fee (including expert fees) as part of the costs, 

3 and the United States shall be liable for costs the same 

4 as a private person. 

5 SEC. 5536. ENFORCEMENT OF CONSUMER PROTECTIONS. 

6 (a) COVERED VIOLATIONS.—The provisions of this 

7 section shall apply with respect to a health plan that fails 

8 to fulfill a duty imposed on the plan under section 1122 

9 and subtitle A of this title. 

10 (b) ADMINISTRATIVE ENFORCEMENT AND CIVIL

11 PENALTIES.—The penalties described in section 

12 1867(d)(1) of the Social Security Act and the procedures 

13 described in section 1128A of such Act (other than the 

14 first two sentences of subsection (a) and subsection (b)) 

15 shall apply to health plans described in subsection (a). In 

16 addition to such penalties, an amount not to exceed 

17 $1,000,000 may be assessed in the case of a finding of 

18 a pattern or practice of such violations. The Secretary 

19 shall establish procedures whereby, when a consumer has 

20 disenrolled from a health plan violating the duties de21 scribed in subsection (a), successor health plans may re22 cover from the original health plan for health care costs 

23 attributable to such violations. 

24 (c) CORRECTION OF SUBSTANTIAL VIOLATIONS.— 

25 Upon an administrative or judicial finding of a substantial 
1070 

•S 2357 

1 violation of the duties described in subsection (a), the 

2 State or court may— 

3 (1) inform all current enrollees of the plan of 

4 the violation and that they may disenroll imme5 diately from that plan and enroll with another com6 munity-rated health plan; and 

7 (2) notify the health plan that it shall imme8 diately cease enrollment activities until it has ob9 tained certifications from the appropriate certifying 

10 entity or court that the violation has been corrected. 

11 Such actions shall not be taken without providing the 

12 health plan with a reasonable opportunity to correct such 

13 violations, except where providing such an opportunity 

14 would risk health or safety. 

15 SEC. 5537. DISCRIMINATION CLAIMS. 

16 (a) CIVIL ACTION BY AGGRIEVED PERSON.—

17 (1) IN GENERAL.—Any person who is aggrieved 

18 by a violation of section 1602 may commence a civil 

19 action against the party or parties committing such 

20 violation in an appropriate State court or district 

21 court of the United States. 

22 (2) STANDARDS.—The standards used to deter23 mine whether a violation has occurred in a complaint 

24 alleging discrimination on the basis of age or dis25 ability under section 1602 shall be the standards ap-
1071 

•S 2357 

1 plied under the Age Discrimination Act of 1975 (42 

2 U.S.C. 6101 et seq.) and the Americans with Dis3 abilities Act of 1990 (42 U.S.C. 12101 et seq.). 

4 (3) RELIEF.—In any action under paragraph 

5 (1), if the court finds a violation of section 1602, the 

6 court may award such equitable and injunctive relief 

7 as it deems appropriate, and may award to the ag8 grieved person any sums lost as a result of the viola9 tion. If the court finds that the party or parties 

10 committing a violation engaged in intentional dis11 crimination in violation of section 1602, the ag12 grieved person may recover compensatory damages. 

13 If the court finds that the party or parties commit14 ting such violation did so with malice or reckless in15 difference to the federally protected rights of the ag16 grieved person, the aggrieved person may recover 

17 punitive damages under this section against a de18 fendant other than a government, government agen19 cy or political subdivision. 

20 (4) ATTORNEYS’ FEES.—In any action under 

21 paragraph (1), the court, in its discretion, may allow 

22 the prevailing party, other than the United States, 

23 a reasonable attorney’s fee (including expert fees 

24 and other litigation expenses) as part of the costs, 
1072 

•S 2357 

1 and the United States shall be liable for costs the 

2 same as a private person. 

3 (b) ACTION BY SECRETARY.—Whenever the Sec4 retary of Health and Human Services finds that a party 

5 has failed to comply with section 1602 or with an applica6 ble regulation issued under such section, the Secretary 

7 shall notify the party. If within a reasonable period of time 

8 the party fails or refuses to comply, the Secretary may— 

9 (1) refer the matter to the Attorney General 

10 with a recommendation that an appropriate civil ac11 tion be instituted; 

12 (2) terminate or limit the participation of such 

13 party in the programs authorized by this Act; 

14 (3) withhold Federal financial assistance to the 

15 party; or 

16 (4) take such other action as may be provided 

17 by law. 

18 (c) ACTION BY ATTORNEY GENERAL.—When a mat19 ter is referred to the Attorney General under subsection 

20 (b)(1), the Attorney General may bring a civil action in 

21 a district court of the United States for such relief as may 

22 be appropriate, including injunctive relief. In a civil action 

23 under this section, the court— 

24 (1) may grant any equitable relief that the 

25 court considers to be appropriate; 
1073 

•S 2357 

1 (2) may award such other relief as the court 

2 considers to be appropriate, including in cases of in3 tentional discrimination compensatory and punitive 

4 damages; and 

5 (3) may, to vindicate the public interest when 

6 requested by the Attorney General, assess a civil 

7 money penalty against the party in an amount— 

8 (A) not exceeding $50,000 for a first viola9 tion; and 

10 (B) not exceeding $100,000 for any subse11 quent violation. 

12 SEC. 5538. NONDISCRIMINATION IN FEDERALLY ASSISTED 

13 PROGRAMS. 

14 Federal payments under this Act shall be treated as 

15 Federal financial assistance for purposes of section 504 

16 of the Rehabilitation Act of 1973 (29 U.S.C. 794), section 

17 303 of the Age Discrimination Act of 1975 (42 U.S.C. 

18 6102), and section 601 of the Civil Rights Act of 1964 

19 (42 U.S.C. 2000d). 

20 SEC. 5539. CIVIL AND ADMINISTRATION ACTION BY ESSEN21 TIAL COMMUNITY PROVIDER. 

22 (a) IN GENERAL.—An electing essential community 

23 provider (as defined in section 1466(d)) who is aggrieved 

24 by the failure of a health plan to fulfill a duty imposed 

25 on the plan by section 1466 may commence a civil action 
1074 

•S 2357 

1 against the plan in an appropriate State court or district 

2 court of the United States. 

3 (b) RELIEF.—In an action under subsection (a), if 

4 the court finds that the health plan has failed to fulfill 

5 a duty imposed on the plan by section 1466, the electing 

6 essential community provider may recover compensatory 

7 damages and the court may order any other appropriate 

8 relief. 

9 (c) ATTORNEY’S FEES.—In any action under sub10 section (a), the court, in its discretion, may allow the pre11 vailing party, other than the United States, a reasonable 

12 attorney’s fee (including expert fees) as part of the costs, 

13 and the United States shall be liable for costs the same 

14 as a private person. 

15 (d) STATE COMPLAINT SYSTEM REQUIRED.—Prior 

16 to commencing an action under subsection (a), the ag17 grieved essential community provider may first elect to 

18 utilize the administrative process provided under this sub19 section as follows: 

20 (1) The Secretary shall prescribe regulations 

21 governing administrative grievance actions by essen22 tial community providers that shall be consistent 

23 with the requirements of section 5504 and that shall 

24 provide for the consolidation of complaints (at the 

25 election of the essential community providers) in 
1075 

•S 2357 

1 cases involving multiple complaints against a single 

2 health plan. 

3 (2) A State shall make available to each elect4 ing essential community provider that is aggrieved 

5 by an action of a health plan under section 1466, 

6 the opportunity to file a complaint in the complaint 

7 review office established under section 5502. In the 

8 case of essential community providers located in a 

9 cooperative established in any State by the Sec10 retary, the Secretary shall assume all of the duties 

11 and obligations of such State under this section. 

12 SEC. 5540. FACIAL CONSTITUTIONAL CHALLENGES. 

13 (a) JURISDICTION.—The United States District 

14 Court for the District of Columbia shall have original and 

15 exclusive jurisdiction of any civil action brought to invali16 date this Act or a provision of this Act on the ground of 

17 its being repugnant to the Constitution of the United 

18 States on its face and for every purpose. In any action 

19 described in this subsection, the district court may not 

20 grant any temporary order or preliminary injunction re21 straining the enforcement, operation, or execution of this 

22 Act or any provision of this Act. 

23 (b) CONVENING OF THREE-JUDGE COURT.—An ac24 tion described in subsection (a) shall be heard and deter-
1076 

•S 2357 

1 mined by a district court of three judges in accordance 

2 with section 2284 of title 28, United States Code. 

3 (c) CONSOLIDATION.—When actions described in 

4 subsection (a) involving a common question of law or fact 

5 are pending before a district court, the court shall order 

6 all the actions consolidated. 

7 (d) DIRECT APPEAL TO SUPREME COURT.—In any 

8 action described in subsection (a), an appeal may be taken 

9 directly to the Supreme Court of the United States from 

10 any final judgment, decree, or order in which the district 

11 court— 

12 (1) holds this Act or any provision of this Act 

13 invalid; and 

14 (2) makes a determination that its holding will 

15 materially undermine the application of the Act as 

16 whole. 

17 (e) CONSTRUCTION.—This section does not limit— 

18 (1) the right of any person— 

19 (A) to a litigation concerning the Act or 

20 any portion of the Act; or 

21 (B) to petition the Supreme Court for re22 view of any holding of a district court by writ 

23 of certiorari at any time before the rendition of 

24 judgment in a court of appeals; or 
1077 

•S 2357 

1 (2) the authority of the Supreme Court to grant 

2 a writ of certiorari for the review described in para3 graph (1)(B). 

4 SEC. 5541. TREATMENT OF PLANS AS PARTIES IN CIVIL AC5 TIONS. 

6 (a) IN GENERAL.—A health plan may sue or be sued 

7 under this Act as an entity. Service of summons, sub8 poena, or other legal process of a court or hearing officer 

9 upon a trustee or an administrator of any such plan in 

10 his or her capacity as such shall constitute service upon 

11 the plan. In a case where a plan has not designated in 

12 applicable plan documents an individual as agent for the 

13 service of legal process, service upon the Secretary of 

14 Health and Human Services (in the case of a community15 rated health plan) or the Secretary of Labor (in the case 

16 of an experienced-rated health plan) shall constitute such 

17 service. The Secretary, not later than 15 days after receipt 

18 of service under the preceding sentence, shall notify the 

19 administrator or any trustee of the plan of receipt of such 

20 service. 

21 (b) OTHER PARTIES.—Any money judgment under 

22 this Act against a plan referred to in subsection (a) shall 

23 be enforceable only against the plan as an entity and shall 

24 not be enforceable against any other person unless liability 
1078 

•S 2357 

1 against such person is established in his individual capac2 ity under this Act. 

3 SEC. 5542. WHISTLEBLOWER PROTECTIONS. 

4 (a) IN GENERAL.—A health plan may not discharge, 

5 discriminate or otherwise take adverse action against any 

6 employee with respect to compensation, terms, conditions 

7 or privileges of employment because the employee (or any 

8 person acting pursuant to the request of the employee) 

9 provided information to any Federal, State or private su10 pervisory agency or entity regarding a possible violation 

11 of any provision of this Act or any regulation issued under 

12 this Act. 

13 (b) CIVIL ACTION.—An employee or former employee 

14 who believes that such employee has been discharged, dis15 criminated or otherwise subject to adverse action in viola16 tion of subsection (a) may file a civil action in the appro17 priate United States district court within 2 years of the 

18 date of such discharge, discrimination or adverse action. 

19 (c) DETERMINATION OF COURT.—If a court in an ac20 tion under subsection (b) determines that a violation of 

21 subsection (a) has occurred, the court may order the 

22 health care entity or plan that committed the violation— 

23 (1) to reinstate the employee to his or her 

24 former position; 
1079 

•S 2357 

1 (2) to pay compensatory damages to the em2 ployee; 

3 (3) to pay reasonable costs and attorneys fees 

4 incurred by the employee in bringing such action; 

5 and 

6 (4) to take such other appropriate actions to 

7 remedy any past discrimination. 

8 SEC. 5543. GENERAL NONPREEMPTION OF RIGHTS AND 

9 REMEDIES. 

10 Nothing in this subtitle shall be construed to deny, 

11 impair, or otherwise adversely affect a right or remedy 

12 available under law to any person, except to the extent 

13 the right or remedy is inconsistent with this title. 

14 Subtitle G—Repeal of Exemption 

15 SEC. 5601. REPEAL OF EXEMPTION FOR HEALTH INSUR16 ANCE. 

17 (a) IN GENERAL.—Section 3 of the Act of March 9, 

18 1945 (15 U.S.C. 1013), known as the McCarran-Ferguson 

19 Act, is amended by adding at the end the following: 

20 ‘‘(c) Notwithstanding that the business of insurance 

21 is regulated by State law, nothing in this Act shall limit 

22 the applicability of the following Acts to the business of 

23 insurance to the extent that such business relates to the 

24 provision of health benefits: 

25 ‘‘(1) The Sherman Act (15 U.S.C. 1 et seq.). 
1080 

•S 2357 

1 ‘‘(2) The Clayton Act (15 U.S.C. 12 et seq.). 

2 ‘‘(3) Federal Trade Commission Act (15 U.S.C. 

3 41 et seq.). 

4 ‘‘(4) The Act of June 19, 1936 (49 Stat. 1526; 

5 15 U.S.C. 21a et seq.), known as the Robinson-Pat6 man Antidiscrimination Act.’’. 

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

8 subsection (a) shall take effect on the first day of the sixth 

9 month beginning after the date of the enactment of this 

10 Act. 

11 TITLE VI—INDIVIDUAL AND 

12 EMPLOYER SUBSIDIES 

13 Subtitle A—Individual Premium 

14 and Cost-Sharing Assistance 

15 SEC. 6001. REQUIREMENT TO OPERATE STATE PROGRAM. 

16 (a) IN GENERAL.—A participating State shall have 

17 in effect a program for furnishing premium assistance and 

18 cost-sharing assistance in accordance with this subtitle for 

19 calendar years beginning after 1996. 

20 (b) DESIGNATION OF STATE AGENCY.—A State may 

21 designate any appropriate State agency to administer the 

22 program under this subtitle. 

23 SEC. 6002. ASSISTANCE WITH STANDARD HEALTH PLAN 

24 PREMIUMS. 

25 (a) ELIGIBILITY.— 
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•S 2357 

1 (1) IN GENERAL.—An eligible individual (as de2 fined in section 6008(4)) who has been determined 

3 by a State under section 6004 to be a premium sub4 sidy eligible individual (as defined in paragraph (2)) 

5 shall be eligible for premium assistance in the 

6 amount determined under subsection (b). 

7 (2) PREMIUM SUBSIDY ELIGIBLE INDI8 VIDUAL.—For purposes of this subtitle, the term 

9 ‘‘premium subsidy eligible individual’’ means any of 

10 the following individuals: 

11 (A) INDIVIDUALS WITH INCOMES BELOW A

12 CERTAIN INCOME THRESHOLD.—An eligible in13 dividual who has a family income determined 

14 under section 6008(3) which does not exceed 

15 200 percent of the poverty line (as defined in 

16 section 6008(5)). 

17 (B) CHILDREN.—An eligible individual 

18 who— 

19 (i) is a child (as defined in section 

20 6008(2)); 

21 (ii) has a family income determined 

22 under section 6008(3) which does not ex23 ceed 240 percent of the poverty line; and 

24 (iii) has not been enrolled in a health 

25 plan during the 6-month period ending on 
1082 

•S 2357 

1 the date the individual submits an applica2 tion to the State for premium assistance 

3 under this subtitle. 

4 (C) PREGNANT WOMEN.—An eligible indi5 vidual who— 

6 (i) is a pregnant woman (as defined in 

7 section 6008(6)); 

8 (ii) has a family income determined 

9 under section 6008(3) which does not ex10 ceed 240 percent of the poverty line; and 

11 (iii) is not enrolled in a health plan on 

12 the date the individual submits an applica13 tion to the State for premium assistance 

14 under this subtitle. 

15 (3) SPECIAL RULE WITH RESPECT TO CHIL16 DREN AND PREGNANT WOMEN.—An eligible indi17 vidual may not be a premium subsidy eligible indi18 vidual described in subparagraphs (B) or (C) of 

19 paragraph (2) if an employer contribution of at least 

20 80 percent of the premium under a standard health 

21 plan that is available to the individual through the 

22 employer is made or offered to be made on behalf of 

23 the individual. 

24 (b) AMOUNT OF ASSISTANCE.— 

25 (1) IN GENERAL.— 
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1 (A) FORMULA.—The amount of premium 

2 assistance for a month for a premium subsidy 

3 eligible individual is— 

4 (i) the least of — 

5 (I) the subsidy percentage speci6 fied in paragraph (2) multiplied by 

1 7 ⁄12th of the annual premium paid for 

8 coverage under a standard health plan 

9 in which the individual is enrolled; 

10 (II) the subsidy percentage speci11 fied in paragraph (2) multiplied by 

1 12 ⁄12th of the weighted average annual 

13 premium rate (as defined in subpara14 graph (B)) for all community-rated 

15 standard health plans offered in the 

16 community rating area in which the 

17 individual resides; or 

18 (III) the subsidy percentage spec19 ified in paragraph (2) multiplied by 

1 20 ⁄12th of the annual reference pre21 mium for the community rating area 

22 in which the individual resides (as de23 fined in subparagraph (C)); minus 

24 (ii) the amount of any employer con25 tribution made or offered to be made on 
1084 

•S 2357 

1 behalf of the individual for coverage under 

2 the standard health plan that is available 

3 to the individual through an employer. 

4 (B) WEIGHTED AVERAGE ANNUAL PRE5 MIUM RATE.—For purposes of this paragraph, 

6 the term ‘‘weighted average annual premium 

7 rate’’ means the average premium for the com8 munity-rated standard health plans offered in 

9 the community rating area in which the indi10 vidual resides, weighted to reflect the total en11 rollment of community-rated eligible individuals 

12 among such plans. 

13 (C) REFERENCE PREMIUM.—For purposes 

14 of this paragraph, the term ‘‘reference pre15 mium’’ means the reference premium estab16 lished under section 4512 of the Internal Rev17 enue Code of 1986. 

18 (D) SPECIAL RULES FOR DETERMINING

19 AMOUNT OF EMPLOYER CONTRIBUTIONS.—For 

20 purposes of determining the amount of an em21 ployer contribution under subparagraph (A), 

22 the following rules shall apply: 

23 (i) FAMILY CONTRIBUTIONS.—If an 

24 employer makes a contribution on behalf of 

25 a family (rather than any particular indi-
1085 

•S 2357 

1 vidual) such contribution shall be allocated 

2 ratably among the individuals in the fam3 ily. 

4 (ii) GREATEST EMPLOYER CONTRIBU5 TION AVAILABLE.—The employer contribu6 tion with respect to any individual is the 

7 largest employer contribution offered to be 

8 made on behalf of the individual by the in9 dividual’s employer or any employer of any 

10 member of the individual’s family. 

11 (2) SUBSIDY PERCENTAGE.—For purposes of 

12 paragraph (1)(A), the term ‘‘subsidy percentage’’ 

13 means the following: 

14 (A) INDIVIDUALS WITH INCOMES BELOW

15 CERTAIN INCOME THRESHOLD.— 

16 (i) IN GENERAL.—Except as provided 

17 in clauses (ii) and (iii), for a premium sub18 sidy eligible individual described in sub19 section (a)(2)(A), 100 percent reduced 

20 (but not below zero) by .80 percentage 

21 points for each 1 percentage point (or por22 tion thereof) by which such individual’s 

23 family income exceeds 100 percent of the 

24 poverty line. 
1086 

•S 2357 

1 (ii) AFDC RECIPIENTS.—For a pre2 mium subsidy eligible individual described 

3 in subsection (a)(2)(A) who is a member of 

4 a family receiving aid to families with de5 pendent children under part A or E of title 

6 IV of the Social Security Act, the subsidy 

7 percentage shall be 100 percent. 

8 (iii) NON-CASH MEDICAID ELIGI9 BLES.— 

10 (I) IN GENERAL.—For a pre11 mium subsidy eligible individual de12 scribed in subsection (a)(2)(A) who is 

13 a non-cash medicaid eligible described 

14 in subclause (II), the subsidy percent15 age shall be 100 percent during the 6- 

16 month period beginning on January 1, 

17 1997. 

18 (II) NON-CASH MEDICAID ELIGI19 BLE.—The non-cash medicaid eligibles 

20 described in this subclause are indi21 viduals receiving medical assistance 

22 under the State plan under title XIX 

23 of the Social Security Act as of De24 cember 31, 1996, who are not individ25 uals— 
1087 

•S 2357 

1 (aa) who are members of a 

2 family receiving aid to families 

3 with dependent children under 

4 part A or E of title IV of the So5 cial Security Act; 

6 (bb) with respect to whom 

7 supplemental security income 

8 benefits are being paid under 

9 title XVI of such Act; or 

10 (cc) eligible for benefits 

11 under part A of title XVIII of 

12 such Act. 

13 (B) CHILDREN AND PREGNANT WOMEN.— 

14 For a premium subsidy eligible individual de15 scribed in subparagraph (B) or (C) of sub16 section (a)(2), 100 percent reduced (but not 

17 below zero) by 1.82 percentage points for each 

18 1 percentage point (or portion thereof) by which 

19 such individuals family income exceeds 185 per20 cent of the poverty line. 

21 (c) PAYMENTS.— 

22 (1) IN GENERAL.—The amount of the premium 

23 assistance available to a premium subsidy eligible in24 dividual under subsection (b) shall be paid by the 

25 State in which the individual resides directly to the 
1088 

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1 standard health plan in which the individual is en2 rolled. Payments under the preceding sentence shall 

3 commence in the first month during which the indi4 vidual is enrolled in a certified standard health plan 

5 and determined under section 6004 to be a premium 

6 subsidy eligible individual. 

7 (2) SPECIAL RULE WITH RESPECT TO FAMILIES

8 WITH MULTIPLE CHILDREN.—If a family includes 

9 more than 1 child described in subsection (a)(2)(B), 

10 no premium assistance may be paid to a plan under 

11 paragraph (1) on behalf of any such child unless 

12 such assistance is paid on behalf of all such children. 

13 (3) ADMINISTRATIVE ERRORS.—A State is fi14 nancially responsible for premium assistance paid 

15 based on an eligibility determination error to the ex16 tent the State’s error rate for eligibility determina17 tions exceeds a maximum permissible error rate to 

18 be specified by the Secretary. 

19 SEC. 6003. ASSISTANCE WITH COST-SHARING FOR STAND20 ARD HEALTH PLANS. 

21 (a) NON-AFDC LOW-INCOME INDIVIDUALS.— 

22 (1) INDIVIDUALS WORKING FOR COMMUNITY23 RATED EMPLOYERS.— 

24 (A) IN GENERAL.—If a non-AFDC low-in25 come individual described in subparagraph (B) 
1089 

•S 2357 

1 is enrolled in a community-rated standard 

2 health plan providing a high cost-sharing sched3 ule, such individual shall be eligible for cost4 sharing assistance consisting of a reduction in 

5 the cost-sharing under such plan to the level of 

6 a plan providing a low cost-sharing schedule. 

7 (B) INDIVIDUAL DESCRIBED.—A non8 AFDC low-income individual described in this 

9 subparagraph is an individual who is employed 

10 by a community-rated employer and who is un11 able to enroll in a standard health plan— 

12 (i) with a premium at or below the 

13 weighted average premium rate for all 

14 community-rated standard health plans of15 fered through the purchasing cooperative 

16 offered by the individual’s employer, and 

17 (ii) providing a low or combination 

18 cost-sharing schedule. 

19 (2) INDIVIDUALS WORKING FOR EXPERIENCE20 RATED EMPLOYERS.— 

21 (A) IN GENERAL.—If a non-AFDC low-in22 come individual described in subparagraph (B) 

23 is enrolled in an experience-rated standard 

24 health plan providing a high cost-sharing sched25 ule, such individual shall be eligible for cost- 
1090 

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1 sharing assistance consisting of a reduction in 

2 the cost-sharing under such plan to the level of 

3 a plan providing a low cost-sharing schedule. 

4 (B) INDIVIDUAL DESCRIBED.—A non5 AFDC low-income individual described in this 

6 subparagraph is an individual who is employed 

7 by an experience-rated employer and who is un8 able to enroll in a standard health plan offered 

9 by such employer providing a low or combina10 tion cost-sharing schedule. 

11 (3) NON-WORKING INDIVIDUALS.— 

12 (A) IN GENERAL.—If a non-AFDC low-in13 come individual described in subparagraph (B) 

14 is enrolled in a community-rated standard plan 

15 providing a high cost-sharing schedule, such in16 dividual shall be eligible for cost-sharing assist17 ance consisting of a reduction in the cost-shar18 ing under such plan to the level of a plan pro19 viding 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 not em23 ployed and who is unable to enroll in a stand24 ard health plan— 
1091 

•S 2357 

1 (i) with a premium at or below the 

2 weighted average premium rate for all 

3 community-rated standard health plans of4 fered in the community rating area in 

5 which the individual resides, and 

6 (ii) providing a low or combination 

7 cost-sharing schedule. 

8 (4) NON-AFDC LOW-INCOME INDIVIDUAL.—For 

9 purposes of this subsection, the term ‘‘non-AFDC 

10 low-income individual’’ means an eligible individual 

11 who— 

12 (A) has a family income determined under 

13 section 6008(3) which does not exceed 150 per14 cent of the poverty line; and 

15 (B) is not a member of a family receiving 

16 aid to families with dependent children under 

17 part A or E of title IV of the Social Security 

18 Act. 

19 (b) AFDC RECIPIENTS.— 

20 (1) LOW OR COMBINATION COST-SHARING

21 PLAN.—An AFDC recipient enrolled in a commu22 nity-rated standard plan— 

23 (A) with a premium at or below the 

24 weighted average premium rate for all commu25 nity rated-standard health plans offered in the 
1092 

•S 2357 

1 community rating area in which the individual 

2 resides, and 

3 (B) providing a low or combination cost4 sharing schedule, 

5 shall be eligible for cost-sharing assistance consisting 

6 of a reduction in the amount of copayment applied 

7 with respect to an item or service in an amount 

8 equal to 20 percent of the copayment amount other9 wise applicable under the plan, rounded to the near10 est dollar. 

11 (2) HIGH COST-SHARING PLAN.—If an AFDC 

12 recipient is unable to enroll in a health plan de13 scribed in paragraph (1) and such individual is en14 rolled in a community-rated standard plan providing 

15 a high cost-sharing schedule, such individual shall be 

16 eligible for cost-sharing assistance consisting of a re17 duction in the cost-sharing under such plan to the 

18 level of a plan providing a low cost-sharing schedule. 

19 (3) AFDC RECIPIENT.—For purposes of this 

20 subsection, the term ‘‘AFDC recipient’’ means an el21 igible individual who is a member of a family receiv22 ing aid to families with dependent children under 

23 part A or E of title IV of the Social Security Act. 

24 (c) NOTIFICATION OF HEALTH PLANS.—If a State 

25 determines that an individual is eligible for cost-sharing 
1093 

•S 2357 

1 assistance under this section, the State shall notify the 

2 standard health plan in which such individual is enrolled 

3 of such determination in a timely manner. 

4 SEC. 6004. ELIGIBILITY DETERMINATIONS. 

5 (a) IN GENERAL.—The Secretary shall promulgate 

6 regulations specifying requirements for State programs 

7 under this subtitle with respect to determining eligibility 

8 for premium and cost-sharing assistance. 

9 (b) SPECIFICATIONS FOR REGULATIONS.—The regu10 lations promulgated by the Secretary under subsection (a) 

11 shall include the following requirements: 

12 (1) FREQUENCY OF APPLICATIONS.—A State 

13 program shall provide that an individual may file an 

14 application for assistance with an agency designated 

15 by the State at any time, in person or by mail. 

16 (2) APPLICATION FORM.—A State program 

17 shall provide for the use of an application form de18 veloped by the Secretary under subsection (c). 

19 (3) DISTRIBUTION OF APPLICATIONS.—A State 

20 program shall make applications accessible at loca21 tions where individuals are most likely to obtain the 

22 applications. 

23 (4) REQUIREMENT TO SUBMIT REVISED APPLI24 CATION.—A State program shall require individuals 

25 to submit revised applications to reflect changes in 
1094 

•S 2357 

1 estimated family incomes, including changes in em2 ployment status of family members, during the year. 

3 The State shall revise the amount of any premium 

4 assistance based on such a revised application. 

5 (5) VERIFICATION.—A State program shall pro6 vide for verification of the information supplied in 

7 applications under this subtitle. Such verification 

8 may include examining return information disclosed 

9 to the State for such purpose under section 

10 6103(l)(15) of the Internal Revenue Code of 1986. 

11 (c) ADMINISTRATION OF STATE PROGRAMS.— 

12 (1) IN GENERAL.—The Secretary shall establish 

13 standards for States operating programs under this 

14 subtitle which ensure that such programs are oper15 ated in a uniform manner with respect to application 

16 procedures, data processing systems, and such other 

17 administrative activities as the Secretary determines 

18 to be necessary. 

19 (2) APPLICATION FORMS.—The Secretary shall 

20 develop an application form for assistance which 

21 shall— 

22 (A) be simple in form and understandable 

23 to the average individual; 

24 (B) require the provision of information 

25 necessary to make a determination as to wheth-
1095 

•S 2357 

1 er an individual is eligible for assistance, includ2 ing a declaration of estimated income by the in3 dividual based, at the election of the indi4 vidual— 

5 (i) on multiplying by a factor of 4 the 

6 individual’s family income for the 3-month 

7 period immediately preceding the month in 

8 which the application is made; or 

9 (ii) on estimated income for the entire 

10 year for which the application is submitted; 

11 and 

12 (C) require attachment of such documenta13 tion as deemed necessary by the Secretary in 

14 order to ensure eligibility for assistance. 

15 (d) EFFECTIVENESS OF ELIGIBILITY.—A determina16 tion by a State that an individual is a premium subsidy 

17 eligible individual or an individual eligible for cost-sharing 

18 assistance shall be effective for the calendar year for which 

19 such determination is made unless a revised application 

20 submitted under subsection (b)(4) indicates that an indi21 vidual is no longer eligible for assistance. 

22 (e) PENALTIES FOR MATERIAL MISREPRESENTA23 TIONS.— 

24 (1) IN GENERAL.—Any individual who know25 ingly makes a material misrepresentation of infor-
1096 

•S 2357 

1 mation in an application for assistance under this 

2 subtitle shall be liable to the Federal Government 

3 for the amount any assistance received by individual 

4 on the basis of a misrepresentation and interest on 

5 such amount at a rate specified by the Secretary, 

6 and, shall, in addition, be liable to the Federal Gov7 ernment for $2,000 or, if greater, 3 times the 

8 amount any assistance received by individual on the 

9 basis of a misrepresentation. 

10 (2) COLLECTION OF PENALTY AMOUNTS.—A 

11 State which receives an application for assistance 

12 with respect to which a material misrepresentation 

13 has been made shall collect the penalty amount re14 quired under paragraph (1) and submit such amount 

15 to the Secretary in a timely manner. 

16 SEC. 6005. END-OF-YEAR RECONCILIATION FOR PREMIUM 

17 ASSISTANCE. 

18 (a) IN GENERAL.— 

19 (1) REQUIREMENT TO FILE STATEMENT.—An 

20 individual who received premium assistance under 

21 this subtitle from a State for any month in a cal22 endar year shall file with the State an income rec23 onciliation statement to verify the individual’s family 

24 income for the year. Such a statement shall be filed 

25 at such time, and contain such information, as the 
1097 

•S 2357 

1 State may specify in accordance with regulations 

2 promulgated by the Secretary. 

3 (2) NOTICE OF REQUIREMENT.—A State shall 

4 provide a written notice of the requirement under 

5 paragraph (1) at the end of the year to an individual 

6 who received premium assistance under this subtitle 

7 from such State in any month during the year. 

8 (b) RECONCILIATION OF PREMIUM ASSISTANCE

9 BASED ON ACTUAL INCOME.— 

10 (1) IN GENERAL.—Based on and using the in11 come reported in the reconciliation statement filed 

12 under subsection (a) with respect to an individual, 

13 the State shall compute the amount of premium as14 sistance that should have been provided under this 

15 subtitle with respect to the individual for the year 

16 involved. 

17 (2) OVERPAYMENT OF ASSISTANCE.—If the 

18 total amount of the premium assistance provided 

19 was greater than the amount computed under para20 graph (1), the individual is liable to the State to pay 

21 an amount equal to the amount of the excess pay22 ment. Any amount collected by a State under this 

23 paragraph shall be submitted to the Secretary in a 

24 timely manner. 
1098 

•S 2357 

1 (3) UNDERPAYMENT OF ASSISTANCE.—If the 

2 total amount of the premium assistance provided 

3 was less than the amount computed under para4 graph (1), the State shall pay to the individual an 

5 amount equal to the amount of the deficit. 

6 (4) STATE OPTION.—A State may, in accord7 ance with regulations promulgated by the Secretary, 

8 establish a procedure under which any overpayments 

9 or underpayments of premium assistance determined 

10 under paragraphs (2) and (3) with respect to an in11 dividual for a year may be collected or paid, as ap12 propriate, through adjustments to the premium as13 sistance furnished to such individual in the suc14 ceeding year. 

15 (c) VERIFICATION.—Each State may use such infor16 mation as it has available to verify income of individuals 

17 with applications filed under this subtitle, including return 

18 information disclosed to the State for such purpose under 

19 section 6103(l)(15) of the Internal Revenue Code of 1986. 

20 (d) PENALTIES FOR FAILURE TO FILE.—In the case 

21 of an individual who is required to file a statement under 

22 this section in a year who fails to file such a statement, 

23 the entire amount of the premium assistance provided in 

24 such year shall be considered an excess amount under sub25 section (b)(2) and such individual shall not be eligible for 
1099 

•S 2357 

1 premium assistance under this subtitle until such state2 ment is filed. A State, using rules established by the Sec3 retary, shall waive the application of this subsection if the 

4 individual establishes, to the satisfaction of the State 

5 under such rules, good cause for the failure to file the 

6 statement on a timely basis. 

7 (e) PENALTIES FOR FALSE INFORMATION.—Any in8 dividual who provides false information in a statement 

9 filed under subsection (a) is subject to the same penalties 

10 as are provided under section 6004(e) for a misrepresenta11 tion of material fact described in such section. 

12 SEC. 6006. ENROLLMENT OUTREACH. 

13 (a) IN GENERAL.—The Secretary shall promulgate 

14 regulations under which each State operating a program 

15 for premium assistance under this subtitle shall have in 

16 effect an enrollment outreach system under which individ17 uals may be determined eligible for such assistance by 

18 health care providers who furnish services to such individ19 uals. 

20 (b) SPECIFICATIONS FOR REGULATIONS.—The regu21 lations promulgated by the Secretary under subsection (a) 

22 shall include the following requirements: 

23 (1) HEALTH CARE PROVIDERS.—Each State 

24 shall permit only the classes or categories of health 

25 care providers determined appropriate by the Sec-
1100 

•S 2357 

1 retary (referred to in this subsection as ‘‘eligible 

2 health care providers’’) to participate in an enroll3 ment outreach system established by the State. 

4 (2) APPLICATION FOR ASSISTANCE.—Each 

5 State shall develop and make available to eligible 

6 health care providers in the State an enrollment 

7 package for distribution to potentially eligible indi8 viduals which includes a simple form for individuals 

9 who receive services from such providers to apply for 

10 premium assistance. Such form shall— 

11 (A) permit an individual completing the 

12 form to make a declaration that the individual 

13 is eligible for a full subsidy under section 6002; 

14 and 

15 (B) permit an individual to enroll in a 

16 community-rated standard health plan offered 

17 in the community rating area in which the indi18 vidual resides. 

19 (3) SUBMISSION OF COMPLETED APPLICA20 TION.—An individual who receives an enrollment ap21 plication form from an eligible health care provider 

22 may complete the form and submit it to the individ23 ual’s provider or the State agency operating the pro24 gram for premium assistance under this subtitle. If 

25 a health care provider receives an application under 
1101 

•S 2357 

1 this section the provider shall submit the application 

2 to the State agency administering the premium as3 sistance program under this subtitle within a period 

4 of time determined appropriate by the Secretary in 

5 regulations. 

6 (4) SELECTION OF HEALTH PLAN.—An indi7 vidual may select a community-rated standard health 

8 plan with which to enroll on the date the individual 

9 submits an application form under this section or 

10 the individual may make such selection at a later 

11 date determined appropriate by the Secretary in reg12 ulations. If an individual fails to select a health plan 

13 with which to enroll by the date determined appro14 priate by the Secretary, the State agency shall select 

15 such a plan for the individual. 

16 (5) EFFECTIVE DATE OF ENROLLMENT.—An 

17 individual who is enrolled in a community-rated 

18 standard health plan in accordance with the enroll19 ment eligibility system established under this section 

20 shall be an enrollee of the plan as of the date the 

21 individual submits an application to the State agen22 cy or a health care provider. 

23 (6) PERIOD OF ELIGIBILITY.—An individual 

24 who submits an application to a health care provider 

25 under an enrollment outreach system under this sec-
1102 

•S 2357 

1 tion shall be eligible for premium assistance under 

2 this subtitle for the period beginning on the date 

3 such application is submitted and ending 60 days 

4 after such date. 

5 (7) NO STATE RESPONSIBILITY FOR ADMINIS6 TRATIVE ERRORS.—Section 6002(c)(3) shall not 

7 apply to any eligibility determinations made under 

8 this section. 

9 (8) NO RECONCILIATION REQUIRED.—The rec10 onciliation provisions of section 6005 shall not apply 

11 to any premium assistance paid on behalf of an indi12 vidual during a period of eligibility for such assist13 ance under this section. 

14 (9) REQUIREMENT ON STATES.—During a pe15 riod of eligibility for premium assistance under this 

16 section, an individual shall be given an opportunity 

17 by a State to apply for continuing eligibility for pre18 mium assistance under this subtitle. 

19 SEC. 6007. PAYMENTS TO STATES. 

20 (a) IN GENERAL.— 

21 (1) PAYMENTS FROM THE SECRETARY.—A 

22 State operating a program for furnishing premium 

23 assistance under this subtitle shall be entitled to re24 ceive payments from the Secretary in an amount 

25 equal to the premium assistance paid on behalf of 
1103 

•S 2357 

1 individuals eligible for such assistance under this 

2 subtitle. Such payments shall be made at such time 

3 and in such form as provided in regulations promul4 gated by the Secretary. 

5 (2) STATE ENTITLEMENT.—This subsection 

6 constitutes budget authority in advance of appro7 priations Acts, and represents the obligation of the 

8 Federal Government to provide payments to States 

9 operating programs under this subtitle in accordance 

10 with this section. 

11 (b) STATE ASSESSMENTS FOR ADMINISTRATION

12 COSTS.—A State operating a program for furnishing pre13 mium and cost-sharing assistance under this subtitle may 

14 impose a premium assessment on the insured health plans 

15 offered in the State in an amount not to exceed one per16 cent of the amount of the premium. Amounts collected 

17 pursuant to this subsection may only be used to cover the 

18 administrative costs of the State in operating such pro19 gram. 

20 (c) AUDITS.—The Secretary shall conduct regular 

21 audits of the activities under the State programs con22 ducted under this subtitle. 

23 SEC. 6008. DEFINITIONS AND DETERMINATIONS OF IN24 COME. 

25 For purposes of this subtitle: 
1104 

•S 2357 

1 (1) STANDARD HEALTH PLAN.—The term 

2 ‘‘standard health plan’’ means a health plan (as de3 fined in section 1011(2)(B)) providing the standard 

4 benefits package as described in section 1201(a). 

5 (2) CHILD.—The term ‘‘child’’ means an indi6 vidual who is under 19 years of age. 

7 (3) DETERMINATIONS OF INCOME.— 

8 (A) FAMILY INCOME.—The term ‘‘family 

9 income’’ means, with respect to an individual 

10 who— 

11 (i) is not a dependent (as defined in 

12 subparagraph (B)) of another individual, 

13 the sum of the modified adjusted gross in14 comes (as defined in subparagraph (D)) 

15 for the individual, the individual’s spouse, 

16 and children who are dependents of the in17 dividual; or 

18 (ii) is a dependent of another indi19 vidual, the sum of the modified adjusted 

20 gross incomes for the other individual, the 

21 other individual’s spouse, and children who 

22 are dependents of the other individual. 

23 (B) DEPENDENT.—The term ‘‘dependent’’ 

24 shall have the meaning given such term under 
1105 

•S 2357 

1 section 152 of the Internal Revenue Code of 

2 1986. 

3 (C) SPECIAL RULE FOR FOSTER CHIL4 DREN.—For purposes of subparagraph (A), a 

5 child who is placed in foster care by a State 

6 agency shall not be considered a dependent of 

7 another individual. 

8 (D) MODIFIED ADJUSTED GROSS IN9 COME.—The term ‘‘modified adjusted gross in10 come’’ means adjusted gross income (as defined 

11 in section 62(a) of the Internal Revenue Code 

12 of 1986)— 

13 (i) determined without regard to sec14 tions 135, 162(l), 911, 931, and 933 of 

15 such Code, and 

16 (ii) increased by— 

17 (I) the amount of interest re18 ceived or accrued by the individual 

19 during the taxable year which is ex20 empt from tax, and 

21 (II) the amount of the social se22 curity benefits (as defined in section 

23 86(d) of such Code) received during 

24 the taxable year to the extent not in-
1106 

•S 2357 

1 cluded in gross income under section 

2 86 of such Code. 

3 The determination under the preceding sen4 tence shall be made without regard to any car5 ryover or carryback. 

6 (E) SPECIAL RULE FOR INDIVIDUALS TEM7 PORARILY UNEMPLOYED.— 

8 (i) IN GENERAL.—For purposes of de9 termining eligibility for premium assistance 

10 under this subtitle for an individual who 

11 becomes unemployed, such individual’s 

12 spouse, and children who are dependents of 

13 such individual, the family income for such 

14 individuals determined under subparagraph 

15 (A) shall be reduced— 

16 (I) for each month before and 

17 after the period of unemployment, by 

18 an amount equal to the lesser of the 

19 gross wages of the individual for the 

month or 1 20 ⁄12th of the amount equal 

21 to 75 percent of the poverty line for 

22 an individual; and 

23 (II) for each month after the 

24 date the individual becomes unem25 ployed, by an amount equal to any 
1107 

•S 2357 

1 unemployment compensation under an 

2 unemployment compensation law of a 

3 State or of the United States received 

4 by or on behalf of the unemployed in5 dividual. 

6 (ii) LIMITATION.—Clause (i) shall no 

7 longer apply to an individual on the earlier 

8 of— 

9 (I) the date on which the period 

10 of unemployment ends; or 

11 (II) the end of the 6-month pe12 riod beginning on the first day of the 

13 first month during which the indi14 vidual receives premium assistance 

15 under this subtitle that would not be 

16 available to such individual if the pro17 visions of clause (i) did not apply. 

18 (iii) SPECIAL RULE.—Clause (i) shall 

19 not apply if an employer contribution of at 

20 least 80 percent of the premium under a 

21 standard health plan is available to the un22 employed individual through an employer 

23 of a member of the individual’s family. 

24 (4) ELIGIBLE INDIVIDUAL.— 
1108 

•S 2357 

1 (A) IN GENERAL.—The term ‘‘eligible indi2 vidual’’ means an individual who is residing in 

3 the United States 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 (C)). 

9 (B) EXCLUSION.—The term ‘‘eligible indi10 vidual’’ shall not include an individual who is 

11 an inmate of a public institution (except as a 

12 patient of a medical institution). 

13 (C) ALIEN PERMANENTLY RESIDING IN

14 THE UNITED STATES UNDER COLOR OF LAW.— 

15 The term ‘‘alien permanently residing in the 

16 United States under color of law’’ means an 

17 alien lawfully admitted for permanent residence 

18 (within the meaning of section 101(a)(20) of 

19 the Immigration and Nationality Act), and in20 cludes any of the following: 

21 (i) An alien who is admitted as a ref22 ugee under section 207 of the Immigration 

23 and Nationality Act. 

24 (ii) An alien who is granted asylum 

25 under section 208 of such Act. 
1109 

•S 2357 

1 (iii) An alien whose deportation is 

2 withheld under section 243(h) of such Act. 

3 (iv) An alien who is admitted for tem4 porary residence under section 210, 210A, 

5 or 245A of such Act. 

6 (v) An alien who has been paroled 

7 into the United States under section 

8 212(d)(5) of such Act for an indefinite pe9 riod or who has been granted extended vol10 untary departure as a member of a nation11 ality group. 

12 (vi) An alien who is the spouse or un13 married child under 21 years of age of a 

14 citizen of the United States, or the parent 

15 of such a citizen if the citizen is over 21 

16 years of age, and with respect to whom an 

17 application for adjustment to lawful per18 manent residence is pending. 

19 (5) POVERTY LINE.—The term ‘‘poverty line’’ 

20 means, for a family for a year, the official poverty 

21 line (as defined by the Office of Management and 

22 Budget, and revised annually in accordance with sec23 tion 673(2) of the Omnibus Budget Reconciliation 

24 Act of 1981) applicable to a family of the size in25 volved. 
1110 

•S 2357 

1 (6) PREGNANT WOMAN.— 

2 (A) IN GENERAL.—The term ‘‘pregnant 

3 woman’’ includes a woman deemed to be a 

4 pregnant woman under subparagraph (B). 

5 (B) PERIOD AFTER TERMINATION OF

6 PREGNANCY.—For purposes of this subtitle, a 

7 woman shall be deemed to be a pregnant 

8 woman during the period beginning on the date 

9 of the termination of the pregnancy and ending 

10 on the first day of the first month that begins 

11 more than 90 days after such date. 

12 Subtitle B—Employer Subsidies 

13 SEC. 6101. PURPOSE. 

14 It is the purpose of this subtitle to provide subsidies 

15 to eligible employers to assist such employers in providing, 

16 or expanding the provision of, health care coverage for the 

17 employees of such employers. 

18 SEC. 6102. ELIGIBLE EMPLOYERS. 

19 (a) IN GENERAL.—To be eligible for a subsidy under 

20 this subtitle an employer shall— 

21 (1) comply with the requirements of part 1 of 

22 subtitle D of title I; 

23 (2) contribute to the cost of health care cov24 erage for all employees of the same class (limited to 

25 full- or part-time) employed by the employer; 
1111 

•S 2357 

1 (3) contribute not less than 50 percent of the 

2 cost of health care coverage for each class of family 

3 enrollment for each employee so covered; and 

4 (4) prepare and submit to the Secretary of 

5 Labor an application, at such time, in such manner 

6 and containing such information as the Secretary 

7 may require. 

8 (b) APPLICATION OF REQUIREMENTS.— 

9 (1) IN GENERAL.—The requirements of para10 graphs (2) and (3) of subsection (a) shall only apply 

11 with respect to the employees described in paragraph 

12 (2). 

13 (2) COVERAGE OF EMPLOYEES.—The employees 

14 described in this paragraph are those employees— 

15 (A) for which the employer is contributing 

16 to the costs of health care coverage; and 

17 (B) for which the employer did not make 

18 such a contribution prior to the date of enact19 ment of this Act. 

20 (c) SOLE PROPRIETORSHIPS.—A sole proprietorship 

21 with not less than 3 full-time employees (including the sole 

22 proprietor) shall be eligible for a subsidy under this sub23 title if such proprietorship reports the payment of wages 

24 (as defined in the Internal Revenue Code of 1986), in the 

25 year prior to the year for which the subsidy is applied for, 
1112 

•S 2357 

1 in an amount required under regulations promulgated by 

2 the Secretary of Labor. 

3 (d) INELIGIBILITY.— 

4 (1) SELF-EMPLOYED.—A self-employed indi5 vidual (as such term is defined in section 1011(c)) 

6 shall not be eligible for a subsidy under this subtitle. 

7 (2) EMPLOYEE LEASING FIRMS.—An employer 

8 that is an employee leasing firm shall not be eligible 

9 for a subsidy under this subtitle. The Secretary of 

10 Labor shall promulgate regulations defining the 

11 term ‘‘employee leasing firm’’. 

12 (3) STATE OR LOCAL GOVERNMENTS.—An em13 ployer that is a State or local government shall not 

14 be eligible for a subsidy under this section. 

15 SEC. 6103. EMPLOYER CERTIFICATION. 

16 (a) REQUIREMENT.—An employer that submits an 

17 application under section 6102(a)(4) shall certify that 

18 such employer, prior to the date of enactment of this Act, 

19 did not contribute to the costs of health care coverage for 

20 the employees for which the employer is applying for the 

21 subsidy. 

22 (b) CONTRIBUTION LIMIT.—For purposes of sub23 section (a), an employer shall be treated as having contrib24 uted to the health care coverage of an employee if the 
1113 

•S 2357 

1 amount of such contribution is $500 or more (as 

2 annualized). 

3 (c) UNION SICKNESS FUNDS.—For purposes of this 

4 subtitle, employers that contribute to union sickness funds 

5 on behalf of their employees shall be deemed to have con6 tributed to the costs of health care coverage for the em7 ployees of such employer. 

8 (d) REGULATIONS.—For purposes of this section, the 

9 Secretary of Labor shall promulgate regulations to enable 

10 an employer to determine whether and to what extent an 

11 employer contributed to the costs of an employee’s health 

12 care coverage prior to the date of enactment of this Act. 

13 An employer shall utilize such regulations in submitting 

14 a certification under this section. 

15 SEC. 6104. AMOUNT OF SUBSIDY. 

16 (a) IN GENERAL.—With respect to an employee for 

17 which a subsidy application submitted by an employer has 

18 been approved by the Secretary of Labor under this sub19 title, the employer shall receive a subsidy (to be paid over 

20 a 5-year period) in an amount that equals— 

21 (1) with respect to the first 3 years after the 

22 date of enactment of this Act— 

23 (A)(i) in the case of a community-rated 

24 employer, 50 percent of the lesser of— 
1114 

•S 2357 

1 (I) the weighted average premium 

2 rate (as defined in section 6002(b)(1)(C)) 

3 for the purchasing cooperative through 

4 which the employer has contributed to the 

5 employee’s health care coverage (for the 

6 year involved); 

7 (II) the community-rate of the stand8 ard health plan under which the employee 

9 received coverage (for the year involved); 

10 or 

11 (III) the weighted average premium 

12 rate of the community rating area in which 

13 the employee resides; or 

14 (ii) in the case of an experience-rated em15 ployer, 50 percent of the lesser of— 

16 (I) the weighted average premium 

17 rate of the community rating area in which 

18 the employee resides; or 

19 (II) the premium rate for the experi20 ence-rated plan under which the employee 

21 received coverage (for the year involved); 

22 less 

23 (B) 12 percent of the wages of the em24 ployee (for the year involved); 
1115 

•S 2357 

1 (2) with respect to the fourth year after the 

2 date of enactment of this Act— 

3 (A) 37.5 percent of the lesser of the 

4 amounts referred to in subparagraph (A) of 

5 paragraph (1) (for the type of employer and the 

6 year involved); less 

7 (B) 12 percent of the wages of the em8 ployee (for the year involved); and 

9 (3) with respect to the fifth year after the date 

10 of enactment of this Act— 

11 (A) 25 percent of the lesser of the amounts 

12 referred to in subparagraph (A) of paragraph 

13 (1) (for the type of employer and the year in14 volved); less 

15 (B) 12 percent of the wages of the em16 ployee (for the year involved). 

17 (b) LIMITATIONS.— 

18 (1) AMOUNT OF CONTRIBUTION.—If, in apply19 ing the formula under subsection (a), the Secretary 

20 of Labor determines that an employer’s contribu21 tions to the health care coverage costs of its employ22 ees exceeds 50 percent of the weighted average pre23 mium rate for the purchasing cooperative through 

24 which the employer has so contributed (for the year 

25 involved), the Secretary shall notify such employer 
1116 

•S 2357 

1 that such employer is not eligible for a subsidy 

2 under this subtitle. 

3 (2) PART-TIME EMPLOYEES.—With respect to 

4 subsidies for health care coverage for part-time em5 ployee, the Secretary of Labor shall develop a for6 mula for the pro-rata reduction in such subsidies 

7 based on the formula described in subsection (a) and 

8 the hours of work performed by the employee. 

9 (3) SINGLE SUBSIDY.—An employer shall not 

10 be eligible to receive more than one subsidy under 

11 this section. The Secretary of Labor shall promul12 gate regulations to ensure that no employer will re13 ceive a second or subsequent subsidy under this sub14 title regardless of whether such employer had pre15 viously received the previous subsidy as an employer 

16 in a capacity different from that of the employer’s 

17 present capacity. 

18 SEC. 6105. DEFINITION. 

19 For purposes of this Act, an employee who is em20 ployed by an employer— 

21 (1) for at least 120 hours in a month shall be 

22 deemed to be employed on a full-time basis with re23 spect to that month, or 
1117 

•S 2357 

1 (2) for at least 40 hours, but less than 120 

2 hours, in a month shall be deemed to be employed 

3 on a part-time basis. 

4 TITLE VII—REVENUE 

5 PROVISIONS 

6 SEC. 7000. AMENDMENT OF 1986 CODE. 

7 Except as otherwise expressly provided, whenever in 

8 this title an amendment or repeal is expressed in terms 

9 of an amendment to, or repeal of, a section or other provi10 sion, the reference shall be considered to be made to a 

11 section or other provision of the Internal Revenue Code 

12 of 1986. 

13 Subtitle A—Financing Provisions 

14 PART 1—INCREASE IN TAX ON TOBACCO 

15 PRODUCTS 

16 SEC. 7101. INCREASE IN EXCISE TAXES ON TOBACCO 

17 PRODUCTS. 

18 (a) CIGARETTES.—Subsection (b) of section 5701 is 

19 amended by striking paragraph (1) and all that follows 

20 and inserting the following: 

21 ‘‘(1) SMALL CIGARETTES.—On cigarettes, 

22 weighing not more than 3 pounds per thousand, the 

23 amount per thousand determined under the fol24 lowing table: 

‘‘In the case of cigarettes removed— The tax per 

thousand is— 

After July 31, 1995, and before January 1, 1997 ............. $19.50
1118 

•S 2357 

‘‘In the case of cigarettes removed— The tax per 

thousand is— 

During 1997 ....................................................................... $24.50

During 1998 ....................................................................... $29.50

After December 31, 1998 ................................................... $34.50. 

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 61 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) SMALL 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) CIGARETTE 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) CIGARETTE 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
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•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) SNUFF.—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 ................................................... $1.031⁄2.’’ 

8 (f) CHEWING 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) APPLICATION 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) SHIPMENTS 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) SHIPMENTS 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) EFFECTIVE 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) IMPOSITION 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) AUTHORITY 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) CREDIT 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) LIABILITY FOR TAX AND METHOD OF PAY6 MENT.— 

7 (A) LIABILITY 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) METHOD 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— 
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•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) DEFINITIONS.—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) OTHER 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) EXEMPTION 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 re12 landed tobacco products or cigarette papers or tubes, 

13 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) IN 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).’’ 

22 (B) The table of sections for subpart F of chap23 ter 52 is amended by adding at the end the following 

24 new item: 
1129 

•S 2357 

‘‘Sec. 5754. Restriction on importation of previously exported tobacco products.’’ 

1 (b) IMPORTERS REQUIRED TO BE QUALIFIED.— 

2 (1) Sections 5712, 5713(a), 5721, 5722, 

3 5762(a)(1), and 5763 (b) and (c) are each amended 

4 by inserting ‘‘or importer’’ after ‘‘manufacturer’’. 

5 (2) The heading of subsection (b) of section 

6 5763 is amended by inserting ‘‘QUALIFIED IMPORT7 ERS,’’ after ‘‘MANUFACTURERS,’’. 

8 (3) The heading for subchapter B of chapter 52 

9 is amended by inserting ‘‘and Importers’’ after 

10 ‘‘Manufacturers’’. 

11 (4) The item relating to subchapter B in the 

12 table of subchapters for chapter 52 is amended by 

13 inserting ‘‘and importers’’ after ‘‘manufacturers’’. 

14 (c) REPEAL OF TAX-EXEMPT SALES TO EMPLOYEES

15 OF CIGARETTE MANUFACTURERS.— 

16 (1) Subsection (a) of section 5704 is amend17 ed— 

18 (A) by striking ‘‘EMPLOYEE USE OR’’ in 

19 the heading, and 

20 (B) by striking ‘‘for use or consumption by 

21 employees or’’ in the text. 

22 (2) Subsection (e) of section 5723 is amended 

23 by striking ‘‘for use or consumption by their employ-
1130 

•S 2357 

1 ees, or for experimental purposes’’ and inserting 

2 ‘‘for experimental purposes’’. 

3 (d) REPEAL OF TAX-EXEMPT SALES TO UNITED

4 STATES.—Subsection (b) of section 5704 is amended by 

5 striking ‘‘and manufacturers may similarly remove such 

6 articles for use of the United States;’’. 

7 (e) BOOKS OF 25 OR FEWER CIGARETTE PAPERS

8 SUBJECT TO TAX.—Subsection (c) of section 5701 is 

9 amended by striking ‘‘On each book or set of cigarette 

10 papers containing more than 25 papers,’’ and inserting 

11 ‘‘On cigarette papers,’’. 

12 (f) STORAGE OF TOBACCO PRODUCTS.—Subsection 

13 (k) of section 5702 is amended by inserting ‘‘under section 

14 5704’’ after ‘‘internal revenue bond’’. 

15 (g) AUTHORITY TO PRESCRIBE MINIMUM MANUFAC16 TURING ACTIVITY REQUIREMENTS.—Section 5712 is 

17 amended by striking ‘‘or’’ at the end of paragraph (1), 

18 by redesignating paragraph (2) as paragraph (3), and by 

19 inserting after paragraph (1) the following new paragraph: 

20 ‘‘(2) the activity proposed to be carried out at 

21 such premises does not meet such minimum capacity 

22 or activity requirements as the Secretary may pre23 scribe, or’’. 
1131 

•S 2357 

1 (h) SPECIAL 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) LIMITATION 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) EFFECTIVE 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) IN 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) ROLL-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) ROLL-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) IN 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) GENERAL 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) EXEMPTION 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) SPECIAL 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 

18 issuer. 

19 ‘‘(B) DESCRIPTION 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) APPLICABLE 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) INSURANCE 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) TREATMENT OF GOVERNMENTAL ENTITIES.— 

17 ‘‘(1) IN 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) EXEMPT 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) EXEMPT 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) NO 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) CLERICAL 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) EFFECTIVE 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) IN 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) IN 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) HIGH COST PLAN.—For purposes of this sec15 tion— 

16 ‘‘(1) IN 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) EXCESS 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 in6 sureds 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) PLANS 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) ANNUAL 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) EFFECT 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) COMPUTATION 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) UPDATING 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 under23 insurance, and in the proportion of expendi24 tures for services provided by academic health 

25 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) CONSULTATION 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) DETERMINATION 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 

8 United States of community-rated individuals 

9 as of 1994 (as determined under paragraph 

10 (4)) for whom such expenditures were deter11 mined. 

12 The population under subparagraph (B) shall not in13 clude SSI recipients. 

14 ‘‘(2) COVERED CURRENT HEALTH CARE EX15 PENDITURES.— 

16 ‘‘(A) IN GENERAL.—For purposes of para17 graph (1), the term ‘covered current health care 

18 expenditures’ means the amount of total pay19 ments made in the United States during 1994 

20 (other than amounts for cost sharing) for items 

21 and services included in the standard benefits 

22 package. 

23 ‘‘(B) REMOVAL OF CERTAIN EXPENDI24 TURES NOT TO BE COVERED.—The amount de25 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) ADDITION 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) ADDITION 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) ASSUMING 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) NONPARTICIPATING 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) IN 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) IN 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) IN 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 

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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 

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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) RISK 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) SPONSORS.—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 

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1 ‘‘(2) STARTUP 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 oper11 ating, adjusted to reflect the factors described in 

12 subsection (c)(3) under the plan which materially 

13 differ from such factors under the community-rated 

14 plans. 

15 ‘‘(3) ACQUISITIONS AND DISPOSITIONS.—The 

16 reference premium after an acquisition or disposition 

17 described in section 41(f)(3) involving the plan spon18 sor of an experience-rated plan shall be made pursu19 ant to such regulations as the Secretary may pre20 scribe. 

21 ‘‘(4) INFORMATION.—The Secretary may re22 quire a plan sponsor of an experience-rated plan to 

23 adopt such conventions as are necessary in its ac24 counting practices and financial records to assure 

25 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) RECOVERY.—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 

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1 ‘‘SEC. 4519. DEFINITIONS AND SPECIAL RULES. 

2 ‘‘(a) HEALTH 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 

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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) INSURANCE POLICY.—The term ‘insurance 

14 policy’ has the meaning given such term by section 

15 4503(a)(2). 

16 ‘‘(2) PLAN 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) SPECIAL 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 

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1 ‘‘(2) GOVERNMENTAL ENTITIES SUBJECT TO

2 TAX.—The rules of section 4503(b) shall apply for 

3 purposes of this part. 

4 ‘‘(3) NO 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) REGULATIONS.—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 

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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) EFFECTIVE 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) IN 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) IMPOSITION 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 

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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 PREMIUM 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) JOINT 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) OTHER DEFINITIONS AND SPECIAL RULES.— 

7 For purposes of this section— 

8 ‘‘(1) THRESHOLD 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) JOINT 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) NOT 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 deter23 mining— 

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) CLERICAL 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) EFFECTIVE 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) ADDITIONAL 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) IN 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) CONTROLLED 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 

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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 CORPORATION

11 SHAREHOLDERS.— 

12 ‘‘(1) IN GENERAL.—In the case of any indi13 vidual— 

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) CERTAIN 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 

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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) AMENDMENT 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 

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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) AMENDMENT 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) INVENTORY 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) IN 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) DEALERS 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. 
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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) EFFECTIVE 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). 
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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 Rev18 enue 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 
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•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) INFORMATION 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, 
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•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 ben7 efit 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. 
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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) GENERAL 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) INCLUSION 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) PERMITTED COVERAGE.—For purposes of 

22 this subsection, the term ‘permitted coverage’ means 

23 any— 
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•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), 
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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 incon7 sistent with the purposes of this subsection. 

8 ‘‘(3) SPECIAL 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 
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•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) RAILROAD 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) UNEMPLOYMENT 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) IN GENERAL.—The amendments made by 

21 this section shall take effect on January 1, 1996. 

22 (2) BENEFITS 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) GENERAL 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) CONFORMING 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.— 
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•S 2357 

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

2 this section shall take effect on January 1, 1997. 

3 (2) BENEFITS 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) EFFECTIVE 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) IN 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-
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•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-
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•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) CONFORMING 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. 
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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) EFFECTIVE DATE.—The amendment made by 

21 subsection (a) shall apply to amounts paid after December 

22 31, 1994. 
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•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. 
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•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) PERMITTED 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 
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•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) IN 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. 
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•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) IN 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 
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•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) NO 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) EMPLOYEE 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) CONFORMING 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) EFFECTIVE 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) TREATMENT 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) QUALIFICATION 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— 
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•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) REQUIREMENTS 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) REPORTING AND DISCLOSURE OF NEEDS AS18 SESSMENT AND PLAN.— 

19 (1) REPORTING.— 

20 (A) ORGANIZATIONS 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 
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•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) ORGANIZATIONS 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) CERTAIN 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) IN 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 reg22 ular business hours by any individual at 

23 the principal office of such organization 

24 and, if such organization regularly main25 tains 1 or more regional or district offices 
1222 

•S 2357 

1 having 3 or more employees, at each such 

2 regional 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) TECHNICAL 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) IN 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) IN 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) SPECIAL RULES RELATING TO LIABILITY FOR

22 TAX.—For purposes of this section— 

23 ‘‘(1) JOINT 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 indi4 vidual described in subparagraph (A), and 

5 ‘‘(C) a 35-percent controlled entity. 

6 ‘‘(2) ORGANIZATION 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) IN 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) IMPOSITION 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) ABATEMENT 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 certain cases.’’ 

1 (d) EFFECTIVE DATES.— 

2 (1) IN 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) IN 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) CERTAIN 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) EFFECTIVE DATE.—The amendments made by 

19 this section shall take effect on the date of the enactment 

20 of this Act. 
1239 

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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) TREATMENT 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) APPLICATION OF SECTION 833 PRIOR TO RE19 PEAL.— 

20 (1) IN 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.— 
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•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) EFFECTIVE 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) TRANSITION 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 enti6 ty— 

7 ‘‘(i) which was established by a State or polit8 ical 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) REPEAL 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) IN 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 OPER19 ATING 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) DEFINITIONS.—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 ‘‘GOVERNMENT’’ 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 ‘‘CERTAIN 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) IN 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) IN 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) REQUIREMENTS.—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 

21 issued (or, in the case of a refunding or series 

22 of refundings, the date on which the original 

23 bond 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) EFFECTIVE 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 med23 ical, 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) LICENSED 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) CERTAIN 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 

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1 mentary medical insurance for the aged) cov2 ering 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) EFFECTIVE 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 

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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 

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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 

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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 

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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) AGGREGATION 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) IN 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) CAFETERIA 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) RESERVES.—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) CLERICAL 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) IN 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) TRANSITION 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) ISSUANCE 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) GENERAL 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) RATES.—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) TERMINALLY 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) IN 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) ISSUANCE 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) IN 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 BEN6 EFIT 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) EFFECTIVE 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 

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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) IN 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) EFFECTIVE 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) IN 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) QUALIFIED 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) SPECIAL 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 pro17 viding 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) ELIGIBLE 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) OTHER DEFINITIONS AND SPECIAL RULES.— 

11 For purposes of this section— 

12 ‘‘(1) BUREAU.—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 sub20 stituting ‘$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-
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1 it under subpart A, B, or D of this part or for pur2 poses of section 55.’’ 

3 (b) CLERICAL 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) EFFECTIVE 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) IN 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) HEALTH 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 
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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 
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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) RECAPTURE.—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) EFFECTIVE 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) MINIMUM PERIOD FOR WORKING LIVES.—Sec23 tion 419A(c)(2) (relating to additional reserves for post24 retirement medical and life insurance benefits) is amended 
1292 

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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) IN 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. 
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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) IN 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-
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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) LIMITATION.—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 pre14 ceding 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 
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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-
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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) ACTIVITIES 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) BASIS 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. 
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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) CLERICAL AMENDMENT.—The table of sections 

24 for subpart A of part IV of subchapter A of chapter 1 
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•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 employed individuals.’’ 

3 (d) EFFECTIVE 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) IN 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) INFORMATION.—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, 
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1 tax-exempt interest income, marital status, and 

2 dependents. 

3 ‘‘(C) RESTRICTION 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)’’. 
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•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) IN 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) IN 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 
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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— 
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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) GRADUATE 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 
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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.— 
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•S 2357 

1 ‘‘(1) INSUFFICIENT 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) ALLOCATION OF EXCESS FUNDS AND IN12 TEREST.—Amounts received in the Graduate Med13 ical 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) CONFORMING 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. 
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•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. 
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•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-
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•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. 
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•S 2357 

1 (b) ELIGIBILITY.—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) LIMITATION 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) IN 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 
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•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) CONTRACTS 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). 
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1 (c) APPLICABLE 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) PAYMENT 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. 
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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) PAYMENT 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 con9 cerning the status of the Indian Health Service as the 

10 payer of last resort for Indians eligible for contract health 

11 services under a health program of the Indian Health 

12 Service. 

13 (c) PAYMENT FOR SERVICES BY MEDICARE.—Pro14 grams of the Indian Health Service shall be eligible for 

15 payments for services provided to Medicare beneficiaries. 

16 (d) RETENTION OF RECEIPTS.—Notwithstanding 

17 any other provision of law, the collections made by a 

18 health program of the Indian Health Service shall remain 

19 with the health program if the receipts are used to— 

20 (1) expand or improve its services; 

21 (2) increase the number of persons it is able to 

22 serve; 

23 (3) construct, expand or modernize its health 

24 care facilities; 
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1 (4) improve the administration of its health 

2 service programs; or 

3 (5) develop or improve linkages with other 

4 health care providers. 

5 (e) COLLECTION.—Each health program of the In6 dian Health Service shall make every reasonable effort to 

7 collect appropriate reimbursement for its costs in pro8 viding health services to persons who are covered by public 

9 or private health insurance programs. 

10 SEC. 8108. CONTRACTING AUTHORITY. 

11 Section 601(d)(1)(B) of the Indian Health Care Im12 provement Act (25 U.S.C. 1661(d)(1)(B)) is amended by 

13 inserting ‘‘(including personal services for the provision of 

14 direct health care services)’’ after ‘‘goods and services’’. 

15 SEC. 8109. CONSULTATION. 

16 (a) OMB AND SECRETARY.—The Director of the Of17 fice of Management and Budget and the Secretary shall 

18 consult, on an annual basis, with representatives of Indian 

19 tribes, tribal organizations, and urban Indian organiza20 tions concerning health care reform initiatives that affect 

21 Indian communities, and policy, funding, and administra22 tion of health programs of the Indian Health Service. The 

23 Secretary shall solicit and consider the views and rec24 ommendations provided by Indian tribes, tribal organiza25 tions, and representatives of urban Indian organizations 
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1 in making determinations that affect Indians and Indian 

2 tribes and shall resolve any differences in favor of Indians 

3 and Indian tribes. 

4 (b) FEDERAL ADVISORY GROUP.— 

5 (1) ESTABLISHMENT.—The Secretary shall es6 tablish an advisory group to assess all aspects of the 

7 development and administration of the budget for 

8 programs of the Indian Health Service and advise 

9 the Office of Management and Budget, the Sec10 retary and Congress with respect to such aspects. 

11 (2) COMPOSITION.—The advisory group shall be 

12 comprised of— 

13 (A) not less than one representative from 

14 each area of the Indian Health Service to be 

15 appointed by the Secretary from nominees of 

16 tribes and tribal organizations in the respective 

17 areas; 

18 (B) not less than one urban Indian rep19 resentative from each area the Indian Health 

20 Service with an urban Indian (as defined in sec21 tion 4(f) of the Indian Health Care Improve22 ment Act (25 U.S.C. 1603(f)) program to be 

23 appointed by the Secretary; and 

24 (C) such other appointees as the Secretary 

25 determines appropriate, on the condition that a 
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1 majority of the members are selected from 

2 nominations submitted to the Secretary by a 

3 tribe or tribal organization. 

4 SEC. 8110. TRANSITIONAL STUDIES. 

5 (a) IN GENERAL.—The Secretary shall conduct plan6 ning, feasibility, or similar health services studies related 

7 to the transition of the health programs of the Indian 

8 Health Service under health care reform. Such studies 

9 shall take into account the measurements and the means 

10 to accomplish the Healthy People 2000 objectives as re11 quired under sections 3 and 214 of the Indian Health Care 

12 Improvement Act. Such studies shall include an assess13 ment of— 

14 (1) the feasibility of developing an Indian 

15 health plan or plans; 

16 (2) the financing necessary to provide the same 

17 level of standard benefits to American Indians and 

18 Alaska Natives as will be available to all other 

19 Americans; 

20 (3) the staffing, program and infrastructure en21 hancements required to deliver the standard benefits 

22 package; 

23 (4) the facility and capital construction needs 

24 necessary to provide the standard benefit package; 

25 and 
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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) ESTABLISHMENT.—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 
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1 appointed are selected from nominations sub2 mitted to the Secretary by tribes or tribal orga3 nizations. 

4 (c) RECOMMENDATIONS.—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. 
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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) IN 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. 
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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) IN 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)), 
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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) LOANS 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) RELATION 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-
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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. 
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‘‘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 Department. 

‘‘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 indi11 vidual enrolled under the Health Security Act in a 

12 VA 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. 
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•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 
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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 ben7 efit 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 
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•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 vet16 eran’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. 
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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 co6 payments, deductibles, and coinsurance amounts for care 

7 and services provided under this chapter. The premium 

8 rate, and the rates for deductibles and copayments, for 

9 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. 
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•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 
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•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 
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•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 Vet7 erans 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, copay14 ments or coinsurance, and deductibles, amounts received 

15 as third-party reimbursements or reimbursements from 

16 Medicare, and amounts received as reimbursements from 

17 another health plan for care furnished to one of its enroll18 ees) 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-
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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 indi20 vidual 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-
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•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) IN GENERAL.—Chapter 73 of title 38, United 

24 States Code, is amended— 
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•S 2357 

1 (1) by redesignating subchapter IV as sub2 chapter V; and 

3 (2) by inserting after subchapter III the fol4 lowing 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. 
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•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 
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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 
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•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) 
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•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 
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•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. 
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•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’). 
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•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 
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•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. 
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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) CLERICAL 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’’. 
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1 TITLE IX—WORKERS COMPENSA2 TION MEDICAL SERVICES 

3 SEC. 9000. APPLICATION OF INFORMATION REQUIRE4 MENTS. 

5 (a) IN 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) RULES.—The Secretary of Labor shall promul25 gate rules to clarify the responsibilities of health plans and 
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•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) APPLICABILITY.—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) AUTHORIZATION.—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) DEVELOPMENT 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. 
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•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) IN 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 
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•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-
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•S 2357 

1 ence, in accordance with sections 5702 and 5703 of 

2 title 5, United States Code. 

3 (c) DUTIES.— 

4 (1) IN 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 exam15 ining the relationship between health plans and 

16 workers 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. 
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•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 
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•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) REPORTS.—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-
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•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) COMPOSITION.—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) IN 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) IN 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-
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•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) IN 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) HEALTH CARE COVERAGE.—For purposes 

21 of this title, the term ‘‘health care coverage’’ means 

22 coverage under— 

23 (A) a certified standard health plan pro24 viding a standard benefits package or an alter25 native standard benefits package; 
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•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: 
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•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; 
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•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) BENEFITS 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) IN 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 
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•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-
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•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) COMMISSION 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. 
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•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) RECOMMENDATION 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) IN 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 

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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 
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•S 2357 

1 order to move to reconsider the vote by which 

2 the motion is agreed to or disagreed to. 

3 (B) TIME LIMITATION ON CONSIDERATION

4 OF BILL.— 

5 (i) IN 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 imple20 menting 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 

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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 

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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) DEBATE 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) DEBATE ON CONFERENCE REPORT.— 

14 Debate in the Senate on the conference report 

15 shall be limited to not more than 10 hours. 

16 (5) FLOOR 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 

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1 (B) GENERAL DEBATE.—After general de2 bate, which shall be confined to the imple3 menting bill and which shall not exceed 4 

4 hours, to be equally divided and controlled by 

5 the Chairman and Ranking Minority Member of 

6 the Committee or Committees to which the bill 

7 had been referred, the bill shall be considered 

8 for 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 

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1 (6) COMPUTATION 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) POINTS OF ORDER BASED ON EXPANDING

12 COVERAGE.— 

13 (A) IN 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) MEETINGS.—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) QUORUM.—Four members of the Commis23 sion shall constitute a quorum thereof. 

24 (b) ADMINISTRATIVE PROVISIONS.— 
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1 (1) FACA 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) PAY.—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) TRAVEL 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) IN GENERAL.—The Commission shall, 

21 without regard to section 5311(b) of title 5, 

22 United States Code, appoint an Executive Di23 rector. 
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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) CONTRACT 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) LEASES 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 Indi16 vidual Premium Requirements 

17 and 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) IN 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 ref18 ugee 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) INDIVIDUAL 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) QUALIFIED RELIGIOUS EXEMPTION.— 

14 (i) IN GENERAL.—The term ‘qualified 

15 religious exemption’ means an exemption 

16 granted by the Secretary to an indi17 vidual— 

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 Rev24 enue 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) IN 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) FULL-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) CONSIDERATION 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) PRESENCE 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 Rev12 enue 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) WEIGHTED 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) IN 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) IN 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) SELF-EMPLOYED.—A self-employed indi25 vidual that does not employ at least one full-time 
1383 

•S 2357 

1 employee may not make an election under paragraph 

2 (1). 

3 SEC. 10112. COMMUNITY-RATED EMPLOYERS. 

4 (a) REQUIREMENT.— 

5 (1) IN 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) TREATMENT 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) GENERAL 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) EMPLOYER 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) SELF-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) CREDITS 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) PREMIUM.—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) CREDITS 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) IN 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) EXCLUSION 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. 
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1 SEC. 10135. FAMILY CREDIT. 

2 (a) IN 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) IN 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— 
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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 pur10 chasing cooperative through which the 

11 family 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-
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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-
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1 come threshold amount (specified in paragraph 

2 (4)), the family obligation amount is zero. 

3 (B) INCOME 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) GRADUATED 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 
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1 than 200 percent) of the applicable poverty 

2 level. 

3 (2) MARGINAL RATES.—In paragraph (1), for a 

4 year: 

5 (A) INITIAL 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) FAMILIES 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 
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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) INDEXING.—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) ROUNDING.—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. 
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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) IN 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 
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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) INCOME 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- 
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1 adjusted income exceeds 100 percent of the 

2 applicable poverty level. 

3 (2) MARGINAL RATES.—In paragraph (1)— 

4 (A) INITIAL 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 
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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. 
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•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) PRESIDENT’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-
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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) CURRENT 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). 
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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-
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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) ELIGIBILITY 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). 
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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) CONSULTATION.—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) SUSPENSION 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 
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1 immediately preceding quarter is less than 1 

2 percent. 

3 (2) WAR.—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) RECOMMENDATIONS 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 AUDIT 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) ADDITIONAL OMB REPORTING REQUIREMENTS

21 TO BE INCLUDED IN PRESIDENT’S BUDGET.— 

22 (1) ADJUSTED ESTIMATE OF TOTAL FEDERAL

23 HEALTH CARE COSTS.— 

24 (A) IN GENERAL.—When the President 

25 submits the budget for fiscal year 1997, and 
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•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 
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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) ADDITIONAL 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 
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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