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[Congressional Bills 103th Congress]
[From the U.S. Government Publishing Office]
[S. 2357 Introduced in Senate (IS)]

103d CONGRESS
  2d Session
                                S. 2357

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

_______________________________________________________________________

                   IN THE SENATE OF THE UNITED STATES

               August 3 (legislative day, July 20), 1994

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

_______________________________________________________________________

                                 A BILL

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

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

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Health Security 
Act''.
    (b) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; table of contents.

  TITLE I--IMPROVED ACCESS TO STANDARDIZED AND AFFORDABLE HEALTH PLANS

       Subtitle A--Rules and Definitions of General Applicability

                 Part 1--Rules of General Applicability

Sec. 1001. Access to standardized coverage.
Sec. 1002. Standard health plan principles.
Sec. 1003. Protection of consumer choice.
                          Part 2--Definitions

Sec. 1011. Definitions relating to health plans.
Sec. 1012. Definitions relating to employment and income.
Sec. 1013. Other general definitions.

                   Subtitle B--Health Plan Standards

           Part 1--Establishment and Application of Standards

Sec. 1101. Establishment of National standards.
Sec. 1102. General rules.

                    Part 2--Insurance Market Reform

Sec. 1111. Guaranteed issue, availability, and renewability.
Sec. 1112. Enrollment.
Sec. 1113. Coverage of dependents.
Sec. 1114. Nondiscrimination based on health status.
Sec. 1115. Benefits.
Sec. 1116. Community rating requirements.
Sec. 1117. Risk adjustment and reinsurance.
Sec. 1118. Financial solvency requirements and consumer protection 
                            against provider claims.

                     Part 3--Delivery System Reform

Sec. 1121. Prohibition of discrimination.
Sec. 1122. Quality assurance standards.
Sec. 1123. Consumer grievance process.
Sec. 1124. Health security cards.
Sec. 1125. Information and marketing standards.
Sec. 1126. Information regarding a patient's right to self-
                            determination in health care services.
Sec. 1127. Contracts with purchasing cooperatives.
Sec. 1128. Health plan arrangements with providers.
Sec. 1129. Utilization management protocols and physician incentive 
                            plans.

               Part 4--Supplemental Health Benefits Plans

Sec. 1141. Supplemental health benefits plans.

                 Subtitle C--Benefits and Cost-Sharing

                   Part 1--Standard Benefits Packages

Sec. 1201. General description of standard benefits packages.
Sec. 1202. Description of categories of items and services.
Sec. 1203. Definitions.

                 Part 2--National Health Benefits Board

Sec. 1211. Creation of National health benefits board; membership.
Sec. 1212. Qualifications of board members.
Sec. 1213. General duties and responsibilities.
Sec. 1214. Powers.
Sec. 1215. Funding.
Sec. 1216. Applicability of Federal Advisory Committee Act.
Sec. 1217. Congressional consideration of Board proposals.

                   Subtitle D--Access to Health Plans

                    Part 1--Access Through Employers

Sec. 1301. General employer responsibilities.
Sec. 1302. Auditing of records.
Sec. 1303. Prohibition of certain employer discrimination.
Sec. 1304. Prohibition on self-insuring cost-sharing benefits.
Sec. 1305. Responsibilities in single-payer States.
Sec. 1306. Development of large employer purchasing groups.
Sec. 1307. Rules governing litigation involving retiree health 
                            benefits.
Sec. 1308. Enforcement.

    Part 2--Access Through Health Insurance Purchasing Cooperatives

                    SUBPART A--GENERAL REQUIREMENTS

Sec. 1321. Organization and operation.
Sec. 1322. Membership.
Sec. 1323. Agreements with standard health plans.
Sec. 1324. Membership and marketing fees.

                  SUBPART B--COMMUNITY-RATED EMPLOYERS

Sec. 1331. Duties of purchasing cooperatives.

          SUBPART C--FEDERAL EMPLOYEES HEALTH BENEFITS PROGRAM

Sec. 1341. Requirements applicable to FEHBP.
Sec. 1342. Special rules for FEHBP supplemental plans.
Sec. 1343. Definitions.

                 Part 3--Treatment of Association Plans

Sec. 1351. Rules relating to multiple employer welfare arrangements.
Sec. 1352. Association plans.

                  Subtitle E--Federal Responsibilities

             Part 1--Secretary of Health and Human Services

                       SUBPART A--GENERAL DUTIES

Sec. 1401. General duties and responsibilities.
Sec. 1402. Annual report.
Sec. 1403. Assistance with family collections.
Sec. 1404. Advisory opinions.
Sec. 1405. Funding.

 SUBPART B--RESPONSIBILITIES RELATING TO REVIEW AND APPROVAL OF STATE 
                                SYSTEMS

Sec. 1411. Federal review and action on State systems.
Sec. 1412. Failure of participating States to meet conditions for 
                            compliance.
Sec. 1413. Reduction in payments for health programs by Secretary of 
                            Health and Human Services.
Sec. 1414. Review of Federal determinations.
Sec. 1415. Federal support for State implementation.

        SUBPART C--RESPONSIBILITIES IN ABSENCE OF STATE SYSTEMS

Sec. 1421. Application of subpart.
Sec. 1422. Federal assumption of responsibilities in non-participating 
                            States.
Sec. 1423. Imposition of surcharge on premiums under federally-operated 
                            system.
Sec. 1424. Return to State operation.

    SUBPART D--ESTABLISHMENT OF CLASS FACTORS FOR CHARGING PREMIUMS

Sec. 1431. Premium class and age class factors.

 SUBPART E--RISK ADJUSTMENT AND REINSURANCE METHODOLOGY FOR PAYMENT OF 
                                 PLANS

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

         SUBPART F--RESPONSIBILITIES FOR FINANCIAL REQUIREMENTS

Sec. 1441. Capital standards for community-rated plans.
Sec. 1442. Standard for guaranty funds.

                       SUBPART G--OPEN ENROLLMENT

Sec. 1445. Periods of authorized changes in enrollment.
Sec. 1446. Distribution of comparative information.
Sec. 1455. Reports.

                 Part 2--Essential Community Providers

Sec. 1461. Certification.
Sec. 1462. Categories of providers automatically certified.
Sec. 1463. Standards for additional providers.
Sec. 1464. Certification process; review; termination of 
                            certifications.
Sec. 1465. Notification of participating States.
Sec. 1466. Health plan requirement.
Sec. 1467. Recommendation on continuation of requirement.
Sec. 1468. Definitions.

        Part 3--Specific Responsibilities of Secretary of Labor

Sec. 1481. Responsibilities of Secretary of Labor.
Sec. 1482. Federal role with respect to multi-State self-insured health 
                            plans.
Sec. 1483. Assistance with employer collections.
Sec. 1484. Penalties for failure of large employer purchasing groups to 
                            meet requirements.
Sec. 1485. Applicability of ERISA enforcement mechanisms for 
                            enforcement of certain requirements.
Sec. 1486. Workplace wellness program.

                 Part 4--Office of Rural Health Policy

Sec. 1491. Office of rural health policy.

            Subtitle F--Participating State Responsibilities

                    Part 1--General Responsibilities

Sec. 1501. State plan and certification of standard health plans and 
                            supplemental health benefits plans.
Sec. 1502. Community rating areas and health plan service areas.
Sec. 1503. Open enrollment periods.
Sec. 1504. Risk adjustment program.
Sec. 1505. Guaranty funds.
Sec. 1506. Enrollment activities.
Sec. 1507. Rural and medically underserved areas.
Sec. 1508. Public access sites.
Sec. 1509. Requirements relating to possessions of the United States.
Sec. 1510. Right of recovery of certain taxes against providers.

                    Part 2--Treatment of State Laws

Sec. 1511. Preemption of certain State laws relating to health plans.
Sec. 1512. Override of restrictive State practice laws.

                       Part 3--State Flexibility

                     SUBPART A--EXISTING STATE LAWS

Sec. 1521. Continuance of existing Federal law waivers.
Sec. 1522. Hawaii prepaid Health Care Act.
Sec. 1523. Alternative State provider payment systems.
Sec. 1524. Alternative State hospital services payment systems.

         SUBPART B--REQUIREMENTS FOR STATE SINGLE-PAYER SYSTEMS

Sec. 1531. Single-payer system described.
Sec. 1532. General requirements for single-payer systems.
Sec. 1533. Special rules for States operating statewide single-payer 
                            system.
Sec. 1534. Special rules for community rating area-specific single-
                            payer systems.

    SUBPART C--EARLY IMPLEMENTATION OF COMPREHENSIVE STATE PROGRAMS

Sec. 1541. Early implementation of comprehensive State programs.

                  Subtitle G--Miscellaneous Provisions

Sec. 1601. Provision of items or services contrary to religious belief 
                            or moral conviction.
Sec. 1602. Antidiscrimination.

                         TITLE II--NEW BENEFITS

   Subtitle A--Coverage of Outpatient Prescription Drugs in Medicare

Sec. 2000. References in subtitle.
           Part 1--Coverage of Outpatient Prescription Drugs

Sec. 2001. Coverage of outpatient prescription drugs.
Sec. 2002. Payment rules and related requirements for covered 
                            outpatient drugs.
Sec. 2003. Medicare rebates for covered outpatient drugs.
Sec. 2004. Prescription drug payment review commission.
Sec. 2005. Coverage of home infusion drug therapy services.
Sec. 2006. Medicare drug benefit plans.
Sec. 2007. Payment for covered outpatient drug benefit under medicare 
                            contracts with HMOs and CMPS.
Sec. 2008. Maintenance of effort.
             Subtitle B--Home and Community-Based Services

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

Sec. 2101. State programs for home and community-based services for 
                            individuals with disabilities.
Sec. 2102. State plans.
Sec. 2103. Individuals with disabilities defined.
Sec. 2104. Home and community-based services covered under State plan.
Sec. 2105. Cost sharing.
Sec. 2106. Quality assurance and safeguards.
Sec. 2107. Advisory groups.
Sec. 2108. Payments to States.
Sec. 2109. Appropriations; allotments to States.
Sec. 2110. Federal evaluations.
Part 2--Grants Relating to the Development of Hospital Linkage Programs

Sec. 2111. Information and technical assistance grants relating to 
                            development of hospital linkage programs.
  Subtitle C--Long-Term Care Insurance Improvement and Accountability

Sec. 2200. Short title.
          Part 1--Promulgation of Standards and Model Benefits

Sec. 2201. Standards.
 Part 2--Establishment and Implementation of Long-term Care Insurance 
                            Policy Standards

Sec. 2211. Implementation of policy standards.
Sec. 2212. Regulation of sales practices.
Sec. 2213. Additional responsibilities for carriers.
Sec. 2214. Renewability standards for issuance, and basic for 
                            cancellation of policies.
Sec. 2215. Benefit standards.
Sec. 2216. Nonforfeiture.
Sec. 2217. Limit of period of contestability and right to return.
Sec. 2218. Civil money penalty.
 Part 3--Long-term Care Insurance Policies, Definition and Endorsements

Sec. 2221. Long-term care insurance policy defined.
Sec. 2222. Code of conduct with respect to endorsements.
                         Subtitle D--Life Care

Sec. 2301. Short title.
Sec. 2302. Life care: public insurance program for nursing home care.
                      Subtitle E--Study and Report

Sec. 2401. Study of issues related to end of life care.
                TITLE III--HEALTH PROFESSIONS WORKFORCE

        Subtitle A--Workforce Priorities Under Federal Payments

Sec. 3000. Definitions.
 Part 1--Institutional Costs of Graduate Medical Education; Workforce 
                               Priorities

       SUBPART A--NATIONAL COUNCIL REGARDING WORKFORCE PRIORITIES

Sec. 3001. National Council on Graduate Medical Education.
         SUBPART B--AUTHORIZED POSITIONS IN SPECIALTY TRAINING

Sec. 3011. Cooperation regarding approved physician training programs.
Sec. 3012. Annual authorization of total number of graduate medical 
                            education positions.
Sec. 3013. Annual authorization of number of specialty positions; 
                            requirements regarding primary health care.
Sec. 3014. National Council recommendation of number of graduate 
                            medical education positions.
Sec. 3015. Allocations among specialities and programs.
             SUBPART C--COSTS OF GRADUATE MEDICAL EDUCATION

      Chapter 1--Operation Of Approved Physician Training Programs

Sec. 3031. Federal formula payments to qualified entities for the costs 
                            of the operation of approved physician 
                            training programs.
Sec. 3032. Application for payments.
Sec. 3033. Availability of funds for payments; annual amount of 
                            payments.
Sec. 3034. Payments for dental and podiatric positions.
   Chapter 2--Academic Health Centers and Other Eligible Institutions

Sec. 3051. Federal formula payments to academic health centers and 
                            other eligible institutions.
Sec. 3052. Request for payments.
Sec. 3053. Availability of funds for payments; annual amount of 
                            payments.
                   SUBPART D--TRANSITIONAL PROVISIONS

Sec. 3055. Transitional payments to institutions.
Sec. 3056. Waiver of foreign country residence requirement with respect 
                            to international medical graduates.
              Part 2--Health Professions Schools Payments

                 SUBPART A--PAYMENTS TO MEDICAL SCHOOLS

Sec. 3061. Federal payments to medical schools.
Sec. 3062. Application for payments.
Sec. 3063. Authorization of appropriations; annual amount of payments.
                SUBPART B--PAYMENTS TO NURSING PROGRAMS

Sec. 3071. Federal payments to graduate nurse training programs.
Sec. 3072. National Council on Graduate Nurse Training.
                 SUBPART C--PAYMENTS TO DENTAL SCHOOLS

Sec. 3073. Dental schools.
            SUBPART D--PAYMENTS TO SCHOOLS OF PUBLIC HEALTH

Sec. 3074. Schools of public health.
                        Part 3--Related Programs

                    SUBPART A--WORKFORCE DEVELOPMENT

Sec. 3081. Programs of the Secretary of Health and Human Services.
Sec. 3082. Programs of the Secretary of Labor.
Sec. 3083. Requirement for certain programs regarding redeployment of 
                            health care workers.
       SUBPART B--TRANSITIONAL PROVISIONS FOR WORKFORCE STABILITY

Sec. 3091. Application.
Sec. 3092. Definitions.
Sec. 3093. Obligations of displacing employer and affiliated 
                            enterprises in event of displacement.
Sec. 3094. Employment with successors.
Sec. 3095. Collective bargaining obligations during transition period.
Sec. 3096. General provisions.
                  Subtitle B--Academic Health Centers

Sec. 3131. Discretionary grants regarding access to centers.
                Subtitle C--Health Research Initiatives

                 Part 1--Programs for Certain Agencies

Sec. 3201. Biomedical, behavioral and health services research.
Sec. 3202. Health services research.
Sec. 3203. AHCPR guidelines and standards.
                      Part 2--Funding for Program

Sec. 3211. Authorizations of appropriations.
                Part 3--Medical Technology Impact Study

Sec. 3221. Medical technology impact study.
    Subtitle D--Core Functions of Public Health Programs; National 
                Initiatives Regarding Preventive Health

                            Part 1--Funding

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

Sec. 3311. Purposes.
Sec. 3312. Grants to States for core functions of public health.
Sec. 3313. Submission of information.
Sec. 3314. Reports.
Sec. 3315. Application for grant.
Sec. 3316. Allocations for certain activities.
Sec. 3317. Definitions.
Sec. 3318. Single application and uniform reporting systems for core 
                            functions of public health and public 
                            health categorical grant programs 
                            administered by the centers for disease 
                            control and prevention.
  Part 3--National Initiatives Regarding Health Promotion and Disease 
                               Prevention

                       SUBPART A--GENERAL GRANTS

Sec. 3331. Grants for national prevention initiatives.
Sec. 3332. Priorities.
Sec. 3333. Submission of information.
Sec. 3334. Application for grant.
   SUBPART B--DEVELOPMENT OF TELEMEDICINE IN RURAL UNDERSERVED AREAS

Sec. 3341. Grants for development of rural telemedicine.
Sec. 3342. Report and evaluation of telemedicine.
Sec. 3343. Regulations on reimbursement of telemedicine.
Sec. 3344. Authorization of appropriations.
Sec. 3345. Definitions.
   Subtitle E--Health Services for Medically Underserved Populations

             Part 1--Initiatives for Access to Health Care

               SUBPART A--AUTHORIZATION OF APPROPRIATIONS

Sec. 3411. Authorizations of appropriations.
SUBPART B--DEVELOPMENT OF COMMUNITY HEALTH GROUPS AND HEALTH CARE SITES 
                              AND SERVICES

Sec. 3421. Grants and contracts for development of plans and networks 
                            and the expansion and development of health 
                            care sites and services.
Sec. 3422. Certain uses of awards.
Sec. 3423. Application.
Sec. 3424. Purposes and conditions.
 SUBPART C--CAPITAL COST OF DEVELOPMENT OF COMMUNITY HEALTH GROUPS AND 
                             OTHER PURPOSES

Sec. 3441. Direct loans and grants.
Sec. 3442. Certain requirements.
Sec. 3443. Defaults; right of recovery.
Sec. 3444. Provisions regarding construction or expansion of 
                            facilities.
Sec. 3445. Application for assistance.
Sec. 3446. Administration of programs.
             SUBPART D--ENABLING AND SUPPLEMENTAL SERVICES

Sec. 3461. Grants and contracts for enabling and supplemental services.
Sec. 3462. Authorizations of appropriations.
                 Part 2--National Health Service Corps

Sec. 3471. Authorizations of appropriations.
Sec. 3472. Allocation for participation of nurses in scholarship and 
                            loan repayment programs.
Sec. 3473. Allocation for participation of psychiatrists, 
                            psychologists, and clinical social workers 
                            in scholarship and loan repayment programs.
      Part 3--Payments to Hospitals Serving Vulnerable Populations

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

           Part 1--Authorities Regarding Participating States

Sec. 3510. Integration of mental health and substance abuse systems.
Sec. 3511. Report on integration of mental health systems.
Part 2--Assistance for State Managed Mental Health and Substance Abuse 
                                Programs

Sec. 3531. Availability of assistance.
Sec. 3532. Plan requirements.
Sec. 3533. Additional Federal responsibilities.
Sec. 3534. Authorization of appropriations.
   Subtitle G--Comprehensive School Health Education; School-Related 
                            Health Services

   Part 1--Healthy Students-Healthy Schools Grants for School Health 
                               Education

Sec. 3601. Purposes.
Sec. 3602. Healthy students-healthy schools grants.
Sec. 3603. Healthy Students-Healthy Schools Interagency Task Force.
Sec. 3604. Duties of the Secretary.
                 Part 5--School-related Health Services

                  SUBPART A--DEVELOPMENT AND OPERATION

Sec. 3681. Authorization of appropriations.
Sec. 3682. Eligibility for grants.
Sec. 3683. Preferences.
Sec. 3684. Planning and development grants.
Sec. 3685. Grants for operation of school health services.
            SUBPART B--CAPITAL COSTS OF DEVELOPING PROJECTS

Sec. 3691. Funding.
              Subtitle H--Public Health Service Initiative

Sec. 3695. Public health service initiative.
       Subtitle I--Additional Provisions Regarding Public Health

Sec. 3901. Curriculum development and implementation regarding domestic 
                            violence and women's health.
Sec. 3902. Community scholarship programs.
               Subtitle J--Occupational Safety and Health

Sec. 3903. Occupational injury and illness prevention.
                    Subtitle K--Full Funding for WIC

Sec. 3905. Full funding for WIC.
                 Subtitle L--Border Health Improvement

Sec. 3908. Border Health Commission.
                    TITLE IV--MEDICARE AND MEDICAID

Sec. 4000. References in title.
                          Subtitle A--Medicare

             Part 1--Integration of Medicare Beneficiaries

Sec. 4001. Individual election to remain in certain health plans.
Sec. 4002. Enrollment and termination of enrollment.
                 Part 2--Provisions Relating to Part A

Sec. 4101. Inpatient hospital services update for PPS hospitals.
Sec. 4102. Reduction in payments for capital-related costs for 
                            inpatient hospital services.
Sec. 4103. Reductions in disproportionate share payments.
Sec. 4104. Extension of freeze on updates to routine service cost 
                            limits for skilled nursing facilities.
Sec. 4105. Medicare-dependent, small rural hospitals.
Sec. 4106. Provisions relating to rural health transition grant 
                            program.
Sec. 4107. Payments for sole community hospitals with teaching programs 
                            and multihospital campuses.
Sec. 4108. Moratorium on designation of new long-term hospitals.
Sec. 4109. Revised payment methodology for rehabilitation and long-term 
                            care hospitals.
Sec. 4110. Termination of indirect medical education payments.
Sec. 4111. Limited service hospital program.
Sec. 4112. Subacute care study.
                 Part 3--Provisions Relating to Part B

Sec. 4201. Updates for physicians' services.
Sec. 4202. Substitution of real GDP to adjust for volume and intensity; 
                            repeal of restriction on maximum reduction 
                            permitted in default update.
Sec. 4203. Payment for physicians' services relating to inpatient stays 
                            in certain hospitals.
Sec. 4204. Changes in underserved area bonus payments.
Sec. 4205. Correction of MVPS upward bias.
Sec. 4206. Demonstration projects for medicare State-based performance 
                            standard rate of increase.
Sec. 4207. Elimination of formula-driven overpayments for certain 
                            outpatient hospital services.
Sec. 4208. Eye or eye and ear hospitals.
Sec. 4209. Imposition of coinsurance on laboratory services.
Sec. 4210. Application of competitive acquisition process for part B 
                            items and services.
Sec. 4211. Application of competitive acquisition procedures for 
                            laboratory services.
Sec. 4212. Expanded coverage for physician assistants and nurse 
                            practitioners.
Sec. 4213. Elimination of balance billing.
Sec. 4214. Development and implementation of resource-based methodology 
                            for practice expenses.
Sec. 4215. Payments for durable medical equipment.
Sec. 4216. General part B premium.
              Part 4--Provisions Relating to Parts A and B

Sec. 4301. Medicare secondary payer changes.
Sec. 4302. Increase in medicare secondary payer coverage for end stage 
                            renal disease services to 24 months.
Sec. 4303. Expansion of centers of excellence.
Sec. 4304. Reduction in routine cost limits for home health services.
Sec. 4305. Imposition of 20 percent coinsurance on home health services 
                            under medicare.
Sec. 4306. Termination of graduate medical education payments.
Sec. 4307. Medicare select.
                      Subtitle B--Medicaid Program

Part 1--Integration of Certain Medicaid Eligibles Into Reformed Health 
                              Care System

Sec. 4601. Limiting coverage under medicaid of items and services 
                            covered under standard benefit package.
   Part 2--Coordinated Care Services for Disabled Medicaid Eligibles

Sec. 4605. Coordinated care services for disabled medicaid eligibles.
      Part 3--Payments to Hospitals Serving Vulnerable Populations

Sec. 4611. Replacement of DSH payment provisions with provisions 
                            relating to payments to hospitals serving 
                            vulnerable populations.
               Part 4--Medicaid Long-term Care Provisions

Sec. 4615. Increased resource disregard for individuals receiving 
                            certain services.
Sec. 4616. Frail elderly demonstration project waivers.
Sec. 4617. Elimination of requirement of prior institutionalization 
                            with respect to habilitation services 
                            furnished under a waiver for home or 
                            community-based services.
Sec. 4618. Elimination of rule regarding availability of beds in 
                            certain institutions.
Sec. 4619. Preadmission screening for mentally retarded individuals.
                         Part 5--Miscellaneous

Sec. 4621. Medicaid coverage of all certified nurse practitioner and 
                            clinical nurse specialist services.
Sec. 4622. Relief from third party liability requirements when cost-
                            effective.
                TITLE V--QUALITY AND CONSUMER PROTECTION

             Subtitle A--Quality Management and Improvement

Sec. 5001. National quality council.
Sec. 5002. National goals and performance measures of quality.
Sec. 5003. Standards and performance measures for health plans.
Sec. 5004. Plan data analysis and consumer surveys.
Sec. 5005. Evaluation and reporting of quality performance.
Sec. 5006. Development and dissemination of practice guidelines.
Sec. 5007. Research on health care quality.
Sec. 5008. Quality improvement foundations.
Sec. 5009. Consumer information and advocacy.
Sec. 5010. Authorization of appropriations.
Sec. 5011. Role of health plans in quality management.
Sec. 5012. Information on health care providers.
Sec. 5013. Conforming amendments to Public Health Service Act.
               Subtitle B--Administrative Simplification

                    Part 1--Purpose and Definitions

Sec. 5101. Purpose.
Sec. 5102. Definitions.
    Part 2--Standards for Data Elements and Information Transactions

Sec. 5111. General requirements on secretary.
Sec. 5112. Standards for data elements of health information.
Sec. 5113. Information transaction standards.
Sec. 5114. Standards relating to written claims submitted by 
                            individuals and written explanations of 
                            benefits.
Sec. 5115. Timetables for adoption of standards.
     Part 3--Requirements With Respect to Certain Transactions and 
                              Information

Sec. 5121. Requirements with respect to certain transactions and 
                            information.
Sec. 5122. Timetables for compliance with requirements.
                  Part 4--Accessing Health Information

Sec. 5131. Accessing health information for authorized purposes.
Sec. 5132. Responding to access requests.
Sec. 5133. Length of time information should be accessible.
Sec. 5134. Timetables for adoption of standards and compliance.
   Part 5--Standards and Certification for Health Information Network

Sec. 5141. Standards and certification for health information network 
                            services.
Sec. 5142. Ensuring availability of information.
                           Part 6--Penalties

Sec. 5151. General penalty for failure to comply with requirements and 
                            standards.
                    Part 7--Miscellaneous Provisions

Sec. 5161. Imposition of additional requirements.
Sec. 5162. Effect on State law.
Sec. 5164. Health information continuity.
Sec. 5165. Protection of commercial information.
Sec. 5166. Payment for health care services or health plan premiums.
Sec. 5167. Health security cards.
Sec. 5168. Misuse of health security card or personal health 
                            identifier.
Sec. 5169. Direct billing for clinical laboratory services.
Sec. 5170. Authorization of appropriations.
                  Part 8--Assistance to the Secretary

Sec. 5171. General requirement on secretary.
Sec. 5172. Health information advisory committee.
Part 9--Demonstration Projects for Community-based Clinical Information 
                                Systems

Sec. 5181. Grants for demonstration projects.
           Part 10--Medicare and Medicaid Coverage Data Bank

Sec. 5191. Repeal of medicare and medicaid coverage data bank.
               Subtitle C--Privacy of Health Information

                    Part 1--Findings and Definitions

Sec. 5201. Findings and purposes.
Sec. 5202. Definitions.
                     Part 2--Authorized Disclosures

                     SUBPART A--GENERAL PROVISIONS

Sec. 5206. General rules regarding disclosure.
Sec. 5207. Authorizations for disclosure of protected health 
                            information.
Sec. 5208. Certified health information network services.
          SUBPART B--SPECIFIC DISCLOSURES RELATING TO PATIENT

Sec. 5211. Disclosures for treatment and financial and administrative 
                            transactions.
Sec. 5212. Next of kin and directory information.
Sec. 5213. Emergency circumstances.
   SUBPART C--DISCLOSURE FOR OVERSIGHT, PUBLIC HEALTH, AND RESEARCH 
                                PURPOSES

Sec. 5216. Oversight.
Sec. 5217. Public health.
Sec. 5218. Health research.
SUBPART D--DISCLOSURE FOR JUDICIAL, ADMINISTRATIVE, AND LAW ENFORCEMENT 
                                PURPOSES

Sec. 5221. Judicial and administrative purposes.
Sec. 5222. Law enforcement.
    SUBPART E--DISCLOSURE PURSUANT TO GOVERNMENT SUBPOENA OR WARRANT

Sec. 5226. Government subpoenas and warrants.
Sec. 5227. Access procedures for law enforcement subpoenas and 
                            warrants.
Sec. 5228. Challenge procedures for law enforcement warrants and 
                            subpoenas.
        SUBPART F--DISCLOSURE PURSUANT TO PRIVATE PARTY SUBPOENA

Sec. 5231. Private party subpoenas.
Sec. 5232. Access procedures for private party subpoenas.
Sec. 5233. Challenge procedures for private party subpoenas.
     Part 3--Procedures for Ensuring Security of Protected Health 
                              Information

                 SUBPART A--ESTABLISHMENT OF SAFEGUARDS

Sec. 5236. Establishment of safeguards.
Sec. 5237. Accounting for disclosures.
 SUBPART B--REVIEW OF PROTECTED HEALTH INFORMATION BY SUBJECTS OF THE 
                              INFORMATION

Sec. 5241. Inspection of protected health information.
Sec. 5242. Amendment of protected health information.
Sec. 5243. Notice of information practices.
            SUBPART C--STANDARDS FOR ELECTRONIC DISCLOSURES

Sec. 5246. Standards for electronic disclosures.
                           Part 4--Sanctions

            SUBPART A--NO SANCTIONS FOR PERMISSIBLE ACTIONS

Sec. 5251. No liability for permissible disclosures.
Sec. 5252. No liability for institutional review board determinations.
Sec. 5253. Reliance on certified entity.
                       SUBPART B--CIVIL SANCTIONS

Sec. 5256. Civil penalty.
Sec. 5257. Civil action.
                     SUBPART C--CRIMINAL SANCTIONS

Sec. 5261. Wrongful disclosure of protected health information.
                   Part 5--Administrative Provisions

Sec. 5266. Relationship to other laws.
Sec. 5267. Rights of incompetents.
Sec. 5268. Exercise of rights.
  Subtitle D--Expanded Efforts To Combat Health Care Fraud and Abuse 
                   Affecting Federal Outlay Programs

                      Part 1--Improved Enforcement

Sec. 5301. Health care fraud and abuse affecting Federal outlay 
                            programs.
Sec. 5302. Establishment of Federal outlay program fraud and abuse 
                            control account.
Sec. 5303. Use of funds by Inspector General.
Sec. 5304. Rewards for information leading to prosecution and 
                            conviction.
              Part 2--Civil Penalties and Rights of Action

Sec. 5311. Civil monetary penalties.
Sec. 5312. Permitting parties to bring actions on own behalf.
Sec. 5313. Exclusion from program participation.
                   Part 3--Amendments to Criminal Law

Sec. 5321. Health care fraud.
Sec. 5322. Theft or embezzlement.
Sec. 5323. False Statements.
Sec. 5324. Bribery and graft.
Sec. 5325. Injunctive relief relating to health care offenses.
Sec. 5326. Grand jury disclosure.
Sec. 5327. Forfeitures for violations of fraud statutes.
              Part 4--Amendments to Civil False Claims Act

Sec. 5331. Amendments to Civil False claims Act.
                         Part 5--Effective Date

Sec. 5341. Effective date.
                  Subtitle E--Medical Liability Reform

                         Part 1--System Reforms

Sec. 5401. Federal tort reform.
Sec. 5402. State-based alternative dispute resolution mechanisms.
Sec. 5403. Requirement of certificate of merit.
Sec. 5404. Limitation on amount of attorney's contingency fees.
Sec. 5405. Periodic payment of awards.
Sec. 5406. Federal study on medical negligence.
Part 2--Demonstration Project Relating to Medical Malpractice Liability

Sec. 5411. Pilot program applying practice guidelines to medical 
                            malpractice liability actions.
Sec. 5412. Enterprise liability demonstration project.
                  Subtitle F--Remedies and Enforcement

   Part 1--Review of Benefit Determinations for Enrolled Individuals

                        SUBPART A--GENERAL RULES

Sec. 5501. Health plan claims procedure.
Sec. 5502. Review in area complaint review offices of grievances based 
                            on acts or practices by health plans.
Sec. 5503. Initial proceedings in complaint review offices.
Sec. 5504. Hearings before hearing officers in complaint review 
                            offices.
Sec. 5505. Civil money penalties.
                  SUBPART B--EARLY RESOLUTION PROGRAMS

Sec. 5511. Establishment of early resolution programs in complaint 
                            review offices.
Sec. 5512. Initiation of participation in mediation proceedings.
Sec. 5513. Mediation proceedings.
Sec. 5514. Legal effect of participation in mediation proceedings.
Sec. 5515. Enforcement of settlement agreements.
Sec. 5516. Due process for health care providers.
         Part 2--Additional Remedies and Enforcement Provisions

Sec. 5531. Judicial review of Federal action on State systems.
Sec. 5532. Civil enforcement.
Sec. 5533. Priority of certain bankruptcy claims.
Sec. 5534. Private right to enforce State responsibilities.
Sec. 5535. Private right to enforce Federal responsibilities in 
                            operating a system in a State.
Sec. 5536. Enforcement of consumer protections.
Sec. 5537. Discrimination claims.
Sec. 5538. Nondiscrimination in federally assisted programs.
Sec. 5539. Civil and administration action by essential community 
                            provider.
Sec. 5540. Facial constitutional challenges.
Sec. 5541. Treatment of plans as parties in civil actions.
Sec. 5542. Whistleblower protections.
Sec. 5543. General nonpreemption of rights and remedies.
                    Subtitle G--Repeal of Exemption

Sec. 5601. Repeal of exemption for health insurance.
              TITLE VI--INDIVIDUAL AND EMPLOYER SUBSIDIES

       Subtitle A--Individual Premium and Cost-Sharing Assistance

Sec. 6001. Requirement to operate State program.
Sec. 6002. Assistance with standard health plan premiums.
Sec. 6003. Assistance with cost-sharing for standard health plans.
Sec. 6004. Eligibility determinations.
Sec. 6005. End-of-year reconciliation for premium assistance.
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-your-own tobacco.
                   Part 2--Health Related Assessments

Sec. 7111. Assessments on insured and self-insured health plans.
Sec. 7112. High cost health plan assessment.
           Part 3--Recapture of Certain Health Care Subsidies

Sec. 7121. Recapture of certain health care subsidies received by high-
                            income individuals.
                        Part 4--Other Provisions

Sec. 7131. Increase in tax on certain hollow point and large caliber 
                            handgun ammunition.
Sec. 7132. Modification to self-employment tax treatment of certain S 
                            corporation shareholders and partners.
Sec. 7133. Extending medicare coverage of, and application of hospital 
                            insurance tax to, all State and local 
                            government employees.
       Subtitle B--Tax Treatment of Employer-Provided Health Care

                       Part 1--General Provisions

Sec. 7201. Limitation on exclusion for employer-provided health 
                            benefits.
Sec. 7202. Health benefits may not be provided under cafeteria plans.
Sec. 7203. Increase in deduction for health insurance costs of self-
                            employed individuals.
Sec. 7204. Limitation on prepayment of medical insurance premiums.
          Part 2--Voluntary Employer Health Care Contributions

Sec. 7111. Tax treatment of voluntary employer health care 
                            contributions.
              Subtitle C--Exempt Health Care Organizations

                       Part 1--General Provisions

Sec. 7301. Qualification and disclosure requirements for nonprofit 
                            health care organizations.
Sec. 7302. Excise taxes for private inurement by tax-exempt health care 
                            organizations.
Sec. 7303. Treatment of health maintenance organizations, parent 
                            organizations, and health insurance 
                            purchasing cooperatives.
Sec. 7304. Tax treatment of taxable organizations providing health 
                            insurance and other prepaid health care 
                            services.
Sec. 7305. Repeal of section 833.
Sec. 7306. Tax exemption for high-risk insurance pools.
            Part 2--Tax Treatment of Section 501(c)(3) Bonds

Sec. 748. Tax treatment of 501(c)(3) bonds similar to governmental 
                            bonds.
   Subtitle D--Tax Treatment of Long-Term Care Insurance and Services

Sec. 7401. Qualified long-term care services treated as medical care.
Sec. 7402. Treatment of long-term care insurance.
Sec. 7403. Tax treatment of accelerated death benefits under life 
                            insurance contracts.
Sec. 7404. Tax treatment of companies issuing qualified accelerated 
                            death benefit riders.
                  Subtitle E--Other Revenue Provisions

                  Part 1--Employment Status Provisions

Sec. 7501. Employment status proposal required from Department of the 
                            Treasury.
Sec. 7502. Increase in services reporting penalties.
          Part 2--Tax Incentives for Health Services Providers

Sec. 7511. Nonrefundable credit for certain primary health services 
                            providers.
Sec. 7512. Expensing of medical equipment.
                    Part 3--Miscellaneous Provisions

Sec. 7521. Post-retirement medical and life insurance reserves.
Sec. 7522. Credit for cost of personal assistance services required by 
                            employed individuals.
Sec. 7523. Disclosure of return information for administration of 
                            certain programs under the Health Security 
                            Act.
  Subtitle F--Graduate Medical Education and Academic Health Centers 
                               Trust Fund

Sec. 7601. Establishment of Graduate Medical Education and Academic 
                            Health Centers Trust Fund.
                   TITLE VIII--OTHER FEDERAL PROGRAMS

                   Subtitle A--Indian Health Service

Sec. 8101. Purposes.
Sec. 8102. Definitions.
Sec. 8103. Eligibility and health service coverage of Indians.
Sec. 8104. Supplemental Indian health care benefits.
Sec. 8105. Provision of health services to non-Indians.
Sec. 8106. Essential community providers.
Sec. 8107. Payment by other providers.
Sec. 8108. Contracting authority.
Sec. 8109. Consultation.
Sec. 8110. Transitional studies.
Sec. 8111. Loans and loan guarantees.
Sec. 8112. Simplification of billing.
Sec. 8113. Long-term care demonstrations.
Sec. 8114. Technical assistance.
Sec. 8115. Public health programs.
Sec. 8116. Survey of health services available to Indian veterans.
Sec. 8117. Rule of construction.
Sec. 8118. Authorization of appropriations.
Sec. 8119. Funding methodology.
            TITLE IX--WORKERS COMPENSATION MEDICAL SERVICES

Sec. 9000. Application of information requirements.
Sec. 9001. Provision of care in disputed cases.
Sec. 9002. Demonstration projects.
Sec. 9003. Commission on Workers Compensation Medical Services.
                       TITLE X--PREMIUM FINANCING

     Subtitle A--National Health Care Cost and Coverage Commission

Sec. 10001. National Health Care Cost And Coverage Commission.
Sec. 10002. Composition.
Sec. 10003. Duties of Commission.
Sec. 10004. Congressional consideration of Commission recommendations.
Sec. 10005. Operation of the Commission.
Subtitle B--Employer and Individual Premium Requirements and Assistance

Sec. 10101. Application of subtitle.
Sec. 10102. Definitions.
                   Part 1--Employer Premium Payments

Sec. 10111. Obligation.
Sec. 10112. Community-rated employers.
Sec. 10113. Experience rated employers.
                Part 2--Family Payment Responsibilities

                        SUBPART A--FAMILY SHARE

Sec. 10131. Enrollment and premium payments.
Sec. 10132. Family share of premiums.
Sec. 10133. Amount of premium.
Sec. 10134. Collection shortfall add-on.
Sec. 10135. Family credit.
Sec. 10136. Premium subsidy.
Sec. 10137. No loss of coverage.
        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.

  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.

    (a) In General.--A participating State system shall require that 
each health plan (whether insured or self-insured) or long-term care 
policy issued, sold, offered for sale, or operated in the State shall 
be certified by the appropriate certifying authority as one of the 
following:
            (1) A certified standard health plan.
            (2) A certified supplemental health benefits plan.
            (3) A certified long-term care policy under part 2 of 
        subtitle B of title II.
    (b) Federal Certification of Multistate Self-Insured Plans.--For 
Federal certification of multistate self-insured health plans, see 
section 1482.

SEC. 1002. STANDARD HEALTH PLAN PRINCIPLES.

    In accordance with this Act, the following principles shall apply 
to all standard health plans:
            (1) No standard health plan may discriminate on the basis 
        of medical history, health status, pre-existing medical 
        conditions, or genetic predisposition to medical conditions.
            (2) A standard health plan--
                    (A) shall offer an annual open enrollment period 
                and accept all eligible individuals for coverage;
                    (B) shall not impose a rider that serves to exclude 
                coverage to an individual; and
                    (C) shall not impose waiting periods before 
                coverage begins.
            (3) A standard health plan shall ensure that all medically 
        necessary or appropriate services, as defined in the benefits 
        package, are provided.
            (4) Health benefits coverage shall be portable from one 
        standard health plan to another.
Nothing in this section shall be construed so as to relieve a standard 
health plan of any obligation or requirement imposed under this Act.

SEC. 1003. PROTECTION OF CONSUMER CHOICE.

    Nothing in this Act shall be construed as prohibiting the 
following:
            (1) An individual from purchasing any health care services.
            (2) An individual from purchasing supplemental insurance 
        (offered consistent with this Act) to cover health care 
        services not included within the standard benefits package 
        established under subtitle C.
            (3) An individual who is not an eligible individual from 
        purchasing health insurance.
            (4) Employers from providing coverage for benefits in 
        addition to such standard benefits package (subject to part 1 
        of subtitle D).
            (5) An individual from obtaining (at the expense of such 
        individual) health care from any health care provider of such 
        individual's choice.

                          PART 2--DEFINITIONS

SEC. 1011. DEFINITIONS RELATING TO HEALTH PLANS.

    Except as otherwise specifically provided, in this Act the 
following definitions and rules apply:
            (1) Health plan.--
                    (A) In general.--The term ``health plan'' means any 
                plan or arrangement which provides, or pays the cost 
                of, health benefits. Such term does not include the 
                following, or any combination thereof:
                            (i) Coverage only for accidental death or 
                        dismemberment.
                            (ii) Coverage providing wages or payments 
                        in lieu of wages for any period during which 
                        the employee is absent from work on account of 
                        sickness or injury.
                            (iii) A medicare supplemental policy (as 
                        defined in section 1882(g)(1) of the Social 
                        Security Act).
                            (iv) Coverage issued as a supplement to 
                        liability insurance.
                            (v) Worker's compensation or similar 
                        insurance.
                            (vi) Automobile medical-payment insurance.
                            (vii) A long-term care policy, including a 
                        nursing home fixed indemnity policy (unless the 
                        Secretary determines that such a policy 
                        provides sufficiently comprehensive coverage of 
                        a benefit so that it should be treated as a 
                        health plan).
                            (viii) An equivalent health care program.
                            (ix) Such other plan or arrangement as the 
                        Secretary determines is not a health plan.
                Such term includes any plan or arrangement not 
                described in any preceding subparagraph which provides 
                for benefit payments, on a periodic basis, for a 
                specified disease or illness or period of 
                hospitalization without regard to the costs incurred or 
                services rendered during the period to which the 
                payments relate.
                    (B) Insured health plan.--
                            (i) In general.--The term ``insured health 
                        plan'' means any health plan which is a 
                        hospital or medical service policy or 
                        certificate, hospital or medical service plan 
                        contract, or health maintenance organization 
                        group contract offered by a carrier.
                            (ii) Carrier.--The term ``carrier'' means a 
                        licensed insurance company, a hospital or 
                        medical service corporation (including an 
                        existing Blue Cross or Blue Shield 
                        organization, within the meaning of section 
                        833(c)(2) of Internal Revenue Code of 1986 as 
                        in effect before the date of the enactment of 
                        this Act), a health maintenance organization, 
                        or other entity licensed or certified by the 
                        State to provide health insurance or health 
                        benefits. The Secretary may issue regulations 
                        that provide for affiliated carriers to be 
                        treated as a single carrier where appropriate 
                        under this Act.
                    (C) Self-insured health plan.--The term `self-
                insured health plan' means an employee welfare benefit 
                plan, church plan, or other arrangement which--
                            (i) provides health benefits funded in a 
                        manner other than through the purchase of one 
                        or more insured health plans, but
                            (ii) does not include any coverage or 
                        insurance described in clauses (i) through (ix) 
                        of subparagraph (A).
            (2) Certified standard health plan.--
                    (A) In general.--The term ``certified standard 
                health plan'' means a standard health plan which is 
                certified by the appropriate certifying authority as 
                meeting the other applicable requirements of this 
                title.
                    (B) Standard health plan.--The term ``standard 
                health plan'' means a health plan which provides for 
                the standard benefits package or the alternative 
                standard benefits package established under subtitle C.
            (3) Certified supplemental health benefits plan.--
                    (A) In general.--The term ``certified supplemental 
                health benefits plan'' means a supplemental health 
                benefits plan which is certified by the appropriate 
                certifying authority as meeting the applicable 
                requirements of part 4 of subtitle B.
                    (B) Supplemental health benefits plan.--The term 
                ``supplemental health benefits plan'' means an insured 
                or self-insured health plan which provides health 
                benefits which consist of supplemental services or 
                cost-sharing described in part 4 of subtitle B. Such 
                term does not include a plan which provides for benefit 
                payments, on a periodic basis, for a specified disease 
                or illness or period of hospitalization without regard 
                to the costs incurred or services rendered during the 
                period to which the payments relate.
            (4) Certified long-term care insurance policy.--
                    (A) In general.--The term ``certified long-term 
                care insurance policy'' means a long-term care 
                insurance policy which is certified by the applicable 
                certifying authority as meeting the applicable 
                requirements of part 2 of subtitle B of title II.
                    (B) Long-term care insurance policy.--The term 
                ``long-term care insurance policy'' has the meaning 
                given such term by section 2721.
            (5) Terms and rules relating to community and experience 
        rating.--
                    (A) Community-rated plan.--The term ``community-
                rated plan'' means a health plan provided to community-
                rated individuals which meets the requirements of 
                section 1116.
                    (B) Community-rated employer.--The term 
                ``community-rated employer'' means, with respect to an 
                employee, an employer that is not an experience-rated 
                employer with respect to such employee.
                    (C) Community-rated individual.--The term 
                ``community-rated individual'' means an individual who 
                is not an experience-rated individual.
                    (D) Experience-rated plan.--
                            (i) In general.--The term ``experience-
                        rated plan'' means a health plan which--
                                    (I) is a self-insured health plan 
                                of an experience-rated employer, or
                                    (II) is an insured health plan 
                                which is experience-rated,
                        but any such plan may cover only experience-
                        rated individuals.
                            (ii) Community rating of government 
                        plans.--Such term shall not include a 
                        government plan of a State or local government.
                    (E) Experience-rated employer.--
                            (i) In general.--The term ``experience-
                        rated employer'' means, with respect to any 
                        calendar year--
                                    (I) any employer if, on each of 20 
                                days during the preceding calendar year 
                                (each day being in a different week), 
                                such employer (or any predecessor) 
                                employed more than 500 employees for 
                                some portion of the day; or
                                    (II) a multiemployer plan or rural 
                                electric cooperative or rural telephone 
                                cooperative association plan that 
                                covers 500 or more individuals.
                            (ii) Special rule for leasing businesses.--
                        In the case of an employer the primary trade or 
                        business of which is employee leasing--
                                    (I) all of the employees which such 
                                employer leases to other employers 
                                shall be treated as community-rated 
                                individuals, and
                                    (II) this Act shall be applied 
                                separately with respect to its other 
                                employees.
                            (iii) U.S. postal service.--Such term 
                        includes the United States Postal Service.
                    (F) Experience-rated individual.--The term 
                ``experience-rated individual'' means an individual who 
                is an employee of an experience-rated employer or a 
                member of a plan described in subparagraph (E)(i)(II).
            (6) Special rule for spouses and dependents.--If any 
        individual is offered coverage under a health plan as the 
        spouse or a dependent of a primary enrollee of such plan, such 
        individual shall have the status of such enrollee unless such 
        individual is eligible to elect other coverage and so elects.

SEC. 1012. DEFINITIONS RELATING TO EMPLOYMENT AND INCOME.

    Except as otherwise specifically provided, in this Act the 
following definitions and rules apply:
            (1) Employer, employee, employment, and wages defined.--
        Except as provided in this section--
                    (A) the terms ``wages'' and ``employment'' have the 
                meanings given such terms under section 3121 of the 
                Internal Revenue Code of 1986,
                    (B) the term ``employee'' has the meaning given 
                such term under section 3121 of such Code, subject to 
                the provisions of chapter 25 of such Code, and
                    (C) the term ``employer'' has the same meaning as 
                the term ``employer'' as used in such section 3121.
            (2) Exceptions.--For purposes of paragraph (1)--
                    (A) Employment.--
                            (i) Employment included.--Paragraphs (1), 
                        (2), (5), (7) (other than clauses (i) through 
                        (iv) of subparagraph (C) and clauses (i) 
                        through (v) of subparagraph (F)), (8), (9), 
                        (10), (11), (13), (15), (18), and (19) of 
                        section 3121(b) of the Internal Revenue Code of 
                        1986 shall not apply.
                            (ii) Exclusion of inmates as employees.--
                        Employment shall not include services performed 
                        in a penal institution by an inmate thereof or 
                        in a hospital or other health care institution 
                        by a patient thereof.
                    (B) Wages.--Paragraph (1) of section 3121(a) of the 
                Internal Revenue Code of 1986 shall not apply.
                    (C) Employees.--
                            (i) Treatment of self-employed.--The term 
                        ``employee'' includes a self-employed 
                        individual.
                            (ii) Exclusion of certain foreign 
                        employment.--The term ``employee'' does not 
                        include an individual with respect to service, 
                        if the individual is not a citizen or resident 
                        of the United States and the service is 
                        performed outside the United States.
            (3) Aggregation rules for employers.--For purposes of this 
        Act--
                    (A) all employers treated as a single employer 
                under subsection (a) or (b) of section 52 of the 
                Internal Revenue Code of 1986 shall be treated as a 
                single employer, and
                    (B) under regulations of the Secretary of Labor, 
                all employees of organizations which are under common 
                control with one or more organizations which are exempt 
                from income tax under subtitle A of the Internal 
                Revenue Code of 1986 shall be treated as employed by a 
                single employer.
        The regulations prescribed under subparagraph (B) shall be 
        based on principles similar to the principles which apply to 
        taxable organizations under subparagraph (A).

SEC. 1013. OTHER GENERAL DEFINITIONS.

    Except as otherwise specifically provided, in this Act the 
following definitions apply:
            (1) Appropriate certifying authority.--The term 
        ``appropriate certifying authority'' means--
                    (A) except as provided in subparagraph (B), in the 
                case of a standard health plan, a supplemental health 
                benefits plan, or a long-term care insurance plan, the 
                State commissioner or superintendent of insurance or 
                other State authority in the participating State; or
                    (B) in the case of a multistate self-insured health 
                plan or a multistate self-insured supplemental health 
                benefits plan, the Secretary of Labor.
            (2) Community rating area.--The term ``community rating 
        area'' means an area specified by a State under section 
        1502(a).
            (3) Equivalent health care program.--The term ``equivalent 
        health care program'' means--
                    (A) part A or part B of the medicare program under 
                title XVIII of the Social Security Act,
                    (B) the medicaid program under title XIX of the 
                Social Security Act,
                    (C) the health care program for active military 
                personnel under title 10, United States Code,
                    (D) the veterans health care program under chapter 
                17 of title 38, United States Code,
                    (E) the Civilian Health and Medical Program of the 
                Uniformed Services (CHAMPUS), as defined in section 
                1073(4) of title 10, United States Code,
                    (F) the Indian health service program under the 
                Indian Health Care Improvement Act (25 U.S.C. 1601 et 
                seq.), and
                    (G) a State single-payer system approved by the 
                Secretary under subpart B of part 3 of subtitle F.
            (4) Essential community provider.--The term ``essential 
        community provider'' means an entity certified as such a 
        provider under subpart B of part 2 of subtitle E.
            (5) Health plan sponsor.--The term ``health plan sponsor'' 
        means--
                    (A) with respect to a community-rated plan, the 
                carrier providing the plan,
                    (B) with respect to an insured experience-rated 
                plan, the carrier providing the plan, and
                    (C) with respect to a self-insured experience-rated 
                plan, the experience-rated employer providing the plan.
            (6) Medicare program.--The term ``medicare program'' means 
        the health insurance program under title XVIII of the Social 
        Security Act.
            (7) Medicare-eligible individual.--The term ``medicare-
        eligible individual'' means an individual who is entitled to 
        benefits under part A of the medicare program.
            (8) Multiemployer plan.--The term ``multiemployer plan'' 
        has the meaning given such term in section 3(37) of the 
        Employee Retirement Income Security Act of 1974, and includes 
        any plan that is treated as such a plan under title I of such 
        Act.
            (9) NAIC.--The term ``NAIC'' means the National Association 
        of Insurance Commissioners.
            (10) Participating provider.--The term ``participating 
        provider'' means, with respect to a health plan, a provider of 
        health care services who is a member of a provider network of 
        the plan.
            (11) Participating state.--The term ``participating State'' 
        means a State establishing a State program under this title.
            (12) Purchasing cooperative.--The term ``purchasing 
        cooperative'' means a health insurance cooperative established 
        under part 2 of subtitle D.
            (13) Residence.--
                    (A) In general.--An individual is considered to 
                reside in the location in which the individual 
                maintains a primary residence (as established under 
                rules of the Secretary).
                    (B) Multiple residences.--Under such rules and 
                subject to section 1112, in the case of an individual 
                who maintains more than one residence, the primary 
                residence of the individual shall be determined taking 
                into account the proportion of time spent at each 
                residence.
                    (C) Couple.--In the case of a couple only one 
                spouse of which is a qualifying employee, except as the 
                Secretary may provide, the residence of the employee 
                shall be the residence of the couple.
            (14) Rural electric cooperative.--The term ``rural electric 
        cooperative'' has the meaning given such term in section 
        3(40)(A)(iv) of the Employee Retirement Income Security Act of 
        1974.
            (15) Rural telephone cooperative associations.--The term 
        ``rural telephone cooperative association'' has the meaning 
        given such term in section 3(40)(A)(v) of the Employee 
        Retirement Income Security Act of 1974.
            (16) Secretary.--The term ``Secretary'' means the Secretary 
        of Health and Human Services.
            (17) State.--The term ``State'' includes the District of 
        Columbia, Puerto Rico, the Virgin Islands, Guam, American 
        Samoa, and the Northern Mariana Islands.
            (18) United States.--The term ``United States'' means the 
        50 States, the District of Columbia, Puerto Rico, the Virgin 
        Islands, Guam, American Samoa, and Northern Mariana Islands.

                   Subtitle B--Health Plan Standards

           PART 1--ESTABLISHMENT AND APPLICATION OF STANDARDS

SEC. 1101. ESTABLISHMENT OF NATIONAL STANDARDS.

    In order for a standard health plan to be eligible to be certified 
as a standard health plan by a participating State, the standard health 
plan shall meet the requirements of this Act, including the following 
uniform national standards established in this subtitle and described 
in regulations promulgated by the Secretary:
            (1) The insurance market reform standards of part 2.
            (2) The delivery system reform standards of part 3.
            (3) Standards for participation in a guaranty fund 
        established by the State under section 1505 (established by the 
        Secretary of Labor in the case of multistate self-insured 
        standard health plans).
            (4) Standards for the collection and reporting of data in 
        accordance with subtitle B of title V.
            (5) Standards for effective grievance procedures that 
        enrollees may utilize in pursuing complaints in accordance with 
        subtitle C of title V.

SEC. 1102. GENERAL RULES.

    (a) Construction.--Whenever in this subtitle a requirement or 
standard is imposed on a standard health plan, the requirement or 
standard is deemed to have been imposed on the insurer or sponsor of 
the plan or policy in relation to that plan or policy.
    (b) Use of Interim, Final Regulations.--In order to permit the 
timely implementation of the provisions of this subtitle, the Secretary 
and the Secretary of Labor are each authorized to issue regulations 
under this subtitle on an interim basis that become final on the date 
of publication, subject to change based on subsequent public comment.

                    PART 2--INSURANCE MARKET REFORM

SEC. 1111. GUARANTEED ISSUE, AVAILABILITY, AND RENEWABILITY.

    (a) Guaranteed Issue.--Except as otherwise provided in this 
section, a standard health plan sponsor--
            (1) offering a community-rated standard health plan shall 
        offer such plan to any community-rated individual applying for 
        coverage (either directly with the plan or through an employer 
        or a purchasing cooperative); and
            (2) offering an experience-rated standard health plan shall 
        offer such plan to any experience-rated individual eligible for 
        coverage under the plan through such individual's experience-
        rated employer.
No plan may engage in any practice that has the effect of attracting or 
limiting enrollees on the basis of personal characteristics, such as 
occupation or affiliation with any person or entity, or those 
characteristics described in section 1602.
    (b) Availability.--
            (1) In general.--A community-rated standard health plan 
        shall be made available to community-rated individuals 
        throughout the entire community rating area in which such plan 
        is offered, including through any employer purchasing 
        cooperative choosing to offer such plan.
            (2) Geographic limitations.--
                    (A) Nonnetwork plans.--A community-rated nonnetwork 
                plan (as defined in section 1127(d(2)(A)) may deny 
                coverage under the plan to a community-rated individual 
                who resides outside the community rating area in which 
                such plan is offered.
                    (B) Network plans.--A community-rated network plan 
                (as defined in section 1127(e)(5)(A)) may deny coverage 
                under the plan to a community-rated individual who 
                resides outside the health plan service area in which 
                such plan is offered.
                    (C) Rules regarding denials.--No denial may be made 
                under subparagraph (A) or (B) unless such denial is 
                applied uniformly, without regard to health status, 
                insurability of individuals, or other characteristics 
                described in section 1602.
            (3) Capacity limitations.--
                    (A) In general.--With the approval of the 
                appropriate regulatory authority, a standard health 
                plan may limit enrollment because of the plan's 
                capacity to deliver services or to maintain financial 
                stability. If such a limitation is imposed, the 
                limitation may not be imposed on a basis of personal 
                characteristics, such as occupation or affiliation with 
                any person or entity, or those characteristics 
                described in section 1602.
                    (B) Restrictions.--If such a limitation is 
                imposed--
                            (i) the plan may only enroll individuals 
                        under the plan consistent with rules 
                        established by the State consistent with 
                        subparagraph (C); and
                            (ii) the plan may not discriminate based on 
                        the method through which a family seeks 
                        enrollment under the plan.
                    (C) State oversight.--Each State shall, in 
                accordance with rules promulgated by the Secretary, 
                establish procedures and methods to assure equal 
                opportunity of enrollment for all families, regardless 
                of when during the open enrollment period, or the 
                method by which, the enrollment has been sought.
    (c) Renewability; Limitation on Termination.--
            (1) In general.--Except as provided in paragraphs (2) and 
        (3), a standard health plan that is issued to an individual 
        shall be renewed, at the option of the individual.
            (2) Grounds for refusal to renew or terminate.--A standard 
        health plan sponsor may refuse to renew, or may terminate, a 
        standard health plan under this title only for--
                    (A) in the case of plan in a participating State 
                and any community rating area in such State with 
                respect to which the requirements of title X have not 
                become effective, nonpayment of premiums;
                    (B) fraud on the part of the individual relating to 
                such plan; or
                    (C) misrepresentation of material facts on the part 
                of the individual relating to an application for 
                coverage or claim for benefits.
            (3) Termination of plans.--A standard health plan may elect 
        not to renew or make available the standard health plan through 
        a particular type of delivery system in a community rating 
        area, but only if the standard health plan--
                    (A) elects not to renew all of its standard health 
                plans using such delivery system in such community 
                rating area; and
                    (B) provides notice to the appropriate certifying 
                authority and each individual covered under the plan of 
                such termination at least 180 days before the date of 
                expiration of the plan.
In such case, a standard health plan sponsor may not provide for the 
issuance of any standard health plan using such a delivery system in 
such community rating area during a 5-year period beginning on the date 
of the termination of the last plan not so renewed. For purposes of 
this paragraph, the term ``delivery system'' means a delivery system 
used by a network plan (as defined in section 1128(e)(5)(A)) or a 
nonnetwork plan.
    (d) Certain Excluded Plans.--The provisions of this section, other 
than subsections (c) and (e)(2)(B), shall not apply to any religious 
fraternal benefit society in existence as of September 1993, which 
bears the risk of providing insurance to its members, and which is an 
organization described in section 501(c)(8) of the Internal Revenue 
Code of 1986 which is exempt from taxation under section 501(a) of such 
Code.
    (e) Application of Interim Standards.--
            (1) In general.--During the interim standards application 
        period, a health plan sponsor may only offer a health plan in a 
        State if such plan sponsor publicly discloses the health plans 
        such sponsor offers in the State and each offered plan meets 
        the standards specified in paragraph (2).
            (2) Specified standards.--
                    (A) Issue and availability.--The standards 
                specified in subsections (a) and (b) if the individual 
                or group applies for coverage during the open 
                enrollment period required under section 1112(h).
                    (B) Renewal.--The standards specified in subsection 
                (c), except paragraph (3) shall be applied by 
                substituting ``State'' for ``community rating area''.
            (3) Interim standards application periods.--The interim 
        standards application period is--
                    (A) in the case of the standard specified in 
                paragraph (2)(A), on or after January 1, 1995, and 
                before January 1, 1997; and
                    (B) in the case of the standard specified in 
                paragraph (2)(B), on or after August 1, 1994, and 
                before January 1, 1997.
            (4) Preemption.--The requirements of this subsection do not 
        preempt any State law unless State law directly conflicts with 
        such requirements. The provision of additional protections 
        under State law shall not be considered to directly conflict 
        with such requirements. The Secretary may issue letter 
        determinations with respect to whether this subsection preempts 
        a provision of State law.
            (5) Construction.--The provisions of this subsection shall 
        be construed in a manner that assures, to the greatest extent 
        practicable, continuity of health benefits under health plans 
        in effect on the effective date of this title.
            (6) Special rules for acquisitions and transfers.--The 
        Secretary may issue regulations regarding the application of 
        this subsection in the case of health plans (or groups of such 
        plans) which are transferred from one health plan sponsor to 
        another sponsor through assumption, acquisition, or otherwise.

SEC. 1112. ENROLLMENT.

    (a) In General.--Each standard health plan shall establish an 
enrollment process consistent with this section.
    (b) Annual Open Enrollment Period.--Each standard health plan shall 
permit eligible individuals to enroll (or change enrollment) in the 
plan during each annual open enrollment period for each community 
rating area specified by the appropriate certifying authority under 
section 1503.
    (c) Additional Periods of Authorized Changes in Enrollment.--
            (1) In general.--Each standard health plan shall provide 
        for changes in enrollment with respect to such other periods 
        and occurrences (including changes in residence, appropriate 
        changes in employment, and the insolvency of carriers or 
        experience-rated employers) for which an individual is 
        authorized to change enrollment in standard health plans, as 
        the Secretary shall specify.
            (2) Disenrollment for Cause.--
                    (A) In general.--The Secretary shall establish 
                procedures by which individuals enrolled in a standard 
                health plan may disenroll from such plan for good cause 
                (as defined by Secretary) at any time during a year and 
                enroll in another standard health plan. Such procedures 
                shall be implemented by participating States in a 
                manner that ensures continuity of coverage for the 
                standard benefits package or the alternative standard 
                benefits package for such individuals during the year.
                    (B) Additional remedies.--In the case of an 
                individual who changes enrollment from a plan for good 
                cause due to a pattern of underservice under a plan, 
                the Secretary may provide rules under which the carrier 
                providing the standard health plan is liable, to the 
                subsequent standard health plan in which the individual 
                is enrolled, for excess costs (as identified in 
                accordance with such rules) during the period for which 
                it may be reasonably anticipated that the individual 
                would (but for such cause) have continued enrollment 
                with the original standard health plan.
    (d) Effectiveness of Change of Enrollment.--Except as the Secretary 
may provide, changes in enrollment during an annual open enrollment 
period under subsection (a) shall take effect as determined by the 
appropriate certifying authority. The Secretary shall also provide when 
a change of enrollment under subsection (c) becomes effective.
    (e) Direct Enrollment.--
            (1) In general.--Subject to paragraph (2), each community-
        rated standard health plan shall provide for the direct 
        enrollment of community-rated individuals in the plan under 
        methods and procedures established by the Secretary.
            (2) Enrollment processes.--The Secretary shall provide 
        standards for States to ensure the broad availability and 
        processing of enrollment forms, including direct enrollment 
        through the mail, and other such processes as the Secretary may 
        designate.
    (f) Marketing Fees.--A community-rated standard health plan may 
impose a marketing fee surcharge for community-rated individuals 
enrolling in the plan through an agent, broker, or other authorized 
sales method, or through a direct enrollment process. Such surcharge 
shall be in addition to the highest marketing fee of such plan for 
community-rated individuals enrolled in such a plan through any 
purchasing cooperative in the community rating area.
    (g) Change of Enrollment.--As used in this section, the term 
``change of enrollment'' includes, with respect to an individual--
            (1) a change in the standard health plan in which the 
        individual is enrolled,
            (2) a change in the type of family enrollment, and
            (3) the enrollment of the individual at the time the 
        individual's status changes to a community-rated individual, 
        experience-rated individual, or a premium subsidy-eligible 
        individual under section 6002.
    (h) Application of Interim Standard.--
            (1) In general.--During the interim standard application 
        period, a health plan sponsor may only offer a health plan in a 
        State if such plan sponsor publicly discloses the health plans 
        such sponsor offers in the State and each offered plan provides 
        for an annual open enrollment period of at least 30 days.
            (2) Interim standard application periods.--The interim 
        standard application period is on or after January 1, 1995, and 
        before January 1, 1997.
            (3) Application of rules.--Paragraphs (4), (5), and (6) of 
        section 1111(d) shall apply to this subsection.

SEC. 1113. COVERAGE OF DEPENDENTS.

    (a) In General.--Except as otherwise provided in this Act, a 
standard health plan shall enroll all members of the same family (as 
defined in subsection (b)).
    (b) Family Defined.--In this Act, unless otherwise provided, the 
term ``family''--
            (1) means, with respect to an individual who is not a child 
        (as defined in subsection (c)), the individual; and
            (2) includes the following persons (if any):
                    (A) The individual's spouse.
                    (B) The individual's children (and, if applicable, 
                the children of the individual's spouse).
    (c) Classes of Enrollment; Terminology.--
            (1) In general.--In this Act, each of the following is a 
        separate class of enrollment:
                    (A) Coverage only of an individual (referred to in 
                this Act as the ``individual'' enrollment or class of 
                enrollment).
                    (B) Coverage only of a child (referred to in this 
                Act as the `single child' enrollment or class of 
                enrollment).
                    (C) Coverage only of one or more children (referred 
                to in this Act as the `multiple children' enrollment or 
                class of enrollment).
                    (D) Coverage of a married couple without children 
                (referred to in this Act as the ``couple-only'' 
                enrollment or class of enrollment).
                    (E) Coverage of an individual and one or more 
                children (referred to in this Act as the ``single 
                parent'' enrollment or class of enrollment).
                    (F) Coverage of a married couple and one or more 
                children (referred to in this Act as the ``dual 
                parent'' enrollment or class of enrollment).
            (2) References to family and couple classes of 
        enrollment.--In this Act:
                    (A) Family.--The terms ``family enrollment'' and 
                ``family class of enrollment'', refer to enrollment in 
                a class of enrollment described in any subparagraph of 
                paragraph (1) (other than subparagraph (A)).
                    (B) Couple.--The term ``couple class of 
                enrollment'' refers to enrollment in a class of 
                enrollment described in subparagraph (D) or (F) of 
                paragraph (1).
    (d) Spouse; Married; Couple.--
            (1) In general.--In this Act, the terms ``spouse'' and 
        ``married'' mean, with respect to a person, another individual 
        who is the spouse of the person or married to the person, as 
        determined under applicable State law.
            (2) Couple.--The term ``couple'' means an individual and 
        the individual's spouse.
    (e) Child Defined.--
            (1) In general.--In this Act, except as otherwise provided, 
        the term ``child'' means an individual who is a child (as 
        determined under paragraph (3)) who--
                    (A) is under 25 years of age or is disabled, and
                    (B) is unmarried.
        The Secretary may adjust the age limitation in subparagraph (A) 
        with respect to part-time or full-time students.
            (2) Application of state law.--Subject to paragraph (3), 
        determinations of whether a person is the child of another 
        person shall be made in accordance with applicable State law.
            (3) National rules.--The Secretary may establish such 
        national rules respecting individuals who will be treated as 
        children under this Act as the Secretary determines to be 
        necessary. Such rules shall be consistent with the following 
        principles:
                    (A) Step child.--A child includes a step child who 
                is an individual living with an adult in a parent-child 
                relationship.
                    (B) Disabled child.--A child includes an unmarried 
                dependent individual regardless of age who is incapable 
                of self-support because of mental or physical 
                disability which existed before age 25.
                    (C) Certain intergenerational families.--A child 
                includes the grandchild of an individual if--
                            (i) the parent of the grandchild is a child 
                        and the parent and grandchild are living with 
                        the grandparent; or
                            (ii) the grandparent has legal custody of 
                        the grandchild.
                    (D) Treatment of emancipated minors.--An 
                emancipated minor shall not be treated as a child.
                    (E) Children placed for adoption.--
                            (i) In general.--A child includes a child 
                        who is placed for adoption with an individual, 
                        except when the child is a child in State-
                        supervised care.
                            (ii) Placed for adoption.--The term 
                        ``placed for adoption'' in connection with any 
                        placement for adoption of a child with any 
                        individual, means the assumption and retention 
                        by such individual of a legal obligation for 
                        total or partial support of such child in 
                        anticipation of the adoption of such child.
    (f) Additional Rules.--
            (1) In general.--The Secretary shall provide for such 
        additional exceptions and special rules, including rules 
        relating to--
                    (A) families in which members are not residing in 
                the same area or in which children are not residing 
                with their parents,
                    (B) changes in family composition occurring during 
                a year,
                    (C) treatment of children in State-supervised care, 
                and
                    (D) treatment of children of parents who are 
                separated or divorced,
        as the Secretary finds appropriate.
            (2) Children in state-supervised care.--
                    (A) In general.--In the case of a child in State-
                supervised care (as described in subparagraph (B)), the 
                child shall be considered as a family of one and 
                enrolled by the State agency who has been awarded 
                temporary or permanent custody of the child (or which 
                has legal responsibility for the child) in a high cost-
                sharing plan unless the State agency has established a 
                special health service delivery system designated to 
                customize and more efficiently provide health services 
                to children in State-supervised care, in which case the 
                State agency will enroll the child in the plan 
                appropriate to ensure access to such a special health 
                service delivery system.
                    (B) Children in state-supervised care.--For 
                purposes of subparagraph (A), the term ``child in 
                State-supervised care'' means any child who is residing 
                away from the child's parents and is temporarily or 
                permanently, on a voluntary or involuntary basis, under 
                the responsibility of a public child welfare or 
                juvenile services agency or court. Such term includes 
                any child who is not yet made a ward of the court or 
                adjudicated as a delinquent residing in emergency 
                shelter care, any child in the physical custody of 
                public or private agencies, and any child who is with 
                foster parents, or other group or residential care 
                providers. Such term also includes any child who is 
                legally adopted and for whom the Federal or State 
                government is providing adoption assistance payments.
    (g) Application of Interim Standards.--
            (1) In general.--During the interim standards application 
        period, a health plan sponsor may only offer a health plan in a 
        State if such plan meets the standards specified in this 
        section.
            (2) Interim standards application periods.--The interim 
        standards application period is on or after January 1, 1995, 
        and before January 1, 1997.
            (3) Application of rules.--Paragraphs (4), (5), and (6) of 
        section 1111(d) shall apply to this subsection.

SEC. 1114. NONDISCRIMINATION BASED ON HEALTH STATUS.

    (a) No Limits on Coverage; No Pre-Existing Condition Limits.--
Except as provided in subsection (b), a standard health plan may not--
            (1) terminate, restrict, or limit coverage or establish 
        premiums based on the health status, medical condition, claims 
        experience, receipt of health care, medical history, 
        anticipated need for health care services, disability, or lack 
        of evidence of insurability of an individual;
            (2) terminate, restrict, or limit coverage in any portion 
        of the plan's community rating area, except as provided in 
        section 1111(b)(2);
            (3) except as provided in section 1111(c)(2), cancel 
        coverage for any community-rated individual until that 
        individual is enrolled in another applicable standard health 
        plan;
            (4) impose waiting periods before coverage begins; or
            (5) impose a rider that serves to exclude coverage of 
        particular individuals or particular health conditions.
    (b) Treatment of Preexisting Condition Exclusions.--
            (1) In general.--Subject to paragraph (4), before January 
        1, 2002, a standard health plan may impose a limitation or 
        exclusion of benefits relating to treatment of a condition 
        based on the fact that the condition preexisted the effective 
        date of the plan with respect to an individual if--
                    (A) the condition was diagnosed or treated during 
                the 3-month period ending on the day before the date of 
                enrollment under the plan;
                    (B) the limitation or exclusion extends for a 
                period not more than 6 months after the date of 
                enrollment under the plan;
                    (C) the limitation or exclusion does not apply to 
                an individual who, as of the date of birth, was covered 
                under the plan; or
                    (D) the limitation or exclusion does not relate to 
                pregnancy.
            (2) Continuous coverage.--A standard health plan shall 
        provide that if an individual under such plan is in a period of 
        continuous coverage with respect to particular services as of 
        the date of enrollment under such plan, any period of exclusion 
        of coverage with respect to a preexisting condition as 
        permitted under paragraph (1) shall be prohibited.
            (3) Definitions.--As used in this subsection:
                    (A) Period of continuous coverage.--The term 
                ``period of continuous coverage'' means, with respect 
                to particular services, the period beginning on the 
                date an individual is enrolled under a standard health 
                plan or an equivalent health care program which 
                provides benefits with respect to such services and 
                ends on the date the individual is not so enrolled for 
                a continuous period of more than 3 months.
                    (B) Preexisting condition.--The term ``preexisting 
                condition'' means, with respect to coverage under a 
                standard health plan, a condition which was diagnosed, 
                or which was treated, within the 3-month period ending 
                on the day before the first date of such coverage 
                (without regard to any waiting period).
            (4) No exclusion during amnesty period or with respect to a 
        subsidy-eligible individual.--This subsection shall not apply--
                    (A) during the first annual open enrollment period 
                specified by the appropriate certifying authority under 
                section 1503, and
                    (B) with respect to the enrollment of an individual 
                eligible for a premium subsidy under subtitle A of 
                title VI.
    (c) Application of Interim Standard.--
            (1) In general.--During the interim standard application 
        period, a health plan sponsor may only offer a health plan in a 
        State if such plan meets the standard specified in paragraph 
        (2).
            (2) Specified standards.--
                    (A) Exclusion.--The standards specified in 
                subsection (b) by substituting--
                            (i) ``6-month'' for ``3-month'' in 
                        paragraph (1)(A), and
                            (ii) ``major medical insurance plan or 
                        other plan offering coverage similar to the 
                        benefits included in the standard benefits 
                        package as established under subtitle C'' for 
                        ``standard health plan''.
                    (B) Coverage.--A self-insured health plan may not 
                reduce or limit coverage of any condition or course of 
                treatment that is expected to cost more than $2,500 
                during any 12-month period.
            (3) Interim standards application period.--The interim 
        standards application period is--
                    (A) in the case of the standard specified in 
                paragraph (2)(A), on or after January 1, 1995, and 
                before January 1, 1997, and
                    (B) in the case of the standard specified in 
                paragraph (2)(B), on or after August 1, 1994, and 
                before January 1, 1997.
            (4) Application of rules.--Paragraphs (4), (5), and (6) of 
        section 1111(e) shall apply to this subsection.

SEC. 1115. BENEFITS.

    (a) In General.--A standard health plan shall offer to all 
enrollees in the plan the standard benefits package or the alternative 
standard benefits package established under subtitle C.
    (b) Alternative Standard Benefits Package.--
            (1) In general.--A carrier may only offer a standard health 
        plan with an alternative standard benefits package in a 
        community rating area if such carrier also offers a standard 
        health plan with a standard benefits package in such area.
            (2) Inclusion in risk adjustment and reinsurance 
        programs.--Any standard health plan with an alternative 
        standard benefits packages shall be included in any reinsurance 
        or risk adjustment program under section 1117 operating in the 
        community rating area in which such plan is offered.
            (3) Offer prohibited if mandates required.--A carrier may 
        not offer an alternative benefits package in a participating 
        State and any community rating area in such State with respect 
        to which the requirements of title X have become effective.

SEC. 1116. COMMUNITY RATING REQUIREMENTS.

    (a) Applicability.--Except as provided in subsection (e), the 
provisions of this section shall apply to community-rated standard 
health plans.
    (b) Standard Premiums With Respect to Community-Rated 
Individuals.--Subject to subsection (d), each community-rated standard 
health plan shall establish within each community rating area in which 
the plan is to be offered a standard premium for individual enrollment 
for the standard benefits package and the alternative standard benefits 
package established under subtitle C.
    (c) Uniform Premiums Within Community Rating Areas.--
            (1) In general.--Subject to paragraph (2), the standard 
        premium described in subsection (b) for all community-rated 
        individuals within a community rating area shall be the same.
            (2) Application to enrollees.--
                    (A) In general.--The premium charged for coverage 
                in a standard health plan shall be the product of--
                            (i) the standard premium (established under 
                        paragraph (1));
                            (ii) in the case of enrollment other than 
                        individual enrollment, the family adjustment 
                        factor specified under subparagraph (B); and
                            (iii) the age adjustment factor (specified 
                        under subparagraph (C)).
                    (B) Family adjustment factor.--The Secretary, in 
                consultation with the NAIC, shall develop a family 
                adjustment factor that reflects the relative actuarial 
                costs of benefit packages based on the applicable 
                family enrollment (as compared with such costs for 
                individual enrollment).
                    (C) Age adjustment factor.--The Secretary, in 
                consultation with the NAIC, shall specify, within 6 
                months of the date of the enactment of this Act, 
                uniform age categories and rating increments for age 
                adjustment factors that reflect the relative actuarial 
                costs of benefit packages among enrollees. The highest 
                age adjustment factor may not exceed twice the lowest 
                age adjustment factor for individuals 18 to 65 years of 
                age. The Secretary shall also provide for the gradual 
                phaseout of age adjustment factors by January 1, 2002.
    (d) Lower Premium Through Purchasing Cooperatives.--Notwithstanding 
any other provision of this section, no premium may be charged to a 
community-rated individual by a community-rated standard health plan in 
a community rating area which is not the same premium negotiated for 
such plan offered through any purchasing cooperative in such area.
    (e) Experience Rating.--
            (1) Applicability.--The provisions of this subsection shall 
        apply to experience-rated standard health plans.
            (2) Rating.--For purposes of applying this section to 
        experience-rated employers, the employees of the employer 
        involved shall constitute the community with respect to the 
        determination of the premium.
            (3) Premiums.--An experience-rated standard health plan may 
        not vary the premium imposed with respect to experience-rated 
        individuals enrolled in the plan, except as may be allowed 
        under this section with respect to geographic and family 
        coverage factors (as determined by the Secretary of Labor) 
        under the plan.

SEC. 1117. RISK ADJUSTMENT AND REINSURANCE.

    (a) In General.--Except as provided in subsection (b), each 
standard health plan shall participate in a standard health plan risk 
adjustment program and a reinsurance program implemented by the State 
in accordance with section 1504.
    (b) Multistate Plans.--Each multistate self-insured standard health 
plan shall participate in a reinsurance program developed by the 
Secretary of Labor under section 1482.

SEC. 1118. FINANCIAL SOLVENCY REQUIREMENTS AND CONSUMER PROTECTION 
              AGAINST PROVIDER CLAIMS.

    (a) Solvency Protection.--Each standard health plan shall meet 
financial solvency requirements to assure protection of enrollees with 
respect to potential insolvency. Each standard health plan shall meet 
requirements relating to capital and solvency established by the 
Secretary under section 1401(h).
    (b) Protection Against Provider Claims.--In the case of a failure 
of a standard health plan to make payments with respect to the standard 
benefits covered under the plan for any reason, an individual who is 
enrolled under the plan is not liable to any health care provider with 
respect to the provision of health services within such set of benefits 
for payments in excess of the amount for which the enrollee would have 
been liable if the plan were to have made payments in a timely manner.

                     PART 3--DELIVERY SYSTEM REFORM

SEC. 1121. PROHIBITION OF DISCRIMINATION.

    (a) In General.--Each standard health plan shall comply with the 
antidiscrimination requirements of section 1602.
    (b) Additional Antidiscrimination Requirements.--
            (1) In general.--No standard health plan may discriminate 
        on the basis of the provider's status as a member of a health 
        care profession for the purposes of selecting among providers 
        of health services for participation in a provider network, but 
        only if the State authorizes members of that profession to 
        render the services in question and such services are covered 
        in the standard benefits package established under subtitle C.
            (2) Rule of construction.--Nothing in paragraph (1)(B) 
        shall be construed as requiring any standard health plan to:
                    (A) include in a network any individual provider;
                    (B) establish any defined ratio of different 
                categories of health professionals; or
                    (C) establish any specific utilization review or 
                internal quality standards other than that required in 
                other provisions of this Act.

SEC. 1122. QUALITY ASSURANCE STANDARDS.

    (a) In General.--Each standard health plan shall comply with the 
plan performance standards in accordance with subtitle A of title V. 
Each standard health plan shall establish procedures, including ongoing 
quality improvement procedures, to ensure that the health care services 
provided to enrollees under the plan will be provided under reasonable 
standards of quality of care consistent with prevailing professionally 
recognized standards of medical practice and the quality standards 
established under subtitle A of title V.
    (b) Internal Quality Assurance Program.--Each standard health plan 
shall establish, and communicate to its enrollees and its providers, an 
ongoing internal program, including periodic reporting, to monitor and 
evaluate the quality and cost effectiveness of its health care 
services, pursuant to standards established by the National Quality 
Council.

SEC. 1123. CONSUMER GRIEVANCE PROCESS.

    Each standard health plan shall demonstrate to the appropriate 
certifying authority the capability to administer the plan in a manner 
which ensures due process for all enrollees under rules established by 
the Secretary.

SEC. 1124. HEALTH SECURITY CARDS.

    Each standard health plan shall issue a health security card to 
each individual enrolled in such plan in accordance with subtitle B of 
title V and regulations promulgated by the Secretary.

SEC. 1125. INFORMATION AND MARKETING STANDARDS.

    (a) In General.--Each standard health plan shall provide 
information to the participating State and each purchasing cooperative 
through which such plan is offered in accordance with sections 1401(d) 
and 5009, other applicable information requirements of this Act, and 
rules promulgated by the Secretary.
    (b) Marketing Methods; Advertising Materials.--A standard health 
plan may utilize direct marketing, agency, or other arrangements to 
distribute health plan information, subject to applicable fair 
marketing practices laws and standards established by the State or by 
the Secretary, including standards to prevent selective marketing. All 
advertising, promotional materials, and other communications with 
health plan members and the general public must be factually accurate 
and responsive to the needs of served populations. A standard health 
plan may not distribute marketing materials to an area smaller than the 
entire community rating area of the plan.
    (c) Payment of Agent Commissions.--A standard health plan--
            (1) may pay a commission or other remuneration to an agent 
        or broker in marketing the plan to individuals or groups, but
            (2) may not vary such remuneration based, directly or 
        indirectly, on the anticipated or actual claims experience 
        associated with the group or individuals to which the plan was 
        sold.
    (d) Materials in Appropriate Languages.--In the case of a community 
rating area that includes a significant number or proportion of 
residents with limited English proficiency, each standard health plan 
in such area shall provide all materials under this Act at an 
appropriate reading level and in the native languages of such 
residents, as appropriate.

SEC. 1126. INFORMATION REGARDING A PATIENT'S RIGHT TO SELF-
              DETERMINATION IN HEALTH CARE SERVICES.

    (a) In General.--Each standard health plan shall provide written 
information to each individual enrolling in such plan of such 
individual's right under State law (whether statutory or as recognized 
by the courts of the State) to make decisions concerning medical care, 
including the right to accept or refuse medical treatment and the right 
to formulate advance directives (as defined in section 1866(f)(3) of 
the Social Security Act (42 U.S.C. 1395cc(f)(3))), and the written 
policies of the standard health plan with respect to such right.
    (b) Promotion of Shared Decision Making.--Each standard health plan 
shall promote shared decision making by assuring that patients are 
appropriately informed about health care treatment options.

SEC. 1127. CONTRACTS WITH PURCHASING COOPERATIVES.

    (a) Contracts with Cooperatives.--A community-rated standard health 
plan provided by a carrier shall enter into contracts with each 
purchasing cooperative seeking such a contract in the community rating 
area served by the plan.
    (b) Pricing.--No community-rated standard health plan shall offer a 
rate to a purchasing cooperative in the community rating area served by 
the plan that is more than the premium rate determined under section 
1116. Such a plan may charge a marketing fee as specified under section 
1324(b)(1).

SEC. 1128. HEALTH PLAN ARRANGEMENTS WITH PROVIDERS.

    (a) Providers Outside Area.--A State may not limit the ability of 
any plan to contract with a provider of health services located outside 
of the geographic boundaries of a community rating area or the State.
    (b) Treatment of Cost-Sharing.--Each standard health plan which 
provides the standard benefits package shall include in its payments to 
providers such additional reimbursements as may be necessary to reflect 
cost-sharing reductions to which individuals are entitled under 
subtitle A of title VI.
    (c) Provider Verification.--Each standard health plan shall ensure 
that all health care providers reimbursed by the plan are authorized 
under State law to provide applicable services. Each standard health 
plan shall--
            (1) verify the credentials of practitioners and facilities;
            (2) ensure that all providers meet applicable State 
        licensing and certification standards;
            (3) ensure that each health care provider participating in 
        the plan annually discloses information regarding operations, 
        ownership, finances, and workforce necessary to evaluate the 
        providers compliance with this Act;
            (4) oversee the quality and performance of participating 
        providers, consistent with section 1122; and
            (5) investigate and resolve consumer complaints against 
        participating providers.
    (d) Requirements for Nonnetwork Plans.--
            (1) In general.--Each standard health plan shall 
        demonstrate, based on standards established by the Secretary, 
        arrangements with a sufficient number, distribution, and 
        variety of qualified health professionals that will accept the 
        plan's payment rates in full to ensure that all nonnetwork 
        items and services covered by the standard benefits package 
        established under subtitle C are available and accessible to 
        all enrollees throughout the community rating area with 
        reasonable promptness and in a manner which assures continuity.
            (2) Definitions relating to nonnetwork plans.--For purposes 
        of this Act:
                    (A) Nonnetwork plan defined.--The term ``nonnetwork 
                plan'' means a standard health plan that does not 
                utilize a provider network (as defined in subsection 
                (e)(5)(B)).
                    (B) Nonnetwork items and services.--The term 
                ``nonnetwork items and services'' means items or 
                services provided to an individual enrolled under a 
                standard health plan by a health care provider who is 
                not a member of a provider network of the plan.
    (e) Requirements for Network Plans.--
            (1) Agreements.--Each standard health plan shall enter into 
        agreements or have such other arrangements with a sufficient 
        number, distribution, and variety of qualified health 
        professionals within the network that will accept the plan's 
        payment rates as payments in full to ensure that all services 
        covered by the standard benefit package established under 
        subtitle C are available and accessible to all enrollees 
        throughout the health plan service area (established under 
        section 1502(d)) with reasonable promptness and in a manner 
        which assure continuity.
            (2) Gatekeeper.--With respect to each standard health plan 
        that utilizes a gatekeeper or similar process to approve health 
        care services, such plan shall ensure that such gatekeeper or 
        process does not create an undue burden for enrollees with 
        complex or chronic health conditions and shall ensure access to 
        relevant specialists for the continued care of such enrollees 
        when medically indicated. In cases of a patient with a severe, 
        complex, or chronic health condition, such plan shall 
        determine, in conjunction with the enrollee and the enrollee's 
        primary care provider, whether it is medically necessary or 
        appropriate to use a specialist or a care coordinator from an 
        interdisciplinary team as the gatekeeper or in the health care 
        approval process.
            (3) Continued care.--Each standard health plan shall 
        develop and implement mechanisms for coordinating the delivery 
        of care among different providers so as to enhance continuity 
        of care for the patient.
            (4) Eligible centers of specialized treatment expertise.--
                    (A) In general.--Each standard health plan must 
                demonstrate that adults, children, and individuals with 
                disabilities have access to specialized treatment 
                expertise when medically indicated by meeting 
                evaluation criteria established by the Secretary. In 
                establishing such criteria, the Secretary may consider 
                a process by which a standard health plan could be 
                deemed to meet such evaluation criteria if such plan 
                demonstrates referrals to designated centers of 
                specialized care when medically necessary or 
                appropriate, informs enrollees of the availability of 
                referral care, and ensures compliance with section 
                1123.
                    (B) Eligible centers.--The Secretary shall 
                establish criteria for designating centers of 
                specialized care and shall designate eligible centers 
                based on such criteria. The criteria shall include 
                requirements for staff credentials and experience, and 
                requirements for measured outcomes in the diagnosis and 
                treatment of patients. The Secretary shall develop 
                additional criteria for outcomes of specialized 
                treatment as research findings become available. To be 
                designated as a center of specialized care, a center 
                shall--
                            (i) attract patients from outside the 
                        center's local geographic region, from across 
                        the State or the Nation; and
                            (ii) either sponsor, participate in, or 
                        have medical staff who participate in peer-
                        reviewed research.
                    (C) Limitation.--A State may not establish rules or 
                policies that require or encourage standard health 
                plans to give preference to centers of specialized 
                treatment expertise within the State or within the 
                community rating area. A standard health plan shall not 
                prohibit an academic health center, teaching hospital, 
                or other center for specialized care with which it 
                contracts from contracting with one or more other 
                plans.
                    (D) Specialized treatment expertise.--For purposes 
                of this paragraph, the term ``specialized treatment 
                expertise'', with respect to the treatment of a health 
                condition by an eligible center, means expertise in 
                diagnosing and treating unusual diseases or conditions, 
                diagnosing and treating diseases or conditions which 
                are unusually difficult to diagnose or treat, and 
                providing other specialized health care.
            (5) Definitions relating to network plans.--For purposes of 
        this Act:
                    (A) Network plan defined.--The term ``network 
                plan'' means a standard health plan that utilizes a 
                provider network.
                    (B) Provider network defined.--The term ``provider 
                network'' means, with respect to a standard health 
                plan, providers that have entered into an agreement 
                with the plan under which such providers are obligated 
                to provide items and services in the standard benefits 
                package established under subtitle C to individuals 
                enrolled in the plan, or have an agreement to provide 
                services on a fee-for-service basis.
                    (C) Network items and services.--The term ``network 
                items and services'' means items or services provided 
                to an individual enrolled under a standard health plan 
                by a health care provider who is a member of a provider 
                network of the plan.
    (f) Emergency and Urgent Care Services.--
            (1) In general.--Each standard health plan shall cover 
        emergency and urgent care services provided to enrollees, 
        without regard to whether or not the provider furnishing such 
        services has a contractual (or other) arrangement with the plan 
        to provide items or services to enrollees of the plan and in 
        the case of emergency services without regard to prior 
        authorization.
            (2) Payment amounts.--In the case of emergency and urgent 
        care provided to an enrollee outside of a standard health 
        plan's community rating area, the payment amounts of the plan 
        shall be based on the applicable fee schedule described in 
        subsection (g).
    (g) Application of Plan Fee Schedule.--
            (1) In general.--Subject to paragraph (2), each standard 
        health plan that provides for payment for services on a fee-
        for-service basis and has not established an agreement or 
        contractual arrangement with providers specifying a basis for 
        payment shall make such payment to such providers under a fee 
        schedule established by the plan.
            (2) Rule of construction.--Nothing in the paragraph (1) 
        shall be construed to prevent a standard health plan from 
        providing for a different basis or level of payment than the 
        fee schedule established under such paragraph as part of a 
        contractual agreement with participating providers under the 
        plan.
    (h) Physician Participation Program; Requirement of Direct 
Billing.--
            (1) Physician participation program.--
                    (A) In general.--Each standard health plan shall 
                establish a program under which participating 
                physicians shall agree to accept the plan's payment 
                schedule as payment in full, and agree not to charge 
                patients more than the cost-sharing required by such 
                plan. Each such plan shall make available the list of 
                participating physicians to enrollees and prospective 
                enrollees.
                    (B) Coverage under agreements with plans.--The 
                agreements or other arrangements entered into under 
                subsection (e)(1) between a standard health plan and 
                the health care providers providing the standard 
                benefits package established under subtitle C to 
                individuals enrolled with the plan shall prohibit a 
                provider from engaging in balance billing described in 
                subparagraph (A).
            (2) Direct billing.--
                    (A) In general.--A provider may not charge or 
                collect from an enrollee amounts that are payable by 
                the standard health plan (including any cost-sharing 
                reduction assistance payable by the plan) and shall 
                submit charges to such plan in accordance with any 
                applicable requirements of subtitle B of title V 
                (relating to health information systems).
                    (B) Prohibition.--An individual or entity that 
                performs clinical laboratory services may not present 
                or cause to be presented, a claim, bill, or demand for 
                payment to any person other than the individual 
                receiving such services, or to the standard health plan 
                of the individual, except that the Secretary may by 
                regulation establish appropriate exceptions to the 
                requirement of this subparagraph.
            (3) Prohibition of balance billing of taxes.--Any agreement 
        entered into between a standard health plan and a provider 
        shall prohibit the provider from charging patients the amount 
        of any tax recovered from the provider under section 4518 of 
        the Internal Revenue Code of 1986.
            (4) Rule of construction.--Nothing in this Act shall be 
        construed to--
                    (A) require or force an individual to receive 
                health care solely through the individual's standard 
                health plan; or
                    (B) prohibit any individual from privately 
                contracting with any health care provider and paying 
                for the treatment or service provider by such provider 
                on a cash basis or any other basis as agreed to between 
                the individual and the provider.
    (i) Relation to Detention.--A standard health plan is not required 
to provide any reimbursement to any detention facility for services 
performed in that facility for detainees in the facility.

SEC. 1129. UTILIZATION MANAGEMENT PROTOCOLS AND PHYSICIAN INCENTIVE 
              PLANS.

    (a) Requiring Consumer Disclosure.--Each standard health plan shall 
disclose upon request to enrollees (and prospective enrollees) and to 
participating providers (and prospective providers), the protocols and 
financial incentives used by the plan, including utilization management 
protocols and physician incentive plans for controlling utilization and 
costs, while protecting proprietary business information to the extent 
specified by the Secretary.
    (b) Utilization Management.--The utilization review and management 
activities of each standard health plan, provided either directly or 
through contract, shall meet the following standards as defined by the 
Secretary:
            (1) Personnel.--All review determinations shall be made by 
        health professionals who are licensed, certified, or otherwise 
        credentialed and who are qualified to review utilization of the 
        treatment being sought.
            (2) Review process.--Each standard health plan shall base 
        utilization management on current scientific knowledge, stress 
        the efficient delivery of health care and quality outcomes, 
        rely primarily on evaluating and comparing practice patterns 
        rather than routine case-by-case review, be consistent and 
        timely in application, and have a process for making review 
        determinations for urgent and emergency care 24 hours a day.
            (3) No financial incentive.--Utilization management by each 
        standard health plan may not create financial incentives for 
        reviewers or providers to reduce or limit medically necessary 
        or appropriate services.
    (c) Physician Incentive Plans.--A standard health plan may not 
operate a physician incentive plan unless such incentive plan meets the 
requirements of section 1876(i)(8)(A) of the Social Security Act (42 
U.S.C. 1395mm(i)(8)(A)).

               PART 4--SUPPLEMENTAL HEALTH BENEFITS PLANS

SEC. 1141. SUPPLEMENTAL HEALTH BENEFITS PLANS.

    (a) Treatment of Supplemental Health Benefits Plans.--
            (1) In general.--Nothing in this Act may be construed as 
        preventing a standard health plan sponsor from offering and 
        pricing (in a manner that is separate from the offering and 
        pricing of the standard health plans offered by such sponsor in 
        the community rating area) supplemental health benefits plans 
        pursuant to the State certification plan, the requirements of 
        this section, and regulations promulgated by the Secretary.
            (2) Plans defined.--In this Act:
                    (A) Supplemental health benefits plan.--The term 
                ``supplemental health benefits plan'' means a 
                supplemental services plan or a cost-sharing plan.
                    (B) Supplemental services plan.--The term 
                ``supplemental services plan'' means a health plan 
                which provides--
                            (i) coverage for services and items not 
                        included in the standard benefits package 
                        established under subtitle C,
                            (ii) coverage for items and services 
                        included in such package but not covered 
                        because of a limitation in amount, duration, or 
                        scope of benefits, or
                            (iii) both.
                    (C) Cost-sharing plan.--The term ``cost-sharing 
                plan'' means a health plan which provides coverage for 
                deductibles and coinsurance imposed as part of the 
                standard benefits package established under subtitle C.
    (b) Requirements for Supplemental Services Plans.--
            (1) Application of certain health plan standards.--
                    (A) In general.--The standards specified in 
                subparagraph (B) shall apply with respect to each 
                supplemental services plan in the same manner as such 
                standards apply with respect to a certified standard 
                health plan.
                    (B) Specified standards.--The standards specified 
                in this subparagraph are as follows:
                            (i) Section 1111 (relating to guaranteed 
                        issue, availability, and renewability).
                            (ii) Section 1112 (relating to enrollment).
                            (iii) Section 1114 (relating to 
                        nondiscrimination based on health status).
                            (iv) Section 1116 (relating to rating 
                        limitations for community-rated market).
            (2) No duplicative health benefits.--A standard health plan 
        sponsor or any other entity may not offer any supplemental 
        services plan that--
                    (A) duplicates the standard benefits package 
                established under subtitle C, or
                    (B) duplicates any coverage provided under the 
                medicare program to any medicare-eligible individual.
            (3) Restrictions on marketing abuses.--Not later than May 
        1, 1995, the Secretary shall develop minimum standards that 
        prohibit marketing practices by standard health plan sponsors 
        and other entities offering supplemental services plans that 
        involve--
                    (A) providing monetary incentives for, or tying or 
                otherwise conditioning, the sale of the plan to 
                enrollees in a certified standard health plan of the 
                sponsor or entity;
                    (B) linking in any manner to the plan's standard 
                benefits package; or
                    (C) using or disclosing to any party information 
                about the health status or claims experience of 
                participants in a certified standard health plan for 
                the purpose of marketing a supplemental services plan.
    (c) Requirements for Cost-Sharing Plans.--
            (1) Rules for offering of policies.--A cost-sharing plan 
        may be offered to an individual only if--
                    (A) the plan is offered by the standard health plan 
                in which the individual is enrolled;
                    (B) the standard health plan offers the plan to all 
                individuals enrolled in the standard health plan;
                    (C) the individual is not enrolled in an 
                alternative benefits package; and
                    (D) the plan is offered only during the enrollment 
                periods for standard health plans specified in section 
                1112.
            (2) Prohibition of coverage of copayments.--A cost-sharing 
        plan may not provide any benefits relating to any copayments 
        established under subtitle C.
            (3) Equivalent coverage for all services.--A cost-sharing 
        plan shall provide coverage for items and services in the 
        standard benefits package to the same extent as the plan 
        provides coverage for all items and services in the package.
            (4) Requirements for pricing.--
                    (A) In general.--The price of any cost-sharing plan 
                shall--
                            (i) be the same for each individual or 
                        class of family to whom the plan is offered;
                            (ii) include any expected increase in 
                        utilization resulting from the purchase of the 
                        plan by individuals enrolled in the standard 
                        health plan; and
                            (iii) not result in a loss-ratio of less 
                        than 90 percent.
                    (B) Loss-ratio defined.--In subparagraph (A)(iii), 
                a ``loss-ratio'' is the ratio of the premium returned 
                to the consumer in payout relative to the total premium 
                collected.

                 Subtitle C--Benefits and Cost-Sharing

                   PART 1--STANDARD BENEFITS PACKAGES

SEC. 1201. GENERAL DESCRIPTION OF STANDARD BENEFITS PACKAGES.

    (a) Standard Benefits Package.--For purposes of this title, a 
standard benefits package is a benefits package that--
            (1)(A) provides all of the items and services under the 
        categories of health care items and services described in 
        section 1202; and
            (B) provides for at least one of the 3 cost-sharing 
        schedules established under section 1213(c)(2) by the National 
        Health Benefits Board established under section 1211 (referred 
        to in this part as the ``Board'') for such a package; and
            (2) has an actuarial value that is equivalent to the 
        actuarial value of the benefits package provided by the Blue 
        Cross/Blue Shield Standard Option under the Federal Employees 
        Health Benefits Program as in effect during 1994, adjusted for 
        an average population and adjusted for the particular cost-
        sharing schedule provided for in the package.
    (b) Alternative Standard Benefits Package.--For purposes of this 
title, an alternative standard benefits package is a benefits package 
that--
            (1)(A) provides all of the items and services under the 
        categories of health care items and services described in 
        section 1202; and
            (B) provides for the very high deductible cost-sharing 
        schedule established under section 1213(c)(3) by the Board for 
        such a package; and
            (2) has an actuarial value that is less than the actuarial 
        value of the benefits package provided by the Blue Cross/Blue 
        Shield Standard Option under the Federal Employees Health 
        Benefits Program as in effect during 1994, adjusted for an 
        average population.
    (c) Actuarial Values.--The Board shall determine the actuarial 
values referred to in subsections (a)(2) and (b)(2).

SEC. 1202. DESCRIPTION OF CATEGORIES OF ITEMS AND SERVICES.

    (a) In General.--The categories of health care items and services 
described in this section are the following, as defined by the Board 
under section 1213(a):
            (1) Hospital services.--The hospital (as defined in section 
        1203(7)) services described in this paragraph include the 
        following:
                    (A) Inpatient hospital services.
                    (B) Outpatient hospital services.
                    (C) 24-hour a day hospital emergency services.
            (2) Health professional services.--The items and services 
        described in this paragraph are--
                    (A) health professional services (as defined in 
                section 1203(3)), including consultations, that are 
                provided in a home, office, or other ambulatory care 
                setting, or an institutional setting; and
                    (B) services and supplies (including drugs and 
                biologicals which cannot be self-administered) 
                furnished as incident to such health professional 
                services.
            (3) Emergency and ambulatory medical and surgical 
        services.--The items and services described in this paragraph 
        are 24-hour a day emergency services and ambulatory medical or 
        surgical services provided in a facility that is legally 
        authorized to provide such services in the State in which such 
        services are provided.
            (4) Clinical preventive services.--The items and services 
        described in this paragraph are clinical preventive services, 
        including services for high risk populations, age-appropriate 
        immunizations, tests, and clinician visits furnished consistent 
        with any periodicity schedule specified by the Board under 
        section 1213(a)(2)(B).
            (5) Mental illness and substance abuse services.--The items 
        and services described in this paragraph are mental illness and 
        substance abuse services, including inpatient, outpatient, 
        residential non-hospital, and intensive non-residential 
        services, for the treatment of mental illness and substance 
        abuse disorders (as defined in section 1203(9)).
            (6) Family planning services and services for pregnant 
        women.--The services described in this section include the 
        following items and services:
                    (A) Voluntary comprehensive family planning 
                services, including counseling and education.
                    (B) Contraceptive drugs and devices that are 
                subject to approval by the Secretary under the Federal 
                Food, Drug, and Cosmetic Act.
                    (C) Services for pregnant women.
            (7) Hospice care.--The hospice care described in this 
        paragraph is items and services provided for end of life care 
        (as defined in section 1203(6)).
            (8) Home health care.--
                    (A) In general.--The home health care described in 
                this paragraph is home health care (as defined in 
                section 1203(4)) and home infusion drug therapy 
                services (as defined in section 1203(5)).
                    (B) Limitations.--Coverage for home health care is 
                subject to the following limitations:
                            (i) Inpatient treatment alternative.--Such 
                        care is covered only as an alternative to 
                        inpatient treatment in a hospital, skilled 
                        nursing facility (as defined in section 
                        1203(15)), or rehabilitation facility (as 
                        defined in section 1203(14)) after an illness, 
                        injury, disorder, or other health condition.
                            (ii) Reevaluation.--At the end of each 60-
                        day period of home health care, the need for 
                        continued care shall be reevaluated by the 
                        person who is primarily responsible for 
                        providing the home health care. Additional 
                        periods of care are covered only if such person 
                        determines that the requirement in clause (i) 
                        is satisfied.
            (9) Extended care services--
                    (A) In general.--The extended care services 
                described in this section are the items and services 
                described in section 1861(h) of the Social Security 
                Act, when provided to an inpatient of a skilled nursing 
                facility or a rehabilitation facility.
                    (B) Limitations.--Extended care services are 
                covered only as an alternative to receiving inpatient 
                hospital services as a result of an illness, injury, 
                disorder, or other health condition.
            (10) Ambulance services.--
                    (A) In general.--The ambulance services described 
                in this paragraph are covered only when indicated by 
                the medical condition of the individual receiving such 
                services. Such services include the following:
                            (i) Ground transportation by ambulance.
                            (ii) Air or water transportation by an 
                        aircraft or vessel equipped for transporting an 
                        injured or sick individual in cases in which 
                        there is no other method of transportation or 
                        where use of another method of transportation 
                        is contra-indicated by the medical condition of 
                        such individual.
            (11) Outpatient laboratory, radiology, and diagnostic 
        services.--The items and services described in this paragraph 
        are laboratory, radiology, and diagnostic services provided 
        upon prescription to individuals who are not inpatients of a 
        hospital, hospice, skilled nursing facility, or rehabilitation 
        facility.
            (12) Outpatient prescription drugs.--The items described in 
        this paragraph are the following used for a medically accepted 
        indication (as defined in section 1203(8)):
                    (A) Outpatient prescription drugs.
                    (B) Blood clotting factors (as defined in section 
                1203(1)).
                    (C) Drugs used for home infusion therapy.
                    (D) Biologicals.
                    (E) Accessories and supplies used directly with the 
                items described in subparagraphs (A) through (D).
            (13) Outpatient rehabilitation services.--
                    (A) In general.--The outpatient rehabilitation 
                services described in this paragraph are--
                            (i) outpatient occupational therapy;
                            (ii) outpatient physical therapy;
                            (iii) outpatient respiratory therapy; and
                            (iv) outpatient speech-language pathology 
                        services and outpatient audiology services.
                    (B) Limitations.--Coverage for outpatient 
                rehabilitation services is subject to the following 
                limitations:
                            (i) Service limitation.--Such services 
                        include only items or services used to restore 
                        or maintain functional capacity or prevent or 
                        minimize limitations on physical and cognitive 
                        functions as a result of an illness, injury, 
                        disorder, or other health condition, including 
                        attaining new functional abilities at an age-
                        appropriate rate.
                            (ii) Reevaluation.--At the end of each 60-
                        day period of outpatient rehabilitation 
                        services, the need for continued services shall 
                        be reevaluated by the person who is primarily 
                        responsible for providing the services. 
                        Additional periods of services are covered only 
                        if such person determines that the requirement 
                        of paragraph (1) is satisfied.
            (14) Durable medical equipment and prosthetic and orthotic 
        devices.--
                    (A) In general.--The items and services described 
                in this paragraph are--
                            (i) durable medical equipment (as defined 
                        in section 1203(2);
                            (ii) prosthetic devices (as defined in 
                        section 1203(12);
                            (iii) orthotics (as defined in section 
                        1203(10)) and prosthetics (as defined in 
                        section 1203(11)); and
                            (iv) accessories and supplies used directly 
                        with the equipment or devices described in 
                        clauses (i) through (iv).
                    (B) Repair, maintenance, etc.--The items and 
                services described in this paragraph include the 
                following with respect to the equipment and devices 
                described in subparagraph (A):
                            (i) Repair and maintenance of such 
                        equipment or devices.
                            (ii) Replacement of such equipment or 
                        devices when required due to loss, irreparable 
                        damage, wear, or because of a change in the 
                        patient's condition.
                            (iii) Fitting and training for the use of 
                        such equipment or devices.
            (15) Vision care, hearing aids, and dental care.--
                    (A) In general.--The items described in this 
                paragraph are the vision care described in subparagraph 
                (B), dental care described in subparagraph (C), and 
                hearing care described in subparagraph (D).
                    (B) Vision care.--The vision care described in this 
                subparagraph is routine eye examinations, diagnosis, 
                and treatment for defects in vision furnished to 
                individuals who are under 22 years of age, including 
                eyeglasses and contact lenses furnished according to a 
                periodicity schedule established by the Board.
                    (C) Dental care.--
                            (i) Individuals under 22.--The dental care 
                        described in this subparagraph shall include 
                        the following, as specified by the Board, 
                        furnished to individuals who are under 22 years 
                        of age:
                                    (I) Emergency dental treatment.
                                    (II) Prevention and diagnosis of 
                                dental disease.
                                    (III) Treatment of dental disease.
                                    (IV) Space maintenance procedures 
                                to prevent orthodontic complications.
                                    (V) Interceptive orthodontic 
                                treatment to prevent severe 
                                malocclusion.
                            (ii) Individuals over 22.--The dental care 
                        described in this subparagraph for individuals 
                        who are over 22 years of age is emergency 
                        dental treatment, as specified by the Board.
                    (D) Hearing care.--The hearing care items and 
                services described in this paragraph are the following 
                when furnished to an individual who is under 22 years 
                of age:
                            (i) Routine ear examinations and diagnosis 
                        for defects in hearing as part of a physician 
                        visit.
                            (ii) Hearing aids when recommended by a 
                        physician or audiologist.
            (16) Investigational treatments.--The items and services 
        described in this paragraph are items and services required to 
        provide patient care pursuant to the design of a qualified 
        investigational treatment (as defined in section 1203(13)).
    (b) Limitation.--
            (1) In general.--Items and services under the categories 
        described in subsection (a) shall be furnished to health plan 
        enrollees when medically necessary or appropriate.
            (2) Definition.--For purposes of this subtitle, the term 
        ``medically necessary or appropriate'' when referring to an 
        item or service means an item or service intended to maintain 
        or improve the biological, psychological, or functional 
        condition of a health plan enrollee or to prevent or mitigate 
        an adverse health outcome to an enrollee.

SEC. 1203. DEFINITIONS.

    For purposes of this subtitle:
            (1) Blood clotting factors.--The term ``blood clotting 
        factors'' has the meaning given such term in section 
        1861(s)(2)(I) of the Social Security Act.
            (2) Durable medical equipment.--The term ``durable medical 
        equipment'' has the meaning given such term in section 1861(n) 
        of the Social Security Act.
            (3) Health professional services.--The term ``health 
        professional services'' means professional services that--
                    (A) are lawfully provided by a physician; or
                    (B) would be described in subparagraph (A) if 
                provided by a physician, but are provided by another 
                person who is legally authorized to provide such 
                services in the State in which the services are 
                provided.
            (4) Home health care.--The term ``home health care'' means 
        the items and services described in section 1861(m) of the 
        Social Security Act.
            (5) Home infusion drug therapy services.--The term ``home 
        infusion drug therapy services'' means the home infusion drug 
        therapy services described in section 1861(ll) of the Social 
        Security Act.
            (6) Hospice care.--The term ``hospice care'' means the 
        items and services described in paragraph (1) of section 
        1861(dd) of the Social Security Act, except that in applying 
        such section for purposes of this paragraph--
                    (A) paragraphs (4)(B) and (5) shall be disregarded; 
                and
                    (B) all references to the Secretary of Health and 
                Human Services shall be treated as references to the 
                Board.
            (7) Hospital.--The term ``hospital'' has the meaning given 
        such term in section 1861(e) of the Social Security Act, except 
        that such term shall include a facility operated by the 
        uniformed services, the Department of Veterans Affairs, and the 
        Indian Health Service that is primarily engaged in providing 
        services to inpatients that are equivalent to the services 
        provided by a hospital defined in such section 1861(e).
            (8) Medically accepted indication.--The term ``medically 
        accepted indication'' means with respect to the use of a drug, 
        any use which has been approved by the Food and Drug 
        Administration for the drug, and includes another use of the 
        drug if--
                    (A) the drug has been approved by the Food and Drug 
                Administration; and
                    (B) such use is supported by one or more citations 
                which are included (or approved for inclusion) in one 
                or more of the following compendia: the American 
                Hospital Formulary Service-Drug Information, the 
                American Medical Association Drug Evaluations, the 
                United States Pharmacopoeia-Drug Information, and other 
                authoritative compendia as identified by the Secretary.
            (9) Mental illness and substance abuse disorders.--The term 
        ``mental illness and substance abuse disorder'' means a mental 
        or substance abuse disorder listed in the Diagnostic and 
        Statistical Manual of Mental Disorders, Fourth Edition, or the 
        International Classification of Diseases, 9th Revision, the 
        Clinical Modification, Third Edition, or revised versions of 
        such manuals or texts.
            (10) Orthotics.--The term ``orthotics'' includes--
                    (A) an accessory or supply used directly with a 
                prosthetic device to achieve therapeutic benefits and 
                proper functioning; and
                    (B) leg, arm, back, and neck braces.
            (11) Prosthetics.--The term ``prosthetics'' includes 
        artificial legs, arms, and eyes.
            (12) Prosthetic devices.--The term ``prosthetic devices'' 
        means devices that replace all or part of the function of a 
        body organ.
            (13) Qualified investigational treatment.--The term 
        ``qualified investigational treatment'' means an 
        investigational treatment that is part of a peer-reviewed and 
        approved research program (as defined by the Secretary) or 
        research trials approved by the Secretary, the Directors of the 
        National Institutes of Health, the Commissioner of the Food and 
        Drug Administration, the Secretary of Veterans Affairs, the 
        Secretary of Defense, or a qualified nongovernmental research 
        entity as defined in guidelines of the National Institutes of 
        Health, including guidelines for cancer center support grants 
        designated by the National Cancer Institute.
            (14) Rehabilitation facility.--The term ``rehabilitation 
        facility'' means an institution (or a distinct part of an 
        institution) which is established and operated for the purpose 
        of providing diagnostic, therapeutic, and rehabilitation 
        services to individuals for rehabilitation from illness, 
        injury, disorder, or other health condition. An entity 
        qualifying as a hospital for as defined in paragraph (7) may 
        also qualify as a rehabilitation facility for the purposes of 
        section 1202(a)(9).
            (15) Skilled nursing facility.--The term ``skilled nursing 
        facility'' means an institution (or a distinct part of an 
        institution) which is primarily engaged in providing to 
        residents--
                    (A) skilled nursing care and related services for 
                residents who require medical or nursing care; or
                    (B) rehabilitation services to residents for 
                rehabilitation from illness, injury, disorder, or other 
                health condition.

                 PART 2--NATIONAL HEALTH BENEFITS BOARD

SEC. 1211. CREATION OF NATIONAL HEALTH BENEFITS BOARD; MEMBERSHIP.

    (a) In General.--There is hereby established a National Health 
Benefits Board (referred to in this part as the ``Board'').
    (b) Composition.--The Board is composed of 7 members appointed by 
the President, by and with the advice and consent of the Senate. No 
more than 4 members of the Board may be affiliated with the same 
political party. Members shall be appointed not later than 90 days 
after the date of the enactment of this title.
    (c) Chair.--The President shall designate one of the members of the 
Board as chair.
    (d) Terms.--
            (1) In general.--Except as provided in paragraph (2), the 
        term of each member of the Board is 6 years and begins when the 
        term of the predecessor of that member ends.
            (2) Initial terms.--The initial terms of the members of the 
        Board first taking office after the date of the enactment of 
        this title, shall expire as designated by the President, two at 
        the end of two years, two at the end of four years, and three 
        at the end of six years.
            (3) Continuation in office.--Upon the expiration of a term 
        of office, a member shall continue to serve until a successor 
        is appointed and qualified.
    (e) Vacancies.--
            (1) In general.--If a vacancy occurs, other than by 
        expiration of term, a successor shall be appointed by the 
        President, by and with the consent of the Senate, to fill such 
        vacancy. The appointment shall be for the remainder of the term 
        of the predecessor.
            (2) No impairment of function.--A vacancy in the membership 
        of the Board does not impair the authority of the remaining 
        members to exercise all of the powers of the Board.
            (3) Acting chair.--The Board may designate a member to act 
        as chair during any period in which there is no chair 
        designated by the President.
    (f) Meetings; Quorum.--
            (1) Meetings.--The chair shall preside at meetings of the 
        Board, and in the absence of the chair, the Board shall elect a 
        member to act as chair pro tempore.
            (2) Frequency.--The Board shall meet not less frequently 
        than 4 times each year.
            (3) Quorum.--Four members of the Board shall constitute a 
        quorum thereof.

SEC. 1212. QUALIFICATIONS OF BOARD MEMBERS.

    (a) Citizenship.--Each member of the Board shall be a citizen of 
the United States.
    (b) Basis of Selection.--Board members shall be selected on the 
basis of their experience and expertise in relevant subjects, including 
the practice of medicine, nursing, or other clinical practices, health 
care financing and delivery, State health systems, consumer protection, 
business, law, and delivery of care to vulnerable populations.
    (c) Pay and Travel Expenses.--
            (1) Pay.--
                    (A) Chair.--The chair of the Board shall be paid at 
                a rate equal to the daily equivalent of the minimum 
                annual rate of basic pay payable for level II of the 
                Executive Schedule under section 5315 of title 5, 
                United States Code, for each day (including travel 
                time) during which the chair is engaged in the actual 
                performance of duties vested in the Board.
                    (B) Members.--Each member of the Board shall be 
                paid at a rate equal to the daily equivalent of the 
                minimum annual rate of basic pay payable for level III 
                of the Executive Schedule under section 5315 of title 
                5, United States Code, for each day (including travel 
                time) during which the member is engaged in the actual 
                performance of duties vested in the Board.
            (2) Travel expenses.--Members of the Board shall receive 
        travel expenses, including per diem in lieu of subsistence, in 
        accordance with sections 5702 and 5703 of title 5, United 
        States Code.

SEC. 1213. GENERAL DUTIES AND RESPONSIBILITIES.

    (a) Clarification and Refinement of Items and Services.--
            (1) In general.--The Board shall promulgate such 
        regulations or establish such guidelines as may be necessary to 
        clarify and refine the items and services under the categories 
        of health care items and services described in section 1202 in 
        accordance with the requirements of subsections (a)(2) and 
        (b)(2) of section 1201.
            (2) Schedules for items and services.--
                    (A) In general.--The Board shall establish and 
                update periodicity schedules for the items and services 
                in the categories of health care items and services 
                described in section 1202.
                    (B) Special rule with respect to clinical 
                preventive services.--With respect to clinical 
                preventive services, the Board--
                            (i) shall specify and define specific items 
                        and services as clinical preventive services 
                        and shall establish and update a periodicity 
                        schedule for such items and services; and
                            (ii) in specifying clinical preventive 
                        services and establishing and updating 
                        periodicity schedules under clause (i), the 
                        Board shall consult with experts in clinical 
                        preventive services, including the U.S. 
                        Preventive Services Task Force, the Advisory 
                        Committee on Immunization Practices, the 
                        American College of Obstetricians and 
                        Gynecologists, and the American Academy of 
                        Pediatrics.
            (3) Mental illness and substance abuse services.--
                    (A) Parity.--
                            (i) In general.--The Board shall design 
                        mental illness and substance abuse services so 
                        as to achieve parity with services for other 
                        medical conditions. Except as provided in 
                        clause (iii), day or visit limits or cost-
                        sharing requirements may not be applied to 
                        mental illness and substance abuse services 
                        that are not applied to services for other 
                        medical conditions.
                            (ii) Parity defined.--For purposes of this 
                        subparagraph, the term ``parity'' means 
                        comprehensive, coverage for all medically 
                        necessary or appropriate mental illness and 
                        substance abuse services in inpatient, 
                        outpatient, residential, and intensive non-
                        residential settings.
                            (iii) Special rule.--
                                    (I) Effect on other benefits.--If 
                                the Board determines that parity of 
                                mental illness and substance abuse 
                                services with services for other 
                                medical conditions cannot be achieved 
                                without imposing unduly burdensome 
                                cost-sharing requirements on other 
                                services, the Board may design mental 
                                illness and substance abuse services 
                                such that they include the following 
                                limits:
                                            (aa) Inpatient hospital 
                                        care may be limited, but in the 
                                        case of mental illness the 
                                        limit may not be set at a level 
                                        below 30 days per year, and in 
                                        the case of substance abuse 
                                        services the limit may not be 
                                        set at a level below the level 
                                        sufficient to provide 
                                        detoxification services.
                                            (bb) After the first 5 
                                        visits for outpatient adult 
                                        psychotherapy, the coinsurance 
                                        for such services may be set at 
                                        a level higher than the 
                                        coinsurance for other services, 
                                        but no higher than a 50 percent 
                                        coinsurance level.
                                            (cc) Consistent with the 
                                        process described in section 
                                        3510, the Board shall ensure 
                                        that parity for mental illness 
                                        and substance abuse services 
                                        with services for other medical 
                                        conditions is established no 
                                        later than January 1, 2001.
                                    (II) Legislative proposal.--If the 
                                Board finds that establishing parity 
                                for mental illness and substance abuse 
                                services with services for other 
                                medical conditions cannot be achieved 
                                by January 1, 2001, without imposing 
                                unduly burdensome cost-sharing on all 
                                services, the Board shall develop a 
                                legislative proposal for an extension 
                                of such date. Not later than January 1, 
                                2000, the Board shall submit to the 
                                Congress an implementing bill which 
                                contains such statutory provisions as 
                                are necessary or appropriate to 
                                implement the legislative proposal 
                                developed under the preceding sentence.
                    (B) Management of services.--
                            (i) In general.--The Board shall develop 
                        standards for the appropriate management of 
                        mental illness and substance abuse services. 
                        Such standards shall include quality managed 
                        care techniques.
                            (ii) Quality managed care.--For purposes of 
                        clause (i), the term ``quality managed care'' 
                        refers to the administration of benefits 
                        through methods of central intake, 
                        preauthorization, and utilization review under 
                        circumstances that protect individuals from 
                        unwarranted denial of services.
                    (C) Settings.--The Board shall give priority to 
                ensuring that mental illness and substance abuse 
                services are provided in the least restrictive setting 
                that is clinically appropriate and encouraging the use 
                of outpatient and intensive nonresidential treatments 
                to the greatest extent possible.
    (b) Determining Medical Necessity or Appropriateness.--
            (1) In general.--The Board shall be authorized to 
        establish--
                    (A) criteria for determinations of medical 
                necessity or appropriateness;
                    (B) procedures for determinations of medical 
                necessity or appropriateness; and
                    (C) regulations or guidelines to be used in 
                determining whether an item or service under the 
                categories of health care items and services described 
                in section 1202 is medically necessary or appropriate.
            (2) Requirements.--The Board shall include the following in 
        establishing criteria, procedures, and regulations under this 
        subsection:
                    (A) Special rules with respect to enrollees under 
                22 years of age.--In making any determination with 
                respect to medical necessity or appropriateness with 
                respect to an enrollee under 22 years of age, the Board 
                shall consider whether the item or service is--
                            (i) is appropriate for the age and health 
                        status of the enrollee;
                            (ii) will prevent or ameliorate the effects 
                        of a condition, illness, injury, or disorder;
                            (iii) will aid the overall physical and 
                        mental growth and development of the enrollee; 
                        or
                            (iv) will assist in achieving or 
                        maintaining maximum functional capacity in 
                        performing daily activities.
                This subparagraph shall apply to all items and services 
                under the categories of health care items and services 
                described in section 1202 as clarified and refined by 
                the Board under subsection (a).
                    (B) Consultations with expert authorities.--The 
                Board shall consider the opinions of experts from 
                academia, medical specialty groups, industry, and 
                government in establishing criteria, procedures, and 
                regulations with regard to medical necessity or 
                appropriateness.
                    (C) Recommendations to secretary.--In the absence 
                of sufficient evidence to develop regulations with 
                respect to any particular coverage determination, the 
                Board shall recommend to the Secretary specific areas 
                for which priorities should be given to undertake 
                clinical trials or establish practice guidelines.
            (3) Health plan requirements.--The regulations established 
        by the Board under this subsection shall provide that health 
        plans shall--
                    (A) in making any determination with respect to 
                medical necessity or appropriateness, consider the 
                criteria and procedures established by the Board under 
                this subsection;
                    (B) be guided by--
                            (i) the initial determination of medical 
                        necessity or appropriateness with respect to an 
                        item or service made by an enrollee and the 
                        health professional furnishing such item or 
                        service; and
                            (ii) available scientific evidence; and
                    (C) if a health plan has developed a treatment 
                guideline or utilization protocol, or has made a 
                general coverage determination, the plan shall--
                            (i) provide a copy of, and a written 
                        statement of the basis for, the guideline, 
                        protocol, or determination at least 60 days 
                        prior to the effective date of such guideline, 
                        protocol, or determination, to each affected 
                        provider with which the plan has a contract and 
                        the government entity which certifies the plan;
                            (ii) provide any or all of such information 
                        upon request to enrollees, potential enrollees, 
                        or other interested parties, including provider 
                        groups and specialty organizations; and
                            (iii) revise such guidelines, protocols, or 
                        determinations periodically, or, if new 
                        scientific evidence becomes available, as soon 
                        as possible after such evidence is available.
    (c) Cost-Sharing.--The Board shall establish cost-sharing schedules 
to be provided by health plans providing a standard benefits package or 
an alternative standard benefits package. In establishing such cost-
sharing schedules, the Board shall meet the following requirements:
            (1) Annual basis.--The Board shall review and update cost-
        sharing schedules as determined appropriate by the Board, but 
        on at least an annual basis.
            (2) Plans providing standard benefits package.--
                    (A) In general.--The Board shall establish 3 cost-
                sharing schedules for health plans providing the 
                standard benefits package which permit a variety of 
                delivery system options, including fee-for-service, 
                preferred provider organizations, point of service, and 
                managed care. Such cost-sharing schedules shall consist 
                of--
                            (i) a low cost-sharing schedule;
                            (ii) a high cost-sharing schedule; and
                            (iii) a combination cost-sharing schedule.
                    (B) Actuarial value of high cost-sharing 
                schedule.--A standard benefit package that provides for 
                the cost-sharing schedule established by the Board 
                under this paragraph that has the lowest actuarial 
                value relative to the actuarial values of all other 
                cost-sharing schedules established by the Board under 
                this paragraph, shall have an actuarial value that is 
                equivalent to the actuarial value of the benefits 
                package provided by the Blue Cross/Blue Shield Standard 
                Option under the Federal Employees Health Benefits 
                Program as in effect during 1994, adjusted for an 
                average population (as determined by the Board).
            (3) Plans providing alternative standard benefits 
        package.--The Board shall establish only one very high 
        deductible cost-sharing schedule for health plans providing the 
        alternative standard benefits package. Such cost-sharing 
        schedule shall provide for a higher deductible than any 
        deductible under a schedule established for health plans 
        providing a standard benefits package.
            (4) Clinical preventive services.--No cost-sharing schedule 
        established by the Board may include cost-sharing for clinical 
        preventive services and prenatal care.
            (5) Cost-sharing rules.--Cost-sharing schedules established 
        by the Board may include copayments, coinsurance, deductibles, 
        and out-of-pocket limits. The copayments, coinsurance, 
        deductibles and out-of-pocket limits on cost-sharing for a year 
        under the schedules shall be applied based upon expenses 
        incurred for covered items and services furnished in the year.
            (6) Lifetime limits.--No cost-sharing schedule established 
        by the Board may include lifetime limits.
    (d) Legislative Proposals on Actuarial Equivalence and Health 
Service Categories.--
            (1) In general.--The Board may develop legislative 
        proposals for modifications to the actuarial equivalence 
        provisions of section 1201 and the categories of health care 
        items and services under section 1202.
            (2) Implementing bill.--The Board shall submit to the 
        Congress an implementing bill which contains such statutory 
        provisions as are necessary or appropriate to implement the 
        legislative proposals developed under paragraph (1).
    (e) Reports.--
            (1) Dental care.--The Board shall undertake a study to 
        determine the costs of providing--
                    (A) preventive dental care to all adults;
                    (B) restorative dental care to all adults; and
                    (C) preventive dental care to adults with 
                developmental, cognitive, and other mental 
                disabilities.
        Not later than July 1, 1996, the Board shall prepare and submit 
        to the Secretary and the Congress, a report concerning such 
        study.
            (2) In vitro fertilization.--The Board shall undertake a 
        study to determine the costs of providing coverage for in vitro 
        fertilization in the standard benefits package. Not later than 
        July 1, 1996, the Board shall prepare and submit to the 
        Secretary and the Congress, a report concerning such study.
    (f) Other Requirements.--The Board shall satisfy any other 
requirements imposed on the Board under this title.

SEC. 1214. POWERS.

    (a) Executive Director; Staff.--
            (1) Executive director.--
                    (A) In general.--The Board shall, without regard to 
                section 5311(b) of title 5, United States Code, appoint 
                an Executive Director.
                    (B) Pay.--The Executive Director shall be paid at a 
                rate equivalent to a rate for the Senior Executive 
                Service.
            (2) Staff.--
                    (A) In general.--Subject to subparagraphs (B) and 
                (C), the Executive Director, with the approval of the 
                Board, may appoint and fix the pay of additional 
                personnel.
                    (B) Pay.--The Executive Director may make such 
                appointments without regard to the provisions of title 
                5, United States Code, governing appointments in the 
                competitive service, and any personnel so appointed may 
                be paid without regard to the provisions of chapter 51 
                and subchapter III of chapter 53 of such title, 
                relating to classification and General Schedule pay 
                rates, except that an individual so appointed may not 
                receive pay in excess of 120 percent of the annual rate 
                of basic pay payable for GS-15 of the General Schedule.
                    (C) Detailed personnel.--Upon request of the 
                Executive Director, the head of any Federal department 
                or agency may detail any of the personnel of that 
                department or agency to the Board to assist the Board 
                in carrying out its duties under this Act.
    (b) Contract Authority.--To the extent provided in advance in 
appropriations Acts, the Board may contract with any person (including 
an agency of the Federal Government) for studies and analysis as 
required to execute its functions. Any employee of the Executive Branch 
may be detailed to the Board to assist the Board in carrying out its 
duties.
    (c) Consultations with Experts.--The Board may consult with any 
outside expert individuals or groups that the Board determines 
appropriate in performing its duties under section 1213. The Board may 
establish advisory committees.
    (d) Access to Information.--The Board may secure directly from any 
department or agency of the United States information necessary to 
enable it to carry out its functions, to the extent such information is 
otherwise available to a department or agency of the United States. 
Upon request of the chair, the head of that department or agency shall 
furnish that information to the Board.
    (e) Delegation of Authority.--Except as otherwise provided, the 
Board may delegate any function to such officers and employees as the 
Board may designate and may authorize such successive redelegations of 
such functions with the Board as the Board deems to be necessary or 
appropriate. No delegation of functions by the Board shall relieve the 
Board of responsibility for the administration of such functions.
    (f) Rulemaking.--The Board is authorized to establish such rules as 
may be necessary to carry out this subtitle.

SEC. 1215. FUNDING.

    (a) Authorization of Appropriations.--There are authorized to be 
appropriated to the Board $5,000,000 for each year and such additional 
sums as may be necessary to carry out the purposes of this part.
    (b) Submission of Budget.--Under the procedures of chapter 11 of 
title 31, United States Code, the budget for the Board for a fiscal 
year shall be reviewed by the Director of the Office of Management and 
Budget and submitted to the Congress as part of the President's 
submission of the Budget of the United States for the fiscal year.

SEC. 1216. APPLICABILITY OF FEDERAL ADVISORY COMMITTEE ACT.

    The Federal Advisory Committee Act (5 U.S.C. App.) shall not apply 
to the Board.

SEC. 1217. CONGRESSIONAL CONSIDERATION OF BOARD PROPOSALS.

    (a) In General.--Any implementing bill described in section 1213 
shall be considered by Congress under the procedures for consideration 
described in subsection (b).
    (b) Congressional Consideration.--
            (1) Rules of house of representatives and senate.--This 
        subsection is enacted by Congress--
                    (A) as an exercise of the rulemaking power of the 
                House of Representatives and the Senate, respectively, 
                and as such is deemed a part of the rules of each 
                House, respectively, but applicable only with respect 
                to the procedure to be followed in that House in the 
                case of an implementing bill described in subsection 
                (a), and supersedes other rules only to the extent that 
                such rules are inconsistent therewith; and
                    (B) with full recognition of the constitutional 
                right of either House to change the rules (so far as 
                relating to the procedure of that House) at any time, 
                in the same manner and to the same extent as in the 
                case of any other rule of that House.
            (2) Introduction and referral.--On the day on which the 
        implementing bill described in subsection (a) is transmitted to 
        the House of Representatives and the Senate, such bill shall be 
        introduced (by request) in the House of Representatives by the 
        Majority Leader of the House, for himself or herself and the 
        Minority Leader of the House, or by Members of the House 
        designated by the Majority Leader and Minority Leader of the 
        House and shall be introduced (by request) in the Senate by the 
        Majority Leader of the Senate, for himself or herself and the 
        Minority Leader of the Senate, or by Members of the Senate 
        designated by the Majority Leader and Minority Leader of the 
        Senate. If either House is not in session on the day on which 
        the implementing bill is transmitted, the bill shall be 
        introduced in the House, as provided in the preceding sentence, 
        on the first day thereafter on which the House is in session. 
        The implementing bill introduced in the House of 
        Representatives and the Senate shall be referred to the 
        appropriate committees of each House.
            (3) Amendments prohibited.--No amendment to an implementing 
        bill shall be in order in either the House of Representatives 
        or the Senate and no motion to suspend the application of this 
        subsection shall be in order in either House, nor shall it be 
        in order in either House for the Presiding Officer to entertain 
        a request to suspend the application of this subsection by 
        unanimous consent.
            (4) Period for committee and floor consideration.--
                    (A) In general.--Except as provided in subparagraph 
                (B), if the committee or committees of either House to 
                which an implementing bill has been referred have not 
                reported it at the close of the 45th day after its 
                introduction, such committee or committees shall be 
                automatically discharged from further consideration of 
                the implementing bill and it shall be placed on the 
                appropriate calendar. A vote on final passage of the 
                implementing bill shall be taken in each House on or 
                before the close of the 45th day after the implementing 
                bill is reported by the committees or committee of that 
                House to which it was referred, or after such committee 
                or committees have been discharged from further 
                consideration of the implementing bill. If prior to the 
                passage by one House of an implementing bill of that 
                House, that House receives the same implementing bill 
                from the other House then--
                            (i) the procedure in that House shall be 
                        the same as if no implementing bill had been 
                        received from the other House; but
                            (ii) the vote on final passage shall be on 
                        the implementing bill of the other House.
                    (B) Computation of days.--For purposes of 
                subparagraph (A), in computing a number of days in 
                either House, there shall be excluded--
                            (i) the days on which either House is not 
                        in session because of an adjournment of more 
                        than 3 days to a day certain, or an adjournment 
                        of the Congress sine die; and
                            (ii) any Saturday and Sunday not excluded 
                        under clause (i) when either House is not in 
                        session.
            (5) Floor consideration in the house of representatives.--
                    (A) Motion to proceed.--A motion in the House of 
                Representatives to proceed to the consideration of an 
                implementing bill shall be highly privileged and not 
                debatable. An amendment to the motion shall not be in 
                order, nor shall it be in order to move to reconsider 
                the vote by which the motion is agreed to or disagreed 
                to.
                    (B) Debate.--Debate in the House of Representatives 
                on an implementing bill shall be limited to not more 
                than 20 hours, which shall be divided equally between 
                those favoring and those opposing the bill. A motion 
                further to limit debate shall not be debatable. It 
                shall not be in order to move to recommit an 
                implementing bill or to move to reconsider the vote by 
                which an implementing bill is agreed to or disagreed 
                to.
                    (C) Motion to postpone.--Motions to postpone, made 
                in the House of Representatives with respect to the 
                consideration of an implementing bill, and motions to 
                proceed to the consideration of other business, shall 
                be decided without debate.
                    (D) Appeals.--All appeals from the decisions of the 
                Chair relating to the application of the Rules of the 
                House of Representatives to the procedure relating to 
                an implementing bill shall be decided without debate.
                    (E) General rules apply.--Except to the extent 
                specifically provided in the preceding provisions of 
                this paragraph, consideration of an implementing bill 
                shall be governed by the Rules of the House of 
                Representatives applicable to other bills and 
                resolutions in similar circumstances.
            (6) Floor consideration in the senate.--
                    (A) Motion to proceed.--A motion in the Senate to 
                proceed to the consideration of an implementing bill 
                shall be privileged and not debatable. An amendment to 
                the motion shall not be in order, nor shall it be in 
                order to move to reconsider the vote by which the 
                motion is agreed to or disagreed to.
                    (B) General debate.--Debate in the Senate on an 
                implementing bill, and all debatable motions and 
                appeals in connection therewith, shall be limited to 
                not more than 20 hours. The time shall be equally 
                divided between, and controlled by, the Majority Leader 
                and the Minority Leader or their designees.
                    (C) Debate of motions and appeals.--Debate in the 
                Senate on any debatable motion or appeal in connection 
                with an implementing bill shall be limited to not more 
                than one hour, to be equally divided between, and 
                controlled by, the mover and the manager of the 
                implementing bill, except that in the event the manager 
                of the implementing bill is in favor of any such motion 
                or appeal, the time in opposition thereto, shall be 
                controlled by the Minority Leader or his designee. Such 
                leaders, or either of them, may, from time under their 
                control on the passage of an implementing bill, allot 
                additional time to any Senator during the consideration 
                of any debatable motion or appeal.
                    (D) Other motions.--A motion in the Senate to 
                further limit debate is not debatable. A motion to 
                recommit an implementing bill is not in order.

                   Subtitle D--Access to Health Plans

                    PART 1--ACCESS THROUGH EMPLOYERS

SEC. 1301. GENERAL EMPLOYER RESPONSIBILITIES.

    (a) Offer of Plans.--
            (1) In general.--Each employer--
                    (A) shall make available to each employee of the 
                employer the opportunity--
                            (i) in the case of an experienced-rated 
                        employer, to enroll through the employer in one 
                        of at least 3 certified experience-rated 
                        standard health plans which provide the 
                        standard benefits package established under 
                        subtitle C, including, if available, a high 
                        cost-sharing plan, a combination cost-sharing 
                        plan, and a low cost-sharing plan as 
                        established under such subtitle; or
                            (ii) in the case of a community-rated 
                        employer--
                                    (I) to enroll in any community-
                                rated plan offered through a purchasing 
                                cooperative operating in the community 
                                rating area in which such employer is 
                                located, and if such cooperative is not 
                                a purchasing cooperative described in 
                                section 1341, then also through a 
                                cooperative so described; and
                                    (II) at the option of the employer, 
                                to enroll through the employer in one 
                                of at least 3 certified community-rated 
                                standard health plans which provide the 
                                standard benefits package established 
                                under subtitle C, including, if 
                                available, a high cost-sharing plan, a 
                                combination cost-sharing plan, and a 
                                low cost-sharing plan as established 
                                under such subtitle; and
                    (B) shall provide, upon request, payroll 
                withholding of the employee's premiums.
            (2) Waiver of requirement.--The Governor of a participating 
        State (or, the Secretary of Labor, in the case of sponsors of 
        multistate self-insured health plans) may waive the requirement 
        under paragraph (1) for any employer in a rural area of such 
        State which demonstrates an insufficient population density to 
        support 3 types of certified standard health plans. Such an 
        employer shall at least offer a high cost-sharing plan as 
        established under subtitle C.
            (3) Prohibition on offering of alternative package.--No 
        employer may offer an alternative standard benefits package 
        established under subtitle C.
    (b) Forwarding of Information.--
            (1) Information regarding plans.--An employer must provide 
        each employee of such employer--
                    (A) with information provided by the State under 
                section 1508 regarding all certified standard health 
                plans offered in the community rating area in which the 
                employer is located, and
                    (B) if the employer knows that an employee resides 
                in another community rating area, information regarding 
                how to obtain information on certified standard health 
                plans offered to residents of such other community 
                rating area.
            (2) Information regarding employees.--An employer shall 
        forward the name and address (and any other necessary 
        identifying information specified by the Secretary) of each 
        employee enrolling through the employer--
                    (A) to the certified standard health plan in which 
                such employee is enrolling, or
                    (B) to the purchasing cooperative (if any) through 
                which such employee is enrolling.

SEC. 1302. AUDITING OF RECORDS.

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

SEC. 1303. PROHIBITION OF CERTAIN EMPLOYER DISCRIMINATION.

    (a) In General.--No employer may discriminate with respect to an 
employee on the basis of the family status of the employee or on the 
basis of the class of family enrollment selected with respect to the 
employee.
    (b) Other Prohibitions.--For the prohibition of other employer 
discriminatory practices, see section 4522 of the Internal Revenue Code 
of 1986.

SEC. 1304. PROHIBITION ON SELF-INSURING COST-SHARING BENEFITS.

    A community-rated employer (and an experience-rated employer with 
respect to employees who are community-rated eligible individuals) may 
provide benefits to employees that consist of the benefits included in 
a cost-sharing plan (as defined in section 1141(a)(2)(C)) only through 
a contribution toward the purchase of a cost-sharing plan which is 
funded primarily through insurance.

SEC. 1305. RESPONSIBILITIES IN SINGLE-PAYER STATES.

    In the case of an individual who resides in a single-payer State 
and an employer with respect to employees who reside in such a State, 
the responsibilities of such individual and employer under such system 
shall supersede the obligations of the individual and employer under 
this subtitle.

SEC. 1306. DEVELOPMENT OF LARGE EMPLOYER PURCHASING GROUPS.

    (a) In General.--Nothing in this title shall be construed as 
prohibiting 2 or more experience-rated employers from joining together 
to purchase insurance for their employees, except that each such 
employer shall be responsible for meeting the employer's requirements 
under this title with respect to its employees.
    (b) Rules by Secretary.--The Secretary of Labor shall provide rules 
for large employer purchasing groups similar to the rules applicable to 
purchasing cooperatives, including rules regarding fiduciary 
responsibilities and financial management.
    (c) No Use of Purchasing Cooperatives.--An experience-rated 
employer shall be ineligible to purchase health insurance through a 
purchasing cooperative, except with respect to health insurance for 
individuals described in paragraphs (1) and (2) of section 1307(d).

SEC. 1307. RULES GOVERNING LITIGATION INVOLVING RETIREE HEALTH 
              BENEFITS.

    (a) Maintenance of Benefits.--
            (1) In general.--If--
                    (A) retiree health benefits or plan or plan sponsor 
                payments in connection with such benefits are to be or 
                have been terminated or reduced under an employee 
                welfare benefit plan; and
                    (B) an action is brought by any participant or 
                beneficiary to enjoin or otherwise modify such 
                termination or reduction,
        the court without requirement of any additional showing shall 
        promptly order the plan and plan sponsor to maintain the 
        retiree health benefits and payments at the level in effect 
        immediately before the termination or reduction while the 
        action is pending in any court. No security or other 
        undertaking shall be required of any participant or beneficiary 
        as a condition for issuance of such relief. An order requiring 
        such maintenance of benefits may be refused or dissolved only 
        upon determination by the court, on the basis of clear and 
        convincing evidence, that the action is clearly without merit.
            (2) Modifications.--Nothing in this section shall preclude 
        a court from modifying the obligation of a plan or plan sponsor 
        to the extent retiree benefits are otherwise being paid.
    (b) Burden of Proof.--In addition to the relief authorized in 
subsection (a) or otherwise available, if, in any action described in 
subsection (a), the terms of the employee welfare benefit plan summary 
plan description or other materials distributed to employees at the 
time of a participant's retirement or disability are silent or are 
ambiguous, either on their face or after consideration of extrinsic 
evidence, as to whether retiree health benefits and payments may be 
terminated or reduced for a participant and his or her beneficiaries 
after the participant's retirement or disability, then the benefits and 
payments shall not be terminated or reduced for the participant and his 
or her beneficiaries unless the plan or plan sponsor establishes by a 
preponderance of the evidence that the summary plan description and 
other materials about retiree benefits--
            (1) were distributed to the participant at least 90 days in 
        advance of retirement or disability;
            (2) did not promise retiree health benefits for the 
        lifetime of the participant and his or her spouse; and
            (3) clearly and specifically disclosed that the plan 
        allowed such termination or reduction as to the participant 
        after the time of his or her retirement or disability.
The disclosure described in paragraph (3) must have been made 
prominently and in language which can be understood by the average plan 
participant.
    (c) Representation.--Notwithstanding any other provision of law, an 
employee representative of any retired employee or the employee's 
spouse or dependents may--
            (1) bring an action described in this section on behalf of 
        such employee, spouse, or dependents; or
            (2) appear in such an action on behalf of such employee, 
        spouse or dependents.
    (d) Retiree Health Benefits.--For the purposes of this section, the 
term ``retiree health benefits'' means health benefits (including 
coverage) which are provided to--
            (1) retired or disabled employees who, immediately before 
        the termination or reduction, are entitled to receive such 
        benefits upon retirement or becoming disabled; and
            (2) their spouses and dependents.
    (e) Effective Date.--The amendments made by this section shall 
apply to actions relating to terminations or reductions of retiree 
health benefits which are pending or brought, on or after July 20, 
1993.

SEC. 1308. ENFORCEMENT.

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

    PART 2--ACCESS THROUGH HEALTH INSURANCE PURCHASING COOPERATIVES

                    Subpart A--General Requirements

SEC. 1321. ORGANIZATION AND OPERATION.

    (a) Designation of Cooperatives.--A State shall certify health 
insurance purchasing cooperatives (in this Act referred to as 
``purchasing cooperatives'') in accordance with this part. Each 
cooperative shall be chartered under State law and operated as a not-
for-profit corporation.
    (b) Board of Directors.--
            (1) In general.--Each cooperative shall be governed by a 
        Board of Directors to be composed of representatives of 
        community-rated employers, community-rated employees, and 
        community-rated individuals as elected by the members of the 
        purchasing cooperative.
            (2) Initial board.--The initial Board of Directors of a 
        purchasing cooperative shall be composed of members selected by 
        the sponsoring entity of the cooperative. Subsequent members of 
        the Board of Directors shall be elected as provided for under 
        paragraph (1) after being nominated by a nominating committee 
        appointed by the preceding Board of Directors.
    (c) Establishment by State or Local Government.--A State or local 
government may establish or sponsor a purchasing cooperative to serve a 
community rating area. The Secretary shall establish special rules 
concerning the legal and governing structure of a State or local 
government purchasing cooperative.
    (d) Membership.--A purchasing cooperative shall accept all 
community-rated employers, community-rated employees, and community-
rated individuals residing within the area served by the cooperative as 
members if such employers, employees, or individuals request such 
membership. Members of a cooperative shall have voting rights to select 
members of the Board of Directors consistent with rules established by 
the State.
    (e) Prohibition.--An insurer may not form or underwrite a 
purchasing cooperative but may administer such a cooperative.
    (f) Duties of Cooperatives.--Each purchasing cooperative shall--
            (1) negotiate (regarding premiums and marketing fees) with 
        and enter into agreements with standard health plans under 
        section 1323;
            (2) enter into agreements with community-rated employers;
            (3) enroll community-rated employees and community-rated 
        individuals in standard health plans;
            (4) collect premiums and make payments to standard health 
        plans on behalf of community-rated employers and community-
        rated individuals;
            (5) provide for coordination with other purchasing 
        cooperatives;
            (6) provide comparative information to the public and the 
        participating State on standard health plans offered through 
        the purchasing cooperative from information provided by the 
        plans under section 1125;
            (7) have the capability of accepting data from standard 
        health plans as required under subtitle B of title V;
            (8) comply with such fiduciary responsibility, financial 
        management, and administrative requirements as the Secretary 
        may establish; and
            (9) carry out other functions provided for under this 
        title.
    (g) Limitation on Activities.--A cooperative shall not--
            (1) perform any activity (including review, approval, or 
        enforcement) relating to payment rates for providers;
            (2) perform any activity (including certification or 
        enforcement) relating to compliance of standard health plans 
        with the requirements of this Act;
            (3) assume insurance risk; or
            (4) perform other activities identified by the State as 
        being inconsistent with the performance of its duties under 
        this Act.
    (h) Rules of Construction.--
            (1) Multiple cooperatives.--Noting in this section shall be 
        construed to prevent a State from certifying or establishing 
        more than one purchasing cooperative in a community rating 
        area.
            (2) Exclusive cooperative.--
                    (A) In general.--Nothing in this section shall be 
                construed as requiring a State to certify or establish 
                more than one purchasing cooperative serving a 
                community rating area.
                    (B) Special rules.--If a State chooses to certify 
                only one purchasing cooperative in a community rating 
                area, then such cooperative (other than a cooperative 
                established under section 1341) may not negotiate 
                regarding premiums as described in subsection (f)(1) 
                and, notwithstanding section 1323(a)(1), shall enter 
                into an agreement with each standard health plan 
                operating in the area which desires such an agreement.
            (3) Single organization serving multiple community rating 
        areas.--Nothing in this section shall be construed as 
        preventing a single not-for-profit corporation from being the 
        purchasing cooperative for more than one community rating area.
            (4) Voluntary participation.--Nothing in this section shall 
        be construed as requiring any community-rated individual, 
        community-rated employee, or community-rated employer to 
        purchase a standard health plan exclusively through a 
        cooperative.

SEC. 1322. MEMBERSHIP.

    (a) In General.--A purchasing cooperative shall offer all 
community-rated individuals and community-rated employees residing 
within the community rating area served by the cooperative the 
opportunity to enroll in any standard health plan that has entered into 
an agreement with the cooperative under section 1323.
    (b) Enrollment Process.--A purchasing cooperative shall establish 
an enrollment process in accordance with rules established by the 
Secretary.
    (c) Coordination Among Purchasing Cooperatives.--Each participating 
State shall establish rules consistent with this section for 
coordination among purchasing cooperatives in cases in which community-
rated employers are located in one community rating area and their 
community-rated employees reside in a different community rating area.

SEC. 1323. AGREEMENTS WITH STANDARD HEALTH PLANS.

    (a) Agreements.--
            (1) In general.--Except as provided in paragraph (2), each 
        purchasing cooperative for a community rating area may enter 
        into an agreement under this section with any standard health 
        plan that the purchasing cooperative desires to be made 
        available through such purchasing cooperative.
            (2) Minimum requirement.--
                    (A) In general.--Except as provided in subparagraph 
                (B), each purchasing cooperative shall enter into an 
                agreement under paragraph (1) with at least 3 types of 
                standard health plans which provide the standard 
                benefits package established under subtitle C, 
                including, if available, a high cost-sharing plan, a 
                combination cost-sharing plan, and a low cost-sharing 
                plan as established under such subtitle.
                    (B) Waiver of requirement.--The Governor of a 
                participating State may waive the requirement under 
                subparagraph (A), in a manner consistent with section 
                1301(a)(2)), for any purchasing cooperative in a rural 
                area of such State which demonstrates an insufficient 
                population density to support 3 types of standard 
                health plans. Such a purchasing cooperative shall at 
                least offer a high cost-sharing plan as established 
                under such subtitle.
            (3) Limitation.--A purchasing cooperative may not enter 
        into an agreement under this section with a standard health 
        plan unless such plan is certified by the State under subtitle 
        E.
            (4) Termination of agreement.--An agreement under paragraph 
        (1) shall remain in effect for a 12-month period. The State 
        shall establish a process for the termination of agreements 
        entered into under this section and a process for appealing 
        such termination under this paragraph. In accordance with rules 
        established by the State--
                    (A) a cooperative may terminate an agreement with a 
                standard health plan if the health plan's certification 
                for the community rating area involved is terminated or 
                if the health plan fails to fulfill the requirements of 
                the agreement; and
                    (B) a standard health plan may appeal the 
                termination of an agreement with a cooperative under 
                this paragraph to the State in accordance with rules 
                and procedures established by the State.
    (b) Receipt of Gross Premiums.--
            (1) In general.--A purchasing cooperative may require that 
        a standard health plan with which such cooperative has an 
        agreement under this section provide for the payment of 
        premiums directly to the cooperative in accordance with rules 
        promulgated by the Secretary.
            (2) Forwarding of premiums.--A purchasing cooperative that 
        requires direct payment of premiums under paragraph (1) shall 
        forward to the standard health plan the amounts collected on 
        the behalf of the enrollees in such plan in accordance with the 
        State program of reinsurance and risk adjustment.
            (3) Certified standard health plans retain risk of 
        nonpayment.--Nothing in this subsection shall be construed as 
        placing upon a purchasing cooperative any risk associated with 
        the failure of individuals and employers to make prompt payment 
        of premiums (other than the portion of the premium representing 
        the purchasing cooperative administrative fee under section 
        1324(a)).

SEC. 1324. MEMBERSHIP AND MARKETING FEES.

    (a) Cooperative Fees.--A purchasing cooperative shall charge 
members a uniform membership fee to cover the cost of activities 
undertaken by the cooperative (including all administrative costs 
incurred by the cooperative).
    (b) Marketing Fees.--
            (1) In general.--A purchasing cooperative shall charge 
        members a separate marketing fee which a standard health plan 
        may charge to cover the cost of marketing and administrative 
        activities undertaken by such plan in such cooperative.
            (2) Negotiation.--A purchasing cooperative and a standard 
        health plan shall negotiate the marketing fee. Such negotiated 
        fee shall not be binding on such health plan with respect to 
        other purchasing cooperatives through which the plan is 
        offered.
            (3) Limitation.--In no case shall a marketing fee assessed 
        by a standard health plan offered outside of a purchasing 
        cooperative be lower than the weighted average of the marketing 
        fees negotiated with all purchasing cooperatives for the 
        community rating area involved.
    (c) Disclosure and Multiple Cooperatives.--
            (1) Disclosure.--A purchasing cooperative shall, prior to 
        the time of enrollment, publish the membership fee of such 
        cooperative and the marketing fees for each standard health 
        plan offered through the cooperative. Such fees shall be 
        calculated and identified as separate charges from the premium 
        charged by the standard health plans offered by the purchasing 
        cooperative.
            (2) Submissions to state.--
                    (A) In general.--Each purchasing cooperative in a 
                community rating area shall provide the State with 
                information on the fees described in paragraph (1) 
                under rules developed by the State.
                    (B) Documentation.--Pursuant to regulations issued 
                by the Secretary, standard health plans shall submit 
                actuarial data and such other documentation as the 
                State may require in order to verify the basis for 
                variation in marketing fees across cooperatives and 
                other insurance distribution sources. States shall use 
                such information in order to make a determination that 
                each plan's marketing fees are based on legitimate 
                variation in marketing and distribution costs across 
                alternative distribution sources.
            (3) Multiple cooperatives.--In community rating areas in 
        which States have certified multiple purchasing cooperatives, 
        such cooperatives may compete for members on the basis of the 
        fees described in this section.

                  Subpart B--Community-Rated Employers

SEC. 1331. DUTIES OF PURCHASING COOPERATIVES.

    (a) In General.--A purchasing cooperative for a community rating 
area shall offer to enter into an agreement under this section with 
each community-rated employer that employs individuals in the community 
rating area and that desires to join the cooperative. An agreement 
between such an employer and a cooperative shall include provisions 
consistent with the requirements of this subtitle.
    (b) Election of Enrollment.--
            (1) In general.--An employee of a community-rated employer 
        may select coverage under any of the standard health plans 
        offered through a purchasing cooperative of which the employer 
        is a member.
            (2) Enrollment outside the cooperative.--An employee of a 
        community-rated employer may elect to enroll in a plan offered 
        through the purchasing cooperative with which the employer has 
        entered into an agreement or directly with a standard health 
        plan selected by the employer (if such plan is not offered by 
        the cooperative selected by the employer). A community-rated 
        employee not residing in the community rating area served by 
        the purchasing cooperative selected by the employer shall 
        enroll in a standard health plan consistent with rules 
        promulgated by the Secretary. The purchasing cooperative 
        selected by the employer shall be responsible for forwarding 
        premium payments to the appropriate plan or cooperative for 
        each community-rated employee in accordance with the State 
        program of reinsurance and risk adjustment.
            (3) Voluntary employer contribution.--If an employer 
        voluntarily contributes to the cost of health insurance 
        coverage for its employees, the employer shall not be required 
        to make a contibution on behalf of an employee who elects to 
        obtain coverage directly from a standard health plan not chosen 
        by such employer or from a purchasing cooperative not chosen by 
        such employer, unless such cooperative is one established under 
        section 1341.
    (c) Forwarding Information on Eligible Employees.--Under an 
agreement between an employer and a cooperative, the employer must 
forward to the appropriate cooperative such information as may be 
required by the Secretary.

          Subpart C--Federal Employees Health Benefits Program

SEC. 1341. REQUIREMENTS APPLICABLE TO FEHBP.

    (a) Availability of Plans.--
            (1) Community-rated individuals.--All standard health plans 
        offered by FEHBP through a purchasing cooperative joined or 
        established by FEHBP in a community rating area under 
        subsection (b) shall be made available to all community-rated 
        individuals residing within that area at the community-rated 
        premium established under section 1116.
            (2) Federal employees and annuitants.--Until the date of 
        universal coverage, any Federal employee or annuitant shall 
        obtain coverage under any FEHBP plan offered through such a 
        purchasing cooperative in the community rating area in which 
        such employee or annuitant resides at the rate established 
        under chapter 89 of title 5, United States Code, for such plan.
            (3) Offer of national plans.--Each purchasing cooperative 
        joined or established under paragraph (1) shall, not later than 
        January 1, 1998, offer to community-rated individuals covered 
        by such cooperative all national FEHBP plans (including 
        employee organization plans) under rules established by the 
        Office of Personnel Management.
    (b) Agreements With Purchasing Cooperatives.--
            (1) In general.--The Office of Personnel Management shall 
        make every effort to enter into an agreement with a purchasing 
        cooperative in each community rating area in the United States 
        to carry out its responsibilities under this section.
            (2) Establishment by opm.--If no purchasing cooperative 
        exists in an area or if the Office of Personnel Management is 
        unsuccessful in reaching such an agreement, the Office of 
        Personnel Management shall establish and administer a 
        purchasing cooperative in such area. Such cooperative shall 
        meet all the requirements of this part except rules regarding 
        governance and fiduciary responsibility.
            (3) Designation as purchasing cooperative.--All FEHBP 
        eligible employees residing in the community rating area served 
        by a cooperative described in paragraph 1 or (2) shall enroll 
        in a standard health plan through such cooperative.
    (c) Requirement of OPM.--
            (1) In general.--The Office of Personnel Management is 
        hereby authorized to take such actions as are appropriate to 
        fulfill its responsibilities under this subpart.
            (2) Rate blending.--The Office of Personnel Management 
        shall implement rules to blend during the period before the 
        date of universal coverage the premiums for FEHBP plans offered 
        through purchasing cooperatives to Federal employees and 
        community-rated individuals in each community rating area.
    (d) Amendments to Title 5.--
            (1) In general.--Chapter 89 of title 5, United States Code, 
        is amended by adding at the end the following new section:
``Sec. 8915. Relationship to the Health Security Act
    ``(a) The provisions of this chapter shall be subject to the 
provisions of the Health Security Act, to the extent of any 
inconsistency between such provisions.
    ``(b) Individuals who are not Federal employees or annuitants and 
who are enrolled in a health benefits plan pursuant to section 1341 of 
the Health Security Act shall for all administrative purposes be 
treated separately from Federal employees and annuitants enrolled under 
this chapter.
    ``(c) No provision of the Health Security Act shall be construed to 
authorize the payment or deposit of any monies from or into the 
Employees Health Benefits Fund.''.
            (2) Conforming amendment.--Section 8914 of title 5, United 
        States Code, is amended by striking out ``Any provision of 
        law'' and inserting in lieu thereof ``Except for the provisions 
        of the Health Security Act, any provision of law''.
            (3) Technical amendment.--The table of sections for chapter 
        89 of title 5, United States Code, is amended by adding after 
        the item relating to section 8914 the following new item:

``8915. Relationship to the Health Security Act.''.

SEC. 1342. SPECIAL RULES FOR FEHBP SUPPLEMENTAL PLANS.

    (a) Development.--The Office of Personnel Management shall develop 
FEHBP supplemental health benefit plans. The Office of Personnel 
Management shall meet and confer with representatives of Federal 
employees and annuitants regarding the supplemental services plans and 
the cost-sharing plans to be offered (including premium contributions, 
if any, to be made by the Federal Government with respect to such plans 
for Federal employees and annuitants) through a process to be 
established by the National Partnership Council.
    (b) Offering.--The Federal Government shall offer FEHBP 
supplemental health benefit plans developed in accordance with 
subsection (a) and cost-sharing plans as provided in section 1141 to 
Federal employees, annuitants, and any other community-rated 
individual.

SEC. 1343. DEFINITIONS.

    For purposes of this subpart:
            (1) Annuitant.--The term ``annuitant'' means an 
        ``annuitant'' as defined by section 8901 of title 5, United 
        States Code.
            (2) FEHBP.--The term ``FEHBP'' means the health insurance 
        program under chapter 89 of title 5, United States Code.
            (3) Federal employee.--The term ``Federal employee'' means 
        an ``employee'' as defined by section 8901 of title 5, United 
        States Code.

                 PART 3--TREATMENT OF ASSOCIATION PLANS

SEC. 1351. RULES RELATING TO MULTIPLE EMPLOYER WELFARE ARRANGEMENTS.

    (a) General Rule.--A multiple employer welfare arrangement--
            (1) shall meet all requirements of this Act applicable to 
        standard health plans, and
            (2) may elect to be treated as a health insurance 
        purchasing cooperative if it meets the requirements of part 2 
        and other applicable requirements of this Act.
    (b) Treatment for Rating Purpose.--
            (1) In general.--Except as provided in paragraph (2), a 
        plan to which subsection (a) applies shall be treated as a 
        community-rated plan and shall meet all requirements of this 
        Act applicable to a community-rated plan.
            (2) Experience-rated plan.--A plan shall be treated as an 
        experience-rated plan only if the only participants in the plan 
        are experience-rated individuals.
    (c) Coordination With ERISA.--Section 514(b) of the Employee 
Retirement Income Security Act of 1974 (29 U.S.C. 1144(b)) is amended 
by striking paragraph (6).
    (d) Multiple Employer Welfare Arrangement.--For purposes of this 
section, the term ``multiple employer welfare arrangement'' has the 
meaning given such term by section 3(40) of the Employer Retirement 
Income Security Act of 1974.

SEC. 1352. ASSOCIATION PLANS.

    (a) General Rule.--Any health plan to which section 1351 does not 
apply which is maintained by an association or similar entity shall 
meet all requirements of this Act applicable to standard health plans.
    (b) Treatment for Rating Purposes.--
            (1) In general.--Except as provided in paragraph (2), a 
        plan to which subsection (a) applies shall be treated as a 
        community-rated plan and shall meet all requirements of this 
        Act applicable to a community-rated plan.
            (2) Experience-rated plan.--A plan shall be treated as an 
        experience-rated plan only if the only participants in the plan 
        are experience-rated individuals.

                  Subtitle E--Federal Responsibilities

             PART 1--SECRETARY OF HEALTH AND HUMAN SERVICES

                       Subpart A--General Duties

SEC. 1401. GENERAL DUTIES AND RESPONSIBILITIES.

    (a) In General.--Except as otherwise specifically provided in this 
Act (or with respect to the administration of provisions in the 
Internal Revenue Code of 1986 or in the Employee Retirement Income 
Security Act of 1974), the Secretary of Health and Human Services shall 
administer and implement all of the provisions of this Act.
    (b) Coverage and Families.--The Secretary shall develop and 
implement standards relating to the eligibility of individuals for 
coverage in applicable health plans under subtitle B and may provide 
such additional exceptions and special rules relating to the treatment 
of family members under section 1113 as the Secretary finds 
appropriate.
    (c) Quality Management and Improvement.--The Secretary shall 
establish and have ultimate responsibility for a performance-based 
system of quality management and improvement as required by section 
5001.
    (d) Information System and Information Related Functions.--
            (1) In general.--The Secretary shall--
                    (A) develop and implement standards to establish a 
                national health information system to measure quality 
                as required by title V;
                    (B) provide model format and content requirements 
                for summary plan descriptions;
                    (C) provide model format and content requirements 
                for comparative plan brochures under section 1125; and
                    (D) provide model format and content requirements 
                for comparative purchasing cooperative brochures under 
                section 1321.
            (2) Information related functions.--
                    (A) Designation.--The Secretary shall provide for 
                the use of entities in the national health data network 
                to perform information related functions under this 
                section with respect to employers, States, contracting 
                entities, and purchasing cooperatives.
                    (B) Functions.--The functions referred to in 
                subparagraph (A) shall include--
                            (i) receipt of information submitted by 
                        employers under section 1301,
                            (ii) with respect to the information 
                        received, transmittal to the States, and
                            (iii) such other functions as the Secretary 
                        specifies.
    (e) Participating State Requirements.--Consistent with the 
provisions of subtitle F, the Secretary shall--
            (1) establish requirements for participating States,
            (2) monitor State compliance with those requirements, and
            (3) provide technical assistance,
in a manner that ensures access to the standard benefit package for all 
eligible individuals.
    (f) Development of Premium and Age Class Factors.--The Secretary 
shall establish premium class and age class factors under subpart D.
    (g) Development of Reinsurance and Risk-Adjustment Methodology.--
The Secretary shall develop a methodology for the reinsurance and risk-
adjustment of premium payments to community-rated and experience-rated 
health plans in accordance with section 1504.
    (h) Financial Requirements.--
            (1) In general.--The Secretary shall establish minimum 
        capital requirements and requirements for guaranty funds and 
        financial reporting and auditing standards under subpart F.
            (2) Financial management standards.--The Secretary, in 
        consultation with the Secretary of Labor, shall establish, for 
        purposes of section 1118, standards relating to the management 
        of finances, maintenance of records, accounting practices, 
        auditing procedures, and financial reporting for States, 
        consumer purchasing cooperatives and health plans. Such 
        standards shall take into account current Federal laws and 
        regulations relating to fiduciary responsibilities and 
        financial management of funds.
            (3) Auditing state performance.--The Secretary shall 
        perform periodic financial and other audits of States to assure 
        that such States are carrying out their responsibilities under 
        this Act consistent with this Act. Such audits shall include 
        audits of State performance in the areas of--
                    (A) assuring enrollment of all community-rated 
                individuals in health plans;
                    (B) management of premium and cost sharing 
                discounts and reductions provided;
                    (C) financial management (including the financial 
                activities of cooperatives and State-designated 
                contracting entities); and
                    (D) assuring enforcement of the antidiscrimination 
                provisions of this Act.
    (i) Standards for Health Plan Grievance Procedures.--The Secretary 
shall establish standards for health plan grievance procedures that are 
used by enrollees in pursuing complaints.
    (j) Fiduciary Requirements.--The Secretary shall, in consultation 
with the Secretary of Labor, develop and promulgate fiduciary 
requirements for the management of funds by States, plans, 
cooperatives, and employers.
    (k) Guaranty Funds.--The Secretary shall establish standards for 
guaranty funds as provided for in section 1442.
    (l) Standards for Utilization Management Programs.--
            (1) In general.--Not later than 12 months after the date of 
        enactment of this Act, the Secretary, in consultation with 
        interested parties which may include one or more accrediting 
        organizations, shall promulgate uniform Federal standards for 
        utilization management programs, to include the activities 
        described in section 1129.
            (2) Compliance.--States shall ensure compliance with the 
        Federal standards established under paragraph (1), consistent 
        with their role in certifying health plans.
            (3) Review and update.--The Secretary shall periodically 
        review and update utilization management standards to reflect 
        appropriate policies and practices in health care delivery.
    (m) Collection Activities.--The Secretary may provide (through 
contract or otherwise) for collection activities for the collection of 
amounts owed to States and purchasing cooperatives for health insurance 
coverage subject to the provisions of this title.

SEC. 1402. ANNUAL REPORT.

    (a) In General.--The Secretary, in consultation with the National 
Health Benefits Board and the Health Care Cost and Coverage Commission, 
shall prepare and submit to the President and the Congress an annual 
report concerning the overall implementation of the new health care 
system under this Act.
    (b) Matters To Be Included.--The Secretary shall include in each 
annual report under this section the following:
            (1) Information on Federal and State implementation.
            (2) Data related to quality improvement.
            (3) Recommendations or changes in the administration and 
        regulation of laws related to health care financing, delivery, 
        and coverage.

SEC. 1403. ASSISTANCE WITH FAMILY COLLECTIONS.

    The Secretary shall provide States with such technical and other 
assistance as may promote the efficient collection of other amounts 
owed by families under this Act.

SEC. 1404. ADVISORY OPINIONS.

    (a) In General.--Community- and provider-based plans, and 
individuals and organizations seeking to establish such plans, shall be 
eligible to receive advisory opinions from appropriate Federal 
entities, including opinions concerning whether their arrangement 
complies with Federal self-referral, fraud and abuse, and anti-trust 
laws.
    (b) Regulations.--The Secretary shall issue regulations setting 
forth the procedures for obtaining advisory opinions described in 
subsection (a).
    (c) Timing of Opinions.--An advisory opinions shall be issued not 
later than 90 days after receipt of a request for such opinion from a 
plan.
    (d) Fees.--Applicants under this section shall pay a fee, the 
amount of which to be determined by the Secretary, to cover the costs 
of providing an opinion under this section.

SEC. 1405. FUNDING.

    There are authorized to be appropriated to the Secretary, such sums 
as may be necessary to carry out this subpart for each of the fiscal 
years 1995 through 1999.

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

SEC. 1411. FEDERAL REVIEW AND ACTION ON STATE SYSTEMS.

    (a) Approval of State Systems by Secretary.--
            (1) In general.--The Secretary shall approve a State health 
        care system for which a plan is submitted under section 1501(a) 
        unless the Secretary determines that the system (as set forth 
        in the plan) does not (or will not) meet the responsibilities 
        for a participating State under this Act.
            (2) Regulations.--Not later than July 1, 1995, the 
        Secretary shall issue regulations, prescribing the requirements 
        for State health care systems under this title, except that in 
        the case of a plan submitted under section 1501(a) before the 
        date of issuance of such regulations, the Secretary shall take 
        action on such document notwithstanding the fact that such 
        regulations have not been issued.
            (3) No approval permitted for years prior to 1996.--Except 
        as otherwise specifically provided in this Act, the Secretary 
        may not approve a State health care system under this subpart 
        for any year prior to 1996.
    (b) Review of Completeness of Plans.--
            (1) In general.--If a State submits a plan under subsection 
        (a)(1), the Secretary shall notify the State, not later than 7 
        working days after the date of submission, whether or not the 
        plan is complete and provides the Secretary with sufficient 
        information to approve or disapprove the document.
            (2) Additional information on incomplete plan.--If the 
        Secretary notifies a State that the State's plan is not 
        complete, the State shall be provided such additional period 
        (not to exceed 45 days) as the Secretary may by regulation 
        establish in which to submit such additional information as the 
        Secretary may require. Not later than 7 working days after the 
        State submits the additional information, the Secretary shall 
        notify the State respecting the completeness of the plan.
    (c) Action on Completed Documents.--
            (1) In general.--The Secretary shall make a determination 
        (and notify the State) on whether the State's plan provides for 
        the implementation of a State system that meets the applicable 
        requirements of this title--
                    (A) in the case of a State that did not require an 
                additional period described in subsection (b)(2) to 
                file a complete plan, not later than 90 days after 
                notifying a State under subsection (b) that the State's 
                plan is complete, or
                    (B) in the case of a State that required an 
                additional period described in subsection (b)(2) to 
                file a complete plan, not later than 90 days after 
                notifying a State under subsection (b) that the State's 
                plan is complete.
            (2) Review of coverage area.--The Secretary shall review 
        the State designation of community rating area boundaries to 
        determine whether such boundaries comply with sections 1502 and 
        1602, and in particular, the requirements of such sections 
        concerning non-discrimination in the establishment of coverage 
        area boundaries.
            (3) Plans deemed approved.--If the Secretary does not meet 
        the applicable deadline for making a determination and 
        providing notice under paragraph (1) with respect to a State's 
        plan, the Secretary shall be deemed to have approved the 
        State's plan for purposes of this Act.
    (d) Opportunity To Respond to Rejected Plan.--
            (1) In general.--If (within the applicable deadline under 
        subsection (c)(1)) the Secretary notifies a State that its plan 
        does not provide for the implementation of a State system that 
        meets the applicable requirements of this title, the Secretary 
        shall provide the State with a period of 60 days in which to 
        submit such additional information and assurances as the 
        Secretary may require.
            (2) Deadline for response.--Not later than 30 days after 
        receiving additional information and assurances under paragraph 
        (1), the Secretary shall make a determination (and notify the 
        State) on whether the State's plan provides for the 
        implementation of a State system that meets the applicable 
        requirements of this title.
            (3) Plan deemed approved.--If the Secretary does not meet 
        the deadline established under paragraph (2) with respect to a 
        State, the Secretary shall be deemed to have approved the 
        State's plan for purposes of this Act.
    (e) Approval of Previously Terminated States.--If the Secretary has 
approved a State system under this part for a year but subsequently 
terminated the approval of the system under section 1412(b)(2), the 
Secretary shall approve the system for a succeeding year if the State--
            (1) demonstrates to the satisfaction of the Secretary that 
        the failure that formed the basis for the termination no longer 
        exists, and
            (2) provides reasonable assurances that the types of 
        actions (or inactions) which formed the basis for such 
        termination will not recur.
    (f) Revisions to State System.--
            (1) Submission.--A State may revise a system approved for a 
        year under this section, except that such revision shall not 
        take effect unless the State has submitted to the Secretary a 
        document describing such revision and the Secretary has 
        approved such revision.
            (2) Actions on revisions.--Not later than 60 days after a 
        document is submitted under paragraph (1), the Secretary shall 
        make a determination (and notify the State) on whether the 
        implementation of the State system, as proposed to be revised, 
        meets the applicable requirements of this title. If the 
        Secretary fails to meet the requirement of the preceding 
        sentence, the Secretary shall be deemed to have approved the 
        implementation of the State system as proposed to be revised.
            (3) Rejection of revisions.--Subsection (d) shall apply to 
        an amendment submitted under this subsection in the same manner 
        as it applies to a completed plan submitted under subsection 
        (b).

SEC. 1412. FAILURE OF PARTICIPATING STATES TO MEET CONDITIONS FOR 
              COMPLIANCE.

    (a) In General.--In the case of a participating State, if the 
Secretary determines that the operation of the State system under this 
title fails to meet the applicable requirements of this Act, the 
Secretary shall apply against the State in accordance with subsection 
(b).
    (b) Type of Sanction Applicable.--The sanctions applicable under 
this section are as follows:
            (1) If the Secretary determines that the State's failure 
        does not substantially jeopardize the ability of eligible 
        individuals in the State to obtain coverage for the standard 
        benefit package, the Secretary shall reduce payments with 
        respect to the State in accordance with section 1413.
            (2) If the Secretary determines that the failure 
        substantially jeopardizes the ability of eligible individuals 
        in the State to obtain coverage for the standard benefit 
        package--
                    (A) the Secretary shall terminate its approval of 
                the State system; and
                    (B) the Secretary shall assume the responsibilities 
                described in section 1422.
    (c) Termination of Sanction.--A State against which a sanction is 
imposed under this section may submit information at any time to the 
Secretary to demonstrate that the failure that led to the imposition of 
the sanction has been corrected.
    (d) Protection of Access to Benefits.--The Secretary shall take 
actions under this section with respect to a State only in a manner 
that assures the continuous coverage of eligible individuals enrolled 
in community-rated health plans.

SEC. 1413. REDUCTION IN PAYMENTS FOR HEALTH PROGRAMS BY SECRETARY OF 
              HEALTH AND HUMAN SERVICES.

    (a) In General.--Upon a determination by the Secretary under 
section 1412(b)(1), the Secretary shall reduce the amount of any of the 
payments described in subsection (b) that would otherwise be made to 
individuals and entities in the State by such amount as the Secretary 
determines to be appropriate.
    (b) Payments Described.--The payments described in this subsection 
are as follows:
            (1) Payments to academic health centers in the State under 
        subtitle B of title III.
            (2) Payments to individuals and entities in the State for 
        health research activities under section 301 and title IV of 
        the Public Health Service Act.
            (3) Payments to hospitals in the State under part 4 of 
        subtitle E of title III (relating to payments to hospitals 
        serving vulnerable populations).

SEC. 1414. REVIEW OF FEDERAL DETERMINATIONS.

    Any State affected by a determination by the Secretary under this 
subpart may appeal such determination in accordance with section 5531.

SEC. 1415. FEDERAL SUPPORT FOR STATE IMPLEMENTATION.

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

        Subpart C--Responsibilities in Absence of State Systems

SEC. 1421. APPLICATION OF SUBPART.

    (a) Initial Application.--This subpart shall apply with respect to 
a State as of January 1, 1997, unless--
            (1) the State submits a plan for a State system under 
        section 1411(a)(1) by July 1, 1996, and
            (2) the Secretary determines under section 1411 that such 
        system meets the requirements of subtitle F.
    (b) Termination of Approval of System of Participating State.--In 
the case of a participating State for which the Secretary terminates 
approval of the State system under section 1412(b)(2), this subpart 
shall apply with respect to the State as of such date as is appropriate 
to assure the continuity of coverage for the standard benefit package 
for eligible individuals in the State.

SEC. 1422. FEDERAL ASSUMPTION OF RESPONSIBILITIES IN NON-PARTICIPATING 
              STATES.

    Upon determining that this subpart will apply to a State for a 
calendar year, the Secretary shall take such steps as are necessary to 
ensure that the standard benefit package is provided to eligible 
individuals in the State during the year, including the establishment 
of community-rating areas within such State as appropriate.

SEC. 1423. IMPOSITION OF SURCHARGE ON PREMIUMS UNDER FEDERALLY-OPERATED 
              SYSTEM.

    If this subpart applies to a State for a calendar year, the 
premiums charged by community-rated health plans in the State shall be 
equal to premiums that would otherwise be charged, increased by 15 
percent. Such 15 percent increase shall be used to reimburse the 
Secretary for any administrative or other expenses incurred as a result 
of establishing and operating the system in that State.

SEC. 1424. RETURN TO STATE OPERATION.

    (a) Application Process.--After the establishment and operation of 
a system by the Secretary in a State under section 1422, the State may 
at any time apply to the Secretary for the approval of a State system 
in accordance with the procedures described in section 1411.
    (b) Timing.--If the Secretary approves the system of a State for 
which the Secretary has operated a system under this subpart during a 
year, the Secretary shall terminate the operation of the system, and 
the State shall establish and operate its approved system, as of 
January 1 of the first year beginning after the Secretary approves the 
State system. The termination of the Secretary's system and the 
operation of the State's system shall be conducted in a manner that 
assures the continuous coverage of eligible individuals in the State 
under community-rated health plans.

    Subpart D--Establishment of Class Factors for Charging Premiums

SEC. 1431. PREMIUM CLASS AND AGE CLASS FACTORS.

    (a) In General.--For purposes of this title and title X, the 
Secretary shall establish premium class and age class factors in 
accordance with section 1113(c).
    (b) Conditions.--In establishing such factors, the factor for the 
class of individual enrollment shall be 1 and the factor for the 
couple-only class of family enrollment shall be 2.

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

SEC. 1435. DEVELOPMENT OF A RISK ADJUSTMENT AND REINSURANCE 
              METHODOLOGY.

    (a) Establishment.--The Secretary shall develop a risk adjustment 
and reinsurance methodology in accordance with section 1504.
    (b) Research and Demonstration.--The Secretary shall conduct and 
support research and demonstration projects to develop and improve, on 
a continuing basis, the risk adjustment and reinsurance methodology 
under this subpart.
    (c) Technical Assistance.--The Secretary shall provide technical 
assistance to States in implementing the methodology developed under 
this subpart.

         Subpart F--Responsibilities for Financial Requirements

SEC. 1441. CAPITAL STANDARDS FOR COMMUNITY-RATED PLANS.

    (a) In General.--The Secretary shall establish, in consultation 
with the States, minimum capital requirements for carriers, for 
purposes of section 1118.
    (b) $500,000 Minimum.--Subject to subsection (c), under such 
requirements there shall be not less than $500,000 of capital 
maintained for each carrier.
    (c) Additional Capital Requirements.--The Secretary shall establish 
standards that provide for additional capital for purposes of this 
section. The amount of such additional capital required shall reflect 
factors likely to affect the financial stability of a carrier, 
including the following:
            (1) Projected plan enrollment and number of providers 
        participating in plans of the carrier.
            (2) Market share and strength of competition.
            (3) Extent and nature of risk-sharing with participating 
        providers and the financial stability of risk-sharing 
        providers.
            (4) Prior performance of the carrier, risk history, and 
        liquidity of assets.
    (d) Community- and Provider-Based Plans.--
            (1) In general.--States shall consider alternative 
        financial instruments and methods for community- and provider-
        based plans (as defined in paragraph (2)) to meet the capital 
        and solvency standards developed in accordance with this 
        section. Provisions made for such plans shall ensure the fiscal 
        integrity and financial solvency of such plans.
            (2) Eligible plans.--Plans eligible for special 
        consideration by States must be offered by public or not-for-
        profit entities that are owned, or in which a majority share of 
        the plan's investment is held by--
                    (A) health care providers who practice in the plan;
                    (B) individuals who live in the area, or not-for-
                profit organizations located in the area serviced by 
                the plan;
                    (C) a combination of individuals and organizations 
                described in subparagraphs (A) and (B); or
                    (D) organizations located outside the service area 
                which provide for control over local operations by 
                individuals described in subparagraphs (A) or (B).
    (e) Development of Standards by NAIC.--The Secretary may request 
the National Association of Insurance Commissioners to develop model 
standards for the additional capital requirements described in 
subsection (c) and to present such standards to the Secretary not later 
than July 1, 1995. The Secretary may accept such standards as the 
standards to be applied under subsection (c) or modify the standards in 
any appropriate manner.

SEC. 1442. STANDARD FOR GUARANTY FUNDS.

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

                       Subpart G--Open Enrollment

SEC. 1445. PERIODS OF AUTHORIZED CHANGES IN ENROLLMENT.

    The Secretary shall specify periods of enrollment in accordance 
with section 1112(c).

SEC. 1446. DISTRIBUTION OF COMPARATIVE INFORMATION.

    The Secretary shall specify a period of time prior to open 
enrollment during which States must provide for the distribution to 
community-rated individuals enrollment materials and comparative 
information on health plans and purchasing cooperatives.

                 PART 2--ESSENTIAL COMMUNITY PROVIDERS

SEC. 1461. CERTIFICATION.

    For purposes of this Act, the Secretary shall certify as an 
``essential community provider'' any health care provider or 
organization that--
            (1) is within any of the categories of providers and 
        organizations specified in section 1462(a), or
            (2) meets the standards for certification under section 
        1463(a).

SEC. 1462. CATEGORIES OF PROVIDERS AUTOMATICALLY CERTIFIED.

    (a) In General.--The categories of providers and organizations, 
including subrecipients, specified in this subsection are as follows:
            (1) Category 1 entities.--The following entities shall be 
        considered category 1 entities:
                    (A) Covered entities as defined in section 
                340B(a)(4) of the Public Health Service Act (42 U.S.C. 
                256b(a)(4)), except that subsections (a)(4)(L)(iii) and 
                (a)(7) of such section shall not apply.
                    (B) School health services centers under title III.
                    (C) Public or nonprofit hospitals--
                            (i) that meet the criteria for public 
                        hospitals which are eligible entities under 
                        section 340B of the Public Health Service Act 
                        in any cost reporting period in the 3-year 
                        period prior to the date of enactment of this 
                        Act, except that subsection (a)(4)(L)(iii) of 
                        such section shall not apply; or
                            (ii) meeting alternative criteria developed 
                        by the Secretary after the date of enactment of 
                        this Act which are comparable to the criteria 
                        utilized in determining eligibility under such 
                        section 340B;
                    (D) Public and private, nonprofit mental health and 
                substance abuse providers receiving funds under title V 
                or XIX of the Public Health Service Act.
                    (E) Runaway homeless youth centers or transitional 
                living programs for homeless youth providing health 
                services under the Runaway Homeless Youth Act of 1974 
                (42 U.S.C. 5701 et seq.).
                    (F) Public or nonprofit maternal and child health 
                providers that receive funding under title V of the 
                Social Security Act.
                    (G) Rural health clinics as defined under section 
                1861(aa)(2) of the Social Security Act.
                    (H) Programs of the Indian Health Service (as 
                defined in section 8302(3)).
            (2) Category 2 entities.--The following entities shall be 
        considered category 2 entities:
                    (A) Medicare dependent small rural hospitals under 
                section 1886(d)(8)(iii) of the Social Security Act.
                    (B) Children's hospitals meeting comparable 
                criteria determined appropriate by the Secretary.
    (b) Study of Federally Certified Rural Health Clinics.--The 
Secretary shall conduct an evaluation of the Rural Health Clinics 
program as defined in section 1861(aa)(2) of the Social Security Act to 
examine the causes of the growth in the program and the characteristics 
of providers certified as rural health clinics and the characteristics 
of the population served by rural health clinics to ensure that the 
program meets the needs of rural underserved communities. The Secretary 
shall report the findings of such evaluation, together with any 
recommended changes in the rural health clinics program, to the 
Congress not later than January 1, 1996.

SEC. 1463. STANDARDS FOR ADDITIONAL PROVIDERS.

    (a) Standards.--The Secretary shall publish standards for the 
certification of additional categories of health care providers and 
organizations as essential community providers, including the 
categories described in subsection (b). Such a health care provider or 
organization shall not be certified unless the Secretary determines, 
under such standards, that health plans operating in the area served by 
the applicant would not otherwise be able to assure adequate access to 
items and services included in the standard benefit package if such a 
provider was not so certified.
    (b) Categories To Be Included.--The categories described in this 
subsection are as follows:
            (1) Certain health professionals.--A health professional 
        who--
                    (A) for at least 20 hours per week--
                            (i) is located in an area (or areas) 
                        designated as a health professional shortage 
                        area (under section 332 of the Public Health 
                        Service Act) or serves a population (or 
                        populations) designated as a medically 
                        underserved population (under section 330 of 
                        the Public Health Service Act); or
                            (ii)(I) is located or provides services in 
                        a neighborhood or community whose residents are 
                        at risk of underservice; and
                            (II) is available to patients at such 
                        location on evenings and weekends; and
                    (B) if the health professional is a physician--
                            (i) is licensed to practice in the 
                        jurisdiction; and
                            (ii) is either--
                                    (I) granted privileges to practice 
                                at one or more hospitals; or
                                    (II) has a consultation and 
                                referral arrangement with one or more 
                                physicians who are granted privileges 
                                to practice at one or more hospitals.
            (2) Institutional providers.--Public and private nonprofit 
        hospitals and other public and nonprofit institutional health 
        care providers, including family planning clinics, located in 
        health professional shortage areas (as defined under section 
        332 of the Public Health Service Act) or receiving funding 
        under subtitle E of title III of this Act).
            (3) Other providers.--
                    (A) In general.--Other public and private nonprofit 
                agencies and organizations that--
                            (i) are located in such an area or 
                        providing health services to such a population, 
                        and
                            (ii) provide health care and services 
                        essential to residents of such an area or such 
                        populations.
                    (B) Nonprofit hospitals.--Nonprofit hospitals with 
                a minimum of 200 beds, located in urban areas where--
                            (i) the cumulative total of its services 
                        provided to individuals who are entitled to 
                        benefits under title XVIII of the Social 
                        Security Act or under a State plan under title 
                        XIX of such Act equals a minimum of 65 percent; 
                        and
                            (ii) a minimum of 20 percent of its 
                        services are provided to individuals eligible 
                        for assistance under such title XIX.

SEC. 1464. CERTIFICATION PROCESS; REVIEW; TERMINATION OF 
              CERTIFICATIONS.

    (a) Certification Process.--
            (1) Publication of procedures.--The Secretary shall 
        publish, not later than 6 months after the date of the 
        enactment of this Act, the procedures to be used by health care 
        professionals, providers, agencies, and organizations seeking 
        certification under this subpart, including the form and manner 
        in which an application for such certification is to be made.
            (2) Timely determination.--The Secretary shall make a 
        determination upon such an application not later than 60 days 
        (or 15 days in the case of a certification for an entity 
        described in section 1462) after the date the complete 
        application has been submitted. The determination on an 
        application for certification of an entity described in section 
        1462 shall only involve the verification that the entity is an 
        entity described in such section.
    (b) Review of Certifications.--The Secretary shall periodically 
review whether professionals, providers, agencies, and organizations 
certified under this subpart continue to meet the requirements for such 
certification.
    (c) Termination or Denial of Certification.--
            (1) Preliminary finding.--If the Secretary preliminarily 
        finds that an entity seeking certification under this section 
        does not meet the requirements for such certification or such 
        an entity certified under this subpart fails to continue to 
        meet the requirements for such certification, the Secretary 
        shall notify the entity of such preliminary finding and permit 
        the entity an opportunity, under subtitle C of title V, to 
        rebut such findings.
            (2) Final determination.--If, after such opportunity, the 
        Secretary continues to find that such an entity continues to 
        fail to meet such requirements, the Secretary shall terminate 
        the certification and shall notify the entity and the State of 
        such termination and the effective date of the termination.

SEC. 1465. NOTIFICATION OF PARTICIPATING STATES.

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

SEC. 1466. HEALTH PLAN REQUIREMENT.

    (a) In General.--
            (1) Category 1 entities.--With respect to each essential 
        community provider described in section 1462(a)(1) (other than 
        a provider of school health services) that makes an election 
        under subsection (d), that serves the health plan service area 
        of such health plan, and that requests participation under this 
        section, a health plan shall either--
                    (A) enter into a written provider participation 
                agreement (described in subsection (b)) with such 
                providers, or
                    (B) enter into a written agreement under which the 
                plan shall make payments to such provider in accordance 
                with subsection (c).
            (2) Category 2 entities.--
                    (A) In general.--With respect to at least one 
                essential community provider described in subparagraph 
                (A) and at least one essential community provider 
                described in subparagraph (B) of section 1462(a)(2), 
                that makes an election under subsection (d), that 
                serves the health plan service area of such health 
                plan, and that requests participation under this 
                section, a health plan shall either--
                            (i) enter into a written provider 
                        participation agreement (described in 
                        subsection (b)) with such providers, or
                            (ii) enter into a written agreement under 
                        which the plan shall make payments to such 
                        provider in accordance with subsection (c).
                    (B) Exception.--A State, as part of the State plan 
                under section 1501(a), may submit to the Secretary for 
                approval a request that the Secretary permit the State 
                to--
                            (i) require health plans operating in 
                        certain community rating areas in the State to 
                        contract with more than one essential community 
                        provider of each type referred to in 
                        subparagraph (A), based on geographic 
                        proximity, cultural and language needs, 
                        capacity to meet the needs of enrollees, or 
                        other factors determined relevant by the State; 
                        and
                            (ii) establish additional types of 
                        essential community providers under section 
                        1462(a)(2) that a health plan must contract 
                        with under subparagraph (A).
                    (C) Discretion of secretary.--With respect to a 
                State request under subparagraph (B), the Secretary 
                shall--
                            (i) approve such request; or
                            (ii) require the designation of such 
                        additional essential community providers in the 
                        State as the Secretary determines necessary.
    (b) Participation Agreement.--A participation agreement between a 
health plan and an electing essential community provider under this 
subsection shall provide that the health plan agrees to treat the 
provider in accordance with terms and conditions the same as those that 
are applicable to other providers participating in the health plan with 
respect to each of the following:
            (1) The scope of services for which payment is made by the 
        plan to the provider.
            (2) The rate of payment for covered care and services.
            (3) The availability of financial incentives to 
        participating providers.
            (4) Limitations on financial risk provided to other 
        participating providers.
            (5) Assignment of enrollees to participating providers.
            (6) Access by the provider's patients to providers in 
        medical specialties or subspecialties participating in the 
        plan.
    (c) Payments for Providers Without Participation Agreements.--
            (1) In general.--Payment in accordance with this subsection 
        is payment based, as elected by the electing essential 
        community provider, either--
                    (A) on the fee schedule developed by the State; or
                    (B) on payment methodologies and rates used under 
                the applicable Medicare payment methodology and rates 
                (or the most closely applicable methodology under such 
                program as the Secretary specifies in regulations).
            (2) Special rule for federally qualified health centers.--
        With respect to each federally qualified health center (as such 
        term is defined in section 1861(aa) of the Social Security Act) 
        that is an essential community provider, a health plan shall 
        make payments based on the reasonable cost rates applicable 
        under section 1833(a)(3) of the Social Security Act, except 
        that the federally qualified health center may accept other 
        payment amounts.
            (3) No application of gate-keeper limitations.--Payment in 
        accordance with this subsection may be subject to utilization 
        review, but may not be subject to otherwise applicable 
        gatekeeper requirements under the plan.
    (d) Election.--
            (1) In general.--In this part, the term ``electing 
        essential community provider'' means, with respect to a health 
        plan, an essential community provider certified under this 
        subpart that elects under this subpart to apply to the health 
        plan.
            (2) Form of election.--An election under this subsection 
        shall be made in a form and manner specified by the Secretary, 
        and shall include notice to the health plan involved. Such an 
        election may be made annually with respect to a health plan, 
        except that the plan and provider may agree to make such an 
        election on a more frequent basis.
    (e) Special Rule for Providers of School Health Services.--A health 
plan shall pay, to each provider of school health services located in 
the plan's service area, an amount determined by the Secretary for such 
services furnished to enrollees of the plan.

SEC. 1467. RECOMMENDATION ON CONTINUATION OF REQUIREMENT.

    (a) Studies.--In order to prepare recommendations under subsection 
(b), the Secretary shall conduct studies regarding essential community 
providers, including studies that assess--
            (1) the definition of essential community provider,
            (2) the sufficiency of the funding levels for providers, 
        including the special rule for federally qualified health 
        centers under section 1466(c)(2), for both covered and 
        uncovered benefits under this Act,
            (3) the effects of contracting requirements relating to 
        such providers on such providers, health plans, and enrollees,
            (4) the impact of the payment rules for such providers, and
            (5) the impact of national health reform on such providers.
    (b) Recommendations to and Consideration by Congress.--
            (1) In general.--Not later than 5 years after the date of 
        enactment of this Act, the Secretary shall submit to Congress, 
        specific recommendations concerning whether, and to what 
        extent, section 1466 should continue to apply to some or all 
        essential community providers. Such recommendations may include 
        a description of the particular types of such providers and 
        circumstances under which such section should continue to 
        apply.
            (2) Joint resolution and consideration by congress.--
                    (A) In general.--The recommendations under 
                paragraph (1) shall be implemented unless a joint 
                resolution (described in subparagraph (B)) disapproving 
                such recommendations is enacted in accordance with the 
                provisions of subparagraph (C), before the end of the 
                45-day period beginning on the date on which such 
                recommendations were submitted. For purposes of 
                applying the preceding sentence and subparagraphs (B) 
                and (C), the days on which either House of Congress is 
                not in session because of an adjournment of more than 
                three days to a day certain shall be excluded in the 
                computation of a period.
                    (B) Joint resolution of disapproval.--A joint 
                resolution described in this subparagraph means only a 
                joint resolution which is introduced within the 10-day 
                period beginning on the date on which the Secretary 
                submits recommendations under paragraph (1) and--
                            (i) which does not have a preamble;
                            (ii) the matter after the resolving clause 
                        of which is as follows: ``That Congress 
                        disapproves the recommendations of the 
                        Secretary of Health and Human Services 
                        concerning the extension of certain essential 
                        community provider provisions, as submitted by 
                        the Secretary on 2/32/32/32/32/32/32/3.'', the 
                        blank space being filled in with the 
                        appropriate date; and
                            (iii) the title of which is as follows: 
                        ``Joint resolution disapproving recommendations 
                        of the Secretary of Health and Human Services 
                        concerning the extension of certain essential 
                        community provider provisions, as submitted by 
                        the Secretary on 2/32/32/32/32/32/32/3.'', the 
                        blank space being filled in with the 
                        appropriate date.
                    (C) Procedures for consideration of resolution of 
                disapproval.--Subject to subparagraph (D), the 
                provisions of section 2908 (other than subsection (a)) 
                of the Defense Base Closure and Realignment Act of 1990 
                shall apply to the consideration of a joint resolution 
                described in subparagraph (B) in the same manner as 
                such provisions apply to a joint resolution described 
                in section 2908(a) of such Act.
                    (D) Special rules.--For purposes of applying 
                subparagraph (C) with respect to such provisions--
                            (i) any reference to the Committee on Armed 
                        Services of the House of Representatives shall 
                        be deemed a reference to an appropriate 
                        Committee of the House of Representatives 
                        (specified by the Speaker of the House of 
                        Representatives at the time of submission of 
                        recommendations under paragraph (1)) and any 
                        reference to the Committee on Armed Services of 
                        the Senate shall be deemed a reference to an 
                        appropriate Committee of the Senate (specified 
                        by the Majority Leader of the Senate at the 
                        time of submission of recommendations under 
                        paragraph (1)); and
                            (ii) any reference to the date on which the 
                        President transmits a report shall be deemed a 
                        reference to the date on which the Secretary 
                        submits a recommendation under paragraph (1).

SEC. 1468. DEFINITIONS.

    As used in subpart:
            (1) Children's hospital.--The term ``children's hospital'' 
        means those hospitals whose inpatients are certified by the 
        Secretary or the State to be predominantly under the age of 18.
            (2) Health professional.--The term ``health professional'' 
        means a physician, nurse, nurse practitioner, certified nurse 
        midwife, physician assistant, psychologist, dentist, 
        pharmacist, chiropractor, clinical social worker, and other 
        health care professional recognized by the Secretary.
            (3) Subrecipient.--The term ``subrecipient'' means, with 
        respect to a recipient of a grant under a particular authority, 
        an entity that--
                    (A) is receiving funding from such a grant under a 
                contract with the principal recipient of such a grant, 
                and
                    (B) meets the requirements established to be a 
                recipient of such a grant.

        PART 3--SPECIFIC RESPONSIBILITIES OF SECRETARY OF LABOR.

SEC. 1481. RESPONSIBILITIES OF SECRETARY OF LABOR.

    (a) In General.--The Secretary of Labor is responsible--
            (1) under subtitle D, for the enforcement of requirements 
        applicable to employers (including requirements relating to 
        payment of premiums under title X if applicable) and the 
        administration of large employer purchasing groups;
            (2) for the temporary assumption of the operation of self-
        insured employer sponsored health plans that are insolvent;
            (3) for carrying out any other responsibilities assigned to 
        the Secretary under this Act; and
            (4) for administering title I of the Employee Retirement 
        Income Security Act of 1974 as it relates to group health plans 
        maintained by large employer purchasing groups.
    (b) Agreements with States.--The Secretary of Labor may enter into 
agreements with States in order to enforce responsibilities of 
employers and large employer purchasing groups, and requirements of 
employer sponsored health plans, under subtitle B of title I of the 
Employee Retirement Income Security Act of 1974.
    (c) Consultation.--In carrying out activities under this Act with 
respect to large employer purchasing groups, employer sponsored health 
plans, and employers, the Secretary of Labor shall consult with the 
Secretary of Health and Human Services.
    (d) Guaranty Funds.--
            (1) In general.--The Secretary of Labor shall establish 
        standards for guaranty funds to be established by a State with 
        respect to a self-insured plan operating wholly within the 
        State.
            (2) Multistate plans.--The Secretary of Labor shall 
        establish and administer a guaranty fund with respect to 
        multistate self-insured plans.
    (e) Employer-Related Requirements.--
            (1) In general.--The Secretary of Labor, in consultation 
        with the Secretary, shall be responsible for assuring that 
        employers--
                    (A) make payments of any employer premiums (and 
                withhold and make payment of the family share of 
                premiums with respect to qualifying employees) and 
                provide discounts to employees as required under this 
                Act, including auditing of collection activities with 
                respect to such payments,
                    (B) submit timely reports as required under this 
                Act, and
                    (C) otherwise comply with requirements imposed on 
                employers under this Act.
            (2) Audit and similar authorities.--The Secretary of 
        Labor--
                    (A) may carry out such audits (directly or through 
                contract) and such investigations of employers and 
                States and large employer purchasing groups,
                    (B) may exercise such authorities under section 504 
                of Employee Retirement Income Security Act of 1974 (in 
                relation to activities under this Act),
                    (C) may provide (through contract or otherwise) for 
                such collection activities (in relation to amounts owed 
                to large employer purchasing groups, and for the 
                benefit of such groups), and
                    (D) may impose such civil penalties in accordance 
                with this Act,
        as may be necessary to carry out such Secretary's 
        responsibilities under this section.
            (3) Auditing of employer payments.--
                    (A) In general.--Each State is responsible for 
                auditing the records of community-rated employers to 
                assure that employer payments (including the payment of 
                amounts withheld) were made in the appropriate amount 
                as provided under subtitle B of title X.
                    (B) Employers with employees residing in different 
                community-rating areas.--In the case of a community-
                rated employer which has employees who reside in more 
                than one community rating area in more than one State, 
                the Secretary of Labor, in consultation with the 
                Secretary, shall establish a process for the 
                coordination of State auditing activities among the 
                States involved.
                    (C) Appeal.--In the case of an audit conducted by a 
                State on an employer under this paragraph, an employer 
                or other State that is aggrieved by the determination 
                in the audit is entitled to review of such audit by the 
                Secretary of Labor in a manner to be provided by such 
                Secretary.
    (f) Authority.--The Secretary of Labor is authorized to issue such 
regulations as may be necessary to carry out section 1305 and 
responsibilities of the Secretary under this Act.

SEC. 1482. FEDERAL ROLE WITH RESPECT TO MULTISTATE SELF-INSURED HEALTH 
              PLANS.

    (a) In General.--In the case of a multistate self-insured health 
plan or a multistate self-insured supplemental health benefits plan, 
the Secretary of Labor shall be responsible for certifying such plans 
and carrying out activities under this title in the same manner as a 
participating State would carry out activities under this title with 
respect to a standard health plan.
    (b) Self-Insured Plan Standards.--The Secretary of Labor shall 
develop and publish standards applicable to self-insured plans offered 
by large employers. The Secretary shall develop and publish such 
standards by not later than the date that is 6 months after the date of 
enactment of this Act. Such standards shall be the certified standard 
health plan standards applicable to self-insured plans under this 
title.
    (c) Determination of Multistate Status.--For purposes of this Act, 
a self-insured health plan or a self-insured supplemental health 
benefits plan shall be considered a multistate health plan if 
established or maintained by an experience-rated employer which has a 
substantial number of employees enrolled in such plan in each of 2 or 
more States (as determined by the Secretary of Labor).

SEC. 1483. ASSISTANCE WITH EMPLOYER COLLECTIONS.

    The Secretary of Labor shall provide States with such technical and 
other assistance as may promote the efficient collection of all amounts 
owed under this Act by employers.

SEC. 1484. PENALTIES FOR FAILURE OF LARGE EMPLOYER PURCHASING GROUPS TO 
              MEET REQUIREMENTS.

    If the Secretary of Labor finds that a large employer purchasing 
group has failed substantially to meet the applicable requirements of 
subtitle D, the Secretary shall impose a civil money penalty of not to 
exceed $10,000 for each such violation.

SEC. 1485. APPLICABILITY OF ERISA ENFORCEMENT MECHANISMS FOR 
              ENFORCEMENT OF CERTAIN REQUIREMENTS.

    The provisions of sections 502 (relating to civil enforcement), 504 
(relating to investigative authority) and 506 (relating to criminal 
enforcement) of the Employee Retirement Income Security Act of 1974 
shall apply to enforcement by the Secretary of Labor of the applicable 
requirements for large group purchasers in the same manner and to same 
extent as such provisions apply to enforcement of title I of such Act.

SEC. 1486. WORKPLACE WELLNESS PROGRAM.

    (a) In General.--The Secretary shall develop certification criteria 
for workplace wellness programs.
    (b) Application of Section.--Any health plan may offer a uniform 
premium discount, not to exceed 5 percent, to employers maintaining 
certified workplace wellness programs.

                 PART 4--OFFICE OF RURAL HEALTH POLICY

SEC. 1491. OFFICE OF RURAL HEALTH POLICY.

    (a) Appointment of Assistant Secretary.--
            (1) In general.--Section 711(a) of the Social Security Act 
        (42 U.S.C. 912(a)) is amended--
                    (A) by striking ``by a Director, who shall advise 
                the Secretary'' and inserting ``by an Assistant 
                Secretary for Rural Health (in this section referred to 
                as the `Assistant Secretary'), who shall report 
                directly to the Secretary''; and
                    (B) by adding at the end the following new 
                sentence: ``The Office shall not be a component of any 
                other office, service, or component of the 
                Department.''.
            (2) Conforming amendments.--(A) Section 711(b) of the 
        Social Security Act (42 U.S.C. 912(b)) is amended by striking 
        ``the Director'' and inserting ``the Assistant Secretary''.
            (B) Section 338J(a) of the Public Health Service Act (42 
        U.S.C. 254r(a)) is amended by striking ``Director of the Office 
        of Rural Health Policy'' and inserting ``Assistant Secretary 
        for Rural Health''.
            (C) Section 464T(b) of the Public Health Service Act (42 
        U.S.C. 285p-2(b)) is amended in the matter preceding paragraph 
        (1) by striking ``Director of the Office of Rural Health 
        Policy'' and inserting ``Assistant Secretary for Rural 
        Health''.
            (D) Section 6213 of the Omnibus Budget Reconciliation Act 
        of 1989 (42 U.S.C. 1395x note) is amended in subsection (e)(1) 
        by striking ``Director of the Office of Rural Health Policy'' 
        and inserting ``Assistant Secretary for Rural Health''.
            (E) Section 403 of the Ryan White Comprehensive AIDS 
        Resources Emergency Act of 1990 (42 U.S.C. 300ff-11 note) is 
        amended in the matter preceding paragraph (1) of subsection (a) 
        by striking ``Director of the Office of Rural Health Policy'' 
        and inserting ``Assistant Secretary for Rural Health''.
            (3) Amendment to the executive schedule.--Section 5315 of 
        title 5, United States Code, is amended by striking ``Assistant 
        Secretaries of Health and Human Services (5)'' and inserting 
        ``Assistant Secretaries of Health and Human Services (6)''.
    (b) Expansion of Duties.--Section 711(a) of the Social Security Act 
(42 U.S.C. 912(a)) is amended by striking ``and access to (and the 
quality of) health care in rural areas'' and inserting ``access to, and 
quality of, health care in rural areas, and reforms to the health care 
system and the implications of such reforms for rural areas''.
    (c) Effective Date.--The amendments made by this section shall take 
effect on January 1, 1996.

            Subtitle F--Participating State Responsibilities

                    PART 1--GENERAL RESPONSIBILITIES

SEC. 1501. STATE PLAN AND CERTIFICATION OF STANDARD HEALTH PLANS AND 
              SUPPLEMENTAL HEALTH BENEFITS PLANS.

    (a) State Plan.--
            (1) In general.--For purposes of the approval of a State 
        health care system by the Secretary under section 1411, a State 
        is a ``participating State'' if the State meets the applicable 
        requirements of this subtitle.
            (2) Submission of plan.--In order to be approved as a 
        participating State under section 1411, a State shall submit to 
        the Secretary a State plan (in a form and manner specified by 
        the Secretary) that describes the State health care system that 
        the State is establishing (or has established).
            (3) Deadline.--If a State is not a participating State with 
        a State health care system in operation by January 1, 1997, the 
        provisions of subpart C of part 1 of subtitle E (relating to 
        responsibilities in absence of State systems) shall take 
        effect.
            (4) Submission of information subsequent to approval.--A 
        State approved as a participating State under section 1411 
        shall submit to the Secretary an annual update to the State 
        health care system not later than February 15 of each year 
        following the first year for which the State is a participating 
        State. The update shall contain--
                    (A) such information as the Secretary may require 
                to determine that the system shall meet the applicable 
                requirements of this Act for the succeeding year; and
                    (B) such information as the Secretary may require 
                to determine that the State operated the system during 
                the previous year in accordance with the Secretary's 
                approval of the system for such previous year.
    (b) Health Plan Accreditation, Certification and Enforcement 
Program.--
            (1) Establishment.--The Secretary shall establish a program 
        for the accreditation, certification and enforcement of health 
        plan standards by States (hereafter referred to in this 
        subsection as the ``ACE program''). Under such program, the 
        Secretary shall--
                    (A) develop guidelines for the accreditation, 
                certification and enforcement of standards for 
                certified standard health plans;
                    (B) approve State ACE programs as meeting such 
                guidelines; and
                    (C) monitor the compliance of States with such 
                guidelines.
            (2) Program elements.--The guidelines referred to in 
        paragraph (1) shall include the following components:
                    (A) Certification.--State certification, and 
                recertification not less frequently than once during 
                each 3-year period, of standard health plans determined 
                by the State to be in compliance with the standards 
                established under subtitle B and with the regulations 
                promulgated by the Secretary concerning such standards.
                    (B) Disenrollment data.--State review of enrollee 
                disenrollment from each standard health plan to 
                determine whether there is a pattern of disenrollment 
                that does not reflect the distribution of such plans' 
                reenrolling membership.
                    (C) Monitoring.--State monitoring of the 
                performance of each standard health plan to ensure that 
                such plans continue to meet the criteria for 
                certification.
            (3) State programs.--Each participating State shall develop 
        accreditation, certification and enforcement programs in 
        accordance with the guidelines established by the Secretary 
        under paragraph (1).
            (4) Use of private organizations.--
                    (A) In general.--A State may utilize private 
                accreditation organizations to review the compliance by 
                standard health plans with specific standards with 
                which such organizations have demonstrated expertise. A 
                State may use such reviews as the basis for determining 
                plan compliance with such standards. The Secretary 
                shall approve eligible accreditation organizations and 
                promulgate regulations prohibiting conflicts of 
                interest in the use of such bodies by States.
                    (B) Limitations.--The use of private accreditation 
                organizations by a State under subparagraph (A) shall 
                not relieve such State of its obligations under this 
                subsection. In no case shall a State delegate 
                enforcement authority or enforcement responsibilities 
                to private organizations.
            (5) Enforcement.--A State ACE program shall establish a 
        process for imposing sanctions on standard health plans that 
        fail to comply with the standards established under this title. 
        Such sanctions may include--
                    (A) limiting or prohibiting new member enrollment;
                    (B) permitting existing members to disenroll from 
                the health plan without penalty;
                    (C) State operation of a health plan to provide 
                transitional access;
                    (D) the imposition of civil monetary penalties in 
                accordance with this Act;
                    (E) requiring that a plan follow a corrective 
                action plan developed by the State; and
                    (F) decertification or denial of recertification, 
                but only after the plan has been provided a reasonable 
                opportunity to comply with such standards.
            (6) Multi-state plans.--The Secretary of Labor, in 
        consultation with the Secretary, shall carry out all 
        certification and enforcement activities described in this 
        subsection with respect to multistate self-insured plans.
    (c) Other State Duties.--A participating State shall--
            (1) certify each purchasing cooperative that meets the 
        requirements of part 2 of subtitle D; and
            (5) administer the State subsidies as provided for in title 
        VI.
    (d) Effective Date.--Subsection (b) shall apply to standard health 
plans and supplemental health benefits plans sold, issued, or renewed 
on or after January 1, 1997.

SEC. 1502. COMMUNITY RATING AREAS AND HEALTH PLAN SERVICE AREAS.

    (a) In General.--In accordance with this section, each 
participating State shall, subject to approval by the Secretary, 
provide for the division of the State into 1 or more community rating 
areas.
    (b) Multiple Areas.--With respect to a community rating area--
            (1) no metropolitan statistical area in a State may be 
        incorporated into more than 1 such area in the State;
            (2) the number of individuals residing within such an area 
        may not be less than 250,000; and
            (3) no area incorporated in a community rating area may be 
        incorporated into another such area.
    (c) Boundaries.--
            (1) In general.--In establishing boundaries for community 
        rating areas, a participating State shall comply with the 
        antidiscrimination requirements of section 1602.
            (2) Coordinating multiple community rating areas.--Nothing 
        in this section shall be construed as preventing a 
        participating State from coordinating the activities of one or 
        more community rating areas in the State.
            (3) Interstate community rating areas.--Community rating 
        areas with respect to interstate areas shall be established in 
        accordance with rules established by the Secretary.
            (4) Coordination in multi-state areas.--One or more 
        participating States may coordinate their operations in 
        contiguous community rating areas. Such coordination may 
        include, the following activities, adoption of joint operating 
        rules, contracting with standard health plans, enforcement 
        activities, and establishment of fee schedules for health 
        providers.
    (d) Health Plan Service Areas.--
            (1) In general.--Pursuant to guidelines developed under 
        paragraph (2), each State shall designate, by not later than 
        January 1, 192/32/3, health plan service areas.
            (2) Guidelines.--The State shall designate one or more 
        health plan service areas within each community rating area in 
        the State, that--
                    (A) prevent discrimination in accordance with 
                section 1602; and
                    (B) do not cross community rating area boundaries.

SEC. 1503. OPEN ENROLLMENT PERIODS.

    Each participating State, based on rules and procedures established 
by the Secretary, shall specify a uniform, annual open enrollment 
period for each community rating area during which all eligible 
individuals are permitted the opportunity to change enrollment among 
the standard health plans offered to such individuals in such area 
under this Act. The initial annual open enrollment period shall be for 
a period of 90 days.

SEC. 1504. RISK ADJUSTMENT PROGRAM.

    (a) Requirement for Implementation.--In accordance with rules 
established by the Secretary, each State shall implement a risk 
adjustment methodology developed by the Secretary under subsection (d).
    (b) State Risk Adjustment Organization.--Each State shall establish 
a State risk adjustment organization to carry out the adjustments 
required under the methodology implemented by the State under 
subsection (a) and make payments in accordance with subsection (c). 
Such organization shall meet standards established by the Secretary 
relating to organizational structure, operation, fiduciary 
responsibilities and financial management.
    (c) Adjustments and Payments.--
            (1) Classes of purchasers.--The Secretary shall specify 
        classes of individual health plan purchasers whose expected 
        expenditures are significantly higher than those of employed 
        individuals covered under community-rated plans.
            (2) Estimates.--The Secretary shall annually estimate the 
        amount by which the expected expenditures related to specified 
        high-cost community-rated individual health plan purchasers (as 
        specified by the Secretary under the methodologies developed 
        under subsection (a)) for the year involved will exceed the 
        expected average expenditures for other community-rated health 
        plan enrollees. Based on such estimates, the Secretary shall 
        develop a per capita adjustment amount with respect to each 
        community rating area.
            (3) Payments.--
                    (A) In general.--The State risk adjustment 
                organization shall, using the methodologies developed 
                by the Secretary under subsection (a), apply the per 
                capita adjustment amount to community-rated and 
                experience-rated (and multistate plans under 
                subparagraph (C)) health plans offered within each 
                community rating area in the State.
                    (B) Standard plans.--Standard health plans subject 
                to an assessment under subparagraph (A) shall make 
                payments to the State risk adjustment organization for 
                the State in which such plans provide coverage.
                    (C) Multistate plans.--A multistate community-rated 
                or experience-rated plan that is subject to an 
                assessment under subparagraph (A) shall make payments 
                to a single State risk adjustment organization and 
                provide such organization with information concerning 
                the geographic distribution of the enrollees in such 
                plan. Such organization shall determine the amount of 
                such payments that are applicable to each community-
                rating area and distribute such amounts to the 
                appropriate State risk adjustment organization.
                    (D) Distribution.--State risk adjustment 
                organizations shall distribute amounts collected under 
                this paragraph to community-rated or experience-rated 
                health plans that are determined to have expenditures 
                for items and services provided to enrolled individuals 
                that are greater than the average expenditures for 
                enrollees in standard health plans. The amounts of such 
                distributions shall be based on the methodology applied 
                by the organization involved.
    (d) Development of Methodologies.--
            (1) In general.--Not later than 
        2/32/32/32/32/32/32/32/32/3, the Secretary, in consultation 
        with an advisory committee established by the Secretary, shall 
        develop a risk adjustment and reinsurance methodology for use 
        by States in accordance with this section.
            (2) Methodology.--
                    (A) Purposes.--The risk adjustment methodology 
                developed under paragraph (1) shall--
                            (i) ensure that assessments imposed on or 
                        payments provided to standard health plans 
                        reflect the expected relative utilization and 
                        expenditures for covered items and services by 
                        the enrollees of each plan compared to the 
                        average utilization and expenditures for all 
                        eligible individuals, and
                            (ii) protect standard health plans that 
                        enroll a disproportionate share of eligible 
                        individuals with respect to whom expected 
                        utilization of health care services (included 
                        in the benefit package) and expected health 
                        care expenditures for such services are greater 
                        than the average level of such utilization and 
                        expenditures for eligible individuals.
                    (B) Factors to be considered.--The methodology 
                shall take into account the following factors:
                            (i) Demographic characteristics.
                            (ii) Health status, including prior use of 
                        health services.
                            (iii) Geographic area of residence.
                            (iv) Socio-economic status.
                            (v) The cost sharing of the plan.
                            (vi) Any other factors determined by the 
                        Secretary to be material to the purposes 
                        described in subparagraph (A).
            (3) Special consideration for mental illness and mental 
        retardation.--In developing the methodology under this section, 
        the Secretary shall give consideration to the unique problems 
        of adjusting payments relating to health plans with respect to 
        individuals with mental illness and mental retardation.
            (4) Mandatory reinsurance.--
                    (A) In general.--The methodology developed under 
                this section shall include a system of mandatory 
                reinsurance as a component of the risk adjustment 
                methodology.
                    (B) Reinsurance system.--The Secretary, in 
                developing the methodology for a mandatory reinsurance 
                system under subparagraph (A), shall--
                            (i) provide for standard health plans to 
                        make payments to state-established reinsurance 
                        programs for the purpose of reinsuring all or 
                        part of the health care expenditures for items 
                        and services included in the standard benefit 
                        package for classes of high-cost individual 
                        health plan purchasers (as specified by the 
                        Secretary) or specific high-cost treatments or 
                        diagnosis; and
                            (ii) specify the manner of creation, 
                        structure, and operation of the system in each 
                        State, including--
                                    (I) the manner (which may be 
                                prospective or retrospective) in which 
                                standard health plans make payments to 
                                the system, and
                                    (II) the type and level of 
                                reinsurance coverage provided by the 
                                system.
            (5) Cost-sharing adjustment.--The standards developed by 
        the Secretary under this subsection shall include a cost-
        sharing adjustment mechanism to adjust for losses among all 
        standard health plans, except multistate self-insured health 
        plans, resulting from the reduced cost-sharing obligations of 
        individuals receiving assistance as is provided under the 
        program described in subtitle A of title VI.
            (6) Confidentiality of information.--The methodology shall 
        be developed under this section in a manner that is consistent 
        with privacy standards promulgated under title V. In developing 
        such standards, the Secretary shall take into account any 
        potential need of States for certain individually identifiable 
        health information in order to carry out risk-adjustment and 
        reinsurance activities under this Act, but only to the minimum 
        extent necessary to carry out such activities and with 
        protections provided to minimize the identification of the 
        individuals to whom the information relates.

SEC. 1505. GUARANTY FUNDS.

    A State, in accordance with the standards established by the 
Secretary under section 1442, shall establish a State guaranty fund 
with respect to community-rated plans offered in such State. The State 
shall establish a separate guaranty fund with respect to self-insured 
plans operating in the State in accordance with section 1481.

SEC. 1506. ENROLLMENT ACTIVITIES.

    (a) Provider-Based Enrollment Mechanisms.--The Secretary shall 
promulgate rules regarding the establishment by each participating 
State, in accordance with section 6006, of provider-based enrollment 
mechanisms for individuals seeking care who are not enrolled in a 
standard health plan. Such rules shall include provisions requiring 
standard health plans to pay providers for care delivered to 
individuals prior to the individual's enrollment in the plan and be 
consistent with section 1114.
    (b) Coordination of Enrollment Activities.--Each participating 
State shall coordinate its activities, including plan enrollment and 
disenrollment activities, with other States in a manner specified by 
the Secretary that ensures continuous, nonduplicative coverage of 
community-rated and experience-rated individuals in standard health 
plans and that minimizes administrative procedures and paperwork.

SEC. 1507. RURAL AND MEDICALLY UNDERSERVED AREAS.

    (a) In General.--If, in accordance with appropriate rules 
established by the Secretary, a State determines that there is 
inadequate access in the provision of health services by standard 
health plans in any area of a State, the State may authorize--
            (1) a standard health plan to be the only standard health 
        plan in the area; or
            (2) two or more standard health plans to take joint action 
        to develop and implement a program.
    (b) Medically Underserved Area Defined.--For purposes of this 
subtitle the term ``medically underserved area'' means an urban or 
rural area designated by the Secretary as an area with a shortage of 
health professional or of health services or facilities.

SEC. 1508. PUBLIC ACCESS SITES.

    (a) Designation.--A State shall designate public access sites 
within each community rating area through which residents of such areas 
can obtain consumer information concerning health plans and purchasing 
cooperatives offered in such areas. Such sites shall be designated in a 
manner that ensures access to such information by health care 
consumers.
    (b) Information.--A State shall, through the public access sites 
designated under subsection (a) and using the information provided to 
the State under sections 1125 and 1321(f)(6), prepare and make 
available information, in a comparative form, concerning standard 
health plans certified by the State and purchasing cooperatives 
operating in the State. The State shall provide such materials to 
employers located within the State.

SEC. 1509. REQUIREMENTS RELATING TO POSSESSIONS OF THE UNITED STATES.

    (a) In General.--A possession of the United States shall be a 
participating State meeting the requirements of this Act only if there 
is an agreement in effect between the United States and such possession 
pursuant to which--
            (1) the laws of such possession impose a part B premium 
        recapture assessment (as defined in subsection (b));
            (2) nothing in any provision of law, including the law of 
        such possession, permits such possession to reduce or remit in 
        any way, directly or indirectly, any liability to such 
        possession by reason of such assessment;
            (3) any amount received in the Treasury of such possession 
        by reason of such assessment shall be paid (at such time and in 
        such manner as the Secretary of the Treasury shall prescribe) 
        to the Federal Supplementary Medical Insurance Trust Fund;
            (4) such assessment is coordinated with the assessment 
        imposed by section 59B of the Internal Revenue Code of 1986 
        such that, for any period, an individual would be required to 
        pay (in the aggregate) not more than the applicable amount for 
        such period; and
            (5) the possession complies with such other requirements as 
        may be prescribed by the Secretary and the Secretary of the 
        Treasury to carry out the purposes of this paragraph, including 
        requirements prescribing the information individuals to whom 
        such assessment may apply shall furnish to the Secretary and 
        the Secretary of the Treasury.
    (b) Qualified Part B Premium Recapture Assessment.--In subsection 
(a), the term ``qualified medicare part B premium recapture 
assessment'' means an assessment imposed and collected by such a 
possession that is--
            (1) equivalent to the assessment imposed under section 59B 
        of the Internal Revenue Code of 1986; and
            (2) imposed on all individuals who are bona fide residents 
        of the possession, to the extent such individuals have not paid 
        the assessment imposed under such section 59B to the United 
        States by reason of subsection (d)(5) of such section.

SEC. 1510. RIGHT OF RECOVERY OF CERTAIN TAXES AGAINST PROVIDERS.

    Each participating State shall provide that issuers and plan 
sponsors of certified standard health plans shall have the right of 
recovery against providers described in section 4518 of the Internal 
Revenue Code of 1986 and shall provide methods of enforcing such right.

                    PART 2--TREATMENT OF STATE LAWS

SEC. 1511. PREEMPTION OF CERTAIN STATE LAWS RELATING TO HEALTH PLANS.

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

SEC. 1512. OVERRIDE OF RESTRICTIVE STATE PRACTICE LAWS.

    (a) Override.--
            (1) In general.--No State may, through licensure or 
        otherwise, restrict the practice of any class of practitioners 
        beyond that which is justified by the education and training of 
        such practitioners.
            (2) Definition.--As used in this section, the term 
        ``practitioner'' means--
                    (A) a nurse practitioner;
                    (B) a certified nurse midwife;
                    (C) a nurse anesthetist;
                    (D) a clinical nurse specialist; and
                    (E) a physicians assistant;
                    that has been awarded a master's degree or 
                postmaster's certificate following the completion of an 
                accredited training program that prepares individuals 
                in advanced practitioner specialties and that is 
                authorized by the State to practice as such a 
                practitioner.
    (b) Regulations.--The Secretary shall promulgate regulations to 
implement subsection (a) and shall ensure that appropriate technical 
assistance is available to States for the purpose of complying with 
this section.

                       PART 3--STATE FLEXIBILITY

                     Subpart A--Existing State Laws

SEC. 1521. CONTINUANCE OF EXISTING FEDERAL LAW WAIVERS.

    Nothing in this Act shall preempt any feature of a State health 
care system operating under a waiver granted before the date of the 
enactment of this Act under titles XVIII or XIX of the Social Security 
Act (42 U.S.C. 1395 et seq. or 1396 et seq.) or the Employee Retirement 
Income Security Act of 1974 (29 U.S.C. 1001 et seq.).

SEC. 1522. HAWAII PREPAID HEALTH CARE ACT.

    (a) ERISA Waiver.--
            (1) In general.--Section 514(b)(5) of the Employee 
        Retirement Income Security Act of 1974 (29 U.S.C. 1144(b)(5)) 
        is amended to read as follows:
            ``(5)(A) Except as provided in subparagraphs (B) and (C), 
        subsection (a) shall not apply to the Hawaii Prepaid Health 
        Care Act (Haw. Rev. Stat. Sec. Sec. 393-1 through 393-51).
            ``(B) Nothing in subparagraph (A) shall be construed to 
        exempt from subsection (a) any State tax law relating to 
        employee benefits plans.
            ``(C) If the Secretary of Labor notifies the Governor of 
        the State of Hawaii that as the result of an amendment to the 
        Hawaii Prepaid Health Care Act enacted after the date of the 
        enactment of this paragraph--
                    ``(i) the proportion of the population with health 
                care coverage under such Act is less than such 
                proportion on such date, or
                    ``(ii) the level of benefit coverage provided under 
                such Act is less than the actuarial equivalent of such 
                level of coverage on such date,
        subparagraph (A) shall not apply with respect to the 
        application of such amendment to such Act after the date of 
        such notification.''.
            (2) Effective date.--The amendment made by paragraph (1) 
        shall take effect on the date of the enactment of this Act.
    (b) HSA Waiver.--
            (1) In general.--The Secretary shall, at the request of the 
        Governor of the State of Hawaii and in accordance with this 
        section, grant a waiver to the State from the requirements of 
        this Act (other than the requirements specified in paragraph 
        (3)).
            (2) Scope of waiver.--The waiver granted under paragraph 
        (1) shall exempt--
                    (A) the State of Hawaii;
                    (B) health plans offered within the State; and
                    (C) health plan participants, including employers, 
                employees, residents, and health plan sponsors within 
                the State,
        from requirements otherwise applicable to the State and such 
        plans and participants.
            (3) Required compliance of other requirements.--The waiver 
        shall initially be granted under paragraph (1) if the State of 
        Hawaii demonstrates to the Secretary that the State maintains--
                    (A) a requirement that employers make premium 
                contributions comparable to the requirements of this 
                Act;
                    (B) a comprehensive benefit package (including cost 
                sharing) that is comparable with the requirements of 
                subtitle B of this title;
                    (C) a percentage of State population with health 
                care coverage that is not less than the national 
                average;
                    (D) a quality control mechanism and data system 
                that are comparable to the applicable requirements of 
                title V; and
                    (E) health care cost containment consistent with 
                the provisions of this Act.
            (4) Waiver period.--The waiver initially granted under 
        paragraph (1) shall extend for the period during which the 
        State of Hawaii continues to comply with the requirements 
        specified in paragraph (3). The Secretary may require the 
        State, every 5 years, to demonstrate to the Secretary the 
        State's continued compliance with such requirements.
            (5) Procedure in the event of non-compliance.--
                    (A) Notice.--If, at any time after granting a 
                waiver under paragraph (1), the Secretary finds that 
                the State of Hawaii is not meeting the requirements 
                specified in paragraph (3), the Secretary shall notify 
                the State of the Secretary's findings.
                    (B) Opportunity to contest.--The State may contest 
                the Secretary's findings under the procedures provided 
                under section 5231.
                    (C) Opportunity for correction.--
                            (i) Findings not contested.--If the State 
                        does not contest the Secretary's findings 
                        within the 30-day period beginning on the date 
                        of receipt of a notice of such findings, the 
                        State shall have--
                                    (I) a 90-day period beginning on 
                                such date to show a good faith effort 
                                to remedy the non-compliance, and
                                    (II) an additional 12-month period 
                                to take such actions as may be required 
                                to bring the State into compliance with 
                                the requirements specified in paragraph 
                                (3).
                            (ii) Contested findings.--If the State 
                        contests the Secretary's findings within such 
                        30-day period but such findings are upheld, the 
                        State shall have--
                                    (I) a 90-day period beginning on 
                                the date of final adjudication to show 
                                a good faith effort to remedy the non-
                                compliance, and
                                    (II) an additional 12-month period 
                                to take such actions as may be required 
                                to bring the State into compliance with 
                                the requirements specified in paragraph 
                                (3).
                    (D) Termination.--If the State fails to demonstrate 
                a good faith effort under subparagraph (C)(i)(I) or 
                (C)(ii)(I) or to take actions under subparagraph 
                (C)(i)(II) or (C)(ii)(II) within the time period 
                specified, the Secretary may revoke the waiver granted 
                in paragraph (1).
            (6) Cooperative agreement with the secretary.--The 
        Secretary shall enter into cooperative agreements with 
        appropriate officials of the State of Hawaii--
                    (A) to develop standards and reporting requirements 
                necessary for the issuance and maintenance of the 
                State's waiver under paragraph (1); and
                    (B) otherwise to effectuate the provisions of this 
                subsection.
            (7) Eligibility for federal funds provided to participating 
        states.--Nothing in this subsection shall preclude the 
        eligibility of the State of Hawaii to participate in any public 
        health initiative, grant, or financial aid program under this 
        Act (including the medicaid program under title XIX of the 
        Social Security Act), or the sharing of revenue resulting from 
        the amendments made by title VII, designed to implement the 
        purpose of this Act. The Secretary shall work with appropriate 
        officials of the State of Hawaii to develop comparable, 
        alternative standards to govern the State's entitlement under 
        title XI.

SEC. 1523. ALTERNATIVE STATE PROVIDER PAYMENT SYSTEMS.

    Notwithstanding any other provision of law, if a hospital 
reimbursement system operated by a State meets the requirements of 
section 1814(b) of the Social Security Act (42 U.S.C. 1395f(b)) and has 
been approved by the Secretary and in continuous operation since July 
1, 1977, the payment rates and methodologies required under the system 
for services provided in the State shall apply to all purchasers and 
payers, including those under employee welfare benefit plans authorized 
under the Employee Retirement Income Security Act of 1974 (29 U.S.C. 
1001 et seq.), workers' compensation programs under State law, the 
Federal Employees' Compensation Act under chapter 81 of title 5, United 
States Code, and Federal employee health benefit plans under chapter 89 
of title 5, United States Code.

SEC. 1524. ALTERNATIVE STATE HOSPITAL SERVICES PAYMENT SYSTEMS.

    (a) In General.--No State shall be prevented from enforcing--
            (1) a State system described in subsection (b), or
            (2) a State system described in subsection (c),
by any provision of the Employee Retirement Income Security Act of 1974 
(29 U.S.C. 1001 et seq.) or chapter 81 or 89 of title 5, United States 
Code.
    (b) Reimbursement Control System.--A State system is described in 
this subsection if it is a State reimbursement control system in 
operation before the date of the enactment of this Act which--
            (1) applies to substantially all non-Federal acute care 
        hospitals in the State, and
            (2) regulates substantially all rates of payment (including 
        maximum charges) in the State for inpatient hospital services, 
        except payments made under title XVIII of the Social Security 
        Act (42 U.S.C. 1395 et seq.).
    (c) Health Insurance Reform System.--A State system is described in 
this subsection if it is a State health insurance reform system in 
operation before the date of the enactment of this Act which requires 
any insurer (including a health maintenance organization) to comply 
with requirements governing open enrollment and community rating, 
including premium adjustments or other health care assessments, for the 
purpose of risk adjustment.
    (d) Effective Dates.--
            (1) Subsection (b).--In the case of a State system 
        described in subsection (b), the provisions of this section 
        shall apply before, on, and after the date of the enactment of 
        this Act.
            (2) Subsection (c).--In the case of a State system 
        described in subsection (c), the provisions of this section 
        shall apply before, on, and after the date of the enactment of 
        this Act, and before the effective date of section 1116 of this 
        Act.

         Subpart B--Requirements for State Single-Payer Systems

SEC. 1531. SINGLE-PAYER SYSTEM DESCRIBED.

    The Secretary shall approve an application of a State to operate a 
single-payer system if the Secretary finds that the system--
            (1) meets the requirements of section 1532; and
            (2)(A) in the case of a system offered throughout a State, 
        meets the requirements for a Statewide single-payer system 
        under section 1533; or
            (B) in the case of a system offered in a single community 
        rating area of a State, meets the requirements for an area 
        specific single-payer system under section 1534.

SEC. 1532. GENERAL REQUIREMENTS FOR SINGLE-PAYER SYSTEMS.

    Each single-payer system shall meet the following requirements:
            (1) Establishment by state.--The system is established 
        under State law, and State law provides for mechanisms to 
        enforce the requirements of the system.
            (2) Operation by state.--The system is operated by the 
        State or a designated agency of the State.
            (3) Enrollment of individuals.--
                    (A) Mandatory enrollment of all community-rated 
                individuals.--The system shall provide for the 
                enrollment of all community-rated individuals residing 
                in the State (or, in the case of an area-specific 
                single-payer system, in the community rating area) who 
                are not medicare-eligible individuals.
                    (B) Optional enrollment of medicare-eligible 
                individuals.--At the option of the State and if the 
                Secretary has approved an application submitted by the 
                State, the system may provide for the enrollment of 
                medicare-eligible individuals residing in the State 
                (or, in the case of an area-specific single-payer 
                system, in the community rating area).
                    (C) Optional enrollment of experience-rated 
                individuals.--
                            (i) In general.--Except as provided in 
                        clause (ii), at the option of the State, a 
                        single-payer system may provide for the 
                        enrollment of experience-rated individuals 
                        residing in the State (or, in the case of an 
                        area-specific single-payer system, in the 
                        community rating area).
                            (ii) Participation by certain multistate 
                        plans.--The system shall not require 
                        participation by any experience-rated 
                        individual who is enrolled in a certified 
                        multistate self-insured standard health plan 
                        which is a multiemployer plan described in 
                        section 1013(10), or which is sponsored by an 
                        experience-rated employer sponsor with at least 
                        5,000 full-time employees.
                    (D) Options included in state system document.--A 
                State may not exercise any of the options described in 
                subparagraphs (B) or (C) for a year unless the State 
                included a description of the option in the submission 
                of its system document to the Secretary for the year 
                under section 1501(a).
                    (E) Exclusion of certain individuals.--A single-
                payer system may not require the enrollment of 
                veterans, active duty military personnel, and American 
                Indians.
            (4) Direct payment to providers.--
                    (A) In general.--With respect to providers who 
                furnish items and services included in the standard 
                benefits package established under subtitle C to 
                individuals enrolled in the system, the State shall 
                make payments directly, or through fiscal 
                intermediaries, to such providers and assume (subject 
                to subparagraph (B)) all financial risk associated with 
                making such payments.
                    (B) Capitated payments permitted.--Nothing in 
                subparagraph (A) shall be construed to prohibit 
                providers furnishing items and services under the 
                system from receiving payments on a capitated, at-risk 
                basis based on prospectively determined rates.
            (5) Provision of standard benefits package.--
                    (A) In general.--The system shall provide for 
                coverage of the standard benefits package established 
                under subtitle C, including the cost-sharing provided 
                under the package (subject to subparagraph (B)), to all 
                individuals enrolled in the system.
                    (B) Imposition of reduced cost-sharing.--The system 
                may decrease the cost-sharing otherwise provided in the 
                standard benefits package established under subtitle C 
                with respect to any individuals enrolled in the system 
                or any class of services included in the package, so 
                long as the system does not increase the cost-sharing 
                otherwise imposed with respect to any other individuals 
                or services.
            (6) Cost containment.--The system shall provide for 
        mechanisms to ensure, in a manner satisfactory to the 
        Secretary, that--
                    (A) the rate of growth in health care spending will 
                not be higher than the target established under this 
                Act;
                    (B) the expenditures described in subparagraph (A) 
                are computed and effectively monitored;
                    (C) automatic, mandatory, nondiscretionary 
                reductions in payments to health care providers will be 
                imposed to the extent required to assure that such per 
                capita expenditures do not exceed the applicable target 
                referred to in subparagraph (A); and
                    (D) Federal payments to a single payer State or 
                health care coverage area shall be limited to the 
                payments that would have been made in the absence of 
                the implementation of the single payer system.
            (7) Federal payments.--The system shall provide for 
        mechanisms to ensure, in a manner satisfactory to the 
        Secretary, that Federal payments to a single-payer State or 
        community rating area shall be limited to the payments that 
        would have been made in the absence of the implementation of 
        the single-payer system.
            (8) Requirements generally applicable to standard health 
        plans.--The system shall meet the requirements applicable to a 
        standard health plan, except that--
                    (A) the system does not have the authority provided 
                to standard health plans under section 1111(b)(3) 
                (relating to permissible limitations on the enrollment 
                of community-rated eligible individuals on the basis of 
                limits on the plan's capacity); and
                    (B) the system is not required to meet the 
                requirements of sections 1116 (relating to rating 
                limitations for community-rated market), 1123(a) 
                (relating to plan solvency), and section 1125 (relating 
                to restrictions on the marketing of plan materials).

SEC. 1533. SPECIAL RULES FOR STATES OPERATING STATEWIDE SINGLE-PAYER 
              SYSTEM.

    (a) In General.--In the case of a State operating a Statewide 
single-payer system--
            (1) the State shall operate the system throughout the 
        State; and
            (2) except as provided in subsection (b), the State shall 
        meet the requirements for participating States under part 1.
    (b) Exceptions to Certain Requirements for Participating States.--
In the case of a State operating a Statewide single-payer system, the 
State is not required to meet the following requirements otherwise 
applicable to participating States under part 1:
            (1) Establishment of community rating and service areas.--
        The requirements of sections 1502(a) (relating to the 
        establishment of community rating areas) and 1502(b) (relating 
        to the designation of health plan service areas).
            (2) Other references inapplicable.--Any requirement which 
        the Secretary determines is not appropriate to apply to a State 
        single-payer system.
    (c) Financing.--
            (1) In general.--A State operating a Statewide single-payer 
        system shall provide for the financing of the system using, at 
        least in part, a payroll-based financing system that requires 
        employers to pay at least the amount that the employers would 
        be required to pay if the employers were subject to the 
        requirements of title X (determined without regard to any 
        effective date).
            (2) Use of financing methods.--Such a State may use, 
        consistent with paragraph (1), any other method of financing.
    (d) Single-Payer State Defined.--In this title, the term ``single-
payer State'' means a State with a Statewide single-payer system in 
effect that has been approved by the Secretary in accordance with this 
part.

SEC. 1534. SPECIAL RULES FOR COMMUNITY RATING AREA-SPECIFIC SINGLE-
              PAYER SYSTEMS.

    (a) In General.--In the case of a State operating a community 
rating area specific single-payer system, except as provided in 
subsection (b), the State shall meet the requirements for participating 
States under part 1.
    (b) Exceptions to Certain Requirements for Participating States.--
            (1) Establishment of service areas.--The requirement of 
        section 1502(b) (relating to the designation of health plan 
        service areas).
            (2) Other references inapplicable.--Any requirement which 
        the Secretary determines is not appropriate to apply to a 
        community rating area specific single-payer system.

    Subpart C--Early Implementation of Comprehensive State Programs

SEC. 1541. EARLY IMPLEMENTATION OF COMPREHENSIVE STATE PROGRAMS

    (a) Application.--
            (1) In general.--In accordance with this section, each 
        State desiring to implement the reform standards established in 
        this Act before the applicable effective date for such 
        standards, may submit an application to the Secretary of Health 
        and Human Services and the Secretary of Labor to request 
        approval of a State comprehensive health care reform program 
        established under State law which meets the requirements 
        specified in subsection (b).
            (2) Establishment of criteria.--The Secretaries shall 
        establish not later than January 1, 1995, criteria for--
                    (A) the approval of such applications, and
                    (B) the continuing review of such State programs 
                consistent with the provisions of subpart B of part 1.
            (3) Expedited procedure.--The Secretaries shall establish 
        an expedited procedure for the consideration and disposition of 
        applications under this subsection. The procedure established 
        by the Secretaries shall provide that such consideration and 
        disposition be completed within 90 days, and that if the 
        application is approved, multistate employers be notified of 
        such approval.
    (b) Requirements Specified.--The State program shall be consistent 
with the reform standards established in this Act and the interim and 
final (if any) regulations promulgated by the Secretaries, including--
            (1) a standardized benefits package meeting the 
        requirements established under subtitle C, or in the event such 
        requirements have not been fully promulgated on the date of the 
        application, the requirements for a qualified health 
        maintenance organization (as defined in section 1310(d) of the 
        Public Health Service Act (42 U.S.C. 300e-9(d));
            (2) insurance reforms and rating requirements as specified 
        under part 2 of subtitle B;
            (3) standards for health plans as specified under part 3 of 
        subtitle B;
            (4) the recognition of, and standards for, purchasing 
        cooperatives, as specified in part 2 of subtitle D;
            (5) compliance with the data collection and privacy 
        procedures established under subtitle B of title V;
            (6) uniform administrative procedures as specified in 
        section 1126;
            (7) the imposition of employer and individual 
        responsibilities as specified in part 1 of subtitle D and title 
        X (determined without regard to any effective date);
            (8) the establishment of the subsidy program under this 
        Act; and
            (9) health care cost containment under this Act.
    (c) Qualification for Federal Funds.--For purposes of this Act, a 
State with an approved State program under this section shall be 
considered a participating State and shall maintain such status if such 
State meets the requirements of this Act as such provisions become 
effective.
    (d) Employer Certification Process.--In the case of any multistate 
self-insured health plan, certification by the plan to the Secretary of 
Labor that such plan is in compliance with the applicable Federal 
standards described in subsection (b) shall satisfy compliance with any 
State program approved under this section.
    (e) Funding.--The Secretary of Health and Human Services shall pay 
over to each State with an approved application under this section for 
each calendar quarter ending before 1997 an amount equal to the 
estimated decrease in Federal expenditures (net of any estimated 
decrease in Federal revenues) for such quarter with respect to such 
State resulting from the implementation of the State comprehensive 
health care reform program.

                  Subtitle G--Miscellaneous Provisions

SEC. 1601. PROVISION OF ITEMS OR SERVICES CONTRARY TO RELIGIOUS BELIEF 
              OR MORAL CONVICTION.

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

SEC. 1602. ANTIDISCRIMINATION.

    (a) In General.--The Secretary of Health and Human Services, and 
any State, health plan, purchasing cooperative, employer, health 
program or activity receiving Federal financial assistance, or other 
entity subject to this Act, shall not directly or through contractual 
arrangements--
            (1) deny or limit access to or the availability of health 
        care services, or otherwise discriminate in connection with the 
        provision of health care services; or
            (2) limit, segregate, or classify an individual in any way 
        which would deprive or tend to deprive such individual of 
        health care services, or otherwise adversely affect his or her 
        access to health care services;
on the basis of race, national origin, sex, religion, language, income, 
age, sexual orientation, disability, health status, or anticipated need 
for health services.
    (b) Application of Section to Specific Actions.--This section shall 
apply to, but is not limited to, the following actions:
            (1) The establishing of boundaries for community rating 
        areas under section 1502, the enrollment of individuals in a 
        health care plan or the marketing of a health care plan, and 
        the selection of providers or the setting of the terms or 
        conditions under which providers participate in a health care 
        plan or provider network.
            (2) The determination of the scope of services provided by 
        a health care plan, and the providing of such services and 
        determining of the site or location of health care facilities.
    (c) Regulations.--Not later than 1 year after the date of the 
enactment of this Act, the Secretary of Health and Human Services shall 
issue regulations to carry out this section.
    (d) Effect on Other Laws. Nothing in this Act shall be construed to 
limit the scope of, or the availability of relief under, any other 
Federal or State law prohibiting discrimination or providing relief 
therefore.

                         TITLE II--NEW BENEFITS

   Subtitle A--Coverage of Outpatient Prescription Drugs in Medicare

SEC. 2000. REFERENCES IN SUBTITLE.

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

           PART 1--COVERAGE OF OUTPATIENT PRESCRIPTION DRUGS

SEC. 2001. COVERAGE OF OUTPATIENT PRESCRIPTION DRUGS.

    (a) Covered Outpatient Drugs as Medical and Other Health 
Services.--Section 1861(s)(2)(J) (42 U.S.C. 1395x(s)(2)(J)) is amended 
to read as follows:
            ``(J) covered outpatient drugs;''.
    (b) Definition of Covered Outpatient Drug.--Section 1861(t) (42 
U.S.C. 1395x(t)) is amended--
            (1) in the heading, by adding at the end the following: ``; 
        Covered Outpatient Drugs'';
            (2) in paragraph (1)--
                    (A) by striking ``paragraph (2)'' and inserting 
                ``the succeeding paragraphs of this subsection'', and
                    (B) by striking the period at the end and inserting 
                ``, but only if used for a medically accepted 
                indication.''; and
            (3) by striking paragraph (2) and inserting the following:
    ``(2) Except as otherwise provided in paragraph (3), the term 
`covered outpatient drug' means any of the following products used for 
a medically accepted indication:
            ``(A) A drug which may be dispensed only upon prescription 
        and--
                    ``(i) which is approved for safety and 
                effectiveness as a prescription drug under section 505 
                or 507 of the Federal Food, Drug, and Cosmetic Act or 
                which is approved under section 505(j) of such Act;
                    ``(ii)(I) which was commercially used or sold in 
                the United States before the date of the enactment of 
                the Drug Amendments of 1962 or which is identical, 
                similar, or related (within the meaning of section 
                310.6(b)(1) of title 21 of the Code of Federal 
                Regulations) to such a drug, and (II) which has not 
                been the subject of a final determination by the 
                Secretary that it is a `new drug' (within the meaning 
                of section 201(p) of the Federal Food, Drug, and 
                Cosmetic Act) or an action brought by the Secretary 
                under section 301, 302(a), or 304(a) of such Act to 
                enforce section 502(f) or 505(a) of such Act; or
                    ``(iii)(I) which is described in section 107(c)(3) 
                of the Drug Amendments of 1962 and for which the 
                Secretary has determined there is a compelling 
                justification for its medical need, or is identical, 
                similar, or related (within the meaning of section 
                310.6(b)(1) of title 21 of the Code of Federal 
                Regulations) to such a drug, and (II) for which the 
                Secretary has not issued a notice of an opportunity for 
                a hearing under section 505(e) of the Federal Food, 
                Drug, and Cosmetic Act on a proposed order of the 
                Secretary to withdraw approval of an application for 
                such drug under such section because the Secretary has 
                determined that the drug is less than effective for all 
                conditions of use prescribed, recommended, or suggested 
                in its labeling.
            ``(B) A biological product which--
                    ``(i) may only be dispensed upon prescription,
                    ``(ii) is licensed under section 351 of the Public 
                Health Service Act, and
                    ``(iii) is produced at an establishment licensed 
                under such section to produce such product.
            ``(C) Insulin certified under section 506 of the Federal 
        Food, Drug, and Cosmetic Act.
            ``(D) Enteral nutrients (but only if provided as a covered 
        home infusion drug).
    ``(3) The term `covered outpatient drug' does not include any 
product--
            ``(A) which is administered through infusion in a setting 
        described in paragraph (5)(A)(ii) unless the product is a 
        covered home infusion drug;
            ``(B) when furnished as part of, or as incident to, any 
        other item or service for which payment may be made under this 
        title (other than physicians' services or services which would 
        be physicians' services if furnished by a physician); or
            ``(C) which is listed under paragraph (2) of section 
        1927(d) (other than subparagraph (I) or (J) of such paragraph) 
        as a drug which may be excluded from coverage under a State 
        plan under title XIX and which the Secretary elects to exclude 
        from coverage under part B.
    ``(4) For purposes of this subsection, the term `medically accepted 
indication', with respect to the use of an outpatient drug, includes 
any use which has been approved by the Food and Drug Administration for 
the drug, and includes another use of the drug if--
            ``(A) the drug has been approved by the Food and Drug 
        Administration; and
            ``(B)(i) such use is supported by one or more citations 
        which are included (or approved for inclusion) in one or more 
        of the following compendia: the American Hospital Formulary 
        Service-Drug Information, the American Medical Association Drug 
        Evaluations, the United States Pharmacopoeia-Drug Information, 
        and other authoritative compendia as identified by the 
        Secretary, unless the Secretary has determined that the use is 
        not medically appropriate or the use is identified as not 
        indicated in one or more such compendia, or
            ``(ii) the carrier involved determines, based upon guidance 
        provided by the Secretary to carriers for determining accepted 
        uses of drugs, that such use is medically accepted based on 
        supportive clinical evidence in peer reviewed medical 
        literature appearing in publications which have been identified 
        for purposes of this clause by the Secretary.
The Secretary may revise the list of compendia in subparagraph (B)(i) 
designated as appropriate for identifying medically accepted 
indications for drugs.
    ``(5)(A) For purposes of this subsection, the term `covered home 
infusion drug' means a covered outpatient drug dispensed to an 
individual that--
            ``(i) is administered intravenously, subcutaneously, or 
        epidurally, using an access device that is inserted into the 
        body and an infusion device to control the rate of flow of the 
        drug (or through other means of administration determined by 
        the Secretary);
            ``(ii) is administered--
                    ``(I) in the individual's home,
                    ``(II) in an institution used as the individual's 
                home, but only if the drug is administered during an 
                inpatient day for which payment is not made to the 
                institution under part A for inpatient or extended care 
                services furnished to the individual, or
                    ``(III) in a facility other than the individual's 
                home if the administration of the drug at the facility 
                is determined by the Secretary to be cost-effective (in 
                accordance with such criteria as the Secretary may 
                establish); and
            ``(iii) with respect to a drug furnished in a home 
        setting--
                    ``(I) is an antibiotic drug and the Secretary has 
                not determined, for the specific drug or the indication 
                to which the drug is applied, that the drug cannot 
                generally be administered safely and effectively in 
                such a setting, or
                    ``(II) is not an antibiotic drug and the Secretary 
                has determined, for the specific drug or the indication 
                to which the drug is applied, that the drug can 
                generally be administered safely and effectively in 
                such a setting.
    ``(B) Not later than January 1, 1999, (and periodically 
thereafter), the Secretary shall publish a list of the drugs, and 
indications for such drugs, that are covered home infusion drugs, with 
respect to which home infusion drug therapy may be provided under this 
title.''.
    (c) Conforming Amendments Repealing Separate Coverage of Certain 
Drugs and Products.--(1) Effective January 1, 1999, section 1861(s)(2) 
(42 U.S.C. 1395x(s)(2)) is amended--
            (A) in subparagraph (A), by striking ``(including drugs'' 
        and all that follows through ``self-administered)'';
            (B) by striking subparagraphs (G) and (I);
            (C) by adding ``and'' at the end of subparagraph (M); and
            (D) by striking subparagraphs (O), (P), and (Q).
    (2) Effective January 1, 1999, section 1861 (42 U.S.C. 1395x) is 
amended by striking the subsection (jj) added by section 4156(a)(2) of 
OBRA-1990.
    (3) Effective January 1, 1999, section 1881(b) (42 U.S.C. 
1395rr(b)) is amended--
            (A) in the first sentence of paragraph (1)--
                    (i) by striking ``, (B)'' and inserting ``, and 
                (B)'', and
                    (ii) by striking ``, and (C)'' and all that follows 
                and inserting a period; and
            (B) in paragraph (11)--
                    (i) by striking ``(11)(A)'' and inserting ``(11)'', 
                and
                    (ii) by striking subparagraphs (B) and (C).

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

    (a) In General.--Section 1834 (42 U.S.C. 1395m) is amended by 
inserting after subsection (c) the following new subsection:
    ``(d) Payment for and Certain Requirements Concerning Covered 
Outpatient Drugs.--
            ``(1) Deductible.--
                    ``(A) In general.--Payment shall be made under 
                paragraph (2) only for expenses incurred by an 
                individual for a covered outpatient drug during a 
                calendar year after the individual has incurred 
                expenses in the year for such drugs (during a period in 
                which the individual is entitled to benefits under this 
                part) equal to the deductible amount for that year.
                    ``(B) Deductible amount.--
                            ``(i) For purposes of subparagraph (A), the 
                        deductible amount is--
                                    ``(I) for 1999, an amount equal to 
                                the amount determined under clause 
                                (ii)(I);
                                    ``(II) for 2000, the amount 
                                (rounded to the nearest dollar) that 
                                the Secretary estimates will ensure 
                                that the percentage of individuals 
                                covered under this part (other than 
                                individuals enrolled with an eligible 
                                organization under section 1876, an 
                                organization described in section 
                                1833(a)(1)(A), or a medicare drug 
                                benefit plan under section 1851) during 
                                the year who will incur expenses for 
                                covered outpatient drugs equal to or 
                                greater than such amount will be the 
                                same as the percentage for the previous 
                                year;
                                    ``(III) for 2001, an amount equal 
                                to the amount determined under clause 
                                (ii)(II); and
                                    ``(IV) for any succeeding year, the 
                                amount (rounded to the nearest dollar) 
                                that the Secretary estimates will 
                                ensure that the percentage of 
                                individuals covered under this part 
                                (other than individuals enrolled with 
                                an eligible organization under section 
                                1876, an organization described in 
                                section 1833(a)(1)(A), or a medicare 
                                drug benefit plan under section 1851) 
                                during the year who will incur expenses 
                                for covered outpatient drugs equal to 
                                or greater than such amount will be the 
                                same as the percentage for the previous 
                                year.
                            ``(ii) For purposes of clause (i), the 
                        amount determined under this clause is--
                                    ``(I) in 1999, an amount determined 
                                by the Secretary such that the amount 
                                so determined will result in projected 
                                incurred spending and administrative 
                                costs (net of projected rebates under 
                                section 1851 and any portion of the 
                                part B premium attributable to the 
                                covered outpatient drug benefit) for 
                                providing payment under this title for 
                                covered outpatient drugs that would be 
                                equal to a spending target equal to 
                                $13,500,000,000; and
                                    ``(II) in 2001, an amount 
                                determined by the Secretary (based on 
                                actual experience) that the Secretary 
                                estimates will ensure that the 
                                percentage of individuals covered under 
                                this part (other than individuals 
                                enrolled with an eligible organization 
                                under section 1876, an organization 
                                described in section 1833(a)(1)(A), or 
                                a medicare drug benefit plan under 
                                section 1851) during the year who will 
                                incur expenses for covered outpatient 
                                drugs equal to or greater than such 
                                amount will be the same as the 
                                percentage that would have incurred 
                                such expenses had actual experience in 
                                such incurred spending and 
                                administrative costs (described in 
                                subclause (I)) for 1999 been equal to 
                                the spending target for 1999 (described 
                                in subclause (I)).
                            ``(iii) The Secretary shall promulgate the 
                        deductible amount for 1999 and each succeeding 
                        year not later than October 1 of the previous 
                        year.
            ``(2) Payment amount.--
                    ``(A) In general.--Subject to the deductible 
                established under paragraph (1), the amount payable 
                under this part for a covered outpatient drug furnished 
                to an individual during a calendar year shall be equal 
                to--
                            ``(i) 80 percent of the payment basis 
                        described in paragraph (3), in the case of an 
                        individual who has not incurred expenses for 
                        covered outpatient drugs during the year 
                        (including the deductible imposed under 
                        paragraph (1)) in excess of the out-of-pocket 
                        limit for the year under subparagraph (B); and
                            ``(ii) 100 percent of the payment basis 
                        described in paragraph (3), in the case of any 
                        other individual.
                    ``(B) Out-of-pocket limit described.--
                            ``(i) For purposes of subparagraph (A), the 
                        out-of-pocket limit for a year is equal to--
                                    ``(I) for 1999, $1275; and
                                    ``(II) for any succeeding year, the 
                                amount (rounded to the nearest dollar) 
                                that the Secretary estimates will 
                                ensure that the percentage of the 
                                average number of individuals covered 
                                under this part (other than individuals 
                                enrolled with an eligible organization 
                                under section 1876 or an organization 
                                described in section 1833(a)(1)(A)) 
                                during the year who will incur expenses 
                                for covered outpatient drugs equal to 
                                or greater than such amount will be the 
                                same as the percentage for the previous 
                                year.
                            ``(ii) The Secretary shall promulgate the 
                        out-of-pocket limit for 1999 and each 
                        succeeding year not later than October 1 of the 
                        previous year.
            ``(3) Payment basis.--For purposes of paragraph (2), the 
        payment basis is the lesser of--
                    ``(A) the actual charge for a covered outpatient 
                drug, or
                    ``(B) the applicable payment limit established 
                under paragraph (4).
            ``(4) Payment limits.--
                    ``(A) Payment limit for single source drugs and 
                multiple source drugs with restrictive prescriptions.--
                In the case of a covered outpatient drug that is a 
                multiple source drug which has a restrictive 
                prescription, or that is single source drug, the 
                payment limit for a payment calculation period is equal 
                to the amount of the administrative allowance 
                (established under paragraph (5)) plus the product of 
                the number of dosage units dispensed and the per unit 
                estimated acquisition cost for the drug product 
                (determined under subparagraph (C)) for the period.
                    ``(B) Payment limit for multiple source drugs 
                without restrictive prescriptions.--In the case of a 
                drug that is a multiple source drug which does not have 
                a restrictive prescription, the payment limit for a 
                payment calculation period is equal to the amount of 
                the administrative allowance (established under 
                paragraph (5)) plus the product of the number of dosage 
                units dispensed and the unweighted median of the unit 
                estimated acquisition cost (determined under 
                subparagraph (C)) for the drug products for the period.
                    ``(C) Determination of unit price.--
                            ``(i) In general.--The Secretary shall 
                        determine, for the dispensing or providing of a 
                        covered outpatient drug product in the payment 
                        calculation period, the estimated acquisition 
                        cost for the drug product. With respect to any 
                        covered outpatient drug product, the estimated 
                        acquisition cost, may not exceed 93 percent of 
                        the published average wholesale price for the 
                        drug, as determined one month prior to the 
                        beginning of the payment calculation period.
                            ``(ii) Compliance with request for 
                        information.--If a wholesaler or direct seller 
                        of a covered outpatient drug refuses, after 
                        being requested by the Secretary, to provide 
                        price information requested to carry out clause 
                        (i), or deliberately provides information that 
                        is false, the Secretary may impose a civil 
                        money penalty of not to exceed $10,000 for each 
                        such refusal or provision of false information. 
                        The provisions of section 1128A (other than 
                        subsections (a) and (b)) shall apply to civil 
                        money penalties under the previous sentence in 
                        the same manner as they apply to a penalty or 
                        proceeding under section 1128A(a). Information 
                        gathered pursuant to clause (i) shall not be 
                        disclosed except as the Secretary determines to 
                        be necessary to carry out the purposes of this 
                        part and to permit the Comptroller General and 
                        the Director of the Congressional Budget Office 
                        to review the information provided.
            ``(5) Administrative allowance for purposes of payment 
        limit.--
                    ``(A) In general.--Except as provided in 
                subparagraphs (B) and (C), the administrative allowance 
                established under this paragraph is--
                            ``(i) for 1999, an amount equal to $5; and
                            ``(ii) for each succeeding year, the amount 
                        for the previous year, adjusted by the 
                        percentage change in the consumer price index 
                        for all urban consumers (U.S. city average) for 
                        the 12-month period ending with June of that 
                        previous year.
                    ``(B) No dispensing fee for certain drugs and 
                products.--No administrative allowance may be provided 
                under this paragraph with respect to any of the 
                following covered outpatient drugs:
                            ``(i) Erythropoietin provided to dialysis 
                        patients.
                            ``(ii) Drugs and biologicals provided as an 
                        incident to a physician's service or to a 
                        service which would be a physician's service if 
                        furnished by a physician.
                            ``(iii) Covered home infusion drugs.
            ``(6) Mail order pharmacy option.--
                    ``(A) Establishment of mail order option.--The 
                Secretary may establish a competitive bidding process 
                to award contracts to mail order pharmacies for the 
                provision of covered outpatient drugs that are 
                maintenance drugs to individuals who opt to receive 
                such drugs through the mail order pharmacies. The 
                payment amount for a covered outpatient drug under this 
                section to a mail order pharmacy under such a contract 
                shall be equal to the amount bid by such plan under 
                this subparagraph instead of the payment limit 
                determined in accordance with paragraph (4).
                    ``(B) Sharing of savings.--To the extent that 
                payment is made under this section for maintenance 
                drugs that are provided through a mail order pharmacy 
                pursuant to subparagraph (A), an individual that opts 
                to receive such drugs from such pharmacy shall receive 
                from the Secretary a rebate or a contribution toward 
                the individual's cost sharing in an amount equal to 25 
                percent of the excess of the payment limit determined 
                in accordance with paragraph (4) over the amount 
                charged by the mail order pharmacy for such drug.
            ``(7) Assuring appropriate prescribing and dispensing 
        practices.--
                    ``(A) In general.--The Secretary shall develop a 
                program to--
                            ``(i) provide on-line prospective review of 
                        prescriptions on a 24-hour basis (in accordance 
                        with subparagraph (B)) and retrospective review 
                        of claims;
                            ``(ii) establish standards for counseling 
                        individuals to whom covered outpatient drugs 
                        are prescribed; and
                            ``(iii) identify (and to educate 
                        physicians, patients, and pharmacists 
                        concerning)--
                                    ``(I) instances or patterns of 
                                unnecessary or inappropriate 
                                prescribing or dispensing practices for 
                                covered outpatient drugs,
                                    ``(II) instances or patterns of 
                                substandard care with respect to such 
                                drugs,
                                    ``(III) potential adverse 
                                reactions, and
                                    ``(IV) appropriate use of generic 
                                products.
                    ``(B) Prospective review.--
                            ``(i) In general.--The program under this 
                        paragraph shall provide for on-line prospective 
                        review of each covered outpatient drug 
                        prescribed for a patient before the 
                        prescription is filled or the drug is 
                        furnished, including screening for potential 
                        drug therapy problems due to therapeutic 
                        duplication, drug-to-drug interactions, and 
                        incorrect drug dosage or duration of drug 
                        treatment.
                            ``(ii) Discussion of appropriate use.--In 
                        conducting prospective review under this 
                        subparagraph, any individual or entity that 
                        dispenses a covered outpatient drug shall offer 
                        to discuss with the patient to whom the drug is 
                        furnished or the patient's caregiver (in person 
                        if practicable, or through access to a toll-
                        free telephone service) information regarding 
                        the appropriate use of the drug, potential 
                        interactions between the drug and other drugs 
                        dispensed to the individual, and such other 
                        matters as the Secretary may require.
                            ``(iii) Additional duties.--In carrying out 
                        this subparagraph, the Secretary shall--
                                    ``(I) develop public domain 
                                software which could be used by 
                                carriers and pharmacies to provide the 
                                on-line prospective review; and
                                    ``(II) study the feasibility and 
                                desirability of requiring patient 
                                diagnosis codes on prescriptions and to 
                                the extent that the Secretary finds 
                                such a requirement to be feasible and 
                                desirable, to implement such a 
                                requirement to be effective on and 
                                after January 1, 2000.
                    ``(C) Prior authorization.--
                            ``(i) Development of list of misused 
                        drugs.--The Secretary shall develop (and 
                        periodically) update a list of covered 
                        outpatient drugs which the Secretary has 
                        determined, based on data collected, may be 
                        subject to misuse or inappropriate use. The 
                        Secretary shall provide a means for 
                        manufacturers to appeal an initial decision to 
                        include a drug on the list.
                            ``(ii) Prior authorization for drugs on 
                        list.--The Secretary shall establish a process 
                        under which (subject to clause (iii)) the 
                        Secretary may require advance approval for any 
                        covered outpatient drug included on the list 
                        developed under clause (i).
                            ``(iii) Restrictions on denial of 
                        approval.--The Secretary may not deny the 
                        approval of a drug under the process 
                        established under clause (ii) before its 
                        dispensing unless the process--
                                    ``(I) provides responses by 
                                telephone or other telecommunication 
                                device within 24 hours of a request for 
                                prior authorization; and
                                    ``(II) provides for the dispensing 
                                of at least a 72-hour supply of a 
                                covered outpatient prescription drug in 
                                emergency situations (as defined by the 
                                Secretary).
                            ``(iv) Expansion to other drugs.--If the 
                        rate of growth of payments under this part for 
                        covered outpatient drugs exceeds the average 
                        rate of growth for parts A and B expenditures 
                        and the Secretary finds such action to be 
                        feasible and desirable, the Secretary may 
                        require advance approval under this 
                        subparagraph for the dispensing of a covered 
                        outpatient drug in cases where a more cost-
                        effective therapeutically or generically 
                        equivalent drug is available.
                    ``(D) Drug use review.--As part of the program 
                established under subparagraph (A), the Secretary shall 
                provide for a drug use review program to provide for 
                the ongoing periodic examination of claims data and 
                other records on covered outpatient drugs furnished to 
                patients under this title in order to identify patterns 
                of fraud, abuse, gross overuse, or inappropriate or 
                medically unnecessary care among physicians, 
                pharmacists, and patients.
                    ``(E) Adoption of medicaid programs.--To the extent 
                considered appropriate by the Secretary, the program 
                developed under this paragraph with respect to drugs 
                furnished in a State may include elements applicable to 
                the furnishing of covered outpatient drugs under the 
                State medicaid program under section 1927.
            ``(8) Billing requirements.--
                    ``(A) Mandatory assignment.--(i) Payment under this 
                part for a covered outpatient drug may only be made on 
                an assignment-related basis.
                    ``(ii) Except for deductible, coinsurance, or 
                copayment amounts applicable under this part, no person 
                may bill or collect any amount from an individual 
                enrolled under this part or other person for a covered 
                outpatient drug for which payment may be made under 
                this part, and no such individual or person is liable 
                for payment of any amounts billed in violation of this 
                clause. If a person knowingly and willfully bills or 
                collects an amount in violation of the previous 
                sentence, the Secretary may apply sanctions against 
                such person in accordance with section 1842(j)(2). 
                Paragraph (4) of section 1842(j) shall apply in this 
                clause in the same manner as such paragraph applies to 
                such section.
                    ``(B) Use of electronic system.--The Secretary 
                shall establish, by not later than January 1, 1998, a 
                point-of-sale electronic system for use by carriers and 
                pharmacies in the submission of information respecting 
                covered outpatient drugs dispensed to medicare 
                beneficiaries under this part. Such system shall be 
                consistent with the standards established by the 
                National Council of Prescription Drug Programs.
            ``(9) Requiring pharmacy supplier numbers.--
                    ``(A) In general.--Payment may not be made under 
                this part with respect to a covered outpatient drug 
                dispensed by a pharmacy unless the entity has obtained 
                a supplier number from the Secretary.
                    ``(B) Standards for issuing supplier numbers.--The 
                Secretary may not issue a supplier number to an entity 
                for purposes of subparagraph (A) unless the entity 
                demonstrates to the Secretary that it will maintain 
                patient records (in accordance with such standards as 
                the Secretary may impose) and meet the other applicable 
                requirements of this subsection and section 1848(g).
            ``(10) Study on pharmaceutical care services.--The 
        Secretary shall conduct a study to develop, in consultation 
        with actively practicing pharmacists, a payment methodology (to 
        be in addition to the administrative allowance established 
        under paragraph (5)) which is based upon and reflects the 
        reasonable charges for varying levels of pharmacist services, 
        including patient consultations provided to individuals under 
        this section. The Secretary shall submit a report, including 
        such recommendations as the Secretary determines to be 
        appropriate, to Congress on the methodology developed under 
        this paragraph not later than September 30, 1998.
            ``(11) Definitions.--In this subsection:
                    ``(A) Multiple and single source drugs.--The terms 
                `multiple source drug' and `single source drug' have 
                the meanings given those terms under section 
                1927(k)(7), except that the reference in such section 
                to a `covered outpatient drug' shall be considered a 
                reference to a covered outpatient drug under this part.
                    ``(B) Restrictive prescription.--A drug has a 
                `restrictive prescription' only if--
                            ``(i) in the case of a written 
                        prescription, the prescription for the drug 
                        indicates, in the handwriting of the physician 
                        or other person prescribing the drug and with 
                        an appropriate phrase (such as `brand medically 
                        necessary') recognized by the Secretary, that a 
                        particular drug product must be dispensed, or
                            ``(ii) in the case of a prescription issued 
                        by telephone--
                                    ``(I) the physician or other person 
                                prescribing the drug (through use of 
                                such an appropriate phrase) states that 
                                a particular drug product must be 
                                dispensed, and
                                    ``(II) the physician or other 
                                person submits to the pharmacy 
                                involved, within 30 days after the date 
                                of the telephone prescription, a 
                                written confirmation which is in the 
                                handwriting of the physician or other 
                                person prescribing the drug and which 
                                indicates with such appropriate phrase 
                                that the particular drug product was 
                                required to have been dispensed.
                    ``(C) Payment calculation period.--The term 
                `payment calculation period' means a calendar year.''.
    (b) Requiring Pharmacies to Submit Claims.--Section 1848(g)(4) (42 
U.S.C. 1395w-4(g)(4)) is amended--
            (1) in the heading--
                    (A) by striking ``Physician'', and
                    (B) by inserting ``by physicians and suppliers'' 
                after ``claims'';
            (2) in the matter in subparagraph (A) preceding clause 
        (i)--
                    (A) by striking ``For services furnished on or 
                after September 1, 1990, within 1 year'' and inserting 
                ``Within 1 year (or 90 days in the case of covered 
                outpatient drugs)'',
                    (B) by striking ``a service'' and inserting ``an 
                item or service'', and
                    (C) by inserting ``or of providing a covered 
                outpatient drug,'' after ``basis,''; and
            (3) in subparagraph (A)(i), by inserting ``item or'' before 
        ``service''.
    (c) Special Rules for Carriers.--
            (1) Use of regional carriers.--Section 1842(b)(2) (42 
        U.S.C. 1395u(b)(2)) is amended by adding at the end the 
        following:
    ``(D) With respect to activities related to covered outpatient 
drugs, the Secretary may enter into contracts with carriers under this 
section to perform the activities on a regional basis.''.
            (2) Additional functions.--Section 1842(b)(3) (42 U.S.C. 
        1395u(b)(3)) is amended--
                    (A) by striking ``and'' at the end of subparagraph 
                (H);
                    (B) by adding ``and'' at the end of subparagraph 
                (L);
                    (C) by redesignating subparagraph (L) as 
                subparagraph (I); and
                    (D) by inserting after subparagraph (I) (as so 
                redesignated) the following new subparagraphs:
            ``(J) if it makes determinations or payments with respect 
        to covered outpatient drugs, will--
                    ``(i) receive information transmitted under the 
                electronic system established under section 
                1834(d)(8)(B), and
                    ``(ii) respond to requests by pharmacies (and 
                individuals entitled to benefits under this part) as to 
                whether or not such an individual has met the 
                prescription drug deductible established under section 
                1834(d)(1)(A) for a year; and
            ``(K) will enter into such contracts with organizations 
        described in subsection (f)(3) as the Secretary determines may 
        be necessary to implement and operate (and for related 
        functions with respect to) the electronic system established 
        under section 1834(d)(8)(B) for covered outpatient drugs under 
        this part;''.
            (3) Payment on other than a cost basis.--Section 
        1842(c)(1)(A) (42 U.S.C. 1395u(c)(1)(A)) is amended--
                    (A) by inserting ``(i)'' after ``(c)(1)(A)'',
                    (B) in the first sentence, by inserting ``, except 
                as otherwise provided in clause (ii),'' after ``under 
                this part, and'', and
                    (C) by adding at the end the following:
    ``(ii) To the extent that a contract under this section provides 
for activities related to covered outpatient drugs, the Secretary may 
provide for payment for those activities based on any method of payment 
determined by the Secretary to be appropriate.''.
            (4) Batch prompt processing of claims.--Section 1842(c) (42 
        U.S.C. 1395u(c)) is amended--
                    (A) in paragraphs (2)(A) and (3)(A), by striking 
                ``Each'' and inserting ``Except as provided in 
                paragraph (4), each'';
                    (B) by adding at the end the following new 
                paragraph:
    ``(4)(A) Each contract under this section which provides for the 
disbursement of funds, as described in subsection (a)(1)(B), with 
respect to claims for payment for covered outpatient drugs shall 
provide for a payment cycle under which each carrier will, on a monthly 
basis, make a payment with respect to all claims which were received 
and approved for payment in the period since the most recent date on 
which such a payment was made with respect to the participating 
pharmacy or individual submitting the claim.
    ``(B) If payment is not issued, mailed, or otherwise transmitted 
within 5 days of when such a payment is required to be made under 
subparagraph (A), interest shall be paid at the rate used for purposes 
of section 3902(a) of title 31, United States Code (relating to 
interest penalties for failure to make prompt payments) for the period 
beginning on the day after such 5-day period and ending on the date on 
which payment is made.''.
            (5) Use of other entities for covered outpatient drugs.--
        Section 1842(f) (42 U.S.C. 1395u(f)) is amended--
                    (A) by striking ``and'' at the end of paragraph 
                (1),
                    (B) by striking the period at the end of paragraph 
                (2) and inserting ``; and'', and
                    (C) by adding at the end the following:
            ``(3) with respect to activities related to covered 
        outpatient drugs, any other private entity which the Secretary 
        determines is qualified to conduct such activities.''.
            (6) Designated carriers to process claims of railroad 
        retirees.--Section 1842(g) (42 U.S.C. 1395u(g)) is amended by 
        inserting ``(other than functions related to covered outpatient 
        drugs)'' after ``functions''.
    (e) Conforming Amendments.--
            (1)(A) Section 1833(a)(1) (42 U.S.C. 1395l(a)(1)) is 
        amended--
                    (i) by striking ``and'' at the end of clause (O), 
                and
                    (ii) by inserting before the semicolon at the end 
                the following: ``, and (Q) with respect to covered 
                outpatient drugs, the amounts paid shall be as 
                prescribed by section 1834(d)''.
            (B) Section 1833(a)(2) (42 U.S.C. 1395l(a)(2)) is amended 
        in the matter preceding subparagraph (A) by inserting ``, 
        except for covered outpatient drugs,'' after ``and (I) of such 
        section''.
            (2) Section 1833(b)(2) (42 U.S.C. 1395l(b)(2)) is amended 
        by inserting ``or with respect to covered outpatient drugs'' 
        before the comma.
            (3) The first sentence of section 1842(h)(2) (42 U.S.C. 
        1395u(h)(2)) is amended by inserting ``(other than a carrier 
        described in subsection (f)(3))'' after ``Each carrier''.
            (4) The first sentence of section 1866(a)(2)(A) (42 U.S.C. 
        1395cc(a)(2)(A)) is amended--
                    (A) in clause (i), by inserting ``section 
                1834(d),'' after ``section 1833(b),'', and
                    (B) in clause (ii), by inserting ``, other than for 
                covered outpatient drugs,'' after ``provider)''.

SEC. 2003. MEDICARE REBATES FOR COVERED OUTPATIENT DRUGS.

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

                 ``rebates for covered outpatient drugs

    ``Sec. 1850. (a) Requirement for Rebate Agreement.--In order for 
payment to be available under this part for covered outpatient drugs of 
a manufacturer dispensed or provided on or after January 1, 1999, the 
manufacturer must have entered into and have in effect a rebate 
agreement with the Secretary meeting the requirements of subsection 
(b), and an agreement to give equal access to discounts in accordance 
with subsection (e).
    ``(b) Terms, Implementation, and Enforcement of Rebate Agreement.--
            ``(1) Periodic rebates.--
                    ``(A) In general.--A rebate agreement under this 
                section shall require the manufacturer to pay to the 
                Secretary for each calendar quarter, not later than 30 
                days after the date of receipt of the information 
                described in paragraph (2) for such quarter, a rebate 
                in an amount determined under subsection (c) for all 
                covered outpatient drugs of the manufacturer described 
                in subparagraph (B).
                    ``(B) Drugs included in quarterly rebate 
                calculation.--Drugs subject to rebate with respect to a 
                calendar quarter are drugs which are dispensed or 
                provided during such quarter to individuals (other than 
                individuals enrolled with an entity with a contract 
                under section 1876 or a medicare drug benefit plan with 
                a contract under section 1851) eligible for benefits 
                under this part, as reported to the Secretary.
            ``(2) Information furnished to manufacturers.--
                    ``(A) In general.--The Secretary shall report to 
                each manufacturer, not later than 60 days after the end 
                of each calendar quarter, information on the total 
                number, for each covered outpatient drug, of units of 
                each dosage form, strength, and package size dispensed 
                or provided under the plan during the quarter, on the 
                basis of the data reported to the Secretary described 
                in paragraph (1)(B).
                    ``(B) Audit.--The Comptroller General may audit the 
                records of the Secretary to the extent necessary to 
                determine the accuracy of reports by the Secretary 
                pursuant to subparagraph (A). Adjustments to rebates 
                shall be made to the extent determined necessary by the 
                audit to reflect actual units of drugs dispensed.
            ``(3) Provision of price information by manufacturer.--
                    ``(A) Quarterly pricing information.--Each 
                manufacturer with an agreement in effect under this 
                section shall report to the Secretary, not later than 
                30 days after the last day of each calendar quarter, on 
                the average manufacturer retail price and the average 
                manufacturer non-retail price for each dosage form and 
                strength of each covered outpatient drug for the 
                quarter.
                    ``(B) Base quarter prices.--Each manufacturer of a 
                covered outpatient drug with an agreement under this 
                section shall report to the Secretary, by not later 
                than 30 days after the effective date of such agreement 
                (or, if later, 30 days after the end of the base 
                quarter), the average manufacturer retail price, for 
                such base quarter, for each dosage form and strength of 
                each such covered drug.
                    ``(C) Verification of average manufacturer price.--
                The Secretary may inspect the records of manufacturers, 
                and survey wholesalers, pharmacies, and institutional 
                purchasers of drugs, as necessary to verify prices 
                reported under subparagraph (A).
                    ``(D) Penalties.--
                            ``(i) Civil money penalties.--The Secretary 
                        may impose a civil money penalty on a 
                        manufacturer with an agreement under this 
                        section--
                                    ``(I) for failure to provide 
                                information required under subparagraph 
                                (A) on a timely basis, in an amount up 
                                to $10,000 per day of delay;
                                    ``(II) for refusal to provide 
                                information about charges or prices 
                                requested by the Secretary for purposes 
                                of verification pursuant to 
                                subparagraph (C), in an amount up to 
                                $100,000; and
                                    ``(III) for provision, pursuant to 
                                subparagraph (A) or (B), of information 
                                that the manufacturer knows or should 
                                know is false, in an amount up to 
                                $100,000 per item of information.
                        Such civil money penalties are in addition to 
                        any other penalties prescribed by law. The 
                        provisions of section 1128A (other than 
                        subsections (a) (with respect to amounts of 
                        penalties or additional assessments) and (b)) 
                        shall apply to a civil money penalty under this 
                        subparagraph in the same manner as such 
                        provisions apply to a penalty or proceeding 
                        under section 1128A(a).
                            ``(ii) Termination of agreement.--If a 
                        manufacturer with an agreement under this 
                        section has not provided information required 
                        under subparagraph (A) or (B) within 90 days of 
                        the deadline imposed, the Secretary may suspend 
                        the agreement with respect to covered 
                        outpatient drugs dispensed after the end of 
                        such 90-day period and until the date such 
                        information is reported (but in no case shall a 
                        suspension be for less than 30 days).
            ``(4) Length of agreement.--
                    ``(A) In general.--A rebate agreement shall be 
                effective for an initial period of not less than one 
                year and shall be automatically renewed for a period of 
                not less than one year unless terminated under 
                subparagraph (B).
                    ``(B) Termination.--
                            ``(i) By the secretary.--The Secretary may 
                        provide for termination of a rebate agreement 
                        for violation of the requirements of the 
                        agreement or other good cause shown. Such 
                        termination shall not be effective earlier than 
                        60 days after the date of notice of such 
                        termination. The Secretary shall afford a 
                        manufacturer an opportunity for a hearing 
                        concerning such termination, but such hearing 
                        shall not delay the effective date of the 
                        termination.
                            ``(ii) By a manufacturer.--A manufacturer 
                        may terminate a rebate agreement under this 
                        section for any reason. Any such termination 
                        shall not be effective until the calendar 
                        quarter beginning at least 60 days after the 
                        date the manufacturer provides notice to the 
                        Secretary.
                            ``(iii) Effective date of termination.--Any 
                        termination under this subparagraph shall not 
                        affect rebates due under the agreement before 
                        the effective date of its termination.
                            ``(iv) Notice to pharmacies.--In the case 
                        of a termination under this subparagraph, the 
                        Secretary shall notify pharmacies and physician 
                        organizations not less than 30 days before the 
                        effective date of such termination.
    ``(c) Amount of Rebate.--
            ``(1) Base rebate.--Each manufacturer shall remit a basic 
        rebate to the Secretary for each calendar quarter in an amount, 
        with respect to each dosage form and strength of a covered 
        outpatient drug, equal to the product of--
                    ``(A) the total number of units subject to rebate 
                for such quarter, as described in subsection (b)(1)(B); 
                and
                    ``(B)(i) in the case of a single-source drug or 
                innovator-multiple source drug, 15 percent of the 
                average manufacturer retail price, or
                    ``(ii) in the case of a noninnovator-multiple 
                source drug furnished over-the-counter, insulin or an 
                enteral nutrient, 6 percent (or the applicable percent 
                if the Secretary implements the sliding scale developed 
                in accordance with paragraph (4)) of the average 
                manufacturer retail price.
            ``(2) Additional rebate.--Each manufacturer shall remit to 
        the Secretary, for each calendar quarter, an additional rebate 
        for each dosage form and strength of a single-source or 
        innovator-multiple-source drug, in an amount equal to--
                    ``(A) the total number of units subject to rebate 
                for such quarter, as described in subsection (b)(1)(B), 
                multiplied by
                    ``(B) the amount, if any, by which the average 
                manufacturer retail price for such drugs of the 
                manufacturer exceeds the average manufacturer retail 
                price for the base quarter, increased by the percentage 
                increase in the Consumer Price Index for all urban 
                consumers (U.S. average) from the end of such base 
                quarter to the month before the beginning of such 
                calendar quarter.
            ``(3) Deposit of rebates.--The Secretary shall deposit 
        rebates under this section in the Federal Supplementary Medical 
        Insurance Trust Fund established under section 1841.
            ``(4) Applicable percent.--
                    ``(A) Noninnovator multiple source drug.--
                            ``(i) In general.--For purposes of this 
                        subparagraph, the Secretary may develop and 
                        implement a sliding scale to determine the 
                        applicable percent for rebates based on the 
                        relationship between the average manufacturer 
                        retail price of the noninnovator-multiple 
                        source drug furnished over-the-counter and the 
                        average manufacturer retail price of the 
                        equivalent innovator drug (except as provided 
                        in subparagraph (B)) .
                            ``(ii) Sliding scale described.--The 
                        sliding scale developed by the Secretary under 
                        clause (i) shall--
                                    ``(I) require that the applicable 
                                percent be not less than 2 percent and 
                                not be greater than 15 percent; and
                                    ``(II) ensure that the total level 
                                of rebates collected under such a 
                                sliding scale would be equivalent to a 
                                flat 6 percent rebate on such drugs.
                    ``(B) Enteral nutrients and insulin.--For purposes 
                of this subparagraph, the applicable percent for 
                enteral nutrients and insulin under the sliding scale 
                would be equal to 6 percent.
    ``(d) Confidentiality of Information.--Notwithstanding any other 
provision of law, information disclosed by a manufacturer under this 
section is confidential and shall not be disclosed by the Secretary (or 
a carrier), except--
            ``(A) as the Secretary determines to be necessary to carry 
        out this section,
            ``(B) to permit the Comptroller General to review the 
        information provided, and
            ``(C) to permit the Director of the Congressional Budget 
        Office to review the information provided.
    ``(e) Definitions.--For purposes of this section--
            ``(1) Average manufacturer retail price.--The term `average 
        manufacturer retail price' means, with respect to a covered 
        outpatient drug of a manufacturer for a calendar quarter, the 
        average price (inclusive of discounts for cash payment, prompt 
        payment, volume purchases, and rebates (other than rebates 
        under this section), but exclusive of nominal prices) paid to 
        the manufacturer for the drug in the United States for drugs 
        distributed to the retail pharmacy class of trade.
            ``(2) Average manufacturer non-retail price.--The term 
        `average manufacturer non-retail price' means, with respect to 
        a covered outpatient drug of a manufacturer for a calendar 
        quarter, the weighted average price (inclusive of discounts for 
        cash payment, prompt payment, volume purchases, and rebates 
        (other than rebates under this section), but exclusive of 
        nominal prices) paid to the manufacturer for the drug in the 
        United States by hospitals and other institutional purchasers 
        that purchase drugs for institutional use and not for resale.
            ``(3) Base quarter.--The term `base quarter' means, with 
        respect to a covered outpatient drug of a manufacturer, the 
        calendar quarter beginning April 1, 1993, or (if later) the 
        first full calendar quarter during which the drug was marketed 
        in the United States.
            ``(4) Drug.--The terms `innovator multiple source drug', 
        `noninnovator multiple source drug', and `single source drug' 
        have the meanings given those terms under section 1927(k)(7), 
        except that the reference in such section to a `covered 
        outpatient drug' shall be considered a reference to a covered 
        outpatient drug under this part.
            ``(5) Manufacturer.--The term `manufacturer' means, with 
        respect to a covered outpatient drug--
                    ``(A) the entity whose National Drug Code number 
                (as issued pursuant to section 510(e) of the Federal 
                Food, Drug, and Cosmetic Act) appears on the labeling 
                of the drug; or
                    ``(B) if the number described in subparagraph (A) 
                does not appear on the labeling of the drug, the person 
                named as the applicant in a human drug application (in 
                the case of a new drug) or the product license 
                application (in the case of a biological product) for 
                such drug approved by the Food and Drug 
                Administration.''.
    (b) Exclusions From Coverage.--Section 1862(a) (42 U.S.C. 1395y(a)) 
is amended--
            (1) by striking ``and'' at the end of paragraph (15),
            (2) by striking the period at the end of paragraph (16) and 
        inserting ``; or'', and
            (3) by inserting after paragraph (16) the following new 
        paragraph:
            ``(17) consisting of a covered outpatient drug (as 
        described in section 1861(t)) furnished during a year for which 
        the drug's manufacturer does not have in effect a rebate 
        agreement with the Secretary that meets the requirements of 
        section 1850 for the year.''.

SEC. 2004. PRESCRIPTION DRUG PAYMENT REVIEW COMMISSION.

    Part B of title XVIII is amended by inserting after section 1846 
the following new section:

             ``prescription drug payment review commission

    ``Sec. 1847. (a)(1) The Director of the Congressional Office of 
Technology Assessment (in this section referred to as the `Director' 
and the `Office', respectively) shall provide for the appointment of a 
Prescription Drug Payment Review Commission (in this section referred 
to as the `Commission'), to be composed of individuals with expertise 
in the provision and financing of covered outpatient drugs appointed by 
the Director (without regard to the provisions of title 5, United 
States Code, governing appointments in the competitive service).
    ``(2) The Commission shall consist of 11 individuals. Members of 
the Commission shall first be appointed by no later than January 1, 
1996, for a term of 3 years, except that the Director may provide 
initially for such shorter terms as will insure that (on a continuing 
basis) the terms of no more than 4 members expire in any one year.
    ``(3) The membership of the Commission shall include recognized 
experts in the fields of health care economics, medicine, pharmacology, 
pharmacy, and prescription drug reimbursement, as well as at least one 
individual who is a medicare beneficiary, one individual representing a 
research-based pharmaceutical company, and one individual representing 
a biotechnology company.
    ``(b)(1) The Commission shall submit to Congress an annual report 
no later than May 1 of each year, beginning with 1997--
                    ``(A) concerning the implementation and the 
                operation of the coverage of covered outpatient drugs 
                under this part, including recommendations to Congress 
                on changes to the program to improve access to 
                prescription drugs, the quality of prescription drug 
                care, and program efficiencies;
                    ``(B) reviewing the process of contracting with 
                medicare drug benefits plans under section 1851;
                    ``(C) concerning the fiscal soundness of the 
                furnishing of covered outpatient drugs under this part;
                    ``(D) concerning the appropriateness, fairness and 
                effectiveness of the rebate structure under section 
                1850; and
                    ``(E) concerning the advisability of developing a 
                review process to exempt small manufacturers of single 
                source or innovator multiple source drugs from rebates 
                under section 1850 based on the manufacturer's sales 
                and the historic pricing of the manufacturer's 
                products.
    ``(c) Section 1845(c)(1) shall apply to the Commission in the same 
manner as it applies to the Physician Payment Review Commission.
    ``(d) There are authorized to be appropriated such sums as may be 
necessary to carry out the provisions of this section. Such sums shall 
be payable from the Federal Supplementary Medical Insurance Trust 
Fund.''.

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

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

                 ``Home Infusion Drug Therapy Services

    ``(ll)(1) The term `home infusion drug therapy services' means the 
items and services described in paragraph (2) furnished to an 
individual who is under the care of a physician--
            ``(A) in a setting described in subsection (t)(5)(A)(ii),
            ``(B) by a qualified home infusion drug therapy provider 
        (as defined in paragraph (3)) or by others under arrangements 
        with them made by that provider, and
            ``(C) under a plan established and periodically reviewed by 
        a physician.
    ``(2) The items and services described in this paragraph are such 
nursing, pharmacy, and related services (including medical supplies, 
intravenous fluids, delivery, and equipment) as are necessary to 
conduct safely and effectively a drug regimen through use of a covered 
home infusion drug (as defined in subsection (t)(5)), but do not 
include such covered home infusion drugs.
    ``(3) The term `qualified home infusion drug therapy provider' 
means any entity that the Secretary determines meets the following 
requirements (or, in the case of a home health agency or an entity with 
respect to which the only items and services described in paragraph (2) 
furnished by the entity are enteral nutrition therapy services, meets 
any of the following requirements which the Secretary considers 
appropriate):
            ``(A) The entity is capable of providing nursing or 
        pharmacy services and providing or arranging for the other 
        items and services described in paragraph (2) and covered home 
        infusion drugs.
            ``(B) The entity maintains clinical records on all 
        patients.
            ``(C) The entity adheres to written protocols and policies 
        with respect to the provision of items and services.
            ``(D) The entity makes services available (as needed) seven 
        days a week on a 24-hour basis.
            ``(E) The entity coordinates all services with the 
        patient's physician.
            ``(F) The entity conducts a quality assessment and 
        assurance program, including drug regimen review and 
        coordination of patient care.
            ``(G) The entity assures that only trained personnel 
        provide covered home infusion drugs (and any other service for 
        which training is required to provide the service safely).
            ``(H) The entity assumes responsibility for the quality of 
        services provided by others under arrangements with the entity.
            ``(I) In the case of an entity in any State in which State 
        or applicable local law provides for the licensing of entities 
        of this nature, the entity (i) is licensed pursuant to such 
        law, or (ii) is approved, by the agency of such State or 
        locality responsible for licensing entities of this nature, as 
        meeting the standards established for such licensing.
            ``(J) The entity meets such other requirements as the 
        Secretary may determine are necessary to assure the safe and 
        effective provision of home infusion drug therapy services and 
        the efficient administration of the home infusion drug therapy 
        benefit.''.
    (c) Payment.--
            (1) In general.--Section 1833 (42 U.S.C. 1395l) is 
        amended--
                    (A) in subsection (a)(2)(B), by striking ``or (E)'' 
                and inserting ``(E), or (F)'',
                    (B) in subsection (a)(2)(D), by striking ``and'' at 
                the end,
                    (C) in subsection (a)(2)(E), by striking the 
                semicolon and inserting ``; and'',
                    (D) by inserting after subsection (a)(2)(E) the 
                following new subparagraph:
                    ``(F) with respect to home infusion drug therapy 
                services, the amounts described in section 1834(j);'', 
                and
                    (E) in the first sentence of subsection (b), by 
                striking ``services, (3)'' and inserting ``services and 
                home infusion drug therapy services, (3)''.
            (2) Amount described.--Section 1834 is amended by adding at 
        the end the following new subsection:
    ``(j) Home Infusion Drug Therapy Services.--
            ``(1) In general.--With respect to home infusion drug 
        therapy services, payment under this part shall be made in an 
        amount equal to the lesser of the actual charges for such 
        services or the fee schedule established under paragraph (2).
            ``(2) Establishment of fee schedule.--
                    ``(A) In general.--The Secretary shall establish by 
                regulation before the beginning of 1999 and each 
                succeeding year a fee schedule for home infusion drug 
                therapy services for which payment is made under this 
                part. A fee schedule established under this subsection 
                shall be on a per diem basis.
                    ``(B) Adjustment for services furnished by 
                institutions.--The fee schedule established by the 
                Secretary under subparagraph (A) shall provide for 
                adjustments in the case of home infusion drug therapy 
                services for which payment is made under this part that 
                are furnished by a provider of services to avoid 
                duplicative payments under this title for the service 
                costs associated with such services.''.
    (d) Certification.--Section 1835(a)(2) (42 U.S.C. 1395n(a)(2)) is 
amended--
            (1) by striking ``and'' at the end of subparagraph (E),
            (2) by striking the period at the end of subparagraph (F) 
        and inserting ``; and'', and
            (3) by inserting after subparagraph (F) the following:
                    ``(G) in the case of home infusion drug therapy 
                services, (i) such services are or were required 
                because the individual needed such services for the 
                administration of a covered home infusion drug, (ii) a 
                plan for furnishing such services has been established 
                and is reviewed periodically by a physician, and (iii) 
                such services are or were furnished while the 
                individual is or was under the care of a physician.''.
    (e) Certification of Home Infusion Drug Therapy Providers; 
Intermediate Sanctions for Noncompliance.--
            (1) Treatment as provider of services.--Section 1861(u) (42 
        U.S.C. 1395x(u)) is amended by inserting ``home infusion drug 
        therapy provider,'' after ``hospice program,''.
            (2) Consultation with state agencies and other 
        organizations.--Section 1863 (42 U.S.C. 1395z) is amended by 
        striking ``and (dd)(2)'' and inserting ``(dd)(2), and 
        (ll)(3)''.
            (3) Use of state agencies in determining compliance.--
        Section 1864(a) (42 U.S.C. 1395aa(a)) is amended--
                    (A) in the first sentence, by striking ``an agency 
                is a hospice program'' and inserting ``an agency or 
                entity is a hospice program or a home infusion drug 
                therapy provider,''; and
                    (B) in the second sentence--
                            (i) by striking ``institution or agency'' 
                        and inserting ``institution, agency, or 
                        entity'', and
                            (ii) by striking ``or hospice program'' and 
                        inserting ``hospice program, or home infusion 
                        drug therapy provider''.
            (4) Application of intermediate sanctions.--Section 1846 
        (42 U.S.C. 1395w-2) is amended--
                    (A) in the heading, by adding ``and for qualified 
                home infusion drug therapy providers'' at the end,
                    (B) in subsection (a), by inserting ``or that a 
                qualified home infusion drug therapy provider that is 
                certified for participation under this title no longer 
                substantially meets the requirements of section 
                1861(ll)(3)'' after ``under this part'', and
                    (C) in subsection (b)(2)(A)(iv), by inserting ``or 
                home infusion drug therapy services'' after ``clinical 
                diagnostic laboratory tests''.
    (f) Use of Regional Intermediaries in Administration of Benefit.--
Section 1816 (42 U.S.C. 1395h) is amended by adding at the end the 
following new subsection:
    ``(k) With respect to carrying out functions relating to payment 
for home infusion drug therapy services and covered home infusion 
drugs, the Secretary may enter into contracts with agencies or 
organizations under this section to perform such functions on a 
regional basis.''.
    (g) Conforming Amendments.--(1) Section 1834(h)(4)(B) (42 U.S.C. 
1395m(h)(4)(B)) is amended by striking ``, except that'' and all that 
follows through ``equipment''.
    (2) Section 1861(n) (42 U.S.C. 1395x(n)) is amended by adding at 
the end the following: ``Such term does not include any home infusion 
drug therapy services described in section 1861(ll) or any covered 
outpatient drug used as a supply related to the furnishing of an item 
of durable medical equipment.''.
    (3) Section 1861(s)(8) (42 U.S.C. 1395x(s)(8)) is amended by 
inserting after ``dental'' the following: ``devices or enteral and 
parenteral nutrients, supplies, and equipment''.
    (h) Effective Date.--The amendments made by this section shall 
apply to items and services furnished on or after January 1, 1999.

SEC. 2006. MEDICARE DRUG BENEFIT PLANS.

    (a) In General.--Part B of title XVIII of the Social Security Act 
(42 U.S.C. 1395 et seq.), as amended by section 2003, is further 
amended by adding at the end the following new section:

``SEC. 1851. MEDICARE DRUG BENEFIT PLANS.

    ``(a) In General.--
            ``(1) General permission to contract.--The Secretary may 
        enter into contracts with medicare drug benefit plans in a 
        State for the provision of covered outpatient drugs (as defined 
        in section 1861(t)(2)) (except as provided in subsection 
        (i)(3)(G)) to individuals entitled to benefits under part A and 
        enrolled under part B if the plan meets the requirements of 
        this section with respect to individuals enrolled under this 
        section.
            ``(2) Entities eligible to enter into a contract.--The 
        Secretary may enter into a contract under this section with a 
        medicare drug benefit plan that is--
                    ``(A) a certified standard health plan but only if 
                such plan has not entered into a contract with the 
                Secretary under section 1876;
                    ``(B) a network of chain and independent pharmacy 
                providers;
                    ``(C) a pharmacy benefit management company; or
                    ``(D) any other entity that the Secretary 
                determines is appropriate.
            ``(3) Availability of plans.--
                    ``(A) In general.--Every individual entitled to 
                benefits under part A and enrolled under part B shall 
                be eligible to enroll under this section with any 
                medicare drug benefit plan with a contract under this 
                section which serves the State in which the individual 
                resides.
                    ``(B) Enrollment by an individual.--In accordance 
                with the enrollment periods established under 
                subsection (e)(1), an individual may enroll under this 
                section with a medicare drug benefit plan with a 
                contract under this section only through a third party 
                designated by the Secretary in regulations and the 
                individual may only terminate enrollment in accordance 
                with subsection (e)(2).
                    ``(C) Information distributed by the secretary.--
                            ``(i) In general.--The Secretary shall 
                        develop and distribute comparative materials to 
                        individuals eligible to enroll under this 
                        section regarding all medicare drug benefit 
                        plans with contracts under this section, the 
                        availability of payment for covered outpatient 
                        drugs under section 1834(d), and the 
                        availability of covered outpatient drugs to 
                        enrollees of entities with contracts under 
                        section 1876. The Secretary shall include in 
                        such comparative materials that each medicare 
                        drug benefit plan with a contract under this 
                        section is authorized by law to terminate or 
                        refuse to renew the contract, and that 
                        termination or nonrenewal of the contract may 
                        result in termination of the enrollments of 
                        individuals enrolled with the plan under this 
                        section.
                            ``(ii) Provision of information by the 
                        plan.--Each medicare drug benefit plan with a 
                        contract under this section shall collect and 
                        provide such standard information as the 
                        Secretary shall prescribe by regulation as 
                        necessary to evaluate the performance and 
                        quality of such plan, including enrollee 
                        satisfaction, and to compare such performance 
                        and quality with competing plans.
            ``(4) Payments.--
                    ``(A) Payments in lieu of normal payments.--
                Payments under a contract to a medicare drug benefit 
                plan under this section shall be instead of the amounts 
                which (in the absence of the contract) would be 
                otherwise payable, pursuant to section 1834, for 
                covered outpatient drugs furnished by or through the 
                plan to individuals enrolled with the plan under this 
                section.
                    ``(B) Source of payment.--The payment to a medicare 
                drug benefit plan under this section for individuals 
                enrolled under this section with the plan and entitled 
                to benefits under part A and enrolled under part B 
                shall be made from the Federal Supplementary Medical 
                Insurance Trust Fund.
            ``(5) Definitions.--
                    ``(A) Service area.--The term `health plan service 
                area' means a health plan service area designated by 
                the State under section 1502(d) of the Health Security 
                Act.
                    ``(B) Certified standard health plan.--The term 
                `certified standard health plan' has the meaning given 
                such term in section 1011(2) of the Health Security 
                Act.
    ``(b) Payment Rules under Contracts.--
            ``(1) In general.--
                    ``(A) Payments.--With respect to any calendar year, 
                each medicare drug benefit plan with a contract under 
                this section shall receive a payment under this title 
                with respect to each individual enrolled with the plan 
                for each month such individual is enrolled equal to the 
                applicable monthly percentage of the lesser of--
                            ``(i) 95 percent of the fee for service 
                        component determined under paragraph (2)(B)(i) 
                        adjusted by the rate factor determined under 
                        subparagraph (C) for the class of such 
                        individual; or
                            ``(ii) the medicare drug benefit plan 
                        component determined under paragraph (2)(B)(ii) 
                        for the plan's service area adjusted by the 
                        rate factor determined under subparagraph (C) 
                        for the class of such individual.
                    ``(B) Applicable monthly percentage.--For purposes 
                of subparagraph (A), the Secretary shall annually set 
                the applicable monthly percentage for each month of the 
                calendar year. Such percentage for a month shall be 
                equal to the Secretary's estimate of the proportion of 
                the total covered outpatient drug benefit incurred in 
                such month under section 1834 to the total covered 
                outpatient drug benefit incurred for such year under 
                section 1834.
                    ``(C) Determination of classes of individuals and 
                rate factors for such classes.--
                            ``(i) Determination of classes.--For 
                        purposes of this section, the Secretary shall 
                        define appropriate classes of individuals based 
                        on such factors as the Secretary determines to 
                        be appropriate.
                            ``(ii) Rate factors.--The Secretary shall 
                        annually determine the rate factors for each 
                        class of individuals defined in clause (i) 
                        reflecting the differences in the average per 
                        capita spending for providing covered 
                        outpatient drug coverage under part B among 
                        individuals in such classes.
            ``(2) Determination of payment rate.--
                    ``(A) Determination by secretary.--The Secretary 
                shall annually determine under subparagraph (B), and 
                shall announce (in a manner intended to provide notice 
                to interested parties) not later than October 1 before 
                the calendar year concerned, the payment for each 
                service area.
                    ``(B) Formulas for determining payment amounts.--
                            ``(i) Fee-for-service component.--The 
                        amount determined under this clause is the 
                        projected average annual per capita drug fee-
                        for-service costs (as defined in subparagraph 
                        (D)) for covered outpatient drugs for the 
                        service area for individuals not enrolled in 
                        medicare drug benefit plans with contracts 
                        under this section or entities with contracts 
                        under section 1876, adjusted by the factor 
                        described in clause (ii)(I).
                            ``(ii) Medicare drug benefit plan 
                        component.--The medicare drug benefit plan 
                        component determined under this clause is the 
                        sum of the following amounts determined with 
                        respect to each medicare drug benefit plan--
                                    ``(I) the amount of the uniform 
                                annual premium submitted by the plan to 
                                the Secretary under subparagraph (C), 
                                adjusted by a factor determined by the 
                                Secretary to normalize the difference 
                                in the distribution of individuals 
                                projected to be enrolled in the plan 
                                among the various classes of 
                                individuals defined by the Secretary to 
                                the national distribution of all 
                                individuals in the program under this 
                                title among such classes; multiplied by
                                    ``(II) a fraction (expressed as a 
                                percentage), the numerator of which is 
                                the number of all individuals enrolled 
                                in the plan (as projected by the plan 
                                using either historical experience or 
                                some other methodology developed by the 
                                Secretary), and the denominator of 
                                which is the number of all individuals 
                                enrolled in all medicare drug benefit 
                                plans in the service area.
                    ``(C) Uniform annual premiums; premium for 
                additional services.--
                            ``(i) In general.--Each medicare drug 
                        benefit plan shall, not later than August 1 of 
                        each year, submit to the Secretary a bid for 
                        the next calendar year for each service area 
                        with respect to which the plan proposes to 
                        serve under a contract under this section. A 
                        bid with respect to a service area shall 
                        include the following:
                                    ``(I) Uniform annual premium.--A 
                                statement of the uniform annual premium 
                                amount that the plan intends to charge 
                                for individuals enrolled under this 
                                section with the plan.
                                    ``(II) Premium for supplemental 
                                plan.--A statement of the fixed monthly 
                                premium amount that the plan intends to 
                                charge for each supplemental plan 
                                offering additional cost-sharing 
                                benefits.
                            ``(ii) Notice before bid submissions.--At 
                        least 45 days before the date for submitting 
                        bids under clause (i) for a year, the Secretary 
                        shall provide for notice to medicare drug 
                        benefit plans of--
                                    ``(I) proposed changes to be made 
                                in the methodology or benefit coverage 
                                assumptions from the methodology and 
                                assumptions used in the previous 
                                calendar year and shall provide such 
                                plans an opportunity to comment on such 
                                proposed changes;
                                    ``(II) the applicable monthly 
                                percentage for each month of the 
                                calendar year as determined by the 
                                Secretary under paragraph (1)(B); and
                                    ``(III) the rate factors for such 
                                calendar year determined under 
                                paragraph (1)(C).
                    ``(D) Projected average annual per capita fee-for-
                service costs.--
                            ``(i) In general.--For purposes of 
                        subparagraph (B), the term `projected average 
                        annual per capita drug fee-for-service costs' 
                        means, with respect to a service area, the 
                        annual amount that the Secretary estimates in 
                        advance would be payable in any contract year 
                        for providing payment for covered outpatient 
                        drugs for individuals enrolled under part B 
                        (including administrative costs incurred by 
                        organizations described in section 1842), if 
                        the services were to be furnished by other than 
                        a medicare drug benefit plan with a contract 
                        under this section or by an entities with a 
                        contract under section 1876.
                            ``(ii) Basis for estimates.--The estimate 
                        made by the Secretary under clause (i) shall be 
                        made on the basis of actual experience of the 
                        service area or, if the Secretary determines 
                        that the data in that service area are 
                        inadequate to make an accurate estimate, the 
                        Secretary may use the actual experience of a 
                        similar area, with appropriate adjustments to 
                        assure actuarial equivalence, including 
                        adjustments the Secretary may determine 
                        appropriate to adjust for demographics, health 
                        status, and the presence of specific medical 
                        conditions. For the first 2 years that 
                        contracts are entered into under this section, 
                        the Secretary shall base such estimates on the 
                        best available data.
            ``(3) Payment rules.--
                    ``(A) Amount of premium.--
                            ``(i) Standard package.--Each medicare drug 
                        benefit plan with a contract under this section 
                        must provide to individuals enrolled with the 
                        plan under this section, for each month of the 
                        duration of such enrollment during each 
                        contract period, the coverage described in 
                        subsection (d) for the lesser of--
                                    ``(I) the applicable monthly 
                                percentage of the uniform annual 
                                premium amount submitted under 
                                paragraph (2)(C)(i)(I); or
                                    ``(II) the applicable monthly 
                                percentage of the amount described in 
                                subsection (b)(1)(A).
                            ``(ii) Supplemental plan.--
                                    ``(I) In general.--Each medicare 
                                drug benefit plan with a contract under 
                                this section must provide to 
                                individuals enrolled with the plan 
                                under this section, for the duration of 
                                such enrollment during each contract 
                                period, a fixed monthly premium for the 
                                supplemental plan described in 
                                paragraph (2)(C)(i)(II) equal to the 
                                premium amount determined by the plan 
                                under such paragraph. An individual 
                                that elects to enroll in the 
                                supplemental plan shall be responsible 
                                for paying to the plan the fixed 
                                monthly premium amount described in the 
                                preceding sentence.
                                    ``(II) Payment greater than fixed 
                                monthly premium.--If, with respect to 
                                any individual enrolled in a medicare 
                                drug benefit plan with a contract under 
                                this section, the amount paid to the 
                                plan under subsection (b)(1)(A) exceeds 
                                the applicable monthly percentage of 
                                the uniform annual premium amount 
                                submitted under paragraph (2)(C)(i)(I), 
                                the plan shall apply such excess to a 
                                premium for any supplemental policy 
                                described in paragraph (2)(C)(ii) that 
                                the individual may elect. If the 
                                individual does not elect such a 
                                policy, the medicare drug benefit plan 
                                shall pay such excess to the Secretary 
                                for deposit in the Federal 
                                Supplementary Medical Insurance Trust 
                                Fund.
                    ``(B) Monthly payments.--
                            ``(i) In general.--The Secretary shall make 
                        monthly payments in advance and in accordance 
                        with the rate determined under paragraph (1)(A) 
                        to each medicare drug benefit plan with a 
                        contract under this section for each individual 
                        enrolled with the plan under this section.
                            ``(ii) Adjustments.--The amount of payment 
                        under this subparagraph may be retroactively 
                        adjusted to take into account any difference 
                        between the actual number of individuals 
                        enrolled in the plan under this section and the 
                        number of such individuals estimated to be so 
                        enrolled in determining the amount of the 
                        advance payment.
                            ``(iii) Payment to plan only.--If an 
                        individual is enrolled under this section with 
                        a medicare drug benefit plan with a contract 
                        under this section, only the plan shall be 
                        entitled to receive payments from the Secretary 
                        under this title for covered outpatient drugs 
                        furnished to the individual.
    ``(d) Coverage of Benefits.--
            ``(1) Drugs provided.--A medicare drug benefit plan with a 
        contract under this section must provide to individuals 
        enrolled in the plan under this section covered outpatient 
        drugs (as defined in section 1861(t)(2)), except as provided in 
        subsection (i)(3)(G).
            ``(2) Provision of medically necessary care.--Each medicare 
        drug benefit plan with a contract under this section must--
                    ``(A) make the covered outpatient drugs described 
                in paragraph (1)--
                            ``(i) available and accessible to enrolled 
                        individuals within the State with reasonable 
                        promptness and in a manner which assures 
                        continuity, and
                            ``(ii) when medically necessary, available 
                        and accessible twenty-four hours a day and 
                        seven days a week, and
                    ``(B) provide for reimbursement with respect to 
                drugs which are described in subparagraph (A) and which 
                are provided to such an individual other than through 
                the plan, if--
                            ``(i) the drugs were medically necessary 
                        and immediately required because of an 
                        unforeseen illness, injury, or condition, and
                            ``(ii) it was not reasonable given the 
                        circumstances to obtain the drugs through the 
                        plan.
            ``(3) Cost-sharing.--Each medicare drug benefit plan with a 
        contract under this section must provide to individuals 
        enrolled under this section with respect to the drugs described 
        in paragraph (1), cost-sharing requirements that are the same 
        as the cost-sharing requirements for covered outpatient drug 
        under section 1834, except that the deductible for a medicare 
        drug benefit plan shall be reduced by an amount determined by 
        the Secretary such that the cost-sharing of the plan is equal 
        to 95 percent of the actuarial value of the cost sharing 
        requirements under section 1834.
            ``(4) Cost-sharing for supplemental plans.--A supplemental 
        plan may not have cost-sharing that applies differential cost-
        sharing based on the therapeutic class of drug prescribed or 
        other cost-sharing structures that the Secretary determines 
        would be likely to discourage enrollment by individuals with 
        medical conditions that require extensive use of prescription 
        drugs.
            ``(5) Actuarial equivalence of standard plan and 
        supplemental plan.--The premium charged to an individual 
        enrolled under this section for a supplemental policy that 
        eliminates or reduces the cost-sharing requirement imposed on 
        such individual and the actuarial value of any remaining cost-
        sharing requirement under the plan shall not exceed 95 percent 
        of the actuarial value of the cost-sharing requirements under 
        section 1834.
    ``(e) Enrollment.--
            ``(1) Enrollment periods.--Each medicare drug benefit plan 
        with a contract under this section must have a uniform open 
        enrollment period (which shall be the period specified by the 
        Secretary under section 1876(c)(3)(A)(i)), for the enrollment 
        of individuals under this section, of at least 30 days duration 
        every year. The plan must also have additional enrollment 
        periods in accordance with the enrollment periods required 
        under clauses (ii), (iii), and (iv) of section 1876(c)(3)(A).
            ``(2) Termination.--An individual may only terminate an 
        individual's enrollment with a medicare drug benefit plan 
        during an open enrollment period described in paragraph (1).
            ``(3) Nondiscrimination.--The medicare drug benefit plan 
        must provide assurances to the Secretary that it will not 
        discriminate against any individual because of the individual's 
        health status, requirements for covered outpatient drugs, 
        claims experience, medical history, or other factors that are 
        generally related to the need for covered outpatient drugs and 
        that it will notify each individual of such fact at the time of 
        the individual's enrollment.
            ``(4) Notice of rights, etc.--Each medicare drug benefit 
        plan with a contract under this section shall provide each 
        enrollee, at the time of enrollment and not less frequently 
        than annually thereafter, an explanation of the enrollee's 
        rights under this section, including an explanation of--
                    ``(A) the enrollee's rights to benefits from the 
                plan,
                    ``(B) the restrictions on payments under this title 
                for covered outpatient drugs furnished other than by or 
                through the plan,
                    ``(C) out-of-plan coverage provided by the plan, 
                and
                    ``(D) appeal rights of enrollees.
    ``(f) Membership Requirements.--
            ``(1) Non-medicare requirement.--
                    ``(A) In general.--Each entity with a contract 
                under this section shall provide at that at least 1/2 
                of the individuals who are provided with drug coverage 
                by the entity are individuals who are not enrolled in a 
                medicare drug benefit plan under this section.
                    ``(B) Suspension of enrollment.--If the Secretary 
                determines that a medicare drug benefit plan with a 
                contract under this section has failed to comply with 
                the requirements of this subsection, the Secretary may 
                provide for the suspension of enrollment of individuals 
                under this section or of payment to the plan under this 
                section for individuals newly enrolled with the plan, 
                after the date the Secretary notifies the plan of such 
                noncompliance.
            ``(2) 5000 individuals.--Each medicare drug benefit plan 
        with a contract under this section shall provide covered 
        outpatient drug coverage to at least 5000 individuals, except 
        that the Secretary may enter into such a contract with a 
        medicare drug benefit plan that has fewer enrollees if the plan 
        primarily serves members residing outside of urbanized areas.
    ``(g) Payment Rules for Plans.--
            ``(1) Subrogation rights.--Notwithstanding any other 
        provision of law, the medicare drug benefit plan may, (in the 
        case of the provision of covered outpatient drugs to an 
        individual enrolled under this section for a drug for which the 
        member is entitled to benefits under a workmen's compensation 
        law or plan of the United States or a State, under an 
        automobile or liability insurance policy or plan, including a 
        self-insured plan, under no fault insurance, or under a primary 
        plan (as defined in section 1862(b)(2)(A)) charge or authorize 
        the provider of such services to charge, in accordance with the 
        charges allowed under such law or policy--
                    ``(A) the insurance carrier, employer, or other 
                entity which under such law, plan, or policy is to pay 
                for the provision of such services, or
                    ``(B) such enrollee to the extent that the enrollee 
                has been paid under such law, plan, or policy for such 
                services.
            ``(2) Prompt payment requirement.--
                    ``(A) In general.--A contract under this section 
                shall require the medicare drug benefit plan to provide 
                prompt payment (consistent with the provisions of 
                section 1842(c)(4)) of claims submitted for covered 
                outpatient drugs furnished to individuals pursuant to 
                such contract, if the drugs are not furnished under a 
                contract between the plan and the provider or supplier.
                    ``(B) Failure.--In the case of a plan which the 
                Secretary determines, after notice and opportunity for 
                a hearing, has failed to make payments of amounts in 
                compliance with subparagraph (A), the Secretary may 
                provide for direct payment of the amounts owed to 
                providers and suppliers for such covered services 
                furnished to individuals enrolled under this section 
                under the contract. If the Secretary provides for such 
                direct payments, the Secretary shall provide for an 
                appropriate reduction in the amount of payments 
                otherwise made to the plan under this section to 
                reflect the amount of the Secretary's payments (and 
                costs incurred by the Secretary in making such 
                payments).
    ``(h) Duration, Termination, Effective Date, and Terms of Contract; 
Powers and Duties of Secretary.--
            ``(1) Duration and termination.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), each contract under this section 
                shall be for a term of at least one year, as determined 
                by the Secretary, and may be made automatically 
                renewable from term to term in the absence of notice by 
                either party of intention to terminate at the end of 
                the current term.
                    ``(B) Exception.--The Secretary may terminate a 
                contract at any time (after such reasonable notice and 
                opportunity for hearing to the medicare drug benefit 
                plan involved as the Secretary may provide in 
                regulations), if the Secretary finds that the plan--
                            ``(i) has failed substantially to carry out 
                        the contract,
                            ``(ii) is carrying out the contract in a 
                        manner inconsistent with the efficient and 
                        effective administration of this section, or
                            ``(iii) no longer substantially complies 
                        with the requirements of this section.
            ``(2) Effective date.--The effective date of any contract 
        executed pursuant to this section shall be specified in the 
        contract.
            ``(3) Terms.--Each contract under this section--
                    ``(A) shall provide that the Secretary, or any 
                person or organization designated by the Secretary--
                            ``(i) shall have the right to inspect or 
                        otherwise evaluate--
                                    ``(I) the quality, appropriateness, 
                                and timeliness of drugs provided under 
                                the contract, and
                                    ``(II) the facilities of the 
                                organization when there is reasonable 
                                evidence of some need for such 
                                inspection, and
                            ``(ii) shall have the right to audit and 
                        inspect any books and records of the medicare 
                        drug benefit plan that pertain--
                                    ``(I) to the ability of the plan to 
                                bear the risk of potential financial 
                                losses, or
                                    ``(II) to drugs provided or 
                                determinations of amounts payable under 
                                the contract;
                    ``(B) shall require the plan with a contract to 
                provide (and pay for) written notice in advance of the 
                contract's termination, as well as a description of 
                alternatives for obtaining benefits under this title, 
                to each individual enrolled under this section with the 
                plan;
                    ``(C)(i) shall require the plan to comply with 
                subsections (a) and (c) of section 1318 of the Public 
                Health Service Act (relating to disclosure of certain 
                financial information) and with the requirement of 
                section 1301(c)(8) of such Act (relating to liability 
                arrangements to protect members);
                    ``(ii) shall require the plan to provide and supply 
                information determined appropriate by the Secretary in 
                the manner determined appropriate by the Secretary; and
                    ``(iii) shall require the plan to notify the 
                Secretary of loans and other special financial 
                arrangements which are made between the plan and 
                subcontractors, affiliates, and related parties; and
                    ``(D) shall contain such other terms and conditions 
                not inconsistent with this section (including requiring 
                the organization to provide the Secretary with such 
                information) as the Secretary may find necessary and 
                appropriate.
            ``(4) Period of disqualification.--The Secretary may not 
        enter into a contract with a medicare drug benefit plan if a 
        previous contract with that plan under this section was 
        terminated at the request of the plan within the preceding 5-
        year period or if the plan submits a bid under subsection 
        (b)(2)(C) and does not enter into a contract, except in 
        circumstances which warrant special consideration, as 
        determined by the Secretary.
            ``(5) Disregard of certain inconsistent laws, etc.--The 
        authority vested in the Secretary by this section may be 
        performed without regard to such provisions of law or 
        regulations relating to the making, performance, amendment, or 
        modification of contracts of the United States as the Secretary 
        may determine to be inconsistent with the furtherance of the 
        purpose of this title.
            ``(6) Findings of failure.--
                    ``(A) In general.--If the Secretary determines that 
                medicare drug benefit plan with a contract under this 
                section--
                            ``(i) fails substantially to provide 
                        medically necessary covered outpatient drugs 
                        that are required (under law or under the 
                        contract) to be provided to an individual 
                        covered under the contract, if the failure has 
                        adversely affected (or has substantial 
                        likelihood of adversely affecting) the 
                        individual;
                            ``(ii) imposes premiums on individuals 
                        enrolled under this section in excess of the 
                        premiums permitted;
                            ``(iii) acts to expel or to refuse to re-
                        enroll an individual in violation of the 
                        provisions of this section;
                            ``(iv) engages in any practice that would 
                        reasonably be expected to have the effect of 
                        denying or discouraging enrollment (except as 
                        permitted by this section) by eligible 
                        individuals with the plan whose medical 
                        condition or history indicates a need for 
                        substantial future covered outpatient drugs;
                            ``(v) misrepresents or falsifies 
                        information that is furnished--
                                    ``(I) to the Secretary under this 
                                section, or
                                    ``(II) to an individual or to any 
                                other entity under this section;
                            ``(vi) employs or contracts with any 
                        individual or entity that is excluded from 
                        participation under this title under section 
                        1128 or 1128A for the provision of health care, 
                        utilization review, medical social work, or 
                        administrative services or employs or contracts 
                        with any entity for the provision (directly or 
                        indirectly) through such an excluded individual 
                        or entity of such services;
                the Secretary may provide, in addition to any other 
                remedies authorized by law, for any of the remedies 
                described in subparagraph (B).
                    ``(B) Remedies.--The remedies described in this 
                subparagraph are--
                            ``(i) civil money penalties of not more 
                        than $25,000 for each determination under 
                        subparagraph (A) or, with respect to a 
                        determination under clause (iv) or (v)(I) of 
                        such subparagraph, of not more than $100,000 
                        for each such determination, plus, with respect 
                        to a determination under subparagraph (A)(ii), 
                        double the excess amount charged in violation 
                        of such subparagraph (and the excess amount 
                        charged shall be deducted from the penalty and 
                        returned to the individual concerned), and 
                        plus, with respect to a determination under 
                        subparagraph (A)(iv), $15,000 for each 
                        individual not enrolled as a result of the 
                        practice involved,
                            ``(ii) suspension of enrollment of 
                        individuals under this section after the date 
                        the Secretary notifies the plan of a 
                        determination under subparagraph (A) and until 
                        the Secretary is satisfied that the basis for 
                        such determination has been corrected and is 
                        not likely to recur, or
                            ``(iii) suspension of payment to the plan 
                        under this section for individuals enrolled 
                        after the date the Secretary notifies the plan 
                        of a determination under subparagraph (A) and 
                        until the Secretary is satisfied that the basis 
                        for such determination has been corrected and 
                        is not likely to recur.
                The provisions of section 1128A (other than subsections 
                (a) and (b)) shall apply to a civil money penalty under 
                clause (i) in the same manner as they apply to a civil 
                money penalty or proceeding under section 1128A(a).
    ``(i) Other General Requirements on Plans.--
            ``(1) Grievance procedures.--Each medicare drug benefit 
        plan with a contract under this section must provide meaningful 
        procedures for hearing and resolving grievances between the 
        plan (including any entity or individual through which the plan 
        provides health care services) and individuals enrolled with 
        the plan under this section.
            ``(2) Appeals.--An individual enrolled with a medicare drug 
        benefit plan under this section who is dissatisfied by reason 
        of the individual's failure to receive any covered outpatient 
        drug to which the individual believes the individual is 
        entitled and at no greater charge than the individual believes 
        the individual is required to pay is entitled, if the amount in 
        controversy is $100 or more, to a hearing before the Secretary 
        to the same extent as is provided in section 205(b), and in any 
        such hearing the Secretary shall make the plan a party. If the 
        amount in controversy is $1,000 or more, the individual or plan 
        shall, upon notifying the other party, be entitled to judicial 
        review of the Secretary's final decision as provided in section 
        205(g), and both the individual and the plan shall be entitled 
        to be parties to that judicial review.
            ``(3) Additional requirements.--Not later then January 1, 
        1998, the Secretary shall establish standards for additional 
        requirements for medicare drug benefit plans with contracts 
        under this section, that to the extent possible are consistent 
        with the standards relating to eligible organizations that have 
        entered into risk contracts under section 1876, and which 
        provide that a medicare drug benefit plan--
                    ``(A) must demonstrate financial solvency;
                    ``(B) must demonstrate the ability to provide 
                benefits to all potential enrollees throughout the 
                State served by the plan;
                    ``(C) must not engage in marketing or other 
                practices designed to discourage or limit the issuance 
                of a medicare outpatient drug coverage plan to any 
                potential enrollee on the basis of health status, 
                claims experience, medical history, or other factors 
                that are generally related to utilization of covered 
                outpatient drugs;
                    ``(D) must inform individuals eligible to enroll 
                with the plan about the plan only in accordance with 
                procedures and conditions determined by the Secretary 
                and may not distribute promotional or informational 
                material unless--
                            ``(i) at least 45 days before its 
                        distribution, the plan has submitted the 
                        material to the Secretary for review,
                            ``(ii) the material is made available to 
                        all individuals eligible to enroll in the plan 
                        in the State served by the plan, and
                            ``(iii) the Secretary has not disapproved 
                        the distribution of the material due to a 
                        determination that in the Secretary's 
                        discretion, the material is materially 
                        inaccurate or misleading or otherwise makes a 
                        material misrepresentation;
                    ``(E) must provide convenient access to pharmacies 
                for individuals in each zip code region of the State 
                taking into account the special needs of individuals 
                who are enrolled in part B;
                    ``(F) in addition to the access described in 
                subparagraph (E), may provide enrollees with a mail-
                order pharmacy option;
                    ``(G) may establish a formulary system (to be 
                maintained throughout the 1-year contract period) which 
                ensures that--
                            ``(i) the formulary shall cover at least 
                        one covered outpatient drug in each therapeutic 
                        class of drugs representing a unique mechanism 
                        of action (as defined by the Secretary); and
                            ``(ii) that any covered outpatient drug 
                        excluded by the formulary is subject to a prior 
                        authorization process in which the plan may not 
                        deny approval of any drug unless the plan 
                        complies with the process described in section 
                        1834(d)(7)(C)(iii);
                    ``(H) must disclose any special relationships or 
                arrangements with drug manufacturers, including 
                ownership arrangements, distribution arrangements, or 
                alliances;
                    ``(I) must have standards to assure the appropriate 
                use of outpatient prescription medications, including a 
                program of prospective and retrospective drug use 
                review, consistent with standards under the drug use 
                review program developed by the Secretary under section 
                1834(d)(7), including for any mail order services 
                operated or used by the plan; and
                    ``(J) is able to process claims for outpatient 
                prescription drugs under the program through an on-line 
                real time point of sale system, and has developed a 
                process for processing out-of-area claims.''.
    (b) Effective Date.--The amendments made by this section shall be 
effective with respect to contracts entered into on or after January 1, 
1999.

SEC. 2007. PAYMENT FOR COVERED OUTPATIENT DRUG BENEFIT UNDER MEDICARE 
              CONTRACTS WITH HMOS AND CMPS.

    (a) In General.--In providing for payments for the covered 
outpatient drug benefit, as added by section 2001, to entities with 
risk contracts under section 1876 of the Social Security Act, the 
Secretary of Health and Human Services may base such payment on classes 
of enrollees or geographic factors that are different than the classes 
or geographic factors otherwise utilized for determining payment under 
such section.
    (b) Effective Date.--This section shall apply to contracts entered 
into on or after January 1, 1999.

SEC. 2008. MAINTENANCE OF EFFORT.

    (a) Maintenance of Effort with Respect to Prescription Drugs.--
Section 1862(b)(1) (42 U.S.C. 1395y(b)(1)) is amended by adding at the 
end the following new subparagraph:
                    ``(F) Prescription drugs.--
                            ``(i) In general.--A group health plan may 
                        not take into account that an individual (or 
                        the individual's spouse) who is covered under 
                        the plan by virtue of the individual's current 
                        retirement status with an employer may be 
                        eligible to receive covered outpatient drug 
                        coverage under part B, except that this 
                        subparagraph shall not prohibit a plan from 
                        taking into account that an individual is 
                        eligible to receive covered outpatient drug 
                        coverage under part B on or after January 1, 
                        2002. To the extent that the group health plan 
                        furnishes prescription drugs pursuant to a 
                        collectively bargained agreement, this 
                        subparagraph shall prohibit a plan from taking 
                        into account that an individual is eligible to 
                        receive covered outpatient drug coverage under 
                        part B for the greater of the period of the 
                        agreement or until January 1, 2002.
                            ``(ii) Current retirement status.--An 
                        individual has `current retirement status' with 
                        an employer if the individual no longer has 
                        current employment status due to the 
                        individual's retirement from such employment 
                        status.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to group health plans offering prescription drug coverage on or 
after January 1, 1994.

             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.

    (a) In General.--Each State that has a plan for home and community-
based services for individuals with disabilities submitted to and 
approved by the Secretary under section 2102(b) is entitled to payment 
in accordance with section 2108.
    (b) Entitlement to Services.--Nothing in this subtitle shall be 
construed to create a right to services for individuals or a 
requirement that a State with an approved plan expend the entire amount 
of funds to which it is entitled under this subtitle.
    (c) Designation of Agency.--Not later than 6 months after the date 
of enactment of this subtitle, the Secretary shall designate an agency 
responsible for program administration under this subtitle.

SEC. 2102. STATE PLANS.

    (a) Plan Requirements.--In order to be approved under subsection 
(b), a State plan for home and community-based services for individuals 
with disabilities must meet the following requirements:
            (1) State maintenance of effort.--
                    (A) In general.--A State plan under this subtitle 
                shall provide that the State will, during any fiscal 
                year that the State is furnishing services under this 
                subtitle, make expenditures of State funds in an amount 
                equal to the State maintenance of effort amount for the 
                year determined under subparagraph (B) for furnishing 
                the services described in subparagraph (C) under the 
                State plan under this subtitle and the State plan under 
                title XIX of the Social Security Act.
                    (B) State maintenance of effort amount.--
                            (i) In general.--The maintenance of effort 
                        amount for a State for a fiscal year is an 
                        amount equal to--
                                    (I) for fiscal year 1998, the base 
                                amount for the State (as determined 
                                under clause (ii)) updated through the 
                                midpoint of fiscal year 1998 by the 
                                estimated percentage change in the 
                                consumer price index during the period 
                                beginning on October 1, 1994 and ending 
                                at that midpoint; and
                                    (II) for succeeding fiscal years, 
                                an amount equal to the amount 
                                determined under this clause for the 
                                previous fiscal year updated through 
                                the midpoint of the year by the 
                                estimated percentage change in the 
                                consumer price index during the 12-
                                month period ending at that midpoint, 
                                with appropriate adjustments to reflect 
                                previous underestimations or 
                                overestimations under this clause in 
                                the projected percentage change in the 
                                consumer price index.
                            (ii) State base amount.--The base amount 
                        for a State is an amount equal to the total 
                        expenditures from State funds made under the 
                        State plan under title XIX of the Social 
                        Security Act during fiscal year 1994 with 
                        respect to medical assistance consisting of the 
                        services described in subparagraph (C).
                    (C) Medicaid services described.--The services 
                described in this subparagraph are the following:
                            (i) Personal care services (as described in 
                        section 1905(a)(24) of the Social Security 
                        Act).
                            (ii) Home or community-based services 
                        furnished under a waiver granted under 
                        subsection (c), (d), or (e) of section 1915 of 
                        such Act.
                            (iii) Home and community care furnished to 
                        functionally disabled elderly individuals under 
                        section 1929 of such Act.
                            (iv) Community supported living 
                        arrangements services under section 1930 of 
                        such Act.
            (2) Eligibility.--
                    (A) In general.--Except as provided in subparagraph 
                (B), within the amounts provided by the State and under 
                section 2108 for such plan, the plan shall provide that 
                services under the plan will be available to 
                individuals with disabilities (as defined in section 
                2103(a)) in the State.
                    (C) Initial screening.--The plan shall provide a 
                process for the initial screening of an individual who 
                appears to have some reasonable likelihood of being an 
                individual with disabilities. Any such process shall 
                require the provision of assistance to individuals who 
                wish to apply but whose disability limits their ability 
                to apply. The initial screening and the determination 
                of disability (as defined under section 2103(b)(1)) 
                shall be conducted by a public agency.
                    (D) Restrictions.--The plan may not limit the 
                eligibility of individuals with disabilities based on--
                            (i) income,
                            (ii) age,
                            (iii) residential setting (other than an 
                        institutional setting), or
                            (iv) other grounds specified by the 
                        Secretary.
                    (E) Continuation of services.--The plan must 
                provide assurances that, in the case of an individual 
                receiving medical assistance for home and community-
                based services under the State medicaid plan under 
                title XIX of the Social Security Act as of the date a 
                State's plan is approved under this subtitle, the State 
                will continue to make available (either under this 
                plan, under the State medicaid plan, or otherwise) to 
                such individual an appropriate level of assistance for 
                home and community-based services, taking into account 
                the level of assistance provided as of such date and 
                the individual's need for home and community-based 
                services.
            (3) Services.--
                    (A) Needs assessment.--Not later than the end of 
                the second year of implementation, the plan or its 
                amendments shall include the results of a statewide 
                assessment of the needs of individuals with 
                disabilities in a format required by the Secretary. The 
                needs assessment shall include demographic data 
                concerning the number of individuals within each 
                category of disability described in this subtitle, and 
                the services available to meet the needs of such 
                individuals.
                    (B) Specification.--Consistent with section 2104, 
                the plan shall specify--
                            (i) the services made available under the 
                        plan,
                            (ii) the extent and manner in which such 
                        services are allocated and made available to 
                        individuals with disabilities, and
                            (iii) the manner in which services under 
                        the plan are coordinated with each other and 
                        with health and long-term care services 
                        available outside the plan for individuals with 
                        disabilities.
                    (C) Taking into account informal care.--A State 
                plan may take into account, in determining the amount 
                and array of services made available to covered 
                individuals with disabilities, the availability of 
                informal care.
                    (D) Allocation.--The State plan--
                            (i) shall specify how services under the 
                        plan will be allocated among covered 
                        individuals with disabilities,
                            (ii) shall attempt to meet the needs of 
                        individuals with a variety of disabilities 
                        within the limits of available funding,
                            (iii) shall include services that assist 
                        all categories of individuals with 
                        disabilities, regardless of their age or the 
                        nature of their disabling conditions,
                            (iv) shall demonstrate that services are 
                        allocated equitably, in accordance with the 
                        needs assessment required under subparagraph 
                        (A), and
                            (v) shall ensure that--
                                    (I) the proportion of the 
                                population of low-income individuals 
                                with disabilities in the State that 
                                represents individuals with 
                                disabilities who are provided home and 
                                community-based services either under 
                                the plan, under the State medicaid 
                                plan, or under both, is not less than,
                                    (II) the proportion of the 
                                population of the State that represents 
                                individuals who are low-income 
                                individuals.
                    (E) Limitation on licensure or certification.--The 
                State may not subject consumer-directed providers of 
                personal assistance services to licensure, 
                certification, or other requirements which the 
                Secretary finds not to be necessary for the health and 
                safety of individuals with disabilities.
                    (F) Consumer choice.--To the extent feasible, the 
                State shall follow the choice of an individual with 
                disabilities (or that individual's designated 
                representative who may be a family member) regarding 
                which covered services to receive and the providers who 
                will provide such services.
            (4) Cost sharing.--The plan shall impose cost sharing with 
        respect to covered services in accordance with section 2105.
            (5) Types of providers and requirements for 
        participation.--The plan shall specify--
                    (A) the types of service providers eligible to 
                participate in the program under the plan, which shall 
                include consumer-directed providers of personal 
                assistance services, except that the plan--
                            (i) may not limit benefits to services 
                        provided by registered nurses or licensed 
                        practical nurses; and
                            (ii) may not limit benefits to services 
                        provided by agencies or providers certified 
                        under title XVIII; and
                    (B) any requirements for participation applicable 
                to each type of service provider.
            (6) Provider reimbursement.--
                    (A) Payment methods.--The plan shall specify the 
                payment methods to be used to reimburse providers for 
                services furnished under the plan. Such methods may 
                include retrospective reimbursement on a fee-for-
                service basis, prepayment on a capitation basis, 
                payment by cash or vouchers to individuals with 
                disabilities, or any combination of these methods. In 
                the case of payment to consumer-directed providers of 
                personal assistance services, including payment through 
                the use of cash or vouchers, the plan shall specify how 
                the plan will assure compliance with applicable 
                employment tax and health care coverage provisions.
                    (B) Payment rates.--The plan shall specify the 
                methods and criteria to be used to set payment rates 
                for--
                            (i) agency administered services furnished 
                        under the plan; and
                            (ii) consumer-directed personal assistance 
                        services furnished under the plan, including 
                        cash payments or vouchers to individuals with 
                        disabilities, except that such payments shall 
                        be adequate to cover amounts required under 
                        applicable employment tax and health care 
                        coverage provisions.
                    (C) Plan payment as payment in full.--The plan 
                shall restrict payment under the plan for covered 
                services to those providers that agree to accept the 
                payment under the plan (at the rates established 
                pursuant to subparagraph (B)) and any cost sharing 
                permitted or provided for under section 2105 as payment 
                in full for services furnished under the plan.
            (7) Quality assurance and safeguards.--The State plan shall 
        provide for quality assurance and safeguards for applicants and 
        beneficiaries in accordance with section 2106.
            (8) Advisory group.--The State plan shall--
                    (A) assure the establishment and maintenance of an 
                advisory group under section 2107(b), and
                    (B) include the documentation prepared by the group 
                under section 2107(b)(4).
            (9) Administration and access.--
                    (A) State agency.--The plan shall designate a State 
                agency or agencies to administer (or to supervise the 
                administration of) the plan.
                    (B) Coordination.--The plan shall specify how it 
                will--
                            (i) coordinate services provided under the 
                        plan, including eligibility prescreening, 
                        service coordination, and referrals for 
                        individuals with disabilities who are 
                        ineligible for services under this subtitle 
                        with the State medicaid plan under title XIX of 
                        the Social Security Act, titles V and XX of 
                        such Act, programs under the Older Americans 
                        Act of 1965, programs under the Developmental 
                        Disabilities Assistance and Bill of Rights Act, 
                        the Individuals with Disabilities Education 
                        Act, and any other Federal or State programs 
                        that provide services or assistance targeted to 
                        individuals with disabilities; and
                            (ii) coordinate with health plans.
                    (C) Administrative expenditures.--Effective 
                beginning with fiscal year 2004, the plan shall contain 
                assurances that not more than 10 percent of 
                expenditures under the plan for all quarters in any 
                fiscal year shall be for administrative costs.
            (10) Reports and information to secretary; audits.--The 
        plan shall provide that the State will furnish to the 
        Secretary--
                    (A) such reports, and will cooperate with such 
                audits, as the Secretary determines are needed 
                concerning the State's administration of its plan under 
                this subtitle, including the processing of claims under 
                the plan, and
                    (B) such data and information as the Secretary may 
                require in a uniform format as specified by the 
                Secretary.
            (11) Use of state funds for matching.--The plan shall 
        provide assurances that Federal funds will not be used to 
        provide for the State share of expenditures under this 
        subtitle.
            (12) Health care worker redeployment.--The plan shall 
        provide for the following:
                    (A) Before initiating the process of implementing 
                the State program under such plan, negotiations will be 
                commenced with labor unions representing the employees 
                of the affected hospitals or other facilities.
                    (B) Negotiations under subparagraph (A) will 
                address the following:
                            (i) The impact of the implementation of the 
                        program upon the workforce.
                            (ii) Methods to redeploy workers to 
                        positions in the proposed system, in the case 
                        of workers affected by the program.
                    (C) The plan will provide evidence that there has 
                been compliance with subparagraphs (A) and (B), 
                including a description of the results of the 
                negotiations.
            (13) Terminology.--The plan shall adhere to uniform 
        definitions of terms, as specified by the Secretary.
    (b) Approval of Plans.--The Secretary shall approve a plan 
submitted by a State if the Secretary determines that the plan--
            (1) was developed by the State after a public comment 
        period of not less than 30 days, and
            (2) meets the requirements of subsection (a).
The approval of such a plan shall take effect as of the first day of 
the first fiscal year beginning after the date of such approval (except 
that any approval made before January 1, 1998, shall be effective as of 
January 1, 1998). In order to budget funds allotted under this 
subtitle, the Secretary shall establish a deadline for the submission 
of such a plan before the beginning of a fiscal year as a condition of 
its approval effective with that fiscal year. Any significant changes 
to the State plan shall be submitted to the Secretary in the form of 
plan amendments and shall be subject to approval by the Secretary.
    (c) Monitoring.--The Secretary shall annually monitor the 
compliance of State plans with the requirements of this subtitle 
according to specified performance standards. In accordance with 
section 2108(e), States that fail to comply with such requirements may 
be subject to a reduction in the Federal matching rates available to 
the State under section 2108(a) or the withholding of Federal funds for 
services or administration until such time as compliance is achieved.
    (d) Technical Assistance.--The Secretary shall ensure the 
availability of ongoing technical assistance to States under this 
section. Such assistance shall include serving as a clearinghouse for 
information regarding successful practices in providing long-term care 
services.
    (e) Regulations.--The Secretary shall issue such regulations as may 
be appropriate to carry out this subtitle on a timely basis.

SEC. 2103. INDIVIDUALS WITH DISABILITIES DEFINED.

    (a) In General.--For purposes of this subtitle, the term 
`individual with disabilities' means any individual within one or more 
of the following categories of individuals:
            (1) Individuals requiring help with activities of daily 
        living.--An individual of any age who--
                    (A) requires hands-on or standby assistance, 
                supervision, or cueing (as defined in regulations) to 
                perform three or more activities of daily living (as 
                defined in subsection (d)), and
                    (B) is expected to require such assistance, 
                supervision, or cueing over a period of at least 90 
                days.
            (2) Individuals with severe cognitive or mental 
        impairment.--An individual of any age--
                    (A) whose score, on a standard mental status 
                protocol (or protocols) appropriate for measuring the 
                individual's particular condition specified by the 
                Secretary, indicates either severe cognitive impairment 
                or severe mental impairment, or both;
                    (B) who--
                            (i) requires hands-on or standby 
                        assistance, supervision, or cueing with one or 
                        more activities of daily living;
                            (ii) requires hands-on or standby 
                        assistance, supervision, or cueing with at 
                        least such instrumental activity (or 
                        activities) of daily living related to 
                        cognitive or mental impairment as the Secretary 
                        specifies; or
                            (iii) displays symptoms of one or more 
                        serious behavioral problems (that is on a list 
                        of such problems specified by the Secretary) 
                        which create a need for supervision to prevent 
                        harm to self or others; and
                    (C) who is expected to meet the requirements of 
                subparagraphs (A) and (B) over a period of at least 90 
                days.
        Not later than 2 years after the date of enactment of this 
        subtitle, the Secretary shall make recommendations regarding 
        the most appropriate duration of disability under this 
        paragraph.
            (3) Individuals with severe or profound mental 
        retardation.--An individual of any age who has severe or 
        profound mental retardation (as determined according to a 
        protocol specified by the Secretary).
            (4) Young children with severe disabilities.--An individual 
        under 6 years of age who--
                    (A) has a severe disability or chronic medical 
                condition that limits functioning in a manner that is 
                comparable in severity to the standards established 
                under paragraphs (1), (2), or (3), and
                    (B) is expected to have such a disability or 
                condition and require such services over a period of at 
                least 90 days.
    (b) Determination.--
            (1) In general.--In formulating eligibility criteria under 
        subsection (a), the Secretary shall establish criteria for 
        assessing the functional level of disability among all 
        categories of individuals with disabilities that are comparable 
        in severity, regardless of the age or the nature of the 
        disabling condition of the individual. The determination of 
        whether an individual is an individual with disabilities shall 
        be made by a public or nonprofit agency that is specified under 
        the State plan and that is not a provider of home and 
        community-based services under this subtitle and by using a 
        uniform protocol consisting of an initial screening and a 
        determination of disability specified by the Secretary. A State 
        may not impose cost sharing with respect to a determination of 
        disability. A State may collect additional information, at the 
        time of obtaining information to make such determination, in 
        order to provide for the assessment and plan described in 
        section 2104(b) or for other purposes.
            (2) Periodic reassessment.--The determination that an 
        individual is an individual with disabilities shall be 
        considered to be effective under the State plan for a period of 
        not more than 6 months (or for such longer period in such cases 
        as a significant change in an individual's condition that may 
        affect such determination is unlikely). A reassessment shall be 
        made if there is a significant change in an individual's 
        condition that may affect such determination.
    (c) Eligibility Criteria.--The Secretary shall reassess the 
validity of the eligibility criteria described in subsection (a) as new 
knowledge regarding the assessments of functional disabilities becomes 
available. The Secretary shall report to the Committees on Finance and 
Labor and Human Resources of the Senate and the Committees on Ways and 
Means and Energy and Commerce of the House of Representatives on its 
findings under the preceding sentence as determined appropriate by the 
Secretary.
    (d) Activity of Daily Living Defined.--For purposes of this 
subtitle, the term `activity of daily living' means any of the 
following: eating, toileting, dressing, bathing, and transferring.

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

    (a) Specification.--
            (1) In general.--Subject to the succeeding provisions of 
        this section, the State plan under this subtitle shall 
        specify--
                    (A) the home and community-based services available 
                under the plan to individuals with disabilities (or to 
                such categories of such individuals), and
                    (B) any limits with respect to such services.
            (2) Flexibility in meeting individual needs.--Subject to 
        subsection (e)(2), such services may be delivered in an 
        individual's home, a range of community residential 
        arrangements, or outside the home.
    (b) Requirement for Needs Assessment and Plan of Care.--
            (1) In general.--The State plan shall provide for home and 
        community-based services to an individual with disabilities 
        only if the following requirements are met:
                    (A) Comprehensive assessment.--A comprehensive 
                assessment of an individual's need for home and 
                community-based services (regardless of whether all 
                need services are available under the plan) shall be 
                made in accordance with a uniform, comprehensive 
                assessment tool that shall be used by a State under 
                this paragraph with the approval of the Secretary. The 
                Secretary shall provide guidance to the States with 
                regard to the appropriate qualifications for 
                individuals who conduct comprehensive assessments.
                    (B) Individualized plan of care.--An individualized 
                plan of care based on the assessment made under 
                subparagraph (A) shall be developed. A plan of care 
                under this subparagraph shall--
                            (i) specify which services included under 
                        the individual plan will be provided under the 
                        State plan under this subtitle;
                            (ii) identify (to the extent possible) how 
                        the individual will be provided any services 
                        specified under the plan of care and not 
                        provided under the State plan;
                            (iii) specify how the provision of services 
                        to the individual under the plan will be 
                        coordinated with the provision of other health 
                        care services to the individual; and
                            (iv) be reviewed and updated every 6 months 
                        (or more frequently if there is a change in the 
                        individual's condition).
                The State shall make reasonable efforts to identify and 
                arrange for services described in clause (ii). Nothing 
                in this subsection shall be construed as requiring a 
                State (under the State plan or otherwise) to provide 
                all the services specified in such a plan.
                    (C) Involvement of individuals.--The individualized 
                plan of care under subparagraph (B) for an individual 
                with disabilities shall--
                            (i) be developed by qualified individuals 
                        (specified under the State plan);
                            (ii) be developed and implemented in close 
                        consultation with the individual (or the 
                        individual's designated representative); and
                            (iii) be approved by the individual (or the 
                        individual's designated representative).
    (c) Requirement for Care Management.--
            (1) In general.--The State shall make available to each 
        category of individuals with disabilities care management 
        services that at a minimum include--
                    (A) arrangements for the provision of such 
                services, and
                    (B) monitoring of the delivery of services.
            (2) Care management services.--
                    (A) In general.--Except as provided in subparagraph 
                (B), the care management services described in 
                paragraph (1) shall be provided by a public or private 
                entity that is not providing home and community-based 
                services under this subtitle.
                    (B) Exception.--A person who provides home and 
                community-based services under this subtitle may 
                provide care management services if--
                            (i) the State determines that there is an 
                        insufficient pool of entities willing to 
                        provide such services in an area due to a low 
                        population of individuals eligible for home and 
                        community-based services under this subtitle 
                        residing in such area; and
                            (ii) the State plan specifies procedures 
                        that the State will implement in order to avoid 
                        conflicts of interest.
    (d) Mandatory Coverage of Personal Assistance Services.--The State 
plan shall include, in the array of services made available to each 
category of individuals with disabilities, both agency-administered and 
consumer-directed personal assistance services (as defined in 
subsection (h)).
    (e) Additional Services.--
            (1) Types of services.--Subject to subsection (f), services 
        available under a State plan under this subtitle may include 
        any (or all) of the following:
                    (A) Homemaker and chore assistance.
                    (B) Home modifications.
                    (C) Respite services.
                    (D) Assistive devices, as defined in the Technology 
                Related Assistance for Individuals with Disabilities 
                Act.
                    (E) Adult day services.
                    (F) Habilitation and rehabilitation.
                    (G) Supported employment.
                    (H) Home health services.
                    (I) Transportation.
                    (J) Any other care or assistive services specified 
                by the State and approved by the Secretary that will 
                help individuals with disabilities to remain in their 
                homes and communities.
            (2) Criteria for selection of services.--The State electing 
        services under paragraph (1) shall specify in the State plan--
                    (A) the methods and standards used to select the 
                types, and the amount, duration, and scope, of services 
                to be covered under the plan and to be available to 
                each category of individuals with disabilities, and
                    (B) how the types, and the amount, duration, and 
                scope, of services specified, within the limits of 
                available funding, provide substantial assistance in 
                living independently to individuals within each of the 
                categories of individuals with disabilities.
    (f) Exclusions and Limitations.--A State plan may not provide for 
coverage of--
            (1) room and board,
            (2) services furnished in a hospital, nursing facility, 
        intermediate care facility for the mentally retarded, or other 
        institutional setting specified by the Secretary, or
            (3) items and services to the extent coverage is provided 
        for the individual under a health plan or the medicare program.
    (g) Payment for Services.--In order to pay for covered services, a 
State plan may provide for the use of--
            (1) vouchers,
            (2) cash payments directly to individuals with 
        disabilities,
            (3) capitation payments to health plans, and
            (4) payment to providers.
    (h) Personal Assistance Services.--
            (1) In general.--For purposes of this subtitle, the term 
        ``personal assistance services'' means those services specified 
        under the State plan as personal assistance services and shall 
        include at least hands-on and standby assistance, supervision, 
        and cueing with activities of daily living, whether agency-
        administered or consumer-directed (as defined in paragraph 
        (2)).
            (2) Consumer-directed.--For purposes of this subtitle:
                    (A) In general.--The term ``consumer-directed'' 
                means, with reference to personal assistance services 
                or the provider of such services, services that are 
                provided by an individual who is selected and managed 
                (and, at the option of the service recipient, trained) 
                by the individual receiving the services.
                    (B) State responsibilities.--A State plan shall 
                ensure that where services are provided in a consumer-
                directed manner, the State shall create or contract 
                with an entity, other than the consumer or the 
                individual provider, to--
                            (i) inform both recipients and providers of 
                        rights and responsibilities under all 
                        applicable Federal labor and tax law; and
                            (ii) assume responsibility for providing 
                        effective billing, payments for services, tax 
                        withholding, unemployment insurance, and 
                        workers' compensation coverage, and act as the 
                        employer of the home care provider.
                    (C) Right of consumers.--Notwithstanding the State 
                responsibilities described in subparagraph (B), service 
                recipients, and, where appropriate, their designated 
                representative, shall retain the right to independently 
                select, hire, terminate, and direct (including manage, 
                train, schedule, and verify services provided) the work 
                of a home care provider.
            (3) Agency administered.--For purposes of this subtitle, 
        the term `agency-administered' means, with respect to such 
        services, services that are not consumer-directed.

SEC. 2105. COST SHARING.

    (a) No Cost Sharing for Poorest.--
            (1) In general.--The State plan may not impose any cost 
        sharing for individuals with income (as determined under 
        subsection (d)) less than 150 percent of the official poverty 
        level (referred to in paragraph (2)) applicable to a family of 
        the size involved.
            (2) Official poverty level.--The term `applicable poverty 
        level' means, for a family for a year, the official poverty 
        line (as defined by the Office of Management and Budget, and 
        revised annually in accordance with section 673(2) of the 
        Omnibus Budget Reconciliation Act of 1981) applicable to a 
        family of the size involved.
    (b) Sliding Scale for Remainder.--
            (1) Required coinsurance.--The State plan shall impose cost 
        sharing in the form of coinsurance (based on the amount paid 
        under the State plan for a service)--
                    (A) at a rate of 10 percent for individuals with 
                disabilities with income not less than 150 percent, and 
                less than 175 percent, of such official poverty line 
                (as so applied);
                    (B) at a rate of 15 percent for such individuals 
                with income not less than 175 percent, and less than 
                225 percent, of such official poverty line (as so 
                applied);
                    (C) at a rate of 25 percent for such individuals 
                with income not less than 225 percent, and less than 
                275 percent, of such official poverty line (as so 
                applied);
                    (D) at a rate of 30 percent for such individuals 
                with income not less than 275 percent, and less than 
                325 percent, of such official poverty line (as so 
                applied);
                    (E) at a rate of 35 percent for such individuals 
                with income not less than 325 percent, and less than 
                400 percent, of such official poverty line (as so 
                applied); and
                    (F) at a rate of 40 percent for such individuals 
                with income equal to at least 400 percent of such 
                official poverty line (as so applied).
            (2) Required annual deductible.--The State plan shall 
        impose cost sharing in the form of an annual deductible--
                    (A) of $100 for individuals with disabilities with 
                income not less than 150 percent, and less than 175 
                percent, of such official poverty line (as so applied);
                    (B) of $200 for such individuals with income not 
                less than 175 percent, and less than 225 percent, of 
                such official poverty line (as so applied);
                    (C) of $300 for such individuals with income not 
                less than 225 percent, and less than 275 percent, of 
                such official poverty line (as so applied);
                    (D) of $400 for such individuals with income not 
                less than 275 percent, and less than 325 percent, of 
                such official poverty line (as so applied);
                    (E) of $500 for such individuals with income not 
                less than 325 percent, and less than 400 percent, of 
                such official poverty line (as so applied); and
                    (F) of $600 for such individuals with income equal 
                to at least 400 percent of such official poverty line 
                (as so applied).
    (c) Recommendation of the Secretary.--The Secretary shall make 
recommendations to the States as to how to reduce cost-sharing for 
individuals with extraordinary out-of-pocket costs for whom the cost-
sharing provisions of this section could jeopardize their ability to 
take advantage of the services offered under this subtitle. The 
Secretary shall establish a methodology for reducing the cost-sharing 
burden for individuals with exceptionally high out-of-pocket costs 
under this subtitle.
    (d) Determination of Income for Purposes of Cost Sharing.--The 
State plan shall specify the process to be used to determine the income 
of an individual with disabilities for purposes of this section. Such 
standards shall include a uniform Federal definition of income and any 
allowable deductions from income.

SEC. 2106. QUALITY ASSURANCE AND SAFEGUARDS.

    (a) Quality Assurance.--
            (1) In general.--The State plan shall specify how the State 
        will ensure and monitor the quality of services, including--
                    (A) safeguarding the health and safety of 
                individuals with disabilities,
                    (B) setting the minimum standards for agency 
                providers and how such standards will be enforced,
                    (C) setting the minimum competency requirements for 
                agency provider employees who provide direct services 
                under this subtitle and how the competency of such 
                employees will be enforced,
                    (D) obtaining meaningful consumer input, including 
                consumer surveys that measure the extent to which 
                participants receive the services described in the plan 
                of care and participant satisfaction with such 
                services,
                    (E) establishing a process to receive, investigate, 
                and resolve allegations of neglect and/or abuse,
                    (F) establishing optional training programs for 
                individuals with disabilities in the use and direction 
                of consumer directed providers of personal assistance 
                services,
                    (G) establishing an appeals procedure for 
                eligibility denials and a grievance procedure for 
                disagreements with the terms of an individualized plan 
                of care,
                    (H) providing for participation in quality 
                assurance activities, and
                    (I) specifying the role of the long-term care 
                ombudsman (under the Older Americans Act of 1965) and 
                the Protection and Advocacy Agency (under the 
                Developmental Disabilities Assistance and Bill of 
                Rights Act) in assuring quality of services and 
                protecting the rights of individuals with disabilities.
            (2) Issuance of regulations.--Not later than 1 year after 
        the date of enactment of this subtitle, the Secretary shall 
        issue regulations implementing the quality provisions of this 
        subsection.
    (b) Federal Standards.--The State plan shall adhere to Federal 
quality standards in the following areas:
            (1) Case review of a specified sample of client records.
            (2) The mandatory reporting of abuse, neglect, or 
        exploitation.
            (3) The development of a registry of provider agencies or 
        home care workers and consumer directed providers of personal 
        assistance services against whom any complaints have been 
        sustained, which shall be available to the public.
            (4) Sanctions to be imposed on States or providers, 
        including disqualification from the program, if minimum 
        standards are not met.
            (5) Surveys of client satisfaction.
            (6) State optional training programs for informal 
        caregivers.
    (c) Client Advocacy.--
            (1) In general.--The State plan shall provide that the 
        State will expend the amount allocated under section 2109(b)(2) 
        for client advocacy activities. The State may use such funds to 
        augment the budgets of the long-term care ombudsman (under the 
        Older Americans Act of 1965) and the Protection and Advocacy 
        Agency (under the Developmental Disabilities Assistance and 
        Bill of Rights Act) or may establish a separate and independent 
        client advocacy office in accordance with paragraph (2) to 
        administer a new program designed to advocate for client 
        rights.
            (2) Client advocacy office.--
                    (A) In general.--A client advocacy office 
                established under this paragraph shall--
                            (i) identify, investigate, and resolve 
                        complaints that--
                                    (I) are made by, or on behalf of, 
                                clients; and
                                    (II) relate to action, inaction, or 
                                decisions, that may adversely affect 
                                the health, safety, welfare, or rights 
                                of the clients (including the welfare 
                                and rights of the clients with respect 
                                to the appointment and activities of 
                                guardians and representative payees), 
                                of--
                                            (aa) providers, or 
                                        representatives of providers, 
                                        of long-term care services;
                                            (bb) public agencies; or
                                            (cc) health and social 
                                        service agencies;
                            (ii) provide services to assist the clients 
                        in protecting the health, safety, welfare, and 
                        rights of the clients;
                            (iii) inform the clients about means of 
                        obtaining services provided by providers or 
                        agencies described in clause (i)(II) or 
                        services described in clause (ii);
                            (iv) ensure that the clients have regular 
                        and timely access to the services provided 
                        through the office and that the clients and 
                        complainants receive timely responses from 
                        representatives of the office to complaints; 
                        and
                            (v) represent the interests of the clients 
                        before governmental agencies and seek 
                        administrative, legal, and other remedies to 
                        protect the health, safety, welfare, and rights 
                        of the clients with regard to the provisions of 
                        this subtitle.
                    (B) Contracts and arrangements.--
                            (i) In general.--Except as provided in 
                        clause (ii), the State agency may establish and 
                        operate the office, and carry out the program, 
                        directly, or by contract or other arrangement 
                        with any public agency or nonprofit private 
                        organization.
                    (C) Licensing and certification organizations; 
                associations.--The State agency may not enter into the 
                contract or other arrangement described in clause (i) 
                with an agency or organization that is responsible for 
                licensing, certifying, or providing long-term care 
                services in the State.
    (d) Safeguards.--
            (1) Confidentiality.--The State plan shall provide 
        safeguards which restrict the use or disclosure of information 
        concerning applicants and beneficiaries to purposes directly 
        connected with the administration of the plan.
            (2) Safeguards against abuse.--The State plans shall 
        provide safeguards against physical, emotional, or financial 
        abuse or exploitation (specifically including appropriate 
        safeguards in cases where payment for program benefits is made 
        by cash payments or vouchers given directly to individuals with 
        disabilities). All providers of services shall be required to 
        register with the State agency.
            (3) Regulations.--Not later than January 1, 1998, the 
        Secretary shall promulgate regulations with respect to the 
        requirements on States under this subsection.
    (e) Specified Rights.--The State plan shall provide that in 
furnishing home and community-based services under the plan the 
following individual rights are protected:
            (1) The right to be fully informed in advance, orally and 
        in writing, of the care to be provided, to be fully informed in 
        advance of any changes in care to be provided, and (except with 
        respect to an individual determined incompetent) to participate 
        in planning care or changes in care.
            (2) The right to--
                    (A) voice grievances with respect to services that 
                are (or fail to be) furnished without discrimination or 
                reprisal for voicing grievances,
                    (B) be told how to complain to State and local 
                authorities, and
                    (C) prompt resolution of any grievances or 
                complaints.
            (3) The right to confidentiality of personal and clinical 
        records and the right to have access to such records.
            (4) The right to privacy and to have one's property treated 
        with respect.
            (5) The right to refuse all or part of any care and to be 
        informed of the likely consequences of such refusal.
            (6) The right to education or training for oneself and for 
        members of one's family or household on the management of care.
            (7) The right to be free from physical or mental abuse, 
        corporal punishment, and any physical or chemical restraints 
        imposed for purposes of discipline or convenience and not 
        included in an individual's plan of care.
            (8) The right to be fully informed orally and in writing of 
        the individual's rights.
            (9) The right to a free choice of providers.
            (10) The right to direct provider activities when an 
        individual is competent and willing to direct such activities.

SEC. 2107. ADVISORY GROUPS.

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

SEC. 2108. PAYMENTS TO STATES.

    (a) In General.--Subject to section 2102(a)(9)(C) (relating to 
limitation on payment for administrative costs), the Secretary, in 
accordance with the Cash Management Improvement Act, shall authorize 
payment to each State with a plan approved under this subtitle, for 
each quarter (beginning on or after January 1, 1998), from its 
allotment under section 2109(b), an amount equal to--
            (1)(A) if the amount demonstrated by State claims to have 
        been expended during the year for home and community-based 
        services under the plan for individuals with disabilities does 
        not exceed 20 percent of the amount allotted to the State under 
        section 2109(b), 100 percent of the amount demonstrated by 
        State claims to have been expended during the quarter for such 
        services for such individuals; or
            (B) for the amount demonstrated by State claims to have 
        been expended during the year for home and community-based 
        services under the plan for individuals with disabilities that 
        exceeds 20 percent of the amount allotted to the State under 
        section 2109(b), the Federal home and community-based services 
        matching percentage (as defined in subsection (b)) of such 
        amount; plus
            (2) an amount equal to 90 percent of the amount 
        demonstrated by the State to have been expended during the 
        quarter for quality assurance activities under the plan; plus
            (3) an amount equal to 90 percent of amount expended during 
        the quarter under the plan for activities (including 
        preliminary screening) relating to determination of eligibility 
        and performance of needs assessment; plus
            (4) an amount equal to 90 percent (or, beginning with 
        quarters in fiscal year 2004, 75 percent) of the amount 
        expended during the quarter for the design, development, and 
        installation of mechanical claims processing systems and for 
        information retrieval; plus
            (5) an amount equal to 50 percent of the remainder of the 
        amounts expended during the quarter as found necessary by the 
        Secretary for the proper and efficient administration of the 
        State plan.
    (b) Federal Home and Community-Based Services Matching 
Percentage.--In subsection (a), the term `Federal home and community-
based services matching percentage' means, with respect to a State, the 
State's Federal medical assistance percentage (as defined in section 
1905(b) of the Social Security Act) increased by 15 percentage points, 
except that the Federal home and community-based services matching 
percentage shall in no case be more than 95 percent.
    (c) Payments on Estimates with Retrospective Adjustments.--The 
method of computing and making payments under this section shall be as 
follows:
            (1) The Secretary shall, prior to the beginning of each 
        quarter, estimate the amount to be paid to the State under 
        subsection (a) for such quarter, based on a report filed by the 
        State containing its estimate of the total sum to be expended 
        in such quarter, and such other information as the Secretary 
        may find necessary.
            (2) From the allotment available therefore, the Secretary 
        shall provide for payment of the amount so estimated, reduced 
        or increased, as the case may be, by any sum (not previously 
        adjusted under this section) by which the Secretary finds that 
        the estimate of the amount to be paid the State for any prior 
        period under this section was greater or less than the amount 
        which should have been paid.
    (d) Application of Rules Regarding Limitations on Provider-Related 
Donations and Health Care Related Taxes.--The provisions of section 
1903(w) of the Social Security Act shall apply to payments to States 
under this section in the same manner as they apply to payments to 
States under section 1903(a) of such Act.
    (e) Failure to Comply with State Plan.--If a State furnishing home 
and community-based services under this subtitle fails to comply with 
the State plan approved under this subtitle, the Secretary may either 
reduce the Federal matching rates available to the State under 
subsection (a) or withhold an amount of funds determined appropriate by 
the Secretary from any payment to the State under this section.

SEC. 2109. APPROPRIATIONS; ALLOTMENTS TO STATES.

    (a) Appropriations.--
            (1) Fiscal years 1998 through 2004.--Subject to paragraph 
        (5)(C), for purposes of this subtitle, the appropriation 
        authorized under this subtitle for each of fiscal years 1998 
        through 2004 is the following:
                    (A) For fiscal year 1998, $1,800,000,000.
                    (B) For fiscal year 1999, $2,900,000,000.
                    (C) For fiscal year 2000, $3,600,000,000.
                    (D) For fiscal year 2001, $5,000,000,000.
                    (E) For fiscal year 2002, $7,900,000,000.
                    (F) For fiscal year 2003, $11,400,000,000.
                    (G) For fiscal year 2004, $15,400,000,000.
            (2) Subsequent fiscal years.--For purposes of this 
        subtitle, the appropriation authorized for State plans under 
        this subtitle for each fiscal year after fiscal year 2004 is 
        the appropriation authorized under this subsection for the 
        preceding fiscal year multiplied by--
                    (A) a factor (described in paragraph (3)) 
                reflecting the change in the consumer price index for 
                the fiscal year, and
                    (B) a factor (described in paragraph (4)) 
                reflecting the change in the number of individuals with 
                disabilities for the fiscal year.
            (3) CPI increase factor.--For purposes of paragraph (2)(A), 
        the factor described in this paragraph for a fiscal year is the 
        ratio of--
                    (A) the annual average index of the consumer price 
                index for the preceding fiscal year, to--
                    (B) such index, as so measured, for the second 
                preceding fiscal year.
            (4) Disabled population factor.--For purposes of paragraph 
        (2)(B), the factor described in this paragraph for a fiscal 
        year is 100 percent plus (or minus) the percentage increase (or 
        decrease) change in the disabled population of the United 
        States (as determined for purposes of the most recent update 
        under subsection (b)(3)(D)).
            (5) Additional funds due to medicaid offsets.--
                    (A) In general.--Each participating State must 
                provide the Secretary with information concerning 
                offsets and reductions in the medicaid program 
                resulting from home and community-based services 
                provided disabled individuals under this subtitle, that 
                would have been paid for such individuals under the 
                State medicaid plan but for the provision of similar 
                services under the program under this subtitle. At the 
                time a State first submits its plan under this subtitle 
                and before each subsequent fiscal year (through fiscal 
                year 2004), the State also must provide the Secretary 
                with such budgetary information (for each fiscal year 
                through fiscal year 2004), as the Secretary determines 
                to be necessary to carry out this paragraph.
                    (B) Reports.--Each State with a program under this 
                subtitle shall submit such reports to the Secretary as 
                the Secretary may require in order to monitor 
                compliance with subparagraph (A). The Secretary shall 
                specify the format of such reports and establish 
                uniform data reporting elements.
                    (C) Adjustments to appropriation.--
                            (i) In general.--For each fiscal year 
                        (beginning with fiscal year 1998 and ending 
                        with fiscal year 2004) and based on a review of 
                        information submitted under subparagraph (A), 
                        the Secretary shall determine the amount by 
                        which the appropriation authorized under 
                        subsection (a) will increase. The amount of 
                        such increase for a fiscal year shall be 
                        limited to the reduction in Federal 
                        expenditures of medical assistance (as 
                        determined by Secretary) that would have been 
                        made under part A of title XIX for home and 
                        community based services for disabled 
                        individuals but for the provision of similar 
                        services under the program under this subtitle.
                            (ii) Annual publication.--The Secretary 
                        shall publish before the beginning of such 
                        fiscal year, the revised appropriation 
                        authorized under this subsection for such 
                        fiscal year.
                    (D) Construction.--Nothing in this subsection shall 
                be construed as requiring States to determine 
                eligibility for medical assistance under the State 
                medicaid plan on behalf of individuals receiving 
                assistance under this subtitle.
    (b) Allotments to States.--
            (1) In general.--The Secretary shall allot the amounts 
        available under the appropriation authorized for the fiscal 
        year (specified in subsection (a)) to the States with plans 
        approved under this subtitle in accordance with an allocation 
        formula developed by the Secretary which takes into account--
                    (A) the percentage of the total number of 
                individuals with disabilities in all States that reside 
                in a particular State;
                    (B) the per capita costs of furnishing home and 
                community-based services to individuals with 
                disabilities in the State; and
                    (C) the percentage of all individuals with incomes 
                at or below 150 percent of the official poverty line 
                (as described in section 2105(a)(2)) in all States that 
                reside in a particular State.
            (2) Allocation for client advocacy activities.--Each State 
        with a plan approved under this subtitle shall allocate one-
        half of one percent of the State's total allotment under 
        paragraph (1) for client advocacy activities as described in 
        section 2106(c).
            (3) No duplicate payment.--No payment may be made to a 
        State under this section for any services provided to an 
        individual to the extent that the State received payment for 
        such services under section 1903(a) of the Social Security Act.
            (4) Reallocations.--Any amounts allotted to States under 
        this subsection for a year that are not expended in such year 
        shall remain available for State programs under this subtitle 
        and may be reallocated to States as the Secretary determines 
        appropriate.
    (c) State Entitlement.--This subtitle constitutes budget authority 
in advance of appropriations Acts, and represents the obligation of the 
Federal Government to provide for the payment to States of amounts 
described in subsection (a).

SEC. 2110. FEDERAL EVALUATIONS.

    (a) In General.--Not later than December 31, 2003, December 31, 
2006, and each December 31 thereafter, the Secretary shall provide to 
Congress analytical reports that evaluate--
            (1) the extent to which individuals with low incomes and 
        disabilities are equitably served;
            (2) the adequacy and equity of service plans to individuals 
        with similar levels of disability across States;
            (3) the comparability of program participation across 
        States, described by level and type of disability; and
            (4) the ability of service providers to sufficiently meet 
        the demand for services.
    (b) Geriatric Assessments.--Not later than 18 months after the date 
of enactment of this part, the Secretary shall report to Congress 
concerning the feasibility of providing reimbursement under health 
plans and other payers of health services for full geriatric 
assessment, when recommended by a physician.

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.

    (a) Findings.--Congress finds that--
            (1) demonstration programs and projects have been developed 
        to offer care management to hospitalized individuals awaiting 
        discharge who are in need of long-term health care services 
        that meet individual needs and preferences in home and 
        community-based settings as an alternative to long-term nursing 
        home care or institutional placement; and
            (2) there is a need to disseminate information and 
        technical assistance to hospitals and State and local community 
        organizations regarding such programs and projects and to 
        provide incentive grants to State and local public and private 
        agencies, including area agencies on aging, to establish and 
        expand programs that offer care management to individuals 
        awaiting discharge from acute care hospitals who are in need of 
        long-term care so that services to meet individual needs and 
        preferences can be arranged in home and community-based 
        settings as an alternative to long-term placement in nursing 
        homes or other institutional settings.
    (b) Dissemination of Information, Technical Assistance, and 
Incentive Grants to Assist in the Development of Hospital Linkage 
Programs.--Part C of title III of the Public Health Service Act (42 
U.S.C. 248 et seq.) is amended by adding at the end thereof the 
following new section:

``SEC. 327B. DISSEMINATION OF INFORMATION, TECHNICAL ASSISTANCE AND 
              INCENTIVE GRANTS TO ASSIST IN THE DEVELOPMENT OF HOSPITAL 
              LINKAGE PROGRAMS.

    ``(a) Dissemination of Information.--The Secretary shall compile, 
evaluate, publish and disseminate to appropriate State and local 
officials and to private organizations and agencies that provide 
services to individuals in need of long-term health care services, such 
information and materials as may assist such entities in replicating 
successful programs that are aimed at offering care management to 
hospitalized individuals who are in need of long-term care so that 
services to meet individual needs and preferences can be arranged in 
home and community-based settings as an alternative to long-term 
nursing home placement. The Secretary may provide technical assistance 
to entities seeking to replicate such programs.
    ``(b) Incentive Grants to Assist in the Development of Hospital 
Linkage Programs.--The Secretary shall establish a program under which 
incentive grants may be awarded to assist private and public agencies, 
including area agencies on aging, and organizations in developing and 
expanding programs and projects that facilitate the discharge of 
individuals in hospitals or other acute care facilities who are in need 
of long-term care services and placement of such individuals into home 
and community-based settings.
    ``(c) Administrative Provisions.--
            ``(1) Eligible entities.--To be eligible to receive a grant 
        under subsection (b) an entity shall be--
                    ``(A)(i) a State agency as defined in section 
                102(43) of the Older Americans Act of 1965; or
                    ``(ii) a State agency responsible for administering 
                home and community care programs under title XIX of the 
                Social Security Act; or
                    ``(B) if no State agency described in subparagraph 
                (A) applies with respect to a particular State, a 
                public or nonprofit private entity.
            ``(2) Applications.--To be eligible to receive an incentive 
        grant under subsection (b), an entity shall prepare and submit 
        to the Secretary an application at such time, in such manner 
        and containing such information as the Secretary may require, 
        including--
                    ``(A) an assessment of the need within the 
                community to be served for the establishment or 
                expansion of a program to facilitate the discharge of 
                individuals in need of long-term care who are in 
                hospitals or other acute care facilities into home and 
                community-care programs that provide individually 
                planned, flexible services that reflect individual 
                choice or preference rather than nursing home or 
                institutional settings;
                    ``(B) a plan for establishing or expanding a 
                program for identifying individuals in hospital or 
                acute care facilities who are in need of individualized 
                long-term care provided in home and community-based 
                settings rather than nursing homes or other 
                institutional settings and undertaking the planning and 
                management of individualized care plans to facilitate 
                discharge into such settings;
                    ``(C) assurances that nongovernmental case 
                management agencies funded under grants awarded under 
                this section are not direct providers of home and 
                community-based services;
                    ``(D) satisfactory assurances that adequate home 
                and community-based long term care services are 
                available, or will be made available, within the 
                community to be served so that individuals being 
                discharged from hospitals or acute care facilities 
                under the proposed program can be served in such home 
                and community-based settings, with flexible, 
                individualized care which reflects individual choice 
                and preference;
                    ``(E) a description of the manner in which the 
                program to be administered with amounts received under 
                the grant will be continued after the termination of 
                the grant for which such application is submitted; and
                    ``(F) a description of any waivers or approvals 
                necessary to expand the number of individuals served in 
                federally funded home and community-based long term 
                care programs in order to provide satisfactory 
                assurances that adequate home and community-based long 
                term care services are available in the community to be 
                served.
            ``(3) Awarding of grants.--
                    ``(A) Preferences.--In awarding grants under 
                subsection (b), the Secretary shall give preference to 
                entities submitting applications that--
                            ``(i) demonstrate an ability to coordinate 
                        activities funded using amounts received under 
                        the grant with programs providing 
                        individualized home and community-based case 
                        management and services to individuals in need 
                        of long term care with hospital discharge 
                        planning programs; and
                            ``(ii) demonstrate that adequate home and 
                        community-based long term care management and 
                        services are available, or will be made 
                        available to individuals being served under the 
                        program funded with amounts received under 
                        subsection (b).
                    ``(B) Distribution.--In awarding grants under 
                subsection (b), the Secretary shall ensure that such 
                grants--
                            ``(i) are equitably distributed on a 
                        geographic basis;
                            ``(ii) include projects operating in urban 
                        areas and projects operating in rural areas; 
                        and
                            ``(iii) are awarded for the expansion of 
                        existing hospital linkage programs as well as 
                        the establishment of new programs.
                    ``(C) Expedited consideration.--The Secretary shall 
                provide for the expedited consideration of any waiver 
                application that is necessary under title XIX of the 
                Social Security Act to enable an applicant for a grant 
                under subsection (b) to satisfy the assurance required 
                under paragraph (1)(D).
            ``(4) Use of grants.--An entity that receives amounts under 
        a grant under subsection (b) may use such amounts for planning, 
        development and evaluation services and to provide 
        reimbursements for the costs of one or more case mangers to be 
        located in or assigned to selected hospitals who would--
                    ``(A) identify patients in need of individualized 
                care in home and community-based long-term care;
                    ``(B) assess and develop care plans in cooperation 
                with the hospital discharge planning staff; and
                    ``(C) arrange for the provision of community care 
                either immediately upon discharge from the hospital or 
                after any short term nursing-home stay that is needed 
                for recuperation or rehabilitation;
            ``(5) Direct services subject to reimbursements.--None of 
        the amounts provided under a grant under this section may be 
        used to provide direct services, other than case management, 
        for which reimbursements are otherwise available under title 
        XVIII or XIX of the Social Security Act.
            ``(6) Limitations.--
                    ``(A) Term.--Grants awarded under this section 
                shall be for terms of less than 3 years.
                    ``(B) Amount.--Grants awarded to an entity under 
                this section shall not exceed $300,000 per year. The 
                Secretary may waive the limitation under this 
                subparagraph where an applicant demonstrates that the 
                number of hospitals or individuals to be served under 
                the grant justifies such increased amounts.
                    ``(C) Supplanting of funds.--Amounts awarded under 
                a grant under this section may not be used to supplant 
                existing State funds that are provided to support 
                hospital link programs.
    ``(d) Evaluation and Reports.--
            ``(1) By grantees.--An entity that receives a grant under 
        this section shall evaluate the effectiveness of the services 
        provided under the grant in facilitating the placement of 
        individuals being discharged from hospitals or acute care 
        facilities into home and community-based long term care 
        settings rather than nursing homes. Such entity shall prepare 
        and submit to the Secretary a report containing such 
        information and data concerning the activities funded under the 
        grant as the Secretary determines appropriate.
            ``(2) By secretary.--Not later than the end of the third 
        fiscal year for which funds are appropriated under subsection 
        (e), the Secretary shall prepare and submit to the appropriate 
        committees of Congress, a report concerning the results of the 
        evaluations and reports conducted and prepared under paragraph 
        (1).
    ``(e) Authorization of Appropriations.--There are authorized to be 
appropriated to carry out this section, $5,000,000 for each of the 
fiscal years 1994 through 1996.''.

  Subtitle C--Long-Term Care Insurance Improvement and Accountability

SEC. 2200. SHORT TITLE.

    This subtitle may be cited as the ``Long-Term Care Insurance 
Improvement and Accountability Act''.

          PART 1--PROMULGATION OF STANDARDS AND MODEL BENEFITS

SEC. 2201. STANDARDS.

    (a) Application of Standards.--
            (1) In general.--Except as provided in paragraph (2), the 
        Secretary, in consultation with the NAIC, shall develop and 
        publish specific standards to implement the standards specified 
        in this subtitle.
            (2) State standards.--Nothing in this subtitle shall be 
        construed as preventing a participating State from applying 
        standards that provide greater protection to insured 
        individuals under long-term care insurance policies than the 
        standards promulgated under this subtitle, except that such 
        State standards may not be inconsistent with any of the 
        standards specified in this subtitle.
    (b) Deadline for Application of Standards.--
            (1) In general.--Subject to paragraph (2), the date 
        specified in this subsection for a State is--
                    (A) the date the State adopts the standards 
                established under subsection (a)(1); or
                    (B) the date that is 1 year after the first day of 
                the first regular legislative session that begins after 
                the date such standards are first established under 
                subsection (a)(2);
        whichever is earlier.
            (2) State requiring legislation.--In the case of a State 
        which the Secretary identifies, in consultation with the NAIC, 
        as--
                    (A) requiring State legislation (other than 
                legislation appropriating funds) in order for the 
                standards established under subsection (a) to be 
                applied; but
                    (B) having a legislature which is not scheduled to 
                meet within 1 year following the beginning of the next 
                regular legislative session in which such legislation 
                may be considered;
        the date specified in this subsection is the first day of the 
        first calendar quarter beginning after the close of the first 
        legislative session of the State legislature that begins on or 
        after January 1, 1995. For purposes of the previous sentence, 
        in the case of a State that has a 2-year legislative session, 
        each year of such session shall be deemed to be a separate 
        regular session of the State legislature.
    (c) Items Included in Standards.--The standards promulgated under 
subsection (a) shall include--
            (1) minimum Federal standards for long-term care insurance 
        consistent with the provisions of this subtitle;
            (2) standards for the enhanced protection of consumers with 
        long-term care insurance; and
            (3) procedures for the modification of the standards 
        established under paragraph (1) in a manner consistent with 
        future laws to expand existing Federal or State long-term care 
        benefits or establish a comprehensive Federal or State long-
        term care benefit program.
    (d) Consultation.--In establishing standards and models of benefits 
under this section, the Secretary shall, after consultation with 
representatives of carriers, consumer groups, and providers of long-
term care services--
            (1) recommend the appropriate inflationary index to be used 
        with respect to the inflation protection benefit portion of the 
        standards;
            (2) recommend the uniform needs assessment mechanism to be 
        used in determining the eligibility of individuals for benefits 
        under a policy;
            (3) recommend appropriate standards for the regulation of 
        the insurance aspects of supported housing arrangements; and
            (4) perform such other activities as determined appropriate 
        by the Secretary.

 PART 2--ESTABLISHMENT AND IMPLEMENTATION OF LONG-TERM CARE INSURANCE 
                            POLICY STANDARDS

SEC. 2211. IMPLEMENTATION OF POLICY STANDARDS.

    (a) In General.--
            (1) Regulatory program.--No long-term care policy (as 
        defined in section (2221)) may be issued, sold, or offered for 
        sale as a long-term care insurance policy in a State on or 
        after the date specified in section 2201(b) unless--
                    (A) the Secretary determines that the State has 
                established a regulatory program that--
                            (i) provides for the application and 
                        enforcement of the standards established under 
                        section 2201(a); and
                            (ii) complies with the requirements of 
                        subsection (b);
                by the date specified in section 2201(b), and the 
                policy has been approved by the State commissioner or 
                superintendent of insurance under such program; or
                    (B) if the State has not established such a 
                program, or if the State's regulatory program has been 
                decertified, the policy has been certified by the 
                Secretary (in accordance with such procedures as the 
                Secretary may establish) as meeting the standards 
                established under section 2201(a) by the date specified 
                in section 2201(b).
        For purposes of this subsection, the advertising or soliciting 
        with respect to a policy, directly or indirectly, shall be 
        deemed the offering for sale of the policy.
            (2) Review of state regulatory programs.--The Secretary 
        shall review regulatory programs described in paragraph (1)(A) 
        at least biannually to determine if they continue to provide 
        for the application and enforcement of the standards and 
        procedures established under section 2201(a) and (b). If the 
        Secretary determines that a State regulatory program no longer 
        meets such standards and requirements, before making a final 
        determination, the Secretary shall provide the State an 
        opportunity to adopt such a plan of correction as would permit 
        the program to continue to meet such standards and 
        requirements. If the Secretary makes a final determination that 
        the State regulatory program, after such an opportunity, fails 
        to meet such standards and requirements, the Secretary shall 
        assume responsibility under paragraph (1)(B) with respect to 
        certifying policies in the State and shall exercise full 
        authority under section 2201 for carriers, agents, or 
        associations or its subsidiary in the State plans in the State.
    (b) Additional Requirements for Approval of State Regulatory 
Programs.--For purposes of subsection (a)(1)(A)(ii), the requirements 
of this subsection for a State regulatory program are as follows:
            (1) Enforcement.--The enforcement under the program--
                    (A) shall be designed in a manner so as to secure 
                compliance with the standards within 30 days after the 
                date of a finding of noncompliance with such standards; 
                and
                    (B) shall provide for notice in the annual report 
                required under paragraph (5) to the Secretary of cases 
                where such compliance is not secured within such 30-day 
                period.
            (2) Process.--The enforcement process under each State 
        regulatory program shall provide for--
                    (A) procedures for individuals and entities to file 
                written, signed complaints respecting alleged 
                violations of the standards;
                    (B) responding to such complaints within 90 days;
                    (C) the investigation of--
                            (i) those complaints which have a 
                        reasonable probability of validity; and
                            (ii) such other alleged violations of the 
                        standards as the program finds appropriate; and
                    (D) the imposition of appropriate sanctions (which 
                include, in appropriate cases, the imposition of a 
                civil money penalty as provided for in section 2218) in 
                the case of a carrier, agent, or association or its 
                subsidiary determined to have violated the standards.
            (3) Private actions.--An individual may commence a civil 
        action in an appropriate State or United States district court 
        to enforce the provisions of this title and may be awarded 
        appropriate relief and reasonable attorney's fees.
            (4) Consumer access to compliance information.--
                    (A) In general.--A State regulatory program shall 
                provide for consumer access to complaints filed with 
                the State commissioner or superintendent of insurance 
                with respect to long-term care insurance policies.
                    (B) Confidentiality.--The access provided under 
                subparagraph (A) shall be limited to the extent 
                required to protect the confidentiality of the identity 
                of individual policyholders.
            (5) Process for approval of premiums.--
                    (A) In general.--Each State regulatory program 
                shall--
                            (i) provide for a process for approving or 
                        disapproving proposed premium increases or 
                        decreases with respect to long-term care 
                        insurance policies; and
                            (ii) establish a policy for receipt and 
                        consideration of public comments before 
                        approving such a premium increase or decrease.
                    (B) Conditions for approval.--No premium increase 
                shall be approved (or deemed approved) under 
                subparagraph (A) unless the proposed increase is 
                accompanied by an actuarial memorandum which--
                            (i) includes a description of the 
                        assumptions that justify the increase, 
                        including a financial report on expenditures;
                            (ii) contains such information as may be 
                        required under the Standards; and
                            (iii) is made available to the public.
                    (C) Application.--Except as provided in 
                subparagraph (D), this paragraph shall not apply to a 
                group long-term care insurance policy issued to a group 
                described in section 4(E)(1) of the NAIC Long Term Care 
                Insurance Model Act (effective January 1991), except 
                that such group policy shall, pursuant to guidelines 
                developed by the NAIC, provide notice to policyholders 
                and certificate holders of any premium change under 
                such group policy.
                    (D) Exception.--Subparagraph (C) shall not apply 
                to--
                            (i) group conversion policies;
                            (ii) the group continuation feature of a 
                        group policy if the insurer separately rates 
                        employee and continuation coverages; and
                            (iii) group policies where the function of 
                        the employer is limited solely to collecting 
                        premiums (through payroll deductions or dues 
                        checkoff) and remitting them to the insurer.
                    (E) Construction.--Nothing in this paragraph shall 
                be construed as preventing the Secretary, in 
                consultation with the NAIC, from promulgating 
                standards, or a State from enacting and enforcing laws, 
                with respect to premium rates or loss ratios for all, 
                including group, long-term care insurance policies.
            (6) Annual reports.--Each State regulatory program shall 
        provide for annual reports to be submitted to the Secretary on 
        the implementation and enforcement of the standards in the 
        State, including information concerning violations in excess of 
        30 days.
            (7) Access to other information.--The State regulatory 
        program shall provide for consumer access to actuarial 
        memoranda, including financial information, provided under 
        paragraph (4).
            (8) Default.--In the case of a State without a regulatory 
        program approved under subsection (a), the Secretary shall 
        provide for the enforcement activities described in subsection 
        (c).
    (c) Secretarial Enforcement Authority.--
            (1) In general.--The Secretary shall exercise authority 
        under this section in the case of a State that does not have a 
        regulatory program approved under this section.
            (2) Complaints and investigations.--The Secretary shall 
        establish procedures--
                    (A) for individuals and entities to file written, 
                signed complaints respecting alleged violations of the 
                requirements of this subtitle;
                    (B) for responding on a timely basis to such 
                complaints; and
                    (C) for the investigation of--
                            (i) those complaints that have a reasonable 
                        probability of validity; and
                            (ii) such other alleged violations of the 
                        requirements of this subtitle as the Secretary 
                        determines to be appropriate.
        In conducting investigations under this subsection, agents of 
        the Secretary shall have reasonable access necessary to enable 
        such agents to examine evidence of any carrier, agent, or 
        association or its subsidiary being investigated.
            (3) Hearings.--
                    (A) In general.--Prior to imposing an order 
                described in paragraph (4) against a carrier, agent, or 
                association or its subsidiary under this section for a 
                violation of the requirements of this subtitle, the 
                Secretary shall provide the carrier, agent, association 
                or subsidiary with notice and, upon request made within 
                a reasonable time (of not less than 30 days, as 
                established by the Secretary by regulation) of the date 
                of the notice, a hearing respecting the violation.
                    (B) Conduct of hearing.--Any hearing requested 
                under subparagraph (A) shall be conducted before an 
                administrative law judge. If no hearing is so 
                requested, the Secretary's imposition of the order 
                shall constitute a final and unappealable order.
                    (C) Authority in hearings.--In conducting hearings 
                under this paragraph--
                            (i) agents of the Secretary and 
                        administrative law judges shall have reasonable 
                        access necessary to enable such agents and 
                        judges to examine evidence of any carrier, 
                        agent, or association or its subsidiary being 
                        investigated; and
                            (ii) administrative law judges, may, if 
                        necessary, compel by subpoena the attendance of 
                        witnesses and the production of evidence at any 
                        designated place or hearing.
                In case of contumacy or refusal to obey a subpoena 
                lawfully issued under this subparagraph and upon 
                application of the Secretary, an appropriate district 
                court of the United States may issue an order requiring 
                compliance with such subpoena and any failure to obey 
                such order may be punished by such court as a contempt 
                thereof.
                    (D) Issuance of orders.--If an administrative law 
                judge determines in a hearing under this paragraph, 
                upon the preponderance of the evidence received, that a 
                carrier, agent, or association or its subsidiary named 
                in the complaint has violated the requirements of this 
                subtitle, the administrative law judge shall state the 
                findings of fact and issue and cause to be served on 
                such carrier, agent, association, or subsidiary an 
                order described in paragraph (4).
            (4) Cease and desist order with civil money penalty.--
                    (A) In general.--Subject to the provisions of 
                subparagraphs (B) through (F), an order under this 
                paragraph--
                            (i) shall require the agent, association or 
                        its subsidiary, or a carrier--
                                    (I) to cease and desist from such 
                                violations; and
                                    (II) to pay a civil penalty in an 
                                amount not to exceed $15,000 in the 
                                case of each agent, and not to exceed 
                                $25,000 for each association or its 
                                subsidiary or a carrier for each such 
                                violation; and
                            (ii) may require the agent, association or 
                        its subsidiary, or a carrier to take such other 
                        remedial action as is appropriate.
                    (B) Corrections within 30 days.--No order shall be 
                imposed under this paragraph by reason of any violation 
                if the carrier, agent, or association or its subsidiary 
                establishes to the satisfaction of the Secretary that--
                            (i) such violation was due to reasonable 
                        cause and was not intentional and was not due 
                        to willful neglect; and
                            (ii) such violation is corrected within the 
                        30-day period beginning on the earliest date 
                        the carrier, agent, association, or subsidiary 
                        knew, or exercising reasonable diligence could 
                        have known, that such a violation was 
                        occurring.
                    (C) Waiver by secretary.--In the case of a 
                violation under this subtitle that is due to reasonable 
                cause and not to willful neglect, the Secretary may 
                waive part or all of the civil money penalty imposed 
                under subparagraph (A)(i)(II) to the extent that 
                payment of such penalty would be grossly excessive 
                relative to the violation involved and to the need for 
                deterrence of violations.
                    (D) Administrative appellate review.--The decision 
                and order of an administrative law judge under this 
                paragraph shall become the final agency decision and 
                order of the Secretary unless, within 30 days, the 
                Secretary modifies or vacates the decision and order, 
                in which case the decision and order of the Secretary 
                shall become a final order under this paragraph.
                    (E) Judicial review.--A carrier, agent, or 
                association or its subsidiary or any other individual 
                adversely affected by a final order issued under this 
                paragraph may, within 45 days after the date the final 
                order is issued, file a petition in the Court of 
                Appeals for the appropriate circuit for review of the 
                order.
                    (F) Enforcement of orders.--If a carrier, agent, or 
                association or its subsidiary fails to comply with a 
                final order issued under this paragraph against the 
                carrier, agent, association or subsidiary after 
                opportunity for judicial review under subparagraph (E), 
                the Secretary shall file a suit to seek compliance with 
                the order in any appropriate district court of the 
                United States. In any such suit, the validity and 
                appropriateness of the final order shall not be subject 
                to review.

SEC. 2212. REGULATION OF SALES PRACTICES.

    (a) Duty of Good Faith and Fair Dealing.--
            (1) In general.--Each agent (as defined in section 2233) or 
        association that is selling or offering for sale a long-term 
        care insurance policy has the duty of good faith and fair 
        dealing to the purchaser or potential purchaser of such a 
        policy.
            (2) Policy replacement form.--With respect to any 
        individual who elects to replace or effect a change in a long-
        term care insurance policy, the individual that is selling such 
        policy shall ensure that such individual completes a policy 
        replacement form developed by the Secretary, in consultation 
        with the NAIC. A copy of such form shall be provided to such 
        individual and additional copies shall be delivered by the 
        selling individual to the old policy issuer and the new issuer 
        and kept on file for inspection by the State regulatory agency.
            (3) Prohibited practices.--An agent or association is 
        considered to have violated paragraph (1) if the agent or 
        association engages in any of the following practices:
                    (A) Twisting.--Knowingly making any misleading 
                representation (including the inaccurate completion of 
                medical histories) or incomplete or fraudulent 
                comparison of any long-term care insurance policy or 
                insurers for the purpose of inducing, or tending to 
                induce, any individual to retain or effect a change 
                with respect to a long-term care insurance policy.
                    (B) High pressure tactics.--Employing any method of 
                marketing having the effect of, or intending to, induce 
                the purchase of long-term care insurance policy through 
                force, fright, threat or undue pressure, whether 
                explicit or implicit.
                    (C) Cold lead advertising.--Making use directly or 
                indirectly of any method of marketing which fails to 
                disclose in a conspicuous manner that a purpose of the 
                method of marketing is solicitation of insurance and 
                that contact will be made by an insurance agent or 
                insurance company.
                    (D) Others.--Engaging in such other practices 
                determined inappropriate under guidelines issued by the 
                Secretary, in consultation with the NAIC.
    (b) Financial Needs Standards.--The Secretary, in consultation with 
the NAIC, shall develop recommended minimum financial needs standards 
(including both income and asset criteria) for the purpose of advising 
individuals as to the costs and amounts of insurance needed when 
considering the purchase of a long-term care insurance policy.
    (c) Prohibition of Sale or Issuance to Medicaid Beneficiaries.--An 
agent, an association, or a carrier may not knowingly sell or issue a 
long-term care insurance policy to an individual who is eligible for 
medical assistance under title XIX of the Social Security Act.
    (d) Prohibition of Sale or Issuance of Duplicate Service Benefit 
Policies.--An agent, association or its subsidiary, or a carrier may 
not sell or issue a service-benefit long-term care insurance policy to 
an individual--
            (1) knowing that the policy provides for coverage that 
        duplicates coverage already provided in another service-benefit 
        long-term care insurance policy held by such individual (unless 
        the policy is intended to replace such other policy); or
            (2) for the benefit of an individual unless the individual 
        (or a representative of the individual) provides a written 
        statement to the effect that the coverage--
                    (A) does not duplicate other coverage in effect 
                under a service-benefit long-term care insurance 
                policy; or
                    (B) will replace another service-benefit long-term 
                care insurance policy.
In this subsection, the term ``service-benefit long-term care insurance 
policy'' means a long-term care insurance policy which provides for 
benefits based on the type and amount of services furnished.
    (e) Prohibition Based on Eligibility for Other Benefits.--A carrier 
may not sell or issue a long-term care insurance policy that reduces, 
limits, or coordinates the benefits provided under the policy on the 
basis that the policyholder has or is eligible for other long-term care 
insurance coverage or benefits.
    (f) Provision of Outline of Coverage.--No agent, association or its 
subsidiary, or carrier may sell or offer for sale a long-term care 
insurance policy without providing to every individual purchaser or 
potential purchaser (or representative) an outline of coverage that 
complies with the standards established under section 2201(a).
    (g) Penalties.--Any agent who sells, offers for sale, or issues a 
long-term care insurance policy in violation of this section may be 
imprisoned not more than 5 years, or fined in accordance with title 18, 
United States Code, and, in addition, is subject to a civil money 
penalty of not to exceed $15,000 for each such violation. Any 
association or its subsidiary or carrier that sells, offers for sale, 
or issues a long-term care insurance policy in violation of this 
section may be fined in accordance with title 18, United States Code, 
and in addition, is subject to a civil money penalty of not to exceed 
$25,000 for each violation. Nothing in this subsection shall be 
construed as preempting or otherwise limiting the penalties that may be 
imposed by a State for conduct that violates this section.
    (h) Agent Training and Certification Requirements.--The Secretary, 
in consultation with the NAIC, shall establish requirements for long-
term care insurance agent training and certification that--
            (1) specify requirements for training insurance agents who 
        desire to sell or offer for sale long-term care insurance 
        policies; and
            (2) specify procedures for certifying and recertifying 
        agents who have completed such training and who are qualified 
        to sell or offer for sale long-term care insurance policies.

SEC. 2213. ADDITIONAL RESPONSIBILITIES FOR CARRIERS.

    (a) Refund of Premiums.--If an application for a long-term care 
insurance policy (or for a certificate under a group long-term care 
insurance policy) is denied or an applicant returns a policy or 
certificate within 30 days of the date of its issuance pursuant to 
subsection 2217, the carrier shall, not later than 30 days after the 
date of the denial or return, refund directly to the applicant, or in 
the case of an employer to whomever remits the premium, any premiums 
paid with respect to such a policy (or certificate). Any such refund 
shall not be made by delivery by the carrier.
    (b) Mailing of Policy.--If an application for a long-term care 
insurance policy (or for a certificate under a group long-term care 
insurance policy) is approved, the carrier shall provide each 
individual applicant the policy (or certificate) of insurance and 
outline of coverage not later than 30 days after the date of the 
approval.
    (c) Information on Denials of Claims.--If a claim under a long-term 
care insurance policy is denied, the carrier shall, within 15 days of 
the date of a written request by the policyholder or certificate holder 
(or representative)--
            (1) provide a written explanation of the reasons for the 
        denial;
            (2) make available all medical and patient records directly 
        relating to such denial; and
            (3) provide a written explanation of the manner in which to 
        appeal the denial.
Except as provided in subsection (e) of section 2215, no claim under 
such a policy may be denied on the basis of a failure to disclose a 
condition at the time of issuance of the policy if the application for 
the policy failed to request information respecting the condition.
    (d) Reporting of Information.--A carrier that issues one or more 
long-term care insurance policies shall periodically (not less often 
than annually) report, in a form and in a manner determined by the 
Secretary, in consultation with the NAIC, to the Commissioner, 
superintendent or director of insurance of each State in which the 
policy is delivered, and shall make available to the Secretary, upon 
request, information in a form and manner determined by the Secretary, 
in consultation with the NAIC, concerning--
            (1) the long-term care insurance policies of the carrier 
        that are in force;
            (2) the most recent premiums for such policies and the 
        premiums imposed for such policies since their initial 
        issuance;
            (3) the lapse rate, replacement rate, and rescission rates 
        by policy;
            (4) the names of that 10 percent of its agents that--
                    (A) have the greatest lapse and replacement rate; 
                and
                    (B) have produced at least $50,000 of long-term 
                care insurance sales in the previous year; and
            (5) the claims denied (expressed as a number and as a 
        percentage of claims submitted) by policy.
Information required under this subsection shall be reported in a 
format specified in the standards established under section 2201(a). 
For purposes of paragraph (3), there shall be included (but reported 
separately) data concerning lapses due to the death of the 
policyholder. For purposes of paragraph (4), there shall not be 
included as a claim any claim that is denied solely because of the 
failure to meet a deductible, waiting period, or exclusionary period.
    (e) Standards on Compensation for Sale of Policies.--
            (1) In general.--Until the Secretary, in consultation with 
        the NAIC, promulgates mandatory standards concerning 
        compensation for the sale of long-term care policies, a carrier 
        that issues one or more long-term care insurance policies may 
        provide a commission or other compensation to an agent or other 
        representative for the sale of such a policy only if the first 
        year commission or other first year compensation to be paid 
        does not exceed--
                    (A) 200 percent of the commission or other 
                compensation paid for selling or servicing the policy 
                in the second year, or
                    (B) 50 percent of the premium paid on the first 
                year policy.
            (2) Subsequent years.--The commission or other compensation 
        provided for the sale of long-term care policies to an 
        individual during each of the years during the 5-year period 
        subsequent to the first year of the policy shall be the same as 
        that provided in the second subsequent year.
            (3) Limitation.--No carrier shall provide compensation to 
        its agents for the sale of a long-term care policy which 
        replaces an existing policy, and no agent shall receive 
        compensation for such sale greater than the renewal 
        compensation payable by the replacing carrier on renewal 
        policies.
            (4) Compensation defined.--As used in this subsection, the 
        term ``compensation'' includes pecuniary or nonpecuniary 
        remuneration of any kind relating to the sale or renewal of the 
        policy, including, but not limited to, deferred compensation, 
        bonuses, gifts, prizes, awards, and finders fees.

SEC. 2214. RENEWABILITY STANDARDS FOR ISSUANCE, AND BASIS FOR 
              CANCELLATION OF POLICIES.

    (a) In General.--No long-term care insurance policy may be canceled 
or nonrenewed for any reason other than nonpayment of premium, material 
misrepresentation, or fraud.
    (b) Continuation and Conversion Rights for Group Policies.--
            (1) In general.--Each group long-term care insurance policy 
        shall provide covered individuals with a basis for continuation 
        or conversion in accordance with this subsection.
            (2) Basis for continuation.--For purposes of paragraph (1), 
        a policy provides a basis for continuation of coverage if the 
        policy maintains coverage under the existing group policy when 
        such coverage would otherwise terminate and which is subject 
        only to the continued timely payment of premiums when due. A 
        group policy which restricts provision of benefits and services 
        to, or contains incentives to use certain providers or 
        facility, may provide continuation benefits which are 
        substantially equivalent to the benefits of the existing group 
        policy.
            (3) Basis for conversion.--For purposes of paragraph (1), a 
        policy provides a basis for conversion of coverage if the 
        policy entitles each individual--
                    (A) whose coverage under the group policy would 
                otherwise be terminated for any reason; and
                    (B) who has been continuously insured under the 
                policy (or group policy which was replaced) for at 
                least 6 months before the date of the termination;
        to issuance of a policy providing benefits not less than, 
        substantially equivalent to, or in excess of, those of the 
        policy being terminated, without evidence of insurability.
            (4) Treatment of substantial equivalence.--In determining 
        under this subsection whether benefits are substantially 
        equivalent, consideration should be given to the difference 
        between managed care and non-managed care plans.
            (5) Group replacement of policies.--If a group long-term 
        care insurance policy is replaced by another long-term care 
        insurance policy purchased by the same policyholder, the 
        succeeding issuer shall offer coverage to all individuals 
        covered under the old group policy on its date of termination. 
        Coverage under the new group policy shall not result in any 
        exclusion for preexisting conditions that would have been 
        covered under the group policy being replaced.
    (c) Standards for Issuance.--
            (1) In general.--
                    (A) Guarantee.--An agent, association or carrier 
                that sells or issues long-term care insurance policies 
                shall guarantee that such policies shall be sold or 
                issued to an individual, or eligible individual in the 
                case of a group plan, if such individual meets the 
                minimum medical underwriting requirements of such 
                policy.
                    (B) Premium for converted policy.--If a group 
                policy from which conversion is made is a replacement 
                for a previous group policy, the premium for the 
                converted policy shall be calculated on the basis of 
                the insured's age at the inception of coverage under 
                the group policy from which conversion is made. Where 
                the group policy from which conversion is made replaced 
                previous group coverage, the premium for the converted 
                policy shall be calculated on the basis of the 
                insured's age at inception of coverage under the group 
                policy replaced.
            (2) Upgrade for current policies.--The Secretary, in 
        consultation with the NAIC, shall establish standards, 
        including those providing guidance on medical underwriting and 
        age rating, with respect to the access of individuals to 
        policies offering upgraded benefits.
            (3) Rate stabilization.--The Secretary, in consultation 
        with the NAIC, shall establish standards for premium rate 
        stabilization.
    (d) Effect of Incapacitation.--
            (1) In general.--
                    (A) Prohibition.--Except as provided in paragraph 
                (2), a long-term care insurance policy in effect as of 
                the effective date of the standards established under 
                section 2201(a) may not be canceled for nonpayment if 
                the policy holder is determined by a long-term care 
                provider, physician, or other health care provider 
                (independent of the issuer of the policy), to be 
                cognitively or mentally incapacitated so as to not make 
                payments in a timely manner.
                    (B) Reinstatement.--A long-term care policy shall 
                include a provision that provides for the reinstatement 
                of such coverage, in the event of lapse, if the insurer 
                is provided with proof of cognitive or mental 
                incapacitation. Such reinstatement option shall remain 
                available for a period of not less than 5 months after 
                termination and shall allow for the collection of past 
                due premium.
            (2) Permitted cancellation.--A long-term care insurance 
        policy may be canceled under paragraph (1) for nonpayment if--
                    (A) the period of such nonpayment is in excess of 
                30 days; and
                    (B) notice of intent to cancel is provided to the 
                policyholder or designated representative of the policy 
                holder not less than 30 days prior to such 
                cancellation, except that notice may not be provided 
                until the expiration of 30 days after a premium is due 
                and unpaid.
        Notice under this paragraph shall be deemed to have been given 
        as of 5 days after the mailing date.

SEC. 2215. BENEFIT STANDARDS.

    (a) Use of Standard Definitions and Terminology, Uniform Format, 
and Standard Benefits.--Pursuant to standards established under section 
2201(a), each long-term care insurance policy shall, with respect to 
services, providers or facilities--
            (1) use uniform language and definitions, except that such 
        language and definitions may take into account the differences 
        between States with respect to definitions and terminology used 
        for long-term care services and providers; and
            (2) use a uniform format for presenting the outline of 
        coverage under such a policy;
as prescribed under guidelines issued by the Secretary, in consultation 
with the NAIC, and periodically updated.
    (b) Disclosure.--
            (1) Outline of coverage.--
                    (A) Requirement.--Each carrier that sells or offers 
                for sale a long-term care insurance policy shall 
                provide an outline of coverage to each individual 
                policyholder under such policy that meets the 
                applicable standards established pursuant to section 
                2201(a), complies with the requirements of subparagraph 
                (B), and is in a uniform format as prescribed in 
                guidelines issued by the Secretary, in consultation 
                with the NAIC, and periodically updated.
                    (B) Contents.--The outline of coverage for each 
                long-term care policy shall substantially and 
                accurately reflect the contents of the policy or the 
                master policy and shall include at least the following:
                            (i) A description of the benefits and 
                        coverage under the policy.
                            (ii) A statement of the exclusions, 
                        reductions, and limitations contained in the 
                        policy.
                            (iii) A statement of the terms under which 
                        the policy (or certificate) may be continued in 
                        force or discontinued, the terms for 
                        continuation or conversion, and any reservation 
                        in the policy of a right to change premiums.
                            (iv) Consumer protection information, 
                        including the manner in which to file a claim 
                        and to register complaints.
                            (v) A statement, in bold face type on the 
                        face of the document in language that is 
                        understandable to an average individual, that 
                        the outline of coverage is a summary only and 
                        not a contract of insurance, and that the 
                        policy (or master policy) contains the 
                        contractual provisions that govern.
                            (vi) A description of the terms, specified 
                        in section 2217, under which a policy or 
                        certificate may be returned and premium 
                        refunded.
                            (vii) Information on--
                                    (I) national average costs for 
                                nursing facility and home health care 
                                and information (in graph form) on the 
                                relationship of the value of the 
                                benefits provided under the policy to 
                                such national average costs and State 
                                average costs; and
                                    (II) other public and private long-
                                term care insurance products and long-
                                term care programs where made available 
                                by the Federal Government or by a State 
                                government.
                            (viii) A statement of the percentage limit 
                        on annual premium increases that is provided 
                        under the policy pursuant to this section.
            (2) Certificates.--A certificate issued pursuant to a group 
        long-term care insurance policy shall include--
                    (A) a description of the principal benefits and 
                coverage provided in the policy;
                    (B) a statement of the principal exclusions, 
                reductions, and limitations contained in the policy; 
                and
                    (C) a statement that the group master policy 
                determines governing contractual provisions.
            (3) Long-term care as part of life insurance.--In the case 
        of a long-term care insurance policy issued as a part of, or a 
        rider on, a life insurance policy, at the time of policy 
        delivery there shall be provided a policy summary that 
        includes--
                    (A) an explanation of how the long-term care 
                benefits interact with other components of the policy 
                (including deductions from death benefits);
                    (B) an illustration of the amount of benefits, the 
                length of benefits, and the guaranteed lifetime 
                benefits (if any) for each covered individual; and
                    (C) any exclusions, reductions, and limitations on 
                benefits of long-term care.
            (4) Additional information.--The Secretary, in consultation 
        with the NAIC shall develop recommendations with respect to 
        informing consumers of the long-term economic viability of 
        carriers issuing long-term care insurance policies.
    (c) Limiting Conditions on Benefits; Minimum Benefits.--
            (1) In general.--A long-term care insurance policy may not 
        condition or limit eligibility--
                    (A) for benefits for a type of services to the need 
                for or receipt of any other services;
                    (B) for any benefit on the medical necessity for 
                such benefit;
                    (C) for benefits furnished by licensed or certified 
                providers in compliance with conditions which are in 
                addition to those required for licensure or 
                certification under State law, or if no State licensure 
                or certification laws exists, developed by the 
                Secretary, in consultation with the NAIC; or
                    (D) for residential care (if covered under the 
                policy) only--
                            (i) to care provided in facilities which 
                        provide a higher level of care; or
                            (ii) to care provided in facilities which 
                        provide for 24-hour or other nursing care not 
                        required in order to be licensed by the State.
            (2) Home health care or community-based services.--If a 
        long-term care insurance policy provides benefits for the 
        payment of specified home health care or community-based 
        services, the policy--
                    (A) may not limit such benefits to services 
                provided by registered nurses or licensed practical 
                nurses;
                    (B) may not require benefits for such services to 
                be provided by a nurse or therapist that can be 
                provided by a home health aide or a home care worker 
                who is licensed or certified under State licensure or 
                certification laws, or if no such laws exist, who is in 
                compliance with qualifications developed by the 
                Secretary, in consultation with the NAIC;
                    (C) may not limit such benefits to services 
                provided by agencies or providers certified under title 
                XVIII of the Social Security Act; and
                    (D) shall provide, at a minimum--
                            (i) benefits for personal care services 
                        (including home health aide and home care 
                        worker services as defined by the Secretary, in 
                        consultation with the NAIC), home health 
                        services, adult day care, and respite care in 
                        an individual's home or in another setting in 
                        the community; or
                            (ii) any of such benefits on a respite care 
                        basis.
            (3) Nursing facility services.--If a long-term care policy 
        provides benefits for the payment of specified nursing facility 
        services, the policy shall provide such benefits with respect 
        to all nursing facilities in the State. Except as provided by 
        the Secretary, in consultation with the NAIC, under uniform 
        language and definitions established under section 2215(a)(1)), 
        the term `nursing facilities' has the meaning given such term 
        by section 1919(a) of the Social Security Act.
            (4) Per diem policies.--
                    (A) Definition.--For purposes of this subtitle, the 
                term ``per diem long-term care insurance policy'' means 
                a long-term care insurance policy (or certificate under 
                a group long-term care insurance policy) that provides 
                for benefit payments on a periodic basis due to 
                cognitive impairment or loss of functional capacity 
                without regard to the expenses incurred or services 
                rendered during the period to which the payments 
                relate.
                    (B) Limitation.--No per diem long-term care 
                insurance policy (or certificate) may condition, limit 
                or otherwise exclude benefit payments based on the 
                receipt of any type services from any type providers of 
                long-term care service providers.
    (d) Prohibition of Discrimination.--A long-term care insurance 
policy may not, with respect to benefits under the policy, treat an 
individual with Alzheimer's disease, with any related progressive 
degenerative dementia of an organic origin, with any organic or 
inorganic mental illness, or with mental retardation or any other 
cognitive or mental impairment, differently from an individual having a 
functional impairment for which such benefits may be made available.
    (e) Limitation on Use of Preexisting Condition Limits.--
            (1) Initial issuance.--
                    (A) In general.--Subject to subparagraph (B), a 
                long-term care insurance policy may not exclude or 
                condition benefits based on a medical condition for 
                which the policyholder received treatment or was 
                otherwise diagnosed before the issuance of the policy.
                    (B) 6-month limit.--A long-term care policy or 
                certificate issued under this subtitle may impose a 
                limitation or exclusion of benefits relating to 
                treatment of a condition based on the fact that the 
                condition preexisted the effective date of the policy 
                or certificate with respect to an individual if--
                            (i) a condition that was diagnosed or 
                        treated during the 6-month period ending on the 
                        day before the first date of coverage under the 
                        policy or certificate; and
                            (ii) the limitation or exclusion extends 
                        for a period not more than 6 months after the 
                        date of coverage under the policy or 
                        certificate.
            (2) Replacement policies.--If a long-term care insurance 
        policy replaces another long-term care insurance policy, the 
        issuer of the replacing policy shall waive any time periods 
        applicable to preexisting conditions, waiting periods, 
        elimination periods, and probationary periods in the new policy 
        for similar benefits to the extent such time was spent under 
        the original policy.
    (f) Eligibility for Benefits.--
            (1) Long-term care policies.--Each long-term care insurance 
        policy shall--
                    (A) describe the level of benefits available under 
                the policy; and
                    (B) specify in clear, understandable terms, the 
                level (or levels) of physical, cognitive, or mental 
                impairment required in order to receive benefits under 
                the policy.
            (2) Functional assessment.--In order to submit a claim 
        under any long-term care insurance policy, each claimant shall 
        have a professional functional assessment of his or her 
        functional or cognitive abilities. Such initial assessment 
        shall be conducted by an individual or entity, meeting the 
        qualifications established by the Secretary, in consultation 
        with the NAIC, to assure the professional competence and 
        credibility of such individual or entity and that such 
        individual meets any applicable State licensure and 
        certification requirements. The individual or entity conducting 
        such assessment may not control, or be controlled by, the 
        issuer of the policy.
            (3) Claims review.--Except as provided in paragraph (4), 
        each long-term care insurance policy shall be subject to final 
        claims review by the carrier pursuant to the terms of the long-
        term care insurance policy.
            (4) Appeals process.--
                    (A) In general.--Each long-term care insurance 
                policy shall provide for a timely and independent 
                appeals process, meeting standards established by the 
                Secretary, in consultation with the NAIC, for 
                individuals who dispute the results of the claims 
                review conducted under paragraph (3) or the 
                policyholder's functional assessment conducted under 
                paragraph (2).
                    (B) Independent assessment.--An appeals process 
                under this paragraph shall include, at the request of 
                the claimant, an independent assessment of the 
                claimant's functional or cognitive abilities.
                    (C) Conduct.--An independent assessment under 
                subparagraph (B) shall be conducted by an individual or 
                entity meeting the qualifications established by the 
                Secretary, in consultation with the NAIC, to assure the 
                professional competence and credibility of such 
                individual or entity and any applicable State licensure 
                and certification requirements and may not be 
                conducted--
                            (i) by an individual who has a direct or 
                        indirect significant or controlling interest 
                        in, or direct affiliation or relationship with, 
                        the issuer of the policy;
                            (ii) by an entity that provides services to 
                        the policyholder or certificate holder for 
                        which benefits are available under the long-
                        term care insurance policy; or
                            (iii) by an individual or entity in control 
                        of, or controlled by, the issuer of the policy.
            (5) Standard assessments.--Not later than 2 years after the 
        date of enactment of this subtitle, the advisory committee 
        established under section 2201(d) shall recommend uniform needs 
        assessment mechanisms for the determination of eligibility for 
        benefits under such assessments.
            (6) Control defined.--For purposes of paragraphs (2) and 
        (4), the term ``control'' means the direct or indirect 
        possession of the power to direct the management and policies 
        of a person. Control is presumed to exist, if any person 
        directly or indirectly, owns, controls, holds with the power to 
        vote, or holds proxies representing at least 10 percent of the 
        voting securities of another person.
    (g) Inflation Protection.--
            (1) Option to purchase.--A carrier may not offer a long-
        term care insurance policy unless the carrier also offers to 
        the proposed policyholder, including each group policyholder, 
        the option to purchase a long-term care insurance policy that 
        provides for increases in benefit levels, with benefit maximums 
        or reasonable durations that are meaningful, to account for 
        reasonably anticipated increases in the costs of long-term care 
        services covered by the policy. A carrier may not offer to a 
        policyholder an inflation protection feature that is less 
        favorable to the policyholder than one of the following:
                    (A) With respect to policies that provide for 
                automatic periodic increases in benefits, the policy 
                provides for an annual increase in benefits in a manner 
                so that such increases are computed annually at a rate 
                of not less than 5 percent.
                    (B) With respect to policies that provide for 
                periodic opportunities to elect an increase in 
                benefits, the policy guarantees that the insured 
                individual will have the right to periodically increase 
                the benefit levels under the policy without providing 
                evidence of insurability or health status so long as 
                the option for the previous period was not declined. 
                The amount of any such additional benefit may not be 
                less than the difference between--
                            (i) the existing policy benefit; and
                            (ii) such existing benefit compounded 
                        annually at a rate of at least 5 percent for 
                        the period beginning on the date on which the 
                        existing benefit is purchased and extending 
                        until the year in which the offer of increase 
                        is made.
                    (C) With respect to service benefit policies, the 
                policy covers a specified percentage of the actual or 
                reasonable charges and does not include a maximum 
                specified indemnity amount or limit.
            (2) Exception.--The requirements of paragraph (1) shall not 
        apply to life insurance policies or riders containing 
        accelerated long-term care benefits.
            (3) Required information.--Carriers shall include the 
        following information in or together with the outline of 
        coverage provided under this subtitle:
                    (A) A comparison (shown as a graph) of the benefit 
                levels of a policy that increases benefits over the 
                policy period with a policy that does not increase 
                benefits. Such comparison shall show benefit levels 
                over not less than a 20-year period.
                    (B) Any expected premium increases or additional 
                premiums required to pay for any automatic or optional 
                benefit increases, whether the individual who purchases 
                the policy obtains the inflation protection initially 
                or whether such individual delays purchasing such 
                protection until a future time.
            (4) Continuation of protection.--Benefit increases under a 
        policy described in paragraph (1) shall continue without regard 
        to an insured's age, claim status or claim history, or the 
        length of time the individual has been insured under the 
        policy.
            (5) Constant premium.--A policy described in paragraph (1) 
        that provides for automatic benefit increases shall include an 
        offer of a premium that the carrier expects to remain constant. 
        Such offer shall disclose in a conspicuous manner that the 
        premium may change in the future unless the premium is 
        guaranteed to remain constant.
            (6) Rejection.--Inflation protection under this subsection 
        shall be included in a long-term care insurance policy unless a 
        carrier obtains a written rejection of such protection signed 
        by the policyholder.

SEC. 2216. NONFORFEITURE.

    (a) In General.--Each long-term care insurance policy (or 
certificate) shall provide that if the policy lapses after the policy 
has been in effect for a minimum period (specified under the standards 
under section 2201(a)), the policy will provide, without payment of any 
additional premiums, nonforfeiture benefits as determined appropriate 
by the Secretary, in consultation with the NAIC.
    (b) Establishment of Standards.--The standards under section 
2201(a) shall provide that the percentage or amount of benefits under 
subsection (a) shall increase based upon the policyholder's equity in 
the policy.

SEC. 2217. LIMIT OF PERIOD OF CONTESTABILITY AND RIGHT TO RETURN.

    (a) Contestability.--A carrier may not cancel or renew a long-term 
care insurance policy or deny a claim under the policy based on fraud 
or intentional misrepresentation relating to the issuance of the policy 
unless notice of such fraud or misrepresentation is provided within a 
time period to be determined by the Secretary, in consultation with the 
NAIC.
    (b) Right to Return.--Each applicant for a long-term care insurance 
policy shall have the right to return the policy (or certificates) 
within 30 days of the date of its delivery (and to have the premium 
refunded) if, after examination of the policy or certificate, the 
applicant is not satisfied for any reason.

SEC. 2218. CIVIL MONEY PENALTY.

    (a) Carrier.--Any carrier, association or its subsidiary that sells 
or offers for sale a long-term care insurance policy and that--
            (1) fails to make a refund in accordance with section 
        2213(a);
            (2) fails to transmit a policy in accordance with section 
        2213(b);
            (3) fails to provide, make available, or report information 
        in accordance with subsections (c) or (d) of section 2213;
            (4) provides a commission or compensation in violation of 
        section 2213(e);
            (5) fails to provide an outline of coverage in violation of 
        section 2215(b)(1); or
            (6) issues a policy without obtaining certain information 
        in violation of section 2215(f);
is subject to a civil money penalty of not to exceed $25,000 for each 
such violation.
    (b) Agents.--Any agent that sells or offers for sale a long-term 
care insurance policy and that--
            (1) fails to make a refund in accordance with section 
        2213(a);
            (2) fails to transmit a policy in accordance with section 
        2213(b);
            (3) fails to provide, make available, or report information 
        in accordance with subsections (c) or (d) of section 2213;
            (4) fails to provide an outline of coverage in violation of 
        section 2215(b)(1); or
            (5) issues a policy without obtaining certain information 
        in violation of section 2215(f);
is subject to a civil money penalty of not to exceed $15,000 for each 
such violation.
    (c) Effect on State Law.--Nothing in this section shall be 
construed as preempting or otherwise limiting the penalties that may be 
imposed by a State for the types of conduct described in this section.

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

SEC. 2221. LONG-TERM CARE INSURANCE POLICY DEFINED.

    (a) In General.--As used in this section, the term ``long-term care 
insurance policy'' means any insurance policy, rider or certificate 
advertised, marketed, offered or designed to provide coverage for not 
less than 12 consecutive months for each covered individual on an 
expense incurred, indemnity prepaid or other basis, for one or more 
necessary diagnostic, preventive, therapeutic, rehabilitative, 
maintenance or personal care services, provided in a setting other than 
an acute care unit of a hospital. Such term includes--
            (1) group and individual annuities and life insurance 
        policies, riders or certificates that provide directly, or that 
        supplement long-term care insurance; and
            (2) a policy, rider or certificates that provides for 
        payment of benefits based on cognitive impairment or the loss 
        of functional capacity.
    (b) Issuance.--Long-term care insurance policies may be issued by--
            (1) carriers;
            (2) fraternal benefit societies;
            (3) nonprofit health, hospital, and medical service 
        corporations;
            (4) prepaid health plans;
            (5) health maintenance organizations; or
            (6) any similar organization to the extent they are 
        otherwise authorized to issue life or health insurance.
    (c) Policies Excluded.--The term ``long-term care insurance 
policy'' shall not include any insurance policy, rider or certificate 
that is offered primarily to provide basic Medicare supplement 
coverage, basic hospital expense coverage, basic medical-surgical 
expense coverage, hospital confinement indemnity coverage, major 
medical expense coverage, disability income or related asset-protection 
coverage, accident only coverage, specified disease or specified 
accident coverage, or limited benefit health coverage. With respect to 
life insurance, such term shall not include life insurance policies, 
riders or certificates--
            (1) that accelerate the death benefit specifically for one 
        or more of the qualifying events of terminal illness, medical 
        conditions requiring extraordinary medical intervention, or 
        permanent institutional confinement,
            (2) that provide the option of a lump-sum payment for those 
        benefits, or
            (3) with respect to which neither the benefits nor the 
        eligibility for the benefits is conditioned upon the receipt of 
        long-term care.
    (d) Applications.--Notwithstanding any other provision of this 
subtitle, this subtitle shall apply to any product advertised, marketed 
or offered as a long-term insurance policy, rider or certificate.

SEC. 2222. CODE OF CONDUCT WITH RESPECT TO ENDORSEMENTS.

    Not later than 1 year after the date of enactment of this subtitle, 
the Secretary, in consultation with the NAIC, shall issue guidelines 
that shall apply to organizations and associations (other than 
employers and labor organizations that do not accept compensation) that 
provide endorsements of long-term care insurance policies, or that 
permit such policies to be offered for sale through the organization or 
association. Such guidelines shall include at minimum the following:
            (1) In endorsing or selling long-term care insurance 
        policies, the primary responsibility of an organization or 
        association shall be to educate their members concerning such 
        policies and assist such members in making informed decisions. 
        Such organizations and associations may not function primarily 
        as sales agents for insurance companies.
            (2) Organizations and associations shall provide objective 
        information regarding long-term care insurance policies sold or 
        endorsed by such organizations and associations to ensure that 
        members of such organizations and associations have a balanced 
        and complete understanding of both the strengths and weaknesses 
        of the policies that are being endorsed or sold.
            (3) Organizations and associations selling or endorsing 
        long-term care insurance policies shall disclose in marketing 
        literature provided to their members concerning such policies 
        the manner in which such policies and the insurance company 
        issuing such policies were selected. If the organization or 
        association and the insurance company have interlocking 
        directorates, the organization or association shall disclose 
        such fact to their members.
            (4) Organizations and associations selling or endorsing 
        long-term care insurance policies shall disclose in marketing 
        literature provided to their members concerning such policies 
        the nature and amount of the compensation arrangements 
        (including all fees, commissions, administrative fees and other 
        forms of financial support that the organization or association 
        receives) from the endorsement or sale of the policy to its 
        members.
            (5) The Boards of Directors of organizations and 
        associations selling or endorsing long-term care insurance 
        policies, if such organizations and associations have a Board 
        of Directors, shall review and approve such insurance policies, 
        the compensation arrangements and the marketing materials used 
        to promote sales of such policies.

                         Subtitle D--Life Care

SEC. 2301. SHORT TITLE.

    This title may be cited as the ``Life Care Act''.

SEC. 2302. LIFE CARE: PUBLIC INSURANCE PROGRAM FOR NURSING HOME CARE.

    The Public Health Service Act is amended by adding at the end 
thereof the following new title:

  ``TITLE XXVII--LIFE CARE: PUBLIC INSURANCE PROGRAM FOR NURSING HOME 
                                  CARE

``SEC. 2701. ESTABLISHMENT OF VOLUNTARY LONG-TERM CARE INSURANCE 
              PROGRAM.

    ``The Secretary shall establish a voluntary insurance program for 
individuals 35 years of age and over to cover the nursing home stays of 
such individuals. The Secretary shall establish a process for 
enrollment in the Life Care program.

``SEC. 2702. BENEFITS.

    ``(a) In General.--
            ``(1) Eligibility for coverage.--Subject to subsection (c), 
        an individual who meets the eligibility criteria prescribed in 
        section 2703 shall be eligible under the program established 
        under this title for coverage for necessary services described 
        in subsection (b) (in the amounts described in subsection (c)) 
        that are provided to the individual by a nursing facility while 
        the individual is an inpatient of the facility.
            ``(2) Nonforfeiture.--The Secretary shall establish 
        standards to ensure the nonforfeiture of benefits for which 
        premiums have been paid.
    ``(b) Types.--Coverage may be provided under this title for--
            ``(1) nursing care provided by or under the supervision of 
        a registered professional nurse;
            ``(2) physical, occupational, or speech therapy furnished 
        by a facility or by others under arrangements with a facility;
            ``(3) medical social work services;
            ``(4) drug, biological, supply, appliance, and equipment 
        for use in the facility, that is ordinarily furnished by the 
        facility for the care and treatment of an inpatient;
            ``(5) such other services necessary to the functioning of a 
        patient, including personal care and assistance with activities 
        of daily living, as are generally provided by a nursing home 
        facility; and
            ``(6) with respect to the initial 6 months of covered 
        residence in a nursing facility, such room and board costs as 
        are not covered by beneficiary copayment.
    ``(c) Coverage Amount.--
            ``(1) In general.--The amount of coverage provided with 
        respect to an eligible individual for the services described in 
        subsection (b) shall, based on an election made by the 
        individual, not exceed $30,000, $60,000, or $90,000 over the 
        lifetime of the eligible individual. Such amounts shall be 
        adjusted by the Secretary to reflect increases in the Consumer 
        Price Index.
            ``(2) Asset protection.--An eligible individual shall be 
        entitled to the asset protection provided under section 2708.
    ``(d) Payment.--Amounts provided under this title with respect to 
an eligible individual for the services described in subsection (b) 
shall be paid from the general fund of the Treasury of the United 
States.
    ``(e) Residential Care Facilities.--The Secretary shall consider 
the feasibility of making payments under this title for services 
delivered in residential care facilities. Not later than 2 years after 
the date of enactment of this Act, the Secretary shall report its 
findings to the Congress with respect to the feasibility of making such 
payments.

``SEC. 2703. ELIGIBILITY.

    ``(a) In General.--An individual shall be eligible for benefits 
under this title if--
            ``(1) the individual--
                    ``(A) is a legal resident of the United States and 
                has elected coverage under subsection (c); and
                    ``(B) has been determined by a Screening Agency 
                through a screening process (conducted in accordance 
                with section 2707)--
                            ``(i)(I) to require hands-on or standby 
                        assistance, supervision, or cueing (as defined 
                        in regulations) to perform three or more 
                        activities of daily living; or
                            ``(II) to require hands-on or standby 
                        assistance, supervision, or cueing with at 
                        least such instrumental activity (or 
                        activities) of daily living related to 
                        cognitive or mental impairment as the Secretary 
                        specifies; or
                            ``(III) to display symptoms of one or more 
                        serious behavioral problems (that is on a list 
                        of such problems specified by the Secretary) 
                        which create a need for supervision to prevent 
                        harm to self or others; or
                            ``(IV) has achieved a score, on a standard 
                        mental status protocol (or protocols) 
                        appropriate for measuring the individual's 
                        particular condition specified by the 
                        Secretary, that indicates either severe 
                        cognitive impairment or severe mental 
                        impairment, or both; and
                            ``(ii) to require such assistance, 
                        supervision, or cueing over a period of at 
                        least 90 days; and
            ``(2)(A) the individual has filed an application for such 
        benefits, and is in need of, benefits covered under this title; 
        or
            ``(B) the legal guardian of the individual has filed an 
        application on behalf of an individual who is in need of 
        benefits covered under this title; or
            ``(C) the representative of an individual who is 
        cognitively impaired and who is in need of benefits covered 
        under this title has filed an application on behalf of the 
        individual.
    ``(b) Current Individuals.--An individual who is in a hospital or 
nursing home on the date of the enrollment of the individual in the 
program established under this title shall be ineligible for coverage 
under this section until the individual's first spell of illness 
beginning after such date.
    ``(c) Election of Coverage.--
            ``(1) In general.--Subject to this subsection, an 
        individual shall have the option to purchase coverage under 
        this title when the individual is 35 years of age, 45 years of 
        age, 55 years of age, or 65 years of age.
            ``(2) Initial year.--During the 1-year period beginning on 
        the date on which final regulations that implement this title 
        are issued, an individual who is 35 years of age or older shall 
        be eligible to purchase insurance under this title, except that 
        such an individual shall not be eligible to purchase such 
        insurance--
                    ``(A) while confined to a hospital or nursing home;
                    ``(B) within the 6-month period after the 
                individual's confinement in a nursing home; or
                    ``(C) within the 90-day period after the 
                individual's confinement in a hospital.
        Individuals described in the matter preceding subparagraph (A) 
        shall become eligible to receive benefits under this title on 
        the expiration of the 3-year period beginning on the date such 
        individuals purchase insurance under this title.
            ``(3) Extension beyond initial year.--If an individual is 
        confined to a nursing home or hospital during a period that 
        extends beyond the first year after the effective date of this 
        title, an individual shall be eligible to enroll in the program 
        established by this title during the 60-day period beginning 
        after the individual's spell of illness.
            ``(4) Subsequent years.--During years subsequent to the 1-
        year period referred to in paragraph (2), an individual shall 
        be eligible to purchase insurance under this title within 6 
        months of the 35th, 45th, 55th or 65th birthday of the 
        individual.
            ``(5) Activation of benefits.--To receive coverage under 
        the insurance program established by this title, an individual 
        shall have purchased such coverage not later than 1 month prior 
        to admission to a nursing facility, unless the reason for the 
        need of services is a result of an accident or stroke 
        subsequent to the date that such individual enrolled for 
        coverage under this title.
    ``(d) Public Education.--In the 12 months preceding the initial 
enrollment period, the Secretary shall, either directly or through 
grants and contracts, conduct a public service and education campaign 
designed to inform potentially eligible individuals as to the nature of 
the benefits and the limited enrollment period. In conducting such 
campaigns the Secretary shall make information available to individuals 
through the open enrollment process for obtaining health care benefits 
under this Act.

``SEC. 2704. PREMIUM RATES.

    ``(a) In General.--The Secretary shall determine one premium rate 
for individuals electing to purchase coverage under this title at age 
35 (or between the ages of 35 and 44 during the initial enrollment 
period), a separate rate for those individuals who elect coverage at 
age 45 (or between the ages of 45 and 54 during the initial enrollment 
period), a separate rate for those individuals who elect such coverage 
at age 55 (or between that ages of 55 and 64 during the initial 
enrollment period), and a separate rate for those individuals who elect 
such coverage at age 65 (or at age 65 and over during the initial 
enrollment period). During the initial enrollment period, the Secretary 
shall establish actuarily fair, age-rated premiums for persons age 65 
and over.
    ``(b) Revision.--The Secretary shall revise premium rates annually 
to increase such rates to reflect the amount of the increase in the 
cost of living adjustment with respect to benefits under title II of 
the Social Security Act.
    ``(c) Rates.--In developing premium rates under the program 
established under this title, the Secretary shall establish rates that 
are expected to cover 100 percent of the reimbursement amount provided 
under this title for nursing home stays for those individuals enrolled 
in the program.
    ``(d) Waiver.--An individual electing to purchase coverage under 
this title shall not be required to pay premiums during any period in 
which such individual is receiving benefits under this title.
    ``(e) Payment.--Premiums shall be paid under this section into the 
general fund of the Treasury of the United States.

``SEC. 2705. QUALIFIED SERVICE PROVIDERS.

    ``(a) In General.--To be considered as a covered nursing home 
service under this title, such service must have been provided by a 
qualified service provider.
    ``(b) Types.--A provider shall be considered a qualified service 
provider under this title if the provider is a nursing facility that is 
certified by the State and meets the requirements of this title and any 
other standards established by the Secretary by regulation for the safe 
and efficient provision of services covered under this title.

``SEC. 2706. REIMBURSEMENT.

    ``(a) Amount.--Monthly reimbursement for nursing facility services 
under this title shall equal 65 percent (or during the initial 6 months 
of coverage, 80 percent) of the amount the Secretary determines to be 
reasonable and appropriate to cover the cost of care provided under 
this title.
    ``(b) Prospective Payment.--To the extent feasible, the Secretary 
shall establish a prospective payment mechanism for payment for nursing 
home services under this title that takes into account the expected 
resource utilization of individual patients based on their degree of 
disability, the methodology recommended for reimbursement of skilled 
nursing facilities under title XVIII of the Social Security Act, and 
other factors determining service requirements.
    ``(c) Room and Board Payment.--An individual receiving benefits 
under this program shall be responsible for the payment of an amount 
for room and board that is equal to--
            ``(1) with respect to the initial 6 months of residence in 
        a nursing facility, 20 percent of the average per diem rate 
        paid by the Secretary to nursing facilities receiving 
        reimbursement under this title; and
            ``(2) with respect to subsequent periods of residence, 35 
        percent of the average per diem rate paid by the Secretary to 
        nursing facilities receiving reimbursement under this title. 
        Payments under subsection (a) and (c) shall be considered 
        payment in full for services received under this section.
    ``(d) Priority Payers.--Notwithstanding any other provision of this 
title, reimbursement for nursing facility services provided under this 
title to an individual shall, to the extent available, be made under 
the Medicare program, under Department of Veterans Affairs' programs, 
or under private insurance policies prior to reimbursement under this 
title.

``SEC. 2707. LONG-TERM CARE SCREENING AGENCY.

    ``(a) Establishment.--The Secretary shall contract with entities to 
act as Long-Term Care Screening Agencies (hereafter referred to in this 
title as the `Screening Agency') for each designated area of a State. 
It shall be the responsibility of such agency to assess the eligibility 
of individuals residing in the geographic jurisdiction of the Agency, 
for services provided under this title according to the requirements of 
this title and regulations prescribed by the Secretary. In entering 
into such contracts, the Secretary shall give preference to State 
governmental entities and private nonprofit agencies.
    ``(b) Eligibility.--The Screening Agency shall determine the 
eligibility of an individual under this title based on the results of a 
preliminary telephone interview or written questionnaire (completed by 
the applicant, by the caregiver of the applicant, or by the legal 
guardian or representative of the applicant) that shall be validated 
through the use of a screening tool administered in person to each 
applicant determined eligible through initial telephone or written 
questionnaire interviews not later than 15 days from the date on which 
such individual initially applied for services under this title.
    ``(c) Questionnaires and Screening Tools.--
            ``(1) In general.--The Secretary shall establish a 
        telephone or written questionnaire and a screening tool to be 
        used by the Screening Agency to determine the eligibility of an 
        individual for services under this title consistent with 
        requirements of this title and the standards established by the 
        Secretary by regulation.
            ``(2) Questionnaires.--The questionnaire shall include 
        questions about the functional impairment and mental status of 
        an individual and other criteria that the Secretary shall 
        prescribe by regulation.
            ``(3) Screening tools.--The screening tool should measure 
        functional impairment caused by physical or cognitive 
        conditions as well as information concerning cognition 
        disability, behavioral problems (such as wandering or abusive 
        and aggressive behavior), and any other criteria that the 
        Secretary shall prescribe by regulation. The screening tool 
        shall be administered in person.
    ``(d) Notification.--Not later than 15 days after the date on which 
an individual initially applied for services under this title (by 
telephone or written questionnaire), the Screening Agency shall notify 
such individual that such individual is not eligible for benefits, or 
that such individuals must schedule an in-person screening to determine 
final eligibility for benefits under this title. The Screening Agency 
shall notify such individual of its final decision not later than 2 
working days after the in-person screening.
    ``(e) In-Person Screening.--An individual (or the legal guardian or 
representative of such individual) whose application for benefits under 
this title is denied on the basis of information provided through a 
telephone or written questionnaire, shall be notified of such 
individual's right to an in-person screening by a nurse or appropriate 
health care professionals.
    ``(f) Appeals.--The Secretary shall establish a mechanism for 
hearings and appeals in cases in which individuals contest the 
eligibility findings of the Screening Agency.
    ``(g) Payment.--
            ``(1) Payment for screening.--The Screening Agency may 
        require payment from individuals only in accordance with 
        standards established by the Secretary.
            ``(2) No payment for poorest.--The Screening Agency may not 
        require payment for individuals with incomes of less than 150 
        percent of the official poverty line.

``SEC. 2708. ASSET PROTECTION.

    ``Notwithstanding any other provision of law, the assets an 
eligible individual may retain and be determined eligible for nursing 
facility benefits, including payments of room and board under this 
title, under State Medicaid programs (in accordance with section 
1902(a)(10)) shall be increased by the amount of coverage ($30,000, 
$60,000, or $90,000) elected under section 2702.

``SEC. 2709. RELATION TO PRIVATE INSURANCE.

    ``(a) In General.--Except as provided in subsection (b), an insurer 
may not offer a long-term care insurance policy to an individual who 
has purchased coverage under this title if the coverage under such 
policy duplicates the coverage provided under this title.
    ``(b) Development of Standard Packages.--The Secretary shall 
develop standard long-term care insurance benefits packages that 
insurers may offer to insured individuals under this title. Such 
packages shall provide coverage for benefits that compliment, but do 
not duplicate, those covered under this title.

``SEC. 2710. DEFINITIONS.

    ``As used in this title:
            ``(1) Nursing facility.--The term `nursing facility' 
        means--
                    ``(A) a skilled nursing facility (as defined in 
                section 1819(a) of the Social Security Act); or
                    ``(B) a facility that is a nursing facility (as 
                defined in section 1919(a) of such Act) which meets the 
                requirements of section 1819(b)(4)(C) of such Act 
                (relating to nursing care).
            ``(2) Spell of illness.--The term `spell of illness' means 
        a period of consecutive days beginning with the first day on 
        which an individual is furnished services as an inpatient in a 
        hospital or nursing facility and ending with the close of the 
        first 6 consecutive months thereafter during which the 
        individual is no longer an inpatient of a nursing facility, or 
        90 days after the individual is no longer an inpatient in a 
        hospital.

``SEC. 2711. REPORTS.

    ``(a) In General.--Prior to the promulgation of regulations 
implementing this title, the Secretary shall report to Congress on--
            ``(1) the actuarially-sound premium rates to be used in the 
        implementation of this Act, including whether the premiums will 
        cover 100 percent of the benefits paid out, and whether Federal 
        funds will be required to support the payment of benefits;
            ``(2) an assessment of the impact of such premium rates on 
        the affordability of coverage under this Act;
            ``(3) a projected enrollment of individuals by age 
        category; and
            ``(4) an estimate of current and projected enrollment of 
        individuals, by age category in coverage under private long-
        term care insurance.
    ``(b) Life Care Report.--Not later than 2 years after the 
promulgation of regulations implementing this title, the Secretary 
shall report to Congress on the following aspects of the Life Care Act:
            ``(1) The current and projected premium rates.
            ``(2) The current and projected enrollment of individuals, 
        by age category and an estimate of current and projected 
        enrollment of individuals by age category in private long-term 
        care insurance.
            ``(3) The projected use of benefits and the impact of use 
        on premium rates.
            ``(4) An assessment of the impact of projected premium 
        rates on the affordability of coverage under this Act.
    ``(c) Recommendations.--The Secretary shall make recommendations to 
Congress regarding necessary revisions to the Life Care Act as a result 
of the findings provided in the reports submitted under this 
section.''.

                      Subtitle E--Study and Report

SEC. 2401. STUDY OF ISSUES RELATED TO END OF LIFE CARE.

    (a) Study.--
            (1) In general.--Within 6 months after the date of the 
        enactment of this Act, the Secretary shall enter into an 
        agreement with the Institute of Medicine of the National 
        Academy of Sciences (or with another nonprofit, nongovernmental 
        organization or consortium of institutions if the Institute 
        declines to perform the study) to investigate and report on 
        issues relating to appropriate care at the end of life, 
        including how to determine the appropriateness of curative or 
        life-prolonging or palliative services for gravely or 
        terminally ill or injured persons of all ages.
            (2) Specific issues.--The study described in paragraph (1) 
        shall specifically include an examination of the following 
        issues:
                    (A) The epidemiology of dying.
                    (B) The feasibility and utility of clinical 
                practice guidelines for appropriate care.
                    (C) Conditions that promote or impede appropriate 
                care (such as professional training and beliefs, 
                financing and organization of services, patient and 
                public knowledge and attitudes).
                    (D) Priorities for research on the issues described 
                in the preceding subparagraphs.
                    (E) Concerns of health care practitioners and 
                providers, medical educators, the general public, and 
                those responsible for public and private decisions 
                about the organization, financing, and quality of 
                health care in the United States.
    (b) Report.--The Institute of Medicine (or the organization 
conducting the study under this section) shall submit to the Secretary 
and the Congress a report on the study described in subsection (a) 
within 27 months after the date of the enactment of this Act.
    (c) Authorization of Appropriations.--There are authorized to be 
appropriated such sums as are necessary to carry out the purposes of 
this section.

                TITLE III--HEALTH PROFESSIONS WORKFORCE

        Subtitle A--Workforce Priorities Under Federal Payments

SEC. 3000. DEFINITIONS.

    For purposes of this subtitle:
            (1) The term ``academic year'' has the meaning given such 
        term in section 3011(b)(3)(A).
            (2) The term ``allocation period'' has the meaning given 
        such term in section 3015(d).
            (3) The term ``annual number of specialty positions'' has 
        the meaning given such term in section 3013(g)(1).
            (4) The term ``approved physician training program'' has 
        the meaning given such term in section 3011(b)(1).
            (5) The term ``consumer price index'' has the meaning given 
        such term in section 3033(e)(1).
            (6) The term ``designation period'' has the meaning given 
        such term in section 3013(g)(2).
            (7) The term ``funding agreement'' has the meaning given 
        such term in section 3011(b)(3)(B).
            (8) The term ``general health care inflation factor'' has 
        the meaning given such term in section 3033(e)(4).
            (9) The term ``medical school'' has the meaning given such 
        term in section 3001(e)(2).
            (10) The term ``medical specialty'' has the meaning given 
        such term in section 3011(b)(3)(C).
            (11) The term ``National Council'' has the meaning given 
        such term in section 3001(e)(3).
            (12) The term ``primary health care'' has the meaning given 
        such term in section 3013(g)(3).
            (13) The term ``qualified applicant'' has the meaning given 
        such term in section 3011(b)(2), in the case of subpart B; and 
        has the meaning given such term in section 3031(c), in the case 
        of subpart C.
            (14) The term ``specialty position'' has the meaning given 
        such term in section 3013(g)(4).
            (15) The term ``training participant'' has the meaning 
        given such term in section 3013(g)(5).

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

       Subpart A--National Council Regarding Workforce Priorities

SEC. 3001. NATIONAL COUNCIL ON GRADUATE MEDICAL EDUCATION.

    (a) In General.--There is established within the Department of 
Health and Human Services a council to be known as the National Council 
on Graduate Medical Education.
    (b) Duties.--The Secretary shall carry out subpart B acting through 
the National Council.
    (c) Composition.--
            (1) In general.--The membership of the National Council 
        shall include between 12 and 16 individuals who are appointed 
        to the Council from among individuals who are not officers or 
        employees of the United States. Such individuals shall be 
        appointed by the Secretary, and shall include individuals from 
        each of the following categories in the following proportions:
                    (A) One-quarter composed of consumers of health 
                care services, at least one of whom resides in a rural 
                area.
                    (B) One-quarter composed of primary health care 
                physicians who are faculty members of medical schools 
                (including officials of medical schools and executives 
                of teaching hospitals) and primary health care 
                physicians who are practicing and are not faculty 
                members of medical schools, at least one of whom 
                resides in a rural area.
                    (C) One-quarter composed of non-primary health care 
                specialty physicians who are faculty members of medical 
                schools, non-primary health care specialty physicians 
                who are not faculty members of medical schools, 
                officials of medical schools, and executive officers of 
                teaching hospitals.
                    (D) One-quarter composed of officers and employees 
                of health plans, and officers or members of purchasing 
                cooperatives.
            (2) Ex officio members; other federal officers or 
        employees.--The membership of the National Council shall 
        include individuals designated by the Secretary to serve as 
        members of the Council from among Federal officers or employees 
        who are appointed by the President, or by the Secretary or 
        other Federal officers who are appointed by the President with 
        the advice and consent of the Senate.
    (d) Chair.--The Secretary shall, from among members of the National 
Council appointed under subsection (c)(1), designate an individual to 
serve as the Chair of the Council.
    (e) Definitions.--For purposes of this subtitle:
            (1) The term ``academic health center'' means an entity 
        defined in section 3051(c)(1).
            (2) The term ``medical school'' means a school of medicine 
        (as defined in section 799 of the Public Health Service Act) or 
        a school of osteopathic medicine (as defined in such section).
            (3) The term ``National Council'' means the council 
        established in subsection (a).
    (f) Conforming Amendment Repealing the Council on Graduate Medical 
Education (COGME).--Effective on the date of the first meeting of the 
National Council, section 30 of the Health Professions Education 
Extension Amendments of 1992 (Public Law 102-408) is repealed.

         Subpart B--Authorized Positions in Specialty Training

SEC. 3011. COOPERATION REGARDING APPROVED PHYSICIAN TRAINING PROGRAMS.

    (a) In General.--With respect to an approved physician training 
program in a medical specialty, a funding agreement with a qualified 
applicant for payments under section 3031 and section 3051 for a 
calendar year is that the qualified applicant will ensure that the 
number of individuals enrolled in the program in the subsequent 
academic year is in accordance with this subpart.
    (b) Definitions.--
            (1) Approved program.--For purposes of this subtitle:
                    (A) The term ``approved physician training 
                program'', with respect to the medical specialty 
                involved, means a residency or other postgraduate 
                program that trains physicians and meets the following 
                conditions:
                            (i) Participation in the program may be 
                        counted toward certification in the medical 
                        specialty as determined under the applicable 
                        standards of the American Board of Medical 
                        Specialties or the Council on Postdoctoral 
                        Training of the American Osteopathic 
                        Association.
                            (ii) The program is accredited by the 
                        Accreditation Council on Graduate Medical 
                        Education, or approved by the Council on 
                        Postdoctoral Training of the American 
                        Osteopathic Association.
                    (B) The term ``approved physician training 
                program'' includes any postgraduate program described 
                in subparagraph (A) that provides health services in an 
                ambulatory setting, without regard to whether the 
                program provides inpatient hospital services.
                    (C) The term ``approved physician training 
                program'' includes any postgraduate program described 
                in subparagraph (A), whether operated by academic 
                health centers, teaching hospitals, group practices, 
                ambulatory care providers, prepaid health plans, or 
                other entities.
                    (D) The term ``approved physician training 
                program'' includes any postgraduate program described 
                in subparagraph (A) that provides fellowship training 
                in family medicine, general internal medicine or 
                general pediatrics, and provides training for a faculty 
                position in family medicine, general medicine or 
                general pediatrics.
            (2) Qualified applicant; subpart definition.--For purposes 
        of this subpart, the term ``qualified applicant'', with respect 
        to an academic year, means an entity that trains individuals in 
        an approved physician program that receives payments under 
        subpart C for the calendar year in which the academic year 
        begins.
            (3) Other definitions.--For purposes of this subtitle:
                    (A)(i) Except as provided in clause (iii), the term 
                ``academic year'' means the 1-year period beginning on 
                July 1. The academic year beginning July 1, 1993, is 
                academic year 1993-1994.
                    (ii) With respect to the funding agreement 
                described in subsection (a), the term ``subsequent 
                academic year'' means the academic year beginning July 
                1 of the calendar year for which payments are to be 
                made under the agreement.
                    (iii) For purposes of determining the academic year 
                in which a training participant enters an approved 
                physician training program, the academic year is the 1-
                year period beginning on or after June 1.
                    (B) The term ``funding agreement'', with respect to 
                payments under section 3031 and 3051 to a qualified 
                applicant, means that the Secretary may make the 
                payments only if the qualified applicant signs the 
                agreement involved.
                    (C) The term ``medical specialty'' includes all 
                medical, surgical, and other physician specialties and 
                subspecialties.

SEC. 3012. ANNUAL AUTHORIZATION OF TOTAL NUMBER OF GRADUATE MEDICAL 
              EDUCATION POSITIONS.

    With respect to the numbers designated by the Council for 
individuals entering eligible programs for an academic year pursuant to 
section 3011, the Council shall ensure that the aggregate number of 
individuals first entering any such program for the year does not 
exceed the following number (expressed as a percentage), as applicable 
to the academic year involved:
            (1) For academic year 1998-1999, 134 percent of the number 
        of individuals who graduated from medical schools in the United 
        States in academic year 1997-1998.
            (2) For academic year 1999-2000, 126 percent of such 
        number.
            (3) For academic year 2000-2001, 118 percent of such 
        number.
            (4) For academic year 2001-2002 and each subsequent 
        academic year, 110 percent of such number, except as provided 
        in section 3014.

SEC. 3013. ANNUAL AUTHORIZATION OF NUMBER OF SPECIALTY POSITIONS; 
              REQUIREMENTS REGARDING PRIMARY HEALTH CARE.

    (a) Annual Authorization of Number of Positions.--In the case of 
each medical specialty, the National Council shall, pursuant to section 
3011, designate for academic year 1998-1999 and each subsequent 
academic year the number of individuals nationwide who are authorized 
to be enrolled in eligible programs in each medical specialty for the 
academic year involved.
    (b) Primary Health Care.--
            (1) Requirement across specialities.--In carrying out 
        subsection (a) for an academic year, the National Council shall 
        ensure that, of the class of training participants entering all 
        eligible programs for their first year of graduate medical 
        education for academic year 1998-1999 or any subsequent 
        academic year, the percentage of such class that completes 
        eligible programs in primary health care and does not 
        subsequently enter a non-primary health care training program, 
        is not less than the following, as applicable to the academic 
        year involved:
                    (A) For academic year 1998-1999, 39 percent.
                    (B) For academic year 1999-2000, 44 percent.
                    (C) For academic year 2000-2001, 49 percent.
                    (D) For academic year 2001-2002 and each subsequent 
                academic year, 55 percent, except as provided in 
                section 3014.
            (2) Rule of construction.--The requirement of paragraph (1) 
        regarding a percentage applies in the aggregate to training 
        participants entering eligible programs for the academic year 
        involved, and not individually to any eligible program.
    (c) Designations Regarding 3-Year Periods.--
            (1) Designation periods.--For each medical specialty, the 
        National Council shall make the annual designations under 
        subsection (a) for periods of 3 academic years.
            (2) Initial period.--The first designation period 
        established by the National Council after the date of the 
        enactment of this Act shall be the academic years 1998-1999 
        through 2000-2001.
    (d) Certain Considerations in Designating Annual Numbers.--
            (1) In general.--Factors considered by the National Council 
        in designating the annual number of specialty positions for an 
        academic year for a medical specialty shall include the extent 
        to which there is a need for additional practitioners in the 
        speciality, as indicated by the following:
                    (A) The characteristics of diseases, disorders, or 
                health conditions treated, including--
                            (i) the incidence and prevalence (in the 
                        general population and in various other 
                        populations) of the diseases, disorders, or 
                        other health conditions with which the 
                        specialty is concerned;
                            (ii) the intensity of care required for 
                        each of these diseases, disorders, or health 
                        conditions;
                            (iii) the relevant training received and 
                        experience attained by primary health care and 
                        specialist physicians in caring for each of 
                        these diseases, disorders, or health 
                        conditions; and
                            (iv) should sufficient data become 
                        available, the extent to which individuals with 
                        certain diseases, disorders, or health 
                        conditions have better health outcomes when 
                        treated by non-primary health care physicians 
                        than by primary health care physicians.
                    (B) The number of physicians who will be practicing 
                in the specialty in the academic year.
                    (C) The number of physicians who will be practicing 
                in the specialty at the end of the 5-year period 
                beginning on the first day of the academic year.
                    (D) Whether, after examining medical specialty 
                requirements, the National Council determines that 
                specialty is a medical shortage specialty (as defined 
                by the National Council).
            (2) Recommendations of private organizations.--In 
        designating the annual number of specialty positions for an 
        academic year for a medical specialty, the National Council 
        shall consider the recommendations of organizations 
        representing physicians in the specialty, organizations 
        representing academic medicine, and the recommendations of 
        organizations representing consumers of the services of such 
        physicians.
    (e) Voluntary Compliance.--
            (1) Establishment of the positions for first designation 
        period.--Not later than June 1, 1996, the National Council 
        shall establish the number of positions in each medical 
        specialty that will be allocated under subsection (a) for the 
        academic years 1998-1999, 1999-2000, and 2000-2001.
            (2) Voluntary compliance.--A medical specialty shall not be 
        subject to the mandatory allocation system described in section 
        3015 if--
                    (A) by June 1, 1997, each eligible approved 
                physician training program has submitted to the 
                National Council a proposal for first year positions in 
                approved physician training programs in that particular 
                medical specialty for the academic years 1998-99, 1999-
                2000, and 2000-2001 and the total proposed number of 
                all such positions for the specialty does not exceed 
                the number of positions established for such specialty 
                under paragraph (1) for each such academic year; and
                    (B) in subsequent academic years, the total 
                proposed number of first year positions in approved 
                physician training programs in that particular medical 
                specialty does not exceed the number of individuals 
                nationwide who are authorized to be enrolled in 
                approved medical training programs for such medical 
                specialty for such year pursuant to subsection (a).
            (3) Loss of compliance.--The National Council may, at any 
        time, determine that a specialty is not in compliance with the 
        number of positions established by the Council under paragraph 
        (1) or subsection (a) and initiate, with respect to that 
        specialty, the system of mandatory allocations described in 
        section 3015.
    (f) Study.--Not later than January 1, 2005, the Secretary shall 
arrange for the completion, by the Institute of Medicine or other 
similar entity, of an independent study concerning the effect of 
medical workforce regulation and planning in general and in particular 
geographic areas. The results of such study together with 
recommendations concerning the appropriateness of modifying or 
eliminating workforce regulations shall be compiled in a report and 
transmitted by the Secretary to the President and the Congress.
    (g) Definitions.--For purposes of this subtitle:
            (1) The term ``annual number of specialty positions'', with 
        respect to a medical specialty, means the number designated by 
        the National Council under subsection (a) for eligible programs 
        for the academic year involved.
            (2) The term ``designation period'' means a 3-year period 
        under subsection (c)(1) for which designations under subsection 
        (a) are made by the National Council.
            (3) The term ``primary health care'' means the following 
        medical specialties: Family medicine, general internal 
        medicine, general pediatrics, geriatric medicine, and 
        obstetrics and gynecology. Only those participants in programs 
        with a significant primary care training emphasis will be 
        considered to have completed an eligible program in primary 
        care for the purposes of subsection (b)(1). Determination of 
        the meaning of a ``significant primary care training emphasis'' 
        will be made by the National Council.
            (4) The term ``specialty position'' means a position as a 
        training participant.
            (5) The term ``training participant'' means an individual 
        who is enrolled in an approved physician training program.

SEC. 3014. NATIONAL COUNCIL RECOMMENDATION OF NUMBER OF GRADUATE 
              MEDICAL EDUCATION POSITIONS.

    (a) In General.--
            (1) Recommendations.--Beginning with academic year 2001-
        2002 and each subsequent academic year, the National Council 
        may after considering the factors described in paragraph (2) 
        annually recommend to the Secretary a change in--
                    (A) the aggregate number of all training 
                participants entering the first year of graduate 
                medical education training in approved physician 
                training programs nationwide determined under section 
                3012(4); and
                    (B) in accordance with subsection (b), the 
                distribution of positions among medical specialties 
                determined under section 3013(a) and 3013(b)(1)(D).
            (2) Factors for consideration.--In developing a 
        recommendation under paragraph (1), the Secretary shall 
        consider the impact on rural, inner city, and public hospitals 
        of reducing numbers of individuals authorized to enter approved 
        physician training programs and the appropriate supply of 
        physicians in the aggregate and in particular medical 
        specialties.
    (b) Limitations on Recommended Percent for Primary Care for 
Academic Year 2001-2002.--For the academic year 2001-2002, the number 
that the National Council may recommend under subsection (a)(1)(B) may 
not be more than 5 percentage points less or 5 percentage points more 
than the number described in section 3013(b)(1)(D).
    (c) Consideration and Implementation by the Secretary.--The 
Secretary shall in the Secretary's discretion implement the 
recommendations by the National Council under subsection (a) in 
accordance with sections 3012 and 3013(b)(1). The Secretary may not 
modify such recommendations.

SEC. 3015. ALLOCATIONS AMONG SPECIALITIES AND PROGRAMS.

    (a) In General.--Subject to the provisions of sections 3012 and 
3013, for each academic year, the National Council shall for each 
medical specialty make allocations among eligible programs of the 
annual number of specialty positions that the Council has designated 
for such year. The preceding sentence is subject to subsection (b)(3).
    (b) Allocations Regarding 3-Year Period.--
            (1) In general.--For each medical specialty, the National 
        Council shall make the annual allocations under subsection (a) 
        for periods of 3 academic years.
            (2) Advance notice to programs.--With respect to the first 
        academic year of an allocation period established by the 
        National Council, the National Council shall, not later than 
        July 1 of the preceding academic year, notify each eligible 
        program of the allocations made for the program for each of the 
        academic years of the period.
            (3) Initial period.--The first allocation period 
        established by the National Council after the date of the 
        enactment of this Act shall be the academic years 1998-1999 
        through 2000-2001.
    (c) Certain Considerations.--
            (1) Geographic areas.--In making allocations under 
        subsection (a) for eligible programs of the various geographic 
        areas, the National Council shall include among the factors 
        considered the--
                    (A) distribution of approved physician training 
                programs with respect to population and community need; 
                and
                    (B) historical distribution of approved physician 
                training programs among the geographic areas.
            (2) Quality of programs.--In making allocations under 
        subsection (a) for eligible programs, the National Council 
        shall consider the quality of such programs.
            (3) Underrepresentation of minority groups and women.--In 
        making an allocation under subsection (a) for an eligible 
        program, the National Council shall include among the factors 
        considered the following:
                    (A) The extent to which the population of training 
                participants in the program includes training 
                participants who are members of racial or ethnic 
                minority groups and women.
                    (B) With respect to a racial or ethnic group or 
                women represented among the training participants, the 
                extent to which the group is underrepresented in the 
                field of medicine generally and in the various medical 
                specialities.
            (4) Underserved rural and inner-city communities.--In 
        making allocations under subsection (a) for eligible programs, 
        the National Council shall consider the extent to which the 
        population of training participants in the program includes 
        training participants who have resided in rural or inner-city 
        communities for a substantial period, as defined by the Council 
        and the proportion of past participants in the program who are 
        practicing in rural or inner-city communities.
            (5) Recommendations of private organizations.--In making 
        allocations under subsection (a) for eligible programs, the 
        National Council shall consider the recommendations of 
        organizations representing physicians in the medical 
        specialties, the recommendations of organizations representing 
        academic medicine and the recommendations of organizations 
        representing consumers of the services of such physicians.
    (d) Definitions.--For purposes of this subtitle, the term 
``allocation period'' means a 3-year period under subsection (b)(1) for 
which allocations under subsection (a) are made by the National 
Council.

             Subpart C--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.

    (a) In General.--In the case of a qualified entity that in 
accordance with section 3032 submits to the Secretary an application 
for calendar year 1997 or any subsequent calendar year, the Secretary 
shall make payments for such year to the qualified entity for the 
purpose specified in subsection (b). The Secretary shall make the 
payments in an amount determined in accordance with section 3033 and 
3034, and may administer the payments as a contract, grant, or 
cooperative agreement.
    (b) Payments for Operation of Approved Physician Training 
Programs.--The purpose of payments under subsection (a) is to assist a 
qualified applicant with the costs of operation of an approved 
physician training program. A funding agreement for such payments is 
that the qualified applicant involved will expend the payments only for 
such purpose or for such other related purposes as the Secretary may 
authorize.
    (c) Qualified Applicant; Subpart Definition.--
            (1) In general.--For purposes of this subpart, the term 
        ``qualified applicant'', with respect to the calendar year 
        involved, means an entity--
                    (A) that trains individuals in approved physician 
                training programs; and
                    (B) that submits to the Secretary an application 
                for such year in accordance with section 3032.
            (2) Entities included.--The term ``qualified applicant'' 
        may include an approved physician training program, teaching 
        hospital, medical school, group practice, an entity 
        representing two or more parties engaged in a formal 
        association, a community health center or another entity 
        operating an approved physician training program.
    (d) Treatment of Podiatric and Dental Residency Programs.--Except 
as provided in section 3034, for the purposes of this subpart, an 
approved physician training program includes training programs approved 
by the Commission on Dental Accreditation or the Council of Podiatric 
Medical Education of the American Podiatric Medical Association. This 
subsection shall not apply for purposes of subpart B.

SEC. 3032. APPLICATION FOR PAYMENTS.

    (a) In General.--
            (1) In general.--For purposes of section 3031(a), an 
        application for payments under such section for a calendar year 
        is in accordance with this section if--
                    (A) the eligible entity involved submits the 
                application not later than the date specified by the 
                Secretary;
                    (B) the application demonstrates that the condition 
                described in subsection (b) is met with respect to the 
                program;
                    (C) the application contains each funding agreement 
                described in this part and the application provides 
                such assurances of compliance with the agreements as 
                the Secretary may require; and
                    (D) the application is in such form, is made in 
                such manner, and contains such agreements, assurances, 
                and information as the Secretary determines to be 
                necessary to carry out this part.
            (2) Certain entities.--If an applicant under paragraph (1) 
        is an entity representing two or more parties--
                    (A) the application shall contain a written 
                agreement, signed by all participants, in which all of 
                the participants agree as to the manner in which the 
                payments will be allocated; and
                    (B) the applicant shall agree to submit additional 
                documentation, if requested by the National Council, 
                that demonstrates that the funds are distributed in the 
                manner agreed upon by all participants.
    (b) Certain Conditions.--An eligible entity meets the condition 
described in this subsection for receiving payments under section 3031 
for a calendar year if--
            (1) the entity agrees to use such funds only to support an 
        approved physician training program;
            (2) with respect to--
                    (A) a specialty for which programs have received 
                allocations under section 3015, the entity agrees that 
                funds will be used only to support approved training 
                programs for which the number of specialists in 
                training is consistent with the allotment under section 
                3015; and
                    (B) a specialty for which a voluntary program has 
                received allocations under section 3013(e), the entity 
                agrees that funds will only be used to support approved 
                training programs for which the number of specialists 
                in training is consistent with the allocations under 
                section 3015(e); and
            (3) the entity notifies each residency training program 
        director of each approved physician training program operated 
        by the entity of the amount of payments received by the entity 
        under this section and sections 3051 and 3055 that is 
        attributable to the number of training participants in the 
        program.
    (c) Residency Training Program Director.--For purposes of this 
section, the term ``residency training program director'' means an 
individual specified in the application of the entity as the official 
with primary administrative responsibility for an approved physician 
training program.

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

    (a) Graduate Medical Education Account.--
            (1) In general.--Subject to paragraph (2) and except as 
        provided in section 3034, the following amounts shall be 
        available for a calendar year for making payments under 
        sections 3031 and 3055 from the Graduate Medical Education 
        Account established under section 9551(a)(2)(A) of the Internal 
        Revenue Code of 1986:
                    (A) In the case of calendar year 1997, 
                $3,200,000,000.
                    (B) In the case of calendar year 1998, 
                $3,550,000,000.
                    (C) In the case of calendar year 1999, 
                $5,800,000,000.
                    (D) In the case of each of calendar years 2000 and 
                2001, $5,800,000,000.
                    (E) In the case of each subsequent calendar year, 
                the amount specified in subparagraph (C) increased by 
                the product of such amount and the general health care 
                inflation factor for such year (as defined in 
                subsection (e)).
            (2) Transitional provision.--
                    (A) In general.--With respect to making payments 
                under sections 3031 and 3055 for calendar year 1997 or 
                1998, the Secretary shall first make payments under 
                section 3031 to eligible programs described in 
                subparagraph (B) in the amount determined for the 
                programs under subsection (b) for such year, and then, 
                from such amounts as remain available under paragraph 
                (1) for such year, shall make payments under section 
                3031 to other eligible programs and shall make payments 
                under section 3055.
                    (B) Participating state.--An eligible program 
                described in this subparagraph is such a program that 
                is operated in a State that is a participating State 
                under title I.
    (b) Amount of Payments for Individual Eligible Entities.--
            (1) In general.--Except as provided in section 3034, 
        payment amounts with respect to any physician training program 
        under this section shall be equal to the product of the number 
        of full time equivalent training participants in the program, 
        and the per resident amount for the training program.
            (2) Per resident amount.--
                    (A) In general.--Except as provided under 
                subparagraph (B), the per resident amount for a 
                training program shall be equal to--
                            (i) with respect to--
                                    (I) the first calendar year during 
                                which the program receives payment 
                                under subsection (a), 90 percent;
                                    (II) the second calendar year 
                                during which the program receives 
                                payment under subsection (a), 80 
                                percent;
                                    (III) the third calendar year 
                                during which the program receives 
                                payment under subsection (a), 70 
                                percent;
                                    (IV) the fourth calendar year 
                                during which the program receives 
                                payment under subsection (a), 60 
                                percent; and
                                    (V) the fifth and subsequent 
                                calendar year during which the program 
                                receives payment under subsection (a), 
                                50 percent;
                        of the approved FTE resident amount that would 
                        have been determined under section 
                        1886(h)(2)(D) of the Social Security Act (42 
                        U.S.C. 1395ww(h)(2)(D)) for the hospital 
                        operating such approved physician training 
                        program for a cost reporting period beginning 
                        in such calendar year if the amendments made by 
                        section 4306 of the Health Security Act had not 
                        been made; and
                            (ii) with respect to--
                                    (I) the first calendar year during 
                                which the program receives payment 
                                under subsection (a), 10 percent;
                                    (II) the second calendar year 
                                during which the program receives 
                                payment under subsection (a), 20 
                                percent;
                                    (III) the third calendar year 
                                during which the program receives 
                                payment under subsection (a), 30 
                                percent;
                                    (IV) the fourth calendar year 
                                during which the program receives 
                                payment under subsection (a), 40 
                                percent; and
                                    (V) the fifth and subsequent 
                                calendar years during which the program 
                                receives payment under subsection (a), 
                                50 percent;
                        of the geographically adjusted national average 
                        per resident amount.
                    (B) Minimum per resident amount.--Notwithstanding 
                the provisions of subparagraph (A), the per resident 
                amount for a training program shall not be less than 75 
                percent of the geographically adjusted national average 
                per resident amount determined in accordance with 
                subparagraph (A)(ii).
                    (C) No historic payment basis.--For purposes of 
                subparagraph (A)(i), the Secretary shall determine the 
                appropriate per resident amount applicable to an entity 
                that--
                            (i) has an approved physician training 
                        program that sponsored or is affiliated with 
                        more than one hospital that had a per resident 
                        amount determined under section 1886(h) of the 
                        Social Security Act which reflects the average 
                        per resident amounts under such section for 
                        such hospitals; or
                            (ii) is an institution that did not have a 
                        per resident amount determined under such 
                        section for cost reporting periods beginning 
                        before 1996 which reflects the national average 
                        per resident amount.
            (3) Adjustment factor.--Payments under this section shall 
        be subject to an adjustment factor, as determined by the 
        Secretary, so that total payments in any year will not exceed 
        the amounts specified in subsection (a) and as provided in 
        subsection (d).
            (4) Additional provisions regarding national average 
        cost.--
                    (A) Determination of national average cost.--The 
                Secretary shall in accordance with clause (ii) of 
                subsection (b)(2)(A) determine, for academic year 1992-
                1993, an amount equal to the geographically adjusted 
                national average per resident amount described in such 
                clause with respect to training a participant in an 
                approved physician training program. The national 
                average applicable under such clause for a calendar 
                year for such programs is, subject to subparagraph (B), 
                the amount determined under the preceding sentence 
                increased by the amount necessary to offset the effects 
                of inflation occurring since academic year 1992-1993, 
                as determined through use of the consumer price index.
                    (B) Geographic adjustment.--The national average 
                determined under subparagraph (A) and applicable to a 
                calendar year shall, in the case of the eligible entity 
                involved, be adjusted by a factor to reflect regional 
                differences in the applicable wage and wage-related 
                costs.
            (5) Funding level and allocation method.--Not later than 
        January 1, 1998, the Secretary shall complete a study to 
        determine the effect and appropriateness of the funding level 
        and allocation method described in subsection (a) and 
        paragraphs (1), (2), (3), and (4) of this subsection on the 
        operation of training programs and on national workforce goals 
        and shall compile the findings and recommendations derived from 
        such study in a report to be submitted to the President and the 
        Congress.
    (c) Determination of Full-Time-Equivalent Training Participants.--
            (1) Rules.--The Secretary shall establish rules consistent 
        with this subsection for the computation of the number of full-
        time-equivalent training participants in approved physician 
        training programs under subsection (b)(1).
            (2) Adjustment for part-year or part-time training 
        participants.--Such rules shall take into account individuals 
        who serve as training participants for only a portion of a 
        period in an approved physician training program or 
        simultaneously with more than one such program.
            (3) Weighting factors for certain training participants.--
                    (A) In general.--Subject to paragraph (4), such 
                rules shall provide, in calculating the number of full-
                time-equivalent training participants in an approved 
                physician training program--
                            (i) for a training participant who is in 
                        the participant's initial training period, the 
                        weighting factor is 1.00,
                            (ii) except as provided in clause (iii), 
                        for a training participant who is not in the 
                        participant's initial training period, the 
                        weighting factor is 0.75, and
                            (iii) in an academic year in which the 
                        total number of training participant positions 
                        in all approved physician training programs 
                        does not exceed--
                                    (I) 134 percent of United States 
                                medical school graduates in academic 
                                year 1997-1998, the weighting factor 
                                for a training participant who is not 
                                in the training participant's initial 
                                training period is 0.70;
                                    (II) 126 percent of United States 
                                medical school graduates in academic 
                                year 1997-1998, the weighting factor 
                                for such a participant is 0.90;
                                    (III) 118 percent of United States 
                                medical school graduates in 1997-1998, 
                                the weighting factor for such a 
                                participant is 0.95 percent; and
                                    (IV) 110 percent of United States 
                                medical school graduates in academic 
                                year 1997-1998, the weighting factor 
                                for such a participant, the weighting 
                                factor is 1.0.
                    (B) Study.--Not later than January 1, 1998, the 
                Secretary shall complete a study to determine the 
                effect that applying weighting factors in calculating 
                the number of full-time-equivalent training 
                participants would have on supporting national 
                workforce goals.
            (4) International medical graduates required to pass fmgems 
        examination.--Such rules shall provide that, in the case of an 
        individual who is an international medical graduate, the 
        individual shall not be counted as a training participant 
        unless--
                    (A) the individual has passed the FMGEMS 
                examination or the U.S. Medical Licensing Examination, 
                or
                    (B) the individual has previously received 
                certification from, or has previously passed the 
                examination of, the Educational Commission for Foreign 
                Medical Graduates.
            (5) Counting time spent in outpatient settings.--Such rules 
        shall provide that only time spent in activities relating to 
        patient care shall be counted and that all the time so spent by 
        a training participant under an approved physician training 
        program shall be counted towards the determination of full-time 
        equivalency, without regard to the setting in which the 
        activities are performed.
    (d) Limitation.--Subject to subsection (a), if the amount available 
from the Graduate Medical Education Account established under section 
9551(a)(2)(A) of the Internal Revenue Code of 1986 for a calendar year 
is insufficient for providing each eligible entity with the amount of 
payments determined under subsection (b) for the entity for such year, 
the Secretary shall make such pro rata reductions in the amounts so 
determined as may be necessary to ensure that the total of payments 
made under section 3031 for such year equals the amount specified under 
section 3033(a).
    (e) Definitions.--For purposes of this subtitle:
            (1) Consumer price index.--The term ``consumer price 
        index'' means the Consumer Price Index for All Urban Consumers 
        (U.S. city average).
            (2) International medical graduate.--The term 
        ``international medical graduate'' means a training participant 
        who is a graduate of a school of medicine, school of 
        osteopathy, school of dentistry, or school of podiatry that is 
        not--
                    (A) a school of medicine accredited by the Liaison 
                Committee on Medical Education of the American Medical 
                Association and the Association of American Medical 
                Colleges (or approved by such Committee as meeting the 
                standards necessary for such accreditation),
                    (B) a school of osteopathic medicine accredited by 
                the American Osteopathic Association, or approved by 
                such Association as meeting the standards necessary for 
                such accreditation,
                    (C) a school of dentistry which is accredited by 
                the Commission on Dental Accreditation, or
                    (D) a school of podiatric medicine which is 
                accredited by the Council of Podiatric Medical 
                Education of the American Podiatric Medical 
                Association.
            (3) FMGEMS examination.--The term ``FMGEMS examination'' 
        means parts I and II of the Foreign Medical Graduate 
        Examination in the Medical Sciences or any successor 
        examination recognized by the Secretary for this purpose.
            (4) General health care inflation factor.--(A) The term 
        ``general health care inflation factor'', with respect to a 
        year, means the percentage increase in the consumer price index 
        for the year plus the following:
                    (i) For 1997, 1.0 percentage points.
                    (ii) For 1998, 0.5 percentage points.
                    (iii) For 1999 and for 2000, 0 percentage points.
            (B) Years after 2000.--
                    (i) Recommendation to congress.--In 1999, the 
                Secretary shall submit to Congress recommendations, 
                after consultation with the Federal Reserve Board, on 
                what the general health care inflation factor should be 
                for years beginning with 2001.
                    (ii) Failure of congress to act.--If the Congress 
                fails to enact a law specifying the general health care 
                inflation factor for a year after 2000, the Secretary, 
                in January of the year before the year involved, shall 
                compute such factor for the year involved. Such factor 
                shall be the product of the factors described in 
                subparagraph (C) for that fiscal year, minus 1.
                    (iii) Study by federal reserve board.--Not later 
                than January 1, 1999, the Federal Reserve Board shall 
                conduct a study, and report to the Secretary, 
                concerning what the general health care inflation 
                factor should be for years beginning with 2001. Such 
                study shall consider whether continued indexing with 
                respect to such factor is advisable and whether the 
                consumer price index should be used (in whole or in 
                part, modified or unmodified) with respect to premium 
                caps for future years. The recommendations of the 
                Federal Reserve Board under such study shall be 
                considered in the recommendations submitted under 
                clause (i).
            (C) Factors.--The factors described in this subparagraph 
        for a year are the following:
                    (i) CPI.--1 plus the percentage change in the CPI 
                for the year, determined based upon the percentage 
                change in the average of the CPI for the 12-month 
                period ending with August 31 of the previous fiscal 
                year over such average for the preceding 12-month 
                period.
                    (ii) Real gdp per capita.--1 plus the average 
                annual percentage change in the real, per capita gross 
                domestic product of the United States during the 3-year 
                period ending in the preceding calendar year, 
                determined by the Secretary based on data supplied by 
                the Department of Commerce.
            (5) Initial training period.--The term ``initial training 
        period'' means the period of time required for board 
        eligibility, except that--
                    (A) except as provided in subparagraph (B), in no 
                case shall the initial period of participation exceed 
                an aggregate period of formal training of more than 5 
                years for any individual, and
                    (B) a period, of not more than 2 years, during 
                which an individual is in a--
                            (i) residency or fellowship program in 
                        geriatric medicine, preventive medicine, or 
                        adolescent medicine, or
                            (ii) a fellowship program in family 
                        medicine, general internal medicine or general 
                        pediatrics, which provides training for a 
                        faculty position in family medicine, general 
                        internal medicine or general pediatrics,
                shall be treated as part of the initial training 
                participation period, but shall not be counted against 
                any limitation on the initial training period.
        The initial training period shall be determined, with respect 
        to a training participant, as of the time the training 
        participant enters any approved physician training program.
            (6) Period of time required for board eligibility.--
                    (A) General rule.--Subject to subparagraphs (B) and 
                (C), the term ``period of time required for board 
                eligibility'' means, for a training participant, the 
                minimum number of years of formal training necessary to 
                satisfy the requirements for initial board eligibility 
                in the particular specialty for which the training 
                participant is training.
                    (B) Application of 1985-1986 directory.--Except as 
                provided in subparagraph (C), the period of time 
                required for board eligibility shall be such period 
                specified in the 1985-1986 Directory of Residency 
                Training Programs published by the Accreditation 
                Council on Graduate Medical Education or a more current 
                version of such Directory or the equivalent directory 
                regarding postdoctoral training for osteopathic 
                physician training programs.
                    (C) Changes in period of time required for board 
                eligibility.--If the Accreditation Council on Graduate 
                Medical Education, in its Directory of Residency 
                Training Programs or the equivalent directory regarding 
                postdoctoral training for osteopathic physician 
                training programs--
                            (i) increases the minimum number of years 
                        of formal training necessary to satisfy the 
                        requirements for a specialty, above the period 
                        specified in its 1985-1986 Directory, the 
                        Secretary may increase the period of time 
                        required for board eligibility for that 
                        specialty, but not to exceed the period of time 
                        required for board eligibility specified in 
                        that later Directory, or
                            (ii) decreases the minimum number of years 
                        of formal training necessary to satisfy the 
                        requirements for a specialty, below the period 
                        specified in its 1985-1986 Directory, the 
                        Secretary may decrease the period of time 
                        required for board eligibility for that 
                        specialty, but not below the period of time 
                        required for board eligibility specified in 
                        that later Directory.

SEC. 3034. PAYMENTS FOR DENTAL AND PODIATRIC POSITIONS.

    (a) In General.--Except as provided in subsections (b) and (c), the 
provisions of this chapter shall apply with respect to dental and 
podiatric medicine training programs.
    (b) Limitation.--Subject to the amount made available under section 
3033(a), the aggregate amount available for making payments to all 
approved physician training programs in dentistry and podiatric 
medicine may not exceed $200,000,000 in any calendar year.
    (c) Payment Methodology.--The Secretary shall determine the amount 
to be paid to approved dental and podiatric training programs on the 
basis of a methodology to be developed by the Secretary that is 
equivalent to the methodology described in section 3033(b)(5).

   CHAPTER 2--ACADEMIC HEALTH CENTERS AND OTHER ELIGIBLE INSTITUTIONS

SEC. 3051. FEDERAL FORMULA PAYMENTS TO ACADEMIC HEALTH CENTERS AND 
              OTHER ELIGIBLE INSTITUTIONS.

    (a) In General.--In the case of an eligible institution that in 
accordance with section 3052 submits to the Secretary a written request 
for calendar year 1997 or any subsequent calendar year, the Secretary 
shall make payments for such year to the eligible institution for the 
purpose specified in subsection (b). The Secretary shall make the 
payments in an amount determined in accordance with section 3053, and 
may administer the payments as a contract, grant, or cooperative 
agreement.
    (b) Payments for Costs Incurred by Eligible Institutions.--
            (1) Costs attributable to academic nature of 
        institutions.--With respect to an eligible institution that is 
        a qualified academic health center or a qualified teaching 
        hospital, the purpose of payments under subsection (a) is to 
        assist such institutions with costs that are not routinely 
        incurred by other entities in providing health services, but 
        are incurred by such institutions in providing health services 
        by virtue of the academic nature of such institutions. Such 
        costs include--
                    (A) with respect to productivity in the provision 
                of health services, costs resulting from the reduced 
                rate of productivity of faculty due to teaching 
                responsibilities;
                    (B) the uncompensated costs of clinical research; 
                and
                    (C) exceptional costs associated with the treatment 
                of health conditions with respect to which an eligible 
                institution has specialized expertise (including 
                treatment of rare diseases, treatment of unusually 
                severe conditions, and providing other specialized 
                health care).
            (2) High intensity nonteaching rural hospital.--With 
        respect to an eligible institution that is a high intensity 
        nonteaching rural hospital, the purpose of payments under 
        subsection (a) is to assist the institution with the costs of 
        treating a substantial number of severely ill patients.
    (c) Definitions.--
            (1) Academic health center.--For purposes of this subtitle, 
        the term ``academic health center'' means an entity that 
        operates a teaching hospital that sponsors or is affiliated 
        with an approved physician training program.
            (2) Eligible institution.--For purposes of this subtitle, 
        the term ``eligible institution'', with respect to a calendar 
        year, means a qualified academic health center, qualified 
        teaching hospital, or high intensity nonteaching rural hospital 
        that submits to the Secretary a written request in accordance 
        with section 3052.
            (3) High intensity nonteaching rural hospital.--For 
        purposes of this subtitle, the term ``high intensity 
        nonteaching rural hospital'' means a nonteaching hospital 
        located in a rural area as defined in section 1886(d)(2)(D) of 
        the Social Security Act (42 U.S.C. 1395ww(d)(2)(D)) that the 
        Secretary determines has a case-mix index (defined as the 
        average weight of all cases in the hospital for all diagnosis-
        related groups as determined in accordance with section 
        1886(d)(4) of such Act (42 U.S.C. 1395ww(d)(4)) of greater than 
        120 percent of the national average case-mix index for all 
        rural hospitals.
            (4) Qualified center or hospital.--For purposes of this 
        subtitle:
                    (A) The term ``qualified academic health center'' 
                means an academic health center that operates a 
                teaching hospital.
                    (B) The term ``qualified teaching hospital'' means 
                any teaching hospital other than a teaching hospital 
                that is operated by an academic health center.
            (5) Teaching hospital.--For purposes of this subtitle, the 
        term ``teaching hospital'' means a hospital that sponsors or is 
        affiliated with an approved physician training program (as 
        defined in section 3011(b) or section 3031(d)).

SEC. 3052. REQUEST FOR PAYMENTS.

  (a) In General.--For purposes of section 3051, a written request for 
payments under such section is in accordance with this section if--
            (1) the eligible institution involved submits the request 
        not later than the date specified by the Secretary;
            (2) the request is accompanied by each funding agreement 
        described in this part; and
            (3) the request is in such form, is made in such manner, 
        and contains such agreements, assurances, and information as 
        the Secretary determines to be necessary to carry out this 
        part.
    (b) Continued Status as Eligible Institution.--A funding agreement 
for payments under section 3051 is that the eligible institution 
involved will maintain status as such an eligible institution. For 
purposes of this subtitle, the term ``funding agreement'', with respect 
to payments under section 3051 to such an eligible institution, means 
that the Secretary may make the payments only if the eligible 
institution makes the agreement involved.
    (c) Compliance With Specialty Allocations.--A funding agreement for 
payments under section 3051 is that an eligible institution that 
operates or is affiliated with an approved physician training program 
shall receive such payments only if the number of specialists in such a 
program is consistent with the allotment under section 3015 or 3013(e).

SEC. 3053. AVAILABILITY OF FUNDS FOR PAYMENTS; ANNUAL AMOUNT OF 
              PAYMENTS.

    (a) Annual Academic Health Center Account.--
            (1) Availability of funds from account.--Except as provided 
        in paragraph (2), the following amounts shall be available for 
        a calendar year for making payments under section 3051 from the 
        Academic Health Center Account established under section 
        9551(a)(2)(B) of the Internal Revenue Code of 1986 is the 
        following, as applicable to the calendar year:
                    (A) In the case of calendar year 1997, 
                $6,280,000,000.
                    (B) In the case of calendar year 1997, 
                $7,250,000,000.
                    (C) In the case of calendar year 1997, 
                $8,220,000,000.
                    (D) In the case of calendar year 2000, 
                $9,400,000,000.
                    (E) In the case of calendar year 2001, 
                $10,640,000,000.
                    (F) In the case of each subsequent calendar year, 
                the amount specified in subparagraph (E) increased by 
                the product of such amount and the general health care 
                inflation factor (as defined in subsection (d)).
            (2) Special allotments.--Of the amounts available for a 
        calendar year for making payments under subsection (a) pursuant 
        to paragraph (1)--
                    (A) such amounts as are necessary shall be reserved 
                to make payments to eligible institutions that are high 
                intensity nonteaching rural hospitals; and
                    (B) the remainder of the amounts available for 
                making payments under subsection (a), shall be expended 
                for making payments under section 3051 to other 
                eligible institutions.
    (b) Amount of Payments for Individual Eligible Institutions.--
            (1) Qualified academic health centers and qualified 
        teaching hospitals.--The amount of payments required in section 
        3051 to be made to a qualified academic health center or a 
        qualified teaching hospital for a calendar year is an amount 
        equal to the product of--
                    (A) the amount available for making such payments 
                for the calendar year from the Academic Health Center 
                Account established under section 9551(a)(2)(B) of the 
                Internal Revenue Code of 1986; and
                    (B) the percentage constituted by the ratio of--
                            (i) the product of--
                                    (I) the sum, for all discharges of 
                                individuals, of the amounts otherwise 
                                paid on behalf of such individuals; and
                                    (II) an adjustment factor equal to 
                                (e raised to the power (.405  x  r) -
                                1), where ``r'' is the ratio of the 
                                qualified academic health center's or 
                                the qualified teaching hospital's full-
                                time equivalent training participants 
                                to beds and ``e'' is the natural log of 
                                one; and
                            (ii) the sum of the respective amounts 
                        determined under clause (i) for qualified 
                        academic health centers and qualified teaching 
                        hospitals.
            (2) High intensity nonteaching rural hospital.--Subject to 
        the annual amount reserved for high intensity nonteaching rural 
        hospitals under subsection (a)(2)(A) for a calendar year, the 
        amount required under section 3051 to be made to a high 
        intensity nonteaching rural hospital is an amount equal to 5 
        percent of the inpatient costs of patient care for all patients 
        of the hospital.
            (3) Adjustment factor.--Payments under this section shall 
        be subject to an adjustment factor, as determined by the 
        Secretary, so that total payments in any year will not exceed 
        the amounts specified in 3053(a).
    (c) Report Regarding Modifications in Formula.--Not later than July 
1, 2000, the Secretary shall submit to the Congress a report containing 
any recommendations of the Secretary for the modification of the 
program of formula payments described in this chapter. In preparing 
such report the Secretary shall consider--
            (1) the costs described in section 3051(b) incurred by 
        academic health centers;
            (2) the adequacy of the formula payments established in 
        this chapter to cover such costs, taking into account any 
        additional revenues to cover such costs paid by other payers, 
        including private health plans;
            (3) the impact of the current payment methodology on 
        training in the ambulatory setting of national workforce goals, 
        and its effect on the education and training of primary care 
        physicians;
            (4) the importance to the maintenance of a quality national 
        health care system of academic health centers in providing for 
        the training of health professionals, in conducting clinical 
        research, and in providing innovative, technically advanced 
        care; and
            (5) the overall impact of the reformed health care system 
        on the ability of academic health centers to perform such 
        functions.
    (d) General Health Care Inflation Factor.--For purposes of this 
subtitle, the term ``general health care inflation factor'', with 
respect to a year, has the meaning given such term in section 
3033(e)(4) for such year.

                   Subpart D--Transitional Provisions

SEC. 3055. TRANSITIONAL PAYMENTS TO INSTITUTIONS.

    (a) Payments Regarding Effects of Subpart B Allocations.--For each 
of the calendar years specified in subsection (b)(2), in the case of an 
eligible entity that submits to the Secretary an application for such 
year in accordance with subsection (d), the Secretary shall make 
payments for the year to the entity for the purpose specified in 
subsection (c). The Secretary shall make the payments in an amount 
determined in accordance with subsection (e), and may administer the 
payments as a contract, grant, or cooperative agreement.
    (b) Eligible Entities Losing Specialty Positions; Relevant Years 
Regarding Payments.--
            (1) Eligible entities losing specialty positions.--The 
        Secretary may make payments under subsection (a) to an eligible 
        entity only if, with respect to the calendar year involved, the 
        entity meets the following conditions:
                    (A) During the year preceding the initiation of 
                transitional payments, the entity--
                            (i) received payments under section 1886(h) 
                        of the Social Security Act (42 U.S.C. 
                        1395ww(h)) for residents in one or more 
                        approved programs, or
                            (ii) sponsored or was affiliated with one 
                        or more approved physician training programs 
                        that received payments under section 3031.
                    (B) The aggregate number of full-time-equivalent 
                training participant positions in such programs have 
                been reduced below the aggregate number of full-time-
                equivalent training participant positions for the 
                academic year 1993-1994.
                    (C) The aggregate number of full-time-equivalent 
                training participant positions in such programs spend 
                in patient care activities at the hospital have been 
                reduced below the aggregate number of full-time-
                equivalent training participant positions for the 
                academic year 1993-1994, as a result of allocations 
                under subpart B, or as a result of voluntary changes 
                under section 3013(e) prior to January 1, 2002.
            (2) Relevant years.--Except as provided in subsection 
        (e)(3), the Secretary may make payments under subsection (a) to 
        an eligible entity only for the first four calendar years after 
        the initial calendar year for which the entity meets the 
        conditions described in paragraph (1).
            (3) Eligible entity.--For purposes of this section, the 
        term ``eligible entity'' means a qualified academic health 
        center or teaching hospital entity that submits to the 
        Secretary an application in accordance with subsection (d).
    (c) Purpose of Payments.--The purpose of payments under subsection 
(a) is to assist an eligible entity with the costs of operation. A 
funding agreement for such payments is that the entity involved will 
expend the payments only for such purpose.
    (d) Application for Payments.--For purposes of subsection (a), an 
application for payments under such subsection is in accordance with 
this subsection if--
            (1) the eligible entity involved submits the application 
        not later than the date specified by the Secretary;
            (2) the application demonstrates that the entity meets the 
        conditions described in subsection (b)(1) and that the entity 
        has cooperated with the approved physician training programs of 
        the entity in meeting the condition described in section 
        3032(b);
            (3) the application contains each funding agreement 
        described in this subpart and the application provides such 
        assurances of compliance with the agreements as the Secretary 
        may require; and
            (4) the application is in such form, is made in such 
        manner, and contains such agreements, assurances, and 
        information as the Secretary determines to be necessary to 
        carry out this subpart.
    (e) Amount of Payments.--
            (1) In general.--Subject to the amounts available from the 
        Graduate Medical Education Account established under section 
        9551(a)(2)(A) of the Internal Revenue Code of 1986 in the 
        calendar year involved, the amount of payments required in 
        subsection (a) to be made to an eligible entity for such year 
        is the product of the amount determined under paragraph (2) and 
        the applicable percentage specified in paragraph (3).
            (2) Number of specialty positions lost.--For purposes of 
        paragraph (1), the amount determined under this paragraph for 
        an eligible entity for the calendar year involved is the 
        product of--
                    (A) an amount equal to the aggregate number of 
                full-time equivalent specialty positions lost; and
                    (B) the amount that would be received under section 
                3033 for each speciality position lost.
            (3) Applicable percentage.--
                    (A) In general.--Except as provided under 
                subparagraph (B), for purposes of paragraph (1), the 
                applicable percentage for a calendar year is the 
                following, as applicable to such year:
                            (i) For the first calendar year after 
                        calendar year 1996 for which the eligible 
                        entity involved meets the conditions described 
                        in subsection (b)(1), 100 percent.
                            (ii) For the second such year, 75 percent.
                            (iii) For the third such year, 50 percent.
                            (iv) For the fourth such year, 25 percent.
                    (B) Exceptions.--
                            (i) Urban or rural underserved 
                        communities.--If the Secretary determines that 
                        access to health care in a rural or urban 
                        underserved community would be impaired by the 
                        annual reductions of the applicable percentage 
                        described in subparagraph (A), the Secretary 
                        may eliminate such annual reduction or adjust 
                        such percentage (at the discretion of the 
                        Secretary) to eligible institutions in such a 
                        community.
                            (ii) Voluntary compliance positions.--For 
                        the number of positions determined in paragraph 
                        (4)(A) that result from voluntary reductions in 
                        the number of specialty positions under section 
                        3013(e), the applicable percentage for a 
                        calendar year is the following as applicable to 
                        such year:
                                    (I) For the first 2 calendar years 
                                after calendar year 1997 for which the 
                                eligible entity involved meets the 
                                conditions described in subsection 
                                (b)(1), 100 percent.
                                    (II) For the third such year, 75 
                                percent.
                                    (III) For the fourth such year, 50 
                                percent.
                                    (IV) For the fifth such year, 25 
                                percent.
            (4) Determination of specialty positions lost.--
                    (A) For purposes of this paragraph, the aggregate 
                number of specialty positions lost, with respect to a 
                calendar year, is the difference between--
                            (i) the aggregate number of specialty 
                        positions described in subparagraph (B) that 
                        are estimated for the eligible entity involved 
                        for the academic year beginning in such 
                        calendar year; and
                            (ii) the aggregate number of such specialty 
                        positions at the entity for academic year 1993-
                        1994.
                    (B) For purposes of subparagraph (A), the specialty 
                positions described in this subparagraph are specialty 
                positions in the medical specialities with respect to 
                which payments under section 3031 are made to the 
                approved physician training programs of the eligible 
                entities involved.
                    (C) The total number of physicians lost for all 
                eligible entities may not exceed the number by which 
                the aggregate number of specialty positions with 
                respect to which payments are made under section 3031 
                for the academic year beginning in such calendar year 
                is below the number of full-time-equivalent positions 
                for the academic year 1993-1994.

SEC. 3056. WAIVER OF FOREIGN COUNTRY RESIDENCE REQUIREMENT WITH RESPECT 
              TO INTERNATIONAL MEDICAL GRADUATES.

    (a) Waiver.--Section 212(e) of the Immigration and Nationality Act 
(8 U.S.C. 1182(e)) is amended--
            (1) in the first proviso by inserting ``(or, in the case of 
        an alien described in clause (iii), pursuant to the request of 
        an interested State agency)'' after ``interested United States 
        Government agency''; and
            (2) by inserting after ``public interest'' the following: 
        ``except that in the case of a waiver requested by an 
        interested State agency the waiver shall be subject to the 
        requirements of section 214(k)''.
    (b) Restrictions on Waiver.--Section 214 of that Act (8 U.S.C. 
1184) is amended by adding at the end the following:
    ``(k)(1) In the case of a request by an interested State agency for 
a waiver of the two-year foreign residence requirement under section 
212(e) with respect to an alien described in clause (iii) of that 
section, the Attorney General shall not grant such waiver unless--
            ``(A) in the case of an alien who is otherwise 
        contractually obligated to return to a foreign country the 
        Director of such country furnishes a statement in writing that 
        it has no objection to such waiver;
            ``(B) the alien demonstrates a bona fide offer of full-time 
        employment at a health facility and begins employment at such 
        facility within 90 days of arrival and agrees to continue to 
        work in accordance with paragraph (2) at the health care 
        facility in which the alien is employed for a total of not less 
        than 3 years (unless the Attorney General determines that 
        extenuating circumstances such as the closure of the facility 
        or hardship to the alien would justify a lesser period of 
        time);
            ``(C) the alien agrees to practice medicine in accordance 
        with paragraph (2) for a total of not less than 3 years only in 
        the geographic area or areas which are designated by the 
        Secretary of Health and Human Services as having a shortage of 
        health care professionals; and
            ``(D) the grant of such waiver would not cause the number 
        of waivers allotted for that State for that fiscal year to 
        exceed twenty.
    ``(2) Whenever an interested State agency requests the waiver of 
the two-year residence requirement under section 212(e) with respect to 
an alien described in clause (iii) of that section, the Attorney 
General shall adjust the status of the alien to that of an alien 
described in section 101(a)(15)(H)(b).
    ``(3) If an alien whose status was adjusted under paragraph (2) 
demonstrates that the alien has worked for a period of 10 years in a 
health professional shortage area, then the Attorney General may 
approve a petition filed on the alien's behalf by the health care 
facility in which the alien is employed seeking adjustment of the 
alien's status to that of a special immigrant described in section 
101(a)(27)(L).
    ``(4) Notwithstanding any other provision of this subsection, the 
two-year foreign residence requirement under section 212(e) shall apply 
with respect to an alien described in clause (iii) of that section, who 
has not otherwise been accorded status under section 101(a)(27)(L), if 
at any time the alien practices medicine in an area other than an area 
described in paragraph (1)(C).''.
    (c) Special Immigrant Status.--Section 101(a)(27) of the 
Immigration and Nationality Act is amended by adding at the end the 
following new subparagraph:
                    ``(L) immigrants whose status have been adjusted 
                from that of an alien described in paragraph (15)(H)(b) 
                pursuant to section 214(k)(2), except that not more 
                than 500 immigrants may be admitted in any fiscal year 
                under this subparagraph.''.
    (d) Grounds for Deportation.--Section 241(a) of the Immigration and 
Nationality Act (8 U.S.C. 1251(a)) is amended by adding at the end the 
following new subparagraph:
                    ``(I) Failure to maintain employment as a health 
                care professional.--Any alien described in section 
                212(e)(iii) who fails to maintain employment in 
                accordance with subparagraphs (B) and (C) of section 
                212(k)(1).''.
    (e) Effective Date.--The amendments made by this section shall 
apply to aliens admitted to the United States under section 
101(a)(15)(J) of the Immigration and Nationality Act, or acquiring such 
status after admission to the United States, before, on, or after the 
date of enactment of this Act and before June 1, 2005.

              PART 2--HEALTH PROFESSIONS SCHOOLS PAYMENTS

                 Subpart A--Payments to Medical Schools

SEC. 3061. FEDERAL PAYMENTS TO MEDICAL SCHOOLS.

    (a) Entitlement.--Each eligible medical school that in accordance 
with section 3062 submits to the Secretary an application for academic 
year 1997, or any subsequent academic year, shall be entitled to 
payments for such year for the purpose specified in subsection (b). The 
Secretary shall make such payments in an amount determined in 
accordance with section 3063, and shall administer the payments as a 
grant. The preceding sentence constitutes budget authority in advance 
of appropriations Acts and represents the obligation of the Federal 
Government to provide funding for such payments in the amounts, and for 
the years specified in this subpart.
    (b) Payments to Medical Schools.--The purpose specified in this 
subsection is to assist an eligible medical school with the direct 
costs of academic programs including the education of medical students 
(especially in primary health care and ambulatory training), graduate 
students in biomedical sciences, and otherwise unfunded faculty 
research. Payments under this section shall supplement and not supplant 
existing resources for this purpose. A funding agreement for such 
payments is that the medical school involved will expend the payments 
received pursuant to section 3063(b) as follows:
            (1) 50 percent shall be expended for primary health care 
        education (including prevention), and peer reviewed primary 
        care research in departments and divisions of primary care, 
        including family medicine departments, and divisions of general 
        internal medicine, geriatric medicine, and general pediatrics, 
        or in medical schools in which primary care activities are 
        primarily performed by other organizational units of the 
        medical school, such other units. The medical school will 
        distribute such amounts among the departments, divisions, or 
        other units of primary care so that the distribution of such 
        amounts bears a reasonable relationship to the amount of 
        ambulatory primary care education of medical students in such 
        departments and divisions and the national workforce goals and 
        shall specify such information and the distribution of funds in 
        the application under section 3062.
            (2) 25 percent shall be expended for other ambulatory 
        training.
            (3) 25 percent shall be expended for the support of peer-
        reviewed faculty research in biomedicine and health services.
    (c) Per Capita Payments by Medical Schools for Off-School 
Education.--A funding agreement for payments under subsection (a) for 
an eligible medical school for an academic year is that if, for the 
academic year, one or more students is enrolled (or accepted for 
enrollment) in the medical school on the contingency of successfully 
completing for the academic year a substantial number of hours in 
medical education through an educational institution that does not 
operate a medical school, and if the medical school provides credit 
toward a doctorate in medicine for the hours successfully completed at 
such other institution, then the medical school will pay to the other 
institution for such academic year an amount equal to the product of--
            (1) the product of--
                    (A) the number of such students attending the other 
                institution for such academic year; and
                    (B) the percentage of the academic year spent at 
                the other institution; and
            (2) the quotient of--
                    (A) the amount of payments made to the medical 
                school under subsection (a) for the academic year; over
                    (B) the number of students in the eligible medical 
                school in the academic year (including students 
                described in this subsection).
    (d) Eligible Medical School; Subpart Definition.--For purposes of 
this subpart, the term ``eligible medical school'' with respect to the 
academic year involved, means an approved medical school that submits 
to the Secretary an application for such year in accordance with 
section 3062.

SEC. 3062. APPLICATION FOR PAYMENTS.

    For purposes of section 3061(a), an application for payments under 
such section for an academic year is in accordance with this section 
if--
            (1) the dean (or appropriate presiding official) of the 
        eligible medical school submits the application not later than 
        the date specified by the Secretary;
            (2) the application contains each funding agreement 
        described in this subpart and provides such assurances of 
        compliance with the agreements as the Secretary may require; 
        and
            (3) the application is in such form, is made in such 
        manner, and contains such agreements, assurances, and 
        information as the Secretary determines to be necessary to 
        carry out this part.

SEC. 3063. AUTHORIZATION OF APPROPRIATIONS; ANNUAL AMOUNT OF PAYMENTS.

    (a) Authorization of Appropriations.--
            (1) In general.--The appropriation authorized for each each 
        of the following academic years for making payments pursuant to 
        section 3061(a) shall not be less than or in excess of the 
        following:
                    (A) In the case of academic year 1997, 
                $200,000,000.
                    (B) In the case of academic year 1998, 
                $300,000,000.
                    (C) In the case of academic year 1998, 
                $400,000,000.
                    (D) In the case of academic year 2000, 
                $500,000,000.
                    (E) In the case of academic year 2001, 
                $600,000,000.
                    (F) In the case of each subsequent academic year, 
                the amount specified in subparagraph (F) increased by 
                the product of such amount and the general health care 
                inflation factor (as defined in subsection (d)).
    (b) Amount of Payments for Individual Eligible Programs.--Subject 
to the annual amount available for making payments pursuant to 
subsection (a) for an academic year, the amount of the payment required 
under section 3041 to be made to an eligible medical school for the 
academic year is an amount equal to the sum of--
            (1) the product of \1/2\ of the amount available for the 
        academic year pursuant to subsection (a) and the proportion of 
        students (as determined by the Secretary) at the eligible 
        medical school in academic year 1993-1994 compared to all 
        students enrolled in eligible medical schools nationwide in 
        academic year 1993-1994;
            (2) the product of \1/4\ of the amount available for the 
        academic year pursuant to subsection (a) and the proportion of 
        peer-reviewed research conducted by the faculty at the eligible 
        medical school (including health services research) compared to 
        all such research conducted by the faculty at all eligible 
        medical schools nationwide; and
            (3) the product of \1/4\ of the amount available for the 
        academic year pursuant to subsection (a) and the proportion of 
        the eligible medical school's number of graduates in primary 
        care specialties from the class graduating 6 years prior to 
        such academic year who complete eligible programs in primary 
        health care and do not subsequently enter a nonprimary health 
        care training program compared to such number of graduates of 
        all eligible medical schools nationwide in such year.
The Secretary shall establish a method for measuring faculty research 
contributions.
    (c) Studies.--
            (1) Funding level and allocation method.--Not later than 
        January 1, 1998, the Secretary shall arrange for an independent 
        study and report to be completed, by the Institute of Medicine 
        or other similar entity, concerning the amount of and 
        allocation method for medical school funding, and the impact of 
        the payments under this part on national workforce goals, 
        including the education and training of primary care 
        physicians. Such report shall be submitted to the President and 
        the Congress and shall include findings and recommendations as 
        to the appropriateness of modifying funding levels or 
        allocations.
            (2) Impact of health care reform on medical education.--Not 
        later than January 1, 2000, the Secretary shall arrange for an 
        independent study and report to be completed, by the Institute 
        of Medicine or other similar entity, concerning the impact of 
        health reform on undergraduate medical education. Such report 
        shall be submitted to the President and the Congress and shall 
        include appropriate findings and recommendations.
    (d) General Health Care Inflation Factor.--As used in this 
subtitle, the term ``general health care inflation factor'' with 
respect to a year, has the meaning given such term in section 
3033(e)(4) for such year.

                Subpart B--Payments to Nursing Programs

SEC. 3071. FEDERAL PAYMENTS TO GRADUATE NURSE TRAINING PROGRAMS.

    (a) Federal Payments to Graduate Nurse Training Programs.--
            (1) Entitlement.--Each eligible graduate nurse training 
        program that in accordance with paragraph (2) submits to the 
        Secretary an application for calendar year 1997 or any 
        subsequent calendar year shall be entitled to payments for such 
        year to the program for the purpose specified in paragraph (3). 
        The Secretary shall make such payments in an amount determined 
        in accordance with subsection (b), and shall administer the 
        payments as a grant. The preceding sentence constitutes budget 
        authority in advance of appropriations Acts and represents the 
        obligation of the Federal Government to provide funding for 
        such payments in the amounts, and for the years specified in 
        this subpart.
            (2) Application for payments.--For purposes of paragraph 
        (1), an application for payments for a calendar year is in 
        accordance with this paragraph if--
                    (A) the eligible graduate nurse training program 
                involved submits the application not later than the 
                date specified by the Secretary;
                    (B) the application provides such assurances as the 
                Secretary may require that the program will expend 
                payments only for the purpose described in paragraph 
                (3);
                    (C) the application contains each funding agreement 
                described in this subpart and the application provides 
                such assurances of compliance with the agreements as 
                the Secretary may require;
                    (D) the application contains an assurance that the 
                graduate nurse training program shall annually submit a 
                report on the costs of clinical training of nurses in 
                such manner as the Secretary may require; and
                    (E) the application is in such form, is made in 
                such manner, and contains such agreements, assurances, 
                and information as the Secretary determines to be 
                necessary to carry out this part.
            (3) Payments for operation of graduate nurse training 
        programs.--The purpose of payments under paragraph (1) is to 
        assist an eligible graduate nurse training program with the 
        costs of the clinical portions of training programs and 
        supporting full-time enrollees in such training programs.
    (b) Authorization of Appropriations; Annual Amount of Payments.--
            (1) In general.--The appropriation authorized for each of 
        the following calendar years for making payments pursuant to 
        subsection (a)(1) shall not be less than or in excess of the 
        following:
                    (A) In the case of calendar year 1997, 
                $200,000,000.
                    (B) In the case of each subsequent calendar year, 
                the amount specified in subparagraph (A) increased by 
                the product of such amount and the general health care 
                inflation factor as defined in subsection (c).
            (2) Amount of payments for individual eligible programs.--
        Subject to the annual amount available under paragraph (1) for 
        a calendar year, the amount of payments required under 
        subsection (a) to be made to an eligible graduate nurse 
        training program that submits to the Secretary an application 
        for such year in accordance with subsection (a)(2) is an amount 
        equal to the product of--
                    (A) the number of full-time enrollees in the 
                program; and
                    (B) the estimated national average per full-time 
                enrollee cost of each graduate nurse training program 
                described in subsection (c)(1) for the calendar year 
                (as determined by the Secretary), adjusted by a factor 
                to reflect regional differences in the applicable wage 
                and wage related costs.
            (3) Limitation.--If the annual amount available under 
        paragraph (1) for a calendar year is insufficient for providing 
        each eligible graduate nurse training program that submits to 
        the Secretary an application for such year in accordance with 
        subsection (a)(2) with the amount of payments determined under 
        paragraph (2) for the program for such year, the Secretary 
        shall make such pro rata reductions in the amounts so 
        determined as may be necessary to ensure that the total of 
        payments made under subsection (a) for such year equals the 
        total of such amount.
    (c) Definitions.--For purposes of this part:
            (1) Eligible graduate nurse training program.--The term 
        ``eligible graduate nurse training program'' means programs in 
        advanced practice nurse education that are programs for 
        education as nurse practitioners, programs for education as 
        nurse midwives, programs for education as nurse anesthetists, 
        and programs for training clinical nurse specialists that are--
                    (A) designated by the Secretary as eligible 
                graduate nurse training programs;
                    (B) accredited programs that award a master degree 
                or a post-nurse master certificate and provide training 
                preparing an individual for practice as an advanced 
                practice nurse; and
                    (C) existing programs funded in 1994 under section 
                822 or 831 of the Public Health Service Act that do not 
                award a master degree may also be designated eligible 
                programs.
            (2) Programs for education as nurse practitioners.--The 
        term ``programs for education as nurse practitioners'' means 
        programs meeting the conditions to be programs for which awards 
        of grants and contracts may be made under section 822 of the 
        Public Health Service Act for education as a nurse 
        practitioners.
            (3) Programs for education as nurse midwives.--The term 
        ``programs for education as nurse midwives'' means programs 
        meeting the conditions to be programs for which awards of 
        grants and contracts may be made under section 822 of the 
        Public Health Service Act for education as nurse midwives.
            (4) Programs for training clinical nurse specialists.--The 
        term ``programs for training clinical nurse specialists'' means 
        programs in advanced practice nurse education meeting the 
        conditions to be programs for which awards of grants and 
        contracts may be made under section 821 of the Public Health 
        Service Act.
            (5) Full-time enrollee.--The term ``full-time enrollee'' 
        means an individual who is enrolled in an advanced nurse 
        training program and qualifies as a full-time student at the 
        institution operating such program.
            (6) General health care inflation factor.--The term 
        ``general health care inflation factor'', with respect to a 
        year, has the meaning given such term in section 3033(e)(4)for 
        such year.

SEC. 3072. NATIONAL COUNCIL ON GRADUATE NURSE TRAINING.

    (a) In General.--There is established within the Department of 
Health and Human Services a council to be known as the National Council 
on Graduate Nurse Training.
    (b) Duties.--The National Council on Graduate Nurse Training 
shall--
            (1) collect and analyze data on trends of supply and demand 
        for advanced practice nurses;
            (2) analyze and consider the supply of advanced practice 
        nurses in the context of changes in the overall supply of 
        health professionals;
            (3) recommend priorities for support of graduate nurse 
        training by type of programs described in section 3071(c);
            (4) report to Congress annually and include in its report 
        the number of students who graduated the previous year from 
        funded programs; and
            (5) consider and recommend appropriate standards for 
        assessing the quality of advanced practice nursing clinical 
        training programs.
    (c) Composition.--
            (1) In general.--The membership of the National Council on 
        Graduate Nurse Training shall include individuals who are 
        appointed to the Council from among individuals who are not 
        officers or employees of the United States. Such individuals 
        shall be appointed by the Secretary, and shall include--
                    (A) a nurse practitioner, a nurse-midwife, a nurse 
                anesthetist, and a clinical nurse specialist; and
                    (B) an official of a school of nursing, an official 
                of a teaching hospital or other health services entity, 
                and other experts in health care financing, delivery, 
                and professions training.
            (2) Ex officio members; other federal officers or 
        employees.--The membership of the National Council on Graduate 
        Nurse Training shall include individuals designated by the 
        Secretary, the Secretary of Veterans Affairs, and the Secretary 
        of the Department of Defense to serve as members of the Council 
        from among Federal officers or employees who are appointed by 
        the President, by the Secretary, the Secretary of Veterans 
        Affairs, the Secretary of Defense, or other Federal officers 
        who are appointed by the President with the advice and consent 
        of the Senate.
    (d) Chair.--The Secretary shall, from among members of the National 
Council on Graduate Nurse Training appointed under subsection (c)(1), 
designate an individual to serve as the Chair of the Council.

                 Subpart C--Payments to Dental Schools

SEC. 3073. DENTAL SCHOOLS.

    (a) Federal Payments to Dental Schools.--
            (1) Entitlement.--Each eligible school of dentistry that in 
        accordance with paragraph (2) submits to the Secretary an 
        application for calendar year 1997 or any subsequent calendar 
        year shall be entitled to payments for such year to the program 
        for the purpose specified in paragraph (3). The Secretary shall 
        make such payments in an amount determined in accordance with 
        subsection (b), and shall administer the payments as a grant. 
        The preceding sentence constitutes budget authority in advance 
        of appropriations Acts and represents the obligation of the 
        Federal Government to provide funding for such payments in the 
        amounts, and for the years specified in this subpart.
            (2) Application for payments.--For purposes of paragraph 
        (1), an application for payments for a calendar year is in 
        accordance with this paragraph if--
                    (A) the dean (or appropriate presiding official of 
                the eligible school of dentistry involved) submits the 
                application not later than the date specified by the 
                Secretary;
                    (B) the application provides such assurances as the 
                Secretary may require that the program will expend 
                payments only for the purpose described in paragraph 
                (3);
                    (C) the application contains each funding agreement 
                described in this subpart and the application provides 
                such assurances of compliance with the agreements as 
                the Secretary may require; and
                    (D) the application is in such form, is made in 
                such manner, and contains such agreements, assurances, 
                and information as the Secretary determines to be 
                necessary to carry out this subpart.
            (3) Purpose.--With respect to an eligible school of 
        dentistry, the purpose of payments under paragraph (1) is to 
        assist such school with the costs of training dentists, 
        including unreimbursed oral health care costs. A funding 
        agreement for such payments is that the school of dentistry 
        involved will expend the payments only for direct expenses 
        determined as allowable by the Secretary.
            (4) School of dentistry.--For purposes of this subtitle, 
        the term ``eligible school of dentistry'' means an accredited 
        public or nonprofit private school in a State that provides 
        training leading to a degree of doctor of dentistry or an 
        equivalent degree, and any advanced training relating to such 
        training.
    (b) Authorization of Appropriations; Annual Amount of Payments.--
            (1) In general.--The appropriation authorized for each of 
        the following calendar years for making payments pursuant to 
        subsection (a)(1) shall not be less than or in excess of the 
        following:
                    (A) In the case of each of calendar years 1997, 
                1998, 1999 and 2000, $50,000,000.
                    (B) In the case of each subsequent calendar year, 
                the amount specified in subparagraph (A) increased by 
                the product of such amount and the general health care 
                inflation factor as defined in subsection (c).
            (2) Amount of payments for individual eligible programs.--
        Subject to the annual amount available under paragraph (1) for 
        a calendar year, the amount of payments required under 
        subsection (a) to be made to an eligible school of dentistry 
        that submits to the Secretary an application for such year in 
        accordance with subsection (a)(2) is an amount equal to the sum 
        of--
                    (A) 75 percent of the amount available pursuant to 
                paragraph (1) multiplied by the ratio of the number of 
                full-time equivalent training participants in the 
                school of dentistry (determined in accordance with a 
                method to be developed by the Secretary) to the 
                national number of full-time equivalent training 
                participants in all schools of dentistry (as determined 
                by the Secretary) in the academic year 1993-1994; and
                    (B) 25 percent of the amount available pursuant to 
                paragraph (1) multiplied by the ratio of the 
                unreimbursed oral health care costs of the school of 
                dentistry to the national unreimbursed oral health care 
                costs of all schools of dentistry (as determined by the 
                Secretary).
    (c) Eligible School of Dentistry.--For purposes of this subpart, 
the term ``eligible school of dentistry'' with respect to a calendar 
year involved, means a school of dentistry that submits to the 
Secretary an application for such year in accordance with subsection 
(a)(2).

            Subpart D--Payments to Schools of Public Health

SEC. 3074. SCHOOLS OF PUBLIC HEALTH.

    (a) Federal Payments to Schools of Public Health.--
            (1) Entitlement.--Each eligible school of public health 
        that in accordance with paragraph (2) submits to the Secretary 
        an application for calendar year 1997 or any subsequent 
        calendar year shall be entitled to payments for such year to 
        the program for the purpose specified in paragraph (3). The 
        Secretary shall make such payments in an amount determined in 
        accordance with subsection (b), and shall administer the 
        payments as a grant. The preceding sentence constitutes budget 
        authority in advance of appropriations Acts and represents the 
        obligation of the Federal Government to provide funding for 
        such payments in the amounts, and for the years specified in 
        this subpart.
            (2) Application for payments.--For purposes of paragraph 
        (1), an application for payments for a calendar year is in 
        accordance with this paragraph if--
                    (A) the dean (or appropriate presiding official of 
                the eligible school of public health involved submits 
                the application not later than the date specified by 
                the Secretary;
                    (B) the application provides such assurances as the 
                Secretary may require that the program will expend 
                payments only for the purpose described in paragraph 
                (3);
                    (C) the application contains each funding agreement 
                described in this subpart and the application provides 
                such assurances of compliance with the agreements as 
                the Secretary may require; and
                    (D) the application is in such form, is made in 
                such manner, and contains such agreements, assurances, 
                and information as the Secretary determines to be 
                necessary to carry out this subpart.
            (3) Purpose.--With respect to an eligible school of public 
        health, the purpose of payments under this paragraph is to 
        assist such school with the costs of training public health 
        professionals in disease prevention and health promotion, the 
        management of health services, health care policy and health 
        care organization, public health practice, outcomes and quality 
        of care, and epidemiologic and biostatistical research. A 
        funding agreement for such payments is that the school of 
        public health involved will expend the payments only for direct 
        expenses determined as allowable by the Secretary.
            (4) School of public health.--For purposes of this subpart, 
        the term ``school of public health'' means an accredited public 
        or non-profit private school in a State that--
                    (A) is located within a university accredited by 
                one of the recognized regional accrediting bodies;
                    (B) has as its central concept the prevention of 
                disease and the promotion of health through research, 
                education and professional practice;
                    (C) offers the Master of Public Health degree;
                    (D) provides, with sufficient faculty and other 
                resources, education at the master degree level with an 
                emphasis in at least each of the following areas:
                            (i) Behavioral sciences.
                            (ii) Biostatistics.
                            (iii) Environmental and health sciences.
                            (iv) Epidemiology.
                            (v) Health services administration; and
                    (E) offers graduate education at the doctoral 
                degree level in at least 1 of the 5 areas described in 
                subparagraph (D).
    (b) Authorization of Appropriations; Annual Amount of Payments.--
            (1) In general.--The appropriation authorized for each of 
        the following calendar years for making payments pursuant to 
        subsection (a)(1) shall not be less than or in excess of the 
        following:
                    (A) In the case of each of calendar years 1997, 
                1998, 1999 and 2000, $25,000,000.
                    (B) In the case of each subsequent calendar year, 
                the amount specified in subparagraph (A) increased by 
                the product of such amount and the general health care 
                inflation factor.
            (2) Payments to schools of public health.--
                    (A) In general.--The amount required under 
                subsection (a) to be made to an eligible school of 
                public health is an amount equal to the product of--
                            (i) the amount available for making such 
                        payments for the calendar year pursuant to 
                        paragraph (1); and
                            (ii) the percentage constituted by the 
                        ratio of the number of full-time students 
                        enrolled in degree programs in such schools and 
                        the number of full-time equivalents of part-
                        time students enrolled in degree programs in 
                        such school (determined in accordance with 
                        subparagraph (B)) to the national number of all 
                        such students in all schools of public health 
                        in the academic year beginning in the previous 
                        fiscal year.
                    (B) Full-time equivalence.--For the purposes of 
                this paragraph, the number of full-time equivalents of 
                part-time students for a school of public health for 
                any school year is a number equal to--
                            (i) the total number of credit hours of 
                        instructions in such year for which study 
                        leading to a graduate degree in public health 
                        or an equivalent degree, divided by
                            (ii) the number of credit hours of 
                        instructions which a student pursuing a full-
                        time course of study leading to a graduate 
                        degree in public health or equivalent degree.
                    (C) New school.--In the case of a new school of 
                public health which applies for a grant under this 
                section in the fiscal year preceding the fiscal year in 
                which it will admit its first class, the enrollment for 
                purposes of subparagraph (A)(ii) shall be the number of 
                full-time students which the Secretary determines, on 
                the basis of assurances provided by the school, will be 
                enrolled in the school, in the fiscal year after the 
                fiscal year in which the grant is made.
    (c) Eligible School of Public Health.--The term ``eligible school 
of public health'' with respect to the calendar year involved, means a 
school of public health that submits to the Secretary for such year in 
accordance with subsection (a)(2).

                        PART 3--RELATED PROGRAMS

                    Subpart A--Workforce Development

SEC. 3081. PROGRAMS OF THE SECRETARY OF HEALTH AND HUMAN SERVICES.

    (a) In General.--
            (1) Funding.--For purposes of carrying out the programs 
        described in this section, there is authorized to be 
        appropriated $100,000,000 for each of the fiscal years 1995 and 
        1996, and $150,000,000 for each of the fiscal years 1997 
        through 2000 (in addition to amounts that may otherwise be 
        authorized to be appropriated for carrying out the programs).
            (2) Administration.--The programs described in this section 
        and carried out with amounts made available under subsection 
        (a) shall be carried out by the Secretary of Health and Human 
        Services.
    (b) Primary Care Physician and Physician Assistant Training.--For 
purposes of subsection (a), the programs described in this section 
include programs to support projects to train additional numbers of 
primary care physicians and physician assistants, including projects to 
enhance community-based generalist training for medical students, 
residents, and practicing physicians; to retrain mid-career physicians 
previously certified in a nonprimary care medical specialty; to expand 
the supply of physicians with special training to serve in rural and 
inner-city medically underserved areas; to support expansion of 
service-linked educational networks that train a range of primary care 
providers in community settings; to provide for training in managed 
care, cost-effective practice management, and continuous quality 
improvement; to provide interdisciplinary training for medical 
students, residents or practicing physicians, and dental students, 
residents, and dental hygienists, to deliver primary care to 
individuals with mental, physical, and developmental disabilities, 
including mental retardation, particularly those who are more than 18 
years of age; and to develop additional information on primary care 
workforce issues as required to meet future needs in health care.
    (c) Training of Underrepresented Racial and Ethnic Minorities and 
Disadvantaged Persons.--For purposes of subsection (a), the programs 
described in this section include a program to support projects to 
increase the number of racial and ethnic underrepresented minority and 
disadvantaged persons in medicine, osteopathy, dentistry, advanced 
practice nursing, public health, psychology, and other health 
professions, including projects to provide continuing financial 
assistance for such persons entering health professions training 
programs; for financial assistance for facility renovation or 
construction; to increase support for recruitment and retention of such 
persons in the health professions; to maintain efforts to foster 
interest in health careers among such persons at the preprofessional 
level; and to increase the number of racial and ethnic minority health 
professions faculty at programs that have a significant number of 
underrepresented racial and ethnic minorities.
    (d) Expanding Rural Health Career Opportunities and Retention 
Efforts.--
            (1) In general.--For purposes of subsection (a), the 
        programs described in this section include programs to support 
        projects to increase the number of individuals living in rural, 
        underserved communities who enter the fields of medicine, 
        osteopathy, dentistry, advanced practice nursing, public 
        health, psychology, and other health professions, and to 
        encourage the retention of such health care professionals in 
        rural, underserved communities.
            (2) Rural health career training.--Projects to increase the 
        number of individuals recruited from rural, underserved areas 
        include projects--
                    (A) to provide continuing financial assistance for 
                such persons entering health professions education and 
                training programs;
                    (B) to increase efforts to foster interest in 
                health careers among such persons at the 
                preprofessional level;
                    (C) to foster the development of training curricula 
                appropriate to rural health care settings; and
                    (D) to increase support for recruitment of such 
                persons in the health professions.
            (3) Retention of rural health care providers.--Projects to 
        encourage the retention of individuals providing health care in 
        rural, underserved areas include projects--
                    (A) to establish State and regional locum tenans 
                programs in rural health care settings so that 
                substitute health care providers are available when 
                permanent staff is absent from the health care setting;
                    (B) to implement programs to foster 
                interdisciplinary team approaches to rural health 
                training and practice; and
                    (C) to develop state-of-the-art network 
                telecommunications and telemedicine systems to link 
                rural health professionals to other health care 
                providers and academic health care centers.
    (e) Nurse Training.--For purposes of subsection (a), the programs 
described in this section include a program to support projects to 
support midlevel provider training and address priority nursing 
workforce needs, including projects to train additional nurse 
practitioners and nurse midwives; to support baccalaureate-level nurse 
training programs providing preparation for careers in teaching, 
community health service, and specialized clinical care; to train 
additional nurse clinicians and nurse anesthetists; to support 
interdisciplinary school-based community nursing programs; and to 
promote research on nursing workforce issues.
    (f) Inappropriate Practice Barriers; Full Utilization of Skills.--
For purposes of subsection (a), the programs described in this section 
include a program--
            (1) to develop and encourage the adoption of model 
        professional practice statutes for advanced practice nurses and 
        physician assistants, and to otherwise support efforts to 
        remove inappropriate barriers to practice by such nurses and 
        such physician assistants; and
            (2) to promote the full utilization of the professional 
        education and clinical skills of advanced practice nurses and 
        physician assistants.
    (g) Advisory Board on Health Care Workforce Development.--
            (1) In general.--The Secretary shall establish an Advisory 
        Board known as the National Advisory Board on Health Care 
        Workforce Development to advise, consult with, and make 
        recommendations to the Secretary and to the Secretary of Labor 
        on matters relating to--
                    (A) health care worker supply and its adequacy to 
                assure proper health care delivery system staffing in 
                both rural and urban areas; and
                    (B) the impact of this Act, and of related changes 
                in law regarding health care, on health care workers 
                and the needs of such workers, including needs 
                regarding education, training, and other career 
                development matters and the relationship of health care 
                workers to health care professionals.
            (2) Composition.--The Board established under paragraph (1) 
        shall be composed of the following members with expertise in 
        health care workforce issues appointed by the Secretary in 
        consultation with the Secretary of Labor:
                    (A) Five representatives of labor organizations 
                representing health care workers.
                    (B) Five representatives of health care delivery 
                institutions.
                    (C) Two representatives from health care education 
                organizations.
                    (D) Two representatives from consumer 
                organizations.
            (3) Assistance.--The Secretary shall provide the Board with 
        such administrative assistance as may be necessary for the 
        Board to carry out this subsection.
    (h) Other Programs.--For purposes of subsection (a), the programs 
described in this section include a program to train health 
professionals and administrators in managed care, cost-effective 
practice management, continuous quality improvement practices, and 
provision of culturally sensitive care.
    (i) Relationship to Existing Programs.--This section may be carried 
out through programs established in title VII or VIII of the Public 
Health Service Act, as appropriate and as consistent with the purposes 
of such programs.
    (j) Mental Retardation and Other Developmental Disabilities.--Title 
VII of the Public Health Service Act is amended by inserting after 
section 778, the following new section:

``SEC. 779. MENTAL RETARDATION AND OTHER DEVELOPMENTAL DISABILITIES.

    ``(a) In General.--The Secretary may make grants and enter into 
contracts with university affiliated programs, schools of medicine, and 
schools of dentistry to assist in meeting the costs of such programs or 
schools to--
            ``(1) improve the interdisciplinary training of primary 
        care physicians and dentists in the health care services needs 
        of individuals with mental, physical, and developmental 
        disabilities, including mental retardation, particularly those 
        who are more than 18 years of age;
            ``(2) develop, evaluate, and disseminate curricula relating 
        to the health care service needs of individuals with mental, 
        physical, and developmental disabilities, including mental 
        retardation, particularly those individuals who are more than 
        18 years of age;
            ``(3) support the training and retraining of faculty to 
        provide such instruction; and
            ``(4) support continuing education of health professionals 
        who provide health care services and support to individuals 
        with mental, physical, and developmental disabilities, 
        including mental retardation, particularly those who are more 
        than 18 years of age.
    ``(b) Authorization of Appropriations.--For purposes of carrying 
out this section, there are authorized to be appropriated, $10,000,000 
for each of the fiscal years 1995 through 2000.''.

SEC. 3082. PROGRAMS OF THE SECRETARY OF LABOR.

    (a) In General.--
            (1) Funding.--For purposes of carrying out the programs 
        described in this section, and for carrying out section 3083, 
        there is authorized to be appropriated $200,000,000 for fiscal 
        year 1995 and each subsequent fiscal year (in addition to 
        amounts that may otherwise be authorized to be appropriated for 
        carrying out the programs).
            (2) Administration.--The programs described in this section 
        and carried out with amounts made available under subsection 
        (a) shall be carried out by the Secretary of Labor (in this 
        section referred to as the ``Secretary'').
    (b) Retraining Programs; Advanced Career Positions; Workforce 
Adjustment Programs.--
            (1) In general.--For purposes of subsection (a), the 
        programs described in this section are the following:
                    (A) A program for skills upgrading and occupational 
                retraining (including retraining health care workers 
                for more advanced positions as technicians, nurses, and 
                physician assistants), and for quality and workforce 
                improvement.
                    (B) A demonstration program to assist workers in 
                health care institutions in obtaining advanced career 
                positions.
                    (C) A program to develop and operate health care 
                industry worker job banks in local employment services 
                agencies or one-stop career centers, subject to the 
                following:
                            (i) Such job banks shall be available to 
                        all health care providers in the community 
                        involved.
                            (ii) Such job banks shall begin operation 
                        not later than 90 days after the date of the 
                        enactment of this Act.
                            (iii)(I) With respect to each affected 
                        community, the local employment service agency 
                        or one-stop career center serving such 
                        community shall be allocated not less than one 
                        counselor whose responsibility it shall be to 
                        develop and operate health and insurance 
                        industry worker job banks. Where the impact of 
                        health care industry restructuring in the 
                        affected community is such that the functions 
                        required under this clause cannot be adequately 
                        provided by one counselor, additional 
                        counselors shall be allocated to carry out such 
                        functions.
                            (II) Such counselor shall solicit job 
                        openings from local health care industry 
                        employers, maintain frequent contacts with 
                        these and other employers, and monitor and 
                        update all job listings appropriate for 
                        displaced health care workers seeking 
                        employment.
                            (III) The local employment service agency 
                        or one-stop career center shall provide 
                        directly, or facilitate the provision of, labor 
                        exchange services to displaced health care 
                        industry workers, including assessment, 
                        counseling, testing, job-search assistance, job 
                        referral and placement, and referral to 
                        training and educational programs, where 
                        appropriate.
                            (IV) The Secretary of Labor shall develop 
                        performance goals for the effective performance 
                        of such job banks with respect to the number 
                        and quality of jobs listed, the degree of 
                        participation by employers in the affected 
                        community, and success in placement of job bank 
                        users in jobs listed, taking into account 
                        specific geographic, economic and labor market 
                        characteristics of the community served.
                    (D) A program to provide for joint labor-management 
                decision-making in the health care sector on workplace 
                matters related to the restructuring of the health care 
                delivery system provided for in this Act.
                    (E) A program to collect data regarding the 
                adequacy of the supply of health care workers by 
                occupation and sector of the health industry in light 
                of existing and projected demand for such workers.
                    (F)(i) A program to encourage the adoption and 
                utilization of high performance, high quality health 
                care delivery systems, including employee participation 
                committees and employee team systems that will 
                contribute to more effective health care by increasing 
                the role and the area of independent decisionmaking of 
                health care workers.
                    (ii) For purposes of this subparagraph, the term 
                ``employee participation committees'' means committees 
                of workers independently selected by and from a 
                facility's nonmanagerial workforce, or selected by 
                unions where collective bargaining agreements are in 
                effect, and which operate independently without 
                employer interference and consult with management on 
                issues of efficiency, productivity, and quality of 
                care, except that an employee participation committee 
                established under and operating in conformity with this 
                subparagraph shall not be considered a labor 
                organization within the meaning of section 2(5) of the 
                National Labor Relations Act or a representative within 
                the meaning of section 1, sixth, of the Railway Labor 
                Act.
            (2) Use of funds.--Amounts made available under subsection 
        (a) for carrying out this section may be expended for program 
        support, faculty development, trainee support, workforce 
        analysis, and dissemination of information, as necessary to 
        produce required performance outcomes.
    (c) Certain Requirements for Programs.--In carrying out the 
programs described in subsection (b), the Secretary shall, with respect 
to the organizations and employment positions involved, provide for the 
following:
            (1) Explicit, clearly defined skill requirements developed 
        for all the positions and projections of the number of openings 
        for each position.
            (2) Opportunities for internal career movement.
            (3) Opportunities to work while training or completing an 
        educational program.
            (4) Evaluation and dissemination.
            (5) Training opportunities in several forms, as 
        appropriate.
    (d) Administrative Requirements.--In carrying out the programs 
described in subsection (b), the Secretary shall, with respect to the 
organizations and employment positions involved, provide for the 
following:
            (1) Joint labor-management implementation and 
        administration.
            (2) Discussion with employees as to training needs for 
        career advancement.
            (3) Commitment to a policy of internal hirings and 
        promotion.
            (4) Provision of support services.
            (5) Consultations with employers and with organized labor.

SEC. 3083. REQUIREMENT FOR CERTAIN PROGRAMS REGARDING REDEPLOYMENT OF 
              HEALTH CARE WORKERS.

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

       Subpart B--Transitional Provisions for Workforce Stability

SEC. 3091. APPLICATION.

    (a) Limitation to Transition Period.--The provisions of this 
subpart are intended to minimize, to the extent possible, disruptions 
in established employment relationships during the period of transition 
to a restructured health care delivery system, and shall terminate 
December 31, 2000.
    (b) Health Care Entities Covered by Subpart.--The provisions of 
this subpart, including references to displacing employers, hiring 
employers, successors and contractors, apply only to health care 
entities that employ more than 25 individuals.

SEC. 3092. DEFINITIONS.

    (a) Health Care Entity.--As used in this subpart, the term ``health 
care entity'' includes individuals, sole proprietorships, partnerships, 
associations, business trusts, corporations, governmental institutions, 
and public agencies (including state governments and political 
subdivisions thereof) that--
            (1) provide health care services under title I (including 
        nonmandatory health care services under title I) or under the 
        amendments made or programs referred to in titles IV and VIII; 
        or
            (2) provide necessary related services, including 
        administrative, food service, janitorial or maintenance 
        services, to an entity that provides health care services (as 
        described in subparagraph (1));
except that an entity that solely manufactures or provides goods or 
equipment to a health care entity shall not be considered a health care 
entity.
    (b) Affiliated Enterprise.--As used in this subpart, the term 
``affiliated enterprise'' means a health care entity that, together 
with the displacing employer, is considered a single employer as 
defined under 414 of the Internal Revenue Code of 1986.
    (c) Preference Eligible Employee.--As used in this subpart, the 
term ``preference eligible employee'' means an employee who--
            (1) has been employed for in excess of 1 year by a health 
        care entity; and
            (2) has been displaced by or has received notice of an 
        impending displacement by such entity.
    (d) Displacement.--As used in this subpart, the term 
``displacement'' includes a lay off, termination, significant cutback 
in paid work hours, or other loss of employment, except that a 
discharge for just cause shall not constitute a displacement within the 
meaning of this paragraph.

SEC. 3093. OBLIGATIONS OF DISPLACING EMPLOYER AND AFFILIATED 
              ENTERPRISES IN EVENT OF DISPLACEMENT.

    (a) Notice.--A health care entity which displaces a preference 
eligible employee shall provide such employee with--
            (1) written notice, no later than the date of displacement, 
        of employment rights under this subpart, including employment 
        rights with respect to affiliated enterprises of the displacing 
        employer; and
            (2) notice of any existing or subsequent vacancies with the 
        displacing employer or an affiliated enterprise, which notice 
        may be given by posting of such vacancies wherever notices to 
        applicants for employment are customarily posted, by listing 
        such vacancies with the local employment services agency, or in 
        such other manner as the Secretary of Labor, by regulation, may 
        hereafter specify.
Any such vacancy shall remain open for applications by preference 
eligible employees for not less than 14 calendar days from the date on 
which the initial notice is provided.
    (b) Hiring Preference.--
            (1) In general.--A qualified preference eligible employee 
        who applies during the notice period described in subsection 
        (a)(2) for a vacant position with the displacing employer or an 
        affiliated enterprise, which position is in the employee's 
        occupational specialty and is located in the same State or 
        Standard Metropolitan Statistical Area in which the employee 
        was employed prior to the displacement, shall be given the 
        right to accept or decline the position before the employer may 
        offer the position to a nonpreference eligible employee.
            (2) Multiple applications.--When considering applications 
        from more than one qualified preference eligible employee, the 
        hiring health care entity shall have discretion as to which of 
        such employees will be offered the position.
            (3) Employment qualifications.--Nothing in this subsection 
        shall be construed to prohibit the hiring health care entity 
        from establishing reasonable employment qualifications for a 
        vacancy to which this subpart applies, except that employees 
        who performed essentially the same work prior to their 
        displacement shall be deemed presumptively qualified for 
        comparable positions.
    (c) Termination of Preference Eligibility.--A displaced employee's 
preference eligibility shall terminate--
            (1) at such time as the displaced employee obtains 
        substantially equivalent employment with the displacing 
        employer; or
            (2) if the employee does not obtain such employment--
                    (A) with respect to health care entities other than 
                the displacing employer, 2 years after the date of the 
                displacement; or
                    (B) with respect to the displacing employer, upon 
                the termination of this subpart pursuant to section 
                3081(a).

SEC. 3094. EMPLOYMENT WITH SUCCESSORS.

    A health care entity that succeeds another health care entity 
through merger, consolidation, acquisition, contract, or other similar 
manner shall provide employees of the previous health care entity who 
would otherwise be displaced the right to continued employment in the 
job positions held by such employees prior thereto, unless the employer 
can establish that such positions no longer exist.

SEC. 3095. COLLECTIVE BARGAINING OBLIGATIONS DURING TRANSITION PERIOD.

    (a) Continuation of Previously Recognized Bargaining 
Representatives and Agreements.--If a majority of the employees in an 
appropriate bargaining unit consists of employees who were previously 
covered by a bargaining agreement or represented by an exclusive 
representative with respect to terms and conditions of employment, and 
there has not been a substantial change in the operations performed by 
the employees in that unit, the employer shall recognize such 
representative as the exclusive representative for the unit and shall 
assume the bargaining agreement, except that where application of this 
subsection would result in the recognition of more than one bargaining 
representative for a single unit, the question concerning which 
representative shall be recognized as the exclusive representative for 
the unit shall be resolved in accordance with applicable Federal or 
State law.
    (b) Joint Employer Status.--If employees of a contractor are 
assigned on a regular basis to perform work on the premises of a 
contracting entity and the tasks performed by these employees are 
functionally integrated with the operations of the contracting entity 
on whose premises such employees work, both the contractor and the 
contracting entity shall be considered joint employers of the employees 
with respect to work performed on those premises for purposes of 
determining compliance with labor relations laws. Employees of such 
joint employers may not be excluded from a bargaining unit within 
either entity on the basis of such joint employer status.

SEC. 3096. GENERAL PROVISIONS.

    (a) Regulations.--Not later than 120 days after the date of 
enactment of this Act, the Secretary shall promulgate regulations to 
implement the requirements of section 3093.
    (b) Other Laws.--The standards and requirements of this subpart 
shall not preempt or excuse noncompliance with any other applicable 
Federal or State law, regulation or municipal ordinance that 
establishes additional notice and preference standards or requirements 
concerning employee dislocation, employee representation, or collective 
bargaining.
    (c) Rules of Construction.--Nothing in this subpart shall be 
construed--
            (1) to excuse or otherwise limit the obligation of an 
        employer to comply with any collective bargaining agreement or 
        any employment benefit plan that provides rights to employees 
        in addition to those provided under this subpart; or
            (2) to require an employer to recognize or bargain with a 
        labor organization in violation of State law.
    (d) Enforcement.--Unless otherwise specifically provided in this 
subpart, the enforcement provisions of section 107 of the Family and 
Medical Leave Act of 1993 (29 U.S.C. 2617) shall apply with respect to 
the enforcement of the individual rights, including notice 
requirements, provided under section 3093. The collective bargaining 
and contractual rights provided under sections 3094 and 3095 shall be 
enforced through administrative and judicial procedures otherwise 
provided under Federal or State law with respect to such rights.

                  Subtitle B--Academic Health Centers

SEC. 3131. DISCRETIONARY GRANTS REGARDING ACCESS TO CENTERS.

    (a) Rural Information and Referral Systems.--The Secretary may make 
grants to eligible centers for the establishment and operation of 
information and referral systems to provide the services of such 
centers to rural health plans.
    (b) Other Purposes Regarding Urban and Rural Areas.--The Secretary 
may make grants to community- and provider-based health plans under 
section 1651(d) to carry out activities (other than activities carried 
out under subsection (a)) for the purpose of providing the services of 
eligible centers to residents of rural or urban communities who 
otherwise would not have adequate access to such services.
    (c) Authorization of Appropriations.--For the purpose of carrying 
out this section, there are authorized to be appropriate, $3,000,000 
for fiscal year 1995, $4,000,000 for fiscal year 1996, and $5,000,000 
for each of the fiscal years 1997 through 2000.

                Subtitle C--Health Research Initiatives

                 PART 1--PROGRAMS FOR CERTAIN AGENCIES

SEC. 3201. BIOMEDICAL, BEHAVIORAL AND HEALTH SERVICES RESEARCH.

    (a) Findings.--Congress finds the following:
            (1) Nearly 4 of 5 peer reviewed research projects deemed 
        worthy of funding by the National Institutes of Health are not 
        funded, and 9 of 10 peer reviewed research projects deemed 
        worthy of funding by the Agency for Health Care Policy and 
        Research are not funded.
            (2) Less than 2 percent of the nearly one trillion dollars 
        our Nation spends on health care is devoted to health research, 
        while the defense industry spends 15 percent of its budget on 
        research.
            (3) Public opinion surveys have shown that Americans want 
        more Federal resources put into health research and support by 
        having a portion of their health insurance premiums set aside 
        for this purpose.
            (4) Ample evidence exists to demonstrate that health 
        research has improved the quality of health care in the United 
        States. Advances such as the development of vaccines, the cure 
        of many childhood cancers, drugs that effectively treat a host 
        of diseases and disorders, a process to protect our Nation's 
        blood supply from the HIV virus, progress against 
        cardiovasculor disease including heart attack and stroke, and 
        new strategies for the early detection and treatment of 
        diseases such as colon, breast, and prostate cancer clearly 
        demonstrates the benefits of health research.
            (5) Among the most effective methods to control health care 
        costs are the prevention of intentional and unintentional 
        injury and the prevention and cure of disease and disability, 
        thus, health research which holds the promise of prevention of 
        intentional and unintentional injury and cure and prevention of 
        disease and disability is a critical component of any 
        comprehensive health care reform plan.
            (6) The state of our Nation's research facilities at the 
        National Institutes of Health and at universities is 
        deteriorating significantly. Renovation and repair of these 
        facilities are badly needed to maintain and improve the quality 
        of research.
            (7) Because the Omnibus Budget Reconciliation Act of 1993 
        freezes discretionary spending for the next 5 years, the 
        Nation's investment in health research through the National 
        Institutes of Health and the Agency for Health Care Policy and 
        Research is likely to decline in real terms unless corrective 
        legislative action is taken.
            (8) A health research fund is needed to maintain our 
        Nation's commitment to health research and to increase the 
        percentage of approved projects which receive funding at the 
        National Institutes of Health and the Agency for Health Care 
        Policy and Research to at least 33 percent.
            (9) Private sector investment in research and development 
        has been responsible for the vast majority of new developments 
        in pharmaceuticals, medical devices, biotechnology and other 
        health care innovations. Over 90 percent of the most prescribed 
        drugs in the United States were discovered by the research-
        based pharmaceutical industry.
            (10) United States industry is the preeminent world leader 
        in the research, development and delivery of innovative 
        therapies that improve the quality of care for people 
        throughout the world.
            (11) Global health care budgets may constrict private 
        sector investment in research and development. Further, they 
        may be inconsistent with the goal of developing promising new 
        cost effective treatment therapies.
    (b) Availability of Funds.--
            (1) In general.--With respect to each calendar year, the 
        Secretary shall pay, from funds in the Treasury not otherwise 
        appropriated, for activities under this section, an amount 
        equal to 0.25 percent in 1996 and subsequent years, of all 
        private premiums required to be paid in accordance with the 
        Act.
            (2) Definition.--For purposes of this subsection, the term 
        ``private health premiums'' means all premium related payments 
        made by employers, individuals, and families for coverage under 
        this Act.
            (3) Maintenance of effort.--No amounts made available under 
        this subsection shall replace or reduce the amount of 
        appropriations for the National Institutes of Health or the 
        Agency for Health Care Policy and Research.
    (c) Purposes for Expenditures.--Part A of title IV of the Public 
Health Service Act (42 U.S.C. 281 et seq.) is amended by adding at the 
end thereof the following new section:

``SEC. 404F. EXPENDITURES FOR BIOMEDICAL AND BEHAVIORAL RESEARCH.

    ``(a) In General.--With respect to 80 percent of the amounts made 
available under section 3201 of the Health Security Act in a fiscal 
year, the Secretary shall distribute--
            ``(1) 2 percent of such amounts during any fiscal year to 
        the Office of the Director of the National Institutes of Health 
        to be allocated at the Director's discretion for the following 
        activities:
                    ``(A) for carrying out the responsibilities of the 
                Office of the Director, in including the Office of 
                Research on Women's Health and the Office of Research 
                on Minority Health, the Office of Alternative Medicine 
                and the Office of Rare Diseases Research; and
                    ``(B) for construction and acquisition of equipment 
                for or facilities of or used by the National Institutes 
                of Health;
            ``(2) 2 percent of such amounts for transfer to the 
        National Center for Research Resources to carry out section 
        1502 of the National Institutes of Health Revitalization Act of 
        1993 concerning Biomedical and Behavioral Research Facilities;
            ``(3) 1 percent of such amounts during any fiscal year for 
        carrying out section 301 and part D of title IV with respect to 
        health information communications; and
            ``(4) the remainder of such amounts during any fiscal year 
        to member institutes of the National Institutes of Health and 
        Centers in the same proportion to the total amount received 
        under this section, as the amount of annual appropriations 
        under appropriations Acts for each member institute and Centers 
        for the fiscal year bears to the total amount of appropriations 
        under appropriations Acts for all member institutes and Centers 
        of the National Institutes of Health for the fiscal year.
    ``(b) Plans of Allocation.--The amounts transferred under 
subsection (a) shall be allocated by the Director of NIH or the various 
directors of the institutes and centers, as the case may be, pursuant 
to allocation plans developed by the various advisory councils to such 
directors, after consultation with such directors.''.

SEC. 3202. HEALTH SERVICES RESEARCH.

    (a) In General.--The Secretary shall distribute the remainder of 
the amounts made available under section 3201 in a fiscal year (not to 
exceed 20 percent of the total of amounts available in a fiscal year 
under such section), to the Agency for Health Care Policy and Research 
for policy-initiated and investigator-initiated research.
    (b) Research on Health Care Reform.--Section 902 of the Public 
Health Service Act (42 U.S.C. 299a), as amended by section 2(b) of 
Public Law 102-410 (106 Stat. 2094), is amended by adding at the end 
the following subsection:
    ``(f) Research on Health Care Reform.--
            ``(1) In general.--In carrying out section 901(b), the 
        Administrator shall conduct and support research on the reform 
        of the health care system of the United States, as directed by 
        the Secretary.
            ``(2) Priorities.--In carrying out paragraph (1), the 
        Administrator shall give priority to the following:
                    ``(A) Conducting and supporting research on the 
                appropriateness and effectiveness of alternative 
                clinical strategies (including community-based programs 
                and preventive services), the quality and outcomes of 
                care, and administrative simplification.
                    ``(B) Conducting and supporting research on the 
                appropriateness and effectiveness of alternative 
                community-based and clinical strategies including 
                integrating preventive services into primary care, the 
                effectiveness of preventive counseling and health 
                education, and the efficacy and cost-effectiveness of 
                clinical preventive services.
                    ``(C) Conducting and supporting research on 
                consumer choice and information resources; on the role 
                of shared decision making in enhancing patient and 
                provider therapeutic options; the effects of health 
                care reform on health delivery systems; methods for 
                risk adjustment; factors influencing access to health 
                care for vulnerable populations, including children, 
                persons with low-income, persons with disabilities, or 
                individuals with chronic or complex health conditions, 
                and primary care.
                    ``(D) The development of clinical practice 
                guidelines consistent with section 913, the 
                dissemination of such guidelines consistent with 
                section 903, and the assessment of the effectiveness of 
                such guidelines.''.

SEC. 3203. AHCPR GUIDELINES AND STANDARDS.

    (a) Traineeship Program.--Section 902(c) of the Public Health 
Service Act (42 U.S.C. 299a(c)) is amended--
            (1) by redesignating the matter following the subsection 
        heading as paragraph (1) and realigning the margin of such so 
        as to align with the margin of section 903(a)(1);
            (2) by inserting before ``The Administrator'' the 
        following: ``In general.--''; and
            (3) by adding at the end thereof the following new 
        paragraph:
            ``(2) Traineeship program.--The Administrator shall 
        establish a traineeship program for not to exceed 25 
        investigators, to enable such investigators to carry out 
        research at the Agency that would benefit the mission of the 
        Agency and further the educational needs of such investigators. 
        Such investigator positions shall not be counted against any 
        Federal employment ceilings affecting the Agency.''.
    (b) Printing Services.--Section 902 of such Act (42 U.S.C. 299a) is 
amended by adding at the end thereof the following new subsection:
    ``(f) Authority to Contract for Printing Services.--The 
Administrator may publish or arrange for the publication of research 
findings and practice guidelines, without regard to section 501 of 
title 44, United States Code.''.
    (c) Panels.--Section 913(a) of the Public Health Service Act (42 
U.S.C. 299b-2(a)) is amended by adding at the end thereof the following 
new flush sentence:
``Panels convened for the purpose of carrying out paragraphs (1) and 
(2) shall not be considered advisory committees within the meaning of 
section 3(2) of the Federal Advisory Committee Act (5 U.S.C. App. 
3(2)), and prior to publication by the Administrator, clinical practice 
guidelines, performance measures, and review criteria as described in 
section 912(a) are not subject to the requirements of section 552 of 
title 5, United States Code.''.
    (d) Arrangements.--Section 913 of such Act (42 U.S.C. 299b-2) is 
amended by adding at the end thereof the following new subsection:
    ``(d) Arrangements.--
            ``(1) In general.--Upon the request of a public or private 
        entity, the Administrator may collect, tabulate, and analyze 
        statistics, perform technology assessments, carry out health 
        services and outcomes and effectiveness research, and 
        facilitate the development of clinical practice guidelines 
        under arrangements with such entities under which such entities 
        compensate the Administrator for the costs of the services 
        provided.
            ``(2) Amounts and personnel.--Amounts collected from 
        payments under this subsection shall be available to the 
        Administrator for obligation until expended, and personnel used 
        to provide such services shall not be counted against any 
        Federal employment ceilings affecting the Agency.''.
    (e) Technical Amendment.--Section 913(c) of such Act (42 U.S.C. 
299b-2(c)) is amended by moving the first sentence so as appear after 
the subsection heading.

                      PART 2--FUNDING FOR PROGRAM

SEC. 3211. AUTHORIZATIONS OF APPROPRIATIONS.

    (a) Relation to Other Funds.--Amounts made available under this 
subtitle are in addition to any other authorizations of appropriations 
that are available to carry out section 3202 and the amendments made by 
such section.
    (b) Trigger and Release of Monies.--No expenditure shall be made 
pursuant to section 3201(b) during any fiscal year in which the annual 
amount appropriated for the National Institutes of Health and the 
Agency for Health Care Policy and Research is less than the amount so 
appropriated for the prior fiscal year. With respect to amounts 
available for expenditure pursuant to section 3201(b) which, as a 
result of the application of this subsection remain unexpended, such 
amounts shall be obligated by the Secretary of Health and Human 
Services under the public health initiative under subtitle H.

                PART 3--MEDICAL TECHNOLOGY IMPACT STUDY

SEC. 3221. MEDICAL TECHNOLOGY IMPACT STUDY.

    (a) Assessment of the Standard Impact of Medical Technologies.--
            (1) In general.--The Secretary, acting through the 
        Administrator of the Agency for Health Care Policy and Research 
        (hereafter referred to in this section as the 
        ``Administrator''), shall undertake an interdisciplinary study 
        (to be known as the ``Medical Technology Impact Study'') to 
        assess the overall economic costs, economic benefits, and 
        effect on patient outcomes of medical technologies used in 
        treating each of a list of target diseases and conditions. The 
        Secretary shall submit the report of the Administrator to 
        Congress (in accordance with subsection (c)) concerning the 
        results of the study and may provide any recommendations 
        determined to be necessary to ensure the availability, access, 
        and appropriate use of medical technologies to improve the 
        quality of health care in the United States.
            (2) Purpose.--The purpose of the study under paragraph (1) 
        is to assess the impact of old, new, and emerging medical 
        technologies on health care costs, social costs, and patient 
        outcomes, and to identify the factors, including government and 
        private payor reimbursement policies, that impede or encourage 
        innovation that improves patient outcomes. Congress intends 
        that the study complement the technology assessment, outcomes 
        research, and guideline development activities authorized under 
        title IX of the Public Health Service Act by providing a 
        comprehensive context for understanding the economic and social 
        factors related to the development and use of medical 
        technologies.
            (3) Definitions.--As used in this section:
                    (A) Economic benefits.--The term ``economic 
                benefits'' may include, based on available data--
                            (i) reductions in the economic costs of 
                        disease;
                            (ii) increases in employment attributable 
                        to the medical technology industry;
                            (iii) increases in Federal and State tax 
                        revenues attributable to the medical technology 
                        industry and its employees;
                            (iv) improvements in the balance of trade 
                        deficit attributable to the medical technology 
                        industry; and
                            (v) other benefits that are determined by 
                        the Advisory Committee established under 
                        subsection (b) to be relevant to assessing the 
                        impact of medical technology.
                    (B) Economic costs.--The term `economic costs' may 
                include, based on available data--
                            (i) the financial costs to the health care 
                        system of diagnosing and treating disease, 
                        including the costs of nontreatment and 
                        palliative care;
                            (ii) the financial costs to employers 
                        resulting from worker illness, including the 
                        costs of productivity losses and worker 
                        absenteeism;
                            (iii) the financial costs to families 
                        resulting from illness of a family member, 
                        including costs associated with loss of income, 
                        hiring of caretakers, and long term and hospice 
                        care;
                            (iv) the financial costs to government of 
                        illness, including reductions in income tax 
                        revenues attributable to worker illness and 
                        worker related injuries and increases in 
                        transfer payments, including unemployment, 
                        disability, welfare, and survivor benefit 
                        payments, made to individuals and families on 
                        account of illness; and
                            (v) other costs that are determined by the 
                        Advisory Committee established under subsection 
                        (b) to be relevant to assessing the impact of 
                        medical technology.
                    (C) Medical technologies.--The term `medical 
                technologies' includes drugs, biologics (including 
                vaccines), medical devices, drug delivery systems, and 
                surgical services and other procedures for preventing, 
                diagnosing, and treating diseases or health conditions.
                    (D) Medical technology industry.--The term `medical 
                technology industry' includes the biotechnology, 
                pharmaceutical, and medical device industries, and such 
                other industries that invent, develop, or market 
                medical technologies.
                    (E) Patient outcomes.--The term `patient outcomes' 
                may include--
                            (i) changes in clinical outcomes, including 
                        stabilization of patients with progressive 
                        disease or health conditions, resulting from 
                        the use of safe and effective medical 
                        technology in prevention, diagnosis, or 
                        treatment;
                            (ii) changes in mortality, morbidity, and 
                        health service use, including stabilization of 
                        patients with progressive diseases;
                            (iii) changes in quality of life, including 
                        ability to perform activities of daily living, 
                        ability to return to work, relief from 
                        discomfort or pain, alleviation of fatigue, and 
                        improved mental functioning and well-being; and
                            (iv) other outcomes that are determined by 
                        the Advisory Committee to be relevant to 
                        assessing the impact of medical technology.
    (b) Advisory Committee.--
            (1) In general.--The Administrator shall establish an 
        Advisory Committee to assist the Agency for Health Care Policy 
        and Research in preparing the reports required under subsection 
        (c). Except as provided in paragraph (3), no member of the 
        Advisory Committee shall be an employee of the Federal 
        Government.
            (2) Membership.--The Advisory Committee shall be balanced 
        in its representation of interested parties and shall be 
        composed of at least two individuals appointed by the President 
        of the Institute of Medicine and two individuals from each of 
        the following categories to be appointed by the Administrator:
                    (A) Experts in medical technology assessment.
                    (B) Experts in objective measures of improved 
                patient outcomes, such as clinical outcomes, mortality, 
                morbidity, and health service use.
                    (C) Experts in subjective measures of improved 
                patient outcomes, such as quality of life.
                    (D) Experts in quantifying the economic costs of 
                disease to the health care system, including public and 
                private payers.
                    (E) Experts in quantifying the economic impact of 
                the medical technology industry.
                    (F) Experts in health statistics and epidemiology.
                    (G) Physicians and other health care providers.
                    (H) Officers or employees of health plans and other 
                health care payers.
                    (I) Experts in the ethical implications of health 
                care.
                    (J) Experts in private sector financial market 
                investment in the medical technology industry.
                    (K) Consumers and members of patient advocacy 
                groups.
                    (L) Health professional organizations.
                    (M) Officers or employees of biotechnology 
                companies.
                    (N) Officers or employees of medical device 
                companies.
                    (O) Officers or employees of pharmaceutical 
                companies.
            (3) Ex officio.--The following individuals or their 
        designees shall serve as ex officio members of the Advisory 
        Committee:
                    (A) The Director of the National Institutes of 
                Health.
                    (B) The Commissioner of Food and Drugs.
                    (C) The Director of the Centers for Disease Control 
                and Prevention.
                    (D) The Administrator of the Health Care Financing 
                Administration.
                    (E) The Under Secretary of Commerce for Technology.
                    (F) The Director of the Congressional Office of 
                Technology Assessment.
    (c) Interdisciplinary Study and Report.--
            (1) In general.--The Administrator, in consultation with 
        the Advisory Committee established under subsection (b), shall 
        determine which diseases or conditions should be studied in the 
        Medical Technology Impact Study under subsection (a). In 
        carrying out the medical technology assessment required under 
        this subsection, the Administrator shall consider various 
        factors, including those outlined in section 904(b)(2) of the 
        Public Health Service Act and government and private payor 
        reimbursement policies that impede or encourage innovation that 
        improves patient outcomes. The diseases or conditions studied 
        in such Study shall be those considered to be high priority 
        according to the following criteria:
                    (A) Aggregate economic costs to the United States.
                    (B) Overall importance to public heath.
                    (C) Potential for improvements in patient outcomes.
                    (D) Significant changes expected in management of 
                the condition.
                    (E) Other criteria identified by the Advisory 
                Committee.
            (2) Design.--The Administrator, in consultation with the 
        Advisory Committee established under subsection (b), and the 
        Institute of Medicine pursuant to paragraph (3), shall develop 
        a design, based on the list of target diseases and conditions, 
        for undertaking the Medical Technology Impact Study under 
        subsection (a).
            (3) Contract.--The Secretary shall request the Institute of 
        Medicine of the National Academy of Sciences to enter into a 
        contract to review the design of the Medical Technology Impact 
        Study under subsection (a) and report to the Administrator 
        concerning any recommendations for revising such design, in the 
        interest of assuring that it reflects the best available 
        scientific methodologies.
            (4) Publication.--The Administrator shall publish the study 
        design under this section and list of target diseases and 
        conditions, the recommendations of the Institute of Medicine, 
        and the response of the Administrator to such recommendations 
        in the Federal Register for a 60-day period for public comment. 
        Any such comments shall be considered by the Administrator in 
        completing the proposed study design for submission to the 
        Secretary.
            (5) Design report.--The Secretary shall report to Congress 
        concerning the proposed design of the Medical Technology Impact 
        Study, together with recommendations for appropriations 
        necessary to carry out the Study.
            (6) Grants and contracts.--Beginning in the first fiscal 
        year for which Congress appropriates funds under subsection 
        (d), and ending on September 30 of that year, the Administrator 
        shall enter into grants and contracts with appropriate entities 
        to conduct any investigations and analyses that may be required 
        to carry out the design of the Medical Technology Impact Study 
        under subsection (a).
            (7) Report on findings.--The Administrator, in consultation 
        with the Advisory Committee established under subsection (b), 
        shall develop a draft comprehensive report concerning the 
        findings of the Medical Technology Impact Study under 
        subsection (a), shall make copies of the draft report available 
        to the public, and shall publish a notice in the Federal 
        Register providing for a 60-day period of public comment. Any 
        such comments shall be considered by the Administrator in 
        completing and submitting the final report to the Secretary.
            (8) Final report.--Not later than 3 years after the date of 
        enactment of this section, the Secretary shall submit the 
        report of the Administrator under this section to Congress, and 
        may include any recommendations determined necessary to assure 
        the availability, access and appropriate use of medical 
        technologies to improve the quality of health care in the 
        United States.
    (d) Authorization of Appropriations.--There are authorized to be 
appropriated such sums as may be necessary to carry out this section.

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

                            PART 1--FUNDING

SEC. 3301. AUTHORIZATIONS OF APPROPRIATIONS.

    (a) Core Functions of Public Health Programs.--For the purpose of 
carrying out part 2, there are authorized to be appropriated 
$123,000,000 for fiscal year 1995, $184,500,000 for fiscal year 1996, 
$266,500,000 for fiscal year 1997, $348,500,000 for fiscal year 1998, 
$410,000,000 for fiscal year 1999, $512,500,000 for fiscal year 2000, 
and $2,000,000 for each of the fiscal years 2001 through 2004.
    (b) National Initiatives Regarding Health Promotion and Disease 
Prevention.--For the purpose of carrying out part 3, there are 
authorized to be appropriated $102,500,000 for each of the fiscal years 
1996 through 1998, $123,000,000 for each of the fiscal years 1999 and 
2000, and $2,000,000 for each of the fiscal years 2001 through 2004.
    (c) Relation to Other Funds.--The authorizations of appropriations 
established in subsections (a) and (b) are in addition to any other 
authorizations of appropriations that are available for the purposes 
described in such subsections.

            PART 2--CORE FUNCTIONS OF PUBLIC HEALTH PROGRAMS

SEC. 3311. PURPOSES.

    Subject to the subsequent provisions of this subtitle, the purposes 
of this part are to strengthen the capacity of State and local public 
health agencies to carry out the following functions:
            (1) To monitor and protect the health of communities 
        against communicable diseases and exposure to toxic 
        environmental pollutants, occupational hazards, harmful 
        products, and poor quality health care.
            (2) To identify and control outbreaks of infectious disease 
        and patterns of chronic disease and injury.
            (3) To inform and educate health care consumers and 
        providers about their roles in preventing injury, preventing 
        and controlling disease and the appropriate use of medical 
        services.
            (4) To develop and test new prevention and public health 
        control interventions.
            (5) To integrate and coordinate the prevention programs and 
        services of standard health plans, community-based providers, 
        local health departments, State health departments, purchasing 
        cooperatives, and other sectors of State and local government 
        that affect health, including education, labor, transportation, 
        welfare, criminal justice, environment, agriculture, and 
        housing.
            (6) To conduct research on the effectiveness and cost-
        effectiveness of public health programs.

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

    (a) In General.--The Secretary shall make grants to States that 
submit applications as prescribed in section 3313 in an amount which 
bears the same ratio to the available amounts for that fiscal year as 
the amounts provided by the Secretary under the provisions of law 
listed in section 1902(2) of the Public Health Service Act to the State 
for fiscal year 1981 bear to the total amount appropriated for such 
provisions of law for fiscal year 1981.
    (b) Core Functions of Public Health Programs.--For purposes of 
subsection (a), the functions described in this subsection are, subject 
to subsection (c), as follows:
            (1)(A) Data collection, activities related to population 
        health (including the population of individuals ineligible for 
        the comprehensive benefit package) measurement and outcomes 
        monitoring, including the acquisition and installation of 
        hardware and software, personnel training and technical 
        assistance to operate and support automated and integrated 
        information systems, the regular collection and analysis of 
        public health data, vital statistics, and personal health 
        services data and analysis for planning and needs assessment 
        purposes of data collected from health plans through the 
        information system under title V of this Act.
            (B) Data measures under this paragraph must include an 
        ethnic identifier on all forms. To the extent feasible, ethnic 
        identifiers should be classified by ethnic sub-group 
        populations. Access to data must be ensured for research 
        organizations and data clearinghouses. Population health 
        measurement and outcome monitoring should focus on health 
        status differentials between racial, and ethnic groups, by 
        subpopulation, and gender differences.
            (2) Activities to protect the environment and to assure the 
        safety of housing, workplaces, food and water, including the 
        following activities:
                    (A) Monitoring and improving the overall public 
                health quality and safety of communities.
                    (B) Assessing exposure to high lead levels and 
                water contamination.
                    (C) Providing support for poison control centers.
                    (D) Monitoring sewage and solid waste disposal, 
                radiation exposure, radon exposure, and noise levels.
                    (E) Abatement of lead-related hazards.
                    (F) Assuring recreation, home and worker safety.
                    (G) Public information and education programs that 
                help to reduce intentional and unintentional injuries, 
                including training parents and children on use of 
                safety devices.
                    (H) Enforcing public health safety and sanitary 
                codes.
                    (I) Other activities relating to promoting the 
                public health of communities.
            (3) Investigation and control of adverse health conditions, 
        including improvements in emergency treatment preparedness, 
        injury prevention, cooperative activities to reduce violence 
        levels in homes and communities, activities to control the 
        outbreak of disease, exposure related conditions and other 
        threats to the health status of individuals.
            (4) Public information and education programs to reduce 
        risks to health such as use of tobacco, alcohol and other 
        drugs, sexual activities that increase the risk to HIV 
        transmission and sexually transmitted diseases, domestic 
        violence, poor diet, physical inactivity, and low childhood 
        immunization levels.
            (5) Accountability and quality assurance activities, 
        including monitoring the quality of personal health services 
        furnished by health plans and providers of medical and health 
        services in a manner consistent with the overall quality of 
        care monitoring activities undertaken under title V, and 
        monitoring communities' overall access to health services.
            (6) Provision of public health laboratory services to 
        complement private clinical laboratory services and that screen 
        for diseases and conditions such as metabolic diseases in 
        newborns, provide toxicology assessments of blood lead levels 
        and other environmental toxins, diagnose sexually transmitted 
        diseases, tuberculosis and other diseases requiring partner 
        notification, test for infectious and food-borne diseases, and 
        monitor the safety of water and food supplies.
            (7) Training and education to assure provision of care by 
        all health professionals, with special emphasis placed on the 
        training of public health professions including 
        epidemiologists, biostatisticians, health educators, public 
        health administrators, sanitarians and laboratory technicians.
            (8) Leadership, policy development and administration 
        activities, including needs assessment, the setting of public 
        health standards, the development of community public health 
        policies, and the development of community public health 
        coalitions.
            (9) Establishment of programs that encourage partnerships 
        among local law enforcement and community groups for the 
        purpose of developing community response teams to assist 
        victims of domestic violence.
    (c) Restrictions on Use of Grant.--
             (1) In general.--A funding agreement for a grant under 
        subsection (a) for a State is that the grant will not be 
        expended--
                    (A) to provide inpatient services;
                    (B) to make cash payments to intended recipients of 
                health services;
                    (C) to purchase or improve land, purchase, 
                construct, or permanently improve (other than minor 
                remodeling) any building or other facility, or purchase 
                major medical equipment;
                    (D) to satisfy any requirement for the expenditure 
                of non-Federal funds as a condition for the receipt of 
                Federal funds; or
                    (E) to provide financial assistance to any entity 
                other than a public or nonprofit private entity.
            (2) Limitation on administrative expenses.--A funding 
        agreement for a grant under subsection (a) is that the State 
        involved will not expend more than 10 percent of the grant for 
        administrative expenses with respect to the grant.
    (d) Maintenance of Effort.--A funding agreement for a grant under 
subsection (a) is that the State involved will maintain expenditures of 
non-Federal amounts for core health functions at a level that is not 
less than the level of such expenditures maintained by the State for 
the fiscal year preceding the first fiscal year for which the State 
receives such a grant.

SEC. 3313. SUBMISSION OF INFORMATION.

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

SEC. 3314. REPORTS.

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

SEC. 3315. APPLICATION FOR GRANT.

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

SEC. 3316. ALLOCATIONS FOR CERTAIN ACTIVITIES.

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

SEC. 3317. DEFINITIONS.

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

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.

    (a) Single Application.--
            (1) In general.--The Secretary, acting through the Director 
        of the Centers for Disease Control and Prevention, shall 
        establish a single consolidated application to enable States to 
        apply for the Core Functions of Public Health Grants Program 
        and any or all of the Public Health Service Act categorical 
        programs described in subsection (b).
            (2) Requirements.--The application developed under 
        paragraph (1) shall--
                    (A) be designed so that information collected will 
                be consistent with the requirements of this part 
                including subsection (b);
                    (B) be designed and implemented not later than 1 
                year after the date of enactment of this Act; and
                    (C) be developed with resources made available 
                under section 3316 (not resources made available for 
                the programs described in subsection (b)).
            (3) State public health officers.--In developing the single 
        consolidated application form to be used under this subsection 
        the Secretary shall consult with Federal, State and local 
        public health agencies.''.
            (4) Eligibility.--States and local governments that have 
        grants, contracts or cooperative agreements in effect with the 
        Centers for Disease Control and Prevention on the date of 
        enactment of this Act shall be eligible to use a single 
        application under this section to apply for any or all of the 
        Public Health Service Act categorical programs described in 
        subsection (b).
    (b) Eligible Public Health Service Act Programs.--Eligible Public 
Health Service Act categorical programs described in this subsection 
are the following:
            (1) The Preventive Health and Health Services Block Grant 
        under section 1903 of the Public Health Service Act.
            (2) The Childhood Lead Poisoning Prevention Program under 
        section 317A of the Public Health Service Act.
            (3) The Sexually Transmitted Diseases Program under section 
        318 of the Public Health Service Act.
            (4) The Prevention of Sexually Transmitted Diseases-Related 
        Infertility Program under section 318A of the Public Health 
        Service Act.
            (5) The Breast and Cervical Cancer Early Detection Program 
        under sections 1501 through 1509 of the Public Health Service 
        Act.
            (6) The National Program of Cancer Registries under section 
        399H of the Public Health Service Act.
            (7) The Injury Control and Prevention Program under 
        sections 391 through 394 of the Public Health Service Act.
            (8) The preventive health for prostate cancer program under 
        section 317D of the Public Health Service Act.
            (9) The birth defects data program under section 317C of 
        the Public Health Service Act.
            (10) Programs under subtitle D of this title.
            (11) Other relevant programs as determined appropriate by 
        the Secretary.
    (c) Allocation of Funds.--In awarding grants to States and local 
governments under a single application under this section, the 
Secretary shall delineate to each grantee the amounts to be dedicated 
to each of the programs described in subsection (b) and ensure that 
funding allotments for each of such programs are consistent with the 
requirements of Federal law.
    (d) Uniform Core Functions of Public Health Reporting System.--
            (1) Development.--The Secretary, acting through the 
        Director of the Office of Disease Prevention and Health 
        Promotion and the Director of the Centers for Disease Control 
        and Prevention, in consultation with other relevant Federal and 
        State health agencies with data collection responsibilities, 
        shall develop and implement a Uniform Core Public Health 
        Functions Reporting System to collect program and fiscal data 
        concerning the programs described in subsection (b).
            (2) Requirements.--The system developed under paragraph (1) 
        shall--
                    (A) use outcomes consistent with the goals of 
                Healthy People 2000;
                    (B) be designed so that information collected will 
                be consistent with the requirements of this part 
                including subsection (b);
                    (C) be designed and implemented not later than 2 
                years after the date of enactment of this Act; and
                    (D) be developed with resources made available 
                under section 3316 of this Act (not resources made 
                available for the programs described in subsection 
                (b)).
            (3) State public health officers.--In developing the data 
        set to be used under Uniform Core Public Health Functions 
        Reporting System the Secretary shall consult with Federal, 
        State and local public health agencies.
    (e) Study.--
            (1) In general.--Within a reasonable period of time after 
        the date of enactment of this Act, the Secretary shall request 
        that the Institute of Medicine conduct a study concerning--
                    (A) the effects of consolidating any or all of the 
                grant programs administered by the Centers for Disease 
                Control and Prevention and described in subsection (b) 
                into a Core Functions of Public Health Block Grant 
                Program;
                    (B) the development of alternative methods for 
                implementing a block grant program or categorical grant 
                program; and
                    (C) alternative formulas for allocating State 
                grants that incorporate measures of health status, 
                population and degree of poverty.
        In particular, the impact of program consolidation on the 
        targeted recipients, including women and vulnerable 
        populations, shall be addressed in the study. If the Institute 
        of Medicine declines to do the study, the Secretary shall make 
        grants to or enter into contracts with a public or nonprofit 
        private entity with relevant expertise for the conduct of such 
        a study.
            (2) Report.--Not later than 1 year after the date of the 
        receipt of the contract under paragraph (1), the contract 
        recipient shall prepare and submit to the Secretary, the Energy 
        and Commerce Committee of the House of Representatives, and the 
        Committee on Labor and Human Resources of the Senate a report 
        that contains the results of the study conducted under 
        paragraph (1).
            (3) Issuance of plan.--Not later than 1 year after the date 
        on which the report under paragraph (2) is received by the 
        Secretary and the committees referred to in such paragraph, the 
        Secretary shall issue a plan in response to the report. Such a 
        plan shall include the identification of relevant changes in 
        authorizing language.

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

                       Subpart A--General Grants

SEC. 3331. GRANTS FOR NATIONAL PREVENTION INITIATIVES.

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

SEC. 3332. PRIORITIES.

    (a) Establishment.--
            (1) Annual statement.--The Secretary shall for each fiscal 
        year develop a statement of proposed priorities for grants 
        under section 3331 for the fiscal year.
            (2) Allocations among priorities.--With respect to the 
        amounts available under section 3301(b) for the fiscal year for 
        carrying out this part, each statement under paragraph (1) for 
        a fiscal year shall include a specification of the percentage 
        of the amount to be devoted to projects addressing each of the 
        proposed priorities established in the statement.
            (3) Process for establishing priorities.--
                    (A) Preference.--In establishing priorities for 
                grants under this part, preference shall be given to 
                projects that--
                            (i) reduce the prevalence of chronic 
                        diseases including cardiovascular disease, 
                        stroke, diabetes, and cancer;
                            (ii) prevent violence against women by 
                        training providers and other health care 
                        professionals to identify victims of domestic 
                        violence, to provide appropriate examination 
                        and treatment, and to refer the victims for 
                        appropriate social and legal services; and
                            (iii) establish community health advisor 
                        programs described in subparagraph (B).
                    (B) Community health advisor programs.--For 
                purposes of subparagraph (A)(iii), the term ``community 
                health advisor program'' means a program that performs 
                the following functions:
                            (i) Provides outreach services to inform 
                        the community of the availability of program 
                        services.
                            (ii) Collaborate efforts with health care 
                        providers and related entities to facilitate 
                        the provision of health services and health 
                        related social services.
                            (iii) Provide public education on health 
                        promotion and disease prevention and efforts to 
                        facilitate the use of available health services 
                        and health-related social services.
                            (iv) Provide health-related counseling.
                            (v) Make referrals for available health 
                        services and health-related social services.
                            (vi) Improve the ability of individuals to 
                        use health services and health-related social 
                        services under Federal, State, and local 
                        programs, through assisting individuals in 
                        establishing eligibility under the programs.
                            (vii) Establish a community health advisor 
                        training program.
                            (viii) Provide services in the language and 
                        cultural context most appropriate for the 
                        individuals served by the program.
                            (ix) Provide compensation for the services 
                        of, and opportunities for training and 
                        employment of, community health advisors.
                            (x) Such other services as the Secretary 
                        determines to be appropriate, which may include 
                        transportation and translation services.
                    (C) Publication of statement.--Not later than 
                January 1 of each fiscal year, the Secretary shall 
                publish a statement under paragraph (1) in the Federal 
                Register. A period of 60 days shall be allowed for the 
                submission of public comments and suggestions 
                concerning the proposed priorities. After analyzing and 
                considering comments on the proposed priorities, the 
                Secretary shall publish in the Federal Register final 
                priorities (and associated reservations of funds) for 
                approval of projects for the following fiscal year.
                    (D) Definition of community health advisor.--For 
                purposes of subparagraph (B), the term ``community 
                health advisor'' means an individual--
                            (i) who has demonstrated the capacity to 
                        carry out one or more of the authorized program 
                        services;
                            (ii) who, for not less than 1 year, has 
                        been a resident of the community in which the 
                        community health advisor program involved is to 
                        be operated; and
                            (iii) is a member of a socioeconomic group 
                        to be served by the program.
    (b) Applicability to Making of Grants.--
            (1) In general.--The Secretary may make grants under 
        section 3331 for projects that the Secretary determines--
                    (A) are consistent with the applicable final 
                statement of priorities and otherwise meets the 
                objectives described in subsection (a); and
                    (B) will assist in meeting a health need or concern 
                of a population within a defined health care coverage 
                area or other service area.
            (2) Special consideration for certain projects.--In making 
        grants under section 3331, the Secretary shall give special 
        consideration to applicants that will carry out projects that, 
        in addition to being consistent with the applicable published 
        priorities under subsection (a) and otherwise meeting the 
        requirements of this part, have the potential for replication 
        in other communities.

SEC. 3333. SUBMISSION OF INFORMATION.

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

SEC. 3334. APPLICATION FOR GRANT.

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

   Subpart B--Development of Telemedicine in Rural Underserved Areas

SEC. 3341. GRANTS FOR DEVELOPMENT OF RURAL TELEMEDICINE.

    (a) In General.--
            (1) Grants awarded.--The Secretary, acting through the 
        Office of Rural Health Policy, shall award grants to eligible 
        entities that have applications approved under subsection (b) 
        for the purpose of expanding access to health care services for 
        individuals in rural areas through the use of telemedicine. 
        Grants shall be awarded under this section to encourage the 
        initial development of rural telemedicine networks, expand 
        existing networks, link existing networks together, or link 
        such networks to existing fiber optic telecommunications 
        systems.
            (2) Eligible entity.--For purposes of this section, the 
        term ``eligible entity'' means a public or nonprofit entity 
        operating in a nonmetropolitan area (as defined by the 
        Secretary of Commerce) as part of a network of community-based 
        providers that includes at least three of the following:
                    (A) Community or migrant health centers.
                    (B) Local health departments.
                    (C) Community mental health centers.
                    (D) Nonprofit hospitals.
                    (E) Private practice health professionals, 
                including rural health clinics.
                    (F) Other publicly funded health or social services 
                agencies.
    (b) Application.--To be eligible to receive a grant under this 
section an entity shall prepare and submit to the Secretary an 
application at such time, in such manner and containing such 
information as the Secretary may require, including a description of 
the use to which the entity will apply any amounts received under the 
grant.
    (c) Preference.--The Secretary shall, in awarding grants under this 
section, give preference to applicants that--
            (1) are health care providers in rural health care networks 
        or providers that propose to form such networks, and the 
        majority of the providers in such a network are located in a 
        medically underserved or health professional shortage areas;
            (2) can demonstrate broad geographic coverage in the rural 
        areas of the State, or States in which the applicant is 
        located;
            (3) propose to use Federal funds to develop plans for, or 
        to establish, telemedicine systems that will link rural 
        hospitals and rural health care providers to other hospitals 
        and health care providers;
            (4) will use the amounts provided under the grant for a 
        range of health care applications such as teleradiology, 
        telepathology, interactive video consultation and remote 
        educational services, and to promote greater efficiency in the 
        use of health care resources; and
            (5) propose to use local matching funds to finance 
        projects.
    (d) Use of Amounts.--Amounts received under a grant awarded under 
this section shall be utilized for the development of telemedicine 
networks involving two or more providers. Such amounts may be used to 
cover the costs associated with the development of telemedicine 
networks and the acquisition or construction of telecommunications 
facilities and equipment including--
            (1) the development and acquisition through lease or 
        purchase of computer hardware and software, audio and visual 
        equipment, computer network equipment, telecommunications 
        transmission facilities, telecommunications terminal 
        equipments, interactive video equipment, data terminal 
        equipment, and other facilities and equipment that would 
        further the purposes of this section;
            (2) the provision of technical assistance and instruction 
        for the development and use of such programming equipment or 
        facilities;
            (3) the development and acquisition of instructional 
        programming;
            (4) demonstration projects for teaching or training medical 
        students, residents, and other health professions students in 
        rural training sites about the application of telemedicine;
            (5) transmission costs, maintenance of equipment, and 
        compensation of specialists and referring practitioners;
            (6) demonstration projects to use telemedicine to 
        facilitate collaboration between physicians and nonphysician 
        primary care practitioners such as physician assistants, nurse 
        practitioners, and certified nurse-midwives; or
            (7) such other uses that are consistent with achieving the 
        purposes of this section as approved by the Secretary.
    (e) Prohibited Uses.--Amounts received under a grant awarded under 
this section may not be used for any of the following:
            (1) Expenditures to purchase or lease equipment to the 
        extent the expenditures would exceed more than 60 percent of 
        the total grant funds.
            (2) Expenditures for indirect costs (as determined by the 
        Secretary) to the extent the expenditures would exceed more 
        than 10 percent of the total grant funds.

SEC. 3342. REPORT AND EVALUATION OF TELEMEDICINE.

    Not later than the date that is 3 years after the date on which the 
first grant is awarded under section 3341, the Secretary, in 
consultation with the Administrator of the Rural Electrification 
Administration, the Secretary of Veterans Affairs, and other agencies 
and departments that have responsibilities for overseeing telemedicine 
projects, shall prepare and submit to the appropriate committees of 
Congress a report that evaluates telemedicine in the United States. 
Such report shall contain an evaluation of--
            (1) whether telemedicine expands access to health care 
        services;
            (2) the cost effectiveness of telemedicine services; and
            (3) the quality of telemedicine services delivered.

SEC. 3343. REGULATIONS ON REIMBURSEMENT OF TELEMEDICINE.

    Not later than July 1, 1996, the Secretary, in consultation with 
the Director of the Office of Rural Health and the Administrator of the 
Health Care Financing Administration, shall issue regulations 
concerning reimbursement for telemedicine services provided under title 
XVIII of the Social Security Act.

SEC. 3344. AUTHORIZATION OF APPROPRIATIONS.

    There are authorized to be appropriated such sums as may be 
necessary to carry out this subpart.

SEC. 3345. DEFINITIONS.

    As used in this part:
            (1) Computer networks.--The term ``computer networks'' 
        means computer hardware and software, terminals, signal 
        conversion equipment including both modulators and 
        demodulators, or related devices, used to communicate with 
        other computers to process and exchange date through a 
        telecommunication network in which signals are generated, 
        modified, or prepared for transmission, or received, via 
        telecommunications terminal equipment and telecommunications 
        transmission facilities.
            (2) Data terminal equipment.--The term ``data terminal 
        equipment'' means equipment that converts user information into 
        data signals for transmission, or reconverts the received data 
        signals into user information, and is normally found on the 
        terminal of a circuit and on the premises of the end user.
            (3) Fiber optic cable.--The term ``fiber optic cable'' 
        means a bundle of optical transmission elements or waveguides 
        usually consisting of a fiber core and fiber cladding that can 
        guide a lightwave and that are incorporated into an assembly of 
        materials that provide tensile strength and external 
        protection.
            (4) Interactive video equipment.--The term ``interactive 
        video equipment'' means equipment used to produce and prepare 
        for transmission audio and visual signals from at least two 
        distant locations in order that individuals at such locations 
        can verbally and visually communicate with each other, and such 
        equipment includes monitors, other display devices, cameras or 
        other recording devices, audio pick-up devices, and other 
        related equipment.
            (5) Rural health care network.--The term ``rural health 
        care network'' means a group of rural hospitals or other rural 
        care health care providers (including clinics, physicians and 
        non-physicians primary care providers) that have entered into a 
        formal relationship with each other or with nonrural hospitals 
        and health care providers for the purpose of strengthening the 
        delivery of health care services in rural areas or specifically 
        to improve their patients' access to telemedicine services. At 
        least 75 percent of hospitals and other health care providers 
        participating in the network shall be located in rural areas.
            (6) Telecommunication transmission facilities.--The term 
        ``telecommunications transmission facilities'' means those 
        facilities that transmit, receive, or carry data between the 
        telecommunications terminal equipment at each end of a 
        telecommunications circuit or path. Such facilities include 
        microwave antennae, relay stations and towers, other 
        telecommunications antennae, fiber-optic cables and repeaters, 
        coaxial cables, communication satellite ground station 
        complexes, copper cable electronic equipment associated with 
        telecommunications transmissions, and similar items as defined 
        by the Secretary.
            (7) Telecommunication terminal equipment.--The term 
        ``telecommunications terminal equipment'' means the assembly of 
        telecommunications equipment at the end of a circuit, normally 
        located on the premises of the end user, that interfaces with 
        telecommunications transmission facilities, and that is used to 
        modify, convert, encode, or otherwise prepare signals to be 
        transmitted via such telecommunications facilities, or that is 
        used to modify, reconvert or carry signals received from such 
        facilities, the purpose of which is to accomplish the goal for 
        which the circuit was established.

   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.

    (a) Improving Access to Health Services.--
            (1) Subpart b.--
                    (A) Except as provided in subparagraph (B), for the 
                purpose of carrying out subpart B, there are authorized 
                to be appropriated $105,000,000 for fiscal year 1995, 
                $245,000,000 for fiscal year 1996, $385,000,000 for 
                fiscal year 1997, $315,000,000 for fiscal year 1998, 
                $245,000,000 for fiscal year 1999, and $105,000,000 for 
                fiscal year 2000.
                    (B) With respect to awards to federally qualified 
                health centers (as defined in section 1861(aa)(4) of 
                the Social Security Act) and rural health clinics under 
                subpart B, there are authorized to be appropriated 
                $45,000,000 for fiscal year 1995, $105,000,000 for 
                fiscal year 1996, $165,000,000 for fiscal year 1997, 
                $135,000,000 for fiscal year 1998, $105,000,000 for 
                fiscal year 1999, and $45,000,000 for fiscal year 2000.
            (2) Subpart c.--
                    (A) For the purpose of providing loans under 
                subpart C, there are authorized to be appropriated such 
                sums as may be necessary to support a loan level of 
                $200,000,000 for each of the fiscal years 1995 through 
                2000.
                    (B) For the purpose of making grants under subpart 
                C, there are authorized to be appropriated $35,000,000 
                for each of the fiscal year 1995 through 2000.
    (b) Relation to Other Funds.--The authorizations of appropriations 
established in subsection (a) are in addition to any other 
authorizations of appropriations that are available for the purpose 
described in such subsection.
    (c) Eligible Entities.--For purposes of this part, the term 
``eligible entities'' means--
            (1) covered entities as defined in section 340B(a)(4) of 
        the Public Health Service Act (42 U.S.C. 256b(a)(4)), except 
        that subsection (a)(4)(L)(iii) and (a)(7) of such section shall 
        not apply;
            (2) school health service sites under title III of this 
        Act;
            (3) nonprofit hospitals meeting the criteria for public 
        hospitals which are eligible entities under section 340B of the 
        Public Health Service Act, except that subsection 
        (a)(4)(L)(iii) of such section shall not apply, and children's 
        hospitals meeting comparable criteria as determined appropriate 
        by the Secretary;
            (4) public and private, nonprofit community mental health 
        centers and substance abuse treatment providers receiving funds 
        from the Substance Abuse and Mental Health Services 
        Administration;
            (5) runaway homeless youth centers or transitional living 
        programs for homeless youth for the provision of health 
        services under the Runaway Homeless Youth Act of 1974 (42 
        U.S.C. 5701 et seq.);
            (6) rural referral centers under section 1886(d)(5)(C) of 
        the Social Security Act, except that such eligibility is 
        restricted to the receipt of grants under section 3441; and
            (7) public or nonprofit entities in nonmetropolitan areas 
        (as defined by the Department of Commerce) in a consortium of 
        community-based providers that includes at least three of the 
        following:
                    (A) community or migrant health centers;
                    (B) local health departments;
                    (C) community mental health centers;
                    (D) nonprofit hospitals;
                    (E) private practice health professionals, 
                including rural health clinics; or
                    (F) other publicly funded health or social services 
                agencies;
        except that such eligibility is restricted to the receipt of 
        grants or contracts under section 3421(a).
    (d) Priority.--In making awards from amounts appropriated under 
subsection (a)(1)(B) and section 3462, the Secretary shall give the 
highest priority to providing adequate assistance to federally 
qualified health centers in order to ensure the provision of 
comprehensive primary health care services, other covered services and 
benefits, and enabling services to medically underserved populations 
that were served by such centers prior to the date of enactment of this 
Act, except that such federally qualified health centers must continue 
to meet the requirements for designation under section 1861(aa)(4) of 
the Social Security Act.
    (e) Equitable Distribution.--The Secretary shall, in awarding 
grants, entering into contracts, and making loans under this part, 
assure an equitable distribution of funds between rural and urban 
areas.

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.

    (a) Authority.--
            (1) In general.--The Secretary may make grants to and enter 
        into contracts with eligible entities described in section 
        3411(c) for--
                    (A) the development of community health groups 
                whose principal purpose is to provide the comprehensive 
                benefit package under title I in one or more health 
                professional shortage areas or to provide such items 
                and services to a significant number of individuals who 
                are members of a medically underserved population; and
                    (B) the expansion of existing health delivery sites 
                and services and the development of new health delivery 
                sites and services.
            (2) Consideration by secretary.--In awarding grants or 
        contracts under paragraph (1), the Secretary shall give 
        consideration to--
                    (A) the geographic proximity of the grant 
                applicants and recipients;
                    (B) cultural and language differences existing 
                within the communities to be served under the grants or 
                contracts; and
                    (C) the capacity needs of the communities to be 
                served.
    (b) Service Area.--In making an award under subsection (a), the 
Secretary shall designate the geographic area with respect to which the 
community health group involved is to provide health services.
    (c) Priority.--In making awards under subsection (a)(1), the 
Secretary shall give priority to proposals in which a greater number of 
eligible entities and other health care providers, especially providers 
in community-and provider-based health plans under section 1651(d), are 
participants in the community health group, except in areas such as 
rural areas, where providers are severely limited in number.
    (d) Limitation on Awards.--The Secretary may not make awards under 
subsection (a)(1) for more than 5 years to the same community health 
group.
    (e) Definitions.--For purposes of this subpart:
            (1) The term ``community health group'' means--
                    (A) a community health network that--
                            (i) is a public or nonprofit private 
                        consortium of health care providers that 
                        principally provides some of the items and 
                        services of the standard benefit package to 
                        medically underserved populations, and 
                        residents of health professional shortage 
                        areas;
                            (ii) has an agreement with one or more 
                        health plans; and
                            (iii) has a written agreement governing the 
                        participation of health care providers in the 
                        consortium to which each participating provider 
                        is a party; or
                    (B) a community health plan that--
                            (i) is a public or nonprofit private entity 
                        that principally provides all of the items and 
                        services of the standard benefit package to 
                        medically underserved populations, and 
                        residents of health professional shortage 
                        areas;
                            (ii) is a participant in one or more health 
                        alliances; and
                            (iii) has a written agreement governing the 
                        participation of health care providers in the 
                        consortium to which each participating provider 
                        is a party.
            (2) The term ``health professional shortage areas'' means 
        health professional shortage areas designated under section 332 
        of the Public Health Service Act.
            (3) The term ``medically underserved population'' means a 
        medically underserved population designated under section 
        330(b)(3) of the Public Health Service Act, populations 
        residing in health professional shortage areas under section 
        332 of the Public Health Service Act, and populations eligible 
        for premium subsidies and cost sharing reductions based on 
        income under title I.

SEC. 3422. CERTAIN USES OF AWARDS.

    (a) In General.--Amounts awarded under section 3421 may be expended 
for--
            (1) the development of a community health group, including 
        entering into contracts between the recipient of the award and 
        health care providers who are to participate in the group;
            (2) the expansion, development and on-going operation of 
        health delivery sites and services; and
            (3) activities under paragraphs (1) and (2) which include--
                    (A) the recruitment, compensation, and training of 
                health professionals and administrative staff;
                    (B) the purchase and upgrading of equipment, 
                supplies, and information systems including 
                telemedicine systems; and
                    (C) the establishment of reserves required for 
                furnishing services on a prepaid or capitated basis, 
                except that eligible entities may use non-cash 
                mechanisms (including bonds, letters of credit and 
                federally guaranteed reinsurance pools) for 
                establishing and maintaining financial reserves.
    (b) Loans and Grants.--The Secretary may expend, in any fiscal 
year, not to exceed 10 percent of the amounts appropriated to carry out 
this subpart to make loans and grants to eligible entities to support 
the types of activities described in section 3441, subject to the 
requirements of subpart C, except that, with respect to amounts 
available for non-federally qualified health center activities, such 
funds may be used to convert facilities from providers of acute care 
service to providers of primary, emergency or long-term care.

SEC. 3423. APPLICATION.

    The Secretary may not make an award to an entity under section 3421 
until such entity submits and application to the Secretary, in such 
form and containing such assurances and information as the Secretary 
determines appropriate, including--
            (1) an assessment of the need that the medically 
        underserved population or populations proposed to be served by 
        the applicant have for health services and for enabling 
        services (as defined in section 3461);
            (2) a description of how the applicant will design the 
        proposed community health plan or practice network (including 
        the service sites involved) for such populations based on the 
        assessment of need;
            (3) a description of efforts to secure financial and 
        professional assistance and support for the project; and
            (4) evidence of significant community involvement in the 
        initiation, development and ongoing operation of the project.

SEC. 3424. PURPOSES AND CONDITIONS.

    Grants shall be made under this subpart for the purposes and 
subject to all of the conditions under which eligible entities 
otherwise receive funding to provide health services to medically 
underserved populations under the Public Health Service Act. The 
Secretary shall prescribe comparable purposes and conditions for 
eligible entities not receiving funding under the Public Health Service 
Act.

 Subpart C--Capital Cost of Development of Community Health Groups and 
                             Other Purposes

SEC. 3441. DIRECT LOANS AND GRANTS.

    (a) In General.--The Secretary shall make grants and loans to--
            (1) eligible entities (as defined in section 3412(c));
            (2) hospitals designated by the Secretary as essential 
        access community hospitals under section 1820(i)(1) of the 
        Social Security Act; or
            (3) rural primary care hospitals under section 1820(i)(2) 
        of such Act;
for the capital costs of developing community health groups (as defined 
in section 3421(e)) and expanding existing health delivery sites or 
developing new health delivery sites.
    (b) Use of Assistance.--
            (1) In general.--The capital costs for which grants and 
        loans made pursuant to subsection (a) may be expended are, 
        subject to paragraphs (2) and (3), the following:
                    (A) The acquisition, modernization, expansion or 
                construction of facilities, or the conversion of 
                unneeded hospital facilities to facilities that will 
                assure or enhance the provision and accessibility of 
                health care and enabling services to medically 
                underserved populations.
                    (B) The purchase of major equipment, including 
                equipment necessary for the support of external and 
                internal information systems.
                    (C) The establishment of reserves required for 
                furnishing services on a prepaid or capitated basis.
                    (D) Such other capital costs as the Secretary may 
                determine are necessary to achieve the objectives of 
                this section.
            (2) Priorities regarding use of funds.--In providing grants 
        and loans under subsection (a) for an entity, the Secretary 
        shall give priority to authorizing the use of amounts for 
        projects for the renovation and modernization of medical 
        facilities necessary to prevent or eliminate safety hazards 
        including asbestos removal, avoid noncompliance with licensure 
        or accreditation standards, or projects to replace obsolete 
        facilities.
            (3) Limitation.--The Secretary may authorize the use of 
        grants and loans under subsection (a) for the construction of 
        new buildings only if the Secretary determines that appropriate 
        facilities are not available through acquiring, modernizing, 
        expanding or converting existing buildings, or that 
        construction new buildings will cost less.
    (c) Amount of Assistance.--
            (1) In general.--The principal amount of loans under 
        subsection (a) may cover up to 90 percent of the costs 
        involved.
            (2) Grants.--Grants under this subsection may not exceed 75 
        percent of the costs involved.
    (d) Interest Subsidies.--Amounts provided under this section may be 
used to provide interest subsidies for loans provided under this 
section where such subsidies are necessary to make a project financial 
feasible.

SEC. 3442. CERTAIN REQUIREMENTS.

    (a) In General.--The Secretary may approve a loan under section 
3441 only if--
            (1) the Secretary is reasonably satisfied that the 
        applicant for the project for which the loan would be made will 
        be able to make payments of principal and interest thereon when 
        due; and
            (2) the applicant provides the Secretary with reasonable 
        assurances that there will be available to it such additional 
        funds as may be necessary to complete the project or 
        undertaking with respect to which such loan is requested.
    (b) Terms and Conditions.--Any loan made under section 3441 shall, 
subject to the Federal Credit Reform Act of 1990, meet such terms and 
conditions (including provisions for recovery in case of default) as 
the Secretary, in consultation with the Secretary of the Treasury, 
determines to be necessary to carry out the purposes of such section 
while adequately protecting the financial interests of the United 
States. Terms and conditions for such loans shall include provisions 
regarding the following:
            (1) Security.
            (2) Maturity date.
            (3) Amount and frequency of installments.
            (4) Rate of interest, which shall be at a rate comparable 
        to the rate of interest prevailing on the date the loan is 
        made.

SEC. 3443. DEFAULTS; RIGHT OF RECOVERY.

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

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

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

SEC. 3445. APPLICATION FOR ASSISTANCE.

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

SEC. 3446. ADMINISTRATION OF PROGRAMS.

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

             Subpart D--Enabling and Supplemental Services

SEC. 3461. GRANTS AND CONTRACTS FOR ENABLING AND SUPPLEMENTAL SERVICES.

    (a) Authority.--
            (1) In general.--The Secretary may make grants to and enter 
        into contracts with eligible entities to assist such entities 
        in providing the services described in subsections (b) and (c) 
        for the purpose of increasing the capacity of individuals to 
        utilize the items and services included in the comprehensive 
        benefits package under title I, and to provide access to 
        essential supplemental services that are not fully reimbursable 
        under title I prior to January 2001.
            (2) Consideration by secretary.--In awarding grants or 
        contracts under paragraph (1), the Secretary shall give 
        consideration to--
                    (A) the geographic proximity of the grant 
                applicants and recipients;
                    (B) cultural and language differences existing 
                within the communities to be served under the grants or 
                contracts; and
                    (C) the capacity needs of the communities to be 
                served.
    (b) Enabling Services.--Enabling services shall include 
transportation, community and patient outreach, patient and family 
education, translation services, case management, home visiting, and 
such other services as the Secretary determines to be appropriate in 
carrying out the purpose described in such subsection.
    (c) Supplemental Services.--Supplemental services shall include 
items or services described in section 1106 or section 1118 of this Act 
that would otherwise be excluded from coverage prior to January 1, 
2001.
    (d) Certain Requirements Regarding Project Area.--The Secretary may 
make an award of a grant or contract under subsection (a) only if the 
applicant involved--
            (1) submits to the Secretary--
                    (A) information demonstrating that the medically 
                underserved populations in the community to be served 
                under the award have a need for enabling services; and
                    (B) a proposed budget for providing such services;
            (2) the applicant for the award agrees that the medically 
        underserved residents of the community will be consulted with 
        respect to the design and implementation of the project carried 
        out with the award;
            (3) agrees that the services will not be denied because the 
        individual is unable to pay for such services; and
            (4) agrees that the applicant will utilize existing 
        resources to the maximum extent practicable.
    (e) Application for Awards of Assistance.--The Secretary may make 
an award of a grant or contract under subsection (a) only if an 
application for the award is submitted to the Secretary, the 
application contains each agreement described in this subpart, and the 
application is in such form, is made in such manner, and contains such 
agreements, assurances, and information as the Secretary determines to 
be necessary to carry out this subpart.

SEC. 3462. AUTHORIZATIONS OF APPROPRIATIONS.

    (a) Enabling Services.--For the purpose of carrying out section 
3461(b), there are authorized to be appropriated $17,200,000 for fiscal 
year 1996, $68,900,000 for each of the fiscal years 1997 through 1999, 
$68,900,000 for fiscal year 2000, and $2,000,000 for each of the fiscal 
years 2001 through 2004.
    (b) Supplemental Services.--For the purpose of carrying out section 
3461(c), there are authorized to be appropriated $82,000,000 for fiscal 
year 1996, $123,000,000 for each of the fiscal years 1997 through 1999, 
$205,000,000 for fiscal year 2000, and $2,000,000 for each of the 
fiscal years 2001 through 2004.
    (c) Federally Qualified Health Centers and Rural Health Clinics.--
With respect to federally qualified health centers (as defined in 
section 1861(aa)(4) of the Social Security Act) and rural health 
clinics--
            (1) for the purpose of carrying out section 3461(b), there 
        are authorized to be appropriated $40,000,000 for fiscal year 
        1996, $161,000,000 for each of the fiscal years 1997 through 
        1999, $201,000,000 for fiscal year 2000, and $2,000,000 for 
        each of the fiscal years 2001 through 2004; and
            (2) for the purpose of carrying out section 3461(c), there 
        are authorized to be appropriated $24,600,000 for fiscal year 
        1996, $36,900,000 for each of the fiscal years 1997 through 
        1999, $61,500,000 for fiscal year 2000, and $2,000,000 for each 
        of the fiscal years 2001 through 2004; and
    (d) Relation to Other Funds.--The authorizations of appropriations 
established in subsection (a) are in addition to any other 
authorizations of appropriations that are available for the purpose 
described in such subsection.

                 PART 2--NATIONAL HEALTH SERVICE CORPS

SEC. 3471. AUTHORIZATIONS OF APPROPRIATIONS.

    (a) Additional Funding; General Corps Program; Allocations 
Regarding Nurses.--For the purpose of carrying out subpart II of part D 
of title III of the Public Health Service Act, and for the purpose of 
carrying out section 3472, there are authorized to be appropriated 
$123,000,000 for each of the fiscal years 1996 and 1997, and 
$201,000,000 for each of the fiscal years 1998 through 2000, and 
$2,000,000 for each of the fiscal years 2001 through 2004.
    (b) Relation to Other Funds.--The authorizations of appropriations 
established in subsection (a) are in addition to any other 
authorizations of appropriations that are available for the purpose 
described in such subsection.

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

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

SEC. 3473. ALLOCATION FOR PARTICIPATION OF PSYCHIATRISTS, 
              PSYCHOLOGISTS, AND CLINICAL SOCIAL WORKERS IN SCHOLARSHIP 
              AND LOAN REPAYMENT PROGRAMS.

    Of the amounts appropriate under section 3471, the Secretary shall 
reserve such amounts as may be necessary to ensure that of the 
aggregate number of individuals who are participants in the scholarship 
program under section 338A of the Public Health Service Act, the number 
who are being educated as psychiatrists, psychologists, and clinical 
social workers or are serving as psychiatrists, psychologists, and 
clinical social workers, respectively, is increased to 15 percent.

      PART 3--PAYMENTS TO HOSPITALS SERVING VULNERABLE POPULATIONS

SEC. 3481. PAYMENTS TO HOSPITALS.

    (a) Entitlement Status.--The Secretary shall make payments in 
accordance with this part to eligible hospitals described in section 
3482. The preceding sentence--
            (1) is an entitlement in the Secretary on behalf of such 
        eligible hospitals (but is not an entitlement in the State in 
        which any such hospital is located or in any individual 
        receiving services from any such hospital); and
            (2) constitutes budget authority in advance of 
        appropriations Acts and represents the obligation of the 
        Federal Government to provide funding for such payments in the 
        amounts, and for the fiscal years, specified in subsection (b).
    (b) Appropriations.--
            (1) In general.--For purposes of subsection (a)(2), the 
        amounts and fiscal years specified in this subsection are (in 
        the aggregate for all eligible hospitals) $1,300,000,000 for 
        the fiscal year in which the general effective date occurs and 
        for each subsequent fiscal year.
            (2) Special rule for years before general effective date.--
                    (A) In general.--For each of the fiscal years 1996 
                and 1997, the amount specified in this subsection for 
                purposes of subsection (a)(2) shall be equal to the 
                aggregate DSH percentage of the amount otherwise 
                determined under paragraph (1).
                    (B) Aggregate dsh percentage defined.--In 
                subparagraph (A), the ``aggregate DSH percentage'' for 
                a year is the amount (expressed as a percentage) equal 
                to--
                            (i) the total amount of payment made by the 
                        Secretary under section 1903(a) of the Social 
                        Security Act during the base year with respect 
                        to payment adjustments made under section 
                        1923(c) of such Act for hospitals in the States 
                        in which eligible hospitals for the year are 
                        located; divided by
                            (ii) the total amount of payment made by 
                        the Secretary under section 1903(a) of such Act 
                        during the base year with respect to payment 
                        adjustments made under section 1923(c) of such 
                        Act for hospitals in all States.
    (c) Payments Made on Quarterly Basis.--Payments to an eligible 
hospital under this section for a year shall be made on a quarterly 
basis during the year.

SEC. 3482. IDENTIFICATION OF ELIGIBLE HOSPITALS.

    (a) State Identification.--In accordance with the criteria 
described in subsection (b) and such procedures as the Secretary may 
require, each State shall identify the hospitals in the State that meet 
such criteria and provide the Secretary with a list of such hospitals.
    (b) Criteria for Eligibility.--A hospital meets the criteria 
described in this subsection if the hospital's low-income utilization 
rate for the base year under section 1923(b)(3) of the Social Security 
Act (as such section is in effect on the day before the date of the 
enactment of this Act) is not less than 25 percent.

SEC. 3483. AMOUNT OF PAYMENTS.

    (a) Distribution of Allocation for Low-Income Assistance.--
            (1) Allocation from total amount.--Of the total amount 
        available for payments under this section in a year, 66.66 
        percent shall be allocated to hospitals for low-income 
        assistance in accordance with this subsection.
            (2) Determination of hospital payment amount.--The amount 
        of payment to an eligible hospital from the allocation made 
        under paragraph (1) during a year shall be the equal to the 
        hospital's low-income percentage of the allocation for the 
        year.
    (b) Distribution of Allocation for Assistance for Uncovered 
Services.--
            (1) Allocation from total amount; determination of state-
        specific portion of allocation.--Of the total amount available 
        for payments under this section in a year, 33.33 percent shall 
        be allocated to hospitals for assistance in furnishing hospital 
        services that are not covered services under title I (in 
        accordance with regulations of the Secretary) or in furnishing 
        hospital services to individuals, including those residing in 
        Southwestern border States, who are not eligible individuals 
        under title I, in accordance with this subsection. The amount 
        available for payments to eligible hospitals in a State shall 
        be equal to an amount determined in accordance with a 
        methodology specified by the Secretary that shall take into 
        consideration the volume of such services provided by hospital 
        in the State as compared to the volume of such services 
        provided by all eligible hospitals.
            (2) Determination of hospital payment amount.--The amount 
        of payment to an eligible hospital in a State from the amount 
        available for payments to eligible hospitals in the State under 
        paragraph (1) during a year shall be the equal to the 
        hospital's low-income percentage of such amount for the year.
    (c) Low-Income Percentage Defined.--
            (1) In general.--In this subsection, an eligible hospital's 
        ``low-income percentage'' for a year is equal to the amount 
        (expressed as a percentage) of the total low-income days for 
        all eligible hospitals for the year that are attributable to 
        the hospital.
            (2) Low-income days described.--For purposes of paragraph 
        (1), an eligible hospital's low-income days for a year shall be 
        equal to the product of--
                    (A) the total number of inpatient days for the 
                hospital for the year (as reported to the Secretary by 
                the State in which the hospital is located, in 
                accordance with a reporting schedule and procedures 
                established by the Secretary); and
                    (B) the hospital's low-income utilization rate for 
                the base year under section 1923(b)(3) of the Social 
                Security Act (as such section is in effect on the day 
                before the date of the enactment of this Act).

SEC. 3484. BASE YEAR.

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

               Subtitle F--Mental Health; Substance Abuse

           PART 1--AUTHORITIES REGARDING PARTICIPATING STATES

SEC. 3510. INTEGRATION OF MENTAL HEALTH AND SUBSTANCE ABUSE SYSTEMS.

    (a) In General.--As a condition of being a participating State 
under title I, each State shall, not later than January 1, 2001, 
achieve the integration of the mental illness and substance abuse 
services of the State and its political subdivisions with the mental 
illness and substance abuse services offered by health plans pursuant 
to title I of this Act. A State may petition the Secretary for a waiver 
of the requirement of this subsection under the circumstances described 
in section 3511(b)(7).
    (b) Certification of Readiness.--
            (1) Petition.--A State may petition the Secretary to 
        integrate the mental illness and substance abuse services of 
        the State and its political subdivisions with the mental 
        illness and substance abuse services offered by health plans 
        pursuant to title I of this Act prior to January 1, 2001.
            (2) State readiness to integrate.--Upon receiving such a 
        petition, the Secretary shall, based on the reports submitted 
        pursuant to subsections (b) and (c) of section 3511 and the 
        criteria promulgated pursuant to paragraph (3), ascertain the 
        State's readiness to integrate its mental illness and substance 
        abuse services with the mental illness and substance abuse 
        services offered by health plans pursuant to title I of this 
        Act and certify whether the State is prepared to conduct such 
        an integration.
            (3) Criteria.--The certification by the Secretary of a 
        State's readiness to integrate under paragraph (2) shall be 
        based on objective criteria promulgated by the Secretary after 
        consultation with the States.
    (c) Application of Provisions.--Upon the issuance of a 
certification of readiness by the Secretary for a State, the limits set 
forth in subsections (d)(2)(B) and (e)(2)(A) of section 1106 shall not 
apply to the provision of mental illness and substance abuse services 
in the State.

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

    (a) In General.--As a condition of being a participating State 
under title I, each State shall, not later than October 1, 1998, submit 
to the Secretary a report containing the information described in 
subsection (b) on (including a plan for) the measures to be implemented 
by the State to achieve the integration of the mental illness and 
substance abuse services of the State and its political subdivisions 
with the mental illness and substance abuse services that are included 
in the comprehensive benefit package under title I. The plan required 
in the preceding sentence shall meet the conditions described in 
section 3083(b). In addition, each State shall submit to the Secretary 
a report containing the information described in subsection (c) for 
each year in which the State participates under title I up to and 
including the year 2001 or the date on which an unlimited benefit for 
mental illness and substance abuse services is provided, whichever 
occurs later.
    (b) Required Contents of Integration Report.--With respect to the 
provision of items and services relating to mental illness and 
substance abuse, the report of a State under subsection (a) shall, at a 
minimum, contain the following information:
            (1) Information on the number of individuals served by or 
        through mental illness and substance abuse programs 
        administered by State and local agencies and the proportion who 
        are eligible persons under title I.
            (2) Information on the extent to which each health provider 
        furnishing mental illness and substance abuse services under a 
        State program participates or will participate in one or more 
        regional or corporate alliance health plans, and, in the case 
        of providers that do not so participate, the reasons for the 
        lack of participation.
            (3) With respect to the two years preceding the year in 
        which the State becomes a participating State under title I--
                    (A) the amount of funds expended by the State and 
                its political subdivisions for each of such years for 
                items and services that are included in the 
                comprehensive benefit package under such title;
                    (B) the amount of funds expended for medically 
                necessary and appropriate items and services not 
                included in such benefit package, including medical 
                care, other health care, and supportive services 
                related to the provision of health care.
            (4) An estimate of the amount that the State will expend to 
        furnish items and services not included in such package once 
        the expansion of coverage for mental illness and substance 
        abuse services is implemented in the year 2001.
            (5) A description of how the State will assure that all 
        individuals served by mental illness and substance abuse 
        programs funded by the State will be enrolled in a health plan 
        and how mental illness and substance abuse services not covered 
        under the benefit package will continue to be furnished to such 
        enrollees.
            (6) A description of the conditions under which the 
        integration of mental illness and substance abuse providers 
        into regional and corporate alliances can be achieved, and an 
        identification of changes in participation and certification 
        requirements that are needed to achieve the integration of such 
        programs and providers into health plans.
            (7) If the integration of mental illness and substance 
        abuse programs operated by the State into one or more health 
        plans is not medically appropriate or feasible for one or more 
        groups of individuals treated under State programs, a 
        description of the reasons that integration is not feasible or 
        appropriate and a plan for assuring the coordination for such 
        individuals of the care and services covered under the 
        comprehensive benefit package with the additional items and 
        services furnished by such programs.
            (8) A description of the manner in which the resources that 
        the State and its political subdivisions currently spend on 
        mental health and substance abuse services will be used to 
        facilitate integration.
    (c) Required Contents of Transition Report.--With respect to the a 
report required under this subsection, the report shall, at a minimum, 
contain the following information:
            (1) The amount of funds expended for substance abuse and 
        mental health services by the source of revenue, including, 
        Federal block grant funds, under title XIX of the Public Health 
        Service Act, Federal categorical grant funds, State and local 
        revenues and health plan payments.
            (2) The amount of funds expended for supportive services to 
        individuals enrolled in substance abuse and mental health 
        treatment programs, including transportation, child care, 
        educational and vocational training and coordination with other 
        public systems such as the social service, child welfare and 
        juvenile and criminal justice systems, by source of revenue.
            (3) The amount of funds expended on medically necessary and 
        appropriate items and services not covered or reimbursed in the 
        comprehensive benefit package by source of revenue.
            (4) The amount of funds expended by the State on substance 
        abuse and mental illness services for individuals who are not 
        eligible to receive the comprehensive benefit package pursuant 
        to this Act, and the source of revenue for such services.
    (d) General Provisions.--Reports under subsections (b) and (c) 
shall be provided at the time and in the manner prescribed by the 
Secretary. The Secretary shall also determine what, if any, reports 
shall be submitted in years following the implementation of an 
unlimited benefit for mental illness and substance abuse services.
    (e) Reporting Requirement.--Each State shall report annually to the 
Secretary on the incidence and prevalence of mental illness and 
substance abuse disorders in the prison population, changes in such 
incidence and prevalence in the prison population, and potential 
causative factors with respect to such changes, including an estimate 
of the extent to which the denial of treatment, or the provision of 
inadequate treatment, to individuals with mental illness and substance 
abuse disorders is contributing to the criminal activity of such 
individuals.

PART 2--ASSISTANCE FOR STATE MANAGED MENTAL HEALTH AND SUBSTANCE ABUSE 
                                PROGRAMS

SEC. 3531. AVAILABILITY OF ASSISTANCE.

    (a) In General.--The Secretary shall make grants to States for the 
development and operation of comprehensive managed mental health and 
substance abuse programs that are integrated with the health delivery 
system established under this Act. Such programs shall--
            (1) promote the development of integrated delivery systems 
        for the management of the mental health and substance abuse 
        services provided under the comprehensive benefits package;
            (2) give priority to providing services to low-income 
        adults with serious mental illness or substance abuse disorders 
        and children with serious emotional disturbance or substance 
        abuse disorders and provide for the phase-in of such services 
        for all eligible persons within 5 years;
            (3) ensure that individuals participating in the program 
        have access to all medically necessary mental health and 
        substance abuse services;
            (4) promote the linkage of mental health and substance 
        abuse services with primary and preventive health care 
        services; and
            (5) meet such other requirements as the Secretary may 
        impose.
    (b) Exception.--Nothing in this part shall be construed as 
preventing States that have separate administrative entities for mental 
health and for substance abuse services from establishing separate 
comprehensive managed care programs for such services and receiving 
assistance under this part for either or both programs.

SEC. 3532. PLAN REQUIREMENTS.

    In order to receive a grant under this part, a State must have a 
plan for a comprehensive managed mental health and substance abuse 
program which is approved by the Secretary. Such plan shall--
            (1) describe the management, access, and referral structure 
        that the State will use to promote and achieve integration of 
        mental health and substance abuse services with the health 
        delivery system established under this Act for eligible 
        individuals in the State;
            (2) describe how the State will ensure that providers of 
        specialized services will meet appropriate standards and 
        provide assurances that the State has complied with section 
        1504 as it affects mental health and substance abuse services;
            (3) describe payment, utilization review, and other 
        mechanisms that the State will use to encourage appropriate 
        service delivery and management of costs;
            (4) describe uniform patient placement criteria that the 
        State will use to ensure placement in appropriate substance 
        abuse treatment programs;
            (5) describe the processes the State will use to ensure 
        that individuals will continue to have access to treatment 
        through referrals from nonhealth public entities, such the 
        juvenile or criminal justice systems, or social service 
        systems;
            (6) specify the methods the State will use to ensure that 
        individuals receiving services under the program have access to 
        all medically necessary and appropriate mental health and 
        substance abuse services;
            (7) define terms that will be used by the State in 
        determining the eligibility of individuals for services under 
        the program;
            (8) describe how health plans will use services under the 
        comprehensive managed mental health and substance abuse 
        programs established under this part;
            (9) describe the role of local government in financing and 
        managing the integrated mental illness and substance abuse 
        treatment system;
            (10) describe the sources of funding, including Medicaid 
        and the block grants authorized by title XIX of the Public 
        Health Service Act, that will be used by the State, other than 
        the grant received under this part, to operate the program, and 
        provide the status of any request for a Medicaid waiver made by 
        the State to the Secretary;
            (11) describe how the State provided for broad-based public 
        input in the development of the plan, and the mechanism that 
        will be used for ongoing public comment on and review of 
        amendments to the plan; and
            (12) describe grievance procedures that will be available 
        for individuals dissatisfied with their health plan's 
        participation in the comprehensive managed mental health and 
        substance abuse program, and mechanisms that will be available 
        to review the performance of health plans and fee-for-service 
        arrangements to ensure against under treatment.

SEC. 3533. ADDITIONAL FEDERAL RESPONSIBILITIES.

    The Secretary shall, upon the submission of a State's plan under 
section 3532, ensure the timely consideration of any Medicaid waiver 
requests submitted by the State, affirm that section 1504 has been 
implemented, and ensure the timely implementation of section 
1641(b)(5).

SEC. 3534. AUTHORIZATION OF APPROPRIATIONS.

    There are authorized to be appropriated for grants under this part, 
$82,000,000 for each of the fiscal years 1995 through 2000, and 
$2,000,000 for each of the fiscal years 2001 through 2004.

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

   PART 1--HEALTHY STUDENTS-HEALTHY SCHOOLS GRANTS FOR SCHOOL HEALTH 
                               EDUCATION

SEC. 3601. PURPOSES.

    It is the purpose of this part--
            (1) to support the development and implementation of 
        comprehensive age appropriate health education programs in 
        public schools for children and youth kindergarten through 
        grade 12; and
            (2) to increase access to preventive and primary health 
        care services for children and youth through school-based or 
        school-linked health service sites in accordance with locally 
        determined needs.

SEC. 3602. HEALTHY STUDENTS-HEALTHY SCHOOLS GRANTS.

    (a) In General.--The Secretary, in consultation with the Secretary 
of Education, shall award grants to State educational agencies in 
eligible States to integrate comprehensive school health education in 
schools within the State, with priority given within States to those 
communities in greatest need as defined by section 3683(a).
    (b) Eligible Uses of Funds.--Funds made available under this 
section shall be used--
            (1) to implement comprehensive school health education 
        programs, as defined in subsection (f)(1) through grants to 
        local educational agencies;
            (2) to provide staff development and technical assistance 
        to local educational agencies, schools, local health agencies, 
        and other community organizations involved in providing 
        comprehensive school health education programs;
            (3) to evaluate and report to the Secretary on the progress 
        made towards attaining the goals and objectives described under 
        subsection (c)(1)(A); and
            (4) to conduct such other activities to achieve the 
        objectives of this subpart as the Secretary may require.
    (c) Application.--An application for a grant under subsection (a), 
shall be jointly developed by the State educational agency and the 
State health agencies of the State involved, and shall contain--
            (1) a State plan for comprehensive school health education 
        programs, that outlines--
                    (A) the goals and objectives of the State for 
                school health education programs, and the manner in 
                which the State will allocate funds to local 
                educational agencies in order to achieve these goals 
                and objectives;
                    (B) the manner in which the State will coordinate 
                programs under this part with other Federal, State and 
                local health education programs and resources, and 
                school health services;
                    (C) the manner in which comprehensive school health 
                education programs will be coordinated with other 
                Federal, State and local education programs (such as 
                programs under titles I, II, and IV of the Elementary 
                and Secondary Education Act of 1965), with the school 
                improvement plan of the State, if any, under title III 
                of the Goals 2000: Educate America Act, and with any 
                similar programs;
                    (D) the manner in which the State shall work with 
                State and local educational agencies and with State and 
                local health agencies to reduce barriers to 
                implementing school health education programs;
                    (E) the manner in which the State will monitor the 
                implementation of such programs by local educational 
                agencies and establish outcome criteria by which to 
                evaluate their effectiveness in achieving progress 
                towards the goals and objectives described in 
                subparagraph (A);
                    (F) the manner in which the State will provide 
                staff development and technical assistance to local 
                educational agencies, and build capacity for 
                professional development of health educators; and
                    (G) the manner in which such school health 
                education programs will be, to the extent practicable, 
                culturally competent and linguistically appropriate and 
                responsive to the diverse needs of the students served;
            (2) a description of the respective roles of the State 
        educational agency, local educational agencies, the State 
        health agency and local health agencies in developing and 
        implementing the State's school health education plan and 
        resulting programs;
            (3) a description of the input of the local community 
        (including students and parents) in the development and 
        operation of comprehensive school health education programs;
            (4) an assurance that communities identified in section 
        3683(a) receive priority as locations for comprehensive school 
        health education programs for all grades to the extent that a 
        State does not implement a statewide program; and
            (5) an assurance that grants to local educational agencies 
        under subsection (b)(1) are contingent upon submission by such 
        agencies of a plan consistent with the requirements for the 
        State plan as required under this subsection.
    (d) Waivers of Statutory and Regulatory Requirements.--
            (1) Waivers.-- Except as provided in paragraph (4), upon 
        the request of an entity and under a relevant program described 
        in paragraph (2), the Secretary of Health and Human Services 
        and the Secretary of Education may grant to the entity a waiver 
        of any requirement of such program regarding the use of funds, 
        or of the regulations issued for the program by the Secretary 
        involved, if the following conditions are met with respect to 
        such program:
                    (A) The Secretary involved determines that the 
                requirements of such program impede the ability of the 
                State educational agency to achieve more effectively 
                the purposes described in section 3601.
                    (B) The Secretary involved determines that, with 
                respect to the use of funds under such program, the 
                requested use of the funds by the entity would be 
                consistent with the purposes described in section 3601.
                    (C) The State educational agency provides all 
                interested local educational agencies in the State with 
                notice and an opportunity to comment on the proposal 
                and makes these comments available to the Secretary.
            (2) Relevant programs.--For purposes of paragraph (1), the 
        programs described in this subparagraph are the following:
                    (A) In the case of programs administered by the 
                Secretary of Health and Human Services, the following:
                            (i) The program known as the Prevention, 
                        Treatment, and Rehabilitation Model Projects 
                        for High Risk Youth, carried out under section 
                        517 of the Public Health Service Act.
                            (ii) The program known as the State and 
                        Local Comprehensive School Health Programs to 
                        Prevent Important Health Problems and Improve 
                        Educational Outcomes, carried out under such 
                        Act.
                    (B) In the case of programs administered by the 
                Secretary of Education, any program carried out under 
                part B of the Drug-Free Schools and Communities Act of 
                1986, except that a component of such comprehensive 
                school health education must be consistent with the 
                statutory intent and purposes of such Act.
            (3) Waiver period.--A waiver under this paragraph shall be 
        for a period not to exceed 3 years, unless the Secretary 
        involved determines that--
                    (A) the waiver has been effective in enabling the 
                State to carry out the activities for which it was 
                requested and has contributed to improved performance 
                of comprehensive health education programs; and
                    (B) such extension is in the public interest;
            (4) Waivers not authorized.--The Secretary involved under 
        paragraph (1), may not waive, under this section, any statutory 
        or regulatory requirements relating to--
                    (A) comparability of services;
                    (B) maintenance of effort;
                    (C) parental participation and involvement;
                    (D) the distribution of funds to States or to local 
                educational agencies or other recipients of funds under 
                the programs described in paragraph (2);
                    (E) maintenance of records;
                    (F) applicable civil rights requirements; or
                    (G) the requirements of sections 438 and 439 of the 
                General Education Provisions Act.
            (5) Termination of waiver.--The Secretary involved under 
        paragraph (1) shall terminate a waiver under this subsection if 
        the Secretary determines that the performance of the State 
        affected by the waiver has been inadequate to justify a 
        continuation of the waiver or if it is no longer necessary to 
        achieve its original purpose.
    (e) Definitions.--As used in this section:
            (1) Comprehensive school health education.--The term 
        ``comprehensive school health education'' means a planned, 
        sequential program of health education that addresses the 
        physical, emotional and social dimensions of student health in 
        kindergarten through grade 12. Such program shall--
                    (A) be designed to assist students in developing 
                the knowledge and behavioral skills needed to make 
                positive health choices and maintain and improve their 
                health, prevent disease and injuries, and reduce risk 
                behaviors which adversely impact health;
                    (B) be comprehensive and include a variety of 
                components addressing personal health, community and 
                environmental health, injury prevention and safety, 
                nutritional health, the effects of substance use and 
                abuse, consumer health regarding the benefits and 
                appropriate use of medical services including 
                immunizations and other clinical preventive services, 
                and other components deemed appropriate by the local 
                educational agencies;
                    (C) be designed to be linguistically and culturally 
                competent and responsive to the needs of the students 
                served; and
                    (D) address locally relevant priorities as 
                determined by parents, students, teachers, and school 
                administrators and health officials.
            (2) Eligible state.--The term ``eligible State'' means a 
        State with a memorandum of understanding or a written 
        cooperative agreement entered into by the agencies responsible 
        for health and education concerning the planning and 
        implementation of comprehensive school health education 
        programs. Among these States a priority shall be given to 
        qualified States as defined in section 3682(c).
            (3) State educational agency.--The term ``State educational 
        agency'' means the officer or agency primarily responsible for 
        the State supervision of public elementary and secondary 
        schools.
            (4) Local educational agency.--The term ``local educational 
        agency'' means a public board of education or other public 
        authority legally constituted within a State for either 
        administrative control or direction of, or to perform a service 
        function for, public elementary or secondary schools in a city, 
        county, township, school district, or other political 
        subdivision of a State, or such combination of school districts 
        or counties as are recognized in a State as an administrative 
        agency for its public elementary or secondary schools. Such 
        term includes any other public institution or agency having 
        administrative control and direction of a public elementary or 
        secondary school.
    (f) Authorized Funding.--For the purpose of carrying out this 
section, out of the funds available under section 3695(b)(2), there are 
made available, not to exceed $15,000,000 for fiscal year 1995, 
$20,000,000 for fiscal year 1996, $25,000,000 for fiscal year 1997, 
$30,000,000 for fiscal year 1998, $40,000,000 for fiscal year 1999, and 
$50,000,000 for fiscal year 2000.

SEC. 3603. HEALTHY STUDENTS-HEALTHY SCHOOLS INTERAGENCY TASK FORCE.

    (a) Establishment.--Not later than 120 days after the date of 
enactment of this Act, the Secretary shall establish a Healthy 
Students-Healthy Schools Interagency Task Force to be composed of 
representatives of the Office of Disease Prevention and Health 
Promotion, the National Institutes of Health, the Centers for Disease 
Control and Prevention, the Health Resources and Services 
Administration, the Office of School Health Education within the 
Department of Education, and other Federal agencies and departments 
which have responsibility for components of school health and 
education.
    (b) Co-chairpersons.--The Assistant Secretary for Health and the 
Assistant Secretary for Elementary and Secondary Education shall serve 
as co-chairpersons of the task force established under subsection (a).
    (c) Functions and Activities.--The task force established under 
subsection (a) shall--
            (1) review and coordinate all Federal efforts in school 
        health education and health services;
            (2) provide scientific and technical advice concerning the 
        development and implementation of model comprehensive school 
        health education programs and curricula;
            (3) develop model student learning objectives and 
        assessment instruments that shall be made available to all 
        States;
            (4) develop a uniform grant application form (a form that 
        serves as the principal document containing the core 
        information concerning a particular entity) and procedures that 
        may be used with respect to all school health education-related 
        programs (including supplementary information procedures to be 
        implemented when an entity that has already submitted an 
        application form is applying for additional assistance) that 
        require the submission of an application; and
            (5) recommend to the Secretary, for inclusion in the 
        biennial report required by section 3604(2), methods for 
        effectively linking school health education and health services 
        research findings at the Federal level with implementation at 
        the State and local levels.
    (d) Consolidation of Initiatives.--Not later than 12 months after 
the date of enactment of this Act, the task force established under 
subsection (a) shall prepare and submit to the Congress a report 
containing the recommendations of the task force for the consolidation 
of Federal school health education initiatives.

SEC. 3604. DUTIES OF THE SECRETARY.

    The Secretary shall--
            (1) establish and maintain a national clearinghouse, using 
        advanced technologies to the maximum extent practicable, and 
        mechanisms for the diverse dissemination of school health 
        education material, including written, audio-visual, and 
        electronically conveyed information to educators, schools, 
        health care providers, and other individuals, organizations, 
        and governmental entities;
            (2) submit a biennial report to the Committee on Labor and 
        Human Resources of the Senate and the appropriate committees of 
        the House of Representatives on the implementation and 
        contribution of comprehensive school health education programs 
        funded under this part toward achieving relevant National 
        Healthy People 2000 objectives established by the Secretary; 
        and
            (3) encourage coordination among Federal agencies, State 
        and local governments, educators, school health providers, 
        community-based organizations, and private sector entities to 
        support development of comprehensive school health education 
        programs and school health services.

                 PART 5--SCHOOL-RELATED HEALTH SERVICES

                  Subpart A--Development and Operation

SEC. 3681. AUTHORIZATION OF APPROPRIATIONS.

    (a) Funding for School-Related Health Services.--For the purpose of 
carrying out this subpart, there are authorized to be appropriated 
$82,000,000 for fiscal year 1995, $164,000,000 for fiscal year 1996, 
$266,500,000 for fiscal year 1997, and $369,000,000 for fiscal year 
1998, $471,500,000 for fiscal year 1999, $574,000,000 for fiscal year 
2000, and $2,000,000 for each of the fiscal years 2001 through 2004.
    (b) Funding for Planning and Development Grants.--Of amounts made 
available under this section, not to exceed $10,000,000 for each of 
fiscal years 1995 and 1996 may be utilized to carry out section 3684.

SEC. 3682. ELIGIBILITY FOR GRANTS.

    (a) In General.--
            (1) Planning and development grants.--Entities eligible to 
        apply for and receive grants under section 3684 are--
                    (A) State health agencies that apply on behalf of 
                local community partnerships; or
                    (B) local community partnerships in States in which 
                health agencies have not successfully applied.
            (2) Operational grants.--Entities eligible to apply for and 
        receive grants under section 3685 are--
                    (A) a qualified State as designated under 
                subsection (c) that apply on behalf of local community 
                partnerships; or
                    (B) local community partnerships in States that are 
                not designated under subparagraph (A).
    (b) Local Community Partnerships.--
            (1) In general.--A local community partnership under 
        subsection (a)(1)(B) and (a)(2)(B) is an entity that, at a 
        minimum includes--
                    (A) a local health care provider, which may be a 
                local public health department, with experience in 
                delivering services to children and youth or medically 
                underserved populations;
                    (B) local educational agency on behalf of one or 
                more public schools; and
                    (C) one community based organization located in the 
                community to be served that has a history of providing 
                services to at-risk children and youth.
            (2) Rural communities.--In rural communities, local 
        partnerships should seek to include, to the fullest extent 
        practicable, providers and community based organizations with 
        experience in serving the target population.
            (3) Parent and community participation.--An applicant 
        described in subsection (a) shall, to the maximum extent 
        feasible, involve broad-based community participation 
        (including parents of the youth to be served).
    (c) Qualified State.--A qualified State under subsection (a)(2)(A) 
is a State that, at a minimum--
            (1) demonstrates an organizational commitment (including a 
        strategic plan) to providing a broad range of health, health 
        education and support services to at-risk youth; and
            (2) has a memorandum of understanding or cooperative 
        agreement jointly entered into by the State agencies 
        responsible for health and education regarding the planned 
        delivery of health and support services in school-based or 
        school-linked centers.

SEC. 3683. PREFERENCES.

    In making grants under sections 3684 and 3685, the Secretary shall 
give priority to applicants whose-communities to be served show the 
most substantial level of need for health services among children and 
youth.

SEC. 3684. PLANNING AND DEVELOPMENT GRANTS.

    (a) In General.--The Secretary may make grants during fiscal years 
1995 and 1996 to entities eligible under section 3862 to develop 
school-based or school-linked health service sites.
    (b) Use of Funds.--Amounts provided under a grant under this 
section may be used for the following:
            (1) Planning for the provision of school health services, 
        including--
                    (A) an assessment of the need for health services 
                among youth in the communities to be served;
                    (B) the health services to be provided and how new 
                services will be integrated with existing services;
                    (C) assessing and planning for the modernization 
                and expansion of existing facilities and equipment to 
                accommodate such services; and
                    (D) an affiliation with relevant health plans.
            (2) recruitment and training of staff for the 
        administration and delivery of school health services;
            (3) the establishment of local community partnerships as 
        described in section 3682 (b);
            (4) in the case of States, the development of memorandums 
        of understanding or cooperative agreements for the coordinated 
        delivery of health and support services through school health 
        service sites; and
            (5) other activities necessary to assume operational 
        status.
    (c) Application for Grants.--To be eligible to receive a grant 
under this section an entity described in section 3682 (a) shall submit 
an application in a form and manner prescribed by the Secretary.
    (d) Number of Grants.--Not more than one planning grant may be made 
to a single applicant. A planning grant may not exceed 2 years in 
duration.
    (e) Amount Available for Development Grant.--The Secretary may 
award not to exceed--
            (1) $150,000 to entities under section 3682(a)(1)(A) and to 
        localities planning for a citywide or countywide school health 
        services delivery system; and
            (2) $50,000 to entities under section 3682(a)(1)(B).

SEC. 3685. GRANTS FOR OPERATION OF SCHOOL HEALTH SERVICES.

    (a) In General.--The Secretary may make grants to eligible entities 
described in section 3682(a)(2) that submit applications consistent 
with the requirements of this section, to pay the cost of operating 
school-based or school-linked health service sites.
    (b) Use of Grant.--Amounts provided under a grant under this 
section may be used for the following--
            (1) health services, including diagnosis and treatment of 
        simple illnesses and minor injuries;
            (2) preventive health services, including health screenings 
        follow-up health care, mental health, and preventive health 
        education;
            (3) enabling services, as defined in section 3461(b), and 
        other necessary support services;
            (4) training, recruitment, and compensation of health 
        professionals and other staff necessary for the administration 
        and delivery of school health services; and
            (5) referral services, including the linkage of individuals 
        to health plans, and community-based health and social service 
        providers.
    (c) Application for Grant.--To be eligible to receive a grant under 
this section an entity described in section 3682(a)(2) shall submit an 
application in a form and manner prescribed by the Secretary. In order 
to receive a grant under this section, an applicant must include in the 
application the following information--
            (1) a description of the services to be furnished by the 
        applicant;
            (2) the amounts and sources of funding that the applicant 
        will expend, including estimates of the amount of payments the 
        applicant will receive from health plans and other sources;
            (3) a description of local community partnerships, 
        including parent and community participation;
            (4) a description of the linkages with other health and 
        social service providers; and
            (5) such other information as the Secretary determines to 
        be appropriate.
    (d) Assurances.--In order to receive a grant under this section, an 
applicant must meet the following conditions--
            (1) school health service sites will, directly or 
        indirectly, provide a broad range of health services, in 
        accordance with the determinations of the local community 
        partnership, that may include--
                    (A) diagnosis and treatment of simple illnesses and 
                minor injuries;
                    (B) preventive health services, including health 
                screenings and follow-up health care, mental health and 
                preventive health education;
                    (C) enabling services, as defined in section 
                3461(b);
                    (D) referrals (including referrals regarding mental 
                health and substance abuse) with follow-up to ensure 
                that needed services are received;
            (2) the applicant provides services recommended by the 
        health provider, in consultation with the local community 
        partnership, and with the approval of the local education 
        agency;
            (3) the applicant provides the services under this 
        subsection to adolescents, and other school age children and 
        their families as deemed appropriate by the local partnership;
            (4) the applicant maintains agreements with community-based 
        health care providers with a history of providing services to 
        such populations for the provision of health care services not 
        otherwise provided directly or during the hours when school 
        health services are unavailable;
            (5) the applicant establishes an affiliation with relevant 
        health plans and will establish reimbursement procedures and 
        will make every reasonable effort to collect appropriate 
        reimbursement for services provided; and
            (6) the applicant agrees to supplement and not supplant the 
        level of State or local funds under the direct control of the 
        applying State or participating local education or health 
        authority expended for school health services as defined by 
        this Act;
            (7) services funded under this Act will be coordinated with 
        existing school health services provided at a participating 
        school; and
            (8) for applicants in rural areas, the assurances required 
        under paragraph (4) shall be fulfilled to the maximum extent 
        possible.
    (e) State Laws.--Notwithstanding any other provision in this part, 
no school based health clinic may provide services, to any minor, when 
to do so is a violation of State laws or regulations pertaining to 
informed consent for medical services to minors.
    (f) Limitation on Administrative Funds.--In the case of a State 
applying on behalf of local educational partnerships, the applicant may 
retain not more than 5 percent of grants awarded under this subpart for 
administrative costs.
    (g) Duration of Grant.--A grant under this section shall be for a 
period determined appropriate by the Secretary.
    (h) Amount of Grant.--The annual amount of a grant awarded under 
this section shall not be more than $200,000 per school-based or 
school-linked health service site.
    (i) Federal Share.--
            (1) In general.--Subject to paragraph (3), a grant for 
        services awarded under this section may not exceed--
                    (A) 90 percent of the non-reimbursed cost of the 
                activities to be funded under the program for the first 
                2 fiscal years for which the program receives 
                assistance under this section; and
                    (B) 75 percent of the non-reimbursed cost of such 
                activities for subsequent years for which the program 
                receives assistance under this section.
        The remainder of such costs shall be made available as provided 
        in paragraph (2).
            (2) Form of non-federal share.--The non-Federal share 
        required by paragraph (1) may be in cash or in-kind, fairly 
        evaluated, including facilities, equipment, personnel, or 
        services, but may not include amounts provided by the Federal 
        Government. In-kind contributions may include space within a 
        school facilities, school personnel, program use of school 
        transportation systems, outposted health personnel, and 
        extension of health provider medical liability insurance.
            (3) Waiver.--The Secretary may waive the requirements of 
        paragraph (1) for any year in accordance with criteria 
        established by regulation. Such criteria shall include a 
        documented need for the services provided under this section 
        and an inability of the grantee to meet the requirements of 
        paragraph (1) despite a good faith effort.
    (j) Training and Technical Assistance.--Entities that receive 
assistance under this section may use not to exceed 10 percent of the 
amount of such assistance to provide staff training and to secure 
necessary technical assistance. To the maximum extent feasible, 
technical assistance should be sought through local community-based 
entities. The limitation contained in this subsection shall apply to 
individuals employed to assist in obtaining funds under this part. 
Staff training should include the training of teachers and other school 
personnel necessary to ensure appropriate referral and utilization of 
services, and appropriate linkages between class-room activities and 
services offered.
    (k) Report and Monitoring.--The Secretary will submit to the 
Committee on Labor and Human Resources in the Senate and the Committee 
on Energy and Commerce in the House of Representatives a biennial 
report on the activities funded under this Act, consistent with the 
ongoing monitoring activities of the Department. Such reports are 
intended to advise the relevant Committees of the availability and 
utilization of services, and other relevant information about program 
activities.

            Subpart B--Capital Costs of Developing Projects

SEC. 3691. FUNDING.

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

              Subtitle H--Public Health Service Initiative

SEC. 3695. PUBLIC HEALTH SERVICE INITIATIVE.

    (a) In General.--Subject to subsection (c), the Secretary of Health 
and Human Services shall pay, from funds in the Treasury not otherwise 
appropriated, individuals and entities that are eligible to receive 
assistance pursuant to the provisions referred to in paragraphs (1) 
through (13) of subsection (b), to the extent of the amounts specified 
under subsection (b).
    (b) Amounts Specified.--The amounts specified in subsection (a) 
with respect to a fiscal year shall be--
            (1) with respect to the core functions of public health 
        programs authorized under part 2 of subtitle D of title III, 
        $123,000,000 for fiscal year 1995, $184,500,000 for fiscal year 
        1996, $266,500,000 for fiscal year 1997, $348,500,000 for 
        fiscal year 1998, $410,000,000 for fiscal year 1999, 
        $512,500,000 for fiscal year 2000, and $2,000,000 for each of 
        the fiscal years 2001 through 2004;
            (2) with respect to the national initiatives regarding 
        health promotion and disease prevention under part 3 of 
        subtitle D of title III, $102,500,000 for each of the fiscal 
        years 1996 through 1998, $123,000,000 for each of the fiscal 
        years 1999 and 2000, and $2,000,000 for each of the fiscal 
        years 2001 through 2004;
            (3) with respect to occupational injury and illness 
        prevention under section 3903, $92,250,000 for each of the 
        fiscal years 1995 through 2000, and $2,000,000 for each of the 
        fiscal years 2001 through 2004;
            (4) with respect to activities for the development of plans 
        and networks under subpart B of part 2 of subtitle E of title 
        III--
                    (A) $43,050,000 for fiscal year 1995, $100,450,000 
                for fiscal year 1996, $157,850,000 for fiscal year 
                1997, $129,150,000 for fiscal year 1998, $100,450,000 
                for fiscal year 1999, $43,050,000 for fiscal year 2000, 
                and $2,000,000 for each of the fiscal years 2001 
                through 2004; and
                    (B) with respect to awards to federally qualified 
                health centers (as defined in section 1861(aa)(4) of 
                the Social Security Act) and rural health clinics under 
                such subpart, $79,950,000 for fiscal year 1995, 
                $186,550,000 for fiscal year 1996, $293,150,000 for 
                fiscal year 1997, $239,850,000 for fiscal year 1998, 
                $186,550,000 for fiscal year 1999, $79,950,000 for 
                fiscal year 2000, and $2,000,000 for each of the fiscal 
                years 2001 through 2004;
            (5) with respect to capital costs under subpart C of part 2 
        of subtitle E of title III, $41,000,000 for each of the fiscal 
        years 1995 through 2000, and $2,000,000 for each of the fiscal 
        years 2001 through 2004;
            (6) with respect to enabling services under subpart D of 
        part 2 of subtitle E of title III--
                    (A) $17,200,000 for fiscal year 1996, $68,900,000 
                for each of the fiscal years 1997 through 1999, 
                $68,900,000 for fiscal year 2000, and $2,000,000 for 
                each of the fiscal years 2001 through 2004; and
                    (B) with respect to awards to federally qualified 
                health centers (as defined in section 1861(aa)(4) of 
                the Social Security Act) and rural health clinics under 
                such subpart, $40,000,000 for fiscal year 1996, 
                $161,000,000 for each of the fiscal years 1997 through 
                1999, $201,000,000 for fiscal year 2000, and $2,000,000 
                for each of the fiscal years 2001 through 2004;
            (7) with respect to supplemental services under subpart D 
        of part 1 of subtitle E of title III--
                    (A) $24,600,000 for fiscal year 1996, $36,900,000 
                for each of the fiscal years 1997 through 1999, 
                $61,500,000 for fiscal year 2000, and $2,000,000 for 
                each of the fiscal years 2001 through 2004; and
                    (B) with respect to awards to federally qualified 
                health centers (as defined in section 1861(aa)(4) of 
                the Social Security Act) and rural health clinics under 
                such subpart, $57,400,000 for fiscal year 1996, 
                $86,100,000 for each of the fiscal years 1997 through 
                1999, and $143,500,000 for fiscal year 2000 and 
                $2,000,000 for each of the fiscal years 2001 through 
                2004;
            (8) with respect to the National Health Service Corps 
        program referred to under section 3471, $123,000,000 for each 
        of the fiscal years 1996 and 1997, and $201,000,000 for each of 
        the fiscal years 1998 through 2000, and $2,000,000 for each of 
        the fiscal years 2001 through 2004;
            (9) with respect to school-related health service programs 
        under subpart A of part 5 of subtitle G of title III, 
        $82,000,000 for fiscal year 1995, $164,000,000 for fiscal year 
        1996, $266,500,000 for fiscal year 1997, and $369,000,000 for 
        fiscal year 1998, $471,500,000 for fiscal year 1999, 
        $574,000,000 for fiscal year 2000, and $2,000,000 for each of 
        the fiscal years 2001 through 2004;
            (10) with respect to the development and operation of 
        comprehensive managed mental health and substance abuse 
        programs under section 3534, $82,000,000 for each of the fiscal 
        years 1995 through 2000, and $2,000,000 for each of the fiscal 
        years 2001 through 2004;
            (11) with respect to programs of the Secretary of Health 
        and Human Services under section 3081, $82,000,000 for each of 
        the fiscal years 1995 and 1996, $123,000,000 for each of the 
        fiscal years 1997 through 2000 and $2,000,000 for each of the 
        fiscal years 2001 through 2004;
            (12) with respect to programs of the Secretary of Labor 
        under section 3082, $164,000,000 for each of the fiscal years 
        1995 through 2000 and $2,000,000 for each of the fiscal years 
        2001 through 2004; and
            (13) with respect to programs of the Indian Health Service 
        under subtitle D of title VIII, $164,000,000 for each of the 
        fiscal years 1995 through 2000 and $2,000,000 for each of the 
        fiscal years 2001 through 2004.
    (c) Authority to Transfer Funds.--The Committee on Appropriations 
of the House of Representatives and the Committee on Appropriations of 
the Senate, acting through appropriations Acts, may transfer the 
amounts specified under subsection (b) in each fiscal year among the 
programs referred to in such subsection.
    (d) Report.--The Secretary shall review the effectiveness of the 
programs included in the Public Health Initiative. Not later than 
October 1, 1998, the Secretary shall prepare and submit to Congress a 
report concerning such review. Such report shall include 
recommendations concerning whether Congress should increase the program 
funding levels described in subsection (b) in fiscal years 2001 through 
2004 to a level equal to that of prior fiscal years.

       Subtitle I--Additional Provisions Regarding Public Health

SEC. 3901. CURRICULUM DEVELOPMENT AND IMPLEMENTATION REGARDING DOMESTIC 
              VIOLENCE AND WOMEN'S HEALTH.

    (a) In General.--The Secretary shall make grants to eligible 
entities for the purpose of implementing and developing for trainees a 
curriculum that includes training in identification, treatment and 
referral of victims of domestic violence and women's health needs.
    (b) Eligible Entities.--For purposes of subsection (a), eligible 
entities are any school of medicine, school of osteopathic medicine, 
school of public health, graduate program in mental health practice, 
school of nursing as defined in section 853 of the Public Health 
Service Act, a program to train physician assistants, a program for 
training allied health professionals, and a program for training of 
family medicine physicians, general internists, general pediatricians, 
geriatricians, and obstetrician/gynecologists.
    (c) Curriculum.--A curriculum developed under this section shall 
include--
            (1) identification of victims of domestic violence and 
        maintaining complete medical records that include documentation 
        of the examination, treatment provided, and referral made and 
        recording the location and nature of the victim's injuries;
            (2) examining and treating such victims within the scope of 
        the health professional's discipline, training, and practice, 
        including at a minimum providing medical advice regarding the 
        dynamics and nature of domestic violence;
            (3) referring the victims to public and nonprofit entities 
        that provide support services for such victims;
            (4) training in the identification and diagnosis of 
        diseases afflicting women and other medical disorders as they 
        affect women;
            (5) training in the treatment of such diseases and 
        disorders with emphasis on the unique needs of women; and
            (6) research into the causes of such diseases and 
        disorders, including determination of appropriate means of 
        prevention.
    (d) Allocation of Appropriations.--Of the amounts made available 
under section 3301(b) for a fiscal year, the Secretary shall reserve 
not to exceed $20,000,000 for a fiscal year for carrying out this 
section.

SEC. 3902. COMMUNITY SCHOLARSHIP PROGRAMS.

    Section 338L of the Public Health Service Act (42 U.S.C. 254t) is 
amended--
            (1) in the section heading, by striking ``DEMONSTRATION'';
            (2) in subsection (a)--
                    (A) by striking ``for the purpose of carrying out 
                demonstration programs''; and
                    (B) by striking ``health manpower shortage areas'' 
                and inserting ``Federally-designated health 
                professional shortage areas'';
            (3) in subsection (c)--
                    (A) by striking ``health manpower shortage areas'' 
                and inserting ``Federally-designated health 
                professional shortage areas'' in the matter preceding 
                paragraph (1); and
                    (B) by striking ``in the health manpower shortage 
                areas in which the community organizations are 
                located,'' and inserting ``in a Federally-designated 
                health professional shortage area that is served by the 
                community organization awarding the scholarship,'' in 
                paragraph (2);
            (4) in subsection (e)(1)--
                    (A) by striking ``health manpower shortage area'' 
                and inserting ``a Federally-designated health 
                professional shortage area''; and
                    (B) by striking ``in which the community'' and all 
                that follows through ``located'';
            (5) in subsection (k)(2), by striking ``internal medicine'' 
        and all that follows through the end thereof and inserting 
        ``general internal medicine, general pediatrics, obstetrics and 
        gynecology, dentistry, or mental health, that are provided by 
        physicians or other health professionals.''; and
            (6) in subsection (l)(1), by striking ``$5,000,000'' and 
        all that follows through ``1993'' and inserting ``$1,000,000 
        for fiscal year 1994, and such sums as may be necessary for 
        each fiscal year thereafter''.

               Subtitle J--Occupational Safety and Health

SEC. 3903. OCCUPATIONAL INJURY AND ILLNESS PREVENTION.

    (a) In General.--The Secretary of Health and Human Services and the 
Secretary of Labor shall work together to develop and implement a 
comprehensive program to expand and coordinate initiatives to prevent 
occupational injuries and illnesses.
    (b) Secretary of Labor.--The Secretary of Labor after consultation 
with the Secretary of Health and Human Services shall directly or by 
grants or contracts--
            (1) provide for training and education programs for 
        employees and employers in the recognition and control of 
        workplace hazards and methods and measures to prevent 
        occupational injuries and illnesses;
            (2) develop model educational materials for training and 
        educating employees and employers on the recognition and 
        control of workplace hazards, including a core curriculum for 
        general safety and health training and materials related to 
        specific safety and health hazards; and
            (3) provide programs and services for technical assistance 
        to employers and employees on the recognition and control of 
        workplace safety and health hazards including programs for 
        onsite consultation.
Technical assistance and consultative services under paragraph (3) 
shall be provided in a manner that is separate from the enforcement 
programs conducted by the Secretary of Labor.
    (c) Secretary of Health and Human Services.--The Secretary of 
Health and Human Services after consultation with the Secretary of 
Labor shall directly or by grants or contracts--
            (1) provide education programs for training occupational 
        safety and health professionals including professionals in the 
        fields of occupational medicine, occupational health nursing, 
        industrial hygiene, safety engineering, toxicology and 
        epidemiology;
            (2) provide education programs for other health 
        professionals and health care providers and the public to 
        improve the recognition, treatment and prevention of 
        occupationally related injuries and illnesses;
            (3) conduct surveillance programs to identify patterns and 
        to determine the prevalence of occupational illnesses, injuries 
        and deaths related to exposure to particular safety and health 
        hazards;
            (4) conduct investigations and evaluations to determine if 
        workplace exposures to toxic chemicals, harmful physical agents 
        or potentially hazardous conditions pose a risk to exposed 
        employees; and
            (5) conduct research, demonstrations and experiments 
        relating to occupational safety and health to identify the 
        causes of and major factors contributing to occupational 
        illnesses and injuries.
    (d) National Advisory Board.--
            (1) Establishment.--There is established a National 
        Advisory Board for Occupational Injury and Illness Prevention 
        to provide oversight, advice and direction on the occupational 
        injury and illness prevention programs and initiatives 
        conducted by the Secretary of Labor and Secretary of Health and 
        Human Services.
            (2) Composition.--The Board shall be composed of 10 members 
        appointed by the Secretary of Labor, 5 of whom are to be 
        designated by the Secretary of Health and Human Services. Such 
        members shall be composed of representatives of employers, 
        employees, and occupational safety and health professionals.
    (e) Director of NIOSH.--The responsibilities of the Secretary of 
Health and Human Services established under this section shall be 
carried out by the Director of the National Institute for Occupational 
Safety and Health.
    (f) Authorization of Appropriations.--For the purposes of carrying 
out this section there are authorized to be appropriated $92,250,000 
for each of the fiscal years 1995 through 2000, and $2,000,000 for each 
of the fiscal years 2001 through 2004.

                    Subtitle K--Full Funding for WIC

SEC. 3905. FULL FUNDING FOR WIC.

    Section 17 of the Child Nutrition Act of 1966 (42 U.S.C. 1786) is 
amended--
            (1) in the second sentence of subsection (a)--
                    (A) by striking ``authorized'' and inserting 
                ``established''; and
                    (B) by striking ``, up to the authorization levels 
                set forth in subsection (g) of this section,'' and 
                inserting ``, up to the levels made available under 
                this section,'';
            (2) in subsection (c)--
                    (A) in the first sentence of paragraph (1), by 
                striking ``may'' and inserting ``shall'';
                    (B) in paragraph (2), by striking ``appropriated'' 
                and inserting ``made available'';
            (3) in subsection (g)--
                    (A) by striking paragraph (1) and inserting the 
                following new paragraph:
    ``(1)(A) There are authorized to be --
            ``(i) appropriated to carry out this section such amounts 
        as are necessary for each of fiscal years 1995 through 2000; 
        and
            ``(ii) made available such amounts as are necessary for the 
        Secretary of the Treasury to fulfill the requirements of 
        subparagraph (B).
    ``(B)(i) Out of any money in the Treasury not otherwise 
appropriated, the Secretary of the Treasury shall provide to the 
Secretary of Agriculture, on January 1 of each fiscal year, to carry 
out this subsection--
            ``(I) $444,000,000 for fiscal year 1996;
            ``(II) $696,000,000 for fiscal year 1997;
            ``(III) $775,000,000 for fiscal year 1998;
            ``(IV) $924,000,000 for fiscal year 1999; and
            ``(V) $1,077,000,000 for fiscal year 2000.
    ``(ii) The Secretary of Agriculture shall be entitled to receive 
the funds and shall accept the funds.
    ``(C) In lieu of obligating the funds made available under 
subparagraph (B) to carry out this subsection, if the amount 
appropriated (in addition to the amount appropriated under subparagraph 
(B)(i)) to carry out this subsection for--
            ``(i) fiscal year 1996 is less than $3,470,000,000, the 
        amount referred to in subparagraph (B)(i)(I) shall be obligated 
        by the Secretary, during the period beginning December 31, 
        1995, and ending June 30, 1996, to increase the special 
        assistance factor prescribed under section 11(a) of the 
        National School Lunch Act (42 U.S.C. 1759a(a)) for free lunches 
        served under the school lunch program (as established under 
        section 4 of such Act (42 U.S.C. 1753));
            ``(ii) fiscal year 1997 is less than $3,470,000,000, the 
        amount referred to in subparagraph (B)(i)(II) shall be 
        obligated by the Secretary, during the period beginning 
        December 31, 1996, and ending June 30, 1997, to increase the 
        special assistance factor prescribed under section 11(a) of 
        such Act for free lunches served under the school lunch program 
        (as established under section 4 of such Act);
            ``(iii) fiscal year 1998 is less than $3,470,000,000, the 
        amount referred to in subparagraph (B)(i)(III) shall be 
        obligated by the Secretary, during the period beginning 
        December 31, 1997, and ending June 30, 1998, to increase the 
        special assistance factor prescribed under section 11(a) of 
        such Act for free lunches served under the school lunch program 
        (as established under section 4 of such Act);
            ``(iv) fiscal year 1999 is less than $3,470,000,000, the 
        amount referred to in subparagraph (B)(i)(IV) shall be 
        obligated by the Secretary, during the period beginning 
        December 31, 1998, and ending June 30, 1999, to increase the 
        special assistance factor prescribed under section 11(a) of 
        such Act for free lunches served under the school lunch program 
        (as established under section 4 of such Act); and
            ``(v) fiscal year 2000 is less than $3,470,000,000, the 
        amount referred to in subparagraph (B)(i)(V) shall be obligated 
        by the Secretary, during the period beginning December 31, 
        1999, and ending June 30, 2000, to increase the special 
        assistance factor prescribed under section 11(a) of such Act 
        for free lunches served under the school lunch program (as 
        established under section 4 of such Act).
    ``(D) Any increase in the special assistance factor prescribed 
under section 11(a) of such Act as a result of subparagraph (C) shall 
not affect any annual adjustment in the factor under section 11(a)(3) 
of such Act.
    ``(E) Notwithstanding any other provision of law, no additional 
amounts shall be made available under this paragraph for any fiscal 
year after fiscal year 2000.'';
                    (B) in the first sentence of paragraph (4), by 
                striking ``appropriated'' and inserting ``made 
                available''; and
                    (C) in paragraph (5), by striking ``appropriated'' 
                and inserting ``made available'';
            (4) in subsection (h)--
                    (A) in paragraph (1)--
                            (i) in subparagraph (A), by striking 
                        ``appropriated'' both places it appears and 
                        inserting ``made available''; and
                            (ii) in subparagraph (C), by striking 
                        ``appropriated'' both places it appears and 
                        inserting ``made available''; and
                    (B) in the first sentence of paragraph (2)(A), by 
                striking ``1990, 1991, 1992, 1993 and 1994'' and 
                inserting ``1990 through 2000''; and
            (5) in subsection (l), by striking ``funds appropriated'' 
        and inserting ``funds made available''.

                 Subtitle L--Border Health Improvement

SEC. 3908. BORDER HEALTH COMMISSION.

    (a) Establishment.--The President is authorized and encouraged to 
conclude an agreement with Mexico to establish a binational commission 
to be known as the United States-Mexico Border Health Commission.
    (b) Duties.--It should be the duty of the Commission--
            (1) to conduct a comprehensive needs assessment in the 
        United States-Mexico Border Area for the purposes of 
        identifying, evaluating, preventing, and resolving health 
        problems and potential health problems that affect the general 
        population of the area;
            (2) to develop and implement a comprehensive plan for 
        carrying out the actions recommended by the needs assessment 
        through--
                    (A) assisting in the coordination of public and 
                private efforts to prevent potential health problems 
                and resolve existing health problems,
                    (B) assisting in the coordination of public and 
                private efforts to educate the population, in a 
                culturally competent manner, concerning such potential 
                and existing health problems; and
                    (C) developing and implementing culturally 
                competent programs to prevent and resolve such health 
                problems and to educate the population, in a culturally 
                competent manner, concerning such health problems where 
                a new program is necessary to meet a need that is not 
                being met through other public or private efforts; and
            (3) to formulate recommendations to the Governments of the 
        United States and Mexico concerning a fair and reasonable 
        method by which the government of one country could reimburse a 
        public or private person in the other country for the cost of a 
        health care service that such person furnishes to a citizen or 
        resident alien of the first country who is unable, through 
        insurance or otherwise, to pay for the service.
    (c) Other Authorized Functions.--In addition to the duties 
described in subsection (b), the Commission should be authorized to 
perform the following functions as the Commission determines to be 
appropriate--
            (1) to conduct or support investigations, research, or 
        studies designed to identify, study, and monitor, on an on-
        going basis, health problems that affect the general population 
        in the United States-Mexico Border Area;
            (2) to conduct or support a binational, public-private 
        effort to establish a comprehensive and coordinated system, 
        which uses advanced technologies to the maximum extent 
        possible, for gathering health-related data and monitoring 
        health problems in the United States-Mexico Border Area; and
            (3) to provide financial, technical, or administrative 
        assistance to public or private persons who act to prevent or 
        resolve such problems or who educate the population concerning 
        such health problems.
    (d) Membership.--
            (1) Number and appointment of united states section.--The 
        United States section of the Commission should be composed of 
        13 members. The section should consist of the following 
        members:
                    (A) The Secretary of Health and Human Services or 
                the Secretary's delegate.
                    (B) The commissioners of health or chief health 
                officer from the States of Texas, New Mexico, Arizona, 
                and California or such commissioners' delegates.
                    (C) Two individuals residing in United States-
                Mexico Border Area in each of the States of Texas, New 
                Mexico, Arizona, and California who are nominated by 
                the chief executive officer of the respective States 
                and appointed by the President from among individuals--
                            (i) who have a demonstrated interest or 
                        expertise in health issues of the United 
                        States-Mexico Border Area; and
                            (ii) whose name appears on a list of 6 
                        nominees submitted to the President by the 
                        chief executive officer of the State where the 
                        nominees resides.
            (2) Commissioner.--The Commissioner of the United States 
        section of the Commission should be the Secretary of Health and 
        Human Services or such individual's delegate to the Commission. 
        The Commissioner should be the leader of the section.
            (3) Compensation.--Members of the United States section of 
        the Commission who are not employees of the United States--
                    (A) shall each receive compensation at a rate of 
                not to exceed the daily equivalent of the annual rate 
                of basic pay payable for positions at GS-15 of the 
                General Schedule under section 5332 of title 5, United 
                States Code, for each day such member is engaged in the 
                actual performance of the duties of the Commission; and
                    (B) shall be allowed travel expenses, including per 
                diem in lieu of subsistence at rates authorized for 
                employees of agencies under subchapter I of chapter 57 
                of title 5, United States Code, while away from their 
                homes or regular places of business in the performance 
                of services of the Commission.
    (e) Regional Offices.--The Commission should designate or establish 
one border health office in each of the States of Texas, New Mexico, 
Arizona, and California. Such office should be located within the 
United States-Mexico Border Area, and should be coordinated with--
            (1) State border health offices; and
            (2) local nonprofit organizations designated by the State's 
        governor and directly involved in border health issues.
If feasible to avoid duplicative efforts, the Commission offices should 
be located in existing State or local nonprofit offices. The Commission 
should provide adequate compensation for cooperative efforts and 
resources.
    (f) Reports.--Not later than February 1 of each year that occurs 
more than 1 year after the date of the establishment of the Commission, 
the Commission should submit an annual report to both the United States 
Government and the Government of Mexico regarding all activities of the 
Commission during the preceding calendar year.
    (g) Definitions.--As used in this section:
            (1) Commission.--The term ``Commission'' means the United 
        States-Mexico Border Health Commission.
            (2) Health problem.--The term ``health problem'' means a 
        disease or medical ailment or an environmental condition that 
        poses the risk of disease or medical ailment. Such term 
        includes diseases, ailments, or risks of disease or ailment 
        caused by or related to environmental factors, control of 
        animals and rabies, control of insect and rodent vectors, 
        disposal of solid and hazardous waste, and control and 
        monitoring of air quality.
            (3) Resident alien.--The term ``resident alien'', when used 
        in reference to a country, means an alien lawfully admitted for 
        permanent residence to the United States or otherwise 
        permanently residing in the United States under color of law 
        (including residence as an asylee, refugee, or parolee).
            (4) Secretary.--The term ``Secretary'' means the Secretary 
        of Health and Human Services.
            (5) United states-mexico border area.--The term ``United 
        States-Mexico Border Area'' means the area located in the 
        United States and Mexico within 100 kilometers of the border 
        between the United States and Mexico.

                    TITLE IV--MEDICARE AND MEDICAID

SEC. 4000. REFERENCES IN TITLE.

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

                          Subtitle A--Medicare

             PART 1--INTEGRATION OF MEDICARE BENEFICIARIES

SEC. 4001. INDIVIDUAL ELECTION TO REMAIN IN CERTAIN HEALTH PLANS.

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

SEC. 4002. ENROLLMENT AND TERMINATION OF ENROLLMENT.

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

                 PART 2--PROVISIONS RELATING TO PART A

SEC. 4101. INPATIENT HOSPITAL SERVICES UPDATE FOR PPS HOSPITALS.

    Section 1886(b)(3)(B)(i) (42 U.S.C. 1395ww(b)(3)(B)(i)) is 
amended--
            (1) by amending subclause (XII) to read as follows:
            ``(XII) for fiscal years 1997 through 2000, the market 
        basket percentage minus 2.0 percentage points for hospitals in 
        all areas, and''; and
            (2) in subclause (XIII), by striking ``1998'' and inserting 
        ``2001''.

SEC. 4102. REDUCTION IN PAYMENTS FOR CAPITAL-RELATED COSTS FOR 
              INPATIENT HOSPITAL SERVICES.

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

SEC. 4103. REDUCTIONS IN DISPROPORTIONATE SHARE PAYMENTS.

    (a) In General.--Section 1886(d)(5)(F) (42 U.S.C. 1395ww(d)(5)(F)) 
is amended--
            (1) in clause (ii), by striking ``The amount'' and 
        inserting ``Subject to clause (ix), the amount'';
            (2) in clause (vi), by striking ``In'' and inserting 
        ``Subject to clause (x), in''; and
            (3) by adding at the end the following new clauses:
    ``(ix) Notwithstanding any other provision of this subparagraph, 
the Secretary shall reduce the amount of any additional payment made to 
a hospital under this subparagraph by an amount equal to the sum of--
            ``(I) for discharges occurring on or after the date on 
        which the State in which such hospital is located becomes a 
        participating State (as such term is defined in title I of the 
        Health Security Act), 33 percent of such additional payment.''.

SEC. 4104. EXTENSION OF FREEZE ON UPDATES TO ROUTINE SERVICE COST 
              LIMITS FOR SKILLED NURSING FACILITIES.

    (a) Payments Based on Cost Limits.--Section 1888(a) (42 U.S.C. 
1395yy(a)) is amended by striking ``112 percent'' each place it appears 
and inserting ``100 percent (adjusted by such amount as the Secretary 
determines to be necessary to preserve the savings resulting from the 
enactment of section 13503(a)(1) of the Omnibus Budget Reconciliation 
Act of 1993)''.
    (b) Adjustments to Limits.--Section 1888(c) (42 U.S.C. 1395yy(c)) 
is amended by inserting the following sentence at the end: ``The effect 
of the amendment made by section 4104(a) of the Health Security Act 
shall not be considered by the Secretary in making adjustments pursuant 
to this subsection.''
    (c) Payments Determined on Prospective Basis.--Section 
1888(d)(2)(B) (42 U.S.C. 1395yy(d)(2)(B)) is amended by striking ``105 
percent'' and inserting ``100 percent (adjusted by such amount as the 
Secretary determines to be necessary to preserve the savings resulting 
from the enactment of section 13503(b) of the Omnibus Budget 
Reconciliation Act of 1993)''.
    (d) Effective Date.--The amendments made by subsections (a), (b), 
and (c) shall apply to cost reporting periods beginning on or after 
October 1, 1995.

SEC. 4105. MEDICARE-DEPENDENT, SMALL RURAL HOSPITALS.

    (a) Clarification of Additional Payment.--Section 
1886(d)(5)(G)(ii)(I) (42 U.S.C. 1395ww(d)(5)(G)(ii)(I)) is amended by 
striking ``the first 3 12-month cost reporting periods that begin'' and 
inserting ``the 36-month period beginning with the first day of the 
cost reporting period that begins''.
    (b) Special Treatment Extended.--Section 1886(d)(5)(G) (42 U.S.C. 
1395ww(d)(5)(G)) is amended--
            (1) in clause (i), by striking ``October 1, 1994'' and 
        inserting ``October 1, 1999''; and
            (2) in clause (ii)(II), by striking ``October 1, 1994'' and 
        inserting ``October 1, 1999''.
    (c) Extension of Target Amount.--Section 1886(b)(3)(D) (42 U.S.C. 
1395ww(b)(3)(D)) is amended--
            (1) in the matter preceding clause (i), by striking ``March 
        31, 1993'' and inserting ``September 30, 1999''; and
            (2) by amending clause (iii) to read as follows:
            ``(iii) with respect to discharges occurring in fiscal 
        years 1994 through 1999, the target amount for the cost 
        reporting period beginning in the previous fiscal year 
        increased by the applicable percentage increase under 
        subparagraph (B)(iv).''.

SEC. 4106. PROVISIONS RELATING TO RURAL HEALTH TRANSITION GRANT 
              PROGRAM.

    (a) Eligibility of Rural Primary Care Hospitals for Grants.--
            (1) In general.--Section 4005(e)(2) of the Omnibus Budget 
        Reconciliation Act of 1987 is amended in the matter preceding 
        subparagraph (A) by inserting ``any rural primary care hospital 
        as defined in section 1861(mm)(1), or'' after ``means''.
            (2) Effective date.--The amendment made by paragraph (1) 
        shall apply to grants made on or after October 1, 1993.
    (b) Extension of Authorization of Appropriations.--Section 
4005(e)(9) of Omnibus Budget Reconciliation Act of 1987 is amended--
            (1) by striking ``1989 and'' and inserting ``1989,''; and
            (2) by striking ``1992'' and inserting ``1992 and 
        $30,000,000 for each of the fiscal years 1993 through 1999''.
    (c) Frequency of Required Reports.--Section 4008(e)(8)(B) of the 
Omnibus Budget Reconciliation Act of 1987 is amended by striking 
``every 6 months'' and inserting ``every 12 months''.

SEC. 4107. PAYMENTS FOR SOLE COMMUNITY HOSPITALS WITH TEACHING PROGRAMS 
              AND MULTIHOSPITAL CAMPUSES.

    (a) In General.--Section 1886(d)(5)(D) (42 U.S.C. 1395ww(d)(5)(D)) 
is amended by adding at the end the following new clause:
    ``(vi) The Secretary shall determine payment under clause (i) for a 
sole-community hospital that is a part of a multi-campus hospital by 
making the determination under such clause for each facility of the 
multi-campus hospital if any facility of the hospital would have a 
value of `r' greater than 0, as `r' is defined in subparagraph (B)(ii). 
In making a determination for each such facility, the Secretary shall 
determine the DRG-specific rate applicable to the facility based on its 
location in accordance with paragraph (3)(D).''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to discharges occurring on or after October 1, 1993, from multi-
campus hospitals that merged facilities on or after October 1, 1987.

SEC. 4108. MORATORIUM ON DESIGNATION OF NEW LONG-TERM HOSPITALS.

    Notwithstanding clause (iv) of section 1886(d)(1)(B) of the Social 
Security Act (42 U.S.C. 1395ww(d)(1)(B)), a hospital which has an 
average inpatient length of stay (as determined by the Secretary of 
Health and Human Services) of greater than 25 days shall not be treated 
as a hospital described in such clause for purposes of such title 
unless such hospital was treated as a hospital described in such clause 
for purposes of such title as of the date of the enactment of this Act.

SEC. 4109. REVISED PAYMENT METHODOLOGY FOR REHABILITATION AND LONG-TERM 
              CARE HOSPITALS.

    (a) Rehabilitation Hospitals and Distinct Part Units.--
            (1) Definition.--Section 1886(d)(1)(B) (42 U.S.C. 
        1395ww(d)(1)(B)) is amended by adding at the end the following 
        new sentence: ``In defining a rehabilitation hospital and a 
        rehabilitation unit of a hospital which is a distinct part of a 
        hospital, the Secretary shall take into account the impact of 
        new technologies, survival rates, and changes in the practice 
        of rehabilitation medicine.''.
            (2) Target amount calculation for rehabilitation hospitals 
        and distinct part units.--
                    (A) In general.--Section 1886(b)(3) (42 U.S.C. 
                1395ww(b)(3)) is amended--
                            (i) in subparagraph (A), by striking ``(D), 
                        and (E)'' and inserting ``(D), (E), and (F)'';
                            (ii) in subparagraph (B)(ii), by striking 
                        ``and (E)'' and inserting ``(E), and (F)''; and
                            (iii) by adding at the end the following 
                        new subparagraph:
                    ``(F)(i) Subject to clause (ii), for cost reporting 
                periods beginning on or after October 1, 1994, in the 
                case of a hospital described in subsection 
                (d)(1)(B)(ii) or a rehabilitation unit described in 
                such subparagraph, the term `target amount' means--
                            ``(I) with respect to the first 12-month 
                        cost reporting period in which this 
                        subparagraph is applied to the hospital or 
                        unit--
                                    ``(aa) the allowable operating 
                                costs of inpatient hospital services 
                                (as defined in subsection (a)(4)) 
                                recognized under this title for the 
                                hospital or unit for the 12-month cost 
                                reporting period (in this subparagraph 
                                referred to as the `base cost reporting 
                                period') preceding the first cost 
                                reporting period for which this 
                                subparagraph was in effect with respect 
                                to such hospital, increased (in a 
                                compounded manner), by
                                    ``(bb) the applicable percentage 
                                increases applied to such hospital or 
                                unit under this paragraph for cost 
                                reporting periods after the base cost 
                                reporting period and up to and 
                                including such first 12-month cost 
                                reporting period, or
                            ``(II) with respect to a later cost 
                        reporting period, the target amount for the 
                        preceding 12-month cost reporting period, 
                        increased by the applicable percentage increase 
                        under subparagraph (B).
                There shall be substituted for the allowable average 
                costs of inpatient hospital services determined under 
                subclause (I)(aa), the average of the allowable average 
                costs of inpatient hospital services (as so defined) 
                recognized under this title for the hospital or unit 
                for cost reporting periods beginning during fiscal 
                years 1990 and 1991 (if any).
                    ``(ii)(I) Notwithstanding the provisions of clause 
                (i), in the case of a hospital or unit to which the 
                last sentence of clause (i) applies, the hospital or 
                unit's target amount under such clause for a cost 
                reporting period shall be--
                            ``(aa) not less than 70 percent of the 
                        national weighted average of all target amounts 
                        calculated under such clause for all hospitals 
                        and units described in such clause (as 
                        determined by the Secretary), and
                            ``(bb) not less than the allowable 
                        operating costs of inpatient hospital services 
                        (as defined in subsection (a)(4) for such 
                        hospital or unit in the base cost reporting 
                        period (including any payments made to such 
                        hospital or unit pursuant to paragraph (1)(A)), 
                        multiplied by the applicable percentage 
                        increase for such cost reporting period under 
                        subparagraph (B).
                    ``(II) Notwithstanding the provisions of clause 
                (i), in the case of a hospital or unit that is not 
                described in subclause (I), the hospital or unit's 
                target amount under such clause for a cost reporting 
                period shall be--
                            ``(aa) not less than the amount described 
                        in subclause (I)(aa), and
                            ``(bb) not greater than 110 percent of the 
                        national weighted average of all target amounts 
                        calculated under clause (i) for all hospitals 
                        and units described in such clause (as 
                        determined by the Secretary).''.
                    (B) Effective date.--The amendments made by 
                subparagraph (A) shall apply with respect to cost 
                reporting periods beginning on or after October 1, 
                1994.
            (3) Development of national prospective rates for 
        rehabilitation hospitals and distinct part units.--
                    (A) Development of proposal.--The Secretary of 
                Health and Human Services (hereafter in this section 
                referred to as the ``Secretary'') shall develop a 
                proposal to replace the current system under which 
                rehabilitation hospitals and rehabilitation units of a 
                hospital which are a distinct part of a hospital (as 
                described in section 1886(d)(1)(B) of the Social 
                Security Act (42 U.S.C. 1395ww(d)(1)(B))) receive 
                payment for the operating and capital-related costs of 
                inpatient hospital services under part A of title XVIII 
                of such Act with a prospective payment system. In 
                developing any proposal under this paragraph to replace 
                the current system with a prospective payment system, 
                the Secretary shall develop a system that provides 
                for--
                            (i) a payment on a per-discharge basis, and
                            (ii) an appropriate weighting of such 
                        payment amount as it relates to the 
                        classification of the discharge.
                    (B) Reports.--Not later than October 1, 1996, the 
                Secretary shall submit the proposal developed under 
                subparagraph (A) to the Congress.
    (b) Assignment of New Base Year for Certified Long-Stay Hospitals 
That Also Serve a Significant Proportion of Low-Income Patients.--
            (1) Rebasing for long-term hospitals.--
                    (A) In general.--Section 1886(b)(3) (42 U.S.C. 
                1395ww(b)(3)), as amended by subsection (a), is further 
                amended--
                            (i) in subparagraph (A), by striking ``(E), 
                        and (F)'' and inserting ``(E), (F), and (G)'';
                            (ii) in subparagraph (B)(ii), by striking 
                        ``(E), and (F)'' and inserting ``(E), (F), and 
                        (G)''; and
                            (iii) by inserting after subparagraph (F) 
                        the following new subparagraph:
                    ``(G)(i) For cost reporting periods beginning on or 
                after October 1, 1994, in the case of a hospital 
                described in subsection (d)(1)(B)(iv) that--
                            ``(I) has not received the additional 
                        payment amount described in paragraph (1)(A) 
                        for at least the preceding 2 consecutive 12-
                        month cost reporting periods; and
                            ``(II) for which the sum of the amounts 
                        described in subclauses (I) and (II) of 
                        subsection (d)(5)(F)(vi) during the period 
                        described in clause (I) exceeds 25 percent,
                the term `target amount' has the meaning given such 
                term by clause (ii).
                    ``(ii) In the case of a hospital described in 
                clause (i), the term `target amount' means--
                            ``(I) with respect to the first 12-month 
                        cost reporting period in which this 
                        subparagraph is applied to the hospital--
                                    ``(aa) the average allowable 
                                operating costs of inpatient hospital 
                                services (as defined in subsection 
                                (a)(4)) recognized under this title for 
                                the hospital during cost reporting 
                                periods of the hospital beginning 
                                during fiscal years 1990 and 1991 for 
                                such hospital (in this subparagraph 
                                referred to as the `base cost reporting 
                                period'), increased (in a compounded 
                                manner), by
                                    ``(bb) the applicable percentage 
                                increases applied to such hospital or 
                                under this paragraph for cost reporting 
                                periods after the base cost reporting 
                                period and up to and including such 
                                first 12-month cost reporting periods, 
                                or
                            ``(II) with respect to a subsequent 12-
                        month cost reporting period, the target amount 
                        for the preceding 12-month cost reporting 
                        period, increased by the applicable percentage 
                        increase under subparagraph (B).
                    ``(iii) Notwithstanding clause (ii)(II), if, after 
                2 consecutive 12-month cost reporting periods, a 
                hospital continues to be described in subclauses (I) 
                and (II) of clause (i), there shall be substituted for 
                the base cost reporting period described in clause 
                (ii)(I)(aa) the most recent preceding 2 12-month cost 
                reporting periods of the hospital for which data is 
                available (as determined by the Secretary), but only if 
                such substituting results in an increase in the target 
                amount for the hospital. The substitution under the 
                preceding sentence may not occur more often than every 
                2 years.
                    ``(iv) Effective October 1, 1994, the Secretary 
                shall take into account the enactment of this 
                subparagraph in making available to the hospital the 
                payments described in section 1815(e)(2), and, shall 
                increase such payments as if the target amount of the 
                hospital had been established pursuant to this 
                subparagraph as of such date.''.
            (2) Effective date.--The amendments made by this subsection 
        shall be effective with respect to cost reporting periods 
        beginning on or after October 1, 1994.

SEC. 4110. TERMINATION OF INDIRECT MEDICAL EDUCATION PAYMENTS.

    (a) In General.--Section 1886(d)(5)(B) (42 U.S.C. 1395ww(d)(5)(B)) 
is amended in the matter preceding clause (i) by striking ``The 
Secretary'' and inserting ``For discharges occurring before January 1, 
1997, the Secretary''.
    (b) Adjustment to Standardized Amounts.--Section 1886(d)(2)(C)(i) 
(42 U.S.C. 1395ww(d)(2)(C)(i)) is amended by striking ``excluding'' and 
inserting ``for discharges occurring before January 1, 1997, 
excluding''.

SEC. 4111. LIMITED SERVICE HOSPITAL PROGRAM.

    (a) Limited Service Hospital Program.--Section 1820 (42 U.S.C. 
13951-4) is amended to read as follows:

                   ``limited service hospital program

    ``Sec. 1820. (a) Purpose.--The purpose of this section is to--
            ``(1) make available alternative hospital models to small 
        rural or isolated rural communities in which facilities are 
        relieved of the burden of selected regulatory requirements by 
        limiting the scope of inpatient acute services required to be 
        offered;
            ``(2) alter medicare reimbursement policy to support the 
        financial viability of alternative facilities by limiting the 
        financial risk faced by such small hospitals through the use of 
        reasonable cost reimbursement; and
            ``(3) promote linkages between facilities designated by the 
        State under this section and broader programs supporting the 
        development of and transition to integrated provider networks.
    ``(b) In General.--Any State that submits an application in 
accordance with subsection (c) may establish a limited service hospital 
program described in subsection (d).
    ``(c) Application.--A State may establish a limited service 
hospital program described in subsection (d) if the State submits to 
the Secretary at such time and in such form as the Secretary may 
require an application containing--
            ``(1) assurances that the State--
                    ``(A) has developed, or is in the process of 
                developing, a State rural health care plan that--
                            ``(i) in the case of a State applying to 
                        establish a rural primary care hospital program 
                        (described in subsection (d)(1)(A)), provides 
                        for the creation of one or more rural health 
                        networks (as defined in subsection (e)) in the 
                        State,
                            ``(ii) promotes regionalization of rural 
                        health services in the State, and
                            ``(iii) improves access to hospital and 
                        other health services for rural residents of 
                        the State;
                    ``(B) has developed the rural health care plan 
                described in subparagraph (A) in consultation with the 
                hospital association of the State, rural hospitals 
                located in the State, and the State Office of Rural 
                Health (or, in the case of a State in the process of 
                developing such plan, that assures the Secretary that 
                it will consult with its State hospital association, 
                rural hospitals located in the State, and the State 
                Office of Rural Health in developing such plan); and
            ``(2) assurances that the State has designated (consistent 
        with the rural health care plan described in paragraph (1)(A)), 
        or is in the process of designating, rural nonprofit or public 
        hospitals or facilities located in the State as rural primary 
        care hospitals facilities or medical assistance facilities; and
            ``(3) such other information and assurances as the 
        Secretary may require.
    ``(d) Limited Service Hospital Program Described.--
            ``(1) In general.--A State that has submitted an 
        application in accordance with subsection (c), may establish a 
        limited service hospital program that includes--
                    ``(A) a rural primary care hospital program under 
                which--
                            ``(i) at least one facility in the State 
                        shall be designated as a rural primary care 
                        hospital in accordance with paragraph (2), and
                            ``(ii) the State shall develop at least one 
                        rural health network (as defined in subsection 
                        (e)) in the State;
                    ``(B) a medical assistance facility program under 
                which at least one facility in the State shall be 
                designated as a medical assistance facility in 
                accordance with paragraph (2); or
                    ``(C) both.
            ``(2) State designation of facilities.--A State may 
        designate one or more facilities as a rural primary care 
        hospital or medical assistance facility in accordance with 
        subparagraph (A) or (B).
                    ``(A) Criteria for designation as rural primary 
                care hospital.--A State may designate a facility as a 
                rural primary care hospital only if the facility--
                            ``(i) is located in a rural area (as 
                        defined in section 1886(d)(2)(D)), or is 
                        located in a county whose geographic area is 
                        substantially larger than the average 
                        geographic area for urban counties in the 
                        United States and whose hospital service area 
                        is characteristic of service areas of hospitals 
                        located in rural areas;
                            ``(ii) at the time such facility applies to 
                        the State for designation as a rural primary 
                        care hospital, is a hospital (or, in the case 
                        of a facility that closed during the 12-month 
                        period that ends on the date the facility 
                        applies for such designation, at the time the 
                        facility closed), with a participation 
                        agreement in effect under section 1866(a);
                            ``(iii) has in effect an agreement to 
                        participate with other hospitals and facilities 
                        in a rural health network;
                            ``(iv) provides 24-hour emergency services 
                        to ill or injured persons prior to admission to 
                        the facility or prior to their transportation 
                        to a full-service hospital;
                            ``(v) provides not more than 15 inpatient 
                        beds (meeting such conditions as the Secretary 
                        may establish) for providing acute inpatient 
                        care;
                            ``(vi) provides inpatient care for a period 
                        not to exceed an average length of 96 hours 
                        (unless a longer period is required because 
                        transfer to a hospital is precluded because of 
                        inclement weather or other emergency 
                        conditions);
                            ``(vii) meets such staffing requirements as 
                        would apply under section 1861(e), to a 
                        hospital located in a rural area, except that--
                                    ``(I) the facility need not meet 
                                hospital standards relating to the 
                                number of hours during a day, or days 
                                during a week, in which the facility 
                                must be open and fully staffed, except 
                                insofar as the facility is required to 
                                provide emergency care on a 24-hour 
                                basis under clause (v) and must have 
                                nursing services available on a 24-hour 
                                basis, but need not otherwise staff the 
                                facility except when an inpatient is 
                                present,
                                    ``(II) the facility may provide any 
                                services otherwise required to be 
                                provided by a full-time, onsite 
                                dietician, pharmacist, laboratory 
                                technician, medical technologist, and 
                                radiological technologist on a part-
                                time, offsite basis under arrangements 
                                as defined in section 1861(w)(1), and
                                    ``(III) the inpatient care 
                                described in clause (vii) may be 
                                provided by a physician's assistant, 
                                nurse practitioner, or clinical nurse 
                                specialist subject to the oversight of 
                                a physician who need not be present in 
                                the facility, and
                            ``(viii) meets the requirements of 
                        subparagraphs (C) through (I) of paragraph (2) 
                        of section 1861(aa), and of clauses (ii) and 
                        (iv) of the second sentence of that paragraph, 
                        except that in determining whether a facility 
                        meets the requirements of this subparagraph, 
                        subparagraphs (E) and (F) of that paragraph 
                        shall be applied as if any reference to 
                        `physician' is a reference to a physician as 
                        defined in section 1861(r)(1).
                    ``(B) Criteria for designation as medical 
                assistance facility.--A State may designate a facility 
                as a medical assistance facility only if the facility--
                            ``(i) is located in a county (or equivalent 
                        unit of local government)--
                                    ``(I) with fewer than 6 residents 
                                per square mile; or
                                    ``(II) in a rural area (as defined 
                                in section 1886(d)(2)(D)) that is 
                                located more than a 35-mile or 45-
                                minute drive from a hospital, a rural 
                                primary care hospital, or another 
                                facility described in this subsection;
                            ``(ii) at the time such facility applies to 
                        the State for designation as a medical 
                        assistance facility--
                                    ``(I) is a hospital (or in the case 
                                of a facility that closed during the 
                                12-month period that ends on the date 
                                the facility applies for such 
                                designation, at the time the facility 
                                closed), with a participation agreement 
                                in effect under section 1866(a); or
                                    ``(II) is licensed in accordance 
                                with applicable State and local laws 
                                and regulations;
                            ``(iii) meets the requirements of clauses 
                        (iv), (vi), and (vii) of subparagraph (A); and
                            ``(iv) meets the requirements of 
                        subparagraph (I) of paragraph (2) of section 
                        1861(aa).
    ``(e) Rural Health Network Defined.--For purposes of this section, 
the term `rural health network' means, with respect to a State, an 
organization--
            ``(1) consisting of--
                    ``(A) at least 1 facility that the State has 
                designated or plans to designate as a rural primary 
                care hospital, and
                    ``(B) at least 1 hospital that furnishes services 
                that a rural primary care hospital cannot furnish, and
            ``(2) the members of which have entered into agreements 
        regarding--
                    ``(A) patient referral and transfer,
                    ``(B) the development and use of communications 
                systems, including (where feasible) telemetry systems 
                and systems for electronic sharing of patient data,
                    ``(C) the provision of emergency and non-emergency 
                transportation among the members, and
                    ``(D) credentialing and quality assurance.
    ``(f) Certification by the Secretary.--The Secretary shall certify 
a facility as a rural primary care hospital or medical assistance 
facility (as the case may be) if the facility--
            ``(1) is located in a State that has established a limited 
        service hospital program in accordance with subsection (d);
            ``(2) is designated as a rural primary care hospital or 
        medical assistance facility by the State in which it is 
        located; and
            ``(3) meets such other criteria as the Secretary may 
        require.
    ``(g) Permitting Maintenance of Swing Beds.--Nothing in this 
section shall be construed to prohibit a State from designating or the 
Secretary from certifying a facility as a rural primary care hospital 
or medical assistance facility solely because, at the time the facility 
applies to the State for designation as a rural primary care hospital 
or medical assistance facility, there is in effect an agreement between 
the facility and the Secretary under section 1883 under which the 
facility's inpatient hospital facilities are used for the furnishing of 
extended care services, except that the number of beds used for the 
furnishing of such services may not exceed the total number of licensed 
inpatient beds at the time the facility applies to the State for such 
designation (minus the number of inpatient beds used for providing 
inpatient care in a rural primary care facility pursuant to subsection 
(d)(2)(A)(vi)). The Secretary may establish additional conditions of 
participation for rural primary care hospitals with a substantial 
number of such beds. For purposes of the first sentence, the number of 
beds of the facility used for the furnishing of extended care services 
shall not include any beds of a unit of the facility that is licensed 
as a distinct-part skilled nursing facility at the time the facility 
applies to the State for designation as a rural primary care hospital 
or medical assistance facility.
    ``(h) Grants.--
            ``(1) Limited service hospital program.--The Secretary may 
        award grants to States that have submitted applications in 
        accordance with subsection (c) for--
                    ``(A) engaging in activities relating to planning 
                and implementing a rural health care plan;
                    ``(B) in the case of a rural primary care hospital 
                program described in subsection (d)(1)(A), engaging in 
                activities relating to planning and implementing rural 
                health networks; and
                    ``(C) designation of facilities as rural primary 
                care hospitals or medical assistance facilities.
            ``(2) Rural emergency medical services.--
                    ``(A) In general.--The Secretary may award grants 
                to States that have submitted applications in 
                accordance with subparagraph (B) for the establishment 
                or expansion of a program for the provision of rural 
                emergency medical services.
                    ``(B) Application.--An application is in accordance 
                with this subparagraph if the State submits to the 
                Secretary at such time and in such form as the 
                Secretary may require an application containing the 
                assurances described in subparagraphs (A)(ii), 
                (A)(iii), and (B) of subsection (c)(1) and paragraph 
                (3) of such subsection.
    ``(i) Study on Clinically Based Alternative to 96-Hour Rule.--The 
Secretary shall conduct a study on the feasibility of admitting 
patients to rural primary care hospitals and medical assistance 
facilities on a limited DRG basis instead of using the 96-hour average 
length of stay criteria described in subsection (d)(2)(A)(vii).
    ``(j) Waiver of Conflicting Part A Provisions.--The Secretary is 
authorized to waive such provisions of this part and part C as are 
necessary to conduct the program established under this section.
    ``(k) Authorization of Appropriations.--There are authorized to be 
appropriated from the Federal Hospital Insurance Trust Fund--
            ``(1) for making grants under subsection (h)(1) to States 
        that have established a rural primary care hospital program in 
        the State under subsection (d)(1)(A), $15,000,000 for each of 
        fiscal years 1993 through 1995; and
            ``(2) for making grants to all States under subsection (h), 
        $25,000,000 in each of the fiscal years 1996 through 1999.''.
    (b) Part A Amendments Relating to Rural Primary Care Hospitals and 
Medical Assistance Facilities.--
            (1) Definitions.--Section 1861 (42 U.S.C. 1395x) is amended 
        by adding at the end the following new subsection:

  ``medical assistance facility; medical assistance facility services

    ``(oo)(1) The term `medical assistance facility' means a facility 
certified by the Secretary as a medical assistance facility under 
section 1820(f).
    ``(2) The term `medical assistance facility services' means items 
and services, furnished to an inpatient for a medical assistance 
facility by such facility, that would be inpatient hospital services if 
furnished to an inpatient of a hospital by a hospital.''.
            (2) Coverage and payment.--(A)(i) Section 1812(a)(1) (42 
        U.S.C. 1395d(a)(1)) is amended by striking ``inpatient hospital 
        services'' the first place it appears and inserting ``, 
        inpatient hospital services and inpatient medical assistance 
        facility services''; and
            (ii) by striking ``inpatient hospital services'' the second 
        place it appears and inserting ``such services''.
            (B) Section 1814 (42 U.S.C. 1395f) is amended--
                    (i) in subsection (b), by striking ``inpatient 
                rural primary care hospital services,'' and inserting 
                ``inpatient rural primary care hospital services, other 
                than a medical assistance facility providing inpatient 
                medical assistance facility services,''; and
                    (ii) by amending subsection (l) to read as follows:
    ``(l) Payment for Inpatient Rural Primary Care Services and 
Inpatient Medical Assistance Facility Services.--The amount of payment 
under this part for inpatient rural primary care services and inpatient 
medical assistance facility services is the reasonable costs of the 
rural primary care hospital or medical assistance facility in providing 
such services.''.
            (3) Treatment of medical assistance facilities as providers 
        of services.--(A) Section 1861(u) (42 U.S.C. 1395x(u)) is 
        amended by inserting ``medical assistance facility,''after 
        ``rural primary care hospital,''.
            (B) The first sentence of section 1864(a) (42 U.S.C. 
        1395aa(a)) is amended by inserting ``a medical assistance 
        facility, as defined in section 1861(oo)(1),'' after 
        ``1861(mm)(1),''.
            (C) The third sentence of section 1865(a) of such Act (42 
        U.S.C. 1395bb(a)) is amended by striking ``or 1861(mm)(1)'' and 
        inserting ``1861(mm)(1), or 1861(oo)(1),''.
            (4) Conforming amendments.--(A) Section 1128A(b)(1) (42 
        U.S.C. 1320a-7a(b)(1)) is amended--
                    (i) by striking ``or a rural primary care 
                hospital'' the first place it appears and inserting ``, 
                a rural primary care hospital, or a medical assistance 
                facility''; and
                    (ii) by striking ``or a rural primary care 
                hospital'' the second place it appears and inserting 
                ``, the rural primary care hospital, or the medical 
                assistance facility''.
            (B) Section 1128B(c) (42 U.S.C. 1320a-7b(c)) is amended by 
        inserting ``medical assistance facility,'' after ``rural 
        primary care hospital,''.
            (C) Section 1134 (42 U.S.C. 1320b-4) is amended by striking 
        ``or rural primary care hospitals'' each place it appears and 
        inserting ``, rural primary care hospitals, or medical 
        assistance facilities''.
            (D) Section 1138(a)(1) (42 U.S.C. 1320b-8(a)(1)) is 
        amended--
                    (i) in the matter preceding subparagraph (A), by 
                striking ``or rural primary care hospital'' and 
                inserting ``, rural primary care hospital, or medical 
                assistance facility'', and
                    (ii) in the matter preceding clause (i) of 
                subparagraph (A), by striking ``or rural primary care 
                hospital'' and inserting ``, rural primary care 
                hospital, or medical assistance facility''.
            (E) Section 1164(e) (42 U.S.C. 1320c-13(e)) is amended by 
        inserting ``medical assistance facilities,'' after ``rural 
        primary care hospitals,''.
            (F) Section 1816(c)(2)(C) (42 U.S.C. 1395h(c)(2)(C)) is 
        amended by inserting ``medical assistance facility,'' after 
        ``rural primary care hospital,''.
            (G) Section 1833 (42 U.S.C. 1395l) is amended--
                    (i) in subsection (h)(5)(A)(iii)--
                            (I) by striking ``or rural primary care 
                        hospital'' and inserting ``rural primary care 
                        hospital, or medical assistance facility''; and
                            (II) by striking ``to the hospital'' and 
                        inserting ``to the hospital or the facility'';
                    (ii) in subsection (i)(1)(A), by inserting 
                ``medical assistance facility,'' after ``rural primary 
                care hospital,'';
                    (iii) in subsection (i)(3)(A), by striking ``or 
                rural primary care hospital services'' and inserting 
                ``rural primary care hospital services, or medical 
                assistance facility services'';
                    (iv) in subsection (l)(5)(A), by inserting 
                ``medical assistance facility,'' after ``rural primary 
                care hospital,'' each place it appears; and
                    (v) in subsection (l)(5)(C), by striking ``or rural 
                primary care hospital'' each place it appears and 
                inserting ``, rural primary care hospital, or medical 
                assistance facility''.
            (H) Section 1835(c) (42 U.S.C. 1395n(c)) is amended by 
        adding at the end the following: ``A medical assistance 
        facility shall be considered a hospital for purposes of this 
        subsection.''.
            (I) Section 1842(b)(6)(A)(ii) (42 U.S.C. 
        1395u(b)(6)(A)(ii)) is amended by inserting ``medical 
        assistance facility,'' after ``rural primary care hospital,''.
            (J) Section 1861 (42 U.S.C. 1395x) is amended--
                    (i) in the last sentence of subsection (e), by 
                striking ``1861(mm)(1))'' and inserting ``1861(mm)(1)) 
                or a medical assistance facility (as defined in section 
                1861(oo)(1)).'',
                    (ii) in subsection (w)(1) by inserting ``medical 
                assistance facility,'' after ``rural primary care 
                hospital,'', and
                    (iii) in subsection (w)(2), by striking ``or rural 
                primary care hospital'' each place it appears and 
                inserting ``, rural primary care hospital, or medical 
                assistance facility''.
            (K) Section 1862(a)(14) (42 U.S.C. 1395y(a)(14)) is amended 
        by striking ``or rural primary care hospital'' each place it 
        appears and inserting ``, rural primary care hospital, or 
        medical assistance facility''.
            (L) Section 1866(a)(1) (42 U.S.C 1395cc(a)(1)) is amended--
                    (i) in subparagraph (F)(ii), by inserting ``medical 
                assistance facilities,'' after ``rural primary care 
                hospitals,'';
                    (ii) in subparagraph (H)--
                            (I) in the matter preceding clause (i), by 
                        inserting ``and in the case of medical 
                        assistance facilities which provide inpatient 
                        medical assistance facility services'' after 
                        ``rural primary care hospital services''; and
                            (II) in clauses (i) and (ii), by striking 
                        ``hospital'' each place it appears and 
                        inserting ``hospital or facility'';
                    (iii) in subparagraph (I)--
                            (I) in the matter preceding clause (i), by 
                        striking ``or rural primary care hospital'' and 
                        inserting ``, a rural primary care hospital, or 
                        a medical assistance facility''; and
                            (II) in clause (ii), by striking ``the 
                        hospital'' and inserting ``the hospital or the 
                        facility''; and
                    (iv) in subparagraph (N)--
                            (I) in the matter preceding clause (i), by 
                        striking ``and rural primary hospitals'' and 
                        inserting ``, rural primary care hospitals, and 
                        medical assistance facilities'';
                            (II) in clause (i), by striking ``or rural 
                        primary care hospital,'' and inserting ``, 
                        rural primary care hospital, or medical 
                        assistance facility,''; and
                            (III) in clause (ii), by striking 
                        ``hospital'' and inserting ``hospital or 
                        facility''.
            (M) Section 1866(a)(3) (42 U.S.C 1395cc(a)(3)) is amended--
                    (i) by striking ``rural primary care hospital,'' 
                each place it appears in subparagraphs (A) and (B) and 
                inserting ``rural primary care hospital, medical 
                assistance facility,'', and
                    (ii) in subparagraph (C)(ii)(II), by striking 
                ``rural primary care hospitals,'' each place it appears 
                and inserting ``rural primary care hospitals, medical 
                assistance facilities''.
            (N) Section 1867(e)(5) (42 U.S.C. 1395dd(e)(5)) is amended 
        by striking ``1861(mm)(1))'' and inserting ``1861(mm)(1)) or a 
        medical assistance facility (as defined in section 
        1861(oo)(1)).''.
    (c) Part B Amendments Relating to Rural Primary Care Hospitals and 
Medical Assistance Facilities.--
            (1) Coverage.--(A) Section 1861(oo) (42 U.S.C. 1395x(oo)) 
        as added by subsection (b)(1), is amended by adding at the end 
        the following new paragraph:
    ``(3) The term `outpatient medical assistance facility services' 
means medical and other health services furnished by a medical 
assistance facility on an outpatient basis.''.
            (B) Section 1832(a)(2) (42 U.S.C. 1395k(a)(2)) is amended--
                    (i) in subparagraph (I), by striking ``and'' at the 
                end;
                    (ii) in subparagraph (J), by striking the period at 
                the end and inserting ``; and''; and
                    (iii) by adding at the end the following new 
                subparagraph:
                    ``(K) outpatient medical assistance facility 
                services (as defined in section 1861(oo)(3)).''.
            (2) Payment.--(A) Section 1833(a) (42 U.S.C. 1395l(a)) is 
        amended--
                    (i) in paragraph (2), in the matter preceding 
                subparagraph (A), by striking ``and (I)'' and inserting 
                ``(I), and (K)'';
                    (ii) in paragraph (6), by striking ``and'' at the 
                end;
                    (iii) in paragraph (7), by striking the period at 
                the end and inserting ``; and''; and
                    (iv) by adding at the end the following new 
                paragraph:
            ``(8) in the case of outpatient medical assistance facility 
        services, the amounts described in section 1834(g).''.
            (B) Section 1834(g) (42 U.S.C. 1395m(g)) is amended--
                    (i) in the subsection heading by inserting ``and 
                Outpatient Medical Assistance Facility Services'' after 
                ``Services'';
                    (ii) in paragraph (1), by striking ``provided 
                during a year before 1993 in a rural primary care 
                hospital under this part shall be determined by one of 
                the following methods as elected by the rural primary 
                care hospital'' and inserting ``in a rural primary care 
                hospital or medical assistance facility under this part 
                shall be determined by one of the following methods as 
                elected by the rural primary care hospital or medical 
                assistance facility'';
                    (iii) in paragraph (1)(A)(ii), by striking 
                ``outpatient rural primary care hospital services'' 
                each place it appears and inserting ``outpatient rural 
                primary care hospital services or outpatient medical 
                assistance facility services''; and
                    (iv) in paragraph (1)(B), by striking ``hospital'' 
                and inserting ``hospital or facility''.
    (d) Payment Continued to Designated EACHs.--
            (1) Termination of each designation.--Section 1820(i)(1)(A) 
        (42 U.S.C. 1395l(4)(i)(1)(A)) is amended by inserting at the 
        end the following new flush sentence:
        ``The Secretary shall not designate any hospital as an 
        essential access community hospital on or after July 1, 
        1994.''.
            (2) Permitting payment to prior designated eachs.--Section 
        1886(d)(5)(D) (42 U.S.C. 1395ww(d)(5)(D)) is amended--
                    (A) in clause (iii)(III), by inserting ``as such 
                section was in effect as of July 1, 1994'' before the 
                period at the end; and
                    (B) in clause (v), by inserting ``as such section 
                was in effect as of July 1, 1994'' after 
                ``1820(i)(1).''
            (3) Effective date.--The amendments made by this subsection 
        shall take effect on July 1, 1994.
    (e) Technical Amendment Relating to Part A Deductible, Coinsurance 
and Spell of Illness.--(1) Section 1812(a)(1) (42 U.S.C. 1395d(a)(1)), 
as amended by subsection (b)(2)(A), is amended--
            (A) by striking ``inpatient medical assistance facility 
        services'' and inserting ``inpatient medical assistance 
        facility services, inpatient rural primary care hospital 
        services, or inpatient medical assistance facility services''; 
        and
            (B) by striking ``and inpatient rural primary care hospital 
        services''.
    (2) Sections 1813(a) and 1813(b)(3)(A) (42 U.S.C. 1395e(a), 
1395e(b)(3)(A)) are each amended by striking ``inpatient hospital 
services'' each place it appears and inserting ``inpatient hospital 
services, inpatient rural primary care hospital services, or inpatient 
medical assistance facility services,''.
    (3) Section 1813(b)(3)(B) (42 U.S.C. 1395e(b)(3)(B)) is amended by 
striking ``inpatient hospital services'' and inserting ``inpatient 
hospital services, inpatient rural primary care hospital services, 
inpatient medical assistance facility services,''.
    (4) Section 1861(a) (42 U.S.C. 1395x(a)) is amended--
            (A) in paragraph (1), by striking ``inpatient hospital 
        services'' and inserting ``inpatient hospital services, 
        inpatient rural primary care hospital services, inpatient 
        medical assistance facility services,''; and
            (B) in paragraph (2), by striking ``hospital'' and 
        inserting ``hospital, rural primary care hospital, or medical 
        assistance facility''.
    (f) Repeal of Development of PPS System For Inpatient Rural Primary 
Care Hospital Services.--
            (1) In general.--Section 1814(l) (42 U.S.C. 1395f(l)) is 
        amended by striking paragraph (2).
            (2) Conforming amendments.--Section 1814(l)(1) (42 U.S.C. 
        1395F(l)(1)) is amended--
                    (A) by striking ``(l)(1)'' and inserting ``(l)'';
                    (B) by redesignating subparagraphs (A) and (B) as 
                paragraphs (1) and (2), respectively;
                    (C) in paragraph (2), as redesignated, by striking 
                ``paragraph'' and inserting ``subsection''; and
                    (D) in the last sentence, by striking ``paragraph'' 
                and inserting ``subsection''.
    (g) Repeal of Development and Implementation of All Inclusive PPS 
System for Outpatient Rural Primary Care Services.--
            (1) In general.--Section 1834(g) (42 U.S.C. 1395m(g)), as 
        amended by subsection (c)(2)(B), is amended by striking 
        paragraph (2).
            (2) Conforming amendments.--Section 1834(g)(1) (42 U.S.C. 
        1395m(g)(1)) is amended--
                    (A) by striking ``(1) In general.--''
                    (B) by redesignating subparagraph (A) and clauses 
                (i) and (ii) of such subparagraph as paragraph (1) and 
                subparagraphs (A) and (B) of such paragraph, 
                respectively;
                    (C) by redesignating subparagraph (B) as paragraph 
                (2);
                    (D) in paragraph (1)(A), as redesignated, by 
                striking ``subparagraph (B)''; and
                    (E) in paragraph (1)(B), as so redesignated, by 
                striking ``subparagraph'' and inserting ``paragraph''.
    (h) Effective Date.--Except as otherwise provided, the amendments 
made by this section shall apply to services furnished on or after 
October 1, 1994.

SEC. 4112. SUBACUTE CARE STUDY.

    (a) Study.--The Secretary of Health and Human Services (hereafter 
in this section referred to as the ``Secretary'') shall--
            (1) define the level and type of care that should 
        constitute subacute care;
            (2) determine the appropriateness of furnishing subacute 
        care in different settings by evaluating the quality of care 
        and patient outcomes;
            (3) determine the cost and effectiveness of providing 
        subacute care under the medicare program under title XVIII of 
        such Act to individuals who are eligible for benefits under 
        part A of such title;
            (4) determine the extent to which hospital DRG prospective 
        payment rates under section 1886(d) of such Act (42 U.S.C. 
        1395ww(d)) are appropriate for the less restrictive 
        institutional settings that provide subacute care; and
            (5) study the relationships between institutions and their 
        payment methodologies in order to develop ways in which to 
        maximize the continuity of care for each patient episode in 
        which subacute care is furnished.
    (b) Report.--Not later than October 1, 1996, the Secretary shall 
submit to the Congress a report on the matters studied under subsection 
(a).

                 PART 3--PROVISIONS RELATING TO PART B

SEC. 4201. UPDATES FOR PHYSICIANS' SERVICES.

    Section 1848(d)(1) (42 U.S.C. 1395w-4(d)(1)) is amended--
            (1) in subparagraph (A), by inserting after ``subparagraph 
        (B)'' the following: ``and, in the case of 1995, specified in 
        subparagraph (C)'';
            (2) by redesignating subparagraph (C) as subparagraph (D); 
        and
            (3) by inserting after subparagraph (B) the following new 
        subparagraph:
                    ``(C) Special provision for 1995.--For purposes of 
                subparagraph (A), the conversion factor specified in 
                this subparagraph for 1995 is--
                            ``(i) in the case of physicians' services 
                        included in the category of primary care 
                        services (as defined for purposes of subsection 
                        (j)(1)), the conversion factor established 
                        under this subsection for 1994 reduced by 1 
                        percent and adjusted by the update established 
                        under paragraph (3) for 1995; and
                            ``(ii) in the case of any other physicians' 
                        services, the conversion factor established 
                        under this subsection for 1994 reduced by 4.0 
                        percent and adjusted by the update established 
                        under paragraph (3) for 1995.''.

SEC. 4202. SUBSTITUTION OF REAL GDP TO ADJUST FOR VOLUME AND INTENSITY; 
              REPEAL OF RESTRICTION ON MAXIMUM REDUCTION PERMITTED IN 
              DEFAULT UPDATE.

    (a) Use of Real GDP To Adjust for Volume and Intensity.--Section 
1848(f)(2)(A)(iii) (42 U.S.C. 1395w-4(f)(2)(A)(iii)) is amended to read 
as follows:
                            ``(iii) 1 plus the average per capita 
                        growth in the real gross domestic product 
                        (divided by 100) for the 5-fiscal-year period 
                        ending with the previous fiscal year (increased 
                        by 1.5 percentage points for the category of 
                        services consisting of primary care services), 
                        and''.
    (b) Repeal of Restriction on Maximum Reduction.--Section 
1848(d)(3)(B)(ii) (42 U.S.C. 1395w-4(d)(3)(B)(ii)) is amended--
            (1) in the heading, by inserting ``in certain years'' after 
        ``adjustment'';
            (2) in the matter preceding subclause (I), by striking 
        ``for a year'';
            (3) in subclause (I), by adding ``and'' at the end;
            (4) in subclause (II), by striking ``, and'' and inserting 
        a period; and
            (5) by striking subclause (III).
    (c) Repeal of Performance Standard Factor.--
            (1) In general.--Section 1848(f)(2) is amended by striking 
        subparagraph (B) and redesignating subparagraph (C) as 
        subparagraph (B).
            (2) Conforming amendment.--Section 1848(f)(2)(A) is amended 
        in the matter following clause (iv) by striking ``1, multiplied 
        by 100'' and all that follows through ``subparagraph (B))'' and 
        inserting ``1 and multiplied by 100''.
    (d) Effective Date.--
            (1) Volume performance standards.--The amendments made by 
        subsections (a) and (c) shall apply with respect to volume 
        performance standards established beginning with fiscal year 
        1995.
            (2) Repeal of restriction on maximum reduction.--The 
        amendments made by subsection (b) shall apply to services 
        furnished on or after January 1, 1997.

SEC. 4203. PAYMENT FOR PHYSICIANS' SERVICES RELATING TO INPATIENT STAYS 
              IN CERTAIN HOSPITALS.

    (a) In General.--
            (1) Limitations described.--Part B of title XVIII (42 
        U.S.C. 1831 et seq.) is amended by inserting after section 1848 
        the following new section:

``limitations on payment for physicians' services relating to inpatient 
                       stays in certain hospitals

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

SEC. 4204. CHANGES IN UNDERSERVED AREA BONUS PAYMENTS.

    (a) In General.--Section 1833(m) (42 U.S.C. 1395l(m)) is amended--
            (1) by inserting ``(1)'' after ``(m)'',
            (2) by inserting ``described in paragraph (2)'' after 
        ``physicians' services'',
            (3) by striking ``10 percent'' and inserting ``the 
        applicable percent'',
            (4) by striking ``service'' the last place it appears and 
        inserting ``services'', and
            (5) by adding at the end the following new paragraph:
    ``(2)(A) The applicable percent referred to in paragraph (1) is 20 
percent in the case of primary care services, as defined in section 
1842(i)(4), and 10 percent for services other than primary care 
services furnished in health professional shortage areas located in 
rural areas as defined in section 1886(d)(2)(D).
    ``(B) The Secretary shall reduce payments for all services (other 
than primary care services) for which payment may be made under this 
section by such percentage as the Secretary determines necessary so 
that, beginning on the date of the enactment of the Health Security 
Act, the amendments made by section 4204(e) of such Act would not 
result in expenditures under this section that exceed the amount of 
such expenditures that would have been made if such amendment had not 
been made.''.
    (b) Effective Date.--The amendments made by paragraph (1) are 
effective for services furnished on or after January 1, 1995.

SEC. 4205. CORRECTION OF MVPS UPWARD BIAS.

    (a) In General.--Section 1848(f)(2)(A)(iv) (42 U.S.C. 1395w-
4(f)(2)(A)(iv)) is amended by striking ``including changes in law and 
regulations affecting the percentage increase described in clause (i)'' 
and inserting ``excluding anticipated responses to such changes''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply with respect to performance standard rates of increase determined 
for fiscal year 1995 and succeeding fiscal years.

SEC. 4206. DEMONSTRATION PROJECTS FOR MEDICARE STATE-BASED PERFORMANCE 
              STANDARD RATE OF INCREASE.

    Section 1848(f) (42 U.S.C. 1395w-4(f)) is amended by adding at the 
end the following new paragraph:
            ``(6) State-based performance standard rates of increase 
        demonstration projects.--The Secretary shall establish 
        demonstration projects in not more than 3 States under which a 
        State elects State-based performance standard rates of increase 
        to substitute for the national performance standard rates of 
        increase established for the year under paragraph (2). The 
        Secretary shall develop criteria for the establishment of such 
        demonstration projects which shall include the requirement of 
        budget-neutrality for payments made under this part with 
        respect to physicians' services furnished in a State 
        participating in the demonstration project.''.

SEC. 4207. ELIMINATION OF FORMULA-DRIVEN OVERPAYMENTS FOR CERTAIN 
              OUTPATIENT HOSPITAL SERVICES.

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

SEC. 4208. EYE OR EYE AND EAR HOSPITALS.

    Section 1833(i)(4)(A) (42 U.S.C. 1395l(i)(4)(A)) is amended in the 
matter following clause (iii) by striking ``January 1, 1995'' and 
inserting ``September 30, 1997''.

SEC. 4209. IMPOSITION OF COINSURANCE ON LABORATORY SERVICES.

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

SEC. 4210. APPLICATION OF COMPETITIVE ACQUISITION PROCESS FOR PART B 
              ITEMS AND SERVICES.

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

            ``competition acquisition for items and services

    ``Sec. 1847. (a) Establishment of Bidding Areas.--
            ``(1) In general.--The Secretary shall establish 
        competitive acquisition areas for the purpose of awarding a 
        contract or contracts for the furnishing under this part of the 
        items and services described in subsection (c) on or after 
        January 1, 1995. The Secretary may establish different 
        competitive acquisition areas under this subsection for 
        different classes of items and services under this part.
            ``(2) Criteria for establishment.--The competitive 
        acquisition areas established under paragraph (1) shall--
                    ``(A) initially be, or be within, metropolitan 
                statistical areas; and
                    ``(B) be chosen based on the availability and 
                accessibility of suppliers and the probable savings to 
                be realized by the use of competitive bidding in the 
                furnishing of items and services in the area.
    ``(b) Awarding of Contracts in Areas.--
            ``(1) In general.--The Secretary shall conduct a 
        competition among individuals and entities supplying items and 
        services under this part for each competitive acquisition area 
        established under subsection (a) for each class of items and 
        services.
            ``(2) Conditions for awarding contract.--The Secretary may 
        not award a contract to any individual or entity under the 
        competition conducted pursuant to paragraph (1) to furnish an 
        item or service under this part unless the Secretary finds that 
        the individual or entity meets quality standards specified by 
        the Secretary for the furnishing of such item or service.
            ``(3) Contents of contract.--A contract entered into with 
        an individual or entity under the competition conducted 
        pursuant to paragraph (1) shall specify (for all of the items 
        and services within a class)--
                    ``(A) the quantity of items and services the entity 
                shall provide; and
                    ``(B) such other terms and conditions as the 
                Secretary may require.
    ``(c) Services Described.--The items and services to which the 
provisions of this section shall apply are as follows:
            ``(1) Magnetic resonance imaging tests and computerized 
        axial tomography scans, including a physician's interpretation 
        of the results of such tests and scans.
            ``(2) Enteral and parenteral nutrients and supplies.''.
    (b) Items and Services To Be Furnished Only Through Competitive 
Acquisition.--Section 1862(a) (42 U.S.C. 1395y(a)) is amended--
            (1) by striking ``or'' at the end of paragraph (15);
            (2) by striking the period at the end of paragraph (16) and 
        inserting ``; or''; and
            (3) by inserting after paragraph (16) the following new 
        paragraph:
            ``(17) where such expenses are for an item or service 
        furnished in a competitive acquisition area (as established by 
        the Secretary under section 1847(a)) by an individual or entity 
        other than the supplier with whom the Secretary has entered 
        into a contract under section 1847(b) for the furnishing of 
        such item or service in that area, unless the Secretary finds 
        that such expenses were incurred in a case of urgent need.''.
    (c) Reduction in Payment Amounts if Competitive Acquisition Fails 
To Achieve Minimum Reduction in Payments.--Notwithstanding any other 
provision of title XVIII of the Social Security Act, if the 
establishment of competitive acquisition areas under section 1847 of 
such Act (as added by subsection (a)) and the limitation of coverage 
for items and services under part B of such title to items and services 
furnished by providers with competitive acquisition contracts under 
such section during 1996 does not result in a reduction of at least 10 
percent in the projected payment amount that would have applied to the 
items or services under part B if the items or services had not been 
furnished through competitive acquisition under such section in such 
year, the Secretary shall reduce for such year the payment amount for 
all such services by such percentage as the Secretary determines 
necessary to result in such a reduction for such year.
    (d) Effective Date.--The amendments made by this section shall 
apply to items and services furnished under part B of title XVIII of 
the Social Security Act on or after January 1, 1995.

SEC. 4211. APPLICATION OF COMPETITIVE ACQUISITION PROCEDURES FOR 
              LABORATORY SERVICES.

    (a) In General.--Section 1847(c), as added by section 4210, is 
amended by inserting after paragraph (2) the following new paragraph:
            ``(3) Clinical diagnostic laboratory tests.''.
    (b) Reduction in Fee Schedule Amounts if Competitive Acquisition 
Fails To Achieve Savings.--Section 1833(h) (42 U.S.C. 1395l(h)) is 
amended by adding at the end the following new paragraph:
    ``(7) Notwithstanding any other provision of this subsection, if 
the Secretary applies the authority provided under section 1847 to 
establish competitive acquisition areas for the furnishing of clinical 
diagnostic laboratory tests during 1996 and the application of such 
authority does not result in a reduction of at least 10 percent in the 
projected payment amount that would have applied to such tests under 
this section in such year if the tests had not been furnished through 
competitive acquisition under section 1847, the Secretary shall reduce 
for such year each payment amount for all such tests otherwise 
determined under the fee schedules and negotiated rates established 
under this subsection by such percentage as the Secretary determines 
necessary to result in such a reduction for such year.''.

SEC. 4212. EXPANDED COVERAGE FOR PHYSICIAN ASSISTANTS AND NURSE 
              PRACTITIONERS.

    (a) Coverage in Outpatient Settings.--Section 1861(s)(2)(K) (42 
U.S.C. 1395x(s)(2)(K)) is amended--
            (1) in clause (i)--
                    (A) by striking ``or'' at the end of subclause 
                (II); and
                    (B) by inserting ``or (IV) in an outpatient setting 
                as defined by the Secretary'' following ``shortage 
                area,''; and
            (2) in clause (ii), by striking ``section 1919(a)'' and 
        inserting ``section 1919(a) or in an outpatient setting as 
        defined by the Secretary''.
    (b) Payment Based on Physician Fee Schedule.--
            (1) Section 1833(a)(1)(O) (42 U.S.C. 1395l(a)(1)(O)) is 
        amended--
                    (A) by striking ``section 1861(s)(2)(K)(iii) 
                (relating to nurse practitioner and clinical nurse 
                specialist services provided in a rural area)'' and 
                inserting ``section 1861(s)(2)(K)'';
                    (B) by striking ``for services furnished on or 
                after January 1, 1992,'' and inserting ``for services 
                described in section 1861(s)(2)(K)(iii) furnished on or 
                after January 1, 1992, and for services described in 
                clauses (i), (ii), and (iv) of section 1861(s)(2)(K) 
                furnished on or after January 1, 1997,''; and
                    (C) by striking ``subsection (r)(2)'' and inserting 
                ``subsection (r)(2) or subparagraph (A) or (B) of 
                section 1842(b)(12)''.
            (2) Section 1842(b)(12)(A) (42 U.S.C. 1395u(b)(12)(A)) is 
        amended--
                    (A) by striking ``and'' at the end of clause (i);
                    (B) in clause (ii)(II), by inserting ``and before 
                January 1, 1997,'' after ``January 1, 1992,'';
                    (C) by striking the period at the end of clause 
                (ii)(II) and inserting ``; and''; and
                    (D) by inserting at the end the following clause:
                            ``(iii) in the case of services furnished 
                        on or after January 1, 1997--
                                    ``(I) in the case of services 
                                performed as an assistant at surgery, 
                                65 percent of the amount that would 
                                otherwise be recognized if performed by 
                                a physician who is serving as an 
                                assistant at surgery, and
                                    ``(II) in the case of other 
                                services, 85 percent of the fee 
                                schedule amount provided under section 
                                1848.''.
    (c) Rural Nurse Practitioners as Assistants at Surgery in Urban 
Areas.--Section 1861(s)(2)(K)(ii) (42 U.S.C. 1395x(s)(2)(K)(ii)), as 
amended by subsection (a)(2), is further amended by adding ``or 
services as an assistant at surgery furnished by a nurse practitioner 
whose primary practice location (as defined by the Secretary) is in a 
rural area (as defined in section 1886(d)(2)(D)) to an individual who 
resides in a rural area when the service is furnished to such 
individual in an urban area by such practitioner when such practitioner 
refers such individual to an urban area for the furnishing of 
services'' after ``as defined by the Secretary''.
    (d) Conforming Amendments.--
            (1) Section 1861(b)(4) (42 U.S.C. 1395x(b)(4)) is amended 
        by striking ``subsection (s)(2)(K)(i)'' and inserting 
        ``subsection (s)(2)(K)''.
            (2) Section 1862(a)(14) (42 U.S.C. 1395y(a)(14)), as 
        amended by section4108(b)(4)(K), is amended by striking 
        ``section 1861(s)(2)(K)(i)'' and inserting ``section 
        1861(s)(2)(K)''.
            (3) Section 1866(a)(1)(H) (42 U.S.C. 1395cc(a)(1)(H)), as 
        amended by section 4108(b)(4)(L)(ii), is further amended by 
        striking ``section 1861(s)(2)(K)(i)'' and inserting ``section 
        1861(s)(2)(K)''.
    (e) Effective Date.--The amendments made by this section shall 
apply to services furnished on or after January 1, 1997.

SEC. 4213. ELIMINATION OF BALANCE BILLING.

    Effective January 1, 1996, notwithstanding any provision of title 
XVIII of the Social Security Act (42 U.S.C. 1395 et seq.), a 
nonparticipating physician, or nonparticipating supplier or other 
person (as such terms are defined in section 1842(i)(2) of such Act (42 
U.S.C. 1395u(i)(2)) may not receive payment for services or items under 
such title.

SEC. 4214. DEVELOPMENT AND IMPLEMENTATION OF RESOURCE-BASED METHODOLOGY 
              FOR PRACTICE EXPENSES.

    (a) Development.--
            (1) In general.--The Secretary of Health and Human Services 
        shall develop a methodology for implementing in 1997 a 
        resource-based system for determining practice expense relative 
        value units for each physician's service. The methodology 
        utilized shall recognize the staff, equipment, and supplies 
        used in the provision of various medical and surgical services 
        in various settings.
            (2) Report.--The Secretary shall transmit a report by 
        January 1, 1996, on the methodology developed under paragraph 
        (1) to the Committee on Ways and Means and the Committee on 
        Energy and Commerce of the House of Representatives and the 
        Committee on Finance of the Senate. The report shall include a 
        presentation of data utilized in developing the methodology and 
        an explanation of the methodology.
    (b) Implementation.--
            (1) In general.--Section 1848(c)(2)(C)(ii) (42 U.S.C. 
        1395w-4(c)(2)(C)(ii)) is amended--
                    (A) by inserting ``for the service for years before 
                1997'' before ``equal to'',
                    (B) by striking the period at the end of subclause 
                (II) and inserting a comma, and
                    (C) by adding after and below subclause (II) the 
                following:
                        ``and for years beginning with 1997 based on 
                        the relative practice expense resources 
                        involved in furnishing the service.''.
            (2) Conforming amendment.--Section 1848(c)(3)(C)(ii) (42 
        U.S.C. 1395w-4(c)(3)(C)(ii)) is amended by striking ``The 
        practice'' and inserting ``For years before 1997, the 
        practice''.
            (3) Application of certain provisions.--In implementing the 
        amendment made by paragraph (1)(C), the provisions of clauses 
        (ii)(II) and (iii) of section 1848(c)(2)(B) of the Social 
        Security Act shall apply in the same manner as they apply to 
        adjustments under clause (ii)(I) of such section.

SEC. 4215. PAYMENTS FOR DURABLE MEDICAL EQUIPMENT.

    (a) In General.--Subparagraph (B) of section 1834(a)(14) (42 U.S.C. 
1395m(a)(14)) is amended by striking the period at the end and 
inserting ``, except that such percentage increase shall--
                            ``(i) be reduced by 2 percentage points for 
                        each of years 1995 and 1996;
                            ``(ii) be reduced by 1.5 percentage points 
                        for 1997;
                            ``(iii) be reduced by 2 percentage points 
                        for 1998; and
                            ``(iv) be reduced by 1 percentage points 
                        for 1999.''.
    (b) Effective Date.--The amendment made by this section shall be 
effective on the date of the enactment of this Act.

SEC. 4216. GENERAL PART B PREMIUM.

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

              PART 4--PROVISIONS RELATING TO PARTS A AND B

SEC. 4301. MEDICARE SECONDARY PAYER CHANGES.

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

SEC. 4302. INCREASE IN MEDICARE SECONDARY PAYER COVERAGE FOR END STAGE 
              RENAL DISEASE SERVICES TO 24 MONTHS.

    (a) In General.--Section 1862(b)(1)(C) (42 U.S.C. 1395y(b)(1)(C)), 
as amended by section 4301(c), is amended by striking the last sentence 
and inserting: ``Effective for items and services furnished on or after 
January 1, 1996 (with respect to periods beginning on or after July 1, 
1994), this subparagraph shall be applied by substituting `24-month' 
for `12-month' each place it appears.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to items and services provided on or after January 1, 1996.

SEC. 4303. EXPANSION OF CENTERS OF EXCELLENCE.

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

SEC. 4304. REDUCTION IN ROUTINE COST LIMITS FOR HOME HEALTH SERVICES.

    (a) Reduction in Update To Maintain Freeze in 1996.--Section 
1861(v)(1)(L)(i) (42 U.S.C. 1395x(v)(1)(L)(i)) is amended--
            (1) in subclause (II), by striking ``or'' at the end;
            (2) in subclause (III), by striking ``112 percent,'' and 
        inserting ``and before July 1, 1996, 112 percent, or''; and
            (3) by inserting after subclause (III) the following new 
        subclause:
            ``(IV) July 1, 1996, 100 percent (adjusted by such amount 
        as the Secretary determines to be necessary to preserve the 
        savings resulting from the enactment of section 13564(a)(1) of 
        the Omnibus Budget Reconciliation Act of 1993),''.
    (b) Basing Limits in Subsequent Years on Median of Costs.--
            (1) In general.--Section 1861(v)(1)(L)(i) (42 U.S.C. 
        1395x(v)(1)(L)(i)), as amended by subsection (a), is amended in 
        the matter following subclause (IV) by striking ``the mean'' 
        and inserting ``the median''.
            (2) Adjustment to limits.--Section 1861(v)(1)(L)(ii) (42 
        U.S.C. 1395x(v)(1)(L)(ii)) is amended by adding at the end the 
        following new sentence: ``The effect of the amendments made by 
        656(b) of the Health Security Act shall not be considered by 
        the Secretary in making adjustments pursuant to this clause.''.
            (3) Effective date.--The amendments made by paragraphs (1) 
        and (2) shall apply to cost reporting periods beginning on or 
        after July 1, 1997.

SEC. 4305. IMPOSITION OF 20 PERCENT COINSURANCE ON HOME HEALTH SERVICES 
              UNDER MEDICARE.

    (a) Part A.--Section 1813(a) (42 U.S.C. 1395e(a)) is amended by 
adding at the end the following new paragraph:
    ``(5) The amount payable for a home health service furnished to an 
individual under this part shall be reduced by a copayment amount equal 
to 20 percent of the average of all the per visit costs for such 
service furnished under this title determined under section 
1861(v)(1)(L) (as determined by the Secretary on a prospective basis 
for services furnished during a calendar year).''.
    (b) Part B.--Section 1833(a)(2) (42 U.S.C. 1395l(a)(2)), as amended 
by section 4108(c)(2), is amended--
            (1) in subparagraph (A), by striking ``to home health 
        services,'' and by striking the comma after ``opinion)'';
            (2) in subparagraph (E), by striking ``and'' at the end;
            (3) in subparagraph (F), by striking the semicolon at the 
        end and inserting ``; and''; and
            (4) by adding at the end the following new subparagraph:
                    ``(G) with respect to any home health service--
                            ``(i) the lesser of --
                                    ``(I) the reasonable cost of such 
                                service, as determined under section 
                                1861(v), or
                                    ``(II) the customary charges with 
                                respect to such service,
                        less the amount a provider may charge as 
                        described in clause (ii) of section 
                        1866(a)(2)(A), or
                            ``(ii) if such service is furnished by a 
                        public provider of services, or by another 
                        provider which demonstrates to the satisfaction 
                        of the Secretary that a significant portion of 
                        its patients are low-income (and requests that 
                        payment be made under this clause), free of 
                        charge or at nominal charges to the public, the 
                        amount determined in accordance with section 
                        1814(b)(2),
                less a copayment amount equal to 20 percent of the 
                average of all per visit costs for such service 
                furnished under this title determined under section 
                1861(v)(1)(L) (as determined by the Secretary on a 
                prospective basis for services furnished during a 
                calendar year);''.
    (c) Provider Charges.--Section 1866(a)(2)(A)(i) (42 U.S.C. 
1395cc(a)(2)(A)(i)) is amended--
            (1) by striking ``deduction or coinsurance'' and inserting 
        ``deduction, coinsurance, or copayment''; and
            (2) by striking ``or (a)(4)'' and inserting ``(a)(4), or 
        (a)(5)''.
    (d) Effective Date.--The amendments made by this section shall 
apply to services furnished on or after July 1, 1995.

SEC. 4306. TERMINATION OF GRADUATE MEDICAL EDUCATION PAYMENTS.

    (a) In General.--Section 1886(h) (42 U.S.C. 1395ww(h)) is amended 
by adding at the end the following new paragraph:
            ``(6) Termination of payments attributable to costs of 
        training physicians.--Notwithstanding any other provision of 
        this section or section 1861(v), no payment may be made under 
        this title for direct graduate medical education costs 
        attributable to an approved medical residency training program 
        for any cost reporting period (or portion thereof) beginning on 
        or after January 1, 1997.''.
    (b) Prohibition Against Recognition of Costs.--Section 1861(v)(1) 
(42 U.S.C. 1395x(v)(1)), as amended by section 4102(b), is amended by 
adding at the end the following new subparagraph:
    ``(U) Such regulations shall not include any provision for specific 
recognition of the costs of graduate medical education for hospitals 
for any cost reporting period (or portion thereof) beginning on or 
after January 1, 1997. Nothing in the previous sentence shall be 
construed to affect in any way payments to hospitals for the costs of 
any approved educational activities that are not described in such 
sentence.''.

SEC. 4307. MEDICARE SELECT.

    (a) Amendments to Provisions Relating to Medicare Select 
Policies.--
            (1) Permitting medicare select policies in all states.--
        Subsection (c) of section 4358 of the Omnibus Budget 
        Reconciliation Act of 1990 is hereby repealed.
            (2) Requirements of medicare select policies.--Section 
        1882(t)(1) (42 U.S.C. 1395ss(t)(1)) is amended to read as 
        follows:
    ``(1)(A) If a medicare supplemental policy meets the requirements 
of the 1991 NAIC Model Regulation or 1991 Federal Regulation and 
otherwise complies with the requirements of this section except that--
            ``(i) the benefits under such policy are restricted to 
        items and services furnished by certain entities (or reduced 
        benefits are provided when items or services are furnished by 
        other entities), and
            ``(ii) in the case of a policy described in subparagraph 
        (C)(i)--
                    ``(I) the benefits under such policy are not one of 
                the groups or packages of benefits described in 
                subsection (p)(2)(A),
                    ``(II) except for nominal copayments imposed for 
                services covered under part B of this title, such 
                benefits include at least the core group of basic 
                benefits described in subsection (p)(2)(B), and
                    ``(III) an enrollee's liability under such policy 
                for physician's services covered under part B of this 
                title is limited to the nominal copayments described in 
                subclause (II),
        the policy shall nevertheless be treated as meeting those 
        requirements if the policy meets the requirements of 
        subparagraph (B).
    ``(B) A policy meets the requirements of this subparagraph if--
            ``(i) full benefits are provided for items and services 
        furnished through a network of entities which have entered into 
        contracts or agreements with the issuer of the policy,
            ``(ii) full benefits are provided for items and services 
        furnished by other entities if the services are medically 
        necessary and immediately required because of an unforeseen 
        illness, injury, or condition and it is not reasonable given 
        the circumstances to obtain the services through the network,
            ``(iii) the network offers sufficient access,
            ``(iv) the issuer of the policy has arrangements for an 
        ongoing quality assurance program for items and services 
        furnished through the network,
            ``(v)(I) the issuer of the policy provides to each enrollee 
        at the time of enrollment an explanation of--
                    ``(aa) the restrictions on payment under the policy 
                for services furnished other than by or through the 
                network,
                    ``(bb) out of area coverage under the policy,
                    ``(cc) the policy's coverage of emergency services 
                and urgently needed care, and
                    ``(dd) the availability of a policy through the 
                entity that meets the 1991 Model NAIC Regulation or 
                1991 Federal Regulation without regard to this 
                subsection and the premium charged for such policy, and
            ``(II) each enrollee prior to enrollment acknowledges 
        receipt of the explanation provided under subclause (I), and
            ``(vi) the issuer of the policy makes available to 
        individuals, in addition to the policy described in this 
        subsection, any policy (otherwise offered by the issuer to 
        individuals in the State) that meets the 1991 Model NAIC 
        Regulation or 1991 Federal Regulation and other requirements of 
        this section without regard to this subsection.
    ``(C)(i) A policy described in this subparagraph--
            ``(I) is offered by an eligible organization (as defined in 
        section 1876(b)),
            ``(II) is not a policy or plan providing benefits pursuant 
        to a contract under section 1876 or an approved demonstration 
        project described in section 603(c) of the Social Security 
        Amendments of 1983, section 2355 of the Deficit Reduction Act 
        of 1984, or section 9412(b) of the Omnibus Budget 
        Reconciliation Act of 1986, and
            ``(III) provides benefits which, when combined with 
        benefits which are available under this title, are 
        substantially similar to benefits under policies offered to 
        individuals who are not entitled to benefits under this title.
    ``(ii) In making a determination under subclause (III) of clause 
(i) as to whether certain benefits are substantially similar, there 
shall not be taken into account, except in the case of preventive 
services, benefits provided under policies offered to individuals who 
are not entitled to benefits under this title which are in addition to 
the benefits covered by this title and which are benefits an entity 
must provide in order to meet the definition of an eligible 
organization under section 1876(b)(1).''.
    (b) Renewability of Medicare Select Policies.--Section 1882(q)(1) 
(42 U.S.C. 1395ss(q)(1)) is amended--
            (1) by striking ``(1) Each'' and inserting ``(1)(A) Except 
        as provided in subparagraph (B), each'';
            (2) by redesignating subparagraphs (A) and (B) as clauses 
        (i) and (ii), respectively; and
            (3) by adding at the end the following new subparagraph:
            ``(B)(i) In the case of a policy that meets the 
        requirements of subsection (t), an issuer may cancel or 
        nonrenew such policy with respect to an individual who leaves 
        the service area of such policy; except that, if such 
        individual moves to a geographic area where such issuer, or 
        where an affiliate of such issuer, is issuing medicare 
        supplemental policies, such individual must be permitted to 
        enroll in any medicare supplemental policy offered by such 
        issuer or affiliate that provides benefits comparable to or 
        less than the benefits provided in the policy being canceled or 
        nonrenewed. An individual whose coverage is canceled or 
        nonrenewed under this subparagraph shall, as part of the notice 
        of termination or nonrenewal, be notified of the right to 
        enroll in other medicare supplemental policies offered by the 
        issuer or its affiliates.
            ``(ii) For purposes of this subparagraph, the term 
        `affiliate' shall have the meaning given such term by the 1991 
        NAIC Model Regulation.''.
    (c) Civil Penalty.--Section 1882(t)(2) (42 U.S.C. 1395ss(t)(2)) is 
amended--
            (1) by striking ``(2)'' and inserting ``(2)(A)'';
            (2) by redesignating subparagraphs (A), (B), (C), and (D) 
        as clauses (i), (ii), (iii), and (iv), respectively;
            (3) in clause (iv), as redesignated--
                    (A) by striking ``paragraph (1)(E)(i)'' and 
                inserting ``paragraph (1)(B)(v)(I); and
                    (B) by striking ``paragraph (1)(E)(ii)'' and 
                inserting ``paragraph (1)(B)(v)(II)'';
            (4) by striking ``the previous sentence'' and inserting 
        ``this subparagraph''; and
            (5) by adding at the end the following new subparagraph:
    ``(B) If the Secretary determines that an issuer of a policy 
approved under paragraph (1) has made a misrepresentation to the 
Secretary or has provided the Secretary with false information 
regarding such policy, the issuer is subject to a civil money penalty 
in an amount not to exceed $100,000 for each such determination. The 
provisions of section 1128A (other than the first sentence of 
subsection (a) and other than subsection (b)) shall apply to a civil 
money penalty under this subparagraph in the same manner as such 
provisions apply to a penalty or proceeding under section 1128A(a).''.
    (d) Effective Dates.--
            (1) NAIC standards.--If, within 9 months after the date of 
        the enactment of this Act, the National Association of 
        Insurance Commissioners (hereafter in this subsection referred 
        to as the ``NAIC'') makes changes in the 1991 NAIC Model 
        Regulation (as defined in section 1882(p)(1)(A) of the Social 
        Security Act) to incorporate the additional requirements 
        imposed by the amendments made by this section, section 
        1882(g)(2)(A) of such Act shall be applied in each State, 
        effective for policies issued to policyholders on and after the 
        date specified in paragraph (3), as if the reference to the 
        Model Regulation adopted on June 6, 1979, were a reference to 
        the 1991 NAIC Model Regulation (as so defined) as changed under 
        this paragraph (such changed Regulation referred to in this 
        subsection as the ``1995 NAIC Model Regulation'').
            (2) Secretary standards.--If the NAIC does not make changes 
        in the 1991 NAIC Model Regulation (as so defined) within the 9-
        month period specified in paragraph (1), the Secretary of 
        Health and Human Services (hereafter in this subsection 
        referred to as the ``Secretary'') shall promulgate a regulation 
        and section 1882(g)(2)(A) of the Social Security Act shall be 
        applied in each State, effective for policies issued to 
        policyholders on and after the date specified in paragraph (3), 
        as if the reference to the Model Regulation adopted on June 6, 
        1979, were a reference to the 1991 NAIC Model Regulation (as so 
        defined) as changed by the Secretary under this paragraph (such 
        changed Regulation referred to in this subsection as the ``1995 
        Federal Regulation'').
            (3) Date specified.--
                    (A) In general.--Subject to subparagraph (B), the 
                date specified in this paragraph for a State is the 
                earlier of--
                            (i) the date the State adopts the 1995 NAIC 
                        Model Regulation or the 1995 Federal 
                        Regulation, or
                            (ii) 1 year after the date the NAIC or the 
                        Secretary first adopts such regulations.
                    (B) Additional legislative action required.--In the 
                case of a State which the Secretary identifies, in 
                consultation with the NAIC, as--
                            (i) requiring State legislation (other than 
                        legislation appropriating funds) in order for 
                        medicare supplemental policies to meet the 1995 
                        NAIC Model Regulation or the 1995 Federal 
                        Regulation, but
                            (ii) having a legislature which is not 
                        scheduled to meet in 1995 in a legislative 
                        session in which such legislation may be 
                        considered,
                the date specified in this paragraph is the first day 
                of the first calendar quarter beginning after the close 
                of the first legislative session of the State 
                legislature that begins on or after January 1, 1996. 
                For purposes of the previous sentence, in the case of a 
                State that has a 2-year legislative session, each year 
                of such session shall be deemed to be a separate 
                regular session of the State legislature.

                      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.

    (a) In General.--Title XIX (42 U.S.C. 1396 et seq.) is amended by 
redesignating section 1931 as section 1932 and by inserting after 
section 1930 the following new section:

   ``treatment of items and services in the standard benefit package

    ``Sec. 1931. (a) Items and Services Covered Under Standard Benefit 
Package.--Except as provided in subsection (c), a State plan under this 
part shall not provide medical assistance consisting of payment for 
items and services in the standard benefit package described in section 
1201(a) of the Health Security Act.
    ``(b) Medical Assistance Not Affected.--Subsection (a) shall not be 
construed as--
            ``(1) affecting the eligibility of any individual for 
        medical assistance consisting of payment for items and services 
        not covered under the standard benefits package;
            ``(2) affecting the amount, duration, and scope of any 
        medical assistance consisting of payment for the items and 
        services described in paragraph (1); or
            ``(3) prohibiting payment of medical assistance for items 
        and services covered under the standard benefits package to the 
        extent that the items and services under this part exceed the 
        items and services covered under such package with respect to 
        amount, duration, and scope.
    ``(c) Exceptions.--Subsection (a) shall not affect the provision of 
medical assistance consisting of payment for items and services in the 
standard benefits package--
            ``(1) which are provided to--
                    ``(A) an individual eligible for medical assistance 
                under the State plan who is not a premium subsidy 
                eligible individual (as defined in 6002(a)(2) of the 
                Health Security Act);
                    ``(B) an individual with respect to whom 
                supplemental security income benefits are being paid 
                under title XVI; and
                    ``(C) an individual who is eligible for benefits 
                under part A of title XVIII; or
            ``(2) which consist of emergency services to certain aliens 
        under section 1903(v)(2).
    ``(d) State Maintenance of Effort.--
            ``(1) In general.--
                    ``(A) Reduction in quarterly payments.--For any 
                calendar quarter in an applicable year (as defined in 
                subparagraph (B)), the amount otherwise payable to a 
                State under section 1903 for the quarter shall be 
                reduced by the State maintenance of effort amount for 
                the quarter determined under paragraph (2).
                    ``(B) Applicable year.--For purposes of this 
                paragraph, the term `applicable year' means 1997 and 
                any succeeding year.
            ``(2) Maintenance of effort amount.--
                    ``(A) In general.--The maintenance of effort amount 
                for a State for a calendar quarter in an applicable 
                year shall be equal to 25 percent of the sum of--
                            ``(i) the State's AFDC eligibles payment 
                        amount for the year determined under paragraph 
                        (3); and
                            ``(ii) the State's non-cash eligibles 
                        payment amount for the year determined under 
                        paragraph (4).
            ``(3) State afdc eligibles payment amount.--
                    ``(A) In general.--The AFDC eligibles payment 
                amount for a State for a year is an amount equal to the 
                product of--
                            ``(i) the adjusted State per capita amount 
                        for the year determined under subparagraph (B); 
                        multiplied by
                            ``(ii) the number of AFDC eligible 
                        individuals receiving premium assistance under 
                        section 6002 of the Health Security Act during 
                        the year (as estimated by the Secretary).
                    ``(B) Adjusted state per capita amount.--
                            ``(i) In general.--The adjusted State per 
                        capita amount for a year is the base State per 
                        capita amount determined under clause (ii) 
                        updated by the percentage change in per capita 
                        health expenditures index (as described in 
                        paragraph (5)(B)) during the period beginning 
                        on October 1, 1994, and ending on December 31 
                        of the year preceding the applicable year (as 
                        determined by the Secretary).
                            ``(ii) Base state per capita amount.--The 
                        base per capita amount for a State shall be an 
                        amount, as determined by the Secretary, equal 
                        to the quotient of--
                                    ``(I) the total expenditures from 
                                State funds made under the State plan 
                                during fiscal year 1994 with respect to 
                                medical assistance consisting of items 
                                and services of the type included in 
                                the standard benefit package for AFDC 
                                eligible individuals; divided by
                                    ``(II) the average total number of 
                                AFDC eligible individuals who received 
                                such medical assistance under the State 
                                plan in any month during fiscal year 
                                1994.
                            ``(iii) Disproportionate share payments not 
                        included.--In applying clause (ii), payments 
                        made under section 1923 shall not be counted in 
                        the gross amount of payments.
                    ``(C) AFDC eligible defined.--For purposes of this 
                paragraph, the term `AFDC eligible' means an individual 
                who receives aid or assistance under any plan of the 
                State approved under part A or part E of title IV.
            ``(4) Non-cash eligibles payment amount.--
                    ``(A) In general.--The non-cash eligibles payment 
                amount for a State for a year is an amount equal to the 
                State's base payment amount (determined under 
                subparagraph (B)) for the applicable year updated by 
                the percentage change in the health expenditures index 
                (as described in paragraph (5)(A)) and the State 
                population index (as described in paragraph (5)(C)) 
                during the period beginning on October 1, 1994, and 
                ending on December 31 of the year preceding the 
                applicable year (as determined by the Secretary).
                    ``(B) State base payment amount.--
                            ``(i) In general.--The base payment amount 
                        for a State for an applicable year shall be an 
                        amount, as determined by the Secretary, equal 
                        to the total expenditures from State funds made 
                        under the State plan during fiscal year 1994 
                        with respect to medical assistance consisting 
                        of items and services of the type included in 
                        the standard benefit package for non-cash 
                        eligible individuals who would not have 
                        received such medical assistance if the 
                        provisions of this section and subtitle A of 
                        title VI of the Health Security Act had been in 
                        effect in fiscal year 1994.
                            ``(ii) Disproportionate share payments 
                        included.--In applying clause (i), payments 
                        made under section 1923 shall be counted in the 
                        gross amount of payments.
                    ``(C) Non-cash eligible defined.--For purposes of 
                this paragraph, the term `non-cash eligible' means any 
                individual who received medical assistance under the 
                State plan during fiscal year 1994 other than an AFDC 
                eligible individual or an individual described in 
                subsection (b).
            ``(5) Indexes.--
                    ``(A) Health expenditures index.--The Secretary 
                shall establish a health expenditures index which 
                measures the change in national health expenditures 
                from year to year.
                    ``(B) Per capita health expenditures index.--The 
                Secretary shall establish a per capita health 
                expenditures index which measures the change in 
                national per capita health expenditures from year to 
                year.
                    ``(C) State population index.--The Secretary shall 
                establish a State population index which measures the 
                change in the number of individuals residing in a State 
                from year to year.''.
    (b) No Federal Financial Participation.--Section 1903(i) (42 U.S.C. 
1396b(i)) is amended--
            (1) by striking ``or'' at the end of paragraph (14),
            (2) by striking the period at the end of paragraph (15) and 
        inserting ``; or'', and
            (3) by inserting after paragraph (15) the following new 
        paragraph:
            ``(16) with respect to items and services covered under the 
        standard benefit package described in section 1201(a) of the 
        Health Security Act for individuals to whom section 1931(a) 
        applies.''.
    (c) Effective Date.--The amendments made by this section shall 
apply with respect to items or services furnished in a State on or 
after January 1, 1997.

   PART 2--COORDINATED CARE SERVICES FOR DISABLED MEDICAID ELIGIBLES

SEC. 4605. COORDINATED CARE SERVICES FOR DISABLED MEDICAID ELIGIBLES.

    (a) State Expenditures Limited to Certified Health Plans.--Section 
1903(m) (42 U.S.C. 1396b) is amended by adding at the end the following 
new paragraph:
            ``(7) No payment shall be made under this part to a State 
        with respect to expenditures incurred by the State for payment 
        for services provided by an entity with a contract under this 
        subsection unless such entity is a standard health plan (as 
        defined in section 1011(2)(B) of the Health Security Act).''.
    (b) Modification to 75/25 Rule.--Section 1903(m)(2)(A)(ii) (42 
U.S.C. 1396b(m)(2)(A)(ii)) is amended by striking ``75 percent'' and 
inserting ``50 percent''.
    (c) Effective Date.--The amendments made by this section shall 
become effective with respect to payments for calendar quarters 
beginning on or after January 1, 1997.

      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.

    (a) Amendments to Provisions Requiring States to Make DSH Payment 
Adjustments.--
            (1) Adjustments to national dsh payment limit.--Section 
        1923(f)(1)(B) (42 U.S.C. 1396r-4(f)(1)(B)) is amended to read 
        as follows:
                    ``(B) National dsh payment limit.--
                            ``(i) In general.--Except as provided in 
                        clause (ii), the national DSH payment limit for 
                        a fiscal year is equal to 12 percent of the 
                        total amount of expenditures under the State 
                        plans under this part for medical assistance 
                        during the fiscal year.
                            ``(ii) Reduction in limit.--For fiscal 
                        years ending in a calendar year during which 
                        the percentage of individuals covered by 
                        insurance, as determined by the National Health 
                        Care Cost and Coverage Commission established 
                        under section 10001 of the Health Security 
                        Act--
                                    ``(I) equals or exceeds 85 percent 
                                but is less than 88 percent, `10 
                                percent' shall be substituted for `12 
                                percent' in clause (i);
                                    ``(II) equals or exceeds 88 percent 
                                but is less than 90 percent, `8 
                                percent' shall be substituted for `12 
                                percent' in clause (i);
                                    ``(III) equals or exceeds 90 
                                percent but is less than 92 percent, `6 
                                percent' shall be substituted for `12 
                                percent' in clause (i); and
                                    ``(IV) equals or exceeds 92 
                                percent, `4 percent' shall be 
                                substituted for `12 percent' in clause 
                                (i).
            (2) Adjustments to state allotment limits.--Section 
        1923(f)(2)(B) (42 U.S.C. 1396r-4(f)(2)(B)) is amended to read 
        as follows:
                    ``(B) Exceptions.--
                            ``(i) In general.--Except as provided in 
                        clause (ii), a State DSH allotment under 
                        subparagraph (A) for a fiscal year shall not 
                        exceed 12 percent of the total amount of 
                        expenditures under the State plan for medical 
                        assistance during the fiscal year.
                            ``(ii) Reduction in limit.--For fiscal 
                        years ending in a calendar year during which 
                        the percentage of individuals covered by 
                        insurance, as determined by the National Health 
                        Care Cost and Coverage Commission established 
                        under section 10001 of the Health Security 
                        Act--
                                    ``(I) equals or exceeds 85 percent 
                                but is less than 88 percent, `10 
                                percent' shall be substituted for `12 
                                percent' in clause (i);
                                    ``(II) equals or exceeds 88 percent 
                                but is less than 90 percent, `8 
                                percent' shall be substituted for `12 
                                percent' in clause (i);
                                    ``(III) equals or exceeds 90 
                                percent but is less than 92 percent, `6 
                                percent' shall be substituted for `12 
                                percent' in clause (i); and
                                    ``(IV) equals or exceeds 92 
                                percent, `4 percent' shall be 
                                substituted for `12 percent' in clause 
                                (i).
            (3) Elimination of high dsh states and state supplemental 
        amounts.--
                    (A) In general.--Section 1923(f)(2)(A) (42 U.S.C. 
                1396r-4(f)(2)(A)) is amended to read as follows:
                    ``(A) In general.--Subject to subparagraph (B), the 
                State DSH allotment for a fiscal year is equal to the 
                State DSH allotment for the previous fiscal year 
                increased by the State growth factor (as defined in 
                paragraph (3)(B)) for the fiscal year.''.
                    (B) Conforming amendments.--(i) Section 1923(f) (42 
                U.S.C. 1396r-4(f)) is amended by striking paragraph (3) 
                and redesignating paragraph (4) as paragraph (3).
                    (ii) Section 1923(f)(3) (42 U.S.C. 1396r-4(f)(3)), 
                as redesignated by clause (i), is amended by striking 
                subparagraphs (A) and (C) and redesignating 
                subparagraphs (B), (D), and (E) as subparagraphs (A), 
                (B), and (C).
                    (iii) Section 1923(f)(3)(B) (42 U.S.C. 1396r-
                4(f)(3)(B)), as redesignated by clauses (i) and (ii), 
                is amended to read as follows:
                    ``(B) State growth amount.--The term `State growth 
                amount' means, with respect to a State for a fiscal 
                year, the product of the State growth factor and the 
                State DSH payment limit for the previous fiscal 
                year.''.
                    (iv) Section 1923(f)(1)(A) (42 U.S.C. 1396r-
                4(f)(1)(A) is amended by striking ``(as defined in 
                paragraph (4)(B))'' and inserting ``(as defined in 
                paragraph (3)(A))''.
            (3) Termination of requirement on states to make dsh 
        payment adjustments.--Section 1923 (42 U.S.C. 1396r-4) is 
        amended by adding at the end the following new subsection:
    ``(h) Termination of Requirement to Make Payment Adjustments.--
            ``(1) In general.--Any requirement imposed by this section 
        on a State to increase the rate or amount of payment for 
        inpatient hospital services provided by a hospital which serves 
        a disproportionate number of low income patients with special 
        needs shall terminate in the year described in paragraph (2).
            ``(2) Year described.--The year described in this paragraph 
        is the first year beginning after the year during which the 
        percentage of individuals covered by insurance, as determined 
        by the National Health Care Cost and Coverage Commission 
        established under section 100001 of the Health Security Act, 
        equals or exceeds 92 percent.''.
            (4) No federal financial participation.--Section 1903(i) 
        (42 U.S.C. 1396b(i)), as amended by section 4601(b), is 
        amended--
                    (A) by striking ``or'' at the end of paragraph 
                (15),
                    (B) by striking the period at the end of paragraph 
                (16) and inserting ``; or'', and
                    (C) by inserting after paragraph (16) the following 
                new paragraph:
            ``(17) during or after the year described in section 
        1923(h)(2) with respect to any payment made by a State to a 
        hospital which serves a disproportionate number of low income 
        patients with special needs that is in excess of the payment 
        otherwise required under this part.''.
            (5) Effective date.--The amendments made by this section 
        shall be effective for calendar quarters beginning on or after 
        January 1, 1997.
    (b) Payments to Hospitals Serving Vulnerable Populations.--Title 
XIX (42 U.S.C. 1396 et seq.) is amended by adding at the end the 
following new part:

     ``PART B--PAYMENTS TO HOSPITALS SERVING VULNERABLE POPULATIONS

``SEC. 1951. PAYMENTS TO HOSPITALS.

    ``(a) Entitlement Status.--The Secretary shall make payments in 
accordance with this part to eligible hospitals described in section 
1952. The preceding sentence constitutes budget authority in advance of 
appropriations Acts and represents the obligation of the Federal 
Government to provide funding for such payments in the amounts, and for 
the fiscal years, specified in subsection (b).
    ``(b) Amount of Entitlement.--For purposes of subsection (a), the 
amounts and fiscal years specified in this subsection are (in the 
aggregate for all eligible hospitals) $2,500,000,000 for the first 
applicable fiscal year (as defined in section 1954) and for each 
subsequent fiscal year.
    ``(c) Payments Made on Quarterly Basis.--Payments to an eligible 
hospital under this section for a year shall be made on a quarterly 
basis during the year.

``SEC. 1952. IDENTIFICATION OF ELIGIBLE HOSPITALS.

    ``(a) Hospitals in Participating States.--In order to be an 
eligible hospital under this part, a hospital must be located in a 
State that is a participating State under title I of the Health 
Security Act.
    ``(b) State Identification.--In accordance with the criteria 
described in subsection (c) and such procedures as the Secretary may 
require, each State shall identify the hospitals in the State that meet 
such criteria and provide the Secretary with a list of such hospitals.
    ``(c) Criteria for Eligibility.--A hospital meets the criteria 
described in this subsection if the hospital's low-income utilization 
rate for the base year under section 1923(b)(3) (as such section is in 
effect on the day before the date of the enactment of this part) is not 
less than 25 percent.

``SEC. 1953. AMOUNT OF PAYMENTS.

    ``(a) In General.--The total amount available for payments under 
this part in a year shall be allocated to hospitals for low-income 
assistance in accordance with this subsection.
    ``(b) Determination of Hospital Payment Amount.--The amount of 
payment to an eligible hospital during a year shall be the equal to the 
hospital's low-income percentage (as defined in subsection (c)) of the 
total amount available for payments under this part for the year.
    ``(c) Low-Income Percentage Defined.--
            ``(1) In general.--For purposes of this section, an 
        eligible hospital's `low-income percentage' for a year is equal 
        to the amount (expressed as a percentage) of the total low-
        income days for all eligible hospitals for the year that are 
        attributable to the hospital.
            ``(2) Low-income days described.--For purposes of paragraph 
        (1), an eligible hospital's low-income days for a year shall be 
        equal to the product of--
                    ``(A) the total number of inpatient days for the 
                hospital for the year (as reported to the Secretary by 
                the State in which the hospital is located, in 
                accordance with a reporting schedule and procedures 
                established by the Secretary); and
                    ``(B) the hospital's low-income utilization rate 
                for the base year under section 1923(b)(3) (as such 
                section is in effect on the day before the date of the 
                enactment of this part).

``SEC. 1954. DEFINITIONS.

    ``For purposes of this part:
            ``(1) Base year.--The term `base year' means 1996.
            ``(2) First applicable fiscal year--The term `first 
        applicable fiscal year' means first fiscal year that begins 
        after the fiscal year ending in the calendar year during which 
        the percentage of individuals covered by insurance, as 
        determined by the National Health Care Cost and Coverage 
        Commission established under section 10001 of the Health 
        Security Act, equals or exceeds 92 percent.''.
    (c) Conforming Amendments.--(1) Title XIX (42 U.S.C. 1396 et seq.) 
is amended by striking the title and inserting the following:

  ``TITLE XIX--MEDICAL ASSISTANCE PROGRAMS AND PAYMENTS TO HOSPITALS 
                    SERVING VULNERABLE POPULATIONS''

     ``PART A--GRANTS TO STATES FOR MEDICAL ASSISTANCE PROGRAMS''.

    (2) Title XIX (42 U.S.C. 1396 et seq.) is amended by striking each 
reference to ``this title'' and inserting ``this part''.

               PART 4--MEDICAID LONG-TERM CARE PROVISIONS

SEC. 4615. INCREASED RESOURCE DISREGARD FOR INDIVIDUALS RECEIVING 
              CERTAIN SERVICES.

    (a) In general.--Section 1902(a)(10) (42 U.S.C. 1396a(a)(10)) is 
amended--
            (1) by striking ``and'' at the end of subparagraph (E);
            (2) by adding ``and'' at the end of subparagraph (F); and
            (3) by adding at the end the following new subparagraph:
                    ``(G) provide that, in determining the eligibility 
                of any unmarried individual who has applied for or is 
                receiving medical assistance consisting of community-
                based services furnished under a waiver under 
                subsection (c) or (d) of section 1915, personal care 
                services described in section 1905(a)(24), or home and 
                community care for functionally disabled elderly 
                individuals under section 1929, the first $4,000 of 
                resources may, at the option of the State, be 
                disregarded.''.
    (b) Effective Date.--The amendments made by subsection (a) shall 
apply to payments for medical assistance for calendar quarters 
beginning on or after January 1, 1995.

SEC. 4616. FRAIL ELDERLY DEMONSTRATION PROJECT WAIVERS.

    (a) Expansion of Number of Waivers.--Section 9412(b)(1) of the 
Omnibus Budget Reconciliation Act of 1986 is amended by striking ``15'' 
and inserting ``40''.
    (b) Development of Protocols and Model Certification Guidelines.--
Section 9412(b) of the Omnibus Budget Reconciliation Act of 1986 is 
amended by adding at the end the following new paragraphs:
            ``(5) The Secretary, in consultation with the States and 
        organizations operating projects in accordance with waivers 
        under this subsection shall develop and publish a waiver 
        protocol that will establish minimum standard requirements that 
        an organization must meet to be eligible for a waiver under 
        this subsection. In developing the protocol under the preceding 
        sentence, the Secretary shall incorporate standards for 
        organizations to deliver integrated acute and long-term care 
        services for the elderly, children, and young adults.
            ``(6) The Secretary shall develop model guidelines that 
        shall be available to States that choose to establish a 
        comprehensive procedure for the licensure and certification of 
        an organization operating a demonstration project under a 
        waiver granted pursuant to this subsection. Such guidelines 
        shall encompass the range of services provided by such an 
        organization.''.
    (c) Evaluations and Reports.--Section 9412(b) of the Omnibus Budget 
Reconciliation Act of 1986, as amended by subsection (b), is amended by 
adding at the end the following new paragraph:
            ``(7)(A) The Secretary shall develop standard evaluation 
        protocols to assess the cost-effectiveness and quality of 
        service provided under--
                    ``(i) demonstration projects operating on the date 
                of the enactment of this paragraph under waivers 
                granted pursuant to this subsection; and
                    ``(ii) demonstration projects granted waivers after 
                the date of the enactment of this paragraph.
            ``(B) The Secretary shall conduct evaluations of the 
        demonstration projects in accordance with the protocols 
        developed under subparagraph (A) and based on the results of 
        such evaluations, report to the Committee on Finance of the 
        Senate, the Committee on Ways and Means of the House of 
        Representatives, and the Subcommittee on Health and the 
        Environment of the Committee on Energy and Commerce of the 
        House of Representatives by--
                    ``(i) not later than January 1, 1998, with respect 
                to demonstration projects described in subparagraph 
                (A)(i); and
                    ``(ii) not later than January 1, 2003, with respect 
                to demonstration projects described in subparagraph 
                (A)(ii);
        on the desirability of granting permanent status under titles 
        XVIII and XIX of the Social Security Act to such demonstration 
        projects that the Secretary has determined to be successful.''.
    (d) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 4617. ELIMINATION OF REQUIREMENT OF PRIOR INSTITUTIONALIZATION 
              WITH RESPECT TO HABILITATION SERVICES FURNISHED UNDER A 
              WAIVER FOR HOME OR COMMUNITY-BASED SERVICES.

    (a) In General.--Section 1915(c)(5) (42 U.S.C. 1396n(c)(5)) is 
amended in the matter preceding subparagraph (A) by striking ``, with 
respect to individuals who receive such services after discharge from a 
nursing facility or intermediate care facility for the mentally 
retarded''.
    (b) Effective Date.--The amendments made by this section shall 
apply to services furnished on or after January 1, 1995.

SEC. 4618. ELIMINATION OF RULE REGARDING AVAILABILITY OF BEDS IN 
              CERTAIN INSTITUTIONS.

    (a) In General.--The first sentence of section 1915(c)(1) (42 
U.S.C. 1396n(c)(1)) is amended by inserting the following before the 
end period: ``(at the option of the State, such determination may be 
made without regard to the availability of beds in such a hospital, 
nursing facility, or intermediate care facility for the mentally 
retarded located in the State)''.
    (b) Effective Date.--The amendment made by subsection (a) shall be 
effective with respect to waivers granted or renewed on or after 
January 1, 1995.

SEC. 4619. PREADMISSION SCREENING FOR MENTALLY RETARDED INDIVIDUALS.

    (a) In General.--Section 1919(b)(3)(F)(ii) (42 U.S.C. 
1396r(b)(3)(F)(ii)) is amended by striking ``that, because'' and all 
that follows through the period at the end and inserting ``that the 
individual's primary need is for medical services that are at the level 
provided by the nursing facility and that the nursing facility has the 
capability to provide any specialized services necessary for 
habilitation of the individual.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to admissions on or after July 1, 1995.

                         PART 5--MISCELLANEOUS

SEC. 4621. MEDICAID COVERAGE OF ALL CERTIFIED NURSE PRACTITIONER AND 
              CLINICAL NURSE SPECIALIST SERVICES.

    (a) In General.--Paragraph (21) of section 1905(a) (42 U.S.C. 
1396d(a)) is amended to read as follows:
            ``(21) services furnished by all certified nurse 
        practitioners (as defined by the Secretary) or clinical nurse 
        specialists (as defined in subsection (t)) which the certified 
        nurse practitioner or clinical nurse specialist is legally 
        authorized to perform under State law (or the State regulatory 
        mechanism provided by State law), whether or not the certified 
        nurse practitioner or clinical nurse specialist is under the 
        supervision of, or associated with, a physician or other health 
        care provider;''.
    (b) Clinical Nurse Specialist Defined.--Section 1905 (42 U.S.C. 
1396) is amended by adding at the end the following new subsection:
    ``(t) The term `clinical nurse specialist' means an individual 
who--
            ``(1) is a registered nurse and is licensed to practice 
        nursing in the State in which the clinical nurse specialist 
        services are performed; and
            ``(2) holds a master's degree in a defined clinical area of 
        nursing from an accredited educational institution.''.
    (c) Effective Date.--The amendments made by this section shall 
become effective with respect to payments for calendar quarters 
beginning on or after January 1, 1995.

SEC. 4622. RELIEF FROM THIRD PARTY LIABILITY REQUIREMENTS WHEN COST-
              EFFECTIVE.

    (a) In General.--Section 1902(a)(25)(B) (42 U.S.C. 1396a(a)(25)(B)) 
is amended to read as follows--
            ``(B) that in any case where such a legal liability is 
        found to exist after medical assistance has been made 
        available, the State or local agency will seek reimbursement 
        for such assistance to the extent of such legal liability, 
        unless--
                    ``(i) the amount of reimbursement the State can 
                reasonably expect to recover for medical assistance 
                furnished to an individual does not exceed the costs of 
                such recovery, or
                    ``(ii) with respect to case management services (as 
                defined in section 1915(g)(2)), the State demonstrates 
                to the satisfaction of the Secretary (using the methods 
                specified by the Secretary under subsection (aa)) that 
                it is not cost-effective in the aggregate to seek such 
                recovery with respect to such services furnished to 
                individuals covered under the State plan;''.
    (b) Methods for Demonstration.--Section 1902(a) (42 U.S.C. 
1396a(a)) is amended by adding at the end the following new subsection:
    ``(aa) The Secretary shall specify in regulations the methods by 
which a State may demonstrate that it is not cost-effective in the 
aggregate to seek reimbursement for medical assistance paid for case 
management services under subsection (a)(25)(B)(ii). The methods 
specified by the Secretary under the preceding sentence shall include 
allowing a State to demonstrate that case management services are not 
generally covered by health insurers in the State.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to payments for medical assistance for calendar quarters 
beginning on or after January 1, 1995.

                TITLE V--QUALITY AND CONSUMER PROTECTION

             Subtitle A--Quality Management and Improvement

SEC. 5001. NATIONAL QUALITY COUNCIL.

    (a) Establishment.--Not later than 1 year after the date of 
enactment of this Act, the Secretary of Health and Human Services shall 
establish a council to be known as the National Quality Council to 
oversee a program of quality management and improvement designed to 
enhance the quality, appropriateness, and effectiveness of health care 
services and access to such services.
    (b) Appointment.--The National Quality Council shall consist of 15 
members appointed by the President, with the advice and consent of the 
Senate, who are broadly representative of the population of the United 
States and shall include the following:
            (1) Individuals and health care providers distinguished in 
        the fields of medicine, public health, health care quality, and 
        related fields of health services research. Such members shall 
        constitute at least one-third of the Council's membership.
            (2) Individuals representing consumers of health care 
        services. Such members shall constitute at least one-third of 
        the Council's membership.
            (3) Other individuals representing purchasers of health 
        care, health plans, States, and nationally recognized health 
        care accreditation organizations.
    (c) Duties.--The National Quality Council shall--
            (1) develop national goals and performance measures of 
        quality;
            (2) develop uniform quality goals and performance measures 
        for plans;
            (3) oversee the design and implementation of a program of 
        national surveys of plans and consumers;
            (4) oversee the design and production of Consumer Report 
        Cards;
            (5) oversee Quality Improvement Foundations;
            (6) oversee National and State-based Consumer Information 
        and Advocacy Centers; and
            (7) oversee the evaluation of the impact of the 
        implementation of this Act on the quality of health care 
        services in the United States and the access of consumers to 
        such services.
    (d) Consultation.--In carrying out these duties, the National 
Quality Council shall establish a process of consultation with 
appropriate interested parties.
    (e) Terms.--
            (1) In general.--Except as provided in paragraph (2), 
        members of the Council shall serve for a term of 4 years.
            (2) Staggered rotation.--Of the members first appointed to 
        the Council under subsection (b), the President shall appoint 
        members to serve for a term of between 1 and 4 years so that no 
        more than one third of the Council seats are vacated each year.
            (3) Service beyond term.--A member of the Council may 
        continue to serve after the expiration of the term of the 
        member until a successor is appointed.
    (f) Vacancies.--If a member of the Council does not serve the full 
term applicable under subsection (e), the individual appointed to fill 
the resulting vacancy shall be appointed for the remainder of the term 
of the predecessor of the individual.
    (g) Chair.--The President shall designate an individual to serve as 
the chair of the Council.
    (h) Meetings.--The Council shall meet not less than once during 
each 4-month period and shall otherwise meet at the call of the 
President or the chair.
    (i) Compensation and Reimbursement of Expenses.--Members of the 
Council shall receive compensation for each day (including travel time) 
engaged in carrying out the duties of the Council. Such compensation 
may not be in an amount in excess of the maximum rate of basic pay 
payable for level IV of the Executive Schedule under section 5315 of 
title 5, United States Code.
    (j) Conflicts of Interest.--Members of the Council shall disclose 
upon appointment to the Council or at any subsequent time that it may 
occur, conflicts of interest.
    (k) Executive Director; Staff.--
            (1) Executive director.--
                    (A) In general.--The Council shall, without regard 
                to section 5311(b) of title 5, United States Code, 
                appoint an Executive Director.
                    (B) Pay.--The Executive Director shall be paid at a 
                rate equivalent to a rate for the Senior Executive 
                Service.
            (2) Staff.--
                    (A) In general.--Subject to subparagraphs (B) and 
                (C), the Executive Director, with the approval of the 
                Council, may appoint and fix the pay of additional 
                personnel.
                    (B) Pay.--The Executive Director may make such 
                appointments without regard to the provisions of title 
                5, United States Code, governing appointments in the 
                competitive service, and any personnel so appointed may 
                be paid without regard to the provisions of chapter 51 
                and subchapter III of chapter 53 of such title, 
                relating to classification and General Schedule pay 
                rates, except that an individual so appointed may not 
                receive pay in excess of 120 percent of the annual rate 
                of basic pay payable for GS-15 of the General Schedule.
                    (C) Detailed personnel.--Upon request of the 
                Executive Director, the head of any Federal department 
                or agency may detail any of the personnel of that 
                department or agency to the Council to assist the 
                Council in carrying out its duties under this Act.
    (l) Contract Authority.--To the extent provided in advance in 
appropriations Acts, the Council may contract with any person 
(including an agency of the Federal Government) for studies and 
analysis as required to execute its functions. Any employee of the 
Executive Branch may be detailed to the Council to assist the Council 
in carrying out its duties.
    (m) Consultations with Experts.--The Council may consult with any 
outside expert individuals or groups that the Council determines 
appropriate in performing its duties under this section. The Council 
may establish advisory committees.
    (n) Access to Information.--The Council may secure directly from 
any department or agency of the United States information necessary to 
enable it to carry out its functions, to the extent such information is 
otherwise available to a department or agency of the United States. 
Upon request of the chair, the head of that department or agency shall 
furnish that information to the Council.
    (o) Delegation of Authority.--Except as otherwise provided, the 
Council may delegate any function to such officers and employees as the 
Council may designate and may authorize such successive redelegations 
of such functions with the Council as the Council deems to be necessary 
or appropriate. No delegation of functions by the Council shall relieve 
the Council of responsibility for the administration of such functions.
    (p) Rulemaking.--The Council is authorized to establish such rules 
as may be necessary to carry out this section.
    (q) Health Care Provider.--For purposes of this subtitle, the term 
``health care provider'' means an individual who, or entity that, 
provides an item or service to an individual that is covered under the 
health plan (as defined in section 1111) in which the individual is 
enrolled.

SEC. 5002. NATIONAL GOALS AND PERFORMANCE MEASURES OF QUALITY.

    (a) In General.--The National Quality Council shall develop a set 
of national quality goals and performance measures of quality for both 
the general population and for population subgroups defined by 
demographic characteristics and health status. The goals and measures 
shall incorporate goals identified by the Secretary of Health and Human 
Services for meeting public health objectives utilizing, but not 
limited to, goals delineated in Healthy People 2000.
    (b) Subject of Measures.--National measures of quality performance 
shall be developed under subsection (a) in a manner that provides 
statistical and other information on at least the following subjects:
            (1) Outcomes of health care services and procedures.
            (2) Population health status.
            (3) Health promotion.
            (4) Prevention of diseases, disorders, disabilities, 
        injuries, and other health conditions.
            (5) Access to care and appropriateness of care.
            (6) Consumer satisfaction.

SEC. 5003. STANDARDS AND PERFORMANCE MEASURES FOR HEALTH PLANS.

    (a) Development.--
            (1) In general.--The National Quality Council shall 
        establish national standards and performance measures for 
        health plans, which may be used to assess the provision of 
        health care services and access to such services, both for the 
        general population and population subgroups defined by 
        demographic characteristics and health status. In subject 
        matter areas with which the National Quality Council determines 
        that sufficient information and consensus exist, the Council 
        shall establish goals for performance by health plans 
        consistent with the national goals and performance measures 
        established under section 5002.
            (2) Measures and standards.--
                    (A) Measures.--Quality measures under this section 
                shall relate, at a minimum, to:
                            (i) Access by consumers to health care 
                        services and providers.
                            (ii) Appropriateness of health care 
                        services.
                            (iii) Consumer satisfaction.
                            (iv) Outcomes of care.
                            (v) Disease prevention and health 
                        promotion.
                    (B) Standards.--Quality standards under this 
                section at a minimum shall relate to:
                            (i) Health plan compliance with members' 
                        rights under this Act.
                            (ii) Quality improvement and 
                        accountability.
                            (iii) Documentation and review of provider 
                        credentialing and competency.
                            (iv) Management of clinical, and 
                        administrative and financial information.
    (b) Certification of Plans.--The National Quality Council shall 
provide information and technical assistance to the Secretary and the 
States concerning the use of national standards and performance 
measures developed under this section for State certification of health 
plans.

SEC. 5004. PLAN DATA ANALYSIS AND CONSUMER SURVEYS.

    (a) In General.--The National Quality Council shall oversee the 
design and conduct of periodic surveys of health care consumers and 
plans to gather information concerning the quality measures established 
under sections 5002 and 5003. The surveys shall monitor consumer 
reaction to the implementation of this Act and, in coordination with 
relevant data from health plans and other sources, be designed to 
assess the impact of this Act both for the general population of the 
United States and for populations vulnerable to discrimination or to 
receiving inadequate care due to health status, demographic 
characteristics, or geographic location.
    (b) Survey Administration and Data Analysis.--The National Quality 
Council shall approve a standard design for the consumer surveys and 
sampling of relevant plan data described in subsection (a) which shall 
be administered by the Administrator of the Agency for Health Care 
Policy and Research or such other appropriate entity as the Council 
shall designate on a plan-by-plan and State-by-State basis. Sufficient 
consumer survey and plan data shall be collected and verified to 
provide for reliable and valid analysis. A State may add survey 
questions on quality measures of local interest to surveys conducted in 
the State. The plan-level survey shall include a subset of consumer 
survey questions related to consumer satisfaction, perceived health 
status, access, and such other survey items designated by the Council.
    (c) Sampling Strategies.--The National Quality Council shall 
approve sampling strategies under subsection (a) that ensure that 
appropriate survey samples adequately measure populations that are 
considered to be at risk of receiving inadequate health care or may be 
difficult to reach through consumer-sampling methods, including 
individuals who--
            (1) fail to enroll in a health plan;
            (2) resign from a plan; or
            (3) are vulnerable to discrimination or to receiving 
        inadequate care due to health status, demographic 
        characteristics, or geographic location.
    (d) Survey Integration.--To the extent feasible, the consumer and 
plan surveys developed under this section shall be integrated with 
existing Federal surveys.

SEC. 5005. EVALUATION AND REPORTING OF QUALITY PERFORMANCE.

    (a) Health Plan Reports.--Each State annually shall publish and 
make available to the public and Consumer Information and Advocacy 
Centers a performance report, in a standard format designated by the 
National Quality Council, outlining the performance of each health plan 
offered in the State with respect to the set of national measures of 
quality performance developed under sections 5002 and 5003. The report 
shall include--
            (1) the results of a smaller number of such measures for 
        health care providers if the available information is 
        statistically meaningful; and
            (2) the results of consumer surveys and an analysis of the 
        plan data collected in section 5004.
    (b) Consumer Report Cards.--The health plan reports under 
subsection (a) shall be summarized in a consumer report card as 
specified by the National Quality Council and made available by the 
State through the Consumer Information and Advocacy Centers to all 
individuals in the State.
    (c) Quality Reports.--The National Quality Council annually shall 
provide recommendations to the Congress, the National Health Benefits 
Board, and the Secretary in the form of a summary report that--
            (1) outlines in a standard format the performance of each 
        State;
            (2) discusses State-level and national trends relating to 
        health care quality; and
            (3) presents data for each State from health plan reports 
        and consumer surveys that were conducted during the year.

SEC. 5006. DEVELOPMENT AND DISSEMINATION OF PRACTICE GUIDELINES.

    The National Quality Council may advise the Secretary and the 
Administrator of the Agency for Health Care Policy and Research 
concerning priorities for the development and periodic review and 
updating of clinically relevant guidelines established under section 
912 of the Public Health Service Act.

SEC. 5007. RESEARCH ON HEALTH CARE QUALITY.

    The National Quality Council may make recommendations to the 
Secretary and the Administrator of the Agency for Health Care Policy 
and Research concerning priorities for research with respect to the 
quality, appropriateness, and effectiveness of health care.

SEC. 5008. QUALITY IMPROVEMENT FOUNDATIONS.

    (a) Establishment.--The National Quality Council shall oversee the 
operation of quality improvement foundations in performing the duties 
specified in subsection (c).
    (b) Structure and Membership.--
            (1) Grant process.--The Secretary, in consultation with the 
        Council, shall, through a competitive grantmaking process, 
        award grants for the establishment and operation of a quality 
        improvement foundation in each State or region (as defined in 
        paragraph (2)(B)).
            (2) Establishment of geographic areas.--The Secretary shall 
        establish throughout the United States geographic areas with 
        respect to which grants under this section will be made. In 
        establishing such areas, the Secretary shall take into account 
        the following criteria:
                    (A) State areas.--Each State shall generally be 
                designated as a geographic area for purposes of this 
                paragraph.
                    (B) Multi-state areas.--The Secretary may establish 
                geographic areas comprised of multiple contiguous 
                States only where the Secretary determines that volume 
                of activity or other relevant factors justifies such an 
                establishment.
            (3) Eligible applicants.--To be eligible to receive a grant 
        for the establishment of a quality improvement foundation under 
        paragraph (1), an applicant entity shall meet the following 
        conditions:
                    (A) Not-for-profit.--The entity shall be a not-for-
                profit entity operating within the State or region 
                involved.
                    (B) Board.--The entity shall have a board which 
                includes--
                            (i) representatives of health care 
                        providers from throughout the State or region 
                        involved, including both practicing providers 
                        and experts in the field of quality measurement 
                        and improvement, which together shall comprise 
                        at least one-fourth of the advisory board's 
                        membership;
                            (ii) at least one representative of 
                        Academic Health Centers or Schools of Public 
                        Health as defined in section 799 of the Public 
                        Health Service Act operating within the State 
                        or region involved (or operating outside of the 
                        State or region if no such Centers or schools 
                        operate within the State or region), which 
                        shall comprise up to one-fourth of the 
                        membership;
                            (iii) representatives of consumers residing 
                        within the State or region involved, who shall 
                        comprise one-fourth of the membership; and
                            (iv) representatives of purchasers of 
                        health care, health plans, and other interested 
                        parties residing within the State or region 
                        involved, and representatives of the State or 
                        States within a region.
                    (C) Staffing.--Each entity shall have sufficient, 
                competent staff of experts possessing the skills and 
                knowledge necessary to enable the foundation to perform 
                its duties.
    (c) Duties.--
            (1) In general.--Each quality improvement foundation shall 
        carry out the duties described in paragraph (2) for the State 
        or region in which the foundation is located. The foundation 
        shall establish a program of activities incorporating such 
        duties and shall be able to demonstrate the involvement of a 
        broad cross-section of the providers and health care 
        institutions throughout the State or region. A foundation may 
        apply for and conduct research described in section 5007.
            (2) Duties described.--The duties described in this 
        paragraph include the following:
                    (A) Collaboration with and technical assistance to 
                providers and health plans in ongoing efforts to 
                improve the quality of health care provided to 
                individuals in the State.
                    (B) Population-based monitoring of practice 
                patterns and patient outcomes,on an other than a case-
                by-case basis.
                    (C) Developing programs in lifetime learning for 
                health professionals to improve the quality of health 
                care by ensuring that health professionals remain 
                informed about new knowledge, acquire new skills, and 
                adopt new roles as technology and societal demands 
                change.
                    (D) Disseminating information about successful 
                quality improvement programs, practice guidelines, and 
                research findings, including information on innovative 
                staffing of health professionals.
                    (E) Assist in developing innovative patient 
                education systems that enhance patient involvement in 
                decisions relating to their health care, including an 
                emphasis on shared decisionmaking between patients and 
                health care providers.
                    (F) Issuing a report to the public regarding the 
                foundation's activities for the previous year including 
                areas of success during the previous year and areas for 
                opportunities in improving health outcomes for the 
                community, and the adoption of guidelines.
                    (G) Providing notice to the State or appropriate 
                entity if the foundation determines, after reasonable 
                opportunities for improvement, that the quality of a 
                provider or plan remains so inadequate that the 
                patients or enrollees of such a provider or plan are 
                subject to potential harm in utilizing the services of 
                such provider or services under such plan.
    (d) Restrictions on Disclosure.--The restrictions on disclosure of 
information under section 1160 of the Social Security Act shall apply 
to quality improvement foundations under this section, except that--
            (1) such foundations shall make data available to qualified 
        organizations and individuals for research for public benefit;
            (2) individuals and qualified organizations shall meet 
        standards consistent with the Public Health Service Act and 
        policies regarding the conduct of scientific research, 
        including provisions related to confidentiality, privacy, 
        protection of humans and shall pay reasonable costs for data; 
        and
            (3) such foundations may exchange information with other 
        quality improvement foundations.

SEC. 5009. CONSUMER INFORMATION AND ADVOCACY.

    (a) Establishment.--
            (1) In general.--The Secretary shall establish (by grant or 
        contract) and oversee a National Center of Consumer Information 
        and Advocacy to provide technical assistance, adequate training 
        and support to States and Consumer Information and Advocacy 
        Centers in each State (hereafter referred to in this section as 
        the ``Center'') to carry out the duties of this section, 
        including providing public education to consumers concerning 
        this Act.
            (2) Requirements for national center.--The National Center 
        of Consumer Information and Advocacy shall be a national non-
        profit organization with public education and health policy 
        expertise and shall have sufficient staff to carry out its 
        duties and a demonstrated ability to represent and work with a 
        broad spectrum of consumers, including vulnerable and 
        underserved populations.
            (3) State-based centers.--The Consumer Information and 
        Advocacy Center in each State shall disseminate State reports 
        on quality performance (as defined in section 5005(4)) and 
        health plan consumer report cards (as defined in section 
        5005(2)) in order to facilitate consumer choice of health 
        plans, perform public outreach and provide education and 
        assistance regarding consumer rights and responsibilities under 
        this Act, and assist consumers in dealing with problems that 
        arise with consumer purchasing cooperatives, large group 
        purchasers, health plans, insurance agencies, and health care 
        providers operating in such State.
    (b) Contracts.--
            (1) Solicitation.--The Secretary shall solicit contracts 
        from private non-profit organizations based in each State to 
        fulfill the duties of the Center in the State. The Secretary 
        may develop such regulations and guidelines as necessary to 
        oversee the process of considering and awarding competitive 
        contracts under this section. In awarding such contracts, the 
        Secretary shall consult with the National Center of Consumer 
        Information and Advocacy and shall, at a minimum, consider the 
        demonstrated ability of the organization to represent and work 
        with a broad spectrum of consumers, including vulnerable and 
        underserved populations.
            (2) Contract period.--The contract period for the State-
        based Consumer Information and Advocacy Centers and the 
        National Center of Consumer Information and Advocacy under this 
        section shall be not less than 4 years and not more than 7 
        years.
    (c) Functions and Responsibilities.--
            (1) Dissemination of reports.--Each Center shall 
        disseminate State reports on quality performance (as defined in 
        section 5005(2)) and health plan consumer report cards (as 
        defined in section 5005(2)) in order to facilitate consumer 
        choice of health plans.
            (2) Staff, offices and hotlines.--Each Center shall have 
        sufficient staff, local offices throughout the State, and a 
        State-wide toll-free hotline to carry out the advocacy duties 
        of this section. Through direct contact and the hotline, the 
        Center shall provide the following services in the State, 
        including appropriate assistance to individuals with limited 
        English language ability--
                    (A) outreach and education relating to consumer 
                rights and responsibilities under this Act, including 
                such rights and services available through the Center;
                    (B) assistance with enrollment in health plans, or 
                obtaining services or reimbursement from health plans;
                    (C) assistance with filing an application for 
                premium or cost sharing subsidies;
                    (D) information to enrollees about existing 
                grievance procedures and coordination with other 
                entities to assist in identifying, investigating, and 
                resolving enrollee grievances under this Act (including 
                grievances before State medical boards);
                    (E) referrals to appropriate local providers of 
                legal assistance and to appropriate State and Federal 
                agencies which may be of assistance to aggrieved 
                individuals in the area; and
                    (F) conduct public hearings no less frequently than 
                once a year to identify and address community health 
                care needs.
    (d) Access to Information.--The Secretary and the States shall 
ensure that, for purposes of carrying out the Center's duties under 
this section, the Center (and officers and employees of the Center in 
local offices) have appropriate access to necessary information subject 
to protections for confidentiality of enrollee information. Each Center 
shall have the capability to accept electronic quality data from plans 
as required under subtitle B.
    (e) Evaluation and Report.--The Secretary shall have the right to 
evaluate the quality and effectiveness of the organization in carrying 
out the functions specified in the contract. The Center shall report to 
the Secretary and the State annually on the nature and patterns of 
consumer complaints received in the Center and its local offices during 
each year and any policy, regulatory, and legislative recommendations 
for needed improvements together with a record of the activities of the 
Center.
    (f) Conflicts of Interest.--The Secretary shall ensure that no 
individual involved in the designation of a State Center, the Center 
itself, or of any delegate thereof is subject to a conflict of 
interest, including affiliation with (through ownership or common 
control) a health care facility, managed care organization, health 
insurance company or association of health care facilities or 
providers. No grantee under this section may have a direct involvement 
with the licensing, certification, or accreditation of a health care 
facility, a health care plan, or a provider of health care services .
    (g) Legal Counsel.--The Secretary shall ensure that adequate legal 
counsel is available, and is able, without conflict of interest, to 
assist the Center, and the local offices thereof in the performance of 
their official duties.
    (h) Coordination.--The Center shall coordinate its activities with 
all appropriate entities including Quality Improvement Foundations 
(established under section 5008) and the State agencies designated to 
carry out client advocacy activities pursuant to section 2106.
    (i) Construction.--Nothing in this section shall replace grievance 
procedures established or otherwise required under this Act.

SEC. 5010. AUTHORIZATION OF APPROPRIATIONS.

    (a) National Quality Council.--For the purpose of carrying out this 
subtitle with respect to the establishment and activities of the 
National Quality Council, there are authorized to be appropriated 
$4,000,000 for each of the fiscal years 1995 through 2000.
    (b) Quality Improvement Foundations.--For the purpose of carrying 
out section 5008, the are authorized to be appropriated $100,000,000 
for fiscal year 1996, $200,000,000 for fiscal year 1997, and 
$300,000,000 for each of the fiscal years 1998 through 2000.
    (c) Consumer Information and Advocacy Centers.--For the purpose of 
carrying out section 5009, the are authorized to be appropriated 
$100,000,000 for fiscal year 1996, $200,000,000 for fiscal year 1997, 
$300,000,000 for each of the fiscal years 1998 through 2000, of which 
$4,000,000 for each fiscal year shall be made available to the National 
Center of Consumer Information and Advocacy.

SEC. 5011. ROLE OF HEALTH PLANS IN QUALITY MANAGEMENT.

    Each health plan shall--
            (1) measure and disclose performance on quality measures as 
        designated by this Act;
            (2) furnish information required under subtitles B and of 
        this title and provide such other reports and information on 
        the quality of care delivered by health care providers who are 
        members of a provider network of the plan as may be required 
        under this Act; and
            (3) maintain quality management systems that--
                    (A) use the national measures of quality 
                performance developed by the National Quality Council 
                under section 5003; and
                    (B) measure the quality of health care furnished to 
                enrollees under the plan by all health care providers 
                of the plan where practical.

SEC. 5012. INFORMATION ON HEALTH CARE PROVIDERS.

    (a) State Obligations.--Each State shall make available to 
consumers, upon request, information concerning providers of health 
care services or supplies. Such information shall include--
            (1) the identity of any provider that has been convicted, 
        under Federal or State law, of a criminal offense relating to 
        fraud, corruption, breach of fiduciary responsibility, or other 
        financial misconduct in connection with the delivery of a 
        health care service or supply;
            (2) the identity of any provider that has been convicted, 
        under Federal or State law, of a criminal offense relating to 
        neglect or abuse of patients in connection with the delivery of 
        a health care service or supply;
            (3) the identity of any provider that has been convicted, 
        under Federal or State law, of a criminal offense relating to 
        the unlawful manufacture, distribution, prescription, or 
        dispensing of a controlled substance; and
            (4) the identity of any provider whose license to provide 
        health care services or supplies has been revoked, suspended, 
        restricted, or not renewed, by a State licensing authority for 
        reasons relating to the provider's professional competence, 
        professional performance, or financial integrity, or any 
        provider who surrendered such a license while a formal 
        disciplinary proceeding was pending before such an authority, 
        if the proceeding concerned the provider's professional 
        competence, professional performance, or financial integrity.
    (b) Public Availability of Information in National Practitioner 
Data Bank on Defendants, Awards, and Settlements.--
            (1) In general.--Section 427(a) of the Health Care Quality 
        Improvement Act (42 U.S.C. 11137 (a)) is amended by adding at 
        the end the following new sentence: ``Not later the January 1, 
        1996, the Secretary shall promulgate regulations under which 
        individuals seeking to enroll in health plans under the Health 
        Security Act shall be able to obtain information reported under 
        this part with respect to physicians and other licensed health 
        practitioners participating in such plans for whom information 
        has been reported under this part on repeated occasions.''.
            (2) Access to data bank for point-of-service contractors 
        under medicare.--Section 427(a) of such Act (42 U.S.C. 
        11137(a)) is amended--
                    (A) by inserting ``to sponsors of point-of-service 
                networks under section 1990 of the Social Security 
                Act,'', and
                    (B) in the heading, by inserting ``Related'' after 
                ``Care''.

SEC. 5013. CONFORMING AMENDMENTS TO PUBLIC HEALTH SERVICE ACT.

    Title IX of the Public Health Service Act is amended--
            (1) in section 903(a)(4) (42 U.S.C. 299a-1(a)(4)), by 
        inserting ``and Quality Improvement Foundations'' after 
        ``health agencies'';
            (2) in section 904(c)(1) (42 U.S.C. 299a-2(c)(1)), by 
        inserting ``the National Quality Council and'' after ``in 
        consultation with'';
            (3) in section 912(b)(4) (42 U.S.C. 299b-1(b)(4))--
                    (A) by inserting ``outcomes,'' before ``risks''; 
                and
                    (B) by inserting before the semicolon ``to the 
                extent feasible given the availability of unbiased, 
                reliable, and valid data'';
            (4) in section 914 (42 U.S.C. 299b-3)--
                    (A) in subsection (a)(2)(B)--
                            (i) by inserting ``the National Quality 
                        Council,'' after ``shall consult with''; and
                            (ii) by inserting before the period ``and 
                        relevant sections of the Health Security Act'';
                    (B) in subsection (c), by inserting ``Quality 
                Improvement Foundations and other'' after ``carried out 
                through''; and
                    (C) in subsection (f)--
                            (i) by striking ``to Administrator'' in the 
                        subsection heading;
                            (ii) by striking ``Administrator'' and 
                        inserting ``National Quality Council and the''; 
                        and
            (5) in section 927 (42 U.S.C. 299c-6), by adding at the end 
        thereof the following new paragraphs:
            ``(5) The term `National Quality Council' means the Council 
        established under section 5001 of the Health Security Act.
            ``(6) The term ``Quality Improvement Foundations'' means 
        the Foundations established under section 5008 of the Health 
        Security Act.''.

               Subtitle B--Administrative Simplification

                    PART 1--PURPOSE AND DEFINITIONS

SEC. 5101. PURPOSE.

    It is the purpose of this subtitle to improve the efficiency and 
effectiveness of the health care system, including the medicare program 
under title XVIII of the Social Security Act and the medicaid program 
under title XIX of such Act, by encouraging the development of a health 
information network through the establishment of standards and 
requirements for the electronic transmission of certain health 
information.

SEC. 5102. DEFINITIONS.

    For purposes of this subtitle:
            (1) Code set.--The term ``code set'' means any set of codes 
        used for encoding data elements, such as tables of terms, 
        medical concepts, medical diagnostic codes, or medical 
        procedure codes.
            (2) Coordination of benefits.--The term ``coordination of 
        benefits'' means determining and coordinating the financial 
        obligations of health plans when health care benefits are 
        payable under 2 or more health plans.
            (3) Health care provider.--The term ``health care 
        provider'' includes a provider of services (as defined in 
        section 1861(u) of the Social Security Act), a provider of 
        medical or other health services (as defined in section 1861(s) 
        of the Social Security Act), and any other person furnishing 
        health care services or supplies.
            (4) Health information.--The term ``health information'' 
        means any information, whether oral or recorded in any form or 
        medium that--
                    (A) is created or received by a health care 
                provider, health plan, health oversight agency (as 
                defined in section 5202), health researcher, public 
                health authority (as defined in section 5202), 
                employer, life insurer, school or university, or health 
                information network service certified under section 
                5141; and
                    (B) relates to the past, present, or future 
                physical or mental health or condition of an 
                individual, the provision of health care to an 
                individual, or the past, present, or future payment for 
                the provision of health care to an individual.
            (5) Health information network.--The term ``health 
        information network'' means the health information system that 
        is formed through the application of the requirements and 
        standards established under this subtitle.
            (6) Health information protection organization.--The term 
        ``health information protection organization'' means a private 
        entity or an entity operated by a State that accesses standard 
        data elements of health information through the health 
        information network, processes such information into non-
        identifiable health information, and may store such 
        information.
            (7) Health information network service.--The term ``health 
        information network service''--
                    (A) means a private entity or an entity operated by 
                a State that enters into contracts to--
                            (i) process or facilitate the processing of 
                        nonstandard data elements of health information 
                        into standard data elements;
                            (ii) provide the means by which persons are 
                        connected to the health information network for 
                        purposes of meeting the requirements of this 
                        subtitle, including the holding of standard 
                        data elements of health information;
                            (iii) provide authorized access to health 
                        information through the health information 
                        network; or
                            (iv) provide specific information 
                        processing services, such as automated 
                        coordination of benefits and claims transaction 
                        routing; and
                    (B) includes a health information protection 
                organization.
            (8) Health plan.--The term ``health plan'' has the meaning 
        given such term in section 1011(1)(A) except that such term 
        shall include clauses (iii), (iv), (v), (vi), and (viii) of 
        such section.
            (9) Non-identifiable health information.--The term ``non-
        identifiable health information'' means health information that 
        is not protected health information as defined in section 5202.
            (10) Health researcher.--The term ``health researcher'' 
        shall have the meaning given such term under section 5202.
            (11) Patient medical record information.--The term 
        ``patient medical record information'' means health information 
        derived from a clinical encounter that relates to the physical 
        or mental condition of an individual.
            (12) Standard.--The term ``standard'' when referring to an 
        information transaction or to data elements of health 
        information means the transaction or data elements meet any 
        standard adopted by the Secretary under part 2 that applies to 
        such information transaction or data elements.

    PART 2--STANDARDS FOR DATA ELEMENTS AND INFORMATION TRANSACTIONS

SEC. 5111. GENERAL REQUIREMENTS ON SECRETARY.

    (a) In General.--The Secretary shall adopt standards and 
modifications to standards under this subtitle that are--
            (1) consistent with the objective of reducing the costs of 
        providing and paying for health care; and
            (2) in use and generally accepted or developed or modified 
        by the standards setting organizations accredited by the 
        American National Standard Institute (ANSI).
    (b) Initial Standards.--The Secretary may develop an expedited 
process for the adoption of initial standards under this subtitle.
    (c) Failsafe.--If the Secretary is unable to adopt standards or 
modified standards in accordance with subsection (a) that meet the 
requirements of this subtitle--
            (1) the Secretary may develop or modify such standards and, 
        after providing public notice and after an adequate period for 
        public comment, adopt such standards; and
            (2) if the Secretary adopts standards under paragraph (1), 
        the Secretary shall submit a report to the appropriate 
        committees of Congress on the actions taken by the Secretary 
        under this subsection.
    (d) Paper Formats.--The Secretary may develop methods by which a 
person may use the standards adopted by the Secretary under this 
subtitle with respect to health information that is in written rather 
than electronic form.

SEC. 5112. STANDARDS FOR DATA ELEMENTS OF HEALTH INFORMATION.

    (a) In General.--The Secretary shall adopt standards necessary to 
make data elements of the following health information uniform and 
compatible for electronic transmission through the health information 
network:
            (1) the health information that is appropriate for 
        transmission in connection with transactions described in 
        subsections (a), (b), and (d) of section 5121;
            (2) the quality information required to be submitted by a 
        health plan under title I and subtitle A of this title; and
            (3) patient medical record information.
    (b) Additions.--The Secretary may make additions to the sets of 
data elements adopted under subsection (a) as the Secretary determines 
appropriate in a manner that minimizes the disruption and cost of 
compliance with such additions.
    (c) Certain Data Elements.--
            (1) Unique health identifiers.--The Secretary shall 
        establish a system to provide for a standard unique health 
        identifier for each individual, employer, health plan, and 
        health care provider for use in the health care system. The 
        personal health identifier for an individual shall be an 
        encrypted form of the social security account number assigned 
        to the individual by the Secretary under section 205(c)(2) of 
        the Social Security Act.
            (2) Code sets.--
                    (A) In general.--The Secretary, in consultation 
                with experts from the private sector and Federal 
                agencies, shall--
                            (i) select code sets for appropriate data 
                        elements from among the code sets that have 
                        been developed by private and public entities; 
                        or
                            (ii) establish code sets for such data 
                        elements if no code sets for the data elements 
                        have been developed.
                    (B) Distribution.--The Secretary shall establish 
                efficient and low-cost procedures for distribution of 
                code sets and modifications to such code sets under 
                section 5115(c).

SEC. 5113. INFORMATION TRANSACTION STANDARDS.

    (a) In General.--The Secretary shall adopt technical standards 
relating to the method by which data elements of health information 
that have been standardized under section 5112 may be transmitted 
electronically, including standards with respect to the format in which 
such data elements shall be transmitted.
    (b) Special Rule for Coordination of Benefits.--Any standards 
adopted by the Secretary under paragraph (1) that relate to 
coordination of benefits shall provide that a claim for reimbursement 
for medical services furnished is tested by an algorithm specified by 
the Secretary against all records of enrollment and eligibility for the 
individual who received such services to determine any primary and 
secondary obligors for payment.
    (c) Electronic Signature.--The Secretary, in coordination with the 
Secretary of Commerce, shall promulgate regulations specifying 
procedures for the electronic transmission and authentication of 
signatures, compliance with which will be deemed to satisfy State and 
Federal statutory requirements for written signatures with respect to 
information transactions required by this Act and written signatures on 
medical records and prescriptions.

SEC. 5114. STANDARDS RELATING TO WRITTEN CLAIMS SUBMITTED BY 
              INDIVIDUALS AND WRITTEN EXPLANATIONS OF BENEFITS.

    The Secretary shall adopt standard methods and formats which--
            (1) may be used by an individual to submit a written claim 
        when the individual's health care provider does not submit the 
        claim; and
            (2) shall be used by health plans to submit a written 
        explanation of benefits to an enrollee.

SEC. 5115. TIMETABLES FOR ADOPTION OF STANDARDS.

    (a) Initial Standards for Data Elements.--The Secretary shall adopt 
standards relating to--
            (1) the data elements for the information described in 
        section 5112(a)(1) not later than 9 months after the date of 
        the enactment of this subtitle (except in the case of standards 
        with respect to data elements for claims attachments which 
        shall be adopted not later than 24 months after the date of the 
        enactment of this subtitle);
            (2) the data elements for the information described in 
        section 5112(a)(2) not later than 9 months after the date of 
        the enactment of this subtitle;
            (3) data elements for patient medical record information 
        not earlier than 24 months and not later than 7 years after the 
        date of the enactment of this subtitle; and
            (4) any addition to a set of data elements, in conjunction 
        with making such an addition.
    (b) Initial Standards for Information Transactions.--The Secretary 
shall adopt standards relating to information transactions under 
section 5113 not later than 9 months after the date of the enactment of 
this subtitle (except in the case of standards for claims attachments 
which shall be adopted not later than 24 months after the date of the 
enactment of this subtitle).
    (c) Standards for Written Claims and Explanations of Benefits.--The 
Secretary shall adopt standard methods and formats described in section 
5114 not later than 9 months after the date of the enactment of this 
subtitle.
    (d) Modifications to Standards.--
            (1) In general.--Except as provided in paragraph (2), the 
        Secretary shall review the standards adopted under this 
        subtitle and shall adopt modified standards as determined 
        appropriate, but no more frequently than once every 6 months. 
        Any modification to standards shall be completed in a manner 
        which minimizes the disruption and cost of compliance.
            (2) Special rules.--
                    (A) Modifications during first 12-month period.--
                Except with respect to additions and modifications to 
                code sets under subparagraph (B), the Secretary shall 
                not adopt any modifications to standards adopted under 
                this subtitle during the 12-month period beginning on 
                the date such standards are adopted unless the 
                Secretary determines that a modification is necessary 
                in order to permit compliance with requirements 
                relating to the standards.
                    (B) Additions and modifications to code sets.--
                            (i) In general.--The Secretary shall ensure 
                        that procedures exist for the routine 
                        maintenance, testing, enhancement, and 
                        expansion of code sets to accommodate changes 
                        in biomedical science and health care delivery.
                            (ii) Additional Rules.--If a code set is 
                        modified under this subsection, the modified 
                        code set shall include instructions on how data 
                        elements that were encoded prior to the 
                        modification are to be converted or translated 
                        so as to preserve the value of the data 
                        elements. Any modification to a code set under 
                        this subsection shall be implemented in a 
                        manner that minimizes the disruption and cost 
                        of complying with such modification.
    (e) Evaluation of Standards.--The Secretary may establish a process 
to measure or verify the consistency of standards adopted or modified 
under this subtitle. Such process may include demonstration projects 
and analysis of the cost of implementing such standards and 
modifications.

     PART 3--REQUIREMENTS WITH RESPECT TO CERTAIN TRANSACTIONS AND 
                              INFORMATION

SEC. 5121. REQUIREMENTS WITH RESPECT TO CERTAIN TRANSACTIONS AND 
              INFORMATION.

    (a) Requirements on Plans and Providers Relating to Financial and 
Administrative Transactions.--If a health care provider or a health 
plan conducts any of the following transactions, such transactions 
shall be standard transactions and the information transmitted or 
received in connection with such transaction shall be in the form of 
standard data elements:
            (1) Claims (including coordination of benefits).
            (2) Claims attachments.
            (3) Responses to research inquiries by a health researcher.
            (4) Other transactions determined appropriate by the 
        Secretary consistent with the goal of reducing administrative 
        costs.
    (b) Requirement Only on Plans Relating to Financial and 
Administrative Transactions.--If a person desires to conduct any of the 
following transactions with a health plan as a standard transaction, 
the health plan shall conduct such standard transaction and the 
information transmitted or received in connection with such transaction 
shall be in the form of standard data elements:
            (1) Enrollment and disenrollment.
            (2) Eligibility.
            (3) Payment and remittance advice.
            (4) Premium payments.
            (5) First report of injury.
            (6) Claims status.
            (7) Referral certification and authorization.
            (8) Other transactions determined appropriate by the 
        Secretary consistent with the goal of reducing administrative 
        costs.
    (c) Requirement on Plans Relating to Quality Information.--Any 
quality information required to be submitted by a health plan under 
title I or subtitle A of this title shall be in the form of standard 
data elements and the transmission of such data shall be in the form of 
a standard transaction.
    (d) Requirement Only on Purchasing Cooperatives.--If a person 
desires to conduct any of the following transactions with a purchasing 
cooperative (as defined in section 1013(12)) as a standard transaction, 
the cooperative shall conduct such standard transaction and the 
information transmitted or received in connection with such transaction 
shall be in the form of standard data elements:
            (1) Enrollment and disenrollment.
            (2) Premium payments.
    (e) Requirement with Respect to Disclosure of Information.--
            (1) In general.--A health plan or health care provider 
        shall make the standard data elements transmitted or received 
        by such plan or provider in connection with the transactions 
        described in subsections (a), (b), and (c) or acquired under 
        section 5164(a) available for disclosure as authorized by this 
        subtitle.
            (2) Special rule.--In the case of a health care provider 
        that does not file claims, such provider shall be responsible 
        for making standard data elements for encounter information 
        available for disclosure as authorized by this subtitle.
    (f) Satisfaction of Requirements.--A health care provider, health 
plan, or consumer purchasing cooperative may satisfy the requirement 
imposed on such provider, plan, or cooperative under subsection (a), 
(b), (c), (d), or (e) by--
            (1) directly transmitting standard data elements;
            (2) submitting nonstandard data elements to a health 
        information network service certified under section 5141 for 
        processing into standard data elements and transmission; or
            (3) in the case of a provider, submitting data elements to 
        a plan which satisfies the requirements imposed on such 
        provider on the provider's behalf.
    (g) Timeliness.--A health care provider or health plan shall be 
determined to have satisfied a requirement imposed under this section 
only if the action required is completed in a timely manner, as 
determined by the Secretary. In setting standards for timeliness, the 
Secretary shall take into consideration the age and the amount of 
information being requested.

SEC. 5122. TIMETABLES FOR COMPLIANCE WITH REQUIREMENTS.

    (a) Initial Compliance.--
            (1) In general.--Not later than 12 months after the date on 
        which standards are adopted under part 2 with respect to a type 
        of transaction or data elements for a type of health 
        information, a health plan, health care provider, or purchasing 
        cooperative shall comply with the requirements of this subtitle 
        with respect to such transaction or information.
            (2) Additional data elements.--Not later than 12 months 
        after the date on which the Secretary adopts an addition to a 
        set of data elements for health information under part 2, a 
        health plan, health care provider, or purchasing cooperative 
        shall comply with the requirements of this subtitle using such 
        data elements.
    (b) Compliance with Modified Standards.--
            (1) In general.--If the Secretary adopts a modified 
        standard under part 2, a health plan, health care provider, or 
        purchasing cooperative shall be required to comply with the 
        modified standard at such time as the Secretary determines 
        appropriate taking into account the time needed to comply due 
        to the nature and extent of the modification.
            (2) Special rule.--In the case of modifications to 
        standards that do not occur within the 12-month period 
        beginning on the date such standards are adopted, the time 
        determined appropriate by the Secretary under paragraph (1) 
        shall be no sooner than the last day of the 90-day period 
        beginning on the date such modified standard is adopted and no 
        later than the last day of the 12 month period beginning on the 
        date such modified standard is adopted.

                  PART 4--ACCESSING HEALTH INFORMATION

SEC. 5131. ACCESSING HEALTH INFORMATION FOR AUTHORIZED PURPOSES.

    (a) In General.--The Secretary shall adopt technical standards for 
appropriate persons, including health plans, health care providers, 
health information network services certified under section 5141, 
health researchers, and Federal and State agencies, to locate and 
access the health information that is available through the health 
information network due to the requirements of this subtitle. Such 
technical standards shall ensure that any request to locate or access 
information shall be authorized under subtitle C.
    (b) Procurement Rule for Government Agencies.--
            (1) In general.--Health information protection 
        organizations certified under section 5141 shall make available 
        to a Federal or State agency pursuant to a Federal Acquisition 
        Regulation (or an equivalent State system), any non-
        identifiable health information that is requested by such 
        agency.
            (2) Certain information available at low cost.--If a health 
        information protection organization described in paragraph (1) 
        needs information from a health plan or health care provider in 
        order to comply with a request of a Federal or State agency 
        that is necessary to comply with a requirement under this Act, 
        such plan or provider shall make such information available to 
        such organization for a charge that does not exceed the 
        reasonable cost of transmitting the information. If requested, 
        a health information protection organization that receives 
        information under the preceding sentence must make such 
        information available to any other such organization that is 
        certified under section 5141 for a charge that does not exceed 
        the reasonable cost of transmitting the information.
    (c) Functional Separation.--The standards adopted by the Secretary 
under subsection (a) shall ensure that any health information disclosed 
under such subsection shall not, after such disclosure, be used or 
released for an administrative, regulatory, or law enforcement purpose 
unless such disclosure was made for such purpose.
    (d) Public Use Functions.--Nothing in this subtitle shall be 
construed to limit the authority of a Federal or State agency to make 
non-identifiable health information available for public use functions.

SEC. 5132. RESPONDING TO ACCESS REQUESTS.

    (a) In General.--The Secretary may adopt, and modify as 
appropriate, standards under which a health care provider or health 
plan shall respond to requests for access to health information 
consistent with this subtitle and subtitle C.
    (b) Standards Described.--The standards under subsection (a) shall 
provide--
            (1) for a standard format under which a provider or plan 
        will respond to each request either by satisfying the request 
        or responding with an explanation of the specific restriction 
        which results in a failure to satisfy the request; and
            (2) that any restrictions will not prevent a plan or 
        provider from responding to a request in a timely manner taking 
        into account the age and amount of the information being 
        requested.
    (c) Construction.--Nothing in this section shall be construed as 
permitting a health care provider or health plan to refuse to disclose 
any health information that is required to be disclosed by law.

SEC. 5133. LENGTH OF TIME INFORMATION SHOULD BE ACCESSIBLE.

    The Secretary shall adopt standards with respect to the length of 
time any standard data elements for a type of health information should 
be accessible through the health information network.

SEC. 5134. TIMETABLES FOR ADOPTION OF STANDARDS AND COMPLIANCE.

    (a) Initial Standards.--The Secretary shall adopt standards under 
this part not later than 9 months after the date of the enactment of 
this subtitle and such standards shall be effective upon adoption.
    (b) Modifications to Standards.--
            (1) In general.--Except as provided in paragraph (2), the 
        Secretary shall review the standards adopted under this part 
        and shall adopt modified standards as determined appropriate, 
        but no more frequently than once every 6 months. Any 
        modification to standards shall be completed in a manner which 
        minimizes the disruption and cost of compliance. Any 
        modifications to standards adopted under this part shall be 
        effective upon adoption.
            (2) Special rule.--The Secretary shall not adopt 
        modifications to any standards adopted under this part during 
        the 12-month period beginning on the date such standards are 
        adopted unless the Secretary determines that a modification is 
        necessary in order to permit compliance with the requirements 
        of this part.

   PART 5--STANDARDS AND CERTIFICATION FOR HEALTH INFORMATION NETWORK

SEC. 5141. STANDARDS AND CERTIFICATION FOR HEALTH INFORMATION NETWORK 
              SERVICES.

    (a) Standards for Operation.--The Secretary shall establish 
standards with respect to the operation of health information network 
services, including standards ensuring that--
            (1) such services develop, operate, and cooperate with one 
        another to form the health information network;
            (2) such services meet all of the requirements under 
        subtitle C that are applicable to such services;
            (3) such services make public information concerning their 
        performance, as measured by uniform indicators such as 
        accessibility, transaction responsiveness, administrative 
        efficiency, reliability, dependability, and any other indicator 
        determined appropriate by the Secretary;
            (4) such services have security procedures that are 
        consistent with the privacy requirements under subtitle C, 
        including secure methods of access to and transmission of data;
            (5) such services, if they are part of a larger 
        organization, have policies and procedures in place which 
        isolate their activities with respect to processing information 
        in a manner that prevents access to such information by such 
        larger organization.
    (b) Certification by the Secretary.--
            (1) Establishment.--Not later than 12 months after the date 
        of the enactment of this subtitle, the Secretary shall 
        establish a certification procedure for health information 
        network services which ensures that certified services are 
        qualified to meet the requirements of this subtitle and the 
        standards established by the Secretary under this section. Such 
        certification procedure shall be implemented in a manner that 
        minimizes the costs and delays of operations for such services.
            (2) Application.--Each entity desiring to be certified as a 
        health information network service shall apply to the Secretary 
        for certification in a form and manner determined appropriate 
        by the Secretary.
            (3) Audits and reports.--The procedure established under 
        paragraph (1) shall provide for audits by the Secretary and 
        reports by an entity certified under this section as the 
        Secretary determines appropriate in order to monitor such 
        entity's compliance with the requirements of this subtitle, 
        subtitle C, and the standards established by the Secretary 
        under this section.
            (4) Recertification.--A health information network service 
        must be recertified under this subsection at least every 3 
        years.
    (c) Loss of Certification.--
            (1) Mandatory termination.--Except as provided in paragraph 
        (3), if a health information network service violates a 
        requirement imposed on such service under subtitle C, its 
        certification under this section shall be terminated unless the 
        Secretary determines that appropriate corrective action has 
        been taken.
            (2) Discretionary termination.--If a health information 
        network service violates a requirement or standard imposed 
        under this subtitle and a penalty has been imposed under 
        section 5151, the Secretary shall review the certification of 
        such service and may terminate such certification.
            (3) Conditional certification--The Secretary may establish 
        a procedure under which a health information network service 
        may remain certified on a conditional basis if the service is 
        operating consistently with a plan intended to correct any 
        violations described in paragraphs (1) or (2). Such procedure 
        may provide for the appointment of a trustee to continue 
        operation of the service until the requirements for full 
        certification are met.
    (d) Certification by Private Entities.--The Secretary may designate 
private entities to conduct the certification procedures established by 
the Secretary under this section. A health information network service 
certified by such an entity in accordance with such designation shall 
be considered to be certified by the Secretary.

SEC. 5142. ENSURING AVAILABILITY OF INFORMATION.

    The Secretary shall establish a procedure under which a health plan 
or health care provider which does not have the ability to transmit 
standard data elements directly or does not have access to a health 
information network service certified under section 5141 shall be able 
to make health information available for disclosure as authorized by 
this subtitle.

                           PART 6--PENALTIES

SEC. 5151. GENERAL PENALTY FOR FAILURE TO COMPLY WITH REQUIREMENTS AND 
              STANDARDS.

    (a) In General.--Except as provided in subsection (b), the 
Secretary shall impose on any person that violates a requirement or 
standard imposed under this subtitle a penalty of not more than $1,000 
for each violation. The provisions of section 1128A of the Social 
Security Act (other than subsections (a) and (b) and the second 
sentence of subsection (f)) shall apply to the imposition of a civil 
money penalty under this subsection in the same manner as such 
provisions apply to the imposition of a penalty under section 1128A of 
such Act.
    (b) Limitations.--
            (1) Noncompliance not discovered exercising reasonable 
        diligence.--A penalty may not be imposed under subsection (a) 
        if it is established to the satisfaction of the Secretary that 
        the person liable for the penalty did not know, and by 
        exercising reasonable diligence would not have known, that such 
        person failed to comply with the requirement or standard 
        described in subsection (a).
            (2) Failures due to reasonable cause.--
                    (A) In general.--Except as provided in 
                subparagraphs (B) and (C), a penalty may not be imposed 
                under subsection (a) if--
                            (i) the failure to comply was due to 
                        reasonable cause and not to willful neglect; 
                        and
                            (ii) the failure to comply is corrected 
                        during the 30-day period beginning on the 1st 
                        date the person liable for the penalty knew, or 
                        by exercising reasonable diligence would have 
                        known, that the failure to comply occurred.
                    (B) Extension of period.--
                            (i) No penalty.--The period referred to in 
                        subparagraph (A)(ii) may be extended as 
                        determined appropriate by the Secretary based 
                        on the nature and extent of the failure to 
                        comply.
                            (ii) Assistance.--If the Secretary 
                        determines that a health plan, health care 
                        provider, or purchasing cooperative failed to 
                        comply because such person was unable to 
                        comply, the Secretary may provide technical 
                        assistance to such person. Such assistance 
                        shall be provided in any manner determined 
                        appropriate by the Secretary.
            (3) Reduction.--In the case of a failure to comply which is 
        due to reasonable cause and not to willful neglect, any penalty 
        under subsection (a) that is not entirely waived under 
        paragraph (2) may be waived to the extent that the payment of 
        such penalty would be excessive relative to the compliance 
        failure involved.

                    PART 7--MISCELLANEOUS PROVISIONS

SEC. 5161. IMPOSITION OF ADDITIONAL REQUIREMENTS.

    (a) Data Element Standards.--A person may not impose a standard on 
another person that is in addition to the standards adopted by the 
Secretary under section 5112 unless--
            (1) such person voluntarily agrees to such standard; or
            (2) a waiver is granted under subsection (c) to impose such 
        standard.
    (b) Transactions and Access Standards.--A person may not impose a 
standard on another person that is in addition to the standards adopted 
by the Secretary under section 5113 or 5131 unless such person 
voluntarily agrees to such standard.
    (c) Conditions for Waivers.--
            (1) In general.--A person may request a waiver from the 
        Secretary in order to require another person to comply with a 
        standard that is in addition to the standards adopted by the 
        Secretary under section 5112.
            (2) Consideration of waiver requests.--No waiver may be 
        granted unless the Secretary determines that the value of the 
        data to be exchanged for research or other purposes 
        significantly outweighs the administrative cost of the 
        additional standard taking into consideration the burden of the 
        timing of the imposition of the additional standard.
            (3) Anonymous reporting.--If a person attempts to impose a 
        standard in addition to the standards adopted by the Secretary 
        under section 5112, the person on whom such additional standard 
        is being imposed may contact the Secretary. The Secretary shall 
        develop a procedure under which the contacting person shall 
        remain anonymous. The Secretary shall notify the person 
        imposing the additional standard that the additional standard 
        may not be imposed unless the other person voluntarily agrees 
        to such standard or a waiver is obtained under this subsection.

SEC. 5162. EFFECT ON STATE LAW.

    (a) In General.--A provision, requirement, or standard under this 
subtitle shall supersede any contrary provision of State law, 
including--
            (1) a provision of State law that requires medical or 
        health plan records (including billing information) to be 
        maintained or transmitted in written rather than electronic 
        form, and
            (2) a provision of State law which provides for 
        requirements or standards that are more stringent than the 
        requirements or standards under this subtitle;
except where the Secretary determines that the provision is necessary 
to prevent fraud and abuse, with respect to controlled substances, or 
for other purposes.
    (b) Public Health Reporting.--Nothing in this subtitle shall be 
construed to invalidate or limit the authority, power, or procedures 
established under any law providing for the reporting of disease or 
injury, child abuse, birth, or death, public health surveillance, or 
public health investigation or intervention.

SEC. 5164. HEALTH INFORMATION CONTINUITY.

    (a) Information Held by Health Plans and Providers.--If a health 
plan or health care provider takes any action that would threaten the 
continued availability of the standard data elements of health 
information held by such plan or provider, such data elements shall be 
obtained by the State in which such plan or provider is located. The 
State shall ensure that such data elements are transferred to a health 
plan or health care provider in accordance with procedures established 
by the Secretary.
    (b) Information Held by Health Information Network Services.--If a 
health information network service certified under section 5141 loses 
its certified status or takes any action that would threaten the 
continued availability of the standard data elements of health 
information held by such service, such data elements shall be 
transferred to another health information network service certified 
under section 5141, as designated by the Secretary.

SEC. 5165. PROTECTION OF COMMERCIAL INFORMATION.

    In adopting standards under this subtitle, the Secretary shall not 
require disclosure of trade secrets and confidential commercial 
information by entities operating in the health information network 
except as required by law.

SEC. 5166. PAYMENT FOR HEALTH CARE SERVICES OR HEALTH PLAN PREMIUMS.

    Nothing in this subtitle shall be construed to prohibit payments 
for health care services or health plan premiums from being made by 
debit, credit, or other payment cards or numbers or other electronic 
payment means.

SEC. 5167. HEALTH SECURITY CARDS.

    (a) In General.--The Secretary shall establish standards relating 
to the form of health security cards issued by health plans and the 
information to be encoded electronically on such cards.
    (b) Form Described.--The standard form for a health security card 
shall be a card which--
            (1) is made of plastic or a similar durable material with a 
        useful life of at least 5 years;
            (2) is resistant to counterfeiting;
            (3) can store information that can be encoded and retrieved 
        electronically;
            (4) can be produced in a cost-effective manner and used in 
        all types of health care locations; and
            (5) specifies on its face the social security account 
        number assigned to the individual who is the cardholder by the 
        Secretary under section 205(c)(2) of the Social Security Act.
    (b) Information Described.--The information electronically encoded 
on a health security card shall include the identity of the individual 
to whom the card was issued, including such individual's personal 
health identifier specified under section 5112(c)(1), and may include 
any other information that the Secretary determines may be useful in 
order for the card to serve the purpose of easing access to and paying 
for health care services. A health plan shall make available to an 
individual cardholder, upon demand by such individual, a printed copy 
of all information electronically encoded on such individual's health 
security card.

SEC. 5168. MISUSE OF HEALTH SECURITY CARD OR PERSONAL HEALTH 
              IDENTIFIER.

    (a) Health Security Card.--A person who--
            (1) requires the display of, requires the use of, or uses a 
        health security card for any purpose other than obtaining or 
        paying for health care;
            (2) falsely makes, forges, counterfeits or alters a health 
        security card;
            (3) without lawful authority prints, photographs, or makes 
        any impression in the likeness of any health security card; or
            (4) sells, transfers, or otherwise delivers a false, 
        forged, counterfeited, or altered health security card knowing 
        that the card is false, forged, counterfeited, or altered;
shall be fined not more than $25,000, imprisoned not more than 2 years, 
or both.
    (b) Personal Health Identifier.--A person who requires the 
disclosure of, requires the use of, or uses an individual's personal 
health identifier for any purpose that is not authorized by the 
Secretary, shall be fined not more than $25,000, imprisoned not more 
than 2 years, or both.

SEC. 5169. DIRECT BILLING FOR CLINICAL LABORATORY SERVICES.

    (a) In General.--
            (1) Requirement.--Except as provided in paragraph (2), in 
        the case of a claim for payment for a clinical diagnostic 
        laboratory test for which payment may otherwise be made, 
        payment may be made only to the person who, or entity which, 
        performed or supervised the test.
            (2) Exception.--Payment for a clinical diagnostic 
        laboratory test may be made to a physician with whom the 
        physician who performed the test shares a practice.
    (b) Additional Exceptions.--The Secretary may, by regulation, 
establish exceptions to the requirement under subsection (a)(1) that 
are in addition to the exception under subsection (a)(2). In 
establishing such exceptions the Secretary shall take into account--
            (1) circumstances in which an individual's privacy might be 
        violated; or
            (2) the need for confidentiality on the part of the person 
        furnishing the test.

SEC. 5170. AUTHORIZATION OF APPROPRIATIONS.

    There are authorized to be appropriated such sums as may be 
necessary to carry out the purposes of this subtitle.

                  PART 8--ASSISTANCE TO THE SECRETARY

SEC. 5171. GENERAL REQUIREMENT ON SECRETARY.

    In complying with any requirements imposed under this subtitle, the 
Secretary shall rely on recommendations of the Health Information 
Advisory Committee established under section 5172 and shall consult 
with appropriate Federal agencies.

SEC. 5172. HEALTH INFORMATION ADVISORY COMMITTEE.

    (a) Establishment.--There is established a committee to be known as 
the Health Care Information Advisory Committee.
    (b) Duty.--
            (1) In general.--The committee shall--
                    (A) provide assistance to the Secretary in 
                complying with the requirements imposed on the 
                Secretary under this subtitle and subtitle C;
                    (B) be generally responsible for advising the 
                Secretary and the Congress on the status of the health 
                information network; and
                    (C) make recommendations to correct any problems 
                that may occur in the network's implementation and 
                ongoing operations and to refine and improve the 
                network.
            (2) Technical assistance.--In performing its duties under 
        this subsection, the committee shall receive technical 
        assistance from appropriate Federal agencies.
    (c) Membership.--
            (1) In general.--The committee shall consist of 15 members 
        to be appointed by the President not later than 60 days after 
        the date of the enactment of this subtitle. The President shall 
        designate 1 member as the Chair.
            (2) Expertise.--The membership of the committee shall 
        consist of individuals who are of recognized standing and 
        distinction and who possess the demonstrated capacity to 
        discharge the duties imposed on the committee.
            (3) Terms.--Each member of the committee shall be appointed 
        for a term of 5 years, except that the members first appointed 
        shall serve staggered terms such that the terms of no more than 
        3 members expire at one time.
            (4) Vacancies.--
                    (A) In general.--A vacancy on the committee shall 
                be filled in the manner in which the original 
                appointment was made and shall be subject to any 
                conditions which applied with respect to the original 
                appointment.
                    (B) Filling unexpired term.--An individual chosen 
                to fill a vacancy shall be appointed for the unexpired 
                term of the member replaced.
                    (C) Expiration of terms.--The term of any member 
                shall not expire before the date on which the member's 
                successor takes office.
            (5) Conflicts of interest.--Members of the committee shall 
        disclose upon appointment to the committee or at any subsequent 
        time that it may occur, conflicts of interest.
    (d) Meetings.--
            (1) In general.--Except as provided in paragraph (2), the 
        committee shall meet at the call of the Chair.
            (2) Initial meeting.--Not later than 30 days after the date 
        on which all members of the committee have been appointed, the 
        committee shall hold its first meeting.
            (3) Quorum.--A majority of the members of the committee 
        shall constitute a quorum, but a lesser number of members may 
        hold hearings.
    (e) Power To Hold Hearings.--The committee may hold such hearings, 
sit and act at such times and places, take such testimony, and receive 
such evidence as the committee considers advisable to carry out the 
purposes of this section.
    (f) Other Administrative Provisions.--Subparagraphs (C), (D), and 
(H) of section 1886(e)(6) of the Social Security Act shall apply to the 
committee in the same manner as they apply to the Prospective Payment 
Assessment Commission.
    (g) Reports.--
            (1) In general.--The committee shall annually prepare and 
        submit to Congress and the Secretary a report including at 
        least an analysis of--
                    (A) the status of the health information network 
                established under this subtitle, including whether the 
                network is fulfilling the purpose described in section 
                5101;
                    (B) the savings and costs of the network;
                    (C) the activities of health information network 
                services certified under section 5141, health care 
                providers, health plans, and other entities using the 
                network to exchange health information;
                    (D) the extent to which entities described in 
                subparagraph (C) are meeting the standards adopted 
                under this subtitle and working together to form an 
                integrated network that meets the needs of its users;
                    (E) the extent to which entities described in 
                subparagraph (C) are meeting the privacy and security 
                protections of subtitle C;
                    (F) the number and types of penalties assessed for 
                noncompliance with the standards adopted under this 
                subtitle;
                    (G) whether the Federal Government and State 
                Governments are receiving information of sufficient 
                quality to meet their responsibilities under the Health 
                Security Act;
                    (H) any problems with respect to implementation of 
                the network;
                    (I) the extent to which timetables under this 
                subtitle for the adoption and implementation of 
                standards are being met; and
                    (J) any legislative recommendations related to the 
                health information network.
            (2) Availability to the public.--Any information in the 
        report submitted to Congress under paragraph (1) shall be made 
        available to the public unless such information may not be 
        disclosed by law.
    (h) Duration.--Notwithstanding section 14(a) of the Federal 
Advisory Committee Act, the committee shall continue in existence until 
otherwise provided by law.
    (i) Authorization of Appropriations.--
            (1) In general.--There are authorized to be appropriated 
        such sums as may be necessary to carry out the purposes of this 
        section.
            (2) Availability.--Any sums appropriated under the 
        authorization contained in this subsection shall remain 
        available, without fiscal year limitation, until expended.

PART 9--DEMONSTRATION PROJECTS FOR COMMUNITY-BASED CLINICAL INFORMATION 
                                SYSTEMS

SEC. 5181. GRANTS FOR DEMONSTRATION PROJECTS.

    (a) In General.--The Secretary may make grants for demonstration 
projects to promote the development and use of electronically 
integrated community-based clinical information systems and 
computerized patient medical records.
    (b) Applications.--
            (1) Submission.--To apply for a grant under this part for 
        any fiscal year, an applicant shall submit an application to 
        the Secretary in accordance with the procedures established by 
        the Secretary.
            (2) Criteria for approval.--The Secretary may not approve 
        an application submitted under paragraph (1) unless the 
        application includes assurances satisfactory to the Secretary 
        regarding the following:
                    (A) Use of existing technology.--Funds received 
                under this part will be used to apply 
                telecommunications and information systems technology 
                that is in existence on the date the application is 
                submitted in a manner that improves the quality of 
                health care, reduces the costs of such care, and 
                protects the privacy and confidentiality of information 
                relating to the physical or mental condition of an 
                individual.
                    (B) Use of existing information systems.--Funds 
                received under this part will be used--
                            (i) to enhance telecommunications or 
                        information systems that are operating on the 
                        date the application is submitted;
                            (ii) to integrate telecommunications or 
                        information systems that are operating on the 
                        date the application is submitted; or
                            (iii) to connect additional users to 
                        telecommunications or information networks or 
                        systems that are operating on the date the 
                        application is submitted.
                    (C) Matching funds.--The applicant shall make 
                available funds for the demonstration project in an 
                amount that equals at least 20 percent of the cost of 
                the project.
    (c) Geographic Diversity.--In making any grants under this part, 
the Secretary shall, to the extent practicable, make grants to persons 
representing different geographic areas of the United States, including 
urban and rural areas.
    (d) Review and Sanctions.--The Secretary shall review at least 
annually the compliance of a person receiving a grant under this part 
with the provisions of this part. The Secretary shall establish a 
procedure for determining whether such a person has failed to comply 
substantially within the provisions of this part and the sanctions to 
be imposed for any such noncompliance.
    (e) Annual Report.--The Secretary shall submit an annual report to 
the President for transmittal to Congress containing a description of 
the activities carried out under this part.
    (g) Authorization of Appropriations.--There are authorized to be 
appropriated such sums as may be necessary to carry out the purposes of 
this section.

           PART 10--MEDICARE AND MEDICAID COVERAGE DATA BANK

SEC. 5191. REPEAL OF MEDICARE AND MEDICAID COVERAGE DATA BANK.

    (a) Repeal of Data Bank.--Section 1144 of the Social Security Act 
(42 U.S.C. 1320b-14), as added by section 13581 of the Omnibus Budget 
Reconciliation Act of 1993, is repealed.
    (b) Conforming Amendments.--
            (1) Medicare.--Section 1862(b)(5) of such Act (42 U.S.C. 
        1395y(b)(5)) is amended--
                    (A) in subparagraph (B), by striking ``the 
                information received under'' and all that follows and 
                inserting ``the information received under subparagraph 
                (A) for the purposes of carrying out this 
                subsection.''; and
                    (B) in subparagraph (C)(i), by striking 
                ``subparagraph (B)(i)'' and inserting ``subparagraph 
                (B)''.
            (2) Medicaid.--Section 1902(a)(25)(A)(i) of such Act (42 
        U.S.C. 1396(a)(25)(A)(i)) is amended by striking ``(including 
        the use of information collected by the Medicare and Medicaid 
        Coverage Data Bank under section 1144 and any additional 
        measures as specified'' and inserting ``(as specified''.
            (3) Conforming amendment related to data matches.--
        Subsection (a)(8)(B) of section 552a of title 5, United States 
        Code, is amended--
                    (A) in clause (v), by adding ``; or'' at the end;
                    (B) in clause (vi), by striking ``; or'' and 
                inserting a semicolon; and
                    (C) by striking clause (vii).
            (4) Conforming amendment to erisa.--
                    (A) Section 101 of the Employee Retirement Income 
                Security Act of 1974 (29 U.S.C. 1031) is amended--
                            (i) by striking subsection (f); and
                            (ii) by redesignating subsection (g) as 
                        subsection (f).
                    (B) Section 502(a) of such Act (29 U.S.C. 1132(a)) 
                is amended--
                            (i) in paragraph (6), by striking the 
                        semicolon at the end and inserting ``; or'';
                            (ii) in paragraph (7), by striking ``; or'' 
                        and inserting a period; and
                            (iii) by striking paragraph (8).
                    (C) Section 502(c) of such Act (29 U.S.C. 1132(c)) 
                is amended by striking paragraph (4).
                    (D) Section 502(e)(1) of such Act (29 U.S.C. 
                1132(e)(1)) is amended by striking ``fiduciary, or any 
                person referred to in section 101(f)(1)'' and inserting 
                ``or fiduciary''.

               Subtitle C--Privacy of Health Information

                    PART 1--FINDINGS AND DEFINITIONS

SEC. 5201. FINDINGS AND PURPOSES.

    (a) Findings.--The Congress finds as follows:
            (1) The improper disclosure of individually identifiable 
        health care information may cause significant harm to an 
        individual's interests in privacy, health care, and reputation 
        and may unfairly affect the ability of an individual to obtain 
        employment, education, insurance, and credit.
            (2) The movement of people and health care related 
        information across State lines, the availability of, access to, 
        and exchange of health care related information with Federally 
        funded health care systems, the medicare program under title 
        XVIII of the Social Security Act, and the medicaid program 
        under title XIX of such Act, through automated data banks and 
        networks, and the emergence of other multistate health care 
        providers and payors create a need for a uniform Federal law 
        governing the disclosure of health care information.
    (b) Purpose.--The purpose of this subtitle is to establish 
effective mechanisms to protect the privacy of individuals with respect 
to individually identifiable health care information that is created or 
maintained as part of health treatment, enrollment, payment, testing, 
or research processes.

SEC. 5202. DEFINITIONS.

    (a) Terms Relating to Protected Health Information.--In this 
subtitle:
            (1) Protected health information.--The term ``protected 
        health information'' means any information, including 
        demographic information collected from an individual, whether 
        oral or recorded in any form or medium, that--
                    (A) is created or received by a health care 
                provider, health plan, health oversight agency, health 
                researcher, public health authority, employer, life 
                insurer, school or university, or certified health 
                information network service; and
                    (B) relates to the past, present, or future 
                physical or mental health or condition of an 
                individual, the provision of health care to an 
                individual, or the past, present, or future payment for 
                the provision of health care to an individual, and--
                            (i) identifies an individual; or
                            (ii) with respect to which there is a 
                        reasonable basis to believe that the 
                        information can be used to identify an 
                        individual.
            (2) Disclose.--The term ``disclose'', when used with 
        respect to protected health information, means to provide 
        access to the information, but only if such access is provided 
        to a person other than the individual who is the subject of the 
        information.
    (b) Terms Relating to Health Care System Participants.--In this 
subtitle:
            (1) Health information trustee.--The term ``health 
        information trustee'' means--
                    (A) a health care provider, health plan, health 
                oversight agency, certified health information network 
                service, employer, life insurer, or school or 
                university insofar as it creates, receives, maintains, 
                uses, or transmits protected health information;
                    (B) any person who obtains protected health 
                information under section 5213, 5217, 5218, 5221, 5222, 
                5226, or 5231; and
                    (C) any employee or agent of a person covered under 
                subparagraph (A) or (B).
            (2) Health care.--The term ``health care''--
                    (A) means--
                            (i) a preventative, diagnostic, 
                        therapeutic, rehabilitative, maintenance, or 
                        palliative care, counseling, service, or 
                        procedure--
                                    (I) with respect to the physical or 
                                mental condition of an individual; or
                                    (II) affecting the structure or 
                                function of the human body or any part 
                                of the human body; or
                            (ii) any sale or dispensing of a drug, 
                        device, equipment, or other item to an 
                        individual, or for the use of an individual, 
                        pursuant to a prescription; but
                    (B) does not include any item or service that is 
                not furnished for the purpose of examining, 
                maintaining, or improving the health of an individual.
            (3) Health care provider.--The term ``health care 
        provider'' means a person who is licensed, certified, 
        registered, or otherwise authorized by law to provide an item 
        or service that constitutes health care in the ordinary course 
        of business or practice of a profession.
            (4) Health oversight agency.--The term ``health oversight 
        agency'' means a person who--
                    (A) performs or oversees the performance of an 
                assessment, evaluation, determination, or investigation 
                relating to the licensing, accreditation, or 
                certification of health care 
                providers; or
                    (B)(i) performs or oversees the performance of an 
                assessment, evaluation, determination, or investigation 
                relating to the effectiveness of, compliance with, or 
                applicability of legal, fiscal, medical, or scientific 
                standards or aspects of performance related to the 
                delivery of, or payment for, health care or relating to 
                health care fraud or fraudulent claims for payment 
                regarding health; and
                    (ii) is a public agency, acting on behalf of a 
                public agency, acting pursuant to a requirement of a 
                public agency, or carrying out activities under a 
                Federal or State law governing the assessment, 
                evaluation, determination, or investigation described 
                in clause (i).
            (5) Health plan.--The term ``health plan'' shall have the 
        meaning given such term under section 5102.
            (6) Health researcher.--The term ``health researcher'' 
        means a person who conducts a biomedical, public health, 
        epidemiological, health services, or health statistics research 
        project or a research project on social and behavioral factors 
        relating to health.
            (7) Institutional review board.--The term ``institutional 
        review board'' means--
                    (A) a board established in accordance with 
                regulations of the Secretary under section 491(a) of 
                the Public Health Service Act;
                    (B) a similar board established by the Secretary 
                for the protection of human subjects in research 
                conducted by the Secretary; or
                    (C) a similar board established under regulations 
                of a Federal Government authority other than the 
                Secretary.
            (8) Public health authority.--The term ``public health 
        authority'' means an authority or instrumentality of the United 
        States, a State, or a political subdivision of a State that is 
        (A) responsible for public health matters; and (B) engaged in 
        such activities as injury reporting, public health 
        surveillance, and public health investigation or intervention.
    (c) References to Certified Entities.--In this subtitle:
            (1) Certified health information network service.--The term 
        ``certified health information network service'' means a health 
        information service (as defined under section 5102) that is 
        certified under section 5141.
            (2) Certified health information protection organization.--
        The term ``certified health information protection 
        organization'' means a health information protection 
        organization (as defined in section 5102) that is certified 
        under section 5141.
    (d) Other Terms.--In this subtitle:
            (1) Individual representative.--The term ``individual 
        representative'' means any individual legally empowered to make 
        decisions concerning the provision of health care to an 
        individual (where the individual lacks the legal capacity under 
        State law to make such decisions) or the administrator or 
        executor of the estate of a deceased individual.
            (2) Law enforcement inquiry.--The term ``law enforcement 
        inquiry'' means an investigation or official proceeding 
        inquiring into whether there is a violation of, or failure to 
        comply with, any criminal or civil statute or any regulation, 
        rule, or order issued pursuant to such a statute.
            (3) Person.--The term ``person'' includes an authority of 
        the United States, a State, or a political subdivision of a 
        State.

                     PART 2--AUTHORIZED DISCLOSURES

                     Subpart A--General Provisions

SEC. 5206. GENERAL RULES REGARDING DISCLOSURE.

    (a) General Rule.--A health information trustee may disclose 
protected health information only for a purpose that is authorized 
under this subtitle.
    (b) Disclosure Within a Trustee.--A health information trustee may 
disclose protected health information to an officer, employee, or agent 
of the trustee, but only for a purpose that is compatible with and 
related to the purpose for which the information was collected or 
received by that trustee.
    (c) Scope of Disclosure.--
            (1) In general.--Every disclosure of protected health 
        information by a health information trustee shall be limited to 
        the minimum amount of information necessary to accomplish the 
        purpose for which the information is disclosed.
            (2) Regulations.--The Secretary, after notice and 
        opportunity for public comment, may issue regulations under 
        paragraph (1), which shall take into account the technical 
        capabilities of the record systems used to maintain protected 
        health information and the costs of limiting disclosure.
    (d) No General Requirement To Disclose.--Nothing in this subtitle 
that permits a disclosure of health information shall be construed to 
require such disclosure.
    (e) Use and Redisclosure of Information.--The protected health 
information received under a disclosure permitted by the subtitle may 
not be used or disclosed unless the use or disclosure is necessary to 
fulfill the purpose for which the information was obtained and is not 
otherwise prohibited by law. Protected health information about an 
individual that is disclosed under this subtitle may not be used in, or 
disclosed to any person for use in, any administrative, civil, or 
criminal action or investigation directed against the individual unless 
specifically permitted by this subtitle.
    (f) Identification of Disclosed Information as Protected 
Information.--
            (1) In general.--Except with respect to protected health 
        information that is disclosed under section 5213 and except as 
        provided in paragraph (2), a health information trustee may not 
        disclose protected health information unless such information 
        is clearly identified as protected health information that is 
        subject to this subtitle.
            (2) Routine disclosures subject to written agreement.--A 
        health information trustee who routinely discloses protected 
        health information to a person may satisfy the identification 
        requirement in paragraph (1) through a written agreement 
        between the trustee and the person with respect to the 
        protected health information.
    (g) Construction.--Nothing in this subtitle shall be construed to 
limit the ability of a health information trustee to charge a 
reasonable fee for the disclosure or reproduction of health 
information.
    (h) Information in Which Providers are Identified.--The Secretary, 
after notice and opportunity for public comment, may issue regulations 
protecting information identifying providers in order to promote the 
availability of health care services.

SEC. 5207. AUTHORIZATIONS FOR DISCLOSURE OF PROTECTED HEALTH 
              INFORMATION.

    (a) Written Authorizations.--A health information trustee may 
disclose protected health information pursuant to an authorization 
executed by the individual who is the subject of the information, if 
each of the following requirements is met:
            (1) Writing.--The authorization is in writing, signed by 
        the individual who is the subject of the information, and dated 
        on the date of such signature.
            (2) Separate form.--The authorization is not on a form used 
        to authorize or facilitate the provision of, or payment for, 
        health care.
            (3) Trustee described.--The trustee is specifically named 
        or generically described in the authorization as authorized to 
        disclose such information.
            (4) Recipient described.--The person to whom the 
        information is to be disclosed is specifically named or 
        generically described in the authorization as a person to whom 
        such information may be disclosed.
            (5) Statement of intended disclosures.--The authorization 
        contains an acknowledgment that the individual who is the 
        subject of the information has read a statement of the 
        disclosures that the person to receive the protected health 
        information intends to make, which statement shall be in 
        writing, on a form that is distinct from the authorization for 
        disclosure, and which statement must be received by the 
        individual authorizing the disclosure on or before such 
        authorization is executed.
            (6) Information described.--The information to be disclosed 
        is described in the authorization.
            (7) Expiration date specified.--The authorization specifies 
        a date or event upon which the authorization expires, which 
        shall not exceed 2 years from the date of the execution of the 
        authorization.
            (8) Authorization timely received.--The authorization is 
        received by the trustee during a period described in subsection 
        (c)(1).
            (9) Disclosure timely made.--The disclosure occurs during a 
        period described in subsection (c)(2).
    (b) Authorizations Requested in Connection With Provision of Health 
Care.--
            (1) In general.--A health information trustee may not 
        request that an individual provide to any other person an 
        authorization described in subsection (a) on a day on which--
                    (A) the trustee provides health care to the 
                individual requested to provide the authorization; or
                    (B) in the case of a trustee that is a health 
                facility, the individual is admitted into the facility 
                as a resident or inpatient in order to receive health 
                care.
            (2) Exception.--Paragraph (1) does not apply if a health 
        information trustee requests that an individual provide an 
        authorization described in subsection (a) for the purpose of 
        assisting the individual in obtaining counseling or social 
        services from a person other than the trustee.
    (c) Time Limitations on Authorizations.--
            (1) Receipt by trustee.--For purposes of subsection (a)(8), 
        an authorization is timely received if it is received by the 
        trustee during--
                    (A) the 1-year period beginning on the date on 
                which the authorization is signed under subsection 
                (a)(1), if the authorization permits the disclosure of 
                protected health information to a person who provides 
                health counseling or social services to individuals; or
                    (B) the 30-day period beginning on the date on 
                which the authorization is signed under subsection 
                (a)(1), if the authorization permits the disclosure of 
                protected health information to a person other than a 
                person described in subparagraph (A).
            (2) Disclosure by trustee.--For purposes of subsection 
        (a)(9), a disclosure is timely made if it occurs before the 
        date or event specified in the authorization upon which the 
        authorization expires.
    (d) Revocation or Amendment of Authorization.--
            (1) In general.--An individual may in writing revoke or 
        amend an authorization described in subsection (a), in whole or 
        in part, at any time, except when--
                    (A) disclosure of protected health information has 
                been authorized to permit validation of expenditures 
                for health care; or
                    (B) action has been taken in reliance on the 
                authorization.
            (2) Notice of revocation.--A health information trustee who 
        discloses protected health information pursuant to an 
        authorization that has been revoked shall not be subject to any 
        liability or penalty under this subtitle if--
                    (A) the reliance was in good faith;
                    (B) the trustee had no notice of the revocation; 
                and
                    (C) the disclosure was otherwise in accordance with 
                the requirements of this subtitle.
    (e) Deceased Individual.--The Secretary shall develop and establish 
through regulation a procedure for obtaining protected health 
information relating to a deceased individual when there is no 
individual representative for such individual.
    (f) Model Authorizations.--The Secretary, after notice and 
opportunity for public comment, shall develop and disseminate model 
written authorizations of the type described in subsection (a) and 
model statements of intended disclosures of the type described in 
subsection (a)(5).
    (g) Copy.--A health information trustee who discloses protected 
health information pursuant to an authorization under this section 
shall maintain a copy of the authorization.

SEC. 5208. CERTIFIED HEALTH INFORMATION NETWORK SERVICES.

    (a) In General.--A health information trustee may disclose 
protected health information to a certified health information network 
service acting as an agent of the trustee for any purpose permitted by 
this subtitle. Such a service, acting as an agent of a trustee, may 
disclose protected health information to another person as permitted 
under this subtitle to facilitate the completion of the purpose for 
which such information was disclosed to the service.
    (b) Certified Health Information Protection Organizations.--A 
health information trustee may disclose protected health information to 
a certified health information protection organization for the purpose 
of creating non-identifiable health information (as defined in section 
5102).

          Subpart B--Specific Disclosures Relating to Patient

SEC. 5211. DISCLOSURES FOR TREATMENT AND FINANCIAL AND ADMINISTRATIVE 
              TRANSACTIONS.

    (a) Health Care Treatment.--A health care provider, health plan, 
employer, or person who receives protected health information under 
section 5213, may disclose protected health information to a health 
care provider for the purpose of providing health care to an individual 
if the individual who is the subject of the information has not 
previously objected in writing to the disclosure.
    (b) Disclosure to Health Plans for Financial and Administrative 
Purposes.--A health care provider or employer may disclose protected 
health information to a health plan for the purpose of providing for 
the payment for, or reviewing the payment of, health care furnished to 
an individual.
    (c) Disclosure by Health Plans for Financial and Administrative 
Purposes.--A health plan may disclose protected health information to a 
health care provider or a health plan for the purpose of providing for 
the payment for, or reviewing the payment of, health care furnished to 
an individual.

SEC. 5212. NEXT OF KIN AND DIRECTORY INFORMATION.

    (a) Next of Kin.--A health care provider or person who receives 
protected health information under section 5213 may disclose protected 
health information to the next of kin, an individual representative of 
the individual who is the subject of the information, or an individual 
with whom that individual has a close personal relationship if--
            (1) the individual who is the subject of the information--
                    (A) has been notified of the individual's right to 
                object and has not objected to the disclosure;
                    (B) is not competent to be notified about the right 
                to object; or
                    (C) exigent circumstances exist such that it would 
                not be practicable to notify the individual of the 
                right to object; and
            (2) the information disclosed relates to health care 
        currently being provided to that individual.
    (b) Directory Information.--A health care provider and a person 
receiving protected health information under section 5213 may disclose 
protected health information to any person if--
            (1) the information does not reveal specific information 
        about the physical or mental condition of the individual who is 
        the subject of the information or health care provided to that 
        person;
            (2) the individual who is the subject of the information--
                    (A) has been notified of the individual's right to 
                object and has not objected to the disclosure;
                    (B) is not competent to be notified about the right 
                to object; or
                    (C) exigent circumstances exist such that it would 
                not be practicable to notify the individual of the 
                right to object; and
            (3) the information consists only of 1 or more of the 
        following items:
                    (A) The name of the individual who is the subject 
                of the information.
                    (B) If the individual who is the subject of the 
                information is receiving health care from a health care 
                provider on a premises controlled by the provider--
                            (i) the location of the individual on the 
                        premises; and
                            (ii) the general health status of the 
                        individual, described as critical, poor, fair, 
                        stable, or satisfactory or in terms denoting 
                        similar conditions.
    (d) Identification of Deceased Individual.--A health care provider, 
health plan, employer, or life insurer, may disclose protected health 
information if necessary to assist in the identification of a deceased 
individual.

SEC. 5213. EMERGENCY CIRCUMSTANCES.

    (a) In General.--A health care provider, health plan, employer, or 
person who receives protected health information under this section may 
disclose protected health information in emergency circumstances when 
necessary to protect the health or safety of an individual from 
imminent harm.
    (b) Scope of Disclosure.--The disclosure of protected health 
information under this section shall be limited to persons who need the 
information to take action to protect the health or safety of the 
individual.

   Subpart C--Disclosure for Oversight, Public Health, and Research 
                                Purposes

SEC. 5216. OVERSIGHT.

    (a) In General.--A health information trustee may disclose 
protected health information to a health oversight agency for an 
oversight function authorized by law.
    (b) Use in Action Against Individuals.--Notwithstanding section 
5206(e), protected health information about an individual that is 
disclosed under this section may be used in, or disclosed to any person 
for use in, any administrative, civil, or criminal action or 
investigation directed against the individual who is the subject of the 
information if the action or investigation arises out of and is 
directly related to receipt of health care or payment for health care 
or an action involving a fraudulent claim related to health.

SEC. 5217. PUBLIC HEALTH.

    A health care provider, health plan, public health authority, 
employer, or person who receives protected health information under 
section 5213 may disclose protected health information to a public 
health authority or other person authorized by law for use in a legally 
authorized--
            (1) disease or injury reporting;
            (2) public health surveillance; or
            (3) public health investigation or intervention.

SEC. 5218. HEALTH RESEARCH.

    (a) In General.--A health information trustee may disclose 
protected health information to a health researcher if an institutional 
review board determines that the research project engaged in by the 
health researcher--
            (1) requires use of the protected health information for 
        the effectiveness of the project; and
            (2) is of sufficient importance to outweigh the intrusion 
        into the privacy of the individual who is the subject of the 
        information that would result from the disclosure.
    (b) Research Requiring Direct Contact.--A health information 
trustee may disclose protected health information to a health 
researcher for a research project that includes direct contact with an 
individual who is the subject of protected health information if an 
institutional review board determines that--
            (1) the research project meets the requirements of 
        paragraphs (1) and (2) of subsection (a);
            (2) direct contact is necessary to accomplish the research 
        purpose; and
            (3) the direct contact will be made in a manner that 
        minimizes the risk of harm, embarrassment, or other adverse 
        consequences to the individual.
    (c) Use of Health Information Network.--
            (1) In general.--A health information trustee may disclose 
        protected health information to a health researcher using the 
        health information network (as defined in section 5102) only if 
        an institutional review board certified by the Secretary under 
        paragraph (2) determines that the research project engaged in 
        by the health researcher meets the requirements of this 
        section.
            (2) Certification of institutional review boards.--
                    (A) Regulations.--The Secretary, after notice and 
                opportunity for public comment, shall issue regulations 
                establishing certification requirements for 
                institutional review boards under this subtitle. Such 
                regulations shall be based on regulations issued under 
                section 491(a) of the Public Health Service Act and 
                shall ensure that institutional review boards certified 
                under this paragraph have the qualifications to access 
                and protect the confidentiality of research subjects.
                    (B) Certification.--The Secretary shall certify an 
                institutional review board that meets the certification 
                requirements established by the Secretary under 
                subparagraph (A).
    (d) Obligations of Recipient.--A person who receives protected 
health information pursuant to subsection (a)--
            (1) shall remove or destroy, at the earliest opportunity 
        consistent with the purposes of the project, information that 
        would enable an individual to be identified, unless--
                    (A) an institutional review board has determined 
                that there is a health or research justification for 
                retention of such identifiers; and
                    (B) there is an adequate plan to protect the 
                identifiers from disclosure that is inconsistent with 
                this section; and
            (2) shall use protected health information solely for 
        purposes of the health research project for which disclosure 
        was authorized under this section.

Subpart D--Disclosure For Judicial, Administrative, and Law Enforcement 
                                Purposes

SEC. 5221. JUDICIAL AND ADMINISTRATIVE PURPOSES.

    A health care provider, health plan, health oversight agency, or 
employer may disclose protected health information--
            (1) pursuant to the Federal Rules of Civil Procedure, the 
        Federal Rules of Criminal Procedure, or comparable rules of 
        other courts or administrative agencies in connection with 
        litigation or proceedings to which the individual who is the 
        subject of the information is a party and in which the 
        individual has placed the individual's physical or mental 
        condition in issue;
            (2) to a court, and to others ordered by a court, if the 
        protected health information is developed in response to a 
        court-ordered physical or mental examination; or
            (3) pursuant to a law requiring the reporting of specific 
        medical information to law enforcement authorities.

SEC. 5222. LAW ENFORCEMENT.

    (a) In General.--A health care provider, health plan, health 
oversight agency, employer, or person who receives protected health 
information under section 5213 may disclose protected health 
information to a law enforcement agency (other than a health oversight 
agency governed by section 5216) if the information is requested for 
use--
            (1) in an investigation or prosecution of a health 
        information trustee;
            (2) in the identification of a victim or witness in a law 
        enforcement inquiry; or
            (3) in connection with the investigation of criminal 
        activity committed against the trustee or on premises 
        controlled by the trustee.
    (b) Certification.--When a law enforcement agency (other than a 
health oversight agency) requests that a health information trustee 
disclose protected health information under this section, the law 
enforcement agency shall provide the trustee with a written 
certification that--
            (1) specifies the information requested;
            (2) states that the information is needed for a lawful 
        purpose under this section; and
            (3) is signed by a supervisory official of a rank 
        designated by the head of the agency.
    (c) Restrictions on Additional Disclosure.--Notwithstanding section 
5206(e), protected health information about an individual that is 
disclosed to a law enforcement agency under this section may be used 
in, or disclosed for, an administrative, civil, or criminal action or 
investigation against the individual if the action or investigation 
arises out of and is directly related to the action or investigation 
for which the information was obtained.

    Subpart E--Disclosure Pursuant to Government Subpoena or Warrant

SEC. 5226. GOVERNMENT SUBPOENAS AND WARRANTS.

    (a) In General.--A health care provider, health plan, health 
oversight agency, employer, or person who receives protected health 
information under section 5213 may disclose protected health 
information under this section if the disclosure is pursuant to--
            (1) a subpoena issued under the authority of a grand jury, 
        and the trustee is provided a written certification by the 
        grand jury seeking the information that the grand jury has 
        complied with the applicable access provisions of section 5227;
            (2) an administrative subpoena or a judicial subpoena or 
        warrant, and the trustee is provided a written certification by 
        the person seeking the information that the person has complied 
        with the applicable access provisions of section 5227; or
            (3) an administrative subpoena or a judicial subpoena or 
        warrant, and the disclosure otherwise meets the conditions of 
        section 5216, 5217, 5221, or 5222.
    (b) Restrictions on Additional Disclosure.--
            (1) Actions or investigations.--Notwithstanding section 
        5206(c), protected health information about an individual that 
        is received under subsection (a) may be disclosed for, or used 
        in, any administrative, civil, or criminal action or 
        investigation against the individual if the action or 
        investigation arises out of and is directly related to the 
        inquiry for which the information was obtained.
            (2) Special rule.--Protected health information about an 
        individual that is received under subsection (a)(3) may not be 
        disclosed by the recipient unless the recipient complies with 
        the conditions and restrictions on disclosure with which the 
        recipient would have been required to comply if the disclosure 
        had been made under section 5216, 5217, 5221, or 5222.

SEC. 5227. ACCESS PROCEDURES FOR LAW ENFORCEMENT SUBPOENAS AND 
              WARRANTS.

    (a) Probable Cause Requirement.--A government authority may not 
obtain protected health information about an individual under paragraph 
(1) or (2) of section 5226(a) for use in a law enforcement inquiry 
unless there is probable cause to believe that the information is 
relevant to a legitimate law enforcement inquiry being conducted by the 
government authority.
    (b) Warrants.--A government authority that obtains protected health 
information about an individual under circumstances described in 
subsection (a) and pursuant to a warrant shall, not later than 30 days 
after the date the warrant was executed, serve the individual with, or 
mail to the last known address of the individual, a notice that 
protected health information about the individual was so obtained, 
together with a notice of the individual's right to challenge the 
warrant in accordance with section 5228.
    (c) Subpoenas.--Except as provided in subsection (d), a government 
authority may not obtain protected health information about an 
individual under circumstances described in subsection (a) and pursuant 
to a subpoena unless a copy of the subpoena has been served on the 
individual on or before the date of return of the subpoena, together 
with a notice of the individual's right to challenge the subpoena in 
accordance with section 5228, and--
            (1) 15 days have passed since the date of service on the 
        individual and within that time period the individual has not 
        initiated a challenge in accordance with section 5228; or
            (2) disclosure is ordered by a court after challenge under 
        section 5228.
    (d) Application for Delay.--
            (1) In general.--A government authority may apply ex parte 
        and under seal to an appropriate court to delay (for an initial 
        period of not longer than 90 days) serving a notice or copy of 
        a subpoena required under subsection (b) or (c) with respect to 
        a law enforcement inquiry. The government authority may apply 
        to the court for extensions of the delay.
            (2) Reasons for delay.--An application for a delay, or 
        extension of a delay, under this subsection shall state, with 
        reasonable specificity, the reasons why the delay or extension 
        is being sought.
            (3) Ex parte order.--The court shall enter an ex parte 
        order delaying or extending the delay of notice, an order 
        prohibiting the disclosure of the request for, or disclosure 
        of, the protected health information, and an order requiring 
        the disclosure of the protected health information if the court 
        finds that--
                    (A) the inquiry being conducted is within the 
                lawful jurisdiction of the government authority seeking 
                the protected health information;
                    (B) there is probable cause to believe that the 
                protected health information being sought is relevant 
                to a legitimate law enforcement inquiry;
                    (C) the government authority's need for the 
                information outweighs the privacy interest of the 
                individual who is the subject of the information; and
                    (D) there is reasonable ground to believe that 
                receipt of notice by the individual will result in--
                            (i) endangering the life or physical safety 
                        of any individual;
                            (ii) flight from prosecution;
                            (iii) destruction of or tampering with 
                        evidence or the information being sought; or
                            (iv) intimidation of potential witnesses.

SEC. 5228. CHALLENGE PROCEDURES FOR LAW ENFORCEMENT WARRANTS AND 
              SUBPOENAS.

    (a) Motion To Quash.--Within 15 days after the date of service of a 
notice of execution or a copy of a subpoena of a government authority 
seeking protected health information about an individual under 
paragraph (1) or (2) of section 5226(a), the individual may file a 
motion to quash--
            (1) in the case of a State judicial warrant or subpoena, in 
        the court which issued the warrant or subpoena;
            (2) in the case of a warrant or subpoena issued under the 
        authority of a State that is not a State judicial warrant or 
        subpoena, in a court of competent jurisdiction; or
            (3) in the case of any other warrant or subpoena issued 
        under the authority of a Federal court or the United States, in 
        the United States district court for the district in which the 
        individual resides or in which the warrant or subpoena was 
        issued.
    (b) Copy.--A copy of the motion shall be served by the individual 
upon the government authority by registered or certified mail.
    (c) Proceedings.--The government authority may file with the court 
such papers, including affidavits and other sworn documents, as sustain 
the validity of the warrant or subpoena. The individual may file with 
the court reply papers in response to the government authority's 
filing. The court, upon the request of the individual or the government 
authority or both, may proceed in camera. The court may conduct such 
proceedings as it deems appropriate to rule on the motion, but shall 
endeavor to expedite its determination.
    (d) Standard for Decision.--A court may deny a motion under 
subsection (a) if it finds there is probable cause to believe the 
protected health information is relevant to a legitimate law 
enforcement inquiry being conducted by the government authority, unless 
the court finds the individual's privacy interest outweighs the 
government authority's need for the information. The individual shall 
have the burden of demonstrating that the individual's privacy interest 
outweighs the need by the government authority for the information.
    (e) Specific Considerations With Respect to Privacy Interest.--In 
reaching its determination, the court shall consider--
            (1) the particular purpose for which the information was 
        collected;
            (2) the degree to which disclosure of the information will 
        embarrass, injure, or invade the privacy of the individual;
            (3) the effect of the disclosure on the individual's future 
        health care;
            (4) the importance of the inquiry being conducted by the 
        government authority, and the importance of the information to 
        that inquiry; and
            (5) any other factor deemed relevant by the court.
    (f) Attorney's Fees.--In the case of a motion brought under 
subsection (a) in which the individual has substantially prevailed, the 
court may assess against the government authority a reasonable 
attorney's fee and other litigation costs (including expert's fees) 
reasonably incurred.
    (g) No Interlocutory Appeal.--A ruling denying a motion to quash 
under this section shall not be deemed to be a final order, and no 
interlocutory appeal may be taken therefrom by the individual. An 
appeal of such a ruling may be taken by the individual within such 
period of time as is provided by law as part of any appeal from a final 
order in any legal proceeding initiated against the individual arising 
out of or based upon the protected health information disclosed.

        Subpart F--Disclosure Pursuant to Private Party Subpoena

SEC. 5231. PRIVATE PARTY SUBPOENAS.

    A health care provider, health plan, employer, or person who 
receives protected health information under section 5213 may disclose 
protected health information under this section if the disclosure is 
pursuant to a subpoena issued on behalf of a private party who has 
complied with the access provisions of section 5232.

SEC. 5232. ACCESS PROCEDURES FOR PRIVATE PARTY SUBPOENAS.

    A private party may not obtain protected health information about 
an individual pursuant to a subpoena unless a copy of the subpoena 
together with a notice of the individual's right to challenge the 
subpoena in accordance with section 5233 has been served upon the 
individual on or before the date of return of the subpoena, and--
            (1) 15 days have passed since the date of service on the 
        individual, and within that time period the individual has not 
        initiated a challenge in accordance with section 5233; or
            (2) disclosure is ordered by a court under section 5233.

SEC. 5233. CHALLENGE PROCEDURES FOR PRIVATE PARTY SUBPOENAS.

    (a) Motion To Quash Subpoena.--Within 15 days after service of a 
copy of the subpoena seeking protected health information under section 
5231, the individual who is the subject of the protected health 
information may file in any court of competent jurisdiction a motion to 
quash the subpoena and serve a copy of the motion on the person seeking 
the information.
    (b) Standard for Decision.--The court shall grant a motion under 
subsection (a) unless the respondent demonstrates that--
            (1) there is reasonable ground to believe the information 
        is relevant to a lawsuit or other judicial or administrative 
        proceeding; and
            (2) the need of the respondent for the information 
        outweighs the privacy interest of the individual.
    (c) Specific Considerations With Respect to Privacy Interest.--In 
determining under subsection (b) whether the need of the respondent for 
the information outweighs the privacy interest of the individual, the 
court shall consider--
            (1) the particular purpose for which the information was 
        collected;
            (2) the degree to which disclosure of the information would 
        embarrass, injure, or invade the privacy of the individual;
            (3) the effect of the disclosure on the individual's future 
        health care;
            (4) the importance of the information to the lawsuit or 
        proceeding; and
            (5) any other relevant factor.
    (d) Attorney's Fees.--In the case of a motion brought under 
subsection (a) in which the individual has substantially prevailed, the 
court may assess against the respondent a reasonable attorney's fee and 
other litigation costs and expenses (including expert's fees) 
reasonably incurred.

     PART 3--PROCEDURES FOR ENSURING SECURITY OF PROTECTED HEALTH 
                              INFORMATION

                 Subpart A--Establishment of Safeguards

SEC. 5236. ESTABLISHMENT OF SAFEGUARDS.

    (a) In General.--A health information trustee shall establish and 
maintain appropriate administrative, technical, and physical 
safeguards--
            (1) to ensure the integrity and confidentiality of 
        protected health information created or received by the 
        trustee; and
            (2) to protect against any anticipated threats or hazards 
        to the security or integrity of such information.
    (b) Regulations.--The Secretary shall promulgate regulations 
regarding security measures for protected health information.

SEC. 5237. ACCOUNTING FOR DISCLOSURES.

    (a) In General.--
            (1) Requirement to create or maintain record.--A health 
        information trustee shall create and maintain, with respect to 
        any protected health information disclosed in exceptional 
        circumstances (as described in paragraph (2)), a record of--
                    (A) the date and purpose of the disclosure;
                    (B) the name of the person to whom or to which the 
                disclosure was made;
                    (C) the address of the person to whom or to which 
                the disclosure was made or the location to which the 
                disclosure was made; and
                    (D) the information disclosed, if the recording of 
                the information disclosed is practicable, taking into 
                account the technical capabilities of the system used 
                to maintain the record and the costs of such 
                maintenance.
            (2) Exceptional circumstances described.--For purposes of 
        paragraph (1) protected health information is disclosed in 
        exceptional circumstances if the disclosure--
                    (A) is not a routine part of doing business, as 
                determined in accordance with guidelines promulgated by 
                the Secretary; or
                    (B) is permitted under sections 5213 and 5217.
    (b) Disclosure Record Part of Information.--A record created and 
maintained under paragraph (a) shall be maintained as part of the 
protected health information to which the record pertains.

 Subpart B--Review of Protected Health Information By Subjects of the 
                              Information

SEC. 5241. INSPECTION OF PROTECTED HEALTH INFORMATION.

    (a) In General.--Except as provided in subsection (c), a health 
care provider or health plan--
            (1) shall permit an individual who is the subject of 
        protected health information to inspect any such information 
        that the provider or plan maintains;
            (2) shall permit the individual to have a copy of the 
        information;
            (3) shall permit a person who has been designated in 
        writing by the individual who is the subject of the information 
        to inspect, or to have a copy of, the information on behalf of 
        the individual or to accompany the individual during the 
        inspection; and
            (4) may offer to explain or interpret information that is 
        inspected or copied under this subsection.
    (b) Additional Requests.--Except as provided in subsection (c), a 
health plan or health care provider shall, upon written request of an 
individual--
            (1) determine the identity of previous providers to the 
        individual; and
            (2) obtain protected health information regarding the 
        individual.
    (c) Exceptions.--A health care provider or health plan is not 
required by this section to permit inspection or copying of protected 
health information if any of the following conditions apply:
            (1) Mental health treatment notes.--The information 
        consists of psychiatric, psychological, or mental health 
        treatment notes, and the provider or plan determines, based on 
        reasonable medical judgment, that inspection or copying of the 
        notes would cause sufficient harm to the individual who is the 
        subject of the notes so as to outweigh the desirability of 
        permitting access, and the provider or plan has not disclosed 
        the notes to any person not directly engaged in treating the 
        individual, except with the authorization of the individual or 
        under compulsion of law.
            (2) Information about others.--The information relates to 
        an individual other than the individual seeking to inspect or 
        have a copy of the information and the provider or plan 
        determines, based on reasonable medical judgment, that 
        inspection or copying of the information would cause sufficient 
        harm to 1 or both of the individuals so as to outweigh the 
        desirability of permitting access.
            (3) Endangerment to life or safety.--The provider or plan 
        determines that disclosure of the information could reasonably 
        be expected to endanger the life or physical safety of any 
        individual.
            (4) Confidential source.--The information identifies or 
        could reasonably lead to the identification of a person (other 
        than a health care provider) who provided information under a 
        promise of confidentiality to a health care provider concerning 
        the individual who is the subject of the information.
            (5) Administrative purposes.--The information--
                    (A) is used by the provider or plan solely for 
                administrative purposes and not in the provision of 
                health care to the individual who is the subject of the 
                information; and
                    (B) has not been disclosed by the provider or plan 
                to any other person.
    (d) Inspection and Copying of Segregable Portion.--A health care 
provider or health plan shall permit inspection and copying under 
subsection (a) of any reasonably segregable portion of a record after 
deletion of any portion that is exempt under subsection (c).
    (e) Conditions.--A health care provider or health plan may require 
a written request for the inspection and copying of protected health 
information under this subsection. The health care provider or health 
plan may require a cost reimbursement for such inspection and copying.
    (f) Statement of Reasons for Denial.--If a health care provider or 
health plan denies a request for inspection or copying under this 
section, the provider or plan shall provide the individual who made the 
request (or the individual's designated representative) with a written 
statement of the reasons for the denial.
    (g) Deadline.--A health care provider or health plan shall comply 
with or deny a request for inspection or copying of protected health 
information under this section within the 30-day period beginning on 
the date on which the provider or plan receives the request.

SEC. 5242. AMENDMENT OF PROTECTED HEALTH INFORMATION.

    (a) In General.--A health care provider or health plan shall, 
within the 45-day period beginning on the date on which the provider or 
plan receives from an individual a written request that the provider or 
plan correct or amend the information--
            (1) make the correction or amendment requested;
            (2) inform the individual of the correction or amendment 
        that has been made; and
            (3) inform any person who is identified by the individual, 
        who is not an officer, employee or agent of the provider or 
        plan, and to whom the uncorrected or unamended portion of the 
        information was previously disclosed, of the correction or 
        amendment that has been made.
    (b) Refusal To Correct.--If the provider or plan refuses to make 
the corrections, the provider or plan shall inform the individual of--
            (1) the reasons for the refusal of the provider or plan to 
        make the correction or amendment;
            (2) any procedures for further review of the refusal; and
            (3) the individual's right to file with the provider or 
        plan a concise statement setting forth the requested correction 
        or amendment and the individual's reasons for disagreeing with 
        the refusal of the provider or plan.
    (c) Bases for Request To Correct or Amend.--An individual may 
request correction or amendment of protected health information about 
the individual under paragraph (a) if the information is not timely, 
accurate, relevant to the system of records, or complete.
    (d) Statement of Disagreement.--After an individual has filed a 
statement of disagreement under paragraph (b)(3), the provider or plan, 
in any subsequent disclosure of the disputed portion of the 
information--
            (1) shall include a copy of the individual's statement; and
            (2) may include a concise statement of the reasons of the 
        provider or plan for not making the requested correction or 
        amendment.
    (e) Rule of Construction.--This section shall not be construed to 
require a health care provider or health plan to conduct a formal, 
informal, or other hearing or proceeding concerning a request for a 
correction or amendment to protected health information the provider or 
plan maintains.
    (f) Correction.--For purposes of paragraph (a), a correction is 
deemed to have been made to protected health information when 
information that is not timely, accurate, relevant to the system of 
records, or complete is clearly marked as incorrect or when 
supplementary correct information is made part of the information.

SEC. 5243. NOTICE OF INFORMATION PRACTICES.

    (a) Preparation of Written Notice.--A health care provider or 
health plan shall prepare a written notice of information practices 
describing the following:
            (1) Personal rights of an individual.--The rights under 
        this subpart of an individual who is the subject of protected 
        health information, including the right to inspect and copy 
        such information and the right to seek amendments to such 
        information, and the procedures for authorizing disclosures of 
        protected health information and for revoking such 
        authorizations.
            (2) Procedures of provider or plan.--The procedures 
        established by the provider or plan for the exercise of the 
        rights of individuals about whom protected health information 
        is maintained.
            (3) Authorized disclosures.--The disclosures of protected 
        health information that are authorized.
    (b) Dissemination of Notice.--A health care provider or health 
plan--
            (1) shall, upon request, provide any individual with a copy 
        of the notice of information practices described in subsection 
        (a); and
            (2) shall make reasonable efforts to inform individuals in 
        a clear and conspicuous manner of the existence and 
        availability of the notice.
    (c) Model Notice.--The Secretary, after notice and opportunity for 
public comment, shall develop and disseminate a model notice of 
information practices for use by health care providers and health plans 
under this section.

            Subpart C--Standards for Electronic Disclosures

SEC. 5246. STANDARDS FOR ELECTRONIC DISCLOSURES.

    The Secretary shall promulgate standards for disclosing protected 
health information in accordance with this subtitle in electronic form. 
Such standards shall include standards relating to the creation, 
transmission, receipt, and maintenance, of any written document 
required or authorized under this subtitle.

                           PART 4--SANCTIONS

            Subpart A--No Sanctions for Permissible Actions

SEC. 5251. NO LIABILITY FOR PERMISSIBLE DISCLOSURES.

    A health information trustee who makes a disclosure of protected 
health information about an individual that is permitted by this 
subtitle shall not be liable to the individual for the disclosure under 
common law.

SEC. 5252. NO LIABILITY FOR INSTITUTIONAL REVIEW BOARD DETERMINATIONS.

    If the members of an institutional review board make a 
determination in good faith that--
            (1) a health research project is of sufficient importance 
        to outweigh the intrusion into the privacy of an individual; 
        and
            (2) the effectiveness of the project requires use of 
        protected health information,
the members, the board, and the parent institution of the board shall 
not be liable to the individual as a result of the determination.

SEC. 5253. RELIANCE ON CERTIFIED ENTITY.

    If a health information trustee contracts with a certified health 
information network service to make a disclosure of any protected 
health information on behalf of such trustee in accordance with this 
subtitle and such service makes a disclosure of such information that 
is in violation of this subtitle, the trustee shall not be liable to 
the individual who is the subject of the information for such unlawful 
disclosure.

                       Subpart B--Civil Sanctions

SEC. 5256. CIVIL PENALTY.

    (a) Violation.--Any health information trustee who the Secretary 
determines has substantially failed to comply with this subtitle shall 
be subject, in addition to any other penalties that may be prescribed 
by law, to a civil penalty of not more than $10,000 for each such 
violation.
    (b) Procedures for Imposition of Penalties.--Section 1128A of the 
Social Security Act, other than subsections (a) and (b) and the second 
sentence of subsection (f) of that section, shall apply to the 
imposition of a civil monetary penalty under this section in the same 
manner as such provisions apply with respect to the imposition of a 
penalty under section 1128A of such Act.

SEC. 5257. CIVIL ACTION.

    (a) In General.--An individual who is aggrieved by conduct in 
violation of this subtitle may bring a civil action to recover--
            (1) the greater of actual damages or liquidated damages of 
        $5,000;
            (2) punitive damages;
            (3) a reasonable attorney's fee and expenses of litigation;
            (4) costs of litigation; and
            (5) such preliminary and equitable relief as the court 
        determines to be appropriate.
    (b) Limitation.--No action may be commenced under this section more 
than 3 years after the date on which the violation was or should 
reasonably have been discovered.

                     Subpart C--Criminal Sanctions

SEC. 5261. WRONGFUL DISCLOSURE OF PROTECTED HEALTH INFORMATION.

    (a) Offense.--A person who knowingly--
            (1) obtains protected health information relating to an 
        individual in violation of this subtitle; or
            (2) discloses protected health information to another 
        person in violation of this subtitle,
shall be punished as provided in subsection (b).
    (b) Penalties.--A person described in subsection (a) shall--
            (1) be fined not more than $50,000, imprisoned not more 
        than 1 year, or both;
            (2) if the offense is committed under false pretenses, be 
        fined not more than $100,000, imprisoned not more than 5 years, 
        or both; and
            (3) if the offense is committed with intent to sell, 
        transfer, or use protected health information for commercial 
        advantage, personal gain, or malicious harm, fined not more 
        than $250,000, imprisoned not more than 10 years, or both.

                   PART 5--ADMINISTRATIVE PROVISIONS

SEC. 5266. RELATIONSHIP TO OTHER LAWS.

    (a) State Law.--Except as provided in subsections (b), (c), and 
(d), this subtitle preempts State law.
    (b) Laws Relating to Public or Mental Health.--Nothing in this 
subtitle shall be construed to preempt or operate to the exclusion of 
any State law relating to public health or mental health that prevents 
or regulates disclosure of protected health information otherwise 
allowed under this subtitle.
    (c) Privileges.--Nothing in this subtitle is intended to preempt or 
modify State common or statutory law to the extent such law concerns a 
privilege of a witness or person in a court of the State. This subtitle 
does not supersede or modify Federal common or statutory law to the 
extent such law concerns a privilege of a witness or person in a court 
of the United States. Authorizations pursuant to section 5207 shall not 
be construed as a waiver of any such privilege.
    (d) Certain Duties Under State or Federal Law.--This subtitle shall 
not be construed to preempt, supersede, or modify the operation of--
            (1) any law that provides for the reporting of vital 
        statistics such as birth or death information;
            (2) any law requiring the reporting of abuse or neglect 
        information about any individual;
            (3) subpart II of part E of title XXVI of the Public Health 
        Service Act (relating to notifications of emergency response 
        employees of possible exposure to infectious diseases); or
            (4) any Federal law or regulation governing confidentiality 
        of alcohol and drug patient records.

SEC. 5267. RIGHTS OF INCOMPETENTS.

    (a) Effect of Declaration of Incompetence.--Except as provided in 
section 5268, if an individual has been declared to be incompetent by a 
court of competent jurisdiction, the rights of the individual under 
this subtitle shall be exercised and discharged in the best interests 
of the individual through the individual's representative.
    (b) No Court Declaration.--Except as provided in section 5268, if a 
health care provider determines that an individual, who has not been 
declared to be incompetent by a court of competent jurisdiction, 
suffers from a medical condition that prevents the individual from 
acting knowingly or effectively on the individual's own behalf, the 
right of the individual to authorize disclosure may be exercised and 
discharged in the best interest of the individual by the individual's 
representative.

SEC. 5268. EXERCISE OF RIGHTS.

    (a) Individuals Who Are 18 or Legally Capable.--In the case of an 
individual--
            (1) who is 18 years of age or older, all rights of the 
        individual shall be exercised by the individual; or
            (2) who, acting alone, has the legal right, as determined 
        by State law, to apply for and obtain a type of medical 
        examination, care, or treatment and who has sought such 
        examination, care, or treatment, the individual shall exercise 
        all rights of an individual under this subtitle with respect to 
        protected health information relating to such examination, 
        care, or treatment.
    (b) Individuals Under 18.--Except as provided in subsection (a)(2), 
in the case of an individual who is--
            (1) under 14 years of age, all the individual's rights 
        under this subtitle shall be exercised through the parent or 
        legal guardian of the individual; or
            (2) 14, 15, 16, or 17 years of age, the rights of 
        inspection and amendment, and the right to authorize disclosure 
        of protected health information of the individual may be 
        exercised either by the individual or by the parent or legal 
        guardian of the individual.

  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.

    (a) In General.--Not later than January 1, 1995, the Secretary and 
the Attorney General of the United States shall establish a joint 
program--
            (1) to coordinate Federal, State, and local law enforcement 
        programs to control fraud and abuse affecting Federal outlay 
        programs,
            (2) to conduct investigations (including consumer complaint 
        investigations), audits, evaluations, and inspections relating 
        to the delivery of and payment for health care in the United 
        States, and
            (3) to facilitate the enforcement of this subtitle and 
        other statutes applicable to health care fraud and abuse.
    (b) Coordination With Law Enforcement Agencies.--In carrying out 
the program under subsection (a), the Secretary and the Attorney 
General shall consult with, and arrange for the sharing of data and 
resources with Federal, State and local law enforcement agencies, State 
Medicaid Fraud Control Units, and State agencies responsible for the 
licensing and certification of health care providers.
    (c) Coordination With Purchasing Cooperatives and Certified Health 
Plans.--In carrying out the program under subsection (a), the Secretary 
and the Attorney General shall consult with, and arrange for the 
sharing of data with representatives of purchasing cooperatives and 
certified standard health plans.
    (d) Authorities of Attorney General and Secretary.--In carrying out 
duties under subsection (a), the Attorney General and the Secretary 
shall--
            (1) conduct, supervise, and coordinate audits, civil and 
        criminal investigations, inspections, and evaluations relating 
        to the program established under such subsection;
            (2) have access (including on-line access as requested and 
        available) to all records available to purchasing cooperatives 
        and certified standard health plans relating to the activities 
        described in paragraph (1) (subject to restrictions based on 
        the confidentiality of certain information under subtitles B 
        and C of this title); and
            (3) issue advisory opinions, fraud alerts, and other 
        appropriate educational material to assist in compliance with 
        the provisions of this subtitle.
    (e) Qualified Immunity for Providing Information.--The provisions 
of section 1157(a) of the Social Security Act (relating to limitation 
on liability) shall apply to a person providing information or 
communications to the Secretary or the Attorney General in conjunction 
with their performance of duties under this section, in the same manner 
as such section applies to information provided to organizations with a 
contract under part 2.
    (f) Use of Powers Under Inspector General Act of 1978.--In carrying 
out duties and responsibilities under the program established under 
subsection (a), the Inspector General is authorized to exercise all 
powers granted under the Inspector General Act of 1978 to the same 
manner and extent as provided in that Act.
    (g) Definitions.--In this subtitle:
            (1) Certified standard health plans; purchasing 
        cooperatives.--The terms ``certified standard health plan'' and 
        ``purchasing cooperative'' have the meanings given such terms 
        by sections 1011(2) and 1013(16), respectively.
            (2) Federal outlay programs.--The term ``Federal outlay 
        programs'' means--
                    (A) any program under title XVIII of the Social 
                Security Act,
                    (B) any State health care program (as defined in 
                section 1128(h) of the Social Security Act),
                    (C) any program under the Public Health Service 
                Act, and
                    (D) any program under this Act, including any State 
                program approved under title I which certifies standard 
                health plans, supplemental health benefits plans, and 
                long-term care policies.
            (3) Inspector general.--The term ``Inspector General'' 
        means the Inspector General of the Department of Health and 
        Human Services.

SEC. 5302. ESTABLISHMENT OF FEDERAL OUTLAY PROGRAM FRAUD AND ABUSE 
              CONTROL ACCOUNT.

    (a) Establishment.--
            (1) In general.--There is hereby established an account to 
        be known as the ``Federal Outlay Program Fraud and Abuse 
        Control Account'' (in this section referred to as the ``Anti-
        Fraud Account''). The Anti-Fraud Account shall consist of--
                    (A) such gifts and bequests as may be made as 
                provided in paragraph (2);
                    (B) such amounts as may be deposited in the Anti-
                Fraud Account as provided in section 5311(d)(2) and 
                title IX of the Social Security Act; and
                    (C) such amounts as are transferred to the Anti-
                Fraud Account under paragraph (3).
            (2) Authorization to accept gifts.--The Anti-Fraud Account 
        is authorized to accept on behalf of the United States money 
        gifts and bequests made unconditionally to the Anti-Fraud 
        Account, for the benefit of the Anti-Fraud Account or any 
        activity financed through the Anti-Fraud Account.
            (3) Transfer of amounts.--
                    (A) In general.--Subject to the limitation in 
                subparagraph (B), the Secretary of the Treasury shall 
                transfer to the Anti-Fraud Account an amount equal to 
                the sum of the following:
                            (i) Criminal fines imposed in cases 
                        involving a Federal health care offense (as 
                        defined in subsection (d)).
                            (ii) Penalties and damages imposed under 
                        the False Claims Act (31 U.S.C. 3729 et seq.), 
                        in cases involving claims related to the 
                        provision of health care items and services 
                        (other than funds awarded to a relator or for 
                        restitution).
                            (iii) Administrative penalties and 
                        assessments imposed under section 5311 (except 
                        as otherwise provided by law).
                            (iv) Amounts resulting from the forfeiture 
                        of property by reason of a Federal health care 
                        offense.
                    (B) Limitation.--The Secretary of the Treasury 
                shall not transfer more than the $75,000,000, plus 50 
                percent of the excess (if any) of the amount described 
                in subparagraph (A) for any fiscal year (beginning in 
                fiscal year 1995).
    (b) Use of Funds.--
            (1) In general.--Amounts in the Anti-Fraud Account shall be 
        available without appropriation and until expended as 
        determined jointly by the Secretary and the Attorney General of 
        the United States in carrying out the Federal Outlay Program 
        Fraud and Abuse Control Program established under section 5301 
        (including the administration of the Program), and may be used 
        to cover costs incurred in operating the Program, including 
        costs of--
                    (A) prosecuting health care matters (through 
                criminal, civil, and administrative proceedings);
                    (B) investigations;
                    (C) financial and performance audits of health care 
                programs and operations;
                    (D) inspections and other evaluations;
                    (E) rewards paid under section 5304; and
                    (F) provider and consumer education (including the 
                provision of advisory opinions) regarding compliance 
                with the provisions of this subtitle.
        Twenty percent of the amounts available in the Anti-Fraud 
        Account for any fiscal year shall be used for costs described 
        in subparagraph (F).
            (2) Funds used to supplement agency appropriations.--It is 
        intended that disbursements made from the Anti-Fraud Account to 
        any Federal agency be used to increase and not supplant the 
        recipient agency's appropriated operating budget.
    (c) Annual Report.--The Secretary and the Attorney General shall 
submit jointly an annual report to Congress on the amount of revenue 
which is generated and disbursed by the Anti-Fraud Account in each 
fiscal year.
    (d) Federal Health Care Offense Defined.--For purposes of 
subsection (a)(3)(A)(i), the term ``Federal health care offense'' means 
a violation of, or a criminal conspiracy to violate--
            (1) sections 226, 668, 1033, or 1347 of title 18, United 
        States Code;
            (2) section 1128B of the Social Security Act;
            (3) sections 287, 371, 664, 666, 1001, 1027, 1341, 1343, or 
        1954 of title 18, United States Code, if the violation or 
        conspiracy relates to health care fraud;
            (4) sections 501 or 511 of the Employee Retirement Income 
        Security Act of 1974, if the violation or conspiracy relates to 
        health care fraud; or
            (5) sections 301, 303(a)(2), or 303 (b) or (e) of the 
        Federal Food Drug and Cosmetic Act, if the violation or 
        conspiracy relates to health care fraud.

SEC. 5303. USE OF FUNDS BY INSPECTOR GENERAL.

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

SEC. 5304. REWARDS FOR INFORMATION LEADING TO PROSECUTION AND 
              CONVICTION.

    (a) In General.--In special circumstances, the Secretary and the 
Attorney General of the United States may jointly make a payment of up 
to $10,000 to a person who furnishes information unknown to the 
Government relating to a possible prosecution of a Federal health care 
offense (as defined in section 5302(d)).
    (b) Ineligible Persons.--A person is not eligible for a payment 
under subsection (a) if--
            (1) the person is a current or former officer or employee 
        of a Federal or State government agency or instrumentality who 
        furnishes information discovered or gathered in the course of 
        government employment;
            (2) the person knowingly participated in the offense;
            (3) the information furnished by the person consists of 
        allegations or transactions that have been disclosed to the 
        public--
                    (A) in a criminal, civil, or administrative 
                proceeding;
                    (B) in a congressional, administrative, or General 
                Accounting Office report, hearing, audit, or 
                investigation; or
                    (C) by the news media, unless the person is the 
                original source of the information; or
            (4) when, in the judgment of the Attorney General, it 
        appears that a person whose illegal activities are being 
        prosecuted or investigated could benefit from the award.
    (c) Definition.--For the purposes of subsection (b)(3)(C), the term 
``original source'' means a person who has direct and independent 
knowledge of the information that is furnished and has voluntarily 
provided the information to the government prior to disclosure by the 
news media.
    (d) No Judicial Review.--Neither the failure of the Secretary and 
the Attorney General to authorize a payment under subsection (a) nor 
the amount authorized shall be subject to judicial review.

              PART 2--CIVIL PENALTIES AND RIGHTS OF ACTION

SEC. 5311. CIVIL MONETARY PENALTIES.

    (a) Actions Subject to Penalty.--
            (1) In general.--Any person who is determined by the 
        Secretary to have committed any action with respect to a 
        certified standard health plan or certified long-term care plan 
        or long-term care services provided under this Act that would 
        subject the person to a penalty under paragraphs (1) through 
        (11) of section 1128A of the Social Security Act if the action 
        was taken with respect to title V, XVIII, XIX, or XX of such 
        Act, shall be subject to a penalty in accordance with 
        subsection (b).
            (2) Treatment of amounts recovered.--Any amounts recovered 
        under the preceding sentence shall be paid to the Secretary and 
        such portions of the amounts recovered as is determined to have 
        been improperly paid from a certified standard health plan or 
        certified long-term care policy for the delivery of or payment 
        for health care items or services shall be repaid to such plan 
        or policy (and enrollees of such plan or policy as appropriate) 
        and the remainder of the amounts recovered shall be deposited 
        in the Federal Outlays Program Fraud and Abuse Control Account 
        established under section 5302.
    (b) Penalties.--
            (1) General rule.--In the case of a person who the 
        Secretary determines has committed an action described in 
        subsection (a), the person shall be subject to the civil 
        monetary penalty (together with any additional assessment) to 
        which the person would be subject to under section 1128A of the 
        Social Security Act if the action was taken with respect to 
        title V, XVIII, XIX, or XX of such Act.
            (2) Penalties described.--Section 1128A(a) of the Social 
        Security Act (42 U.S.C. 1320a-7a(a)) is amended--
                    (A) by striking ``$2,000'' and inserting 
                ``$10,000''; and
                    (B) by striking ``twice the amount claimed'' and 
                inserting ``3 times the amount claimed''.
            (3) Interest on penalties.--Section 1128A(f) of such Act 
        (42 U.S.C. 1320a-7a(f)) is amended by adding after the first 
        sentence the following: ``Interest shall accrue on the 
        penalties and assessments imposed by a final determination of 
        the Secretary in accordance with an annual rate established by 
        the Secretary under the Federal Claims Collection Act. The rate 
        of interest charged shall be the rate in effect on the date the 
        determination becomes final and shall remain fixed at that rate 
        until the entire amount due is paid. In addition, the Secretary 
        is authorized to recover the costs of collection in any case 
        where such penalties and assessments are not paid within 30 
        days after the determination becomes final, or in the case of a 
        compromised amount, where payments are more than 90 days past 
        due. In lieu of actual costs, the Secretary is authorized to 
        impose a charge of up to 10 percent of the amount of such 
        penalties and assessments owed to cover the costs of 
        collection.''.
    (c) Additional Offenses.--
            (1) In general.--Section 1128A(a) of the Social Security 
        Act (42 U.S.C. 1320a-7a(a)) is amended--
                    (A) by striking ``or'' at the end of paragraphs (1) 
                and (2);
                    (B) by striking the comma at the end of paragraph 
                (2) and inserting a semicolon; and
                    (C) by inserting after paragraph (3) the following 
                new paragraphs:
            ``(4) offers, pays, or transfers remuneration to any 
        individual eligible for benefits under title XVIII of this Act, 
        or under a Federal outlay program (as defined in section 
        5301(g)(1) of the Health Security Act) that such person knows 
        or should know is likely to influence such individual to order 
        or receive from a particular provider, practitioner, or 
        supplier any item or service for which payment may be made, in 
        whole or in part, under title XVIII, or a Federal outlay 
        program;
            ``(5) in the case of a person who is not an organization, 
        agency, or other entity, who is excluded from participating in 
        a program under title XVIII or a Federal outlay program in 
        accordance with this section, section 1128, or section 1156 and 
        who, during the period of exclusion, retains either a direct or 
        indirect ownership or control interest of 5 percent or more in, 
        or an ownership or control interest (as defined in section 
        1124(a)(3)) in, or who is an officer, director, agent, or 
        managing employee (as defined in section 1126(b)) of, an entity 
        that is participating in a program under title XVIII;
            ``(6) engages in a practice that circumvents a payment 
        methodology intended to reimburse for two or more discreet 
        medical items or services at a single or fixed amount, 
        including but not limited to, multiple admissions or 
        readmission to hospitals and other institutions reimbursed on a 
        diagnosis reimbursement grouping basis;
            ``(7) engages in a practice which has the effect of 
        limiting (as compared to other plan enrollees) the appropriate 
        utilization of health care services covered by law or under the 
        service contract by title XIX or other publicly subsidized 
        patients, including but not limited to differential standards 
        for the location and hours of service offered by providers 
        participating in the plan;
            ``(8) fails to comply with a quality assurance program or a 
        utilization review activity;
            ``(9) employs or contracts with any individual or entity 
        who is excluded from participating in a program under title 
        XVIII or a Federal outlay program in accordance with this 
        section, section 1128, or section 1156, for the provision of 
        any services (including but not limited to health care, 
        utilization review, medical social work, or administrative), or 
        employs or contracts with any entity for the direct or indirect 
        provision of such services, through such an excluded individual 
        or entity; or
            ``(10) submits false or fraudulent statements, data or 
        information, or claims to the Secretary, the Secretary of 
        Labor,any other Federal agency, a State health care agency, a 
        purchasing cooperative (under subtitle 2/32/3 of title 2/32/3 
        of the Health Security Act), or any other Federal, State or 
        local agency charged with implementation or oversight of a 
        certified health plan under this Act or a public program that 
        the person knows or should know is fraudulent;''.
            (2) Remuneration defined.--Section 1128A(i) of such Act (42 
        U.S.C. 1320a-7a(i)) is amended by adding at the end the 
        following new paragraph:
            ``(6) The term `remuneration' includes the waiver of 
        coinsurance and deductible amounts (or any part thereof), and 
        transfers of items or services for free or for other than fair 
        market value, except that such term does not include the waiver 
        of coinsurance or deductible amounts by a person or entity, 
        if--
                    ``(A) the waiver is not offered as part of any 
                advertisement or solicitation;
                    ``(B) the person does not routinely waive 
                coinsurance or deductible amounts; and
                    ``(C) the person--
                            ``(i) waives the coinsurance and deductible 
                        amounts after determining in good faith that 
                        the individual is indigent;
                            ``(ii) fails to collect coinsurance or 
                        deductible amounts after making reasonable 
                        collection efforts; or
                            ``(iii) provides for any permissible waiver 
                        as specified in section 1128B(b)(3) or in 
                        regulations issued by the Secretary.''.
            (3) Claim for item or service based on incorrect coding or 
        medically unnecessary services.--Section 1128A(a)(1) of such 
        Act (42 U.S.C. 1320a-7a(a)(1)) is amended--
                    (A) in subparagraph (A), by striking ``claimed,'' 
                and inserting the following: ``claimed, including any 
                person who presents or causes to be presented a claim 
                for an item or service which includes a procedure or 
                diagnosis code that the person knows or should know 
                will result in a greater payment to the person than the 
                code applicable to the item or service actually 
                provided or actual patient medical condition,'';
                    (B) in subparagraph (C), by striking ``or'' at the 
                end;
                    (C) in subparagraph (D), by striking ``; or'' and 
                inserting ``, or''; and
                    (D) by inserting after subparagraph (D) the 
                following new subparagraph:
                    ``(E) is for a medical or other item or service 
                that a person knows or should know is not medically 
                necessary; or''.
    (c) Procedures for Imposition of Penalties.--
            (1) Applicability of procedures under social security 
        act.--Except as otherwise provided in paragraph (2), the 
        provisions of section 1128A of the Social Security Act (other 
        than subsections (a) and (b) and the second sentence of 
        subsection (f)) shall apply to the imposition of a civil 
        monetary penalty, assessment, or exclusion under this section 
        in the same manner as such provisions apply with respect to the 
        imposition of a penalty, assessment, or exclusion under section 
        1128A of such Act.
            (4) Authority of secretary of labor to impose penalties, 
        assessments, and exclusions.--
                    (A) In general.--The Secretary of Labor may 
                initiate an action to impose a civil monetary penalty, 
                assessment, or exclusion under this section with 
                respect to actions relating to a certified multistate 
                self-insured health plan if authorized by the Attorney 
                General of the United States and the Secretary pursuant 
                to regulations promulgated by the Secretary in 
                consultation with the Attorney General.
                    (B) Regulations described.--Under the regulations 
                promulgated under subparagraph (A), the Attorney 
                General and the Secretary shall review an action 
                proposed by the Secretary of Labor, and not later than 
                60 days after receiving notice of the proposed action 
                from the Secretary of Labor, shall--
                            (i) approve the proposed action to be taken 
                        by the Secretary of Labor;
                            (ii) disapprove the proposed action; or
                            (iii) assume responsibility for initiating 
                        a criminal, civil, or administrative action 
                        based on the information provided in the 
                        notice.
                    (C) Action deemed approved.--If the Attorney 
                General and the Secretary fail to respond to a proposed 
                action by the Secretary of Labor within the period 
                described in paragraph (2), the Attorney General and 
                the Secretary shall be deemed to have approved the 
                proposed action to be taken by the Secretary of Labor.
    (e) Notification of Licensing Authorities.--Whenever the 
Secretary's determination to impose a penalty, assessment, or exclusion 
under this section becomes final, the Secretary shall notify the 
appropriate State or local licensing agency or organization (including 
the agency specified in section 1864(a) and 1902(a)(33) of the Social 
Security Act) that such a penalty, assessment, or exclusion has become 
final and the reasons therefore.

SEC. 5312. PERMITTING PARTIES TO BRING ACTIONS ON OWN BEHALF.

    (a) In General.--Subject to subsections (b) and (c), a certified 
standard health plan (as defined in section 1011(2)) or an experience-
rated employer (as defined in section 1011(5)(E)) that suffers harm or 
monetary loss exceeding the sum or value of $10,000 (excluding 
interest) as a result of any activity of an individual or entity which 
makes the individual or entity subject to a civil monetary penalty 
under section 5311 may, in a civil action against the individual or 
entity in the United States District Court, obtain treble damages and 
costs including attorneys' fees against the individual or entity and 
such equitable relief as is appropriate.
    (b) Requirements for Bringing Action.--A person may bring a civil 
action under this section only if--
            (1) the person provides the Secretary with written notice 
        of--
                    (A) the person's intent to bring an action under 
                this section,
                    (B) the identities of the individuals or entities 
                the person intends to name as defendants to the action, 
                and
                    (C) all information the person possesses regarding 
                the activity that is the subject of the action that may 
                materially affect the Secretary's decision to initiate 
                a proceeding to impose a civil monetary penalty under 
                section 5311 against the defendants, and
            (2) one of the following conditions is met:
                    (A) During the 60-day period that begins on the 
                date the Secretary receives the written notice 
                described in paragraph (1), the Secretary does not 
                notify the person that the Secretary intends to 
                initiate an investigation to determine whether to 
                impose a civil monetary penalty under section 5311 
                against the defendants.
                    (B) The Secretary notifies the person during the 
                60-day period described in subparagraph (A) that the 
                Secretary intends to initiate an investigation to 
                determine whether to impose a civil monetary penalty 
                under such section against the defendants, and the 
                Secretary subsequently notifies the person that the 
                Secretary no longer intends to initiate an 
                investigation or proceeding to impose a civil monetary 
                penalty against the defendants.
                    (C) After the expiration of the 1-year period that 
                begins on the date written notice is provided to the 
                Secretary, the Secretary has not initiated a proceeding 
                to impose a civil monetary penalty against the 
                defendants.
    (c) Treatment of Excess Awards.--If a person is awarded any amounts 
in an action brought under this section that are in excess of the 
damages suffered by the person as a result of the defendant's 
activities, 20 percent of such amounts shall be withheld from the 
person for payment into the Federal Outlays Program Fraud and Abuse 
Control Account established under section 5302.
    (d) Statute of Limitations.--No action may be brought under this 
section more than 6 years after the date of the activity with respect 
to which the action is brought.
    (e) No Limitation on Other Actions.--Nothing in this section shall 
limit the right of any person to pursue any other right of action or 
remedy available under the law.
    (f) Pendant Jurisdiction.--Nothing in this section shall be 
construed, by reason of a claim arising under this section, to confer 
on the Courts of the United States jurisdiction over any State law 
claim.

SEC. 5313. EXCLUSION FROM PROGRAM PARTICIPATION.

    (a) Mandatory Exclusion.--
            (1) In general.--Except as provided in paragraph (2), the 
        Secretary shall exclude an individual or entity from 
        participating in any applicable health plan if the individual 
        or entity--
                    (A) is excluded from participation in a public 
                program under, or is otherwise described in, section 
                1128(a) of the Social Security Act (relating to 
                individuals and entities convicted of health care-
                related crimes or patient abuse);
                    (B) has been convicted after the date of the 
                enactment of this section, under Federal or State law, 
                in connection with the delivery of a health care item 
                or service of a criminal offense consisting of a felony 
                relating to fraud, theft, embezzlement, breach of 
                fiduciary responsibility, or other financial 
                misconduct; or
                    (C) has been convicted after such date, under 
                Federal or State law, of a criminal offense consisting 
                of a felony relating to the unlawful manufacture, 
                distribution, prescription, or dispensing of a 
                controlled substance.
    (2) Waiver permitted.--
            (A) In general.--When, in the opinion of the Secretary, 
        mandatory exclusion under paragraph (1) of an individual or 
        entity would significantly harm the public health or pose a 
        significant risk to the public health, the Secretary may waive 
        such exclusion and shall apply such other appropriate penalties 
        as authorized under this subtitle.
            (B) Application for waiver of exclusion.--
                    (i) In general.--An individual or entity subject to 
                mandatory exclusion under this subsection may apply to 
                the Secretary, in a manner specified by the Secretary 
                in regulations, for waiver of the exclusion.
                    (ii) Secretarial response.--The Secretary may waive 
                the exclusion for the reasons described in subparagraph 
                (A).
    (b) Permissive Exclusion.--The Secretary may exclude and individual 
or entity from participating in any applicable health plan if the 
individual or entity--
            (1) is excluded from participation in a public program 
        under, or is otherwise described in, section 1128(b) of the 
        Social Security Act (other than paragraphs (3), (6)(A), (6)(C), 
        (6)(D), (10), or (13) of such section);
            (2) has been convicted after the date of the enactment of 
        this section, under Federal or State law, in connection with 
        the delivery of a health care item or service of a criminal 
        offense consisting of a misdemeanor relating to fraud, theft, 
        embezzlement, breach of fiduciary responsibility, or other 
        financial misconduct; or
            (3) has been convicted after the date of the enactment of 
        this section, under Federal or State law, of a criminal offense 
        consisting of a misdemeanor relating to the unlawful 
        manufacture, distribution, prescription, or dispensing of a 
        controlled substance.
    (c) Period of Exclusion.--
            (1) Notice of exclusion.--An exclusion under this section 
        shall be effective at such time and upon such reasonable notice 
        to the public and to the individual or entity excluded as may 
        be specified in regulations consistent with paragraph (2).
            (2) Effective date of exclusion.--Such an exclusion shall 
        be effective with respect to services furnished to an 
        individual on or after the effective date of the exclusion.
            (3) Period of exclusion.--
                    (A) In general.--The Secretary shall specify, in 
                the notice of exclusion under paragraph (1), the 
                minimum period (or, in the case of an exclusion of an 
                individual excluded from participation in a public 
                program under, or is otherwise described in, section 
                1128(b)(12) of the Social Security Act, the period) of 
                the exclusion.
                    (B) Minimum period for mandatory exclusions.--In 
                the case of a mandatory exclusion under subsection (a), 
                the minimum period of exclusion shall be not less than 
                2 years.
                    (C) Minimum period for certain permissive 
                exclusions.--
                            (i) Fraud, obstruction of investigation, 
                        and controlled substance conviction.--In the 
                        case of an exclusion of an individual excluded 
                        from participation in a public program under, 
                        or is otherwise described in, paragraph (1) or 
                        (2) of section 1128(b) of the Social Security 
                        Act or paragraph (1), (2), or (3) of subsection 
                        (b) of this section, the period of exclusion 
                        shall be a minimum of 1 year, unless the 
                        Secretary determines that a longer period is 
                        necessary because of aggravating circumstances.
                            (ii) Suspensions.--In the case of an 
                        exclusion of an individual or entity excluded 
                        from participation in a public program under, 
                        or is otherwise described in, paragraph (4), 
                        (5)(A), or (5)(B) of section 1128(b) of the 
                        Social Security Act, the period of the 
                        exclusion shall not be less than the period 
                        during which the individual's or entity's 
                        license to provide health care is revoked, 
                        suspended or surrendered, or the individual or 
                        the entity is excluded or suspended from a 
                        Federal or State health care program.
                            (iii) Unnecessary services.--In the case of 
                        an exclusion of an individual or entity 
                        described in paragraph (6)(B) of section 
                        1128(b) of the Social Security Act, the period 
                        of the exclusion shall be not less than 1 year.
    (d) Notice to Entities Administering Public Programs for the 
Delivery of or Payment for Health Care Items or Services.--
            (1) In general.--The Secretary shall exercise the authority 
        under this section in a manner that results in an individual's 
        or entity's exclusion from all certified standard health plans 
        under such program for the delivery of or payment for health 
        care items or services.
            (2) Notification.--The Secretary shall promptly notify each 
        sponsor of an applicable health plan and each entity that 
        administers a State health care program described in section 
        1128(h) of the Social Security Act of the fact and 
        circumstances of each exclusion (together with the period 
        thereof) effected against an individual or entity under this 
        section or under section 5311(b)(3).
    (e) Notice to State Licensing Agencies.--The provisions of section 
1128(e) of the Social Security Act shall apply to this section in the 
same manner as such provisions apply to sections 1128 and 1128A of such 
Act.
    (f) Notice, Hearing, and Judicial Review.--
            (1) In general.--Subject to paragraph (2), any individual 
        or entity that is excluded (or directed to be excluded) from 
        participation under this section is entitled to reasonable 
        notice and opportunity for a hearing thereon by the Secretary 
        to the same extent as is provided in section 205(b) of the 
        Social Security Act, and to judicial review of the Secretary's 
        final decision after such hearing as is provided in section 
        205(g) of such Act, except that such action shall be brought in 
        the Court of Appeals of the United States for the judicial 
        circuit in which the individual or entity resides, or has a 
        principal place of business, or, if the individual or entity 
        does not reside or have a principal place of business within 
        any such judicial circuit, in the United States Court of 
        Appeals for the District of Columbia Circuit.
            (2) Administrative hearing.--Unless the Secretary 
        determines that the health or safety of individuals receiving 
        services warrants the exclusion taking effect earlier, any 
        individual or entity that is the subject of an adverse 
        determination based on paragraphs (6)(B), (7), (8), (9), (11), 
        (12), (14), or (15) of section 1128(b) of the Social Security 
        Act, shall be entitled to a hearing by an administrative law 
        judge (as provided under section 205(b) of the Social Security 
        Act) on the determination before any exclusion based upon the 
        determination takes effect. If a hearing is requested, the 
        exclusion shall be effective upon the issuance of an order by 
        the administrative law judge upholding the determination of the 
        Secretary to exclude.
    (g) Convicted Defined.--In this section, the term ``convicted'' has 
the meaning given such term in section 1128(i) of the Social Security 
Act.
    (h) Request for Exclusion.--
            (1) In general.--The sponsor of any standard health plan, 
        the board of any purchasing cooperative, and the Secretary of 
        Labor in the case of a multistate self-insured health plan may 
        request that the Secretary of Health and Human Services exclude 
        an individual or entity with respect to actions under a 
        certified health plan in accordance with this section.
            (2) Response by secretary.--
                    (A) In general.--An individual or entity excluded 
                (or directed to be excluded) from participation under 
                this section or section 5411(b)(3) may apply to the 
                Secretary, in a manner specified by the Secretary in 
                regulations and at the end of the minimum period of 
                exclusion (or, in the case of an individual or entity 
                described in section 1128(b)(12) of the Social Security 
                Act, the period of exclusion) provided under this 
                section or section 5411(b)(3) and at such other times 
                as the Secretary may provide, for termination of the 
                exclusion.
                    (B) Secretarial response.--The Secretary may 
                terminate the exclusion if the Secretary determines, on 
                the basis of the conduct of the applicant which 
                occurred after the date of the notice of exclusion or 
                which was unknown to the Secretary at the time of the 
                exclusion, that--
                            (i) there is no basis under this section or 
                        section 5411(b)(3) for a continuation of the 
                        exclusion, and
                            (ii) there are reasonable assurances that 
                        the types of actions which formed the basis for 
                        the original exclusion have not recurred and 
                        will not recur.
                    (C) Notification of termination.--The Secretary 
                shall promptly notify each sponsor of an applicable 
                health plan and each entity that administers a State 
                health care program described in section 1128(h) of the 
                Social Security Act of each termination of exclusion 
                made under this paragraph.
    (i) Effect of Exclusion.--Notwithstanding any other provision of 
this Act, no payment may be made under a certified standard health plan 
for the delivery of or payment for any item or service (other than an 
emergency item or service, not including items or services furnished in 
an emergency room of a hospital) furnished--
            (1) by an individual or entity during the period when such 
        individual or entity is excluded pursuant to this section from 
        participation in a certified standard health plan; or
            (2) at the medical direction or on the prescription of a 
        physician during the period when the physician is excluded 
        pursuant to this section from participation in a certified 
        health plan and the person furnishing the item or service knew 
        or had reason to know of the exclusion (after a reasonable time 
        period after reasonable notice has been furnished to the 
        person).

                   PART 3--AMENDMENTS TO CRIMINAL LAW

SEC. 5321. HEALTH CARE FRAUD.

    (a) In General.--Chapter 63 of title 18, United States Code, is 
amended by adding at the end the following:
``Sec. 1347. Health care fraud
    ``(a) Whoever knowingly executes, or attempts to execute, a scheme 
or artifice--
            ``(1) to defraud any purchasing cooperative, certified 
        standard health plan, certified long-term care insurance 
        policy, or other person, in connection with the delivery of or 
        payment for health care benefits, items, or services; or
            ``(2) to obtain, by means of false or fraudulent pretenses, 
        representations, or promises, any of the money or property 
        owned by, or under the custody or control of, any purchasing 
        cooperative, certified standard health plan, certified long-
        term care insurance policy, or person in connection with the 
        delivery of or payment for health care benefits, items, or 
        services;
shall be fined under this title or imprisoned not more than 10 years, 
or both. If the violation results in serious bodily injury (as defined 
in section 1365 of this title) such person shall be imprisoned for any 
term of years.
    ``(b) As used in this section the terms `purchasing cooperative', 
`certified standard health plan', and `certified long-term care 
insurance policy' have the meanings given those terms in sections 
1013(16), 1011(2), and 1011(4) of the Health Security Act, 
respectively.''.
    (b) Clerical Amendment.--The table of sections at the beginning of 
chapter 63 of title 18, United States Code, is amended by adding at the 
end the following:

``1347. Health care fraud.''.

SEC. 5322. THEFT OR EMBEZZLEMENT.

    (a) In General.--Chapter 31 of title 18, United States Code, is 
amended by adding at the end the following:
``Sec. 668. Theft or embezzlement in connection with health care
    ``(a) Whoever embezzles, steals, willfully and unlawfully converts 
to the use of any person other than the rightful owner, or 
intentionally misapplies any of the moneys, securities, premiums, 
credits, property, or other assets of a purchasing cooperative, 
certified standard health plan, certified long-term care insurance 
policy, or of any fund connected with such a cooperative, plan, or 
policy, shall be fined under this title or imprisoned not more than 10 
years, or both.
    ``(b) As used in this section, the terms `purchasing cooperative', 
`certified standard health plan', and `certified long-term care 
insurance policy' have the meanings given those terms in sections 
1013(16), 1011(2), and 1011(4) of the Health Security Act, 
respectively.''.
    (b) Clerical Amendment.--The table of sections at the beginning of 
chapter 31 of title 18, United States Code, is amended by adding at the 
end the following:

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

SEC. 5323. FALSE STATEMENTS.

    (a) In General.--Chapter 47 of title 18, United States Code, is 
amended by adding at the end the following:
``Sec. 1033. False statements relating to health care matters
    ``(a) Whoever, in any matter involving a purchasing cooperative, 
certified standard health plan, or certified long-term care insurance 
policy, knowingly and willfully falsifies, conceals, or covers up by 
any trick, scheme, or device a material fact, or makes any false, 
fictitious, or fraudulent statements or representations, or makes or 
uses any false writing or document knowing the same to contain any 
false, fictitious, or fraudulent statement or entry, shall be fined 
under this title or imprisoned not more than 5 years, or both.
    ``(b) As used in this section, the terms `purchasing cooperative', 
`certified standard health plan', and `certified long-term care 
insurance policy' have the meanings given those terms in sections 
1013(16), 1011(2), and 1011(4) of the Health Security Act, 
respectively.''.
    (b) Clerical Amendment.--The table of sections at the beginning of 
chapter 47 of title 18, United States Code, is amended by adding at the 
end the following:

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

SEC. 5324. BRIBERY AND GRAFT.

    (a) In General.--Chapter 11 of title 18, United States Code, is 
amended by adding at the end the following:
``Sec. 226. Bribery and graft in connection with health care
    ``(a) Whoever--
            ``(1) directly or indirectly, corruptly gives, offers, or 
        promises anything of value to a health care official, or offers 
        or promises a health care official to give anything of value to 
        any other person, with intent--
                    ``(A) to influence any of the health care 
                official's actions, decisions, or duties relating to a 
                purchasing cooperative, certified standard health plan, 
                or certified long-term care insurance policy;
                    ``(B) to influence such an official to commit or 
                aid in the committing, or collude in or allow, any 
                fraud, or make opportunity for the commission of any 
                fraud, on a purchasing cooperative, certified standard 
                health plan, or certified long-term care insurance 
                policy; or
                    ``(C) to induce such an official to engage in any 
                conduct in violation of the lawful duty of such 
                official; or
            ``(2) being a health care official, directly or indirectly, 
        corruptly demands, seeks, receives, accepts, or agrees to 
        accept anything of value personally or for any other person or 
        entity, the giving of which violates paragraph (1) of this 
        subsection;
shall be fined under this title or imprisoned not more than 15 years, 
or both.
    ``(b) Whoever, otherwise than as provided by law for the proper 
discharge of any duty, directly or indirectly gives, offers, or 
promises anything of value to a health care official, for or because of 
any of the health care official's actions, decisions, or duties 
relating to a purchasing cooperative, certified standard health plan, 
or certified long-term care insurance policy, shall be fined under this 
title or imprisoned not more than two years, or both.
    ``(c) As used in this section--
            ``(1) the term `health care official' means--
                    ``(A) an administrator, officer, trustee, 
                fiduciary, custodian, counsel, agent, or employee of 
                any purchasing cooperative, certified standard health 
                plan, or certified long-term care insurance policy;
                    ``(B) an officer, counsel, agent, or employee, of 
                an organization that provides services under contract 
                to any purchasing cooperative, certified standard 
                health plan, or certified long-term care insurance 
                policy;
                    ``(C) an official or employee of a State agency 
                having regulatory authority over any purchasing 
                cooperative, certified standard health plan, or 
                certified long-term care insurance policy;
                    ``(D) an officer, counsel, agent, or employee of a 
                health care sponsor;
            ``(2) the term `health care sponsor' means any individual 
        or entity serving as the sponsor of a certified health plan for 
        purposes of the Health Security Act, and includes the joint 
        board of trustees or other similar body used by two or more 
        employers to administer a certified standard health plan for 
        purposes of such Act; and
            ``(3) the terms `purchasing cooperative', `certified 
        standard health plan', and `certified long-term care insurance 
        policy' have the meanings given those terms in sections 
        1013(16), 1011(2), and 1011(4) of the Health Security Act, 
        respectively.''.
    (b) Clerical Amendment.--The table of chapters at the beginning of 
chapter 11 of title 18, United States Code, is amended by adding at the 
end the following:

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

SEC. 5325. INJUNCTIVE RELIEF RELATING TO HEALTH CARE OFFENSES.

    Section 1345(a)(1) of title 18, United States Code, is amended--
            (1) by striking ``or'' at the end of subparagraph (A);
            (2) by inserting ``or'' at the end of subparagraph (B); and
            (3) by adding at the end the following:
            ``(C) committing or about to commit a Federal health care 
        offense (as defined in section 5302(d) of the Health Security 
        Act);''.

SEC. 5326. GRAND JURY DISCLOSURE.

    Section 3322 of title 18, United States Code, is amended--
            (1) by redesignating subsections (c) and (d) as subsections 
        (d) and (e), respectively; and
            (2) by inserting after subsection (b) the following:
    ``(c) A person who is privy to grand jury information concerning a 
health law violation--
            ``(1) received in the course of duty as an attorney for the 
        Government; or
            ``(2) disclosed under rule 6(e)(3)(A)(ii) of the Federal 
        Rules of Criminal Procedure;
may disclose that information to an attorney for the Government to use 
in any civil proceeding related to a Federal health care offense (as 
defined in section 5302(d) of the Health Security Act).''.

SEC. 5327. FORFEITURES FOR VIOLATIONS OF FRAUD STATUTES.

    Section 982(a) of title 18, United States Code, is amended by 
inserting after paragraph (5) the following:
    ``(6) The court, in imposing sentence on a person convicted of a 
Federal health care offense (as defined in section 5302(d) of the 
Health Security Act), shall order such person to forfeit to the United 
States any property, real or personal, constituting or traceable to the 
gross proceeds obtained, directly or indirectly, as a result of the 
commission of the offense.''.

              PART 4--AMENDMENTS TO CIVIL FALSE CLAIMS ACT

SEC. 5331. AMENDMENTS TO CIVIL FALSE CLAIMS ACT.

    Section 3729 of title 31, United States Code, is amended--
            (1) in subsection (a)(7), by inserting ``or to a certified 
        standard health plan or certified long-term care insurance 
        policy'' after ``property to the Government'';
            (2) in the matter following subsection (a)(7), by inserting 
        ``or certified standard health plan or certified long-term care 
        insurance policy'' before ``sustains because of the act of that 
        person,'';
            (3) at the end of the first sentence of subsection (a), by 
        inserting ``or certified standard health plan or certified 
        long-term care insurance policy'' before ``sustains because of 
        the act of the person.'';
            (4) in subsection (c)--
                    (A) by inserting ``the term'' after ``section,''; 
                and
                    (B) by adding at the end the following: ``The term 
                also includes any request or demand, whether under 
                contract of otherwise, for money or property which is 
                made or presented to a certified standard health plan 
                or certified long-term care insurance policy.''; and
            (5) by adding at the end the following:
    ``(f) Certified Standard Health Plan and Certified Long-Term Care 
Insurance Policy Defined.--For purposes of this section, the terms 
`purchasing cooperative', `certified standard health plan', and 
`certified long-term care insurance policy' have the meanings given 
those terms in sections 1013(16), 1011(2), and 1011(4) of the Health 
Security Act, respectively.''.

                         PART 5--EFFECTIVE DATE

SEC. 5341. EFFECTIVE DATE.

    Except as otherwise provided in this subtitle, the provisions of, 
and amendments made by, this subtitle shall be effective on and after 
January 1, 1996.

                  Subtitle E--Medical Liability Reform

                         PART 1--SYSTEM REFORMS

SEC. 5401. FEDERAL TORT REFORM.

    (a) Applicability.--
            (1) In general.--Except as provided in section 5402, this 
        subtitle shall apply with respect to any medical malpractice 
        liability action brought in any State or Federal court, except 
        that this subtitle shall not apply to a claim or action for 
        damages arising from a vaccine-related injury or death to the 
        extent that title XXI of the Public Health Service Act applies 
        to the claim or action.
            (2) Preemption.--The provisions of this subtitle shall 
        preempt any State law to the extent that such law is 
        inconsistent with the limitations contained in such provisions.
            (3) Effect on sovereign immunity and choice of law or 
        venue.--Nothing in this subtitle shall be construed to--
                    (A) waive or affect any defense of sovereign 
                immunity asserted by any State under any provision of 
                law;
                    (B) waive or affect any defense of sovereign 
                immunity asserted by the United States;
                    (C) affect the applicability of any provision of 
                the Foreign Sovereign Immunities Act of 1976;
                    (D) preempt State choice-of-law rules with respect 
                to claims brought by a foreign nation or a citizen of a 
                foreign nation; or
                    (E) affect the right of any court to transfer venue 
                or to apply the law of a foreign nation or to dismiss a 
                claim of a foreign nation or of a citizen of a foreign 
                nation on the ground of inconvenient forum.
            (4) Federal court jurisdiction not established on federal 
        question grounds.--Nothing in this subtitle shall be construed 
        to establish any jurisdiction in the district courts of the 
        United States over medical malpractice liability actions on the 
        basis of section 1331 or 1337 of title 28, United States Code.
    (b) Definitions.--In this subtitle, the following definitions 
apply:
            (1) Alternative dispute resolution system; ADR.--The term 
        ``alternative dispute resolution system'' or ``ADR'' means a 
        system that provides for the resolution of medical malpractice 
        claims in a manner other than through medical malpractice 
        liability actions.
            (2) Claimant.--The term ``claimant'' means any person who 
        alleges a medical malpractice claim, and any person on whose 
        behalf such a claim is alleged, including the decedent in the 
        case of an action brought through or on behalf of an estate.
            (3) Health care professional.--The term ``health care 
        professional'' means any individual who provides health care 
        services in a State and who is required by the laws or 
        regulations of the State to be licensed or certified by the 
        State to provide such services in the State.
            (4) Health care provider.--The term ``health care 
        provider'' means any organization or institution that is 
        engaged in the delivery of health care services in a State and 
        that is required by the laws or regulations of the State to be 
        licensed or certified by the State to engage in the delivery of 
        such services in the State.
            (5) Injury.--The term ``injury'' means any illness, 
        disease, or other harm that is the subject of a medical 
        malpractice liability action or a medical malpractice claim.
            (6) Medical malpractice liability action.--The term 
        ``medical malpractice liability action'' means a cause of 
        action brought in a State or Federal court against a health 
        care provider or health care professional by which the 
        plaintiff brings a medical malpractice claim.
            (7) Medical malpractice claim.--The term ``medical 
        malpractice claim'' means a claim brought against a health care 
        provider or health care professional in which a claimant 
        alleges that injury was caused by the provision of (or the 
        failure to provide) health care services, except that such term 
        does not include--
                    (A) any claim based on an allegation of an 
                intentional tort;
                    (B) any claim based on an allegation that a product 
                is defective that is brought against any individual or 
                entity that is not a health care professional or health 
                care provider; or
                    (C) any claim brought pursuant to subtitle F.

SEC. 5402. STATE-BASED ALTERNATIVE DISPUTE RESOLUTION MECHANISMS.

    (a) Application to Malpractice Claims Under Plans.--Prior to or 
immediately following the commencement of any medical malpractice 
action, the parties shall participate in the alternative dispute 
resolution system administered by the State under subsection (b). Such 
participation shall be in lieu of any other provision of Federal or 
State law or any contractual agreement made by or on behalf of the 
parties prior to the commencement of the medical malpractice action.
    (b) Adoption of Mechanism by State.--Each State shall--
            (1) maintain or adopt at least one of the alternative 
        dispute resolution methods satisfying the requirements 
        specified under subsection (c) and (d) for the resolution of 
        medical malpractice claims arising from the provision of (or 
        failure to provide) health care services to individuals 
        enrolled in a standard health plan; and
            (2) clearly disclose to enrollees (and potential enrollees) 
        the availability and procedures for consumer grievances, 
        including a description of the alternative dispute resolution 
        method or methods adopted under this subsection.
    (c) Specification of Permissible Alternative Dispute Resolution 
Methods.--
            (1) In general.--The Attorney General, in consultation with 
        the Secretary, shall, by regulation, develop alternative 
        dispute resolution methods for the use by States in resolving 
        medical malpractice claims under subsection (a). Such methods 
        shall include at least the following:
                    (A) Arbitration.--The use of arbitration, a nonjury 
                adversarial dispute resolution process which may, 
                subject to subsection (d), result in a final decision 
                as to facts, law, liability or damages.
                    (B) Claimant-requested binding arbitration.--For 
                claims involving a sum of money that falls below a 
                threshold amount set by the Secretary, the use of 
                arbitration not subject to subsection (d). Such binding 
                arbitration shall be at the sole discretion of the 
                claimant.
                    (C) Mediation.--The use of mediation, a settlement 
                process coordinated by a neutral third party without 
                the ultimate rendering of a formal opinion as to 
                factual or legal findings.
                    (D) Early neutral evaluation.--The use of early 
                neutral evaluation, in which the parties make a 
                presentation to a neutral attorney or other neutral 
                evaluator for an assessment of the merits, to encourage 
                settlement. If the parties do not settle as a result of 
                assessment and proceed to trial, the neutral 
                evaluator's opinion shall be kept confidential.
            (2) Standards for establishing methods.--In developing 
        alternative dispute resolution methods under paragraph (1), the 
        Attorney General shall assure that the methods promote the 
        resolution of medical malpractice claims in a manner that--
                    (A) is affordable for the parties involved;
                    (B) provides for timely resolution of claims;
                    (C) provides for the consistent and fair resolution 
                of claims; and
                    (D) provides for reasonably convenient access to 
                dispute resolution for individuals enrolled in plans.
            (3) Waiver authority.--Upon application of a State, the 
        Attorney General, in consultation with the Secretary, may grant 
        the State the authority to fulfill the requirement of 
        subsection (b) by adopting a mechanism other than a mechanism 
        established by the Attorney General pursuant to this 
        subsection, except that such mechanism must meet the standards 
        set forth in paragraph (2).
    (d) Further Redress.--Except with respect to the claimant-requested 
binding arbitration method set forth in subsection (c)(1)(B), and 
notwithstanding any other provision of a law or contractual agreement, 
a plan enrollee dissatisfied with the determination reached as a result 
of an alternative dispute resolution method applied under this section 
may, after the final resolution of the enrollee's claim under the 
method, initiate or resume a cause of action to seek damages or other 
redress with respect to the claim to the extent otherwise permitted 
under State law. The results of any alternative dispute resolution 
procedure are inadmissible at any subsequent trial, as are all 
statements, offers, and other communications made during such 
procedures, unless otherwise admissible under State law.

SEC. 5403. REQUIREMENT OF CERTIFICATE OF MERIT.

    (a) Requiring Submission With Complaint.--Except as provided in 
subsection (c) and subject to the penalties of subsection (e), no 
medical malpractice liability action may be brought by any individual 
unless, at the time the individual commences such action, the 
individual or the individual's attorney submits an affidavit declaring 
that--
            (1) the individual (or the individual's attorney) has 
        consulted and reviewed the facts of the claim with a qualified 
        specialist (as defined in subsection (d));
            (2) the individual or the individual's attorney has 
        obtained a written report by a qualified specialist that 
        clearly identifies the individual and that includes the 
        specialist's determination that, based upon a review of the 
        available medical record and other relevant material, a 
        reasonable medical interpretation of the facts supports a 
        finding that the claim against the defendant is meritorious and 
        based on good cause; and
            (3) on the basis of the qualified specialist's review and 
        consultation, the individual (or the individual's attorney) has 
        concluded that the claim is meritorious and based on good 
        cause.
    (b) Identity of Specialist.--Only upon a showing of good cause may 
a court order that the identity of the specialist used for purposes of 
subsection (a) be revealed. In such an event, such identity shall be 
reviewed by the court on an in camera basis only.
    (c) Extension in Certain Instances.--
            (1) In general.--Subject to paragraph (2), subsection (a) 
        shall not apply with respect to an individual who brings a 
        medical malpractice liability action without submitting an 
        affidavit described in such subsection if--
                    (A) despite good faith efforts, the individual is 
                unable to obtain the written report before the 
                expiration of the applicable statute of limitations;
                    (B) despite good faith efforts, at the time the 
                individual commences the action, the individual has 
                been unable to obtain medical records or other 
                information necessary, pursuant to any applicable law, 
                to prepare the written report requested; or
                    (C) the court of competent jurisdiction determines 
                that the affidavit requirement shall be extended upon a 
                showing of good cause.
            (2) Deadline for submission where extension applies.--In 
        the case of an individual who brings an action to which 
        paragraph (1) applies, the action shall be dismissed unless the 
        individual submits the affidavit described in subsection (a) 
        not later than--
                    (A) in the case of an action to which subparagraph 
                (A) of paragraph (1) applies, 90 days after commencing 
                the action; or
                    (B) in the case of an action to which subparagraph 
                (B) of paragraph (1) applies, 90 days after obtaining 
                the information described in such subparagraph or when 
                good cause for an extension no longer exists.
    (d) Qualified Specialist Defined.--
            (1) In general.--As used in subsection (a), the term 
        ``qualified specialist'' means, with respect to a medical 
        malpractice liability action, a health care professional who is 
        reasonably believed by the individual bringing the action (or 
        the individual's attorney) to have expertise in the same or 
        substantially similar area of practice to that involved in the 
        action.
            (2) Evidence of expertise.--For purposes of paragraph (1), 
        evidence of required expertise may include evidence that the 
        individual--
                    (A) practices (or has practiced) or teaches (or has 
                taught) in the same or substantially similar area of 
                health care or medicine to that involved in the action; 
                or
                    (B) is otherwise qualified by experience or 
                demonstrated competence in the relevant practice area.
    (e) Sanctions for Submitting False Affidavit.--Upon the motion of 
any party or on its own initiative, the court in a medical malpractice 
liability action may impose a sanction on a party, the party's 
attorney, or both, for--
            (1) any knowingly false statement made in an affidavit 
        described in subsection (a);
            (2) making any false representations in order to obtain a 
        qualified specialist's report; or
            (3) failing to have the qualified specialist's written 
        report in his or her custody and control;
and may require that the sanctioned party reimburse the other party to 
the action for costs and reasonable attorney's fees.

SEC. 5404. LIMITATION ON AMOUNT OF ATTORNEY'S CONTINGENCY FEES.

    (a) In General.--An attorney who represents, on a contingency fee 
basis, a plaintiff in a medical malpractice liability action may not 
charge, demand, receive, or collect for services rendered in connection 
with such action (including the resolution of the claim that is the 
subject of the action under any alternative dispute resolution system) 
in excess of--
            (1) 33\1/3\ percent of the first $150,000 of the total 
        amount recovered by judgment or settlement in such action; plus
            (2) 25 percent of any amount recovered above the amount 
        described in paragraph (1);
unless otherwise determined under State law. Such amount shall be 
computed after deductions are made for all the expenses associated with 
the claim other than those attributable to the normal operating 
expenses of the attorney.
    (b) Calculation of Periodic Payments.--In the event that a judgment 
or settlement includes periodic or future payments of damages, the 
amount recovered for purposes of computing the limitation on the 
contingency fee under subsection (a) may, in the discretion of the 
court, be based on the cost of the annuity or trust established to make 
the payments. In any case in which an annuity or trust is not 
established to make such payments, such amount shall be based on the 
present value of the payments.
    (c) Contingency Fee Defined.--As used in this section, the term 
``contingency fee'' means any fee for professional legal services which 
is, in whole or in part, contingent upon the recovery of any amount of 
damages, whether through judgment or settlement.

SEC. 5405. PERIODIC PAYMENT OF AWARDS.

    (a) In General.--A party to a medical malpractice liability action 
may petition the court to instruct the trier of fact to award any 
future damages on an appropriate periodic basis. If the court, in its 
discretion, so instructs the trier of fact, and damages are awarded on 
a periodic basis, the court may require the defendant to purchase an 
annuity or other security instrument (typically based on future damages 
discounted to present value) adequate to assure payments of future 
damages.
    (b) Failure or Inability To Pay.--With respect to an award of 
damages described in subsection (a), if a defendant fails to make 
payments in a timely fashion, or if the defendant becomes or is at risk 
of becoming insolvent, upon such a showing the claimant may petition 
the court for an order requiring that remaining balance be discounted 
to present value and paid to the claimant in a lump-sum.
    (c) Modification of Payment Schedule.--The court shall retain 
authority to modify the payment schedule based on changed 
circumstances.
    (d) Future Damages Defined.--As used in this section, the term 
``future damages'' means any economic or noneconomic loss other than 
that incurred or accrued as of the time of judgment.

SEC. 5406. FEDERAL STUDY ON MEDICAL NEGLIGENCE.

    (a) Study.--To improve the level of empirical data on the incidence 
and effect of medical negligence in the United States, the Secretary of 
Health and Human Services shall commission and oversee a nationwide 
interdisciplinary study to evaluate--
            (1) the incidence of injuries resulting from medical 
        treatment, including a determination of the percentage of such 
        injuries that resulted from the negligence of a physician, 
        other health care provider or health care institution;
            (2) the costs of medical expenses and lost wages to the 
        victims of medical negligence and their families, and their 
        compensation for such losses under the current malpractice 
        system;
            (3) methods to reduce the incidence and costs of medical 
        negligence; and
            (4) methods to promote the efficient and fair resolution of 
        legal claims stemming from the incidence of medical negligence.
    (b) Access to Records.--For the purposes of the study conducted 
under subsection (a), the Secretary of Health and Human Services shall 
have the powers necessary to access hospital patients' records while 
maintaining patient confidentiality.
    (c) Report to Congress.--Not later than 3 years after the 
commission of the study under subsection (a), the study shall be 
completed and the Secretary of Health and Human Services shall prepare 
and submit to Congress a report describing the findings of the study.

PART 2--DEMONSTRATION PROJECT RELATING TO MEDICAL MALPRACTICE LIABILITY

SEC. 5411. PILOT PROGRAM APPLYING PRACTICE GUIDELINES TO MEDICAL 
              MALPRACTICE LIABILITY ACTIONS.

    (a) Establishment.--Not later than 1 year after the Secretary of 
Health and Human Services determines that appropriate practice 
guidelines are available and were developed with the input of health 
care providers, legal professionals and consumer representatives, the 
Secretary shall establish pilot programs under which the Secretary 
shall provide funds (in such amounts as the Secretary determines 
appropriate) to one or more eligible States to determine the effect of 
applying practice guidelines in the resolution of medical malpractice 
liability actions.
    (b) Eligibility of State.--To be eligible to participate in a pilot 
program under subsection (a), a State shall prepare and submit to the 
Secretary an application at such time, in such manner, and containing 
such information as the Secretary may require, including--
            (1) assurances that, under the law of the State, in the 
        resolution of any medical malpractice liability action, 
        compliance or noncompliance with an appropriate practice 
        guideline shall be admissible by either party at trial as 
        presumptive evidence-of nonliability or liability for medical 
        negligence; and
            (2) such other information and assurances as the Secretary 
        may require.
    (c) Reports to Congress.--Not later than 3 months after the last 
day of each year for which a pilot program established under subsection 
(a) is in effect, the Secretary of Health and Human Services shall 
prepare and submit to Congress a report describing the operation of the 
program during the year for which the report is submitted. Such report 
shall contain such recommendations as the Secretary considers 
appropriate, include recommendations relating to revisions to the laws 
governing medical practice liability.

SEC. 5412. ENTERPRISE LIABILITY DEMONSTRATION PROJECT.

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

                  Subtitle F--Remedies and Enforcement

   PART 1--REVIEW OF BENEFIT DETERMINATIONS FOR ENROLLED INDIVIDUALS

                        Subpart A--General Rules

SEC. 5501. HEALTH PLAN CLAIMS PROCEDURE.

    (a) Definitions.--For purposes of this section--
            (1) Claim.--The term ``claim'' means a claim for payment or 
        provision of benefits under a health plan, a request for 
        preauthorization of items or services which is submitted to a 
        health plan prior to receipt of the items or services, or the 
        denial, reduction or termination of any service or request for 
        a referral or reimbursement.
            (2) Individual claimant.--The term ``individual claimant'' 
        with respect to a claim means any individual who submits the 
        claim to a health plan in connection with the individual's 
        enrollment under the plan, or on whose behalf the claim is 
        submitted to the plan by a provider.
            (3) Provider claimant.--The term ``provider claimant'' with 
        respect to a claim means any provider who submits the claim to 
        a health plan with respect to items or services provided to an 
        individual enrolled under the plan.
    (b) General Rules Governing Treatment of Claims.--
            (1) Adequate notice of disposition of claim.--In any case 
        in which a claim is submitted in complete form to a health 
        plan, the plan shall provide to the individual claimant and any 
        provider claimant with respect to the claim a written notice of 
        the plan's approval or denial of the claim within 15 days after 
        the date of the submission of the claim. The notice to the 
        individual claimant shall be written in language calculated to 
        be understood by the typical individual enrolled under the plan 
        and in a form which takes into account accessibility to the 
        information by individuals whose primary language is not 
        English. In the case of a denial of the claim, the notice shall 
        be provided within 5 days after the date of the determination 
        to deny the claim, and shall set forth the specific reasons for 
        the denial. Such notice shall include an explanation of the 
        specific reasons and facts underlying the decision to reduce or 
        fail to provide services or pay the claim. The notice of a 
        denial shall clearly explain the right to appeal the denial 
        under paragraph (2) and a description of the process for 
        appealing such decision sufficient to allow the claimant to 
        initiate an appeal and submit evidence to the decision maker in 
        support of the position of the claimant. Failure by any plan to 
        comply with the requirements of this paragraph with respect to 
        any claim submitted to the plan shall be treated as approval by 
        the plan of the claim.
            (2) Plan's duty to review denials upon timely request.--The 
        plan shall review its denial of the claim if an individual 
        claimant or provider claimant with respect to the claim submits 
        to the plan a written request for reconsideration of the claim 
        after receipt of written notice from the plan of the denial. 
        The plan shall allow any such claimant not less than 60 days, 
        after receipt of written notice from the plan of the denial, to 
        submit the claimant's request for reconsideration of the claim.
            (3) Time limit for review.--The plan shall complete any 
        review required under paragraph (2), and shall provide the 
        individual claimant and any provider claimant with respect to 
        the claim written notice of the plan's decision on the claim 
        after reconsideration pursuant to the review, within 30 days 
        after the date of the receipt of the request for 
        reconsideration.
            (4) De novo reviews.--Any review required under paragraph 
        (2)--
                    (A) shall be de novo,
                    (B) shall be conducted by an individual who did not 
                make the initial decision denying the claim and who is 
                authorized to approve the claim, and
                    (C) shall include review by a qualified physician 
                in the same speciality as the treating physician if the 
                resolution of any issues involved requires medical 
                expertise.
    (c) Treatment of Urgent Requests to Plans for Preauthorization.--
            (1) In general.--This subsection applies in the case of any 
        claim submitted by an individual claimant or a provider 
        claimant consisting of a request for preauthorization of items 
        or services which is accompanied by an attestation that--
                    (A) failure to immediately provide the items or 
                services could reasonably be expected to result in--
                            (i) placing the health of the individual 
                        claimant (or, with respect to an individual 
                        claimant who is a pregnant woman, the health of 
                        the woman or her unborn child) in serious 
                        jeopardy,
                            (ii) serious impairment to bodily 
                        functions, or
                            (iii) serious dysfunction of any bodily 
                        organ or part,
                or
                    (B) immediate provision of the items or services is 
                necessary because the individual claimant has made or 
                is at serious risk of making an attempt to harm such 
                individual claimant or another individual.
            (2) Shortened time limit for consideration of requests for 
        preauthorization.--Notwithstanding subsection (b)(1), a health 
        plan shall approve or deny any claim described in paragraph (1) 
        within 12 hours after submission of the claim to the plan. 
        Failure by the plan to comply with the requirements of this 
        paragraph with respect to the claim shall be treated as 
        approval by the plan of the claim.
            (3) Expedited exhaustion of plan remedies.--Any claim 
        described in paragraph (1) which is denied by the plan shall be 
        treated as a claim with respect to which all remedies under the 
        plan provided pursuant to this section are exhausted, 
        irrespective of any review provided under subsection (b)(2).
            (4) Denial of previously authorized claims not permitted.--
        In any case in which a health plan approves a claim described 
        in paragraph (1)--
                    (A) the plan may not subsequently deny payment or 
                provision of benefits pursuant to the claim, unless the 
                plan makes a showing of an intentional 
                misrepresentation of a material fact by the individual 
                claimant, and
                    (B) in the case of a violation of subparagraph (A) 
                in connection with the claim, all remedies under the 
                plan provided pursuant to this section with respect to 
                the claim shall be treated as exhausted.
    (d) Time Limit for Determination of Incompleteness of Claim.--For 
purposes of this section--
            (1) any claim submitted by an individual claimant and 
        accepted by a provider serving under contract with a health 
        plan and any claim described in subsection (b)(1) shall be 
        treated with respect to the individual claimant as submitted in 
        complete form, and
            (2) any other claim for benefits under the plan shall be 
        treated as filed in complete form as of 10 days after the date 
        of the submission of the claim, unless the plan provides to the 
        individual claimant and any provider claimant, within such 
        period, a written notice of any required matter remaining to be 
        filed in order to complete the claim.
Any filing by the individual claimant or the provider claimant of 
additional matter requested by the plan pursuant to paragraph (2) shall 
be treated for purposes of this section as an initial filing of the 
claim.
    (e) Additional Notice and Disclosure Requirements for Health 
Plans.--In the case of a denial of a claim for benefits under a health 
plan, the plan shall include, together with the specific reasons 
provided to the individual claimant and any provider claimant under 
subsection (b)(1)--
            (1) if the denial is based in whole or in part on a 
        determination that the claim is for an item or service which is 
        not covered by the comprehensive benefit package or exceeds 
        payment rates under the applicable fee schedule, the factual 
        basis for the determination,
            (2) if the denial is based in whole or in part on exclusion 
        of coverage with respect to services because the services are 
        determined to comprise an experimental treatment or 
        investigatory procedure, the medical basis for the 
        determination and a description of the process used in making 
        the determination, and
            (3) if the denial is based in whole or in part on a 
        determination that the treatment is not medically necessary or 
        appropriate or is inconsistent with the plan's practice 
        guidelines, the medical basis for the determination, the 
        guidelines used in making the determination, and a description 
        of the process used in making the determination.
    (f) Waiver of Rights Prohibited.--A health plan may not require any 
party to waive any right under the plan or this Act as a condition for 
approval of any claim under the plan, except to the extent otherwise 
specified in a formal settlement agreement.

SEC. 5502. REVIEW IN AREA COMPLAINT REVIEW OFFICES OF GRIEVANCES BASED 
              ON ACTS OR PRACTICES BY HEALTH PLANS.

    (a) Complaint Review Offices.--
            (1) In general.--In accordance with rules which shall be 
        prescribed by the Secretary of Labor, each State shall 
        establish and maintain a complaint review office for each 
        community rating area established by such State. According to 
        designations which shall be made by each State under 
        regulations of the Secretary of Labor, the complaint review 
        office for a community rating area established by such State 
        shall also serve as the complaint review office for large group 
        sponsors operating in the State with respect to individuals who 
        are enrolled under health plans maintained by such sponsors and 
        who reside within the area of the community rating area.
            (2) Health systems not established by States.--In the case 
        of any health care system established in any State by the 
        Secretary of Health and Human Services, the Secretary of Health 
        and Human Services shall assume all duties and obligations of 
        such State under this part in accordance with the applicable 
        regulations of the Secretary of Labor under this part.
    (b) Filings of Complaints by Aggrieved Persons.--In the case of any 
person who is aggrieved by--
            (1) any act or practice engaged in by any health plan which 
        consists of or results in denial of payment or provision of 
        benefits under the plan or delay in the payment or provision of 
        benefits, or
            (2) any act or practice engaged in by any other plan 
        maintained in a community rating area or by a large group 
        sponsor which consists of or results in denial of payment or 
        provision of benefits under a supplemental benefit policy or a 
        cost sharing policy or delay in the payment or provision of the 
        benefits,
if the claimant alleges that the denial or delay consists of a failure 
to comply with the terms of the plan (including the provision of 
benefits in full when due in accordance with the terms of the plan), or 
with the applicable requirements of this Act, such person may file a 
complaint with the appropriate complaint review office.
    (c) Exhaustion of Plan Remedies.--Any complaint including a claim 
to which section 5501 applies may not be filed until the complainant 
has exhausted all remedies provided under the plan with respect to the 
claim in accordance with such section.
    (d) Form of Complaint.--The complaint shall be in writing under 
oath or affirmation, shall set forth the complaint in a manner 
calculated to give notice of the nature of the complaint, and shall 
contain such information as may be prescribed in regulations of the 
Secretary of Labor.
    (e) Notice of Filing.--The complaint review office shall serve by 
certified mail a notice of the complaint (including the date, place, 
and circumstances of the alleged violation) on the person or persons 
alleged in the complaint to have committed the violation within 10 days 
after the filing of the complaint.
    (f) Time Limitation.--Complaints may not be brought under this 
section with respect to any violation later than one year after the 
date on which the complaining party knows or should have reasonably 
known that a violation has occurred. This subsection shall not prevent 
the subsequent amending of a complaint.

SEC. 5503. INITIAL PROCEEDINGS IN COMPLAINT REVIEW OFFICES.

    (a) Elections.--Whenever a complaint is brought to the complaint 
review office under section 5502(b), the complaint review office shall 
provide the complainant with an opportunity, in such form and manner as 
shall be prescribed in regulations of the Secretary of Labor, to elect 
one of the following:
            (1) To forego further proceedings in the complaint review 
        office and rely on remedies available in a court of competent 
        jurisdiction.
            (2) To submit the complaint as a dispute under the Early 
        Resolution Program established under subpart B and thereby 
        suspend further review proceedings under this section pending 
        termination of proceedings under the Program.
            (3) In any case in which an election under paragraph (1) or 
        (2) is not made, or an election under paragraph (2) was made 
        but resolution of all matters in the complaint was not obtained 
        upon termination of proceedings pursuant to the election by 
        settlement agreement or otherwise, to proceed with the 
        complaint to a hearing in the complaint review office under 
        section 5504 regarding the unresolved matters.
    (b) Duty of Complaint Review Office.--The complaint review office 
shall provide (in a linguistically appropriate manner) an explanation 
to complainants bringing complaints to the office concerning the legal 
and other ramifications of each option available under this section.
    (c) Effect of Participation in Early Resolution Program.--Any 
matter in a complaint brought to the complaint review office which is 
included in a dispute which is timely submitted to the Early Resolution 
Program established under subpart B shall not be assigned to a hearing 
under section 5504 unless the proceedings under the Program with 
respect to the dispute are terminated without settlement or resolution 
of the dispute with respect to such matter. Upon termination of any 
proceedings regarding a dispute submitted to the Program, the 
applicability of this section to any matter in a complaint which was 
included in the dispute shall not be affected by participation in the 
proceedings, except to the extent otherwise required under the terms of 
any settlement agreement or other formal resolution obtained in the 
proceedings.

SEC. 5504. HEARINGS BEFORE HEARING OFFICERS IN COMPLAINT REVIEW 
              OFFICES.

    (a) Hearing Process.--
            (1) Assignment of complaints to hearing officers and notice 
        to parties.--
                    (A) In general.--In the case of an election under 
                section 5503(a)(3)--
                            (i) the complaint review office shall 
                        assign the complaint, and each motion in 
                        connection with the complaint, to a hearing 
                        officer employed by the State in the office; 
                        and
                            (ii) the hearing officer shall have the 
                        power to issue and cause to be served upon the 
                        plan named in the complaint a copy of the 
                        complaint and a notice of hearing before the 
                        hearing officer at a place fixed in the notice, 
                        not less than 5 days after the serving of the 
                        complaint.
                    (B) Qualifications for hearing officers.--No 
                individual may serve in a complaint review office as a 
                hearing officer unless the individual meets standards 
                which shall be prescribed by the Secretary of Labor. 
                Such standards shall include experience, training, 
                ability to communicate with the enrollee, affiliations, 
                diligence, absence of actual or potential conflicts of 
                interest, and other qualifications deemed relevant by 
                the Secretary of Labor. At no time shall a hearing 
                officer have any official, financial, or personal 
                conflict of interest with respect to issues in 
                controversy before the hearing officer.
            (2) Amendment of complaints.--Any such complaint may be 
        amended by the hearing officer conducting the hearing, upon the 
        motion of the complainant, in the hearing officer's discretion 
        at any time prior to the issuance of an order based thereon.
            (3) Answers.--The party against whom the complaint is filed 
        shall have the right to file an answer to the original or 
        amended complaint and to appear in person or otherwise and give 
        testimony at the place and time fixed in the complaint.
    (b) Additional Parties.--In the discretion of the hearing officer 
conducting the hearing, any other person may be allowed to intervene in 
the proceeding and to present testimony.
    (c) Hearings.--
            (1) De novo hearing.--Each hearing officer shall hear 
        complaints and motions de novo.
            (2) Testimony.--The testimony taken by the hearing officer 
        shall be reduced to writing. Thereafter, the hearing officer, 
        in his or her discretion, upon notice may provide for the 
        taking of further testimony or hear argument.
            (3) Authority of hearing officers.--The hearing officer may 
        compel by subpoena the attendance of witnesses and the 
        production of evidence at any designated place or hearing. In 
        case of contumacy or refusal to obey a subpoena lawfully issued 
        under this paragraph and upon application of the hearing 
        officer, an appropriate district court of the United States may 
        issue an order requiring compliance with the subpoena and any 
        failure to obey the order may be punished by the court as a 
        contempt thereof. The hearing officer may also seek enforcement 
        of the subpoena in a State court of competent jurisdiction.
            (4) Expedited hearings.--Notwithstanding section 5503 and 
        the preceding provisions of this section, upon receipt of a 
        complaint containing a claim described in section 5501(c)(1), 
        the complaint review office shall promptly provide the 
        complainant with the opportunity to make an election under 
        section 5503(a)(3) and assignment to a hearing on the complaint 
        before a hearing officer. The complaint review office shall 
        ensure that such a hearing commences not later than 24 hours 
        after receipt of the complaint by the complaint hearing office 
        and not later than 3 days after the receipt of a complaint, the 
        Complaint Review Office shall provide a decision.
    (d) Decision of Hearing Officer.--
            (1) In general.--Not later than 120 days after the date on 
        which a complaint is assigned under this section, the hearing 
        officer shall decide if the preponderance of the evidence 
        justifies the denial of services and whether to decide in favor 
        of the complainant with respect to each alleged act or 
        practice. Each such decision--
                    (A) shall include the hearing officer's findings of 
                fact, and
                    (B) shall constitute the hearing officer's final 
                disposition of the proceedings.
            (2) Decisions finding in favor of complainant.--If the 
        hearing officer's decision includes a determination that any 
        party named in the complaint has engaged in or is engaged in an 
        act or practice described in section 5502(b), the hearing 
        officer shall issue and cause to be served on such party an 
        order which requires such party--
                    (A) to cease and desist from such act or practice,
                    (B) to provide the benefits due under the terms of 
                the plan and to otherwise comply with the terms of the 
                plan and the applicable requirements of this Act,
                    (C) to pay to the complainant prejudgment interest 
                on the actual costs incurred in obtaining the items and 
                services at issue in the complaint,
                    (D) to pay to the prevailing complainant a 
                reasonable attorney's fee, reasonable expert witness 
                fees, and other reasonable costs relating to the 
                hearing on the charges on which the complainant 
                prevails, and
                    (E) to provide other appropriate relief.
            (3) Decisions not in favor of complainant.--If the hearing 
        officer's decision includes a determination that the party 
        named in the complaint has not engaged in or is not engaged in 
        an act or practice referred to in section 5502(b), the hearing 
        officer--
                    (A) shall include in the decision a dismissal of 
                the charge in the complaint relating to the act or 
                practice, and
                    (B) upon a finding that such charge is frivolous, 
                shall issue and cause to be served on the complainant 
                an order which requires the complainant to pay to such 
                party a reasonable attorney's fee, reasonable expert 
                witness fees, and other reasonable costs relating to 
                the proceedings on such charge.
            (4) Submission and service of decisions.--The hearing 
        officer shall submit each decision to the complaint review 
        office at the conclusion of the proceedings and the office 
        shall cause a copy of the decision to be served on the parties 
        to the proceedings.
    (e) Final Decision.--The decision of the hearing officer shall be 
final and binding upon all parties.
    (f) Court Enforcement of Orders.--
            (1) In general.--The complainant may petition any court of 
        competent jurisdiction for enforcement of the order. In any 
        such proceeding, the order of the hearing officer shall not be 
        subject to review.
            (2) Awarding of costs.--In any action for court enforcement 
        under this subsection, a prevailing complainant shall be 
        entitled to a reasonable attorney's fee, reasonable expert 
        witness fees, and other reasonable costs relating to such 
        action.

SEC. 5505. CIVIL MONEY PENALTIES.

    (a) Denial or Delay in Payment or Provision of Benefits.--
            (1) In general.--The Secretary of Labor may assess a civil 
        penalty against any health plan, or against any other plan in 
        connection with benefits provided thereunder under a 
        supplemental benefit policy or a cost sharing policy, for 
        unreasonable denial or delay in the payment or provision of 
        benefits thereunder, in an amount not to exceed--
                    (A) $25,000 per violation, or $75,000 per violation 
                in the case of a finding of bad faith on the part of 
                the plan, and
                    (B) in the case of a finding of a pattern or 
                practice of such violations engaged in by the plan, 
                $1,000,000 in addition to the total amount of penalties 
                assessed under subparagraph (A) with respect to such 
                violations.
        For purposes of subparagraph (A), each violation with respect 
        to any single individual shall be treated as a separate 
        violation.
            (2) Civil action to enforce civil penalty.--The Secretary 
        of Labor may commence a civil action in any court of competent 
        jurisdiction to enforce a civil penalty assessed under 
        paragraph (1).
            (3) Supplemental plans.--Nothing in this section shall be 
        construed to limit the rights and remedies available under 
        State law with respect to supplemental benefit plans.
    (b) Civil Penalties for Certain Other Actions.--The Secretary of 
Labor may assess a civil penalty described in section 5505(b)(1) 
against any experience-rated health plan, or against any other plan 
sponsored by a large employer group purchaser in connection with 
benefits provided thereunder under a cost sharing policy, for any 
action described in section 5505(a). The Secretary of Labor may 
initiate proceedings to impose such penalty in the same manner as the 
Secretary of Health and Human Services may initiate proceedings under 
section 5505 with respect to actions described in section 5505(a).

                  Subpart B--Early Resolution Programs

SEC. 5511. ESTABLISHMENT OF EARLY RESOLUTION PROGRAMS IN COMPLAINT 
              REVIEW OFFICES.

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

SEC. 5512. INITIATION OF PARTICIPATION IN MEDIATION PROCEEDINGS.

    (a) Eligibility of Cases for Submission to Early Resolution 
Program.--A dispute may be submitted to the Early Resolution Program 
only if the following requirements are met with respect to the dispute:
            (1) Nature of dispute.--The dispute consists of--
                    (A) an assertion by an individual enrolled under a 
                health plan of one or more claims against the health 
                plan for payment or provision of benefits, or against 
                any other health plan with respect to benefits provided 
                under a supplemental benefit policy or a cost sharing 
                policy, based on alleged coverage under the plan; and
                    (B) a denial by the plan of the claims, or a denial 
                of appropriate reimbursement based on the claims, by 
                the plan.
            (2) Nature of disputed claim.--Each claim consists of--
                    (A) a claim for payment or provision of benefits 
                under the plan; or
                    (B) a request for information or documents the 
                disclosure of which is required under this Act 
                (including claims of entitlement to disclosure based on 
                colorable claims to rights to benefits under the plan).
    (b) Filing of Election.--A complainant with a dispute which is 
eligible for submission to the Early Resolution Program may make the 
election under section 5503(a)(2) to submit the dispute to mediation 
proceedings under the Program not later than 15 days after the date the 
complaint is filed with the complaint review office under section 
5502(b).
    (c) Agreement To Participate.--
            (1) Election by claimant.--A complainant may elect 
        participation in the mediation proceedings only by entering 
        into a written participation agreement (including an agreement 
        to comply with the rules of the Program and consent for the 
        complaint review office to contact the health plan regarding 
        the agreement), and by releasing plan records to the Program 
        for the exclusive use of the facilitator assigned to the 
        dispute.
            (2) Participation by plans or health benefits 
        contractors.--Each party whose participation in the mediation 
        proceedings has been elected by a claimant pursuant to 
        paragraph (1) shall participate in, and cooperate fully with, 
        the proceedings. The claims review office shall provide such 
        party with a copy of the participation agreement described in 
        paragraph (1), together with a written description of the 
        Program. Such party shall submit the copy of the agreement, 
        together with its authorized signature signifying receipt of 
        notice of the agreement, to the claims review office, and shall 
        include in the submission to the claims review office a copy of 
        the written record of the plan claims procedure completed 
        pursuant to section 5501 with respect to the dispute and all 
        relevant plan documents. The relevant documents shall include 
        all documents under which the plan is or was administered or 
        operated, including copies of any insurance contracts under 
        which benefits are or were provided and any fee or 
        reimbursement schedules for health care providers.

SEC. 5513. MEDIATION PROCEEDINGS.

    (a) Role of Facilitator.--In the course of mediation proceedings 
under the Early Resolution Program, the facilitator assigned to the 
dispute shall prepare the parties for a conference regarding the 
dispute and serve as a neutral mediator at such conference, with the 
goal of achieving settlement of the dispute.
    (b) Preparations for Conference.--In advance of convening the 
conference, after identifying the necessary parties and confirming that 
the case is eligible for the Program, the facilitator shall analyze the 
record of the claims procedure conducted pursuant to section 5501 and 
any position papers submitted by the parties to determine if further 
case development is needed to clarify the legal and factual issues in 
dispute, and whether there is any need for additional information and 
documents.
    (c) Conference.--Upon convening the conference, the facilitator 
shall assist the parties in identifying undisputed issues and exploring 
settlement. If settlement is reached, the facilitator shall assist in 
the preparation of a written settlement agreement. If no settlement is 
reached, the facilitator shall present the facilitator's evaluation, 
including an assessment of the parties' positions, the likely outcome 
of further administrative action or litigation, and suggestions for 
narrowing the issues in dispute.
    (d) Time Limit.--The facilitator shall ensure that mediation 
proceedings with respect to any dispute under the Early Resolution 
Program shall be completed within 120 days after the election to 
participate. The parties may agree to one extension of the proceedings 
by not more than 30 days if the proceedings are suspended to obtain an 
agency ruling or to reconvene the conference in a subsequent session.
    (e) Inapplicability of Formal Rules.--Formal rules of evidence 
shall not apply to mediation proceedings under the Early Resolution 
Program. All statements made and evidence presented in the proceedings 
shall be admissible in the proceedings. The facilitator shall be the 
sole judge of the proper weight to be afforded to each submission. The 
parties to mediation proceedings under the Program shall not be 
required to make statements or present evidence under oath.
    (f) Representation.--Parties may participate pro se or be 
represented by attorneys throughout the proceedings of the Early 
Resolution Program.
    (g) Confidentiality.--
            (1) In general.--Under regulations of the Secretary of 
        Labor, rules similar to the rules under section 574 of title 5, 
        United States Code (relating to confidentiality in dispute 
        resolution proceedings) shall apply to the mediation 
        proceedings under the Early Resolution Program.
            (2) Civil remedies.--The Secretary of Labor may assess a 
        civil penalty against any person who discloses information in 
        violation of the regulations prescribed pursuant to paragraph 
        (1) in the amount of three times the amount of the claim 
        involved. The Secretary of Labor may bring a civil action to 
        enforce such civil penalty in any court of competent 
        jurisdiction.

SEC. 5514. LEGAL EFFECT OF PARTICIPATION IN MEDIATION PROCEEDINGS.

    (a) Process Nonbinding.--Findings and conclusions made in the 
mediation proceedings of the Early Resolution Program shall be treated 
as advisory in nature and nonbinding. Except as provided in subsection 
(b), the rights of the parties under subpart A shall not be affected by 
participation in the Program.
    (b) Resolution Through Settlement Agreement.--If a case is settled 
through participation in mediation proceedings under the Program, the 
facilitator shall assist the parties in drawing up an agreement which 
shall constitute, upon signature of the parties, a binding contract 
between the parties, which shall be enforceable under section 5515.
    (c) Preservation of Rights of Non-Parties.--The settlement 
agreement shall not have the effect of waiving or otherwise affecting 
any rights to review under subpart A, or any other right under this Act 
or the plan, with respect to any person who is not a party to the 
settlement agreement.

SEC. 5515. ENFORCEMENT OF SETTLEMENT AGREEMENTS.

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

SEC. 5516. DUE PROCESS FOR HEALTH CARE PROVIDERS.

    (a) Publicly Available Standards and Process.--Each health plan 
shall establish and utilize--
            (1) publicly available standards for contracting with 
        health care providers; and
            (2) a publicly available process for dismissing such 
        providers or failing to renew contracts with such providers.
    (b) Notice Requirement.--
            (1) In general.--The process established by a health plan 
        under subsection (a) shall include reasonable notification to a 
        health care provider of a decision to dismiss such provider or 
        not to renew a contract with such provider before such decision 
        takes effect.
            (2) Exception.--The notice required under paragraph (1) 
        shall not apply if failure to dismiss a provider or renewing a 
        provider's contract would adversely affect the health or safety 
        of a patient.
            (3) Contents of notice.--Each notice to a health care 
        provider under paragraph (1) shall contain the reasons for the 
        dismissal or failure to renew. Such reasons shall be consistent 
        with the standards established under subsection (a).
    (c) Review.--The process established by a health plan under 
subsection (a) shall include an opportunity for review of the health 
plan's action by a health care provider who is dismissed by a health 
plan or with respect to whom a health plan fails to renew a contract. 
Such review shall be conducted by--
            (1) the provider's peers who have contracts with, or are 
        employed by, the health plan; and
            (2) if there is mutual consent of the provider and the 
        health plan, one or more enrollees in the health plan.
A health care provider may have an attorney present in connection with 
any review under this subsection if the provider notifies the health 
plan that an attorney will be present in advance of the review 
proceeding.
    (d) Effect on Other Laws.--The provisions of this section shall not 
supersede any other provision of Federal or State law.

         PART 2--ADDITIONAL REMEDIES AND ENFORCEMENT PROVISIONS

SEC. 5531. JUDICIAL REVIEW OF FEDERAL ACTION ON STATE SYSTEMS.

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

SEC. 5532. CIVIL ENFORCEMENT.

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

SEC. 5533. PRIORITY OF CERTAIN BANKRUPTCY CLAIMS.

    Section 507(a)(8) of title 11, United States Code, is amended to 
read as follows:
            ``(8) Eighth, allowed unsecured claims--
                    ``(A) based upon any commitment by the debtor to 
                the Federal Deposit Insurance Corporation, the 
                Resolution Trust Corporation, the Director of the 
                Office of Thrift Supervision, the Comptroller of the 
                Currency, or the Board of Governors of the Federal 
                Reserve System, or their predecessors or successors, to 
                maintain the capital of an insured depository 
                institution; or
                    ``(B) for payments under title X of the Health 
                Security Act owed to a State.''.

SEC. 5534. PRIVATE RIGHT TO ENFORCE STATE RESPONSIBILITIES.

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

SEC. 5535. PRIVATE RIGHT TO ENFORCE FEDERAL RESPONSIBILITIES IN 
              OPERATING A SYSTEM IN A STATE.

    (a) In General.--The failure of the Secretary of Health and Human 
Services to carry out a responsibility under subpart C of part 1 of 
subtitle E of title I, confers an enforceable right of action on any 
person who is aggrieved by such failure. Such a person may commence a 
civil action against the Secretary in an appropriate State court or 
district court of the United States.
    (b) Exhaustion of Remedies.--In an action under subsection (a), the 
court shall exercise jurisdiction without regard to whether the 
aggrieved person has exhausted any administrative or other remedies 
that may be provided by law.
    (c) Relief.--In an action under subsection (a), if the court finds 
that a failure described in such subsection has occurred, the aggrieved 
person may recover compensatory damages and the court may award any 
other appropriate relief.
    (d) Attorney's Fees.--In an action under subsection (a), the court, 
in its discretion, may allow the prevailing party, other than the 
United States, a reasonable attorney's fee (including expert fees) as 
part of the costs, and the United States shall be liable for costs the 
same as a private person.

SEC. 5536. ENFORCEMENT OF CONSUMER PROTECTIONS.

    (a) Covered Violations.--The provisions of this section shall apply 
with respect to a health plan that fails to fulfill a duty imposed on 
the plan under section 1122 and subtitle A of this title.
    (b) Administrative Enforcement and Civil Penalties.--The penalties 
described in section 1867(d)(1) of the Social Security Act and the 
procedures described in section 1128A of such Act (other than the first 
two sentences of subsection (a) and subsection (b)) shall apply to 
health plans described in subsection (a). In addition to such 
penalties, an amount not to exceed $1,000,000 may be assessed in the 
case of a finding of a pattern or practice of such violations. The 
Secretary shall establish procedures whereby, when a consumer has 
disenrolled from a health plan violating the duties described in 
subsection (a), successor health plans may recover from the original 
health plan for health care costs attributable to such violations.
    (c) Correction of Substantial Violations.--Upon an administrative 
or judicial finding of a substantial violation of the duties described 
in subsection (a), the State or court may--
            (1) inform all current enrollees of the plan of the 
        violation and that they may disenroll immediately from that 
        plan and enroll with another community-rated health plan; and
            (2) notify the health plan that it shall immediately cease 
        enrollment activities until it has obtained certifications from 
        the appropriate certifying entity or court that the violation 
        has been corrected.
Such actions shall not be taken without providing the health plan with 
a reasonable opportunity to correct such violations, except where 
providing such an opportunity would risk health or safety.

SEC. 5537. DISCRIMINATION CLAIMS.

    (a) Civil Action by Aggrieved Person.--
            (1)  In general.--Any person who is aggrieved by a 
        violation of section 1602 may commence a civil action against 
        the party or parties committing such violation in an 
        appropriate State court or district court of the United States.
            (2) Standards.--The standards used to determine whether a 
        violation has occurred in a complaint alleging discrimination 
        on the basis of age or disability under section 1602 shall be 
        the standards applied under the Age Discrimination Act of 1975 
        (42 U.S.C. 6101 et seq.) and the Americans with Disabilities 
        Act of 1990 (42 U.S.C. 12101 et seq.).
            (3) Relief.--In any action under paragraph (1), if the 
        court finds a violation of section 1602, the court may award 
        such equitable and injunctive relief as it deems appropriate, 
        and may award to the aggrieved person any sums lost as a result 
        of the violation. If the court finds that the party or parties 
        committing a violation engaged in intentional discrimination in 
        violation of section 1602, the aggrieved person may recover 
        compensatory damages. If the court finds that the party or 
        parties committing such violation did so with malice or 
        reckless indifference to the federally protected rights of the 
        aggrieved person, the aggrieved person may recover punitive 
        damages under this section against a defendant other than a 
        government, government agency or political subdivision.
            (4) Attorneys' fees.--In any action under paragraph (1), 
        the court, in its discretion, may allow the prevailing party, 
        other than the United States, a reasonable attorney's fee 
        (including expert fees and other litigation expenses) as part 
        of the costs, and the United States shall be liable for costs 
        the same as a private person.
    (b) Action by Secretary.--Whenever the Secretary of Health and 
Human Services finds that a party has failed to comply with section 
1602 or with an applicable regulation issued under such section, the 
Secretary shall notify the party. If within a reasonable period of time 
the party fails or refuses to comply, the Secretary may--
            (1) refer the matter to the Attorney General with a 
        recommendation that an appropriate civil action be instituted;
            (2) terminate or limit the participation of such party in 
        the programs authorized by this Act;
            (3) withhold Federal financial assistance to the party; or
            (4) take such other action as may be provided by law.
    (c) Action by Attorney General.--When a matter is referred to the 
Attorney General under subsection (b)(1), the Attorney General may 
bring a civil action in a district court of the United States for such 
relief as may be appropriate, including injunctive relief. In a civil 
action under this section, the court--
            (1) may grant any equitable relief that the court considers 
        to be appropriate;
            (2) may award such other relief as the court considers to 
        be appropriate, including in cases of intentional 
        discrimination compensatory and punitive damages; and
            (3) may, to vindicate the public interest when requested by 
        the Attorney General, assess a civil money penalty against the 
        party in an amount--
                    (A) not exceeding $50,000 for a first violation; 
                and
                    (B) not exceeding $100,000 for any subsequent 
                violation.

SEC. 5538. NONDISCRIMINATION IN FEDERALLY ASSISTED PROGRAMS.

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

SEC. 5539. CIVIL AND ADMINISTRATION ACTION BY ESSENTIAL COMMUNITY 
              PROVIDER.

    (a) In General.--An electing essential community provider (as 
defined in section 1466(d)) who is aggrieved by the failure of a health 
plan to fulfill a duty imposed on the plan by section 1466 may commence 
a civil action against the plan in an appropriate State court or 
district court of the United States.
    (b) Relief.--In an action under subsection (a), if the court finds 
that the health plan has failed to fulfill a duty imposed on the plan 
by section 1466, the electing essential community provider may recover 
compensatory damages and the court may order any other appropriate 
relief.
    (c) Attorney's Fees.--In any action under subsection (a), the 
court, in its discretion, may allow the prevailing party, other than 
the United States, a reasonable attorney's fee (including expert fees) 
as part of the costs, and the United States shall be liable for costs 
the same as a private person.
    (d) State Complaint System Required.--Prior to commencing an action 
under subsection (a), the aggrieved essential community provider may 
first elect to utilize the administrative process provided under this 
subsection as follows:
            (1) The Secretary shall prescribe regulations governing 
        administrative grievance actions by essential community 
        providers that shall be consistent with the requirements of 
        section 5504 and that shall provide for the consolidation of 
        complaints (at the election of the essential community 
        providers) in cases involving multiple complaints against a 
        single health plan.
            (2) A State shall make available to each electing essential 
        community provider that is aggrieved by an action of a health 
        plan under section 1466, the opportunity to file a complaint in 
        the complaint review office established under section 5502. In 
        the case of essential community providers located in a 
        cooperative established in any State by the Secretary, the 
        Secretary shall assume all of the duties and obligations of 
        such State under this section.

SEC. 5540. FACIAL CONSTITUTIONAL CHALLENGES.

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

SEC. 5541. TREATMENT OF PLANS AS PARTIES IN CIVIL ACTIONS.

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

SEC. 5542. WHISTLEBLOWER PROTECTIONS.

    (a) In General.--A health plan may not discharge, discriminate or 
otherwise take adverse action against any employee with respect to 
compensation, terms, conditions or privileges of employment because the 
employee (or any person acting pursuant to the request of the employee) 
provided information to any Federal, State or private supervisory 
agency or entity regarding a possible violation of any provision of 
this Act or any regulation issued under this Act.
    (b) Civil Action.--An employee or former employee who believes that 
such employee has been discharged, discriminated or otherwise subject 
to adverse action in violation of subsection (a) may file a civil 
action in the appropriate United States district court within 2 years 
of the date of such discharge, discrimination or adverse action.
    (c) Determination of Court.--If a court in an action under 
subsection (b) determines that a violation of subsection (a) has 
occurred, the court may order the health care entity or plan that 
committed the violation--
            (1) to reinstate the employee to his or her former 
        position;
            (2) to pay compensatory damages to the employee;
            (3) to pay reasonable costs and attorneys fees incurred by 
        the employee in bringing such action; and
            (4) to take such other appropriate actions to remedy any 
        past discrimination.

SEC. 5543. GENERAL NONPREEMPTION OF RIGHTS AND REMEDIES.

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

                    Subtitle G--Repeal of Exemption

SEC. 5601. REPEAL OF EXEMPTION FOR HEALTH INSURANCE.

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

              TITLE VI--INDIVIDUAL AND EMPLOYER SUBSIDIES

       Subtitle A--Individual Premium and Cost-Sharing Assistance

SEC. 6001. REQUIREMENT TO OPERATE STATE PROGRAM.

    (a) In General.--A participating State shall have in effect a 
program for furnishing premium assistance and cost-sharing assistance 
in accordance with this subtitle for calendar years beginning after 
1996.
    (b) Designation of State Agency.--A State may designate any 
appropriate State agency to administer the program under this subtitle.

SEC. 6002. ASSISTANCE WITH STANDARD HEALTH PLAN PREMIUMS.

    (a) Eligibility.--
            (1) In general.--An eligible individual (as defined in 
        section 6008(4)) who has been determined by a State under 
        section 6004 to be a premium subsidy eligible individual (as 
        defined in paragraph (2)) shall be eligible for premium 
        assistance in the amount determined under subsection (b).
            (2) Premium subsidy eligible individual.--For purposes of 
        this subtitle, the term ``premium subsidy eligible individual'' 
        means any of the following individuals:
                    (A) Individuals with incomes below a certain income 
                threshold.--An eligible individual who has a family 
                income determined under section 6008(3) which does not 
                exceed 200 percent of the poverty line (as defined in 
                section 6008(5)).
                    (B) Children.--An eligible individual who--
                            (i) is a child (as defined in section 
                        6008(2));
                            (ii) has a family income determined under 
                        section 6008(3) which does not exceed 240 
                        percent of the poverty line; and
                            (iii) has not been enrolled in a health 
                        plan during the 6-month period ending on the 
                        date the individual submits an application to 
                        the State for premium assistance under this 
                        subtitle.
                    (C) Pregnant women.--An eligible individual who--
                            (i) is a pregnant woman (as defined in 
                        section 6008(6));
                            (ii) has a family income determined under 
                        section 6008(3) which does not exceed 240 
                        percent of the poverty line; and
                            (iii) is not enrolled in a health plan on 
                        the date the individual submits an application 
                        to the State for premium assistance under this 
                        subtitle.
            (3) Special rule with respect to children and pregnant 
        women.--An eligible individual may not be a premium subsidy 
        eligible individual described in subparagraphs (B) or (C) of 
        paragraph (2) if an employer contribution of at least 80 
        percent of the premium under a standard health plan that is 
        available to the individual through the employer is made or 
        offered to be made on behalf of the individual.
    (b) Amount of Assistance.--
            (1) In general.--
                    (A) Formula.--The amount of premium assistance for 
                a month for a premium subsidy eligible individual is--
                            (i) the least of --
                                    (I) the subsidy percentage 
                                specified in paragraph (2) multiplied 
                                by \1/12\th of the annual premium paid 
                                for coverage under a standard health 
                                plan in which the individual is 
                                enrolled;
                                    (II) the subsidy percentage 
                                specified in paragraph (2) multiplied 
                                by \1/12\th of the weighted average 
                                annual premium rate (as defined in 
                                subparagraph (B)) for all community-
                                rated standard health plans offered in 
                                the community rating area in which the 
                                individual resides; or
                                    (III) the subsidy percentage 
                                specified in paragraph (2) multiplied 
                                by \1/12\th of the annual reference 
                                premium for the community rating area 
                                in which the individual resides (as 
                                defined in subparagraph (C)); minus
                            (ii) the amount of any employer 
                        contribution made or offered to be made on 
                        behalf of the individual for coverage under the 
                        standard health plan that is available to the 
                        individual through an employer.
                    (B) Weighted average annual premium rate.--For 
                purposes of this paragraph, the term ``weighted average 
                annual premium rate'' means the average premium for the 
                community-rated standard health plans offered in the 
                community rating area in which the individual resides, 
                weighted to reflect the total enrollment of community-
                rated eligible individuals among such plans.
                    (C) Reference premium.--For purposes of this 
                paragraph, the term ``reference premium'' means the 
                reference premium established under section 4512 of the 
                Internal Revenue Code of 1986.
                    (D) Special rules for determining amount of 
                employer contributions.--For purposes of determining 
                the amount of an employer contribution under 
                subparagraph (A), the following rules shall apply:
                            (i) Family contributions.--If an employer 
                        makes a contribution on behalf of a family 
                        (rather than any particular individual) such 
                        contribution shall be allocated ratably among 
                        the individuals in the family.
                            (ii) Greatest employer contribution 
                        available.--The employer contribution with 
                        respect to any individual is the largest 
                        employer contribution offered to be made on 
                        behalf of the individual by the individual's 
                        employer or any employer of any member of the 
                        individual's family.
            (2) Subsidy percentage.--For purposes of paragraph (1)(A), 
        the term ``subsidy percentage'' means the following:
                    (A) Individuals with incomes below certain income 
                threshold.--
                            (i) In general.--Except as provided in 
                        clauses (ii) and (iii), for a premium subsidy 
                        eligible individual described in subsection 
                        (a)(2)(A), 100 percent reduced (but not below 
                        zero) by .80 percentage points for each 1 
                        percentage point (or portion thereof) by which 
                        such individual's family income exceeds 100 
                        percent of the poverty line.
                            (ii) AFDC recipients.--For a premium 
                        subsidy eligible individual described in 
                        subsection (a)(2)(A) who is a member of a 
                        family receiving aid to families with dependent 
                        children under part A or E of title IV of the 
                        Social Security Act, the subsidy percentage 
                        shall be 100 percent.
                            (iii) Non-cash medicaid eligibles.--
                                    (I) In general.--For a premium 
                                subsidy eligible individual described 
                                in subsection (a)(2)(A) who is a non-
                                cash medicaid eligible described in 
                                subclause (II), the subsidy percentage 
                                shall be 100 percent during the 6-month 
                                period beginning on January 1, 1997.
                                    (II) Non-cash medicaid eligible.--
                                The non-cash medicaid eligibles 
                                described in this subclause are 
                                individuals receiving medical 
                                assistance under the State plan under 
                                title XIX of the Social Security Act as 
                                of December 31, 1996, who are not 
                                individuals--
                                            (aa) who are members of a 
                                        family receiving aid to 
                                        families with dependent 
                                        children under part A or E of 
                                        title IV of the Social Security 
                                        Act;
                                            (bb) with respect to whom 
                                        supplemental security income 
                                        benefits are being paid under 
                                        title XVI of such Act; or
                                            (cc) eligible for benefits 
                                        under part A of title XVIII of 
                                        such Act.
                    (B) Children and pregnant women.--For a premium 
                subsidy eligible individual described in subparagraph 
                (B) or (C) of subsection (a)(2), 100 percent reduced 
                (but not below zero) by 1.82 percentage points for each 
                1 percentage point (or portion thereof) by which such 
                individuals family income exceeds 185 percent of the 
                poverty line.
    (c) Payments.--
            (1) In general.--The amount of the premium assistance 
        available to a premium subsidy eligible individual under 
        subsection (b) shall be paid by the State in which the 
        individual resides directly to the standard health plan in 
        which the individual is enrolled. Payments under the preceding 
        sentence shall commence in the first month during which the 
        individual is enrolled in a certified standard health plan and 
        determined under section 6004 to be a premium subsidy eligible 
        individual.
            (2) Special rule with respect to families with multiple 
        children.--If a family includes more than 1 child described in 
        subsection (a)(2)(B), no premium assistance may be paid to a 
        plan under paragraph (1) on behalf of any such child unless 
        such assistance is paid on behalf of all such children.
            (3) Administrative errors.--A State is financially 
        responsible for premium assistance paid based on an eligibility 
        determination error to the extent the State's error rate for 
        eligibility determinations exceeds a maximum permissible error 
        rate to be specified by the Secretary.

SEC. 6003. ASSISTANCE WITH COST-SHARING FOR STANDARD HEALTH PLANS.

    (a) Non-AFDC Low-Income Individuals.--
            (1) Individuals working for community-rated employers.--
                    (A) In general.--If a non-AFDC low-income 
                individual described in subparagraph (B) is enrolled in 
                a community-rated standard health plan providing a high 
                cost-sharing schedule, such individual shall be 
                eligible for cost-sharing assistance consisting of a 
                reduction in the cost-sharing under such plan to the 
                level of a plan providing a low cost-sharing schedule.
                    (B) Individual described.--A non-AFDC low-income 
                individual described in this subparagraph is an 
                individual who is employed by a community-rated 
                employer and who is unable to enroll in a standard 
                health plan--
                            (i) with a premium at or below the weighted 
                        average premium rate for all community-rated 
                        standard health plans offered through the 
                        purchasing cooperative offered by the 
                        individual's employer, and
                            (ii) providing a low or combination cost-
                        sharing schedule.
            (2) Individuals working for experience-rated employers.--
                    (A) In general.--If a non-AFDC low-income 
                individual described in subparagraph (B) is enrolled in 
                an experience-rated standard health plan providing a 
                high cost-sharing schedule, such individual shall be 
                eligible for cost-sharing assistance consisting of a 
                reduction in the cost-sharing under such plan to the 
                level of a plan providing a low cost-sharing schedule.
                    (B) Individual described.--A non-AFDC low-income 
                individual described in this subparagraph is an 
                individual who is employed by an experience-rated 
                employer and who is unable to enroll in a standard 
                health plan offered by such employer providing a low or 
                combination cost-sharing schedule.
            (3) Non-working individuals.--
                    (A) In general.--If a non-AFDC low-income 
                individual described in subparagraph (B) is enrolled in 
                a community-rated standard plan providing a high cost-
                sharing schedule, such individual shall be eligible for 
                cost-sharing assistance consisting of a reduction in 
                the cost-sharing under such plan to the level of a plan 
                providing a low cost-sharing schedule.
                    (B) Individual described.--A non-AFDC low-income 
                individual described in this subparagraph is an 
                individual who is not employed and who is unable to 
                enroll in a standard health plan--
                            (i) with a premium at or below the weighted 
                        average premium rate for all community-rated 
                        standard health plans offered in the community 
                        rating area in which the individual resides, 
                        and
                            (ii) providing a low or combination cost-
                        sharing schedule.
            (4) Non-afdc low-income individual.--For purposes of this 
        subsection, the term ``non-AFDC low-income individual'' means 
        an eligible individual who--
                    (A) has a family income determined under section 
                6008(3) which does not exceed 150 percent of the 
                poverty line; and
                    (B) is not a member of a family receiving aid to 
                families with dependent children under part A or E of 
                title IV of the Social Security Act.
    (b) AFDC Recipients.--
            (1) Low or combination cost-sharing plan.--An AFDC 
        recipient enrolled in a community-rated standard plan--
                    (A) with a premium at or below the weighted average 
                premium rate for all community rated-standard health 
                plans offered in the community rating area in which the 
                individual resides, and
                    (B) providing a low or combination cost-sharing 
                schedule,
        shall be eligible for cost-sharing assistance consisting of a 
        reduction in the amount of copayment applied with respect to an 
        item or service in an amount equal to 20 percent of the 
        copayment amount otherwise applicable under the plan, rounded 
        to the nearest dollar.
            (2) High cost-sharing plan.--If an AFDC recipient is unable 
        to enroll in a health plan described in paragraph (1) and such 
        individual is enrolled in a community-rated standard plan 
        providing a high cost-sharing schedule, such individual shall 
        be eligible for cost-sharing assistance consisting of a 
        reduction in the cost-sharing under such plan to the level of a 
        plan providing a low cost-sharing schedule.
            (3) AFDC recipient.--For purposes of this subsection, the 
        term ``AFDC recipient'' means an eligible individual who is a 
        member of a family receiving aid to families with dependent 
        children under part A or E of title IV of the Social Security 
        Act.
    (c) Notification of Health Plans.--If a State determines that an 
individual is eligible for cost-sharing assistance under this section, 
the State shall notify the standard health plan in which such 
individual is enrolled of such determination in a timely manner.

SEC. 6004. ELIGIBILITY DETERMINATIONS.

    (a) In General.--The Secretary shall promulgate regulations 
specifying requirements for State programs under this subtitle with 
respect to determining eligibility for premium and cost-sharing 
assistance.
    (b) Specifications for Regulations.--The regulations promulgated by 
the Secretary under subsection (a) shall include the following 
requirements:
            (1) Frequency of applications.--A State program shall 
        provide that an individual may file an application for 
        assistance with an agency designated by the State at any time, 
        in person or by mail.
            (2) Application form.--A State program shall provide for 
        the use of an application form developed by the Secretary under 
        subsection (c).
            (3) Distribution of applications.--A State program shall 
        make applications accessible at locations where individuals are 
        most likely to obtain the applications.
            (4) Requirement to submit revised application.--A State 
        program shall require individuals to submit revised 
        applications to reflect changes in estimated family incomes, 
        including changes in employment status of family members, 
        during the year. The State shall revise the amount of any 
        premium assistance based on such a revised application.
            (5) Verification.--A State program shall provide for 
        verification of the information supplied in applications under 
        this subtitle. Such verification may include examining return 
        information disclosed to the State for such purpose under 
        section 6103(l)(15) of the Internal Revenue Code of 1986.
    (c) Administration of State Programs.--
            (1) In general.--The Secretary shall establish standards 
        for States operating programs under this subtitle which ensure 
        that such programs are operated in a uniform manner with 
        respect to application procedures, data processing systems, and 
        such other administrative activities as the Secretary 
        determines to be necessary.
            (2) Application forms.--The Secretary shall develop an 
        application form for assistance which shall--
                    (A) be simple in form and understandable to the 
                average individual;
                    (B) require the provision of information necessary 
                to make a determination as to whether an individual is 
                eligible for assistance, including a declaration of 
                estimated income by the individual based, at the 
                election of the individual--
                            (i) on multiplying by a factor of 4 the 
                        individual's family income for the 3-month 
                        period immediately preceding the month in which 
                        the application is made; or
                            (ii) on estimated income for the entire 
                        year for which the application is submitted; 
                        and
                    (C) require attachment of such documentation as 
                deemed necessary by the Secretary in order to ensure 
                eligibility for assistance.
    (d) Effectiveness of Eligibility.--A determination by a State that 
an individual is a premium subsidy eligible individual or an individual 
eligible for cost-sharing assistance shall be effective for the 
calendar year for which such determination is made unless a revised 
application submitted under subsection (b)(4) indicates that an 
individual is no longer eligible for assistance.
    (e) Penalties for Material Misrepresentations.--
            (1) In general.--Any individual who knowingly makes a 
        material misrepresentation of information in an application for 
        assistance under this subtitle shall be liable to the Federal 
        Government for the amount any assistance received by individual 
        on the basis of a misrepresentation and interest on such amount 
        at a rate specified by the Secretary, and, shall, in addition, 
        be liable to the Federal Government for $2,000 or, if greater, 
        3 times the amount any assistance received by individual on the 
        basis of a misrepresentation.
            (2) Collection of penalty amounts.--A State which receives 
        an application for assistance with respect to which a material 
        misrepresentation has been made shall collect the penalty 
        amount required under paragraph (1) and submit such amount to 
        the Secretary in a timely manner.

SEC. 6005. END-OF-YEAR RECONCILIATION FOR PREMIUM ASSISTANCE.

    (a) In General.--
            (1) Requirement to file statement.--An individual who 
        received premium assistance under this subtitle from a State 
        for any month in a calendar year shall file with the State an 
        income reconciliation statement to verify the individual's 
        family income for the year. Such a statement shall be filed at 
        such time, and contain such information, as the State may 
        specify in accordance with regulations promulgated by the 
        Secretary.
            (2) Notice of requirement.--A State shall provide a written 
        notice of the requirement under paragraph (1) at the end of the 
        year to an individual who received premium assistance under 
        this subtitle from such State in any month during the year.
    (b) Reconciliation of Premium Assistance Based on Actual Income.--
            (1) In general.--Based on and using the income reported in 
        the reconciliation statement filed under subsection (a) with 
        respect to an individual, the State shall compute the amount of 
        premium assistance that should have been provided under this 
        subtitle with respect to the individual for the year involved.
            (2) Overpayment of assistance.--If the total amount of the 
        premium assistance provided was greater than the amount 
        computed under paragraph (1), the individual is liable to the 
        State to pay an amount equal to the amount of the excess 
        payment. Any amount collected by a State under this paragraph 
        shall be submitted to the Secretary in a timely manner.
            (3) Underpayment of assistance.--If the total amount of the 
        premium assistance provided was less than the amount computed 
        under paragraph (1), the State shall pay to the individual an 
        amount equal to the amount of the deficit.
            (4) State option.--A State may, in accordance with 
        regulations promulgated by the Secretary, establish a procedure 
        under which any overpayments or underpayments of premium 
        assistance determined under paragraphs (2) and (3) with respect 
        to an individual for a year may be collected or paid, as 
        appropriate, through adjustments to the premium assistance 
        furnished to such individual in the succeeding year.
    (c) Verification.--Each State may use such information as it has 
available to verify income of individuals with applications filed under 
this subtitle, including return information disclosed to the State for 
such purpose under section 6103(l)(15) of the Internal Revenue Code of 
1986.
    (d) Penalties for Failure to File.--In the case of an individual 
who is required to file a statement under this section in a year who 
fails to file such a statement, the entire amount of the premium 
assistance provided in such year shall be considered an excess amount 
under subsection (b)(2) and such individual shall not be eligible for 
premium assistance under this subtitle until such statement is filed. A 
State, using rules established by the Secretary, shall waive the 
application of this subsection if the individual establishes, to the 
satisfaction of the State under such rules, good cause for the failure 
to file the statement on a timely basis.
    (e) Penalties for False Information.--Any individual who provides 
false information in a statement filed under subsection (a) is subject 
to the same penalties as are provided under section 6004(e) for a 
misrepresentation of material fact described in such section.

SEC. 6006. ENROLLMENT OUTREACH.

    (a) In General.--The Secretary shall promulgate regulations under 
which each State operating a program for premium assistance under this 
subtitle shall have in effect an enrollment outreach system under which 
individuals may be determined eligible for such assistance by health 
care providers who furnish services to such individuals.
    (b) Specifications for Regulations.--The regulations promulgated by 
the Secretary under subsection (a) shall include the following 
requirements:
            (1) Health care providers.--Each State shall permit only 
        the classes or categories of health care providers determined 
        appropriate by the Secretary (referred to in this subsection as 
        ``eligible health care providers'') to participate in an 
        enrollment outreach system established by the State.
            (2) Application for assistance.--Each State shall develop 
        and make available to eligible health care providers in the 
        State an enrollment package for distribution to potentially 
        eligible individuals which includes a simple form for 
        individuals who receive services from such providers to apply 
        for premium assistance. Such form shall--
                    (A) permit an individual completing the form to 
                make a declaration that the individual is eligible for 
                a full subsidy under section 6002; and
                    (B) permit an individual to enroll in a community-
                rated standard health plan offered in the community 
                rating area in which the individual resides.
            (3) Submission of completed application.--An individual who 
        receives an enrollment application form from an eligible health 
        care provider may complete the form and submit it to the 
        individual's provider or the State agency operating the program 
        for premium assistance under this subtitle. If a health care 
        provider receives an application under this section the 
        provider shall submit the application to the State agency 
        administering the premium assistance program under this 
        subtitle within a period of time determined appropriate by the 
        Secretary in regulations.
            (4) Selection of health plan.--An individual may select a 
        community-rated standard health plan with which to enroll on 
        the date the individual submits an application form under this 
        section or the individual may make such selection at a later 
        date determined appropriate by the Secretary in regulations. If 
        an individual fails to select a health plan with which to 
        enroll by the date determined appropriate by the Secretary, the 
        State agency shall select such a plan for the individual.
            (5) Effective date of enrollment.--An individual who is 
        enrolled in a community-rated standard health plan in 
        accordance with the enrollment eligibility system established 
        under this section shall be an enrollee of the plan as of the 
        date the individual submits an application to the State agency 
        or a health care provider.
            (6) Period of eligibility.--An individual who submits an 
        application to a health care provider under an enrollment 
        outreach system under this section shall be eligible for 
        premium assistance under this subtitle for the period beginning 
        on the date such application is submitted and ending 60 days 
        after such date.
            (7) No state responsibility for administrative errors.--
        Section 6002(c)(3) shall not apply to any eligibility 
        determinations made under this section.
            (8) No reconciliation required.--The reconciliation 
        provisions of section 6005 shall not apply to any premium 
        assistance paid on behalf of an individual during a period of 
        eligibility for such assistance under this section.
            (9) Requirement on states.--During a period of eligibility 
        for premium assistance under this section, an individual shall 
        be given an opportunity by a State to apply for continuing 
        eligibility for premium assistance under this subtitle.

SEC. 6007. PAYMENTS TO STATES.

    (a) In General.--
            (1) Payments from the Secretary.--A State operating a 
        program for furnishing premium assistance under this subtitle 
        shall be entitled to receive payments from the Secretary in an 
        amount equal to the premium assistance paid on behalf of 
        individuals eligible for such assistance under this subtitle. 
        Such payments shall be made at such time and in such form as 
        provided in regulations promulgated by the Secretary.
            (2) State entitlement.--This subsection constitutes budget 
        authority in advance of appropriations Acts, and represents the 
        obligation of the Federal Government to provide payments to 
        States operating programs under this subtitle in accordance 
        with this section.
    (b) State Assessments for Administration Costs.--A State operating 
a program for furnishing premium and cost-sharing assistance under this 
subtitle may impose a premium assessment on the insured health plans 
offered in the State in an amount not to exceed one percent of the 
amount of the premium. Amounts collected pursuant to this subsection 
may only be used to cover the administrative costs of the State in 
operating such program.
    (c) Audits.--The Secretary shall conduct regular audits of the 
activities under the State programs conducted under this subtitle.

SEC. 6008. DEFINITIONS AND DETERMINATIONS OF INCOME.

    For purposes of this subtitle:
            (1) Standard health plan.--The term ``standard health 
        plan'' means a health plan (as defined in section 1011(2)(B)) 
        providing the standard benefits package as described in section 
        1201(a).
            (2) Child.--The term ``child'' means an individual who is 
        under 19 years of age.
            (3) Determinations of income.--
                    (A) Family income.--The term ``family income'' 
                means, with respect to an individual who--
                            (i) is not a dependent (as defined in 
                        subparagraph (B)) of another individual, the 
                        sum of the modified adjusted gross incomes (as 
                        defined in subparagraph (D)) for the 
                        individual, the individual's spouse, and 
                        children who are dependents of the individual; 
                        or
                            (ii) is a dependent of another individual, 
                        the sum of the modified adjusted gross incomes 
                        for the other individual, the other 
                        individual's spouse, and children who are 
                        dependents of the other individual.
                    (B) Dependent.--The term ``dependent'' shall have 
                the meaning given such term under section 152 of the 
                Internal Revenue Code of 1986.
                    (C) Special rule for foster children.--For purposes 
                of subparagraph (A), a child who is placed in foster 
                care by a State agency shall not be considered a 
                dependent of another individual.
                    (D) Modified adjusted gross income.--The term 
                ``modified adjusted gross income'' means adjusted gross 
                income (as defined in section 62(a) of the Internal 
                Revenue Code of 1986)--
                            (i) determined without regard to sections 
                        135, 162(l), 911, 931, and 933 of such Code, 
                        and
                            (ii) increased by--
                                    (I) the amount of interest received 
                                or accrued by the individual during the 
                                taxable year which is exempt from tax, 
                                and
                                    (II) the amount of the social 
                                security benefits (as defined in 
                                section 86(d) of such Code) received 
                                during the taxable year to the extent 
                                not included in gross income under 
                                section 86 of such Code.
                The determination under the preceding sentence shall be 
                made without regard to any carryover or carryback.
                    (E) Special rule for individuals temporarily 
                unemployed.--
                            (i) In general.--For purposes of 
                        determining eligibility for premium assistance 
                        under this subtitle for an individual who 
                        becomes unemployed, such individual's spouse, 
                        and children who are dependents of such 
                        individual, the family income for such 
                        individuals determined under subparagraph (A) 
                        shall be reduced--
                                    (I) for each month before and after 
                                the period of unemployment, by an 
                                amount equal to the lesser of the gross 
                                wages of the individual for the month 
                                or \1/12\th of the amount equal to 75 
                                percent of the poverty line for an 
                                individual; and
                                    (II) for each month after the date 
                                the individual becomes unemployed, by 
                                an amount equal to any unemployment 
                                compensation under an unemployment 
                                compensation law of a State or of the 
                                United States received by or on behalf 
                                of the unemployed individual.
                            (ii) Limitation.--Clause (i) shall no 
                        longer apply to an individual on the earlier 
                        of--
                                    (I) the date on which the period of 
                                unemployment ends; or
                                    (II) the end of the 6-month period 
                                beginning on the first day of the first 
                                month during which the individual 
                                receives premium assistance under this 
                                subtitle that would not be available to 
                                such individual if the provisions of 
                                clause (i) did not apply.
                            (iii) Special rule.--Clause (i) shall not 
                        apply if an employer contribution of at least 
                        80 percent of the premium under a standard 
                        health plan is available to the unemployed 
                        individual through an employer of a member of 
                        the individual's family.
            (4) Eligible individual.--
                    (A) In general.--The term ``eligible individual'' 
                means an individual who is residing in the United 
                States and who is--
                            (i) a citizen or national of the United 
                        States; or
                            (ii) an alien permanently residing in the 
                        United States under color of law (as defined in 
                        subparagraph (C)).
                    (B) Exclusion.--The term ``eligible individual'' 
                shall not include an individual who is an inmate of a 
                public institution (except as a patient of a medical 
                institution).
                    (C) Alien permanently residing in the united states 
                under color of law.--The term ``alien permanently 
                residing in the United States under color of law'' 
                means an alien lawfully admitted for permanent 
                residence (within the meaning of section 101(a)(20) of 
                the Immigration and Nationality Act), and includes any 
                of the following:
                            (i) An alien who is admitted as a refugee 
                        under section 207 of the Immigration and 
                        Nationality Act.
                            (ii) An alien who is granted asylum under 
                        section 208 of such Act.
                            (iii) An alien whose deportation is 
                        withheld under section 243(h) of such Act.
                            (iv) An alien who is admitted for temporary 
                        residence under section 210, 210A, or 245A of 
                        such Act.
                            (v) An alien who has been paroled into the 
                        United States under section 212(d)(5) of such 
                        Act for an indefinite period or who has been 
                        granted extended voluntary departure as a 
                        member of a nationality group.
                            (vi) An alien who is the spouse or 
                        unmarried child under 21 years of age of a 
                        citizen of the United States, or the parent of 
                        such a citizen if the citizen is over 21 years 
                        of age, and with respect to whom an application 
                        for adjustment to lawful permanent residence is 
                        pending.
            (5) Poverty line.--The term ``poverty line'' means, for a 
        family for a year, the official poverty line (as defined by the 
        Office of Management and Budget, and revised annually in 
        accordance with section 673(2) of the Omnibus Budget 
        Reconciliation Act of 1981) applicable to a family of the size 
        involved.
            (6) Pregnant woman.--
                    (A) In general.--The term ``pregnant woman'' 
                includes a woman deemed to be a pregnant woman under 
                subparagraph (B).
                    (B) Period after termination of pregnancy.--For 
                purposes of this subtitle, a woman shall be deemed to 
                be a pregnant woman during the period beginning on the 
                date of the termination of the pregnancy and ending on 
                the first day of the first month that begins more than 
                90 days after such date.

                     Subtitle B--Employer Subsidies

SEC. 6101. PURPOSE.

    It is the purpose of this subtitle to provide subsidies to eligible 
employers to assist such employers in providing, or expanding the 
provision of, health care coverage for the employees of such employers.

SEC. 6102. ELIGIBLE EMPLOYERS.

    (a) In General.--To be eligible for a subsidy under this subtitle 
an employer shall--
            (1) comply with the requirements of part 1 of subtitle D of 
        title I;
            (2) contribute to the cost of health care coverage for all 
        employees of the same class (limited to full- or part-time) 
        employed by the employer;
            (3) contribute not less than 50 percent of the cost of 
        health care coverage for each class of family enrollment for 
        each employee so covered; and
            (4) prepare and submit to the Secretary of Labor an 
        application, at such time, in such manner and containing such 
        information as the Secretary may require.
    (b) Application of Requirements.--
            (1) In general.--The requirements of paragraphs (2) and (3) 
        of subsection (a) shall only apply with respect to the 
        employees described in paragraph (2).
            (2) Coverage of employees.--The employees described in this 
        paragraph are those employees--
                    (A) for which the employer is contributing to the 
                costs of health care coverage; and
                    (B) for which the employer did not make such a 
                contribution prior to the date of enactment of this 
                Act.
    (c) Sole Proprietorships.--A sole proprietorship with not less than 
3 full-time employees (including the sole proprietor) shall be eligible 
for a subsidy under this subtitle if such proprietorship reports the 
payment of wages (as defined in the Internal Revenue Code of 1986), in 
the year prior to the year for which the subsidy is applied for, in an 
amount required under regulations promulgated by the Secretary of 
Labor.
    (d) Ineligibility.--
            (1) Self-employed.--A self-employed individual (as such 
        term is defined in section 1011(c)) shall not be eligible for a 
        subsidy under this subtitle.
            (2) Employee leasing firms.--An employer that is an 
        employee leasing firm shall not be eligible for a subsidy under 
        this subtitle. The Secretary of Labor shall promulgate 
        regulations defining the term ``employee leasing firm''.
            (3) State or local governments.--An employer that is a 
        State or local government shall not be eligible for a subsidy 
        under this section.

SEC. 6103. EMPLOYER CERTIFICATION.

    (a) Requirement.--An employer that submits an application under 
section 6102(a)(4) shall certify that such employer, prior to the date 
of enactment of this Act, did not contribute to the costs of health 
care coverage for the employees for which the employer is applying for 
the subsidy.
    (b) Contribution Limit.--For purposes of subsection (a), an 
employer shall be treated as having contributed to the health care 
coverage of an employee if the amount of such contribution is $500 or 
more (as annualized).
    (c) Union Sickness Funds.--For purposes of this subtitle, employers 
that contribute to union sickness funds on behalf of their employees 
shall be deemed to have contributed to the costs of health care 
coverage for the employees of such employer.
    (d) Regulations.--For purposes of this section, the Secretary of 
Labor shall promulgate regulations to enable an employer to determine 
whether and to what extent an employer contributed to the costs of an 
employee's health care coverage prior to the date of enactment of this 
Act. An employer shall utilize such regulations in submitting a 
certification under this section.

SEC. 6104. AMOUNT OF SUBSIDY.

    (a) In General.--With respect to an employee for which a subsidy 
application submitted by an employer has been approved by the Secretary 
of Labor under this subtitle, the employer shall receive a subsidy (to 
be paid over a 5-year period) in an amount that equals--
            (1) with respect to the first 3 years after the date of 
        enactment of this Act--
                    (A)(i) in the case of a community-rated employer, 
                50 percent of the lesser of--
                            (I) the weighted average premium rate (as 
                        defined in section 6002(b)(1)(C)) for the 
                        purchasing cooperative through which the 
                        employer has contributed to the employee's 
                        health care coverage (for the year involved);
                            (II) the community-rate of the standard 
                        health plan under which the employee received 
                        coverage (for the year involved); or
                            (III) the weighted average premium rate of 
                        the community rating area in which the employee 
                        resides; or
                    (ii) in the case of an experience-rated employer, 
                50 percent of the lesser of--
                            (I) the weighted average premium rate of 
                        the community rating area in which the employee 
                        resides; or
                            (II) the premium rate for the experience-
                        rated plan under which the employee received 
                        coverage (for the year involved);
                less
                    (B) 12 percent of the wages of the employee (for 
                the year involved);
            (2) with respect to the fourth year after the date of 
        enactment of this Act--
                    (A) 37.5 percent of the lesser of the amounts 
                referred to in subparagraph (A) of paragraph (1) (for 
                the type of employer and the year involved); less
                    (B) 12 percent of the wages of the employee (for 
                the year involved); and
            (3) with respect to the fifth year after the date of 
        enactment of this Act--
                    (A) 25 percent of the lesser of the amounts 
                referred to in subparagraph (A) of paragraph (1) (for 
                the type of employer and the year involved); less
                    (B) 12 percent of the wages of the employee (for 
                the year involved).
    (b) Limitations.--
            (1) Amount of contribution.--If, in applying the formula 
        under subsection (a), the Secretary of Labor determines that an 
        employer's contributions to the health care coverage costs of 
        its employees exceeds 50 percent of the weighted average 
        premium rate for the purchasing cooperative through which the 
        employer has so contributed (for the year involved), the 
        Secretary shall notify such employer that such employer is not 
        eligible for a subsidy under this subtitle.
            (2) Part-time employees.--With respect to subsidies for 
        health care coverage for part-time employee, the Secretary of 
        Labor shall develop a formula for the pro-rata reduction in 
        such subsidies based on the formula described in subsection (a) 
        and the hours of work performed by the employee.
            (3) Single subsidy.--An employer shall not be eligible to 
        receive more than one subsidy under this section. The Secretary 
        of Labor shall promulgate regulations to ensure that no 
        employer will receive a second or subsequent subsidy under this 
        subtitle regardless of whether such employer had previously 
        received the previous subsidy as an employer in a capacity 
        different from that of the employer's present capacity.

SEC. 6105. DEFINITION.

    For purposes of this Act, an employee who is employed by an 
employer--
            (1) for at least 120 hours in a month shall be deemed to be 
        employed on a full-time basis with respect to that month, or
            (2) for at least 40 hours, but less than 120 hours, in a 
        month shall be deemed to be employed on a part-time basis.

                     TITLE VII--REVENUE PROVISIONS

SEC. 7000. AMENDMENT OF 1986 CODE.

    Except as otherwise expressly provided, whenever in this title an 
amendment or repeal is expressed in terms of an amendment to, or repeal 
of, a section or other provision, the reference shall be considered to 
be made to a section or other provision of the Internal Revenue Code of 
1986.

                    Subtitle A--Financing Provisions

              PART 1--INCREASE IN TAX ON TOBACCO PRODUCTS

SEC. 7101. INCREASE IN EXCISE TAXES ON TOBACCO PRODUCTS.

    (a) Cigarettes.--Subsection (b) of section 5701 is amended by 
striking paragraph (1) and all that follows and inserting the 
following:
            ``(1) Small cigarettes.--On cigarettes, weighing not more 
        than 3 pounds per thousand, the amount per thousand determined 
        under the following table:

 
                                                            The tax per
          ``In the case of cigarettes removed--            thousand is--
 
  After July 31, 1995, and before January 1, 1997.......      $19.50
  During 1997...........................................      $24.50
  During 1998...........................................      $29.50
  After December 31, 1998...............................      $34.50.
 

            ``(2) Large cigarettes.--On cigarettes, weighing more than 
        3 pounds per thousand, removed at any time, an amount per 
        thousand equal to 2.1 times the tax per thousand imposed by 
        paragraph (1) on cigarettes removed at such time; except that, 
        if more than 6\1/2\ inches in length, they shall be taxable at 
        the rate prescribed for cigarettes weighing not more than 3 
        pounds per thousand, counting each 2\3/4\ inches, or fraction 
        thereof, of the length of each as one cigarette.''
    (b) Cigars.--Paragraphs (1) and (2) of section 5701(a) are amended 
to read as follows:
            ``(1) Small cigars.--On cigars, weighing not more than 3 
        pounds per thousand, the amount per thousand determined under 
        the following table:

 
                                                            The tax per
            ``In the case of cigars removed--              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.
 

            ``(2) Large cigars.--On cigars, weighing more than 3 pounds 
        per thousand, the applicable percentage (determined under the 
        following table) of the price for which sold but not more than 
        the applicable limitation (determined under such table) per 
        thousand:

 
                                          The applicable
    ``In the case of cigars removed--     percentage is-- The limitation
                                                               is--
 
After July 31, 1995 and before January      21 percent        $48.75
 1, 1997................................
During 1997.............................    26 percent        $61.26
During 1998.............................    31 percent        $73.74
After December 31, 1998.................    37 percent       $86.25.''
 

    (c) Cigarette Papers.--Subsection (c) of section 5701 is amended--
            (1) by striking ``0.75 cent (0.625 cent on cigarette papers 
        removed during 1991 or 1992)'' and inserting ``the amount 
        determined in accordance with the following table'', and
            (2) by adding at the end the following:

 
                                                            The tax for
       ``In the case of cigarette papers removed--        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.''
 

    (d) Cigarette Tubes.--Subsection (d) of section 5701 is amended--
            (1) by striking ``1.5 cents (1.25 cents on cigarette tubes 
        removed during 1991 or 1992)'' and inserting ``the amount 
        determined in accordance with the following table'', and
            (2) by adding at the end the following:

 
                                                            The tax for
       ``In the case of cigarette tubes removed--          each 50 tubes
                                                               is--
 
  After July 31, 1995 and before January 1, 1997........    2.44 cents
  During 1997...........................................    3.06 cents
  During 1998...........................................    3.69 cents
  After December 31, 1998...............................   4.31 cents.''
 

    (e) Snuff.--Paragraph (1) of section 5701(e) is amended--
            (1) by striking ``36 cents (30 cents on snuff removed 
        during 1991 or 1992)'' and inserting ``the amount determined in 
        accordance with the following table'', and
            (2) by adding at the end the following:

 
                                                            The tax per
            ``In the case of snuff removed--                pound is--
 
  After July 31, 1995 and before January 1, 1997........    58.5 cents
  During 1997...........................................    73.5 cents
  During 1998...........................................    88.5 cents
  After December 31, 1998...............................   $1.03\1/2\.''
 

    (f) Chewing Tobacco.--Paragraph (2) of section 5701(e) is amended--
            (1) by striking ``12 cents (10 cents on chewing tobacco 
        removed during 1991 or 1992)'' and inserting ``the amount 
        determined in accordance with the following table'', and
            (2) by adding at the end the following:

 
                                                            The tax per
       ``In the case of chewing tobacco removed--           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.''
 

    (g) Pipe Tobacco.--Subsection (f) of section 5701 is amended--
            (1) by striking ``67.5 cents (56.25 cents on pipe tobacco 
        removed during 1991 or 1992)'' and inserting ``the amount 
        determined in accordance with the following table'', and
            (2) by adding at the end the following:

 
                                                            The tax per
         ``In the case of pipe tobacco removed--            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.''
 

    (h) Application of Tax Increase to Puerto Rico.--Section 5701 is 
amended by adding at the end the following new subsection:
    ``(h) Application of Taxes to Puerto Rico.--Notwithstanding 
subsections (b) and (c) of section 7653 and any other provision of 
law--
            ``(1) In general.--On tobacco products and cigarette papers 
        and tubes, manufactured in or imported into the Commonwealth of 
        Puerto Rico, there is hereby imposed a tax at the rate equal to 
        the excess of--
                    ``(A) the rate of tax applicable under this section 
                to like articles manufactured in the United States, 
                over
                    ``(B) the rate referred to in subparagraph (A) as 
                in effect on the day before the date of the enactment 
                of the Health Security Act.
            ``(2) Shipments to puerto rico from the united states.--
        Only the rates of tax in effect on the day before the date of 
        the enactment of the Health Security Act shall be taken into 
        account in determining the amount of any exemption from, or 
        credit or drawback of, any tax imposed by this section on any 
        article shipped to the Commonwealth of Puerto Rico from the 
        United States.
            ``(3) Shipments from puerto rico to the united states.--The 
        rates of tax taken into account under section 7652(a) with 
        respect to tobacco products and cigarette papers and tubes 
        coming into the United States from the Commonwealth of Puerto 
        Rico shall be the rates of tax in effect on the day before the 
        date of the enactment of the Health Security Act.
            ``(4) Disposition of revenues.--The provisions of section 
        7652(a)(3) shall not apply to any tax imposed by reason of this 
        subsection.''
    (i) Effective Date.--The amendments made by this section shall 
apply to articles removed (as defined in section 5702(k) of the 
Internal Revenue Code of 1986, as amended by this Act) after July 31, 
1995.
    (j) Floor Stocks Taxes.--
            (1) Imposition of tax.--On tobacco products and cigarette 
        papers and tubes manufactured in or imported into the United 
        States or the Commonwealth of Puerto Rico which are removed 
        before any tax-increase date and held on such date for sale by 
        any person, there is hereby imposed a tax in an amount equal to 
        the excess of--
                    (A) the tax which would be imposed under section 
                5701 of the Internal Revenue Code of 1986 on the 
                article if the article had been removed on such date, 
                over
                    (B) the prior tax (if any) imposed under section 
                5701 or 7652 of such Code on such article.
            (2) Authority to exempt cigarettes held in vending 
        machines.--To the extent provided in regulations prescribed by 
        the Secretary, no tax shall be imposed by paragraph (1) on 
        cigarettes held for retail sale on any tax-increase date, by 
        any person in any vending machine. If the Secretary provides 
        such a benefit with respect to any person, the Secretary may 
        reduce the $500 amount in paragraph (3) with respect to such 
        person.
            (3) Credit against tax.--Each person shall be allowed as a 
        credit against the taxes imposed by paragraph (1) on each tax-
        increase date an amount equal to $500. Such credit shall not 
        exceed the amount of taxes imposed by paragraph (1) on such 
        date for which such person is liable.
            (4) Liability for tax and method of payment.--
                    (A) Liability for tax.--A person holding any 
                article on any tax-increase date to which any tax 
                imposed by paragraph (1) applies shall be liable for 
                such tax.
                    (B) Method of payment.--The tax imposed by 
                paragraph (1) shall be paid in such manner as the 
                Secretary shall prescribe by regulations.
                    (C) Time for payment.--The tax imposed by paragraph 
                (1) on any tax-increase date shall be paid on or before 
                the date which is 3 months after such tax-increase 
                date.
            (5) Articles in foreign trade zones.--Notwithstanding the 
        Act of June 18, 1934 (48 Stat. 998, 19 U.S.C. 81a) and any 
        other provision of law, any article which is located in a 
        foreign trade zone on any tax-increase date shall be subject to 
        the taxes imposed by paragraph (1) if--
                    (A) internal revenue taxes have been determined, or 
                customs duties liquidated, with respect to such article 
                before such date pursuant to a request made under the 
                1st proviso of section 3(a) of such Act, or
                    (B) such article is held on such date under the 
                supervision of a customs officer pursuant to the 2d 
                proviso of such section 3(a).
            (6) Definitions.--For purposes of this subsection--
                    (A) Tax-increase date.--The term ``tax-increase 
                date'' means August 1, 1995, January 1, 1997, January 
                1, 1998, and January 1, 1999.
                    (B) Other definitions.--Terms used in this 
                subsection which are also used in section 5702 of the 
                Internal Revenue Code of 1986 shall have the respective 
                meanings such terms have in such section, as amended by 
                this Act.
                    (C) Secretary.--The term ``Secretary'' means the 
                Secretary of the Treasury or his delegate.
            (7) Controlled groups.--Rules similar to the rules of 
        section 5061(e)(3) of such Code shall apply for purposes of 
        this subsection.
            (8) Other laws applicable.--All provisions of law, 
        including penalties, applicable with respect to the taxes 
        imposed by section 5701 of such Code shall, insofar as 
        applicable and not inconsistent with the provisions of this 
        subsection, apply to the floor stocks taxes imposed by 
        paragraph (1), to the same extent as if such taxes were imposed 
        by such section 5701. The Secretary may treat any person who 
        bore the ultimate burden of the tax imposed by paragraph (1) as 
        the person to whom a credit or refund under such provisions may 
        be allowed or made.

SEC. 7102. MODIFICATIONS OF CERTAIN TOBACCO TAX PROVISIONS.

    (a) Exemption for Exported Tobacco Products and Cigarette Papers 
and Tubes To Apply Only to Articles Marked for Export.--
            (1) Subsection (b) of section 5704 is amended by adding at 
        the end the following new sentence: ``Tobacco products and 
        cigarette papers and tubes may not be transferred or removed 
        under this subsection unless such products or papers and tubes 
        bear such marks, labels, or notices as the Secretary shall by 
        regulations prescribe.''
            (2) Section 5761 is amended by redesignating subsections 
        (c) and (d) as subsections (d) and (e), respectively, and by 
        inserting after subsection (b) the following new subsection:
    ``(c) Sale of Tobacco Products and Cigarette Papers and Tubes for 
Export.--Except as provided in subsections (b) and (d) of section 
5704--
            ``(1) every person who sells, relands, or receives within 
        the jurisdiction of the United States any tobacco products or 
        cigarette papers or tubes which have been labeled or shipped 
        for exportation under this chapter,
            ``(2) every person who sells or receives such relanded 
        tobacco products or cigarette papers or tubes, and
            ``(3) every person who aids or abets in such selling, 
        relanding, or receiving,
shall, in addition to the tax and any other penalty provided in this 
title, be liable for a penalty equal to the greater of $1,000 or 5 
times the amount of the tax imposed by this chapter. All tobacco 
products and cigarette papers and tubes relanded within the 
jurisdiction of the United States, and all vessels, vehicles, and 
aircraft used in such relanding or in removing such products, papers, 
and tubes from the place where relanded, shall be forfeited to the 
United States.''
            (3) Subsection (a) of section 5761 is amended by striking 
        ``subsection (b)'' and inserting ``subsection (b) or (c)''.
            (4) Subsection (d) of section 5761, as redesignated by 
        paragraph (2), is amended by striking ``The penalty imposed by 
        subsection (b)'' and inserting ``The penalties imposed by 
        subsections (b) and (c)''.
            (5)(A) Subpart F of chapter 52 is amended by adding at the 
        end the following new section:

``SEC. 5754. RESTRICTION ON IMPORTATION OF PREVIOUSLY EXPORTED TOBACCO 
              PRODUCTS.

    ``(a) In General.--Tobacco products and cigarette papers and tubes 
previously exported from the United States may be imported or brought 
into the United States only as provided in section 5704(d). For 
purposes of this section, section 5704(d), section 5761, and such other 
provisions as the Secretary may specify by regulations, references to 
exportation shall be treated as including a reference to shipment to 
the Commonwealth of Puerto Rico.
    ``(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).''
            (B) The table of sections for subpart F of chapter 52 is 
        amended by adding at the end the following new item:

                              ``Sec. 5754. Restriction on importation 
                                        of previously exported tobacco 
                                        products.''
    (b) Importers Required To Be Qualified.--
            (1) Sections 5712, 5713(a), 5721, 5722, 5762(a)(1), and 
        5763 (b) and (c) are each amended by inserting ``or importer'' 
        after ``manufacturer''.
            (2) The heading of subsection (b) of section 5763 is 
        amended by inserting ``Qualified Importers,'' after 
        ``Manufacturers,''.
            (3) The heading for subchapter B of chapter 52 is amended 
        by inserting ``and Importers'' after ``Manufacturers''.
            (4) The item relating to subchapter B in the table of 
        subchapters for chapter 52 is amended by inserting ``and 
        importers'' after ``manufacturers''.
    (c) Repeal of Tax-Exempt Sales to Employees of Cigarette 
Manufacturers.--
            (1) Subsection (a) of section 5704 is amended--
                    (A) by striking ``Employee Use or'' in the heading, 
                and
                    (B) by striking ``for use or consumption by 
                employees or'' in the text.
            (2) Subsection (e) of section 5723 is amended by striking 
        ``for use or consumption by their employees, or for 
        experimental purposes'' and inserting ``for experimental 
        purposes''.
    (d) Repeal of Tax-Exempt Sales to United States.--Subsection (b) of 
section 5704 is amended by striking ``and manufacturers may similarly 
remove such articles for use of the United States;''.
    (e) Books of 25 or Fewer Cigarette Papers Subject to Tax.--
Subsection (c) of section 5701 is amended by striking ``On each book or 
set of cigarette papers containing more than 25 papers,'' and inserting 
``On cigarette papers,''.
    (f) Storage of Tobacco Products.--Subsection (k) of section 5702 is 
amended by inserting ``under section 5704'' after ``internal revenue 
bond''.
    (g) Authority To Prescribe Minimum Manufacturing Activity 
Requirements.--Section 5712 is amended by striking ``or'' at the end of 
paragraph (1), by redesignating paragraph (2) as paragraph (3), and by 
inserting after paragraph (1) the following new paragraph:
            ``(2) the activity proposed to be carried out at such 
        premises does not meet such minimum capacity or activity 
        requirements as the Secretary may prescribe, or''.
    (h) Special Rules Relating to Puerto Rico and the Virgin Islands.--
Section 7652 is amended by adding at the end the following new 
subsection:
    ``(h) Limitation on Cover Over of Tax on Tobacco Products.--For 
purposes of this section, with respect to taxes imposed under section 
5701 or this section on any tobacco product or cigarette paper or tube, 
the amount covered into the treasuries of Puerto Rico and the Virgin 
Islands shall not exceed the rate of tax under section 5701 in effect 
on the article on the day before the date of the enactment of the 
Health Security Act.''
    (i) Effective Date.--The amendments made by this section shall 
apply to articles removed (as defined in section 5702(k) of the 
Internal Revenue Code of 1986, as amended by this Act) after December 
31, 1994.

SEC. 7103. IMPOSITION OF EXCISE TAX ON MANUFACTURE OR IMPORTATION OF 
              ROLL-YOUR-OWN TOBACCO.

    (a) In General.--Section 5701 (relating to rate of tax), as amended 
by section 7101, is amended by redesignating subsections (g) and (h) as 
subsections (h) and (i) and by inserting after subsection (f) the 
following new subsection:
    ``(g) Roll-Your-Own Tobacco.--On roll-your-own tobacco, 
manufactured in or imported into the United States, there shall be 
imposed a tax of the amount determined in accordance with the following 
table per pound (and a proportionate tax at the like rate on all 
fractional parts of a pound).

 
                                                            The tax per
    ``In the case of roll-your-own tobacco removed--        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.''
 

    (b) Roll-Your-Own Tobacco.--Section 5702 (relating to definitions) 
is amended by adding at the end the following new subsection:
    ``(p) Roll-Your-Own Tobacco.--The term `roll-your-own tobacco' 
means any tobacco which, because of its appearance, type, packaging, or 
labeling, is suitable for use and likely to be offered to, or purchased 
by, consumers as tobacco for making cigarettes.''
    (c) Technical Amendments.--
            (1) Subsection (c) of section 5702 is amended by striking 
        ``and pipe tobacco'' and inserting ``pipe tobacco, and roll-
        your-own tobacco''.
            (2) Subsection (d) of section 5702 is amended--
                    (A) in the material preceding paragraph (1), by 
                striking ``or pipe tobacco'' and inserting ``pipe 
                tobacco, or roll-your-own tobacco'', and
                    (B) by striking paragraph (1) and inserting the 
                following new paragraph:
            ``(1) a person who produces cigars, cigarettes, smokeless 
        tobacco, pipe tobacco, or roll-your-own tobacco solely for the 
        person's own personal consumption or use, and''.
            (3) The chapter heading for chapter 52 is amended to read 
        as follows:

    ``CHAPTER 52--TOBACCO PRODUCTS AND CIGARETTE PAPERS AND TUBES''.

            (4) The table of chapters for subtitle E is amended by 
        striking the item relating to chapter 52 and inserting the 
        following new item:

                              ``Chapter 52. Tobacco products and 
                                        cigarette papers and tubes.''
    (d) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to roll-your-own tobacco removed (as defined in section 
        5702(k) of the Internal Revenue Code of 1986, as amended by 
        this Act) after July 31, 1995.
            (2) Transitional rule.--Any person who--
                    (A) on the date of the enactment of this Act is 
                engaged in business as a manufacturer of roll-your-own 
                tobacco or as an importer of tobacco products or 
                cigarette papers and tubes, and
                    (B) before August 1, 1995, submits an application 
                under subchapter B of chapter 52 of such Code to engage 
                in such business,
        may, notwithstanding such subchapter B, continue to engage in 
        such business pending final action on such application. Pending 
        such final action, all provisions of such chapter 52 shall 
        apply to such applicant in the same manner and to the same 
        extent as if such applicant were a holder of a permit under 
        such chapter 52 to engage in such business.

                   PART 2--HEALTH RELATED ASSESSMENTS

SEC. 7111. ASSESSMENTS ON INSURED AND SELF-INSURED HEALTH PLANS.

    (a) General Rule.--Subtitle D (relating to miscellaneous excise 
taxes) is amended by adding after chapter 36 the following new chapter:

                ``CHAPTER 37--HEALTH RELATED ASSESSMENTS

                              ``Subchapter A. Insured and self-insured 
                                        health plans.

         ``Subchapter A--Insured and Self-Insured Health Plans

                              ``Sec. 4501. Health insurance and health-
                                        related administrative 
                                        services.
                              ``Sec. 4502. Self-insured health plans.
                              ``Sec. 4503. Definitions and special 
                                        rules.

``SEC. 4501. HEALTH INSURANCE AND HEALTH-RELATED ADMINISTRATIVE 
              SERVICES.

    ``(a) Imposition of Tax.--There is hereby imposed--
            ``(1) on each taxable health insurance policy, a tax equal 
        to 1.75 percent of the premiums received under such policy, and
            ``(2) on each amount received for health-related 
        administrative services, a tax equal to 1.75 percent of the 
        amount so received.
    ``(b) Liability for Tax.--
            ``(1) Health insurance.--The tax imposed by subsection 
        (a)(1) shall be paid by the issuer of the policy.
            ``(2) Health-related administrative services.--The tax 
        imposed by subsection (a)(2) shall be paid by the person 
        providing the health-related administrative services.
    ``(c) Taxable Health Insurance Policy.--For purposes of this 
section--
            ``(1) In general.--Except as otherwise provided in this 
        section, the term `taxable health insurance policy' means any 
        insurance policy providing accident or health insurance with 
        respect to individuals residing in the United States.
            ``(2) Exemption of certain policies.--The term `taxable 
        health insurance policy' does not include any insurance policy 
        if substantially all of the coverage provided under such policy 
        relates to--
                    ``(A) liabilities incurred under workers' 
                compensation laws,
                    ``(B) tort liabilities,
                    ``(C) liabilities relating to ownership or use of 
                property,
                    ``(D) credit insurance, or
                    ``(E) such other similar liabilities as the 
                Secretary may specify by regulations.
            ``(3) Special rule where policy provides other coverage.--
        In the case of any taxable health insurance policy under which 
        amounts are payable other than for accident or health coverage, 
        in determining the amount of the tax imposed by subsection 
        (a)(1) on any premium paid under such policy, there shall be 
        excluded the amount of the charge for the nonaccident or health 
        coverage if--
                    ``(A) the charge for such nonaccident or health 
                coverage is either separately stated in the policy, or 
                furnished to the policyholder in a separate statement, 
                and
                    ``(B) such charge is reasonable in relation to the 
                total charges under the policy.
        In any other case, the entire amount of the premium paid under 
        such a policy shall be subject to tax under subsection (a)(1).
            ``(4) Treatment of prepaid health coverage arrangements.--
                    ``(A) In general.--In the case of any arrangement 
                described in subparagraph (B)--
                            ``(i) such arrangement shall be treated as 
                        a taxable health insurance policy,
                            ``(ii) the payments or premiums referred to 
                        in subparagraph (B)(i) shall be treated as 
                        premiums received for a taxable health 
                        insurance policy, and
                            ``(iii) the person referred to in 
                        subparagraph (B)(i) shall be treated as the 
                        issuer.
                    ``(B) Description of arrangements.--An arrangement 
                is described in this subparagraph if under such 
                arrangement--
                            ``(i) fixed payments or premiums are 
                        received as consideration for any person's 
                        agreement to provide or arrange for the 
                        provision of accident or health coverage to 
                        residents of the United States, regardless of 
                        how such coverage is provided or arranged to be 
                        provided, and
                            ``(ii) substantially all of the risks of 
                        the rates of utilization of services is assumed 
                        by such person or the provider of such 
                        services.
    ``(d) Health-Related Administrative Services.--For purposes of this 
section, the term `health-related administrative services' means--
            ``(1) the processing of claims or performance of other 
        administrative services in connection with accident or health 
        coverage under a taxable health insurance policy if the charge 
        for such services is not included in the premiums under such 
        policy, and
            ``(2) processing claims, arranging for provision of 
        accident or health coverage, or performing other administrative 
        services in connection with an applicable self-insured health 
        plan (as defined in section 4502(c)) established or maintained 
        by a person other than the person performing the services.
For purposes of paragraph (1), rules similar to the rules of subsection 
(c)(3) shall apply.

``SEC. 4502. SELF-INSURED HEALTH PLANS.

    ``(a) Imposition of Tax.--In the case of any applicable self-
insured health plan, there is hereby imposed a tax for each month equal 
to 1.75 percent of the sum of--
            ``(1) the accident or health coverage expenditures for such 
        month under such plan, and
            ``(2) the direct administrative expenditures for such month 
        under such plan.
    ``(b) Liability for Tax.--
            ``(1) In general.--The tax imposed by subsection (a) shall 
        be paid by the plan sponsor.
            ``(2) Plan sponsor.--For purposes of paragraph (1), the 
        term `plan sponsor' means--
                    ``(A) the employer in the case of a plan 
                established or maintained by a single employer,
                    ``(B) the employee organization in the case of a 
                plan established or maintained by an employee 
                organization, or
                    ``(C) in the case of--
                            ``(i) a plan established or maintained by 2 
                        or more employers or jointly by 1 or more 
                        employers and 1 or more employee organizations,
                            ``(ii) a voluntary employees' beneficiary 
                        association under section 501(c)(9), or
                            ``(iii) a plan described in subsection 
                        (c)(2)(F),
                the association, committee, joint board of trustees, 
                cooperative, or other similar group of representatives 
                of the parties who establish or maintain the plan.
    ``(c) Applicable Self-Insured Health Plan.--For purposes of this 
section, the term `applicable self-insured health plan' means any plan 
for providing accident or health coverage if--
            ``(1) any portion of such coverage is provided other than 
        through an insurance policy, and
            ``(2) such plan is established or maintained--
                    ``(A) by one or more employers for the benefit of 
                their employees or former employees,
                    ``(B) by one or more employee organizations for the 
                benefit of their members or former members,
                    ``(C) jointly by 1 or more employers and 1 or more 
                employee organizations for the benefit of employees or 
                former employees,
                    ``(D) by a voluntary employees' beneficiary 
                association described in section 501(c)(9),
                    ``(E) by any organization described in section 
                501(c)(6), or
                    ``(F) in the case of a plan not described in the 
                preceding subparagraphs, by a multiple employer welfare 
                arrangement, a rural electric cooperative, or a rural 
                telephone cooperative association, as such terms are 
                defined in section 3(40) of the Employee Retirement 
                Income Securities Act of 1974.
    ``(d) Accident or Health Coverage Expenditures.--For purposes of 
this section--
            ``(1) In general.--The accident or health coverage 
        expenditures of any applicable self-insured health plan for any 
        month are the aggregate expenditures paid in such month for 
        accident or health coverage provided under such plan to the 
        extent such expenditures are not subject to tax under section 
        4501.
            ``(2) Treatment of reimbursements.--In determining accident 
        or health coverage expenditures during any month of any 
        applicable self-insured health plan, reimbursements (by 
        insurance or otherwise) received during such month shall be 
        taken into account as a reduction in accident or health 
        coverage expenditures.
            ``(3) Certain expenditures disregarded.--Paragraph (1) 
        shall not apply to any expenditure for the acquisition or 
        improvement of land or for the acquisition or improvement of 
        any property to be used in connection with the provision of 
        accident or health coverage which is subject to the allowance 
        under section 167, except that, for purposes of paragraph (1), 
        allowances under section 167 shall be considered as 
        expenditures.
    ``(e) Direct Administrative Expenditures.--For purposes of this 
section, the term `direct administrative expenditures' means the 
administrative expenditures under the plan to the extent such 
expenditures are not subject to tax under section 4501. In determining 
the amount of such expenditures, rules similar to the rules of 
subsection (d)(3) shall apply.

``SEC. 4503. DEFINITIONS AND SPECIAL RULES.

    ``(a) Definitions.--For purposes of this subchapter--
            ``(1) Accident or health coverage.--The term `accident or 
        health coverage' means any coverage which, if provided by an 
        insurance policy, would cause such policy to be a taxable 
        health insurance policy (as defined in section 4501(c)).
            ``(2) Insurance policy.--The term `insurance policy' means 
        any policy or other instrument whereby a contract of insurance 
        is issued, renewed, or extended.
            ``(3) Premium.--The term `premium' means the gross amount 
        of premiums and other consideration (including advance 
        premiums, deposits, fees, and assessments) arising from 
        policies issued by a person acting as the primary insurer, 
        adjusted for any return or additional premiums paid as a result 
        of endorsements, cancellations, audits, or retrospective 
        rating. Amounts returned where the amount is not fixed in the 
        contract but depends on the experience of the insurer or the 
        discretion of management shall not be included in return 
        premiums.
            ``(4) United states.--The term `United States' includes any 
        possession of the United States.
    ``(b) Treatment of Governmental Entities.--
            ``(1) In general.--For purposes of this subchapter--
                    ``(A) the term `person' includes any governmental 
                entity, and
                    ``(B) notwithstanding any other law or rule of law, 
                governmental entities shall not be exempt from the 
                taxes imposed by this subchapter except as provided in 
                paragraph (2).
            ``(2) Exempt governmental programs.--In the case of an 
        exempt governmental program--
                    ``(A) no tax shall be imposed under section 4501 on 
                any premium received pursuant to such program or on any 
                amount received for health-related administrative 
                services pursuant to such program, and
                    ``(B) no tax shall be imposed under section 4502 on 
                any expenditures pursuant to such program.
            ``(3) Exempt governmental program.--For purposes of this 
        subchapter, the term `exempt governmental program' means--
                    ``(A) the insurance programs established by parts A 
                and B of title XVIII of the Social Security Act,
                    ``(B) the medical assistance program established by 
                title XIX of the Social Security Act,
                    ``(C) any program established by Federal law for 
                providing medical care (other than through insurance 
                policies) to individuals (or the spouses and dependents 
                thereof) by reason of such individuals being--
                            ``(i) members of the Armed Forces of the 
                        United States, or
                            ``(ii) veterans, and
                    ``(D) any program established by Federal law for 
                providing medical care (other than through insurance 
                policies) to members of Indian tribes (as defined in 
                section 4(d) of the Indian Health Care Improvement 
                Act).
    ``(c) No Cover Over to Possessions.--Notwithstanding any other 
provision of law, no amount collected under this subchapter shall be 
covered over to any possession of the United States.''
    (b) Clerical Amendment.--The table of chapters for subtitle D is 
amended by inserting after the item relating to chapter 36 the 
following new item:

                              ``Chapter 37. Health related 
                                        assessments.''
    (c) Effective Date.--The amendments made by this section shall 
apply with respect to premiums received, and expenses incurred, with 
respect to coverage for periods after December 31, 1995.

SEC. 7112. HIGH COST HEALTH PLAN ASSESSMENT.

    (a) In General.--Subchapter A of chapter 37 (relating to 
assessments on insured and self-insured health benefits), as added by 
section 7111, is amended by adding at the end the following new part:

                   ``PART II--HIGH COST HEALTH PLANS

                              ``Subpart A. Community-rated plans.
                              ``Subpart B. Experience-rated plans.
                              ``Subpart C. Definitions and special 
                                        rules.

                   ``Subpart A--Community-Rated Plans

                              ``Sec. 4511. Community-rated plans.
                              ``Sec. 4512. Reference premiums.

``SEC. 4511. COMMUNITY-RATED PLANS.

    ``(a) Imposition of Tax.--
            ``(1) In general.--If a community-rated certified standard 
        health plan is a high cost plan for any coverage period 
        beginning after December 31, 1996, there is hereby imposed a 
        tax equal to 25 percent of the excess premiums of the plan for 
        the period.
            ``(2) Liability for tax.--The tax imposed by this section 
        shall be paid by the issuer of the high cost plan.
    ``(b) High Cost Plan.--For purposes of this section--
            ``(1) In general.--A plan is a high cost plan for any 
        coverage period if--
                    ``(A) it is operating within a noncompetitive 
                community rating area, and
                    ``(B) it has excess premiums for the period.
            ``(2) Noncompetitive community rating area.--A community 
        rating area is a noncompetitive community rating area for any 
        coverage period if, for the preceding coverage period--
                    ``(A) the weighted average premium per primary 
                insured in community-rated certified standard health 
                plans in the area, exceeded
                    ``(B) the weighted average reference premium for 
                all such plans.
        The determination under this paragraph shall be made on the 
        basis of enrollment during the annual open enrollment period 
        for such preceding coverage period.
    ``(c) Excess Premiums.--For purposes of this section--
            ``(1) In general.--The term `excess premiums' means, with 
        respect to a certified standard health plan, the excess (if 
        any) of--
                    ``(A) the premiums received under the plan during 
                the coverage period, over
                    ``(B) the sum of the amounts determined under 
                paragraph (2) with respect to each class of enrollment.
            ``(2) Excess premium baseline.--
                    ``(A) In general.--The amount determined under this 
                paragraph for any class of enrollment for any coverage 
                period is an amount equal to the product of the 
                reference premium for such class and the number of 
                primary insureds in such class for the period.
                    ``(B) Proportionate reduction of reference 
                premium.--The reference premium applicable under 
                subparagraph (A) to an individual who was a primary 
                insured for only a portion of the coverage period shall 
                be proportionately reduced to reflect the period the 
                individual was not a primary insured.
            ``(3) Disregard of age adjustment.--The amount determined 
        under paragraph (1)(A) shall be adjusted to reflect the 
        premiums which would have been received if no age adjustment 
        were permitted under section 1116 of the Health Security Act.
            ``(4) Reduction for taxes.--The amount determined under 
        paragraph (1)(A) shall be reduced by the amount of the tax 
        imposed by this section included in determining the amount of 
        the premiums.
    ``(d) Coverage Period.--For purposes of this subpart, the term 
`coverage period' means, with respect to any community rating area, the 
12-month period for which an individual is covered under a standard 
health plan if the individual enrolls in the plan during the annual 
open enrollment period for the area under section 1503 of the Health 
Security Act.
    ``(e) Plans Covering More Than One Area.--For purposes of this 
subpart, if a community-rated plan covers individuals residing in more 
than 1 community rating area, the plan shall be treated as a separate 
plan with respect to each such area.

``SEC. 4512. REFERENCE PREMIUMS.

    ``(a) Establishment of Reference Premiums.--For purposes of this 
subpart--
            ``(1) In general.--The Secretary shall, in consultation 
        with the Secretary of Health and Human Services, establish for 
        each coverage period a reference premium for each class of 
        enrollment for community-rated plans within a community rating 
        area. The Secretary shall publish such reference premiums 
        within a reasonable period of time before the annual open 
        enrollment period for the coverage period.
            ``(2) Method of determining reference premium.--Each 
        reference premium for a class of enrollment for any coverage 
        period shall be the reference premium in effect for such class 
        for the preceding coverage period--
                    ``(A) increased by the target growth rate for the 
                coverage period as provided under subsection (b)(1), 
                and
                    ``(B) adjusted to reflect--
                            ``(i) material changes in the 
                        characteristics of community-rated individuals 
                        as provided under subsection (b)(2), and
                            ``(ii) changes in the actuarial value of 
                        the standard benefits package as provided under 
                        subsection (b)(3).
    ``(b) Annual Adjustments to Reference Premiums.--For purposes of 
subsection (a)(2)--
            ``(1) Target growth rate.--The target growth rate for any 
        coverage period is the percentage increase in the Consumer 
        Price Index (as defined in section 1(f)(4)) which the Secretary 
        estimates will occur during the coverage period--
                    ``(A) increased by 2 percentage points (3 and 2.5 
                percentage points in the case of coverage periods 
                beginning in 1997 and 1998, respectively), and
                    ``(B) increased or decreased by the amount the 
                estimate under this paragraph was incorrect for the 
                preceding coverage period.
            ``(2) Material changes.--
                    ``(A) In general.--The Secretary may, in 
                consultation with the Secretary of Health and Human 
                Services and pursuant to such method as the Secretary 
                prescribes, adjust the reference premium to reflect 
                changes in the demographic characteristics (including 
                factors such as age, gender, and socioeconomic status) 
                and health status of community-rated individuals in the 
                community rating area which are materially different 
                when compared to the average changes in such 
                characteristics and status in the United States.
                    ``(B) Effect on weighted average.--Any adjustments 
                under subparagraph (A) for any coverage period shall 
                not result in a change in the weighted average of such 
                factors for all community rating areas in the United 
                States.
            ``(3) Changes in benefit package.--If the actuarial value 
        of the standard benefits package is changed pursuant to 
        subtitle C of title I of the Health Security Act, the Secretary 
        shall adjust the reference premiums appropriately to reflect 
        such change.
    ``(c) Computation of Reference Premium for 1996.--
            ``(1) In general.--The Secretary, in consultation with the 
        Secretary of Health and Human Services, shall compute the 
        reference premium for each class of enrollment for 1996. Each 
        such reference premium shall be the reference premium which is 
        adjusted under subsection (a)(2) in determining the reference 
        premium for coverage periods beginning in 1997.
            ``(2) Method of determining reference premiums.--Each 
        reference premium under paragraph (1) shall be equal to the 
        national average per capita current coverage health 
        expenditures for 1994 (determined under subsection (d))--
                    ``(A) increased as provided in paragraph (3),
                    ``(B) adjusted to reflect the differences in the 
                community rating area as provided in paragraph (4), and
                    ``(C) modified to reflect the class of enrollment 
                for which it is being determined in the same manner as 
                premiums are modified under section 1116 of the Health 
                Security Act.
            ``(3) Updating for 1995 and 1996.--The Secretary shall 
        update the national average per capita current coverage health 
        expenditures for 1994 to reflect the annual percentage 
        increases for calendar years 1995 and 1996 in private sector 
        health care spending for items and services included in the 
        standard benefits package. Such increase shall not exceed the 
        current projected increase in per capita private health 
        insurance premiums for such years contained in the estimate of 
        national health insurance expenditures published by the 
        Congressional Budget Office in the fall of 1993.
            ``(4) Area adjustments.--
                    ``(A) In general.--The Secretary shall, using 
                information of the type described in subparagraph (B), 
                establish an adjustment for each community rating area 
                which takes into account the differences among 
                community rating areas, including variations in health 
                care expenditures, in rates of uninsurance and 
                underinsurance, and in the proportion of expenditures 
                for services provided by academic health centers.
                    ``(B) Type of information.--The type of information 
                described in this subparagraph is--
                            ``(i) information on variations in premiums 
                        across States and across community rating areas 
                        within a State (based on surveys and other 
                        data);
                            ``(ii) information on variations in per 
                        capita health spending by State, as measured by 
                        the Secretary;
                            ``(iii) information on variations across 
                        States in per capita spending under the 
                        medicare program and in such spending among 
                        community rating areas within a State under 
                        such program; and
                            ``(iv) area rating factors commonly used by 
                        actuaries.
                    ``(C) Consultation process.--The Secretary shall, 
                in cooperation with the Secretary of Health and Human 
                Services, consult with representatives of States and 
                community rating areas before establishing the 
                adjustment under this subsection.
    ``(d) Determination of National Average per Capita Current Coverage 
Health Expenditures.--
            ``(1) In general.--The national average per capita current 
        coverage health expenditures are equal to--
                    ``(A) the total amount of covered current health 
                care expenditures described in paragraph (2), divided 
                by
                    ``(B) the estimated population in the United States 
                of community-rated individuals as of 1994 (as 
                determined under paragraph (4)) for whom such 
                expenditures were determined.
        The population under subparagraph (B) shall not include SSI 
        recipients.
            ``(2) Covered current health care expenditures.--
                    ``(A) In general.--For purposes of paragraph (1), 
                the term `covered current health care expenditures' 
                means the amount of total payments made in the United 
                States during 1994 (other than amounts for cost 
                sharing) for items and services included in the 
                standard benefits package.
                    ``(B) Removal of certain expenditures not to be 
                covered.--The amount determined under subparagraph (A) 
                shall be decreased by the proportion of such amount 
                that is attributable to any of the following:
                            ``(i) Medicare beneficiaries.
                            ``(ii) SSI recipients.
                            ``(iii) Expenditures which are paid for 
                        through workers' compensation or automobile or 
                        other liability insurance.
                            ``(iv) Any other expenditures by parties 
                        (including the Federal Government) that the 
                        Secretary estimates will not be payable by 
                        community-rated plans for coverage under the 
                        standard benefits package.
                    ``(C) Addition of projected expenditures for 
                uninsured and underinsured individuals.--The amount 
                determined under subparagraph (A) (as adjusted under 
                subparagraph (B)) shall be increased to take into 
                account increased utilization of, and expenditures for, 
                items and services covered under the standard benefits 
                package likely to occur, as a result of coverage under 
                a community-rated plan of individuals who, as of 1994, 
                were uninsured or underinsured with respect to the 
                standard benefits package. In making such 
                determination, such expenditures shall be based on the 
                estimated average cost for such services in 1994 (and 
                not on private payment rates established for such 
                services). In making such determination, the estimated 
                amount of uncompensated care in 1994 shall be reduced 
                to reflect the number and characteristics of the 
                currently uninsured who will become insured by reason 
                of the Health Security Act and will not include 
                adjustments to offset payments below costs by public 
                programs.
                    ``(D) Addition of health plan administration 
                costs.--The amount determined under subparagraph (A) 
                (as adjusted under the preceding subparagraphs) shall 
                be increased by an estimated percentage (determined by 
                the Secretary, but no more than 15 percent) that 
                reflects the proportion of premiums that are required 
                for administration and for State premium taxes (which 
                taxes shall be limited to such amounts in 1994 as are 
                attributable to the health benefits to be included in 
                the standard benefits package).
                    ``(E) Decrease for cost sharing.--The amount 
                determined under subparagraph (A) (as adjusted under 
                the preceding subparagraphs) shall be decreased by a 
                percentage that reflects (i) the estimated average 
                percentage of total amounts payable for items and 
                services covered under the standard benefits package 
                that will be payments in the form of cost sharing under 
                a certified standard benefit plan with a high cost-
                sharing option, and (ii) the percentage reduction in 
                utilization estimated to result from the application of 
                such cost sharing.
            ``(3) Special rules.--
                    ``(A) Benefits used.--The determinations under this 
                subsection shall be based on the standard benefits 
                package as in effect in 1996.
                    ``(B) Assuming no change in expenditure pattern.--
                The determination under paragraph (2) shall be made 
                without regard to any change in the pattern of 
                expenditures that may result from the enrollment of SSI 
                recipients in community-rated plans.
            ``(4) Eligible individuals.--The determination of 
        individuals who are community-rated individuals under this 
        subsection shall be made as though the Health Security Act was 
        fully in effect in each State as of 1994.
    ``(e) Treatment of Certain States.--For purposes of this section--
            ``(1) Nonparticipating states.--In the case of a State that 
        is not a participating State or otherwise has not established 
        community rating areas, the entire State shall be treated as a 
        single community rating area.
            ``(2) Changes in boundaries.--In the case of a State that 
        changes the boundaries of its community rating areas, the 
        Secretary shall provide a method for computing reference 
        premiums for each area affected by such change in a manner 
        that--
                    ``(A) reflects the factors taken into account in 
                establishing the adjustment factors under this section, 
                and
                    ``(B) results in the weighted average of the newly 
                computed reference premiums for the areas affected by 
                the change being equal to the weighted average of the 
                reference premiums for the areas as previously 
                established.

                  ``Subpart B--Experience-Rated Plans

                              ``Sec. 4515. Experience-rated plans.

``SEC. 4515. EXPERIENCE-RATED PLANS.

    ``(a) Imposition of Tax.--
            ``(1) In general.--In the case of any calendar year 
        beginning after December 31, 1999, there is hereby imposed a 
        tax equal to 25 percent of the excess premium equivalents of an 
        experience-rated standard health plan.
            ``(2) Liability for tax.--The tax imposed by this section 
        shall be paid by the plan sponsor.
    ``(b) Excess Premium Equivalents.--For purposes of this section--
            ``(1) In general.--The term `excess premium equivalents' 
        means the excess (if any) of--
                    ``(A) the premium equivalents of the plan for the 
                calendar year, over
                    ``(B) the product of the reference premium and the 
                number of primary insureds covered by the plan during 
                the calendar year.
            ``(2) Proportionate reduction in reference premium.--The 
        reference premium applicable under paragraph (1)(B) to a 
        primary insured covered under the plan for only a portion of 
        the calendar year shall be proportionately reduced to reflect 
        the period the individual was not a primary insured.
    ``(c) Reference Premium.--For purposes of this section--
            ``(1) In general.--The reference premium for any plan for 
        any calendar year shall be the reference premium in effect for 
        the preceding calendar year--
                    ``(A) increased by the target growth rate for the 
                calendar year as provided under paragraph (2), and
                    ``(B) adjusted to reflect--
                            ``(i) material changes in the 
                        characteristics of individuals covered by the 
                        plan as provided under paragraph (3), and
                            ``(ii) changes in the actuarial value of 
                        the standard benefits package as provided under 
                        paragraph (4).
            ``(2) Target growth rate.--The target growth rate for any 
        calendar year is the percentage increase in the Consumer Price 
        Index (as defined in section 1(f)(4)) which the Secretary 
        estimates will occur during the calendar year--
                    ``(A) increased by 2 percentage points, and
                    ``(B) increased or decreased by the amount the 
                estimate under this paragraph was incorrect for the 
                preceding calendar year.
            ``(3) Material changes.--The Secretary may, in consultation 
        with the Secretary of Health and Human Services, establish such 
        method as the Secretary determines appropriate for adjusting 
        the reference premium for any plan to reflect changes in the 
        demographic characteristics (including factors such as age, 
        gender, socioeconomic status, and class of enrollment) and 
        health status of individuals in the plan which are materially 
        different when compared to the average changes in such 
        characteristics and status in the United States.
            ``(4) Changes in benefit package.--If the actuarial value 
        of the standard benefits package is changed pursuant to 
        subtitle C of title I of the Health Security Act, the Secretary 
        shall adjust the reference premiums appropriately to reflect 
        such change.
    ``(d) Reference Premium for 1999.--
            ``(1) In general.--The reference premium for calendar year 
        1999 shall be equal to the average of the per capita premium 
        equivalents for calendar years 1997, 1998, and 1999. Such 
        reference premium shall be the reference premium which is 
        adjusted under subsection (c) for determining the reference 
        premium for calendar year 2000.
            ``(2) Per capita premium equivalent.--
                    ``(A) In general.--The per capita premium 
                equivalent for any calendar year shall be equal to the 
                premium equivalent for providing the standard benefits 
                package to each primary insured, adjusted as provided 
                under subparagraph (B).
                    ``(B) Growth factors.--The amount determined under 
                subparagraph (A)--
                            ``(i) for calendar year 1997 shall be 
                        increased by the target growth rates for 
                        calendar years 1998 and 1999, and
                            ``(ii) for calendar year 1998 shall be 
                        increased by the target growth rate for 
                        calendar year 1999.
                For purposes of this subparagraph, the target growth 
                rate shall be determined under subsection (c)(2), 
                except that subsection (c)(2)(A) shall be applied for 
                calendar year 1998 by substituting `2.5' for `2'.
    ``(e) Premium Equivalents.--For purposes of this section--
            ``(1) In general.--The term `premium equivalents' means, 
        with respect to any calendar year, the sum of--
                    ``(A) expenditures described in subsections (d) and 
                (e) of section 4502 with respect to coverage under the 
                plan, and
                    ``(B) in the case of any coverage provided through 
                an insurance policy, premiums paid for such coverage.
            ``(2) Exclusion of nonstandard coverage.--The premium 
        equivalents for any calendar year shall not include amounts 
        with respect to--
                    ``(A) any coverage other than coverage for the 
                standard benefits package, or
                    ``(B) any cost-sharing coverage.
            ``(3) Risk adjustment payments.--The premium equivalents 
        for any calendar year shall include payments under any risk 
        adjustment program established under title I of the Health 
        Security Act.
            ``(4) Taxes disregarded.--The premium equivalents for any 
        calendar year shall not include the amount of any tax imposed 
        by this section.
    ``(f) Special Rules.--For purposes of this section--
            ``(1) Aggregation rules.--
                    ``(A) Plans.--All plans maintained by the same plan 
                sponsor shall be treated as 1 plan.
                    ``(B) Sponsors.--All plan sponsors which are 
                treated as a single employer under subsection (b) or 
                (c) of section 414 shall be treated as 1 plan sponsor.
            ``(2) Startup plans.--If a plan sponsor first begins 
        operation of an experience-rated plan after 1997, the reference 
        premium for the first calendar year for which the plan is in 
        operation and to which this section applies shall, under 
        regulations prescribed by the Secretary, be determined as if 
        the reference premium for the preceding calendar year were 
        equal to the average of the reference premiums for all 
        community-rated plans for the preceding calendar year in the 
        areas in which the plan is operating, adjusted to reflect the 
        factors described in subsection (c)(3) under the plan which 
        materially differ from such factors under the community-rated 
        plans.
            ``(3) Acquisitions and dispositions.--The reference premium 
        after an acquisition or disposition described in section 
        41(f)(3) involving the plan sponsor of an experience-rated plan 
        shall be made pursuant to such regulations as the Secretary may 
        prescribe.
            ``(4) Information.--The Secretary may require a plan 
        sponsor of an experience-rated plan to adopt such conventions 
        as are necessary in its accounting practices and financial 
        records to assure that only costs related to the standard 
        benefits package are taken into account in determining the 
        premium equivalents with respect to the plan.

               ``Subpart C--Definitions and Special Rules

                              ``Sec. 4518. Right of recovery.
                              ``Sec. 4519. Definitions and special 
                                        rules.

``SEC. 4518. RIGHT OF RECOVERY FROM PROVIDERS.

    ``(a) General Rule.--Each issuer or plan sponsor of a certified 
standard health plan shall be entitled to recover from the providers of 
items or services covered by the plan an amount equal to 50 percent of 
the amount of any tax imposed by this part on the issuer or sponsor.
    ``(b) Recovery.--For purposes of subsection (a)--
            ``(1) any amount recovered from any provider shall not 
        exceed the provider's proportionate share of items or services 
        provided under the plan for the period the tax was imposed, and
            ``(2) an issuer or plan sponsor may recover an amount from 
        a provider through a reduction in payments under the plan, 
        direct payments from the provider, or such other manner as may 
        be provided under State law adopted pursuant to section 1510 of 
        the Health Security Act.
    ``(c) Balance Billing.--For prohibition of balance billing of any 
amount recovered from a provider under this section, see section 
1128(h)(3) of the Health Security Act.

``SEC. 4519. DEFINITIONS AND SPECIAL RULES.

    ``(a) Health Plans.--For purposes of this part--
            ``(1) Standard health plan.--The term `standard health 
        plan' has the meaning given such term by section 1011(2)(B) of 
        the Health Security Act, except that such term does not include 
        a plan offering the alternative standard benefit package 
        described in 1201(b) of such Act.
            ``(2) Standard benefits package.--The term `standard 
        benefits package' has the meaning given such term by section 
        1201(a) of such Act.
    ``(b) Community Rating Areas and Plans.--For purposes of this 
part--
            ``(1) Community rating area.--The term `community rating 
        area' means an area established under section 1502 of the 
        Health Security Act.
            ``(2) Community-rated plan.--The term `community-rated 
        plan' means a plan which is community-rated under section 1116 
        of such Act.
            ``(3) Experience-rated plan.--The term `experience-rated 
        plan' means any plan which is not a community-rated plan.
    ``(c) Premiums.--For purposes of this part--
            ``(1) In general.--The term `premium' has the meaning given 
        such term by section 4503(a)(3).
            ``(2) Administrative costs.--Amounts received for health-
        related administrative services (as defined in section 4501(d)) 
        provided in connection with any standard health plan taken into 
        account under section 4511(c)(3) shall be treated as premiums.
            ``(3) Risk adjustment payments.--Payments under a risk 
        adjustment program established under title I of the Health 
        Security Act shall be disregarded in computing the amount of 
        any premiums.
    ``(d) Insurance Policy and Plan Sponsor.--For purposes of this 
part--
            ``(1) Insurance policy.--The term `insurance policy' has 
        the meaning given such term by section 4503(a)(2).
            ``(2) Plan sponsor.--The term `plan sponsor' has the 
        meaning given such term by section 4502(b)(2), except that in 
        the case of a plan not described in such section, such term 
        means the person or persons who establish or maintain the plan.
    ``(e) Special Rules.--For purposes of this part--
            ``(1) Deposits.--The Secretary may require deposits of any 
        taxes imposed by subpart A or B at such times as the Secretary 
        determines appropriate.
            ``(2) Governmental entities subject to tax.--The rules of 
        section 4503(b) shall apply for purposes of this part.
            ``(3) No cover over to possessions.--Notwithstanding any 
        other provision of law, no amount collected under this part 
        shall be covered over to any possession of the United States.
    ``(f) Regulations.--The Secretary shall issue such regulations as 
are necessary to carry out the provisions of this part, including 
regulations--
            ``(1) requiring the maintenance of such records, and the 
        reporting of such information as the Secretary determines 
        necessary, and
            ``(2) which provide that 2 or more plans of a person or any 
        related persons must be aggregated, or a plan must be treated 
        as 2 or more separate plans.''
    (b) Conforming Amendments.--
            (1) Subchapter A of chapter 37, as added by section 7111, 
        is amended by inserting after the subchapter heading the 
        following:

                              ``Part I. Premium and related 
                                        assessments.
                              ``Part II. High cost health plans.

              ``PART I--PREMIUM AND RELATED ASSESSMENTS''.

            (2) Section 4503, as so added, is amended by striking 
        ``subchapter'' each place it appears and inserting ``part''.
    (c) Effective Date.--The amendments made by this section shall take 
effect on January 1, 1996.

           PART 3--RECAPTURE OF CERTAIN HEALTH CARE SUBSIDIES

SEC. 7121. RECAPTURE OF CERTAIN HEALTH CARE SUBSIDIES RECEIVED BY HIGH-
              INCOME INDIVIDUALS.

    (a) In General.--Subchapter A of chapter 1 is amended by adding at 
the end the following new part:

  ``PART VIII--CERTAIN HEALTH CARE SUBSIDIES RECEIVED BY HIGH-INCOME 
                              INDIVIDUALS

                              ``Sec. 59B. Recapture of certain health 
                                        care subsidies.

``SEC. 59B. RECAPTURE OF CERTAIN HEALTH CARE SUBSIDIES.

    ``(a) Imposition of Recapture Amount.--In the case of an 
individual, if the modified adjusted gross income of the taxpayer for 
the taxable year exceeds the threshold amount, such taxpayer shall pay 
(in addition to any other amount imposed by this subtitle) a recapture 
amount for such taxable year equal to the aggregate of the Medicare 
part B recapture amounts (if any) for months during such year that a 
premium is paid under part B of title XVIII of the Social Security Act 
for the coverage of the individual under such part.
    ``(b) Medicare Part B Premium Recapture Amount for Month.--For 
purposes of this section, the Medicare part B premium recapture amount 
for any month is the amount equal to the excess of--
            ``(1) 150 percent of the monthly actuarial rate for 
        enrollees age 65 and over determined for that calendar year 
        under section 1839(b) of the Social Security Act, over
            ``(2) the total monthly premium under section 1839 of the 
        Social Security Act (determined without regard to subsections 
        (b) and (f) of section 1839 of such Act).
    ``(c) Phase-in of Recapture Amount.--
            ``(1) In general.--If the modified adjusted gross income of 
        the taxpayer for any taxable year exceeds the threshold amount 
        by less than $15,000, the recapture amount imposed by this 
        section for such taxable year shall be an amount which bears 
        the same ratio to the recapture amount which would (but for 
        this subsection) be imposed by this section for such taxable 
        year as such excess bears to $15,000.
            ``(2) Joint returns.--If a recapture amount is determined 
        separately for each spouse filing a joint return, paragraph (1) 
        shall be applied by substituting `$30,000' for `$15,000' each 
        place it appears.
    ``(d) Other Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Threshold amount.--The term `threshold amount' 
        means--
                    ``(A) except as otherwise provided in this 
                paragraph, $90,000,
                    ``(B) $115,000 in the case of a joint return, and
                    ``(C) zero in the case of a taxpayer who--
                            ``(i) is married (as determined under 
                        section 7703) but does not file a joint return 
                        for such year, and
                            ``(ii) does not live apart from his spouse 
                        at all times during the taxable year.
            ``(2) Modified adjusted gross income.--The term `modified 
        adjusted gross income' means adjusted gross income--
                    ``(A) determined without regard to sections 135, 
                911, 931, and 933, and
                    ``(B) increased by the amount of interest received 
                or accrued by the taxpayer during the taxable year 
                which is exempt from tax.
            ``(3) Joint returns.--In the case of a joint return--
                    ``(A) the recapture amount under subsection (a) 
                shall be the sum of the recapture amounts determined 
                separately for each spouse, and
                    ``(B) subsections (a) and (c) shall be applied by 
                taking into account the combined modified adjusted 
                gross income of the spouses.
            ``(4) Coordination with other provisions.--
                    ``(A) Treated as tax for subtitle f.--For purposes 
                of subtitle F, the recapture amount imposed by this 
                section shall be treated as if it were a tax imposed by 
                section 1.
                    ``(B) Not treated as tax for certain purposes.--The 
                recapture amount imposed by this section shall not be 
                treated as a tax imposed by this chapter for purposes 
                of determining--
                            ``(i) the amount of any credit allowable 
                        under this chapter, or
                            ``(ii) the amount of the minimum tax under 
                        section 55.
                    ``(C) Treated as payment for medical insurance.--
                The recapture amount imposed by this section shall be 
                treated as an amount paid for insurance covering 
                medical care, within the meaning of section 213(d).
            ``(5) Taxes imposed by possessions.--The tax imposed by 
        this section shall not apply to a bona fide resident of a 
        possession with respect to which the requirements of section 
        1509 of the Health Security Act are met.''
    (b) Transfers to Federal Supplementary Medical Insurance Trust 
Fund.--
            (1) In general.--There are hereby appropriated to the 
        Federal Supplementary Medical Insurance Trust Fund amounts 
        equivalent to the aggregate increase in liabilities under 
        chapter 1 of the Internal Revenue Code of 1986 which is 
        attributable to the application of section 59B(a) of such Code, 
        as added by this section.
            (2) Transfers.--The amounts appropriated by paragraph (1) 
        to the Federal Supplementary Medical Insurance Trust Fund shall 
        be transferred from time to time (but not less frequently than 
        quarterly) from the general fund of the Treasury on the basis 
        of estimates made by the Secretary of the Treasury of the 
        amounts referred to in paragraph (1). Any quarterly payment 
        shall be made on the first day of such quarter and shall take 
        into account the recapture amounts referred to in such section 
        59B(a) for such quarter. Proper adjustments shall be made in 
        the amounts subsequently transferred to the extent prior 
        estimates were in excess of or less than the amounts required 
        to be transferred.
    (c) Reporting Requirements.--
            (1) Paragraph (1) of section 6050F(a) (relating to returns 
        relating to social security benefits) is amended by striking 
        ``and'' at the end of subparagraph (B) and by inserting after 
        subparagraph (C) the following new subparagraph:
                    ``(D) the number of months during the calendar year 
                for which a premium was paid under part B of title 
                XVIII of the Social Security Act for the coverage of 
                such individual under such part, and''.
            (2) Paragraph (2) of section 6050F(b) is amended to read as 
        follows:
            ``(2) the information required to be shown on such return 
        with respect to such individual.''
            (3) Subparagraph (A) of section 6050F(c)(1) is amended by 
        inserting before the comma ``and in the case of the information 
        specified in subsection (a)(1)(D)''.
            (4) The heading for section 6050F is amended by inserting 
        ``and medicare part b coverage'' before the period.
            (5) The item relating to section 6050F in the table of 
        sections for subpart B of part III of subchapter A of chapter 
        61 is amended by inserting ``and Medicare part B coverage'' 
        before the period.
    (d) Waiver of Certain Estimated Tax Penalties.--No addition to tax 
shall be imposed under section 6654 of the Internal Revenue Code of 
1986 (relating to failure to pay estimated income tax) for any period 
before April 16, 1997, with respect to any underpayment to the extent 
that such underpayment resulted from section 59B(a) of the Internal 
Revenue Code of 1986, as added by this section.
    (e) Clerical Amendment.--The table of parts for subchapter A of 
chapter 1 is amended by adding at the end thereof the following new 
item:

                              ``Part VIII. Certain health care 
                                        subsidies received by high-
                                        income individuals.''
    (f) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1995.

                        PART 4--OTHER PROVISIONS

SEC. 7131. INCREASE IN TAX ON CERTAIN HOLLOW POINT AND LARGE CALIBER 
              HANDGUN AMMUNITION.

    (a) Increase in Manufacturers Tax.--
            (1) In general.--Section 4181 (relating to imposition of 
        tax on firearms) is amended--
                    (A) by striking ``Shells, and cartridges'' and 
                inserting ``Shells and cartridges not taxable at 10,000 
                percent'', and
                    (B) by adding at the end the following:
            ``Articles taxable at 10,000 percent.--
                    ``Any jacketed, hollow point projectile which may 
                be used in a handgun and the jacket of which is 
                designed to produce, upon impact, sharp-tipped, barb-
                like projections that extend beyond the diameter of the 
                unfired projectile.
                    ``Any cartridge with a projectile measuring .500 
                inch or greater in diameter which may be used in a 
                handgun.''
            (2) Additional taxes added to the general fund.--Section 
        3(a) of the Act of September 2, 1937 (16 U.S.C. 669b(a)), 
        commonly referred to as the ``Pittman-Robertson Wildlife 
        Restoration Act'', is amended by adding at the end the 
        following new sentence: ``There shall not be covered into the 
        fund the portion of the tax imposed by such section 4181 that 
        is attributable to any increase in amounts received in the 
        Treasury under such section by reason of the amendments made by 
        section 7131(a)(1) of the Health Security Act, as estimated by 
        the Secretary.''
    (b) Effective Dates.--
            (1) In general.--The amendments made by this section shall 
        apply to sales after December 31, 1994.
            (2) Floor stocks tax.--
                    (A) In general.--In the case of any article held on 
                January 1, 1995, which is taxable under section 4181 of 
                the Internal Revenue Code of 1986 on and after such 
                date at a tax rate of 10,000 percent, there is hereby 
                imposed a tax equal to the excess of--
                            (i) the tax which would be imposed under 
                        section 4181 of such Code if the article were 
                        sold on such date, over
                            (ii) the prior tax (if any) imposed under 
                        such section on such article.
                    (B) Credit.--Each person shall be allowed as a 
                credit against the taxes imposed by subparagraph (A) an 
                amount equal to the taxes imposed on articles which 
                such person destroys (in such manner as the Secretary 
                may prescribe) after December 31, 1994, and before 
                April 1, 1995.
                    (C) Payment.--The taxes imposed by subparagraph (A) 
                on any article shall be paid by the person holding the 
                article on January 1, 1995. Such taxes shall be paid 
                before April 1, 1995, in such manner as the Secretary 
                of the Treasury may prescribe.
                    (D) Articles in foreign trade zones.--
                Notwithstanding the Act of June 18, 1934 (48 Stat. 998, 
                19 U.S.C. 81a) and any other provision of law, any 
                article which is located in a foreign trade zone on 
                January 1, 1995, shall be subject to the tax imposed by 
                subparagraph (A) if--
                            (i) internal revenue taxes have been 
                        determined, or customs duties liquidated, with 
                        respect to such article before such date 
                        pursuant to a request made under the 1st 
                        proviso of section 3(a) of such Act, or
                            (ii) such article is held on such date 
                        under the supervision of a customs officer 
                        pursuant to the 2d proviso of such section 
                        3(a).
                    (E) Controlled groups.--Rules similar to the rules 
                of section 5061(e)(3) of such Code shall apply for 
                purposes of this paragraph.
                    (F) Other laws applicable.--All provisions of law, 
                including penalties, applicable with respect to the 
                taxes imposed by section 4181 of such Code shall, 
                insofar as applicable and not inconsistent with the 
                provisions of this subsection, apply to the floor 
                stocks taxes imposed by subparagraph (A), to the same 
                extent as if such taxes were imposed by such section 
                4181. The Secretary may treat any person who bore the 
                ultimate burden of the tax imposed by subparagraph (A) 
                as the person to whom a credit or refund under such 
                provisions may be allowed or made.

SEC. 7132. MODIFICATION TO SELF-EMPLOYMENT TAX TREATMENT OF CERTAIN S 
              CORPORATION SHAREHOLDERS AND PARTNERS.

    (a) Treatment of Certain S Corporation Shareholders.--
            (1) Amendment to internal revenue code.--Section 1402 
        (relating to definitions) is amended by adding at the end the 
        following new subsection:
    ``(k) Treatment of Certain S Corporation Shareholders.--
            ``(1) In general.--In the case of any individual--
                    ``(A) who is a 2-percent shareholder (as defined in 
                section 1372(b)) of an S corporation for any taxable 
                year of such corporation, and
                    ``(B) who provides significant services to or on 
                behalf of such S corporation during such taxable year,
        such shareholder's net earnings from self-employment shall 
        include 80 percent of such shareholder's pro rata share (as 
        determined under section 1366(a)) of the taxable income or loss 
        of such corporation for such taxable year from service-related 
        businesses carried on by such corporation, and to the extent 
        provided in regulations, for any other taxable year to the 
        extent such income or loss is attributable to such services.
            ``(2) Certain exceptions to apply.--In determining the 
        amount to be taken into account under paragraph (1), the 
        exceptions provided in subsection (a) shall apply, except that, 
        in the case of the exceptions provided in subsection (a)(5), 
        rules similar to the rules of subparagraph (B) thereof shall 
        apply to shareholders in S corporations.
            ``(3) Service-related business.--For purposes of this 
        subsection, the term `service-related business' means--
                    ``(A) any trade or business involving the 
                performance of services in the fields of health (other 
                than with respect to inpatient personal care 
                facilities), law, engineering, architecture, 
                accounting, actuarial services, performing arts, 
                consulting, athletics, or financial services (other 
                than lending or brokerage services), or
                    ``(B) any other trade or business with respect to 
                which the Secretary determines that capital is an 
                insignificant income-producing factor.
            ``(4) Application of deferred compensation rules.--For 
        purposes of subchapter D of chapter 1 (and any other provision 
        of this title relating thereto), in the case of an individual 
        who is treated as having net earnings from self-employment by 
        reason of paragraph (1)--
                    ``(A) such individual shall not be treated as a 
                self-employed individual (within the meaning of section 
                401(c)(1)) with respect to services performed for the S 
                corporation, and
                    ``(B) such net earnings shall be treated as 
                compensation received by the individual as an employee 
                of the S corporation.''
            (2) Amendment to social security act.--Section 211 of the 
        Social Security Act is amended by adding at the end the 
        following new subsection:

           ``Treatment of Certain S Corporation Shareholders

    ``(k)(1) In the case of any individual--
            ``(A) who is a 2-percent shareholder (as defined in section 
        1372(b) of the Internal Revenue Code of 1986) of an S 
        corporation for any taxable year of such corporation, and
            ``(B) who provides significant services to or on behalf of 
        such S corporation during such taxable year,
such shareholder's net earnings from self-employment shall include 80 
percent of such shareholder's pro rata share (as determined under 
section 1366(a) of such Code) of the taxable income or loss of such 
corporation for such taxable year from service-related businesses (as 
defined in section 1402(k)(3) of such Code) carried on by such 
corporation, and to the extent provided in regulations, for any other 
taxable year to the extent such income or loss is attributable to such 
services.
    ``(2) In determining the amount to be taken into account under 
paragraph (1), the exceptions provided in subsection (a) shall apply, 
except that, in the case of the exceptions provided in subsection 
(a)(5), rules similar to the rules of subparagraph (B) thereof shall 
apply to shareholders in S corporations.''
    (b) Treatment of Certain Limited Partners.--
            (1) Amendment of the internal revenue code.--Paragraph (13) 
        of section 1402(a) is amended to read as follows:
            ``(13) there shall be excluded the distributive share of 
        any item of income or loss of a limited partner, as such, other 
        than--
                    ``(A) guaranteed payments described in section 
                707(c) to that partner for services actually rendered 
                to or on behalf of the partnership to the extent that 
                those payments are established to be in the nature of 
                remuneration for those services, or
                    ``(B) in the case of a limited partner who provides 
                significant services to or on behalf of the partnership 
                for any taxable year of the partnership, 80 percent of 
                the limited partner's distributive share (determined 
                without regard to payments described in subparagraph 
                (A)) of the taxable income or loss of such 
                partnership--
                            ``(i) for such taxable year from service-
                        related businesses (as defined in subsection 
                        (k)(3)) of such partnership, and
                            ``(ii) to the extent provided in 
                        regulations, for any other taxable year to the 
                        extent attributable to such services;''.
            (2) Amendment of the social security act.--Paragraph (12) 
        of section 211(a) of the Social Security Act is amended to read 
        as follows:
            ``(12) there shall be excluded the distributive share of 
        any item of income or loss of a limited partner, as such, other 
        than--
                    ``(A) guaranteed payments described in section 
                707(c) of the Internal Revenue Code of 1986 to that 
                partner for services actually rendered to or on behalf 
                of the partnership to the extent that those payments 
                are established to be in the nature of remuneration for 
                those services, or
                    ``(B) in the case of a limited partner who provides 
                significant services to or on behalf of the partnership 
                for any taxable year of the partnership, 80 percent of 
                the limited partner's distributive share (determined 
                without regard to payments described in subparagraph 
                (A)) of the taxable income or loss of such 
                partnership--
                            ``(i) for such taxable year from service-
                        related businesses (as defined in section 
                        1402(k)(3) of such Code) of such partnership, 
                        and
                            ``(ii) to the extent provided in 
                        regulations prescribed by the Secretary of the 
                        Treasury, for any other taxable year to the 
                        extent attributable to such services;''.
    (c) Inventory Income.--Section 1402 (relating to definitions), as 
amended by subsection (a), is amended by adding at the end the 
following new subsection:
    ``(l) Inventory Income.--
            ``(1) In general.--The net earnings from self-employment of 
        any taxpayer for any taxable year under subsection (a) 
        (determined without regard to this subsection) shall be reduced 
        by 40 percent of the lesser of--
                    ``(A) the taxpayer's allocable share of net 
                inventory income, or
                    ``(B) the amount of such net earnings in excess of 
                the applicable amount for the taxable year.
            ``(2) Net inventory income.--
                    ``(A) In general.--For purposes of paragraph (1), 
                the term `net inventory income' means net income from 
                the sale of property described in section 1221(1).
                    ``(B) Dealers in securities.--For purposes of 
                subparagraph (A)--
                            ``(i) any security described in section 
                        475(c)(2) (without regard to the last sentence 
                        thereof) which is held by a person as a dealer 
                        in securities (as defined in section 475(c)(1)) 
                        shall be treated as property described in 
                        section 1221(1), and
                            ``(ii) net income from any such security 
                        shall be taken into account to the extent 
                        otherwise taken into account in computing net 
                        earnings from self-employment.
            ``(3) Applicable amount.--For purposes of paragraph (1), 
        the term `applicable amount' means the excess of--
                    ``(A) $135,000, adjusted, in the case of any 
                taxable year beginning in any calendar year after 1996, 
                in the same manner as is used in adjusting the 
                contribution and benefit base for the calendar year 
                under section 230(b) of the Social Security Act, over
                    ``(B) the amount of wages paid to the individual 
                during the taxable year.''
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years of individuals beginning after December 31, 
1995, and to taxable years of S corporations and partnerships ending 
with or within such taxable years of individuals.

SEC. 7133. EXTENDING MEDICARE COVERAGE OF, AND APPLICATION OF HOSPITAL 
              INSURANCE TAX TO, ALL STATE AND LOCAL GOVERNMENT 
              EMPLOYEES.

    (a) In General.--
            (1) Application of hospital insurance tax.--Section 
        3121(u)(2) is amended by striking subparagraphs (C) and (D).
            (2) Coverage under medicare.--Section 210(p) of the Social 
        Security Act (42 U.S.C. 410(p)) is amended by striking 
        paragraphs (3) and (4).
            (3) Effective date.--The amendments made by this subsection 
        shall apply to services performed after September 30, 1995.
    (b) Transition in Benefits for State and Local Government Employees 
and Former Employees.--
            (1) In general.--
                    (A) Employees newly subject to tax.--For purposes 
                of sections 226, 226A, and 1811 of the Social Security 
                Act, in the case of any individual who performs 
                services during the calendar quarter beginning October 
                1, 1995, the wages for which are subject to the tax 
                imposed by section 3101(b) of the Internal Revenue Code 
                of 1986 only because of the amendment made by 
                subsection (a), the individual's medicare qualified 
                State or local government employment (as defined in 
                subparagraph (B)) performed before October 1, 1995, 
                shall be considered to be ``employment'' (as defined 
                for purposes of title II of such Act), but only for 
                purposes of providing the individual (or another 
                person) with entitlement to hospital insurance benefits 
                under part A of title XVIII of such Act for months 
                beginning with October 1995.
                    (B) Medicare qualified state or local government 
                employment defined.--In this paragraph, the term 
                ``medicare qualified State or local government 
                employment'' means medicare qualified government 
                employment described in section 210(p)(1)(B) of the 
                Social Security Act (determined without regard to 
                section 210(p)(3) of such Act, as in effect before its 
                repeal under subsection (a)(2)).
            (2) Authorization of appropriations.--There are authorized 
        to be appropriated to the Federal Hospital Insurance Trust Fund 
        from time to time such sums as the Secretary of Health and 
        Human Services deems necessary for any fiscal year on account 
        of--
                    (A) payments made or to be made during such fiscal 
                year from such Trust Fund with respect to individuals 
                who are entitled to benefits under title XVIII of the 
                Social Security Act solely by reason of paragraph (1),
                    (B) the additional administrative expenses 
                resulting or expected to result therefrom, and
                    (C) any loss in interest to such Trust Fund 
                resulting from the payment of those amounts, in order 
                to place such Trust Fund in the same position at the 
                end of such fiscal year as it would have been in if 
                this subsection had not been enacted.
            (3) Information to individuals who are prospective medicare 
        beneficiaries based on state and local government employment.--
        Section 226(g) of the Social Security Act (42 U.S.C. 426(g)) is 
        amended--
                    (A) by redesignating paragraphs (1) through (3) as 
                subparagraphs (A) through (C), respectively,
                    (B) by inserting ``(1)'' after ``(g)'', and
                    (C) by adding at the end the following new 
                paragraph:
            ``(2) The Secretary, in consultation with State and local 
        governments, shall provide procedures designed to assure that 
        individuals who perform medicare qualified government 
        employment by virtue of service described in section 210(a)(7) 
        are fully informed with respect to (A) their eligibility or 
        potential eligibility for hospital insurance benefits (based on 
        such employment) under part A of title XVIII, (B) the 
        requirements for, and conditions of, such eligibility, and (C) 
        the necessity of timely application as a condition of becoming 
        entitled under subsection (b)(2)(C), giving particular 
        attention to individuals who apply for an annuity or retirement 
        benefit and whose eligibility for such annuity or retirement 
        benefit is based on a disability.''
    (c) Technical Amendments.--
            (1) Subparagraph (A) of section 3121(u)(2) is amended by 
        striking ``subparagraphs (B) and (C),'' and inserting 
        ``subparagraph (B),''.
            (2) Subparagraph (B) of section 210(p)(1) of the Social 
        Security Act (42 U.S.C. 410(p)(1)) is amended by striking 
        ``paragraphs (2) and (3).'' and inserting ``paragraph (2).''
            (3) Section 218 of the Social Security Act (42 U.S.C. 418) 
        is amended by striking subsection (n).
            (4) The amendments made by this subsection shall apply 
        after September 30, 1995.

       Subtitle B--Tax Treatment of Employer-Provided Health Care

                       PART 1--GENERAL PROVISIONS

SEC. 7201. LIMITATION ON EXCLUSION FOR EMPLOYER-PROVIDED HEALTH 
              BENEFITS.

    (a) General Rule.--Section 106 (relating to contributions by 
employer to accident and health plans) is amended to read as follows:

``SEC. 106. CONTRIBUTIONS BY EMPLOYER TO ACCIDENT AND HEALTH PLANS.

    ``(a) General Rule.--Except as otherwise provided in this section, 
gross income of an employee does not include employer-provided coverage 
under an accident or health plan.
    ``(b) Inclusion of Certain Benefits Not Part of Permitted 
Coverage.--
            ``(1) In general.--Effective on and after January 1, 2004, 
        gross income of an employee shall include employer-provided 
        coverage under any accident or health plan which is not 
        permitted coverage.
            ``(2) Permitted coverage.--For purposes of this subsection, 
        the term `permitted coverage' means any--
                    ``(A) coverage under a certified standard health 
                plan (as defined in section 1011(2)(A) of the Health 
                Security Act),
                    ``(B) coverage under a certified supplemental 
                health benefit plan (as defined in section 1011(3)(A) 
                of the Health Security Act) which consists of the 
                payment of cost sharing amounts under a certified 
                standard health plan (as so defined) providing the 
                standard benefits package described in part 1 of 
                subtitle C of title I of such Act,
                    ``(C) coverage under a qualified long-term care 
                insurance policy (as defined in section 7702B(b)),
                    ``(D) coverage providing wages or payments in lieu 
                of wages for any period during which the employee is 
                absent from work on account of sickness or injury,
                    ``(E) coverage only for accidental death or 
                dismemberment,
                    ``(F) coverage under a medicare supplemental policy 
                (as defined in section 1882(g)(1) of the Social 
                Security Act),
                    ``(G) coverage under an equivalent health care 
                program (as defined in section 1013(3) of the Health 
                Security Act), and
                    ``(H) other coverage to the extent that the 
                Secretary determines that the continuation of an 
                exclusion for such coverage is not inconsistent with 
                the purposes of this subsection.
            ``(3) Special rules for flexible spending arrangements.--
                    ``(A) In general.--To the extent that any employer-
                provided coverage is provided through a flexible 
                spending or similar arrangement, paragraph (1) shall be 
                applied by substituting `January 1, 1996,' for `January 
                1, 2004'.
                    ``(B) Flexible spending arrangement.--For purposes 
                of this paragraph, a flexible spending arrangement is a 
                benefit program which provides employees with coverage 
                under which--
                            ``(i) specified incurred expenses may be 
                        reimbursed (subject to reimbursement maximums 
                        and other reasonable conditions), and
                            ``(ii) the maximum amount of reimbursement 
                        which is reasonably available to a participant 
                        for such coverage is less than 500 percent of 
                        the value of such coverage.
                In the case of an insured plan, the maximum amount 
                reasonably available shall be determined on the basis 
                of the underlying coverage.''
    (b) Employment Tax Treatment.--
            (1) Social security tax.--
                    (A) Subsection (a) of section 3121 is amended by 
                inserting after paragraph (21) the following new 
                sentence:
``Nothing in paragraph (2) shall exclude from the term `wages' any 
amount which is required to be included in gross income under section 
106(b).''
                    (B) Subsection (a) of section 209 of the Social 
                Security Act is amended by inserting after paragraph 
                (21) the following new sentence:
``Nothing in paragraph (2) shall exclude from the term `wages' any 
amount which is required to be included in gross income under section 
106(b) of the Internal Revenue Code of 1986.''
            (2) Railroad retirement tax.--Paragraph (1) of section 
        3231(e) is amended by adding at the end the following new 
        sentence: ``Nothing in clause (i) of the second sentence of 
        this paragraph shall exclude from the term `compensation' any 
        amount which is required to be included in gross income under 
        section 106(b).''
            (3) Unemployment tax.--Subsection (b) of section 3306 is 
        amended by inserting after paragraph (16) the following new 
        sentence:
``Nothing in paragraph (2) shall exclude from the term `wages' any 
amount which is required to be included in gross income under section 
106(b).''
            (4) Wage withholding.--Subsection (a) of section 3401 is 
        amended by adding at the end the following new sentence:
``Nothing in the preceding provisions of this subsection shall exclude 
from the term `wages' any amount which is required to be included in 
gross income under section 106(b).''
    (c) Effective Dates.--
            (1) In general.--The amendments made by this section shall 
        take effect on January 1, 1996.
            (2) Benefits provided pursuant to collective bargaining 
        agreements.--In the case of a flexible spending arrangement 
        maintained pursuant to 1 or more collective bargaining 
        agreements between employee representatives and 1 or more 
        employers which was ratified before June 30, 1994, the 
        amendments referred to in paragraph (1) shall not apply to 
        benefits pursuant to any such agreement before the later of--
                    (A) January 1, 1996, or
                    (B) the earlier of--
                            (i) the date on which the last of such 
                        agreements terminate (determined without regard 
                        to any extension thereof on or after June 30, 
                        1994), or
                            (ii) January 1, 1998.

SEC. 7202. HEALTH BENEFITS MAY NOT BE PROVIDED UNDER CAFETERIA PLANS.

    (a) General Rule.--Subsection (f) of section 125 (defining 
qualified benefits) is amended by adding at the end the following new 
sentence: ``Such term shall not include any benefits or coverage under 
an accident or health plan.''
    (b) Conforming Amendment.--Subsection (g) of section 125 is amended 
by striking paragraph (2) and redesignating paragraphs (3) and (4) as 
paragraphs (2) and (3), respectively.
    (c) Effective Dates.--
            (1) In general.--The amendments made by this section shall 
        take effect on January 1, 1997.
            (2) Benefits provided pursuant to collective bargaining 
        agreements.--In the case of a cafeteria plan maintained 
        pursuant to 1 or more collective bargaining agreements between 
        employee representatives and 1 or more employers which was 
        ratified before June 30, 1994, the amendments referred to in 
        paragraph (1) shall not apply to benefits pursuant to any such 
        agreement before the later of--
                    (A) January 1, 1997, or
                    (B) the earlier of--
                            (i) the date on which the last of such 
                        agreements terminate (determined without regard 
                        to any extension thereof on or after June 30, 
                        1994), or
                            (ii) January 1, 1999.

SEC. 7203. INCREASE IN DEDUCTION FOR HEALTH INSURANCE COSTS OF SELF-
              EMPLOYED INDIVIDUALS.

    (a) Provision Made Permanent.--
            (1) In general.--Subsection (l) of section 162 (relating to 
        special rules for health insurance costs of self-employed 
        individuals) is amended by striking paragraph (6).
            (2) Effective date.--The amendment made by paragraph (1) 
        shall apply to taxable years beginning after December 31, 1993.
    (b) Amount of Deduction.--
            (1) In general.--Paragraphs (1) and (2) of section 162(l) 
        are amended to read as follows:
            ``(1) In general.--In the case of an individual who is an 
        employee within the meaning of section 401(c), there shall be 
        allowed as a deduction under this section an amount equal to 50 
        percent of the amount paid during the taxable year for coverage 
        under a certified standard health plan (as defined in section 
        1011(2)(A) of the Health Security Act).
            ``(2) Limitations.--
                    ``(A) Lower percentage in certain cases.--
                            ``(i) In general.--If the taxpayer has 1 or 
                        more employees in a trade or business with 
                        respect to which such taxpayer is treated as an 
                        employee within the meaning of section 401(c), 
                        the deduction under paragraph (1) shall not 
                        exceed the portion of the amount paid which is 
                        equivalent to the largest employer contribution 
                        made on behalf of any such employee for 
                        coverage under a certified standard health 
                        plan.
                            ``(ii) Equivalent contribution.--For 
                        purposes of clause (i), the amount paid is 
                        equivalent to a contribution if--
                                    ``(I) it is the same dollar amount 
                                as the contribution,
                                    ``(II) it represents the same 
                                percentage of cost under the plan to 
                                which it is made as does the 
                                contribution, or
                                    ``(III) it represents the same 
                                percentage of the weighted average 
                                premium for the class of enrollment (as 
                                defined in section 1113(c) of the 
                                Health Security Act) for the community 
                                rating area in which the employee works 
                                as does the contribution.
                        For purposes of applying subclause (II) or 
                        (III), any dollar limitation applicable to all 
                        employer contributions (whether expressed as a 
                        dollar amount or a percentage described in 
                        subclause (III)) shall be disregarded.
                    ``(B) Deduction limited to earned income.--No 
                deduction shall be allowed under paragraph (1) to the 
                extent that the amount of such deduction exceeds the 
                taxpayer's earned income (within the meaning of section 
                401(c)).
                    ``(C) Other coverage.--Paragraph (1) shall not 
                apply to any taxpayer for any calendar month for which 
                the taxpayer is eligible to participate in any 
                subsidized health plan maintained by any employer of 
                the taxpayer or the taxpayer's spouse.''
            (2) Conforming amendment.--Subparagraph (A) of section 
        162(l)(5) is amended by striking ``shall be treated as such 
        individual's earned income'' and inserting ``shall be included 
        in such individual's earned income''.
            (3) Effective date.--The amendments made by this subsection 
        shall apply to taxable years beginning after December 31, 1995.

SEC. 7204. LIMITATION ON PREPAYMENT OF MEDICAL INSURANCE PREMIUMS.

    (a) General Rule.--Subsection (d) of section 213 is amended by 
adding at the end the following new paragraph:
            ``(10) Limitation on prepayments.--If--
                    ``(A) the taxpayer pays a premium or other amount 
                which constitutes medical care under paragraph (1), and
                    ``(B) such premium or other amount is properly 
                allocable to insurance coverage or care to be provided 
                during periods more than 12 months after the month in 
                which such payment is made,
        such premium or other amount shall be treated as paid ratably 
        over the period during which such insurance coverage or care is 
        to be provided. The preceding sentence shall not apply to any 
        premium to which paragraph (7) applies.''
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to amounts paid after December 31, 1994.

          PART 2--VOLUNTARY EMPLOYER HEALTH CARE CONTRIBUTIONS

SEC. 7111. TAX TREATMENT OF VOLUNTARY EMPLOYER HEALTH CARE 
              CONTRIBUTIONS.

    (a) In General.--Chapter 37 (relating to health-related taxes), as 
added by section 7111, is amended by adding at the end the following 
new subchapter:

      ``Subchapter B--Voluntary Employer-Provided Health Benefits

                              ``Sec. 4521. Taxable employer-provided 
                                        health benefits.
                              ``Sec. 4522. Discriminatory employer 
                                        practices.
                              ``Sec. 4523. Exceptions.
                              ``Sec. 4524. Definitions and special 
                                        rules.

``SEC. 4521. TAXABLE EMPLOYER-PROVIDED HEALTH BENEFITS.

    ``(a) Imposition of Tax.--There is hereby imposed a tax equal to 
the product of--
            ``(1) the sum of--
                    ``(A) the taxable employer contributions for any 
                taxable year, plus
                    ``(B) the aggregate employer contributions for 
                permitted coverage described in subparagraph (A) or (B) 
                of subsection (b)(2) during any portion of the taxable 
                year during which there is discriminatory permitted 
                coverage, and
            ``(2) the highest rate of tax imposed under section 11(b) 
        for the taxable year.
    ``(b) Taxable Employer Contribution.--For purposes of this 
section--
            ``(1) In general.--The term `taxable employer contribution' 
        means any employer contribution under an accident or health 
        plan for coverage of an employee other than permitted coverage.
            ``(2) Permitted coverage.--For purposes of this subsection, 
        the term `permitted coverage' means--
                    ``(A) coverage under a certified standard health 
                plan (as defined in section 1011(2)(A) of the Health 
                Security Act),
                    ``(B) coverage under a certified supplemental 
                health benefit plan (as defined in section 1011(3)(A) 
                of such Act), except that this subparagraph shall not 
                apply to coverage of any employee who is covered under 
                a certified standard health plan which provides the 
                alternative standard benefits package described in 
                subtitle C of title I of such Act,
                    ``(C) coverage under a qualified long-term care 
                insurance policy (as defined in section 7702B(b)),
                    ``(D) coverage providing wages or payments in lieu 
                of wages for any period during which the employee is 
                absent from work on account of sickness or injury,
                    ``(E) coverage only for accidental death or 
                dismemberment,
                    ``(F) coverage under a medicare supplemental policy 
                (as defined in section 1882(g)(1) of the Social 
                Security Act), and
                    ``(G) coverage under an equivalent health care 
                program (as defined in section 1013(3) of the Health 
                Security Act).
    ``(c) Discriminatory Permitted Coverage.--For purposes of this 
section, the term `discriminatory permitted coverage' means, with 
respect to any period, coverage--
            ``(1) which is permitted coverage described in subparagraph 
        (A) or (B) of subsection (b)(2), and
            ``(2) with respect to which the requirements of subsection 
        (a) or (b) of section 4522 are not met during such period.

``SEC. 4522. DISCRIMINATORY EMPLOYER PRACTICES.

    ``(a) Health Status Requirements.--For purposes of section 4521(c), 
an employer meets the requirements of this subsection if, with respect 
to coverage described in such section--
            ``(1) there is no waiting period or denial of coverage with 
        respect to an employee, and
            ``(2) the amount of the employer contribution on behalf of 
        an employee is not conditioned, and does not vary,
by reason of the employee's health status, claims experience, medical 
history, receipt of health care, or lack of evidence of insurability.
    ``(b) Uniform Contribution Requirements.--
            ``(1) In general.--For purposes of section 4521(c), an 
        employer meets the requirements of this subsection if the 
        employer contribution on behalf of an employee for coverage 
        described in such section is equivalent to each employer 
        contribution on behalf of all other employees who elect such 
        coverage under plans offered by the employer.
            ``(2) Equivalent contribution.--For purposes of paragraph 
        (1), a contribution is equivalent to any other contribution 
        if--
                    ``(A) it is the same dollar amount as the other 
                contribution,
                    ``(B) it represents the same percentage of cost 
                under the plan to which it is made as does the other 
                contribution, or
                    ``(C) it represents the same percentage of the 
                weighted average premium for the class of enrollment 
                (as defined in section 1113(c) of the Health Security 
                Act) for the community rating area in which the 
                employee works as does the other contribution.
        For purposes of applying subparagraph (B) or (C), any dollar 
        limitation applicable to all employer contributions (whether 
        expressed as a dollar amount or a percentage described in 
        subparagraph (C)) shall be disregarded.
            ``(3) Excluded employees.--
                    ``(A) In general.--The following employees of an 
                employer shall be excluded from consideration under 
                this subsection:
                            ``(i) Any employee before the employee has 
                        completed 6 months of service with the 
                        employer.
                            ``(ii) Any employee who normally works less 
                        than 24 hours per week.
                            ``(iii) Any employee who normally works 
                        during not more than 6 months of any year.
                            ``(iv) Any employee who has not attained 
                        age 18.
                            ``(v) Any employee who is included in a 
                        unit of employees covered by an agreement which 
                        the Secretary finds to be a collective 
                        bargaining agreement between employee 
                        representatives and 1 or more employers if 
                        there is evidence that employer-provided 
                        benefits for standard health benefits coverage 
                        was the subject of good faith bargaining 
                        between the employee representatives and 
                        employer or employers.
                            ``(vi) Any employee who is a nonresident 
                        alien and who receives no earned income (within 
                        the meaning of section 911(d)(2)) from the 
                        employer which constitutes income from sources 
                        within the United States (within the meaning of 
                        section 861(a)(3)).
                            ``(vii) Any former employee.
                    ``(B) Coverage of part-time employees.--
                            ``(i) In general.--If an employer makes an 
                        employer contribution for any period for 
                        coverage described in section 4521(c) for any 
                        employee who normally works at least 10 hours 
                        but less than 24 hours per week, subparagraph 
                        (A)(ii) shall be applied by substituting `10 
                        hours' for `24 hours'.
                            ``(ii) Requirements may be met 
                        separately.--If an employer elects the 
                        application of this clause--
                                    ``(I) the requirements of this 
                                subsection shall be applied separately 
                                to employees to whom this subsection 
                                applies by reason of clause (i), and
                                    ``(II) such employees shall be 
                                excluded in determining whether such 
                                requirements are met with respect to 
                                any other employees.
                            ``(iii) Pro rata contributions 
                        permissible.--For purposes of this subsection, 
                        contributions on behalf of any employee to 
                        which this subsection applies by reason of 
                        clause (i) shall not fail to be treated as 
                        equivalent solely because they are 
                        proportionate to the number of hours the 
                        employee works.
            ``(4) Aggregation rules.--For purposes of this subsection--
                    ``(A) In general.--All employers treated as a 
                single employer under subsection (b) or (c) of section 
                414 shall be treated as a single employer.
                    ``(B) Affiliated service groups.--All employees of 
                members of an affiliated service group (as defined in 
                section 414(m)) shall be treated as employed by a 
                single employer.
            ``(5) Separate lines of business.--If, under section 
        414(r), an employer is treated as operating separate lines of 
        business for a year, the employer may apply this subsection 
        separately to employees in each separate line of business.

``SEC. 4523. EXCEPTIONS.

    ``(a) Exception for Reasonable Diligence.--No tax shall be imposed 
by this subchapter during any period for which it is established to the 
satisfaction of the Secretary that the employer did not know, or 
exercising reasonable diligence would not have known, that the employer 
had taken any action subject to tax under this subchapter.
    ``(b) Corrections Within 30 Days.--No tax shall be imposed by this 
subchapter with respect to any action subject to tax under this 
subchapter if--
            ``(1) such action was due to reasonable cause and not to 
        willful neglect, and
            ``(2) such action is corrected during the 30-day period 
        beginning on the 1st date the employer knew, or exercising 
        reasonable diligence would have known, that such action was 
        subject to such tax.
    ``(c) Waiver by Secretary.--In the case of any action subject to 
tax under this subchapter which is due to reasonable cause and not to 
willful neglect, the Secretary may waive part or all of any tax imposed 
by this subchapter to the extent that the payment of such tax would be 
excessive relative to the action involved.

``SEC. 4524. DEFINITIONS AND SPECIAL RULES.

    ``(a) Definitions.--For purposes of this subchapter--
            ``(1) Employer.--
                    ``(A) In general.--The term `employer' means any 
                person or governmental entity for whom an individual 
                performs services, of whatever nature, as an employee 
                (as defined in section 3401(c)).
                    ``(B) Special rules.--
                            ``(i) A partnership shall be treated as the 
                        employer of each partner who is an employee 
                        within the meaning of section 401(c)(1).
                            ``(ii) An S corporation shall be treated as 
                        the employer of each shareholder who is an 
                        employee within the meaning of section 
                        401(c)(1).
            ``(2) Employer contributions.--The term `employer 
        contribution' means, with respect to coverage under a health 
        plan, a reasonable estimate of the portion of the cost of the 
        coverage which is to be provided by the employer.
    ``(b) Liability for Tax.--Any tax imposed by this subchapter shall 
be paid by the employer.
    ``(c) Taxes To Apply to Governmental and Other Tax-Exempt 
Entities.--Notwithstanding any other provision of law or rule of law, 
none of the following shall be exempt from the taxes imposed by this 
subchapter:
            ``(1) The United States, any State or political subdivision 
        thereof, the District of Columbia, and any agency or 
        instrumentality of any of the foregoing.
            ``(2) Any other entity otherwise exempt from tax under 
        chapter 1.
    ``(d) No Cover Over to Possessions.--Notwithstanding any other 
provision of law, no amount collected under this subchapter shall be 
covered over to any possession of the United States.
    ``(e) Regulations.--The Secretary shall prescribe such regulations 
as are necessary to carry out the provisions of this subchapter, 
including regulations providing for the determination of the amount of 
any employer contribution, the aggregation of governmental and tax-
exempt entities, and the prevention of the avoidance of any tax imposed 
by this subchapter through the use of any arrangement described in 
section 414(o).''
    (b) Employee Leasing.--Paragraph (3) of section 414(n) is amended 
by striking ``and'' at the end of subparagraph (B), by striking the 
period at the end of subparagraph (C) and inserting ``, and'', and by 
adding at the end the following new subparagraph:
                    ``(D) subchapter B of chapter 37.''
    (c) Tax Not Deductible.--Section 275(a) is amended by adding at the 
end the following new paragraph:
            ``(7) The taxes imposed by section 4521 (relating to 
        taxable employer-provided health benefits).''
    (d) Conforming Amendment.--The table of subchapters for chapter 37 
is amended by adding at the end the following new item:

                              ``Subchapter B. Voluntary employer-
                                        provided health benefits.''
    (e) Effective Date.--The amendments made by this section shall take 
effect on January 1, 1996.

              Subtitle C--Exempt Health Care Organizations

                       PART 1--GENERAL PROVISIONS

SEC. 7301. QUALIFICATION AND DISCLOSURE REQUIREMENTS FOR NONPROFIT 
              HEALTH CARE ORGANIZATIONS.

    (a) Treatment of Hospitals and Other Entities Providing Health Care 
Services.--Section 501 (relating to exemption from tax on corporations, 
certain trusts, etc.) is amended by redesignating subsection (n) as 
subsection (o) and by inserting after subsection (m) the following new 
subsection:
    ``(n) Qualification of Health Care Organizations as Exempt 
Organizations.--
            ``(1) In general.--An organization which is described in 
        paragraph (3) or (4) of subsection (c) and the predominant 
        activity of which is the provision of health care services 
        shall be exempt from tax under subsection (a) only if--
                    ``(A) such organization, with the participation of 
                community representatives, annually--
                            ``(i) assesses its community's needs for 
                        health care services and qualified outreach 
                        services, and
                            ``(ii) prepares a written plan to meet 
                        those needs,
                    ``(B) pursuant to such plan, such organization 
                provides (directly or indirectly) significant qualified 
                outreach services,
                    ``(C) such organization does not discriminate 
                against individuals in the provision of health care 
                services on the basis of participation in a government-
                sponsored health plan, and
                    ``(D) such organization does not discriminate 
                against individuals in the provision of emergency 
                health care services on the basis of ability to pay.
            ``(2) Special rule for health maintenance organizations.--A 
        health maintenance organization shall not be treated as 
        described in subsection (c)(3) unless substantially all of its 
        primary care health services are provided as described in 
        subsection (m)(6)(A).
            ``(3) Definitions and special rule.--For purposes of this 
        subsection--
                    ``(A) Qualified outreach services.--The term 
                `qualified outreach services' means health care 
                services (or preventive care, educational, or social 
                services programs related thereto) which are provided--
                            ``(i) in 1 or more medically underserved 
                        areas,
                            ``(ii) at below cost to individuals who are 
                        otherwise unable to afford such services, or
                            ``(iii) at emergency care facilities which 
                        provide specialty services and which normally 
                        operate at a loss.
                Such term shall not include insurance described in 
                subparagraph (B)(iii) unless such insurance is provided 
                on a subsidized basis.
                    ``(B) Health care services.--The term `health care 
                services' means--
                            ``(i) any activity which consists of 
                        providing medical care (as defined in section 
                        213(d)(1)(A)) to individuals,
                            ``(ii) in the case of an organization 
                        described in subsection (c)(3), any activity 
                        which is treated as accomplishing an exempt 
                        purpose of the organization solely because it 
                        is carried on as part of an activity described 
                        in clause (i), and
                            ``(iii) insurance (other than commercial-
                        type insurance, as defined in subsection (m)) 
                        for the activities described in clauses (i) and 
                        (ii).
                    ``(C) Medically underserved area.--The term 
                `medically underserved area' means, with respect to a 
                health care service, any area reasonably determined by 
                the organization (in a manner not inconsistent with 
                regulations prescribed by the Secretary) to have--
                            ``(i) a shortage (relative to the number of 
                        individuals needing such service) of health 
                        professionals performing such service, or
                            ``(ii) a population group experiencing such 
                        a shortage.
                Such term includes a health professional shortage area 
                (as defined in section 332 of the Public Health Service 
                Act).
            ``(4) Exceptions.--This subsection shall not apply to any 
        organization which--
                    ``(A) demonstrates, in a manner not inconsistent 
                with regulations prescribed by the Secretary, that one 
                of its principal purposes is academic training or 
                medical research, or
                    ``(B) provides health care services exclusively on 
                an uncompensated basis, regardless of ability to pay.
            ``(5) Disallowance of charitable deductions.--No gift or 
        bequest to an organization which is not exempt from tax by 
        reason of this subsection shall be allowed as a deduction under 
        section 170, 545(b)(2), 556(b)(2), 642(c), 2055, 2106(a)(2), or 
        2522.
            ``(6) Requirements supplement other requirements.--The 
        requirements of this subsection are in addition to, and not in 
        lieu of, the requirements otherwise applicable to an 
        organization described in paragraph (3) or (4) of subsection 
        (c).''
    (b) Reporting and Disclosure of Needs Assessment and Plan.--
            (1) Reporting.--
                    (A) Organizations described in section 501(c)(3).--
                Subsection (b) of section 6033 (relating to certain 
                organizations described in section 501(c)(3)) is 
                amended by striking ``and'' at the end of paragraph 
                (9), by redesignating paragraph (10) as paragraph (12), 
                and by inserting after paragraph (9) the following new 
                paragraphs:
            ``(10) in the case of an organization which prepares a plan 
        described in section 501(n)(1)(A) (relating to community 
        needs)--
                    ``(A) a copy of such plan for the year, and
                    ``(B) information on the implementation of such 
                plan for the year (including unrecovered costs and 
                revenues foregone in furtherance of such plan),
            ``(11) such information as the Secretary may require with 
        respect to any taxable inurement (as defined in section 
        4958(d)), and''.
                    (B) Organizations described in section 501(c)(4).--
                Section 6033 is amended by redesignating subsection (f) 
                as subsection (g) and by inserting after subsection (e) 
                the following new subsection:
    ``(f) Certain Organizations Described in Section 501(c)(4).--Every 
organization described in section 501(c)(4) which is subject to the 
requirements of subsection (a) and which prepares a plan described in 
section 501(n)(1)(A) (relating to community needs) for the year--
            ``(1) shall include a copy of such plan with the return 
        required under subsection (a) for the year, and
            ``(2) shall include on such return the information referred 
        to in paragraphs (10)(B) and (11) of subsection (b) with 
        respect to such organization.''
            (2) Disclosure.--
                    (A) In general.--Subsection (e) of section 6104 
                (relating to public inspection of certain annual 
                returns and applications for exemption) is amended by 
                adding at the end the following new paragraph:
            ``(3) Community health care needs assessment and plan.--
                    ``(A) In general.--Every organization which is 
                required to prepare a plan described in section 
                501(n)(1)(A) (relating to community needs)--
                            ``(i) shall make a copy of such plan (and 
                        the assessment on which such plan is based) 
                        available for inspection during regular 
                        business hours by any individual at the 
                        principal office of such organization and, if 
                        such organization regularly maintains 1 or more 
                        regional or district offices having 3 or more 
                        employees, at each such regional or district 
                        office, and
                            ``(ii) upon request of an individual made 
                        at such principal office or such a regional or 
                        district office, shall provide--
                                    ``(I) a copy of such plan (and 
                                assessment), and
                                    ``(II) a copy of the annual return 
                                filed under section 6033,
                        to such individual without charge other than a 
                        reasonable fee for any reproduction and mailing 
                        costs.
                If the request under clause (ii) is made in person, 
                such copies shall be provided immediately and, if made 
                other than in person, shall be provided within 30 days.
                    ``(B) Period of availability.--Subparagraph (A) 
                shall apply--
                            ``(i) with respect to any plan (and 
                        assessment) during the 3-year period after the 
                        close of the year for which such plan is 
                        prepared, and
                            ``(ii) with respect to any return, during 
                        the 3-year period beginning on the filing date 
                        (as defined in paragraph (1)(D)).
                    ``(C) Limitation.--Subparagraph (A)(ii) shall not 
                apply to any request if the Secretary determines, upon 
                application by an organization, that such request is 
                part of a harassment campaign and that compliance with 
                such request is not in the public interest.''
                    (B) Technical amendment.--The heading for 
                subsection (e) of section 6104 is amended by striking 
                ``and Applications for Exemption'' and inserting ``, 
                Applications for Exemption, and Community Needs 
                Assessment and Plan for Health and Outreach Services''.
    (c) Effective Dates.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall take effect on January 1, 
        1995.
            (2) HMO service requirement.--So much of the amendments 
        made by this section as relates to section 501(n)(2) of the 
        Internal Revenue Code of 1986, as added by this section, shall 
        take effect on the date of the enactment of this Act.

SEC. 7302. EXCISE TAXES FOR PRIVATE INUREMENT BY TAX-EXEMPT HEALTH CARE 
              ORGANIZATIONS.

    (a) In General.--Chapter 42 (relating to private foundations and 
certain other tax-exempt organizations) is amended by redesignating 
subchapter D as subchapter E and by inserting after subchapter C the 
following new subchapter:

      ``Subchapter D--Private Inurement by Tax-Exempt Health Care 
                             Organizations

                              ``Sec. 4958. Taxes on private inurement.
                              ``Sec. 4959. Other definitions.

``SEC. 4958. TAXES ON PRIVATE INUREMENT.

    ``(a) Initial Taxes.--
            ``(1) On the beneficiary.--There is hereby imposed on any 
        taxable inurement a tax equal to 25 percent of the amount 
        thereof. The tax imposed by this paragraph shall be paid by any 
        beneficiary of such inurement.
            ``(2) On the management.--In any case in which there is a 
        tax imposed by paragraph (1), there is hereby imposed on the 
        participation of any organization manager of an organization in 
        any taxable inurement which occurs with respect to such 
        organization, knowing that it is taxable inurement, a tax equal 
        to 2\1/2\ percent of the amount thereof, unless such 
        participation is not willful and is due to reasonable cause. 
        The tax imposed by this paragraph shall be paid by any 
        organization manager who participated in the taxable inurement.
    ``(b) Additional Taxes.--
            ``(1) On the beneficiary.--In any case in which an initial 
        tax is imposed by subsection (a)(1) on any taxable inurement 
        and such inurement is not corrected within the taxable period, 
        there is hereby imposed a tax equal to 200 percent of the 
        amount of the taxable inurement. The tax imposed by this 
        paragraph shall be paid by any beneficiary of such inurement.
            ``(2) On the management.--In any case in which an 
        additional tax is imposed by paragraph (1), if an organization 
        manager refused to agree to part or all of the correction, 
        there is hereby imposed a tax equal to 50 percent of the amount 
        of the taxable inurement. The tax imposed by this paragraph 
        shall be paid by any organization manager who refused to agree 
        to part or all of the correction.
    ``(c) Special Rules Relating to Liability for Tax.--For purposes of 
this section--
            ``(1) Joint and several liability.--If more than one person 
        is liable under any paragraph of subsection (a) or (b) with 
        respect to any one taxable inurement, all such persons shall be 
        jointly and severally liable under such paragraph with respect 
        to such inurement.
            ``(2) Limit for management.--With respect to any 1 taxable 
        inurement, the maximum amount of the tax imposed by subsection 
        (a)(2) shall not exceed $10,000, and the maximum amount of the 
        tax imposed by subsection (b)(2) shall not exceed $10,000.
    ``(d) Taxable Inurement.--For purposes of this section, the term 
`taxable inurement' means any inurement not permitted under paragraph 
(3) or (4) of section 501(c), as the case may be, in a transaction 
involving an applicable tax-exempt health care organization in which--
            ``(1) the value of any economic benefit provided to or for 
        the use of a disqualified person exceeds the value of the 
        consideration (including the performance of services) received 
        by the organization for providing such benefit, or
            ``(2) the amount of any economic benefit provided to or for 
        the use of a disqualified person is determined in whole or in 
        part by the gross or net revenues of 1 or more activities of 
        the organization.
The amount of any taxable inurement with respect to any such 
transaction shall be the excess described in paragraph (1) or the 
amount described in paragraph (2). For purposes of paragraph (1), an 
economic benefit shall not be treated as provided as consideration for 
the performance of services unless the organization clearly indicated 
its intent to so treat such benefit.
    ``(e) Other Definitions.--For purposes of this section--
            ``(1) Disqualified person.--The term `disqualified person' 
        means, with respect to any transaction--
                    ``(A) any person who was, at any time during the 5-
                year period ending on the date of such transaction--
                            ``(i) an organization manager, or
                            ``(ii) an individual (other than an 
                        organization manager)--
                                    ``(I) in a position to exercise 
                                substantial influence over the affairs 
                                of the organization, or
                                    ``(II) performing substantial 
                                medical services as a physician 
                                pursuant to an employment or other 
                                contractual relationship with the 
                                organization or a related organization,
                    ``(B) a member of the family of an individual 
                described in subparagraph (A), and
                    ``(C) a 35-percent controlled entity.
            ``(2) Organization manager.--The term `organization 
        manager' means, with respect to any applicable tax-exempt 
        health care organization, any officer, director, or trustee of 
        such organization (or any individual having powers or 
        responsibilities similar to those of officers, directors, or 
        trustees of the organization).
            ``(3) 35-percent controlled entity.--
                    ``(A) In general.--The term `35-percent controlled 
                entity' means--
                            ``(i) a corporation in which persons 
                        described in subparagraph (A) or (B) of 
                        paragraph (1) own more than 35 percent of the 
                        total combined voting power,
                            ``(ii) a partnership in which such persons 
                        own more than 35 percent of the profits 
                        interest, and
                            ``(iii) a trust or estate in which such 
                        persons own more than 35 percent of the 
                        beneficial interest.
                    ``(B) Constructive ownership rules.--Rules similar 
                to the rules of paragraphs (3) and (4) of section 
                4946(a) shall apply for purposes of this subsection.
            ``(4) Family members.--The members of an individual's 
        family shall be determined under section 4946(d); except that 
        such members also shall include the brothers and sisters 
        (whether by the whole or halfblood) of the individual and their 
        spouses.
    ``(f) Treatment of Previously Exempt Organizations.--
            ``(1) In general.--For purposes of this section, the status 
        of any organization as an applicable tax-exempt health care 
        organization shall be terminated only if--
                    ``(A)(i) such organization notifies the Secretary 
                (at such time and in such manner as the Secretary may 
                by regulations prescribe) of its intent to accomplish 
                such termination, or
                    ``(ii) there is a final determination by the 
                Secretary that such status has terminated, and
                    ``(B)(i) such organization pays the tax imposed by 
                paragraph (2) (or any portion not abated pursuant to 
                paragraph (3)), or
                    ``(ii) the entire amount of such tax is abated 
                pursuant to paragraph (3).
            ``(2) Imposition of tax.--There is hereby imposed on each 
        organization referred to in paragraph (1) a tax equal to the 
        lesser of--
                    ``(A) the amount which the organization 
                substantiates by adequate records or other 
                corroborating evidence as the aggregate tax benefit 
                resulting from its exemption from tax under section 
                501(a), or
                    ``(B) the value of the net assets of such 
                organization.
            ``(3) Abatement of tax.--The Secretary may abate the unpaid 
        portion of the assessment of any tax imposed by paragraph (2), 
        or any liability in respect thereof, if the applicable tax-
        exempt health care organization distributes all of its net 
        assets to 1 or more organizations each of which has been in 
        existence, and described in section 501(c)(3), for a continuous 
        period of at least 60 calendar months. If the distributing 
        organization is described in section 501(c)(4), the preceding 
        sentence shall be applied by treating the reference to section 
        501(c)(3) as including a reference to section 501(c)(4).
            ``(4) Certain rules made applicable.--Rules similar to the 
        rules of subsections (d), (e), and (f) of section 507 shall 
        apply for purposes of this subsection.

``SEC. 4959. OTHER DEFINITIONS.

    ``(a) Applicable Tax-Exempt Health Care Organization.--For purposes 
of this subchapter, the term `applicable tax-exempt health care 
organization' means any organization--
            ``(1) the predominant activity of which is the provision of 
        health care services (as defined in section 501(n)(3)), and
            ``(2) which (without regard to any taxable inurement) would 
        be described in paragraph (3) or (4) of section 501(c) and 
        exempt from tax under section 501(a).
Such term does not include a private foundation (as defined in section 
509(a)).
    ``(b) Taxable Period; Correction.--For purposes of this 
subchapter--
            ``(1) Taxable period.--The term `taxable period' means, 
        with respect to any taxable inurement, the period beginning 
        with the date on which the inurement occurs and ending on the 
        earliest of--
                    ``(A) the date of mailing a notice of deficiency 
                under section 6212 with respect to the tax imposed by 
                subsection (a)(1) of section 4958, or
                    ``(B) the date on which the tax imposed by such 
                subsection (a)(1) is assessed.
            ``(2) Correction.--The terms `correction' and `correct' 
        mean, with respect to any taxable inurement, undoing the 
        inurement to the extent possible, establishing safeguards to 
        prevent future such inurement, and where fully undoing the 
        inurement is not possible, such additional corrective action as 
        is prescribed by the Secretary by regulations.''
    (b) Application of Private Inurement Rule to Tax-Exempt Health Care 
Organizations Described in Section 501(c)(4).--Paragraph (4) of section 
501(c) is amended by inserting ``(A)'' after ``(4)'' and by adding at 
the end the following:
            ``(B) Subparagraph (A) shall not apply to an entity the 
        predominant activity of which is the provision of health care 
        services (as defined in subsection (n)(3)) unless no part of 
        the net earnings of such entity inures to the benefit of any 
        private shareholder or individual.''
    (c) Technical and Conforming Amendments.--
            (1) Subsection (e) of section 4955 is amended--
                    (A) by striking ``Section 4945'' in the heading and 
                inserting ``Sections 4945 and 4958'', and
                    (B) by inserting before the period ``or a taxable 
                inurement for purposes of section 4958''.
            (2) Subsections (a), (b), and (c) of section 4963 are each 
        amended by inserting ``4958,'' after ``4955,''.
            (3) Subsection (e) of section 6213 is amended by inserting 
        ``4958 (relating to private inurement),'' before ``4971''.
            (4) Paragraphs (2) and (3) of section 7422(g) are each 
        amended by inserting ``4958,'' after ``4955,''.
            (5) Subsection (b) of section 7454 is amended by inserting 
        ``or whether an organization manager (as defined in section 
        4958(f)) has `knowingly' participated in taxable inurement (as 
        defined in section 4958(d)),'' after ``section 4912(b),''.
            (6) The table of subchapters for chapter 42 is amended by 
        striking the last item and inserting the following:

                              ``Subchapter D. Private inurement by tax-
                                        exempt health care 
                                        organizations.
                              ``Subchapter E. Abatement of first and 
                                        second tier taxes in certain 
                                        cases.''
    (d) Effective Dates.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to inurement 
        occurring on or after June 30, 1994.
            (2) Application of binding contract rule to tax-exempt 
        health care organizations described in section 501(c)(4).--The 
        amendments made by this section shall not apply to any 
        inurement involving an organization described in section 
        501(c)(4) of the Internal Revenue Code of 1986 occurring before 
        July 1, 1996, pursuant to a written contract which was binding 
        on June 29, 1994, and at all times thereafter before such 
        inurement occurred.

SEC. 7303. TREATMENT OF HEALTH MAINTENANCE ORGANIZATIONS, PARENT 
              ORGANIZATIONS, AND HEALTH INSURANCE PURCHASING 
              COOPERATIVES.

    (a) Insurance Provided by Health Maintenance Organizations.--
            (1) In general.--Section 501(m) (relating to certain 
        organizations providing commercial-type insurance not exempt 
        from tax) is amended by adding at the end the following new 
        paragraph:
            ``(6) Certain activities provided by health maintenance 
        organizations not treated as commercial-type insurance.--For 
        purposes of this subsection, the provision of (or the arranging 
        for the provision of) medical care on a prepaid basis by a 
        health maintenance organization shall not be treated as 
        providing commercial-type insurance if (and only if) such care 
        is--
                    ``(A) care provided by such organization to its 
                members at its own facilities through health care 
                professionals who do not provide substantial health 
                care services other than on behalf of such 
                organization,
                    ``(B) care provided by a health care professional 
                to a member of such organization on a basis under which 
                substantially all of the risks of the rates of 
                utilization is assumed by the provider of such care,
                    ``(C) care (other than primary care) provided to a 
                member of such organization pursuant to a referral by 
                such organization, or
                    ``(D) emergency care provided to a member of such 
                organization at a location outside such member's area 
                of residence.''
            (2) Technical amendments.--
                    (A) Paragraph (3) of section 501(m) is amended by 
                striking subparagraph (B) and by redesignating 
                subparagraphs (C), (D), and (E) as subparagraphs (B), 
                (C), and (D), respectively.
                    (B) Paragraph (5) of section 501(m) is amended by 
                striking ``paragraph (3)(E)'' and inserting ``paragraph 
                (3)(D)''.
    (b) Treatment of Parent Organizations of Health Care Providers.--
Section 509(a) (defining private foundation) is amended by striking 
``and'' at the end of paragraph (3), by redesignating paragraph (4) as 
paragraph (5), and by inserting after paragraph (3) the following new 
paragraph:
            ``(4) an organization which is organized and operated for 
        the benefit of, and which directly or indirectly controls, an 
        organization described in section 170(b)(1)(A)(iii), and''.
    (c) Purchasing Cooperatives Exempt From Tax.--
            (1) In general.--Subsection (c) of section 501 (relating to 
        exemption from tax on corporations, certain trusts, etc.) is 
        amended by adding at the end the following new paragraph:
            ``(26)(A) Any health insurance purchasing cooperative 
        described in section 1013(12) of the Health Security Act.
            ``(B) Such a cooperative shall not be exempt from tax 
        pursuant to any provision other than this paragraph.
            ``(C) Such a cooperative shall not be exempt from tax 
        unless--
                    ``(i) no part of the net earnings of such 
                cooperative inures to the benefit of any private 
                shareholder or individual,
                    ``(ii) no substantial part of the activities of 
                such cooperative is carrying on propaganda, or 
                otherwise attempting, to influence legislation (except 
                as otherwise provided in subsection (h)), and
                    ``(iii) such cooperative does not participate in, 
                or intervene in (including the publishing or 
                distributing of statements), any political campaign on 
                behalf of (or in opposition to) any candidate for 
                public office.''
            (2) Certain provisions applicable to organizations 
        described in section 501(c)(3) made applicable to purchasing 
        cooperatives.--Section 501 is amended by redesignating 
        subsection (o) as subsection (p) and by inserting after 
        subsection (n) the following new subsection:
    ``(o) Certain Provisions Made Applicable to Health Insurance 
Purchasing Cooperatives.--A health insurance purchasing cooperative 
described in subsection (c)(26) shall be treated--
            ``(1) as described in subsection (c)(3) for purposes of 
        applying subsection (h) (relating to expenditures by public 
        charities to influence legislation), section 4955 (relating to 
        taxes on political expenditures of section 501(c)(3) 
        organizations), and section 4958 (relating to private 
        inurement), and
            ``(2) as described in subsection (h)(4).''
    (d) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 7304. TAX TREATMENT OF TAXABLE ORGANIZATIONS PROVIDING HEALTH 
              INSURANCE AND OTHER PREPAID HEALTH CARE SERVICES.

    (a) General Rule.--Section 831 is amended by redesignating 
subsection (c) as subsection (d) and by inserting after subsection (b) 
the following new subsection:
    ``(c) Treatment of Organizations Providing Health Insurance and 
Other Prepaid Health Care Services.--
            ``(1) General rule.--Any organization to which this 
        subsection applies shall be taxable under this part in the same 
        manner as if it were an insurance company other than a life 
        insurance company.
            ``(2) Organizations to which subsection applies.--This 
        subsection shall apply to any organization--
                    ``(A) which is not exempt from taxation under this 
                subtitle,
                    ``(B) which is not taxable as a life insurance 
                company under part I of this subchapter, and
                    ``(C) the primary and predominant business activity 
                of which during the taxable year consists of 1 or more 
                of the following:
                            ``(i) Issuing accident and health insurance 
                        contracts or the reinsuring of risks undertaken 
                        by other insurance companies under such 
                        contracts.
                            ``(ii) Operating as a health maintenance 
                        organization.
                            ``(iii) Entering into arrangements under 
                        which--
                                    ``(I) fixed payments or premiums 
                                are received as consideration for the 
                                organization's agreement to provide or 
                                arrange for the provision of health 
                                care services, regardless of how the 
                                health care services are provided or 
                                arranged to be provided, and
                                    ``(II) substantially all of the 
                                risks of the rates of utilization of 
                                such services is assumed by such 
                                organization or the provider of such 
                                services.
        In the case of an organization which has as a material business 
        activity the issuing of accident and health insurance contracts 
        or the reinsuring of risks undertaken by other insurance 
        companies under such contracts, the administering of accident 
        and health insurance contracts by such organization shall be 
        treated as part of such business activity for purposes of 
        subparagraph (C)(i).''
    (b) Effective Date.--
            (1) In general.--The amendment made by this section shall 
        apply to taxable years beginning after December 31, 1994.
            (2) Transitional rules.--
                    (A) Organizations to which paragraph applies.--This 
                paragraph shall apply to any organization to which 
                section 831(c) of the Internal Revenue Code of 1986 (as 
                added by subsection (a)) applies for such 
                organization's first taxable year beginning after 
                December 31, 1994; except that this paragraph shall not 
                apply if such organization treated itself as an 
                insurance company taxable under part II of subchapter L 
                of chapter 1 of such Code on its original Federal 
                income tax return for its taxable year beginning in 
                1992 and for all of its taxable years thereafter 
                beginning before January 1, 1995.
                    (B) Treatment of currently taxable companies.--
                Except as provided in regulations prescribed by the 
                Secretary of the Treasury or his delegate, in the case 
                of any organization to which this paragraph applies--
                            (i) the amendments made by this section 
                        shall be treated as a change in the method of 
                        accounting, and
                            (ii) all adjustments required to be taken 
                        into account under section 481 of the Internal 
                        Revenue Code of 1986 shall be taken into 
                        account for such company's first taxable year 
                        beginning after December 31, 1994.
                    (C) Treatment of currently tax-exempt companies.--
                Except as provided in regulations prescribed by the 
                Secretary of the Treasury or his delegates, in the case 
                of any organization to which this paragraph applies and 
                which was exempt from tax under chapter 1 of the 
                Internal Revenue Code of 1986 for such organization's 
                last taxable year beginning before January 1, 1995--
                            (i) no adjustment shall be made under 
                        section 481 (or any other provision) of such 
                        Code on account of a change in its method of 
                        accounting required by this section for its 
                        first taxable year beginning after December 31, 
                        1994, and
                            (ii) for purposes of determining gain or 
                        loss, the adjusted basis of any asset held by 
                        such organization on the first day of such 
                        taxable year shall be treated as equal to its 
                        fair market value as of such day.

SEC. 7305. REPEAL OF SECTION 833.

    (a) Repeal of Section 833.--
            (1) In general.--Section 833 (relating to treatment of Blue 
        Cross and Blue Shield and similar organizations) is hereby 
        repealed.
            (2) Conforming amendments.--
                    (A) Section 56(c) is amended by striking paragraph 
                (3).
                    (B) The table of sections for part II of subchapter 
                L of chapter 1 is amended by striking the item relating 
                to section 833.
    (b) Application of Section 833 Prior to Repeal.--
            (1) In general.--Section 833(c) (relating to organization 
        to which section applies) is amended by adding at the end the 
        following new paragraph:
            ``(4) Treatment as existing blue cross or blue shield 
        organization.--
                    ``(A) In general.--Paragraph (2) shall be applied 
                to an organization described in subparagraph (B) as if 
                it were a Blue Cross or Blue Shield organization.
                    ``(B) Applicable organization.--An organization is 
                described in this subparagraph if it--
                            ``(i) is organized and governed by State 
                        laws which are specifically and exclusively 
                        applicable to not-for-profit insurance or 
                        health-service type organizations, and
                            ``(ii) is not a Blue Cross or Blue Shield 
                        organization or health maintenance 
                        organization.''
            (2) Effective date.--The amendment made by this section 
        shall apply to taxable years beginning after December 31, 1986.
    (c) Effective Date of Repeal.--
            (1) In general.--Except as otherwise provided in this 
        subsection, the amendments made by subsection (a) shall apply 
        to taxable years beginning after December 31, 1996.
            (2) Transition rules for blue cross and blue shield and 
        similar organizations.--
                    (A) Prior fresh start preserved.--The adjusted 
                basis of any asset determined under section 
                1012(c)(3)(A)(ii) of the Tax Reform Act of 1986 shall 
                not be affected by the amendments made by this section.
                    (B) Recoupment of prior reserve benefit.--In the 
                case of any organization entitled to the benefits of 
                section 833(a)(3) of the Internal Revenue Code of 1986 
                (as in effect after the amendment made by subsection 
                (a)) for such organization's last taxable year 
                beginning before January 1, 1997, the amount determined 
                under paragraph (4) of section 832(b) of such Code for 
                each of such organization's first 6 taxable years 
                beginning after December 31, 1996, shall be increased 
                by an amount equal to 3\1/3\ percent of its unearned 
                premiums on outstanding business as of the close of 
                such organization's last taxable year beginning before 
                January 1, 1997.

SEC. 7306. TAX EXEMPTION FOR HIGH-RISK INSURANCE POOLS.

    Subsection (c) of section 501 (relating to list of exempt 
organizations) is amended by adding at the end the following new 
paragraph:
    ``(27)(A) In the case of taxable years beginning after December 31, 
1989, and before January 1, 1997, a qualified high risk health 
insurance pool.
    ``(B) For purposes of subparagraph (A), the term `qualified high 
risk health insurance pool' means an entity--
            ``(i) which was established by a State or political 
        subdivision thereof to provide health insurance on a nonprofit 
        basis to persons unable to obtain health insurance because of 
        health conditions,
            ``(ii) with respect to which the State or political 
        subdivision--
                    ``(I) participates in the ongoing governance of the 
                entity, and
                    ``(II) subsidizes the operation of the entity, and
            ``(iii) no part of the net earnings of which inure to the 
        benefit of any private shareholder, member, or individual.''

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

SEC. 748. TAX TREATMENT OF 501(C)(3) BONDS SIMILAR TO GOVERNMENTAL 
              BONDS.

    (a) In General.--Subsection (a) of section 150 (relating to 
definitions and special rules) is amended by striking paragraphs (2) 
and (4), by redesignating paragraphs (5) and (6) as paragraphs (4) and 
(5), respectively, and by inserting after paragraph (1) the following 
new paragraph:
            ``(2) Exempt person.--
                    ``(A) In general.--The term `exempt person' means--
                            ``(i) a governmental unit, or
                            ``(ii) a 501(c)(3) organization, but only 
                        with respect to its activities which do not 
                        constitute unrelated trades or businesses as 
                        determined by applying section 513(a).
                    ``(B) Governmental unit not to include federal 
                government.--The term `governmental unit' does not 
                include the United States or any agency or 
                instrumentality thereof.
                    ``(C) 501(c)(3) organization.--The term `501(c)(3) 
                organization' means any organization described in 
                section 501(c)(3) and exempt from tax under section 
                501(a).''
    (b) Repeal of Qualified 501(c)(3) Bond Designation.--Section 145 
(relating to qualified 501(c)(3) bonds) is repealed.
    (c) Conforming Amendments.--
            (1) Paragraph (3) of section 141(b) is amended--
                    (A) by striking ``government use'' in subparagraph 
                (A)(ii)(I) and subparagraph (B)(ii) and inserting 
                ``exempt person use'',
                    (B) by striking ``a government use'' in 
                subparagraph (B) and inserting ``an exempt person 
                use'',
                    (C) by striking ``related business use'' in 
                subparagraph (A)(ii)(II) and subparagraph (B) and 
                inserting ``related private business use'',
                    (D) by striking ``related business use'' in the 
                heading of subparagraph (B) and inserting ``related 
                private business use'', and
                    (E) by striking ``government use'' in the heading 
                thereof and inserting ``exempt person use''.
            (2) Subparagraph (A) of section 141(b)(6) is amended by 
        striking ``a governmental unit'' and inserting ``an exempt 
        person''.
            (3) Paragraph (7) of section 141(b) is amended--
                    (A) by striking ``government use'' and inserting 
                ``exempt person use'', and
                    (B) by striking ``Government use'' in the heading 
                thereof and inserting ``Exempt person use''.
            (4) Section 141(b) is amended by striking paragraph (9).
            (5) Paragraph (1) of section 141(c) is amended by striking 
        ``governmental units'' and inserting ``exempt persons''.
            (6) Section 141 is amended by redesignating subsection (e) 
        as subsection (f) and by inserting after subsection (d) the 
        following new subsection:
    ``(e) Certain Issues Used To Provide Residential Rental Housing for 
Family Units.--
            ``(1) In general.--Except as provided in paragraph (2), for 
        purposes of this title, the term `private activity bond' 
        includes any bond issued as part of an issue if any portion of 
        the net proceeds of the issue are to be used (directly or 
        indirectly) by an exempt person described in section 
        150(a)(2)(A)(ii) to provide residential rental property for 
        family units. This paragraph shall not apply if the bond would 
        not be a private activity bond if the section 501(c)(3) 
        organization were not an exempt person.
            ``(2) Exception for bonds used to provide qualified 
        residential rental projects.--Paragraph (1) shall not apply to 
        any bond issued as part of an issue if the portion of such 
        issue which is to be used as described in paragraph (1) is to 
        be used to provide--
                    ``(A) a residential rental property for family 
                units if the first use of such property is pursuant to 
                such issue,
                    ``(B) qualified residential rental projects (as 
                defined in section 142(d)), or
                    ``(C) property which is to be substantially 
                rehabilitated in a rehabilitation beginning within the 
                2-year period ending 1 year after the date of the 
                acquisition of such property.
            ``(3) Substantial rehabilitation.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), rules similar to the rules of section 
                47(c)(1)(C) shall apply in determining for purposes of 
                paragraph (2)(C) whether property is substantially 
                rehabilitated.
                    ``(B) Exception.--For purposes of subparagraph (A), 
                clause (ii) of section 47(c)(1)(C) shall not apply, but 
                the Secretary may extend the 24-month period in section 
                47(c)(1)(C)(i) where appropriate due to circumstances 
                not within the control of the owner.
            ``(4) Certain property treated as new property.--Solely for 
        purposes of determining under paragraph (2)(A) whether the 1st 
        use of property is pursuant to tax-exempt financing--
                    ``(A) In general.--If--
                            ``(i) the 1st use of property is pursuant 
                        to taxable financing,
                            ``(ii) there was a reasonable expectation 
                        (at the time such taxable financing was 
                        provided) that such financing would be replaced 
                        by tax-exempt financing, and
                            ``(iii) the taxable financing is in fact so 
                        replaced within a reasonable period after the 
                        taxable financing was provided,
                then the 1st use of such property shall be treated as 
                being pursuant to the tax-exempt financing.
                    ``(B) Special rule where no operating state or 
                local program for tax-exempt financing.--If, at the 
                time of the 1st use of property, there was no operating 
                State or local program for tax-exempt financing of the 
                property, the 1st use of the property shall be treated 
                as pursuant to the 1st tax-exempt financing of the 
                property.
                    ``(C) Definitions.--For purposes of this paragraph:
                            ``(i) Tax-exempt financing.--The term `tax-
                        exempt financing' means financing provided by 
                        tax-exempt bonds.
                            ``(ii) Taxable financing.--The term 
                        `taxable financing' means financing which is 
                        not tax-exempt financing.''
            (7) Section 141(f), as redesignated by paragraph (6), is 
        amended--
                    (A) by adding ``or'' at the end of subparagraph 
                (E),
                    (B) by striking ``, or'' at the end of subparagraph 
                (F), and inserting in lieu thereof a period, and
                    (C) by striking subparagraph (G).
            (8) The last sentence of section 144(b)(1) is amended by 
        striking ``(determined'' and all that follows to the period.
            (9) Clause (ii) of section 144(c)(2)(C) is amended by 
        striking ``a governmental unit'' and inserting ``an exempt 
        person''.
            (10) Section 146(g) is amended--
                    (A) by striking paragraph (2), and
                    (B) by redesignating the remaining paragraphs after 
                paragraph (1) as paragraphs (2) and (3), respectively.
            (11) The heading of section 146(k)(3) is amended by 
        striking ``governmental'' and inserting ``exempt person''.
            (12) The heading of section 146(m) is amended by striking 
        ``Government'' and inserting ``Exempt Person''.
            (13) Subsection (h) of section 147 is amended to read as 
        follows:
    ``(h) Certain Rules Not To Apply to Mortgage Revenue Bonds and 
Qualified Student Loan Bonds.--Subsections (a), (b), (c), and (d) shall 
not apply to any qualified mortgage bond, qualified veterans' mortgage 
bond, or qualified student loan bond.''
            (14) Section 147 is amended by striking paragraph (4) of 
        subsection (b) and redesignating paragraph (5) of such 
        subsection as paragraph (4).
            (15) Subparagraph (F) of section 148(d)(3) is amended--
                    (A) by striking ``or which is a qualified 501(c)(3) 
                bond'', and
                    (B) by striking ``governmental use bonds and 
                qualified 501(c)(3)'' in the heading thereof and 
                inserting ``exempt person''.
            (16) Subclause (II) of section 148(f)(4)(B)(ii) is amended 
        by striking ``(other than a qualified 501(c)(3) bond)''.
            (17) Clause (iv) of section 148(f)(4)(C) is amended--
                    (A) by striking ``a governmental unit or a 
                501(c)(3) organization'' each place it appears and 
                inserting ``an exempt person'',
                    (B) by striking ``qualified 501(c)(3) bonds,'', and
                    (C) by striking the comma after ``private activity 
                bonds'' the first place it appears.
            (18) Subparagraph (A) of section 148(f)(7) is amended by 
        striking ``(other than a qualified 501(c)(3) bond)''.
            (19) Paragraph (2) of section 149(d) is amended--
                    (A) by striking ``(other than a qualified 501(c)(3) 
                bond)'', and
                    (B) by striking ``Certain private'' in the heading 
                thereof and inserting ``Private''.
            (20) Section 149(e)(2) is amended--
                    (A) by striking ``which is not a private activity 
                bond'' in the second sentence and inserting ``which is 
                a bond issued for an exempt person described in section 
                150(a)(2)(A)(i)'', and
                    (B) by adding at the end the following new 
                sentence: ``Subparagraph (D) shall not apply to any 
                bond which is not a private activity bond but which 
                would be such a bond if the 501(c)(3) organization 
                using the proceeds thereof were not an exempt person.''
            (21) The heading of subsection (b) of section 150 is 
        amended by striking ``Tax-Exempt Private Activity Bonds'' and 
        inserting ``Certain Tax-Exempt Bonds''.
            (22) Paragraph (3) of section 150(b) is amended--
                    (A) by inserting ``owned by a 501(c)(3) 
                organization'' after ``any facility'' in subparagraph 
                (A),
                    (B) by striking ``any private activity bond which, 
                when issued, purported to be a tax-exempt qualified 
                501(c)(3) bond'' in subparagraph (A) and inserting 
                ``any bond which, when issued, purported to be a tax-
                exempt bond, and which would be a private activity bond 
                if the 501(c)(3) organization using the proceeds 
                thereof were not an exempt person'', and
                    (C) by striking the heading thereof and inserting 
                ``Bonds for exempt persons other than governmental 
                units.--''.
            (23) Paragraph (5) of section 150(b) is amended--
                    (A) by striking ``private activity'' in 
                subparagraph (A),
                    (B) by inserting ``and which would be a private 
                activity bond if the 501(c)(3) organization using the 
                proceeds thereof were not an exempt person'' after 
                ``tax-exempt bond'' in subparagraph (A),
                    (C) by striking subparagraph (B) and inserting the 
                following new subparagraph:
                    ``(B) such facility is required to be owned by an 
                exempt person, and'', and
                    (D) by striking ``governmental units or 501(c)(3) 
                organizations'' in the heading thereof and inserting 
                ``exempt persons''.
            (24) Section 150 is amended by adding at the end the 
        following new subsection:
    ``(f) Certain Rules To Apply to Bonds for Exempt Persons Other Than 
Governmental Units.--
            ``(1) In general.--Nothing in section 103(a) or any other 
        provision of law shall be construed to provide an exemption 
        from Federal income tax for interest on any bond which would be 
        a private activity bond if the 501(c)(3) organization using the 
        proceeds thereof were not an exempt person unless such bond 
        satisfies the requirements of subsections (b) and (f) of 
        section 147.
            ``(2) Special rule for pooled financing of 501(c)(3) 
        organization.--
                    ``(A) In general.--At the election of the issuer, a 
                bond described in paragraph (1) shall be treated as 
                meeting the requirements of section 147(b) if such bond 
                meets the requirements of subparagraph (B).
                    ``(B) Requirements.--A bond meets the requirements 
                of this subparagraph if--
                            ``(i) 95 percent or more of the net 
                        proceeds of the issue of which such bond is a 
                        part are to be used to make or finance loans to 
                        2 or more 501(c)(3) organizations or 
                        governmental units for acquisition of property 
                        to be used by such organizations,
                            ``(ii) each loan described in clause (i) 
                        satisfies the requirements of section 147(b) 
                        (determined by treating each loan as a separate 
                        issue),
                            ``(iii) before such bond is issued, a 
                        demand survey was conducted which shows a 
                        demand for financing greater than an amount 
                        equal to 120 percent of the lendable proceeds 
                        of such issue, and
                            ``(iv) 95 percent or more of the net 
                        proceeds of such issue are to be loaned to 
                        501(c)(3) organizations or governmental units 
                        within 1 year of issuance and, to the extent 
                        there are any unspent proceeds after such 1-
                        year period, bonds issued as part of such issue 
                        are to be redeemed as soon as possible 
                        thereafter (and in no event later than 18 
                        months after issuance).
                A bond shall not meet the requirements of this 
                subparagraph if the maturity date of any bond issued as 
                part of such issue is more than 30 years after the date 
                on which the bond was issued (or, in the case of a 
                refunding or series of refundings, the date on which 
                the original bond was issued).''
            (25) Section 1302 of the Tax Reform Act of 1986 is 
        repealed.
            (26) Subparagraph (C) of section 57(a)(5) is amended by 
        striking clause (ii) and redesignating clauses (iii) and (iv) 
        as clauses (ii) and (iii), respectively.
            (27) Paragraph (3) of section 103(b) is amended by 
        inserting ``and section 150(f)'' after ``section 149''.
            (28) Paragraph (3) of section 265(b) is amended--
                    (A) by striking clause (ii) of subparagraph (B) and 
                inserting the following:
                            ``(ii) Certain bonds not treated as private 
                        activity bonds.--For purposes of clause 
                        (i)(II), there shall not be treated as a 
                        private activity bond any obligation issued to 
                        refund (or which is part of a series of 
                        obligations issued to refund) an obligation 
                        issued before August 8, 1986, which was not an 
                        industrial development bond (as defined in 
                        section 103(b)(2) as in effect on the day 
                        before the date of the enactment of the Tax 
                        Reform Act of 1986) or a private loan bond (as 
                        defined in section 103(o)(2)(A), as so in 
                        effect, but without regard to any exemption 
                        from such definition other than section 
                        103(o)(2)(A)).''; and
                    (B) by striking ``(other than a qualified 501(c)(3) 
                bond, as defined in section 145)'' in subparagraph 
                (C)(ii)(I).
    (d) Effective Date.--The amendments made by this section shall 
apply to bonds (including refunding bonds) issued after December 31, 
1994.

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

SEC. 7401. QUALIFIED LONG-TERM CARE SERVICES TREATED AS MEDICAL CARE.

    (a) General Rule.--Paragraph (1) of section 213(d) (defining 
medical care) is amended by striking ``or'' at the end of subparagraph 
(B), by redesignating subparagraph (C) as subparagraph (D), and by 
inserting after subparagraph (B) the following new subparagraph:
                    ``(C) for qualified long-term care services (as 
                defined in subsection (g)), or''.
    (b) Qualified Long-Term Care Services Defined.--Section 213 
(relating to the deduction for medical, dental, etc., expenses) is 
amended by adding at the end the following new subsection:
    ``(g) Qualified Long-Term Care Services.--For purposes of this 
section--
            ``(1) In general.--The term `qualified long-term care 
        services' means necessary diagnostic, curing, mitigating, 
        treating, preventive, therapeutic, and rehabilitative services, 
        and maintenance and personal care services (whether performed 
        in a residential or nonresidential setting) which--
                    ``(A) are required by an individual during any 
                period the individual is an incapacitated individual 
                (as defined in paragraph (2)),
                    ``(B) have as their primary purpose--
                            ``(i) the provision of needed assistance 
                        with 1 or more activities of daily living (as 
                        defined in paragraph (3)), or
                            ``(ii) protection from threats to health 
                        and safety due to severe cognitive impairment, 
                        and
                    ``(C) are provided pursuant to a continuing plan of 
                care prescribed by a licensed professional (as defined 
                in paragraph (4)).
            ``(2) Incapacitated individual.--The term `incapacitated 
        individual' means any individual who--
                    ``(A) is unable to perform, without substantial 
                assistance from another individual (including 
                assistance involving cueing or substantial 
                supervision), at least 2 activities of daily living as 
                defined in paragraph (3), or
                    ``(B) has severe cognitive impairment as defined by 
                the Secretary in consultation with the Secretary of 
                Health and Human Services.
        Such term shall not include any individual otherwise meeting 
        the requirements of the preceding sentence unless a licensed 
        professional within the preceding 12-month period has certified 
        that such individual meets such requirements.
            ``(3) Activities of daily living.--Each of the following is 
        an activity of daily living:
                    ``(A) Eating.
                    ``(B) Toileting.
                    ``(C) Transferring.
                    ``(D) Bathing.
                    ``(E) Dressing.
            ``(4) Licensed professional.--The term `licensed 
        professional' means--
                    ``(A) a physician or registered professional nurse, 
                or
                    ``(B) any other individual who meets such 
                requirements as may be prescribed by the Secretary 
                after consultation with the Secretary of Health and 
                Human Services.
            ``(5) Certain services not included.--The term `qualified 
        long-term care services' shall not include any services 
        provided to an individual--
                    ``(A) by a relative (directly or through a 
                partnership, corporation, or other entity) unless the 
                relative is a licensed professional with respect to 
                such services, or
                    ``(B) by a corporation or partnership which is 
                related (within the meaning of section 267(b) or 
                707(b)) to the individual.
        For purposes of this paragraph, the term `relative' means an 
        individual bearing a relationship to the individual which is 
        described in paragraphs (1) through (8) of section 152(a).''
    (c) Technical Amendments.--
            (1) Subparagraph (D) of section 213(d)(1) (as redesignated 
        by subsection (a)) is amended to read as follows:
                    ``(D) for insurance (including amounts paid as 
                premiums under part B of title XVIII of the Social 
                Security Act, relating to supplementary medical 
                insurance for the aged) covering medical care referred 
                to in--
                            ``(i) subparagraphs (A) and (B), or
                            ``(ii) subparagraph (C), but only if such 
                        insurance is provided under a qualified long-
                        term care insurance policy (as defined in 
                        section 7702B(b)) and the amount paid for such 
                        insurance is not disallowed under section 
                        7702B(d)(4).''
            (2) Paragraph (6) of section 213(d) is amended--
                    (A) by striking ``subparagraphs (A) and (B)'' and 
                inserting ``subparagraph (A), (B), and (C)'', and
                    (B) by striking ``paragraph (1)(C)'' in 
                subparagraph (A) and inserting ``paragraph (1)(D)''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1995.

SEC. 7402. TREATMENT OF LONG-TERM CARE INSURANCE.

    (a) General Rule.--Chapter 79 (relating to definitions) is amended 
by inserting after section 7702A the following new section:

``SEC. 7702B. TREATMENT OF LONG-TERM CARE INSURANCE.

    ``(a) In General.--For purposes of this title--
            ``(1) a qualified long-term care insurance policy (as 
        defined in subsection (b)) shall be treated as an accident or 
        health insurance contract,
            ``(2) amounts (other than policyholder dividends (as 
        defined in section 808) or premium refunds) received under a 
        qualified long-term care insurance policy shall be treated as 
        amounts received for personal injuries and sickness and shall 
        be treated as reimbursement for expenses actually incurred for 
        medical care (as defined in section 213(d)),
            ``(3) any plan of an employer providing coverage under a 
        qualified long-term care insurance policy shall be treated as 
        an accident or health plan with respect to such coverage,
            ``(4) except as provided in subsection (d)(4), amounts paid 
        for a qualified long-term care insurance policy providing the 
        benefits described in subsection (b)(6)(B) shall be treated as 
        payments made for insurance for purposes of section 
        213(d)(1)(D), and
            ``(5) a qualified long-term care insurance policy shall be 
        treated as a guaranteed renewable contract subject to the rules 
        of section 816(e).
    ``(b) Qualified Long-Term Care Insurance Policy.--For purposes of 
this title:
            ``(1) In general.--The term `qualified long-term care 
        insurance policy' means any certified long-term care policy (as 
        defined in section 1011(4)(A)) of the Health Security Act) 
        that--
                    ``(A) limits benefits under such policy to 
                individuals who are certified by a licensed 
                professional (as defined in section 213(g)(4)) within 
                the preceding 12-month period--
                            ``(i) as being unable to perform, without 
                        substantial assistance from another individual 
                        (including assistance involving cueing or 
                        substantial supervision), 2 or more activities 
                        of daily living (as defined in section 
                        213(g)(3)), or
                            ``(ii) having a severe cognitive impairment 
                        (as defined in section 213(g)(2)(B)), and
                    ``(B) satisfies the requirements of paragraphs (2), 
                (3), (4), (5), and (6).
            ``(2) Premium requirements.--The requirements of this 
        paragraph are met with respect to a policy if such policy 
        provides that premium payments may not be made earlier than the 
        date such payments would have been made if the contract 
        provided for level annual payments over the life expectancy of 
        the insured or 20 years, whichever is shorter. A policy shall 
        not be treated as failing to meet the requirements of the 
        preceding sentence solely by reason of a provision in the 
        policy providing for a waiver of premiums if the insured 
        becomes an individual certified in accordance with paragraph 
        (1)(A).
            ``(3) Prohibition of cash value.--The requirements of this 
        paragraph are met if the policy does not provide for a cash 
        value or other money that can be paid, assigned, pledged as 
        collateral for a loan, or borrowed, other than as provided in 
        paragraph (4).
            ``(4) Refunds of premiums and dividends.--The requirements 
        of this paragraph are met with respect to a policy if such 
        policy provides that--
                    ``(A) policyholder dividends are required to be 
                applied as a reduction in future premiums or, to the 
                extent permitted under paragraph (6), to increase 
                benefits described in subsection (a)(2),
                    ``(B) refunds of premiums upon a partial surrender 
                or a partial cancellation are required to be applied as 
                a reduction in future premiums, and
                    ``(C) any refund on the death of the insured, or on 
                a complete surrender or cancellation of the policy, 
                cannot exceed the aggregate premiums paid under the 
                contract.
        Any refund on a complete surrender or cancellation of the 
        policy shall be includible in gross income to the extent that 
        any deduction or exclusion was allowable with respect to the 
        premiums.
            ``(5) Coordination with other entitlements.--The 
        requirements of this paragraph are met with respect to a policy 
        if such policy does not pay, or provide reimbursement for, 
        expenses incurred to the extent that such expenses are also 
        paid or reimbursed under title XVIII of the Social Security Act 
        or are paid or reimbursed under a certified standard health 
        plan (as defined in section 1011(2)(A)) of the Health Security 
        Act).
            ``(6) Maximum benefit.--
                    ``(A) In general.--The requirements of this 
                paragraph are met if the benefits payable under the 
                policy for any period (whether on a periodic basis or 
                otherwise) may not exceed the dollar amount in effect 
                for such period.
                    ``(B) Nonreimbursement payments permitted.--
                Benefits shall include all payments described in 
                subsection (a)(2) to or on behalf of an insured 
                individual without regard to the expenses incurred 
                during the period to which the payments relate. For 
                purposes of section 213(a), such payments shall be 
                treated as compensation for expenses paid for medical 
                care.
                    ``(C) Dollar amount.--The dollar amount in effect 
                under this paragraph shall be $150 per day (or the 
                equivalent amount within the calendar year in the case 
                of payments on other than a per diem basis).
                    ``(D) Adjustments for increased costs.--
                            ``(i) In general.--In the case of any 
                        calendar year after 1996, the dollar amount in 
                        effect under subparagraph (C) for any period or 
                        portion thereof occurring during such calendar 
                        year shall be equal to the sum of--
                                    ``(I) the amount in effect under 
                                subparagraph (C) for the preceding 
                                calendar year (after application of 
                                this subparagraph), plus
                                    ``(II) the product of the amount 
                                referred to in subclause (I) multiplied 
                                by the cost-of-living adjustment for 
                                the calendar year.
                            ``(ii) Cost-of-living adjustment.--For 
                        purposes of clause (i), the cost-of-living 
                        adjustment for any calendar year is the 
                        percentage (if any) by which the cost index 
                        under clause (iii) for the preceding calendar 
                        year exceeds such index for the second 
                        preceding calendar year.
                            ``(iii) Cost index.--The Secretary, in 
                        consultation with the Secretary of Health and 
                        Human Services, shall before January 1, 1997, 
                        establish a cost index to measure increases in 
                        costs of nursing home and similar facilities. 
                        The Secretary may from time to time revise such 
                        index to the extent necessary to accurately 
                        measure increases or decreases in such costs.
                            ``(iv) Special rule for calendar year 
                        1997.--Notwithstanding clause (ii), for 
                        purposes of clause (i), the cost-of-living 
                        adjustment for calendar year 1997 is the sum of 
                        1.5 percent plus the percentage by which the 
                        CPI for calendar year 1996 (as defined in 
                        section 1(f)(4)) exceeds the CPI for calendar 
                        year 1995 (as so defined).
                    ``(E) Period.--For purposes of this paragraph, a 
                period begins on the date that an individual has a 
                condition which would qualify for certification under 
                subsection (b)(1)(A) and ends on the earlier of the 
                date upon which--
                            ``(i) such individual has not been so 
                        certified within the preceding 12-months, or
                            ``(ii) the individual's condition ceases to 
                        be such as to qualify for certification under 
                        subsection (b)(1)(A).
                    ``(F) Aggregation rule.--For purposes of this 
                paragraph, all policies issued with respect to the same 
                insured shall be treated as one policy.
    ``(c) Treatment of Long-Term Care Insurance Policies.--For purposes 
of this title, any amount received or coverage provided under a long-
term care insurance policy that is not a qualified long-term care 
insurance policy shall not be treated as an amount received for 
personal injuries or sickness or provided under an accident or health 
plan and shall not be treated as excludible from gross income under any 
provision of this title.
    ``(d) Treatment of Coverage Provided as Part of a Life Insurance 
Contract.--Except as otherwise provided in regulations prescribed by 
the Secretary, in the case of any long-term care insurance coverage 
(whether or not qualified) provided by rider on a life insurance 
contract--
            ``(1) In general.--This section shall apply as if the 
        portion of the contract providing such coverage is a separate 
        contract or policy.
            ``(2) Premiums and charges for long-term care coverage.--
        Premium payments for coverage under a long-term care insurance 
        policy and charges against the life insurance contract's cash 
        surrender value (within the meaning of section 7702(f)(2)(A)) 
        for such coverage shall be treated as premiums for purposes of 
        subsection (b)(2).
            ``(3) Application of section 7702.--Section 7702(c)(2) 
        (relating to the guideline premium limitation) shall be applied 
        by increasing the guideline premium limitation with respect to 
        a life insurance contract, as of any date--
                    ``(A) by the sum of any charges (but not premium 
                payments) described in paragraph (2) made to that date 
                under the contract, less
                    ``(B) any such charges the imposition of which 
                reduces the premiums paid for the contract (within the 
                meaning of section 7702(f)(1)).
            ``(4) Application of section 213.--No deduction shall be 
        allowed under section 213(a) for charges against the life 
        insurance contract's cash surrender value described in 
        paragraph (2), unless such charges are includible in income as 
        a result of the application of section 72(e)(10) and the 
        coverage provided by the rider is a qualified long-term care 
        insurance policy under subsection (b).
            ``(5) Amount of distribution under rider.--This subsection 
        shall not apply to any rider on a life insurance contract 
        unless the percentage reduction in the cash surrender value of 
        the contract by reason of any payment under the rider does not 
        exceed the percentage reduction in the death benefit payable 
        under the contract by reason of the payment.
For purposes of this subsection, the term `portion' means only the 
terms and benefits under a life insurance contract that are in addition 
to the terms and benefits under the contract without regard to the 
coverage under a long-term care insurance policy, except that the 
coverage under a rider described in this subsection shall not fail to 
be treated as such an addition by reason of a reduction in the 
contract's death benefit or cash surrender value resulting from any 
payment under the rider.
    ``(e) Regulations.--The Secretary shall prescribe such regulations 
as may be necessary to carry out the requirements of this section, 
including regulations to prevent the avoidance of this section by 
providing long-term care insurance coverage under a life insurance 
contract and to provide for the proper allocation of amounts between 
the long-term care and life insurance portions of a contract.''
    (b) Cafeteria Plans.--Section 125(f) is amended by adding at the 
end the following new sentence: ``Such term does not include any 
coverage or benefits under a qualified long-term care policy (as 
defined in section 7702B).''
    (c) Reserves.--Clause (iii) of section 807(d)(3)(A) is amended by 
inserting ``(other than a qualified long-term care insurance policy 
within the meaning of section 7702(B))'' after ``contract''.
    (d) Clerical Amendment.--The table of sections for chapter 79 is 
amended by inserting after the item relating to section 7702A the 
following new item:

                              ``Sec. 7702B. Treatment of long-term care 
                                        insurance.''
    (e) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to policies issued after December 31, 1995, except that a 
        policy issued before January 1, 1996, which, on January 1, 
        1996, satisfies the requirements of a qualified long-term care 
        insurance policy as set forth in section 7702B(b) of the 
        Internal Revenue Code of 1986 shall be treated as having been 
        issued on January 1, 1996.
            (2) Transition rule.--If, after the date of enactment of 
        this Act and before January 1, 1996, a policy providing for 
        long-term care insurance coverage is exchanged solely for a 
        qualified long-term care insurance policy (as defined in 
        section 7702B(b) of such code), no gain or loss shall be 
        recognized on the exchange, except that gain (if any) shall be 
        recognized to the extent of the sum of the money and the fair 
        market value of the other property received. For purposes of 
        this paragraph, the cancellation of a policy providing for 
        long-term care insurance coverage and reinvestment of the 
        cancellation proceeds in a qualified long-term care insurance 
        policy within 60 days thereafter shall be treated as an 
        exchange.
            (3) Issuance of rider not treated as material change.--For 
        purposes of applying section 101(f), 7702, or 7702A of such 
        Code to any contract, the issuance of a rider on a life 
        insurance contract providing long-term care insurance coverage 
        shall not be treated as a modification or material change of 
        such contract.

SEC. 7403. TAX TREATMENT OF ACCELERATED DEATH BENEFITS UNDER LIFE 
              INSURANCE CONTRACTS.

    (a) General Rule.--Section 101 (relating to certain death benefits) 
is amended by adding at the end the following new subsection:
    ``(g) Treatment of Certain Accelerated Death Benefits.--
            ``(1) In general.--For purposes of this section, any amount 
        received under a life insurance contract on the life of an 
        insured who is a terminally ill individual shall be treated as 
        an amount paid by reason of the death of such insured.
            ``(2) Necessary conditions.--
                    ``(A) In general.--Paragraph (1) shall not apply to 
                any amount received unless--
                            ``(i) the total amount received is not less 
                        than the present value (determined under 
                        subparagraph (B)) of the reduction in the death 
                        benefit otherwise payable in the event of the 
                        death of the insured, and
                            ``(ii) the percentage reduction in the cash 
                        surrender value of the contract by reason of 
                        the distribution does not exceed the percentage 
                        reduction in the death benefit payable under 
                        the contract by reason of such distribution.
                    ``(B) Present value.--The present value of the 
                reduction in the death benefit shall be determined by--
                            ``(i) using a discount rate which is based 
                        on an interest rate which does not exceed the 
                        highest interest rate set forth in subparagraph 
                        (C), and
                            ``(ii) assuming that the death benefit (or 
                        the portion thereof) would have been paid on 
                        the date which is 12 months after the date of 
                        the certification referred to in paragraph (3).
                    ``(C) Rates.--The interest rates set forth in this 
                subparagraph are the following:
                            ``(i) the 90-day Treasury bill yield,
                            ``(ii) the rate described as Moody's 
                        Corporate Bond Yield Average-Monthly Average 
                        Corporates as published by Moody's Investors 
                        Service, Inc., or any successor thereto, for 
                        the calendar month ending 2 months before the 
                        date on which the rate is determined, and
                            ``(iii) the rate used to compute the cash 
                        surrender values under the contract during the 
                        applicable period plus 1 percent per annum.
                    ``(D) Special rules relating to liens.--If a lien 
                is imposed against a life insurance contract with 
                respect to any amount referred to in paragraph (1)--
                            ``(i) for purposes of subparagraph (A), the 
                        amount of such lien shall be treated as a 
                        reduction (at the time of receipt) in the death 
                        benefit or cash surrender value to the extent 
                        that such benefit or value, as the case may be, 
                        is (or may become) subject to the lien, and
                            ``(ii) paragraph (1) shall not apply to the 
                        amount received unless any rate of interest 
                        with respect to any amount in connection with 
                        which such lien is imposed does not exceed the 
                        highest rate set forth in subparagraph (C).
            ``(3) Terminally ill individual.--For purposes of this 
        subsection, the term `terminally ill individual' means an 
        individual who the insurer has determined, after receipt of an 
        acceptable certification by a licensed physician, has an 
        illness or physical condition which can reasonably be expected 
        to result in death within 12 months after the date of 
        certification.
            ``(4) Exception for business-related policies.--This 
        subsection shall not apply in the case of any amount paid to 
        any taxpayer other than the insured if such taxpayer has an 
        insurable interest with respect to the life of the insured by 
        reason of the insured being a director, officer, or employee of 
        the taxpayer or by reason of the insured having a financial 
        interest in any trade or business carried on by the taxpayer.''
    (b) Effective Dates.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendment made by this section shall apply to amounts received 
        after the date of the enactment of this Act.
            (2) Delay in application of discount rules.--Clause (i) of 
        section 101(g)(2)(A) of the Internal Revenue Code of 1986 shall 
        not apply to any amount received before January 1, 1995.
            (3) Issuance of rider not treated as material change.--For 
        purposes of applying section 101(f), 7702, or 7702A of the 
        Internal Revenue Code of 1986 to any contract, the issuance of 
        a qualified accelerated death benefit rider (as defined in 
        section 818(g) of such Code (as added by this Act)) shall not 
        be treated as a modification or material change of such 
        contract.

SEC. 7404. TAX TREATMENT OF COMPANIES ISSUING QUALIFIED ACCELERATED 
              DEATH BENEFIT RIDERS.

    (a) Qualified Accelerated Death Benefit Riders Treated as Life 
Insurance.--Section 818 (relating to other definitions and special 
rules) is amended by adding at the end the following new subsection:
    ``(g) Qualified Accelerated Death Benefit Riders Treated as Life 
Insurance.--For purposes of this part--
            ``(1) In general.--Any reference to a life insurance 
        contract shall be treated as including a reference to a 
        qualified accelerated death benefit rider on such contract.
            ``(2) Qualified accelerated death benefit riders.--For 
        purposes of this subsection, the term `qualified accelerated 
        death benefit rider' means any rider on a life insurance 
        contract which provides for a distribution to an individual 
        upon the insured becoming a terminally ill individual (as 
        defined in section 101(g)(3)).''
    (b) Effective Date.--The amendments made by this section shall take 
effect on January 1, 1995.

                  Subtitle E--Other Revenue Provisions

                  PART 1--EMPLOYMENT STATUS PROVISIONS

SEC. 7501. EMPLOYMENT STATUS PROPOSAL REQUIRED FROM DEPARTMENT OF THE 
              TREASURY.

    Not later than January 1, 1996, the Secretary of the Treasury shall 
submit to the Committee on Ways and Means of the House of 
Representatives and the Committee on Finance of the Senate a 
legislative proposal providing statutory standards for the 
classification of workers as employees or independent contractors.

SEC. 7502. INCREASE IN SERVICES REPORTING PENALTIES.

    (a) Increase in Penalty.--Section 6721(a) (relating to imposition 
of penalty) is amended by adding at the end the following new 
paragraph:
            ``(3) Increased penalty for returns involving payments for 
        services.--
                    ``(A) In general.--Subject to the overall 
                limitation of paragraph (1), the amount of the penalty 
                under paragraph (1) for any failure with respect to any 
                applicable return shall be equal to the greater of $50 
                or 5 percent of the amount required to be reported 
                correctly but not so reported.
                    ``(B) Exception where substantial compliance.--
                Subparagraph (A) shall not apply to failures with 
                respect to applicable returns required to be filed by a 
                person during any calendar year if the aggregate amount 
                which is timely and correctly reported on applicable 
                returns filed by the person for the calendar year is at 
                least 97 percent of the aggregate amount which is 
                required to be reported on applicable returns by the 
                person for the calendar year.
                    ``(C) Applicable return.--For purposes of this 
                paragraph, the term `applicable return' means any 
                information return required to be filed under--
                            ``(i) section 6041(a) but only if such 
                        return relates to payments to any person for 
                        services performed by such person (other than 
                        as an employee), or
                            ``(ii) section 6041A(a).''
    (b) Conforming Amendment.--Section 6721(a)(1) is amended by 
striking ``In'' and inserting ``Except as provided in paragraph (3), 
in''.
    (c) Effective Date.--The amendments made by this section shall 
apply to returns the due date for which (without regard to extensions) 
is more than 30 days after the date of the enactment of this Act.

          PART 2--TAX INCENTIVES FOR HEALTH SERVICES PROVIDERS

SEC. 7511. NONREFUNDABLE CREDIT FOR CERTAIN PRIMARY HEALTH SERVICES 
              PROVIDERS.

    (a) In General.--Subpart A of part IV of subchapter A of chapter 1 
(relating to nonrefundable personal credits) is amended by inserting 
after section 22 the following new section:

``SEC. 23. PRIMARY HEALTH SERVICES PROVIDERS.

    ``(a) Allowance of Credit.--There shall be allowed as a credit 
against the tax imposed by this chapter for the taxable year an amount 
equal to the product of--
            ``(1) the number of months during such taxable year--
                    ``(A) during which the taxpayer is a qualified 
                primary health services provider, and
                    ``(B) which are within the taxpayer's eligible 
                service period, and
            ``(2) $1,000 ($500 in the case of a qualified practitioner 
        who is not a physician).
    ``(b) Qualified Primary Health Services Provider.--For purposes of 
this section--
            ``(1) In general.--The term `qualified primary health 
        services provider' means, with respect to any month, any 
        qualified practitioner who--
                    ``(A) has in effect a certification by the Bureau 
                as a provider of primary health services and such 
                certification is, when issued, for a health 
                professional shortage area in which the qualified 
                practitioner is providing primary health services,
                    ``(B) is providing primary health services full 
                time in the health professional shortage area 
                identified in such certification, and
                    ``(C) has not received a scholarship under the 
                National Health Service Corps Scholarship Program or 
                any loan repayments under the National Health Service 
                Corps Loan Repayment Program.
            ``(2) Special rules relating to shortage areas.--
                    ``(A) Areas ceasing to be shortage areas.--For 
                purposes of paragraph (1)(B) and subsection (e)(2), a 
                provider shall be treated as providing services in a 
                health professional shortage area when such area ceases 
                to be such an area if it was such an area on the first 
                day of the provider's eligible service period.
                    ``(B) Areas within metropolitan areas.--A qualified 
                practitioner who is providing services within a 
                metropolitan statistical area (as defined in section 
                143(k)(2)) shall not be treated as meeting the 
                requirements of paragraph (1)(B) unless such services 
                are provided for, or on behalf of, a governmental or 
                nonprofit entity.
            ``(3) Qualified practitioner.--The term `qualified 
        practitioner' means a physician, a physician assistant, a nurse 
        practitioner, or a certified nurse-midwife.
    ``(c) Eligible Service Period.--For purposes of this section, the 
term `eligible service period' means the period of 36 consecutive 
calendar months beginning with the first month the taxpayer is a 
qualified primary health services provider (as specified in the 
certification under subsection (b)(1)(A)). A taxpayer shall not have 
more than 1 eligible service period.
    ``(d) Other Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Bureau.--The term `Bureau' means the Bureau of 
        Primary Health Care, Health Resources and Services 
        Administration of the United States Public Health Service.
            ``(2) Physician.--The term `physician' has the meaning 
        given to such term by section 1861(r) of the Social Security 
        Act.
            ``(3) Physician assistant; nurse practitioner.--The terms 
        `physician assistant' and `nurse practitioner' have the 
        meanings given to such terms by section 1861(aa)(5) of the 
        Social Security Act.
            ``(4) Certified nurse-midwife.--The term `certified nurse-
        midwife' has the meaning given to such term by section 
        1861(gg)(2) of the Social Security Act.
            ``(5) Primary health services.--The term `primary health 
        services' has the meaning given such term by section 330(b)(1) 
        of the Public Health Service Act.
            ``(6) Health professional shortage area.--The term `health 
        professional shortage area' has the meaning given such term by 
        section 332(a)(1)(A) of the Public Health Service Act.
            ``(7) Practitioner currently practicing in shortage 
        areas.--In the case of a qualified practitioner who, on 
        December 31, 1994, was providing primary health services in any 
        health professional shortage area--
                    ``(A) the practitioner's eligible service period 
                shall begin on January 1, 1995, and
                    ``(B) if such practitioner is a physician, 
                subsection (a)(2) shall be applied by substituting 
                `$500' for `$1,000'.
    ``(e) Recapture of Credit.--
            ``(1) In general.--If there is a recapture event during any 
        taxable year, then--
                    ``(A) no credit shall be allowed under subsection 
                (a) for such taxable year and any succeeding taxable 
                year, and
                    ``(B) the tax of the taxpayer under this chapter 
                for such taxable year shall be increased by an amount 
                equal to the aggregate credits allowed to such taxpayer 
                under this section for all prior taxable years.
            ``(2) Recapture event defined.--
                    ``(A) In general.--For purposes of this subsection, 
                the term `recapture event' means the failure of the 
                taxpayer to be a qualified primary health services 
                provider during any of the first 24 months during the 
                taxpayer's eligible service period.
                    ``(B) Secretarial waiver.--The Secretary, in 
                consultation with the Secretary of Health and Human 
                Services, may waive any recapture event caused by 
                extraordinary circumstances.
            ``(3) No credits against tax; minimum tax.--Any increase in 
        tax under this subsection shall not be treated as a tax imposed 
        by this chapter for purposes of determining the amount of any 
        credit under subpart A, B, or D of this part or for purposes of 
        section 55.''
    (b) Clerical Amendment.--The table of sections for subpart A of 
part IV of subchapter A of chapter 1 is amended by inserting after the 
item relating to section 22 the following new item:

                              ``Sec. 23. Primary health services 
                                        providers.''
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1994.

SEC. 7512. EXPENSING OF MEDICAL EQUIPMENT.

    (a) In General.--Paragraph (1) of section 179(b) (relating to 
dollar limitation on expensing of certain depreciable business assets) 
is amended to read as follows:
            ``(1) Dollar limitation.--
                    ``(A) General rule.--The aggregate cost which may 
                be taken into account under subsection (a) for any 
                taxable year shall not exceed $17,500.
                    ``(B) Health care property.--The aggregate cost 
                which may be taken into account under subsection (a) 
                shall be increased by the lesser of--
                            ``(i) the cost of section 179 property 
                        which is health care property placed in service 
                        during the taxable year, or
                            ``(ii) $10,000.''
    (b) Definition.--Section 179(d) (relating to definitions) is 
amended by adding at the end the following new paragraph:
            ``(11) Health care property.--
                    ``(A) In general.--For purposes of this section, 
                the term `health care property' means section 179 
                property--
                            ``(i) which is medical equipment used in 
                        the screening, monitoring, observation, 
                        diagnosis, or treatment of patients in a 
                        laboratory, medical, or hospital environment,
                            ``(ii) which is owned (directly or 
                        indirectly) and used by 1 or more physicians 
                        (as defined in section 1861(r) of the Social 
                        Security Act) in the active conduct of the 
                        full-time trade or business of all such 
                        physicians of providing primary health services 
                        (as defined in section 330(b)(1) of the Public 
                        Health Service Act) in a health professional 
                        shortage area (as defined in section 
                        332(a)(1)(A) of the Public Health Service Act), 
                        and
                            ``(iii) substantially all the use of which 
                        is in such area.
                    ``(B) Special rule for metropolitan statistical 
                areas.--A physician who is providing services within a 
                metropolitan statistical area (as defined in section 
                143(k)(2)) shall not be treated as meeting the 
                requirements of subparagraph (A)(ii) unless such 
                services are provided for, or on behalf of, a 
                governmental or nonprofit entity.''
    (c) Recapture.--Paragraph (10) of section 179(d) is amended by 
inserting ``and with respect to any health care property which ceases 
(other than by an area failing to be treated as a health professional 
shortage area) to be health care property at any time'' before the 
period.
    (d) Effective Date.--The amendments made by this section shall 
apply to property placed in service in taxable years beginning after 
December 31, 1994.

                    PART 3--MISCELLANEOUS PROVISIONS

SEC. 7521. POST-RETIREMENT MEDICAL AND LIFE INSURANCE RESERVES.

    (a) Minimum Period for Working Lives.--Section 419A(c)(2) (relating 
to additional reserves for post-retirement medical and life insurance 
benefits) is amended by inserting ``(but not less than 10 years)'' 
after ``working lives of the covered employees''.
    (b) Separate Accounting.--
            (1) Requirement.--Section 419A(c)(2) is amended by adding 
        at the end the following new flush sentence:
``Such reserve shall be maintained as a separate account.''
            (2) Use of reserve for other purposes.--Paragraph (1) of 
        section 4976(b) (defining disqualified benefit) is amended by 
        striking ``and'' at the end of subparagraph (B), by striking 
        the period at the end of subparagraph (C) and inserting ``, 
        and'', and by adding after subparagraph (C) the following new 
        subparagraph:
                    ``(D) any payment to which subparagraph (C) does 
                not apply which is out of an account described in 
                section 419A(c)(2) and which is not used to provide a 
                post-retirement medical benefit or life insurance 
                benefit.''
    (c) Effective Dates.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to contributions 
        paid or accrued after December 31, 1994, in taxable years 
        ending after such date.
            (2) Separate accounting.--The amendments made by subsection 
        (b) shall apply to contributions paid or accrued after the date 
        of the enactment of this Act, in taxable years ending after 
        such date.

SEC. 7522. CREDIT FOR COST OF PERSONAL ASSISTANCE SERVICES REQUIRED BY 
              EMPLOYED INDIVIDUALS.

    (a) In General.--Subpart A of part IV of subchapter A of chapter 1 
(relating to nonrefundable personal credits), as amended by section 
7511, is amended by inserting after section 23 the following new 
section:

``SEC. 24. COST OF PERSONAL ASSISTANCE SERVICES REQUIRED BY EMPLOYED 
              INDIVIDUALS.

    ``(a) Allowance of Credit.--
            ``(1) In general.--In the case of an eligible individual, 
        there shall be allowed as a credit against the tax imposed by 
        this chapter for the taxable year an amount equal to the 
        applicable percentage of the personal assistance expenses paid 
        or incurred by the taxpayer during such taxable year.
            ``(2) Applicable percentage.--For purposes of paragraph 
        (1), the term `applicable percentage' means 50 percent reduced 
        (but not below zero) by 10 percentage points for each $5,000 by 
        which the modified adjusted gross income (as defined in section 
        59B(d)(2)) of the taxpayer for the taxable year exceeds 
        $45,000. In the case of a married individual filing a separate 
        return, the preceding sentence shall be applied by substituting 
        `$2,500' for `$5,000' and `$22,500' for `$45,000'.
    ``(b) Limitation.--The amount of personal assistance expenses for 
the benefit of an individual which may be taken into account under 
subsection (a) for the taxable year shall not exceed the lesser of--
            ``(1) $15,000, or
            ``(2) such individual's earned income (as defined in 
        section 32(c)(2)) for the taxable year.
In the case of a joint return, the amount under the preceding sentence 
shall be determined separately for each spouse.
    ``(c) Eligible Individual.--For purposes of this section, the term 
`eligible individual' means any individual (other than a nonresident 
alien) who, by reason of any medically determinable physical impairment 
which can be expected to result in death or which has lasted or can be 
expected to last for a continuous period of not less than 12 months, is 
unable to engage in any substantial gainful activity without personal 
assistance services appropriate to carry out activities of daily 
living. An individual shall not be treated as an eligible individual 
unless such individual furnishes such proof thereof (in such form and 
manner, and at such times) as the Secretary may require.
    ``(d) Other Definitions.--For purposes of this section--
            ``(1) Personal assistance expenses.--The term `personal 
        assistance expenses' means expenses for--
                    ``(A) personal assistance services appropriate to 
                carry out activities of daily living in or outside the 
                home,
                    ``(B) homemaker/chore services incidental to the 
                provision of such personal assistance services,
                    ``(C) in the case of an individual with a cognitive 
                impairment, assistance with life skills,
                    ``(D) communication services,
                    ``(E) work-related support services,
                    ``(F) coordination of services described in this 
                paragraph,
                    ``(G) assistive technology and devices, including 
                assessment of the need for particular technology and 
                devices and training of family members, and
                    ``(H) modifications to the principal place of abode 
                of the individual to the extent the expenses for such 
                modifications would (but for subsection (e)(2)) be 
                expenses for medical care (as defined by section 213) 
                of such individual.
            ``(2) Activities of daily living.--The term `activities of 
        daily living' means eating, toileting, transferring, bathing, 
        and dressing.
    ``(e) Special Rules.--
            ``(1) Payments to related persons.--No credit shall be 
        allowed under this section for any amount paid by the taxpayer 
        to any person who is related (within the meaning of section 267 
        or 707(b)) to the taxpayer.
            ``(2) Coordination with medical expense deduction.--Any 
        amount taken into account in determining the credit under this 
        section shall not be taken into account in determining the 
        amount of the deduction under section 213.
            ``(3) Basis reduction.--For purposes of this subtitle, if a 
        credit is allowed under this section for any expense with 
        respect to any property, the increase in the basis of such 
        property which would (but for this paragraph) result from such 
        expense shall be reduced by the amount of the credit so 
        allowed.
    ``(f) Cost-of-Living Adjustment.--In the case of any taxable year 
beginning after 1996, the $45,000 and $22,500 amounts in subsection 
(a)(2) and the $15,000 amount in subsection (b) shall be increased by 
an amount equal to--
            ``(1) such dollar amount, multiplied by
            ``(2) the cost-of-living adjustment determined under 
        section 1(f)(3) for the calendar year in which the taxable year 
        begins by substituting `calendar year 1995' for `calendar year 
        1992' in subparagraph (B) thereof.
If any increase determined under the preceding sentence is not a 
multiple of $1,000, such increase shall be rounded to the nearest 
multiple of $1,000.''
    (b) Technical Amendment.--Subsection (a) of section 1016 is amended 
by striking ``and'' at the end of paragraph (24), by striking the 
period at the end of paragraph (25) and inserting ``, and'', and by 
adding at the end thereof the following new paragraph:
            ``(26) in the case of any property with respect to which a 
        credit has been allowed under section 24, to the extent 
        provided in section 24(e)(3).''
    (c) Clerical Amendment.--The table of sections for subpart A of 
part IV of subchapter A of chapter 1 is amended by inserting after the 
item relating to section 23 the following new item:

                              ``Sec. 24. Cost of personal assistance 
                                        services required by employed 
                                        individuals.''
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1995.

SEC. 7523. DISCLOSURE OF RETURN INFORMATION FOR ADMINISTRATION OF 
              CERTAIN PROGRAMS UNDER THE HEALTH SECURITY ACT.

    (a) In General.--Section 6103(l) (relating to disclosure of returns 
and return information for purposes other than tax administration) is 
amended by adding at the end the following new paragraph:
            ``(15) Disclosure of return information for purposes of 
        health security act.--
                    ``(A) In general.--The Secretary shall, upon 
                written request, disclose current return information 
                described in subparagraph (B) to any Federal, State, or 
                local agency administering an assistance program under 
                the Health Security Act.
                    ``(B) Information.--The information described in 
                this subparagraph is information which consists only of 
                adjusted gross income, the untaxed portion of social 
                security benefits, tax-exempt interest income, marital 
                status, and dependents.
                    ``(C) Restriction on disclosure.--The Secretary 
                shall disclose return information under subparagraph 
                (A) only for purposes of, and to the extent necessary 
                in, determining eligibility for, or the correct amount 
                of, assistance provided under the Health Security Act.
                    ``(D) Exclusion from matching program.--Any matches 
                of information under this paragraph shall not be 
                treated as a matching program for purposes of section 
                552a of title 5, United States Code.''
    (b) Conforming Amendments.--
            (1) Section 6103(9)(2) is amended by inserting ``or (15)'' 
        after ``subsection (l)(7)(D)''.
            (2) Section 6103(p)(3)(A) is amended by striking ``or 
        (14)'' and inserting ``(14), or (15)''.
            (3) Section 6103(p)(4) is amended--
                    (A) by striking ``or (12)'' in the matter preceding 
                subparagraph (A) and inserting ``(12), or (15)'', and
                    (B) by striking ``or (14)'' in subparagraph (F)(ii) 
                and inserting ``(14), or (15)''.
            (4) Section 7213(a)(2) is amended by striking ``or (12)'' 
        and inserting ``(12), or (15)''.

  Subtitle F--Graduate Medical Education and Academic Health Centers 
                               Trust Fund

SEC. 7601. ESTABLISHMENT OF GRADUATE MEDICAL EDUCATION AND ACADEMIC 
              HEALTH CENTERS TRUST FUND.

    (a) In General.--Subchapter A of chapter 98 (relating to 
establishment of trust funds) is amended by adding at the end the 
following new part:

                   ``PART II--HEALTH CARE TRUST FUNDS

                              ``Sec. 9551. Graduate Medical Education 
                                        and Academic Health Centers 
                                        Trust Fund

``SEC. 9551. GRADUATE MEDICAL EDUCATION AND ACADEMIC HEALTH CENTERS 
              TRUST FUND.

    ``(a) Creation of Trust Fund.--
            ``(1) In general.--There is established in the Treasury of 
        the United States a trust fund to be known as the `Graduate 
        Medical Education and Academic Health Centers Trust Fund', 
        consisting of such amounts as may be appropriated or credited 
        to the Academic Health Centers Trust Fund as provided in this 
        section or section 9602(b).
            ``(2) Accounts in the trust fund.--The Graduate Medical 
        Education and Academic Health Centers Trust Fund shall consist 
        of the following 2 accounts:
                    ``(A) The Graduate Medical Education Account.
                    ``(B) The Academic Health Centers Account.
        Each such account shall consist of such amounts as are 
        allocated to it under this section.
    ``(b) Transfers to the Trust Fund.--
            ``(1) Taxes.--There are hereby appropriated to the Graduate 
        Medical Education and Academic Health Centers Trust Fund 
        amounts received in the Treasury under sections 4501 and 4502 
        (relating to assessments on insured and self-insured health 
        plans) to the extent attributable to the rates of such taxes 
        not in excess of 1.5 percent.
            ``(2) Transfers from other trust funds.--The Secretary of 
        Health and Human Services shall transfer each fiscal year to 
        the Graduate Medical Education and Academic Health Centers 
        Trust Fund from the Federal Hospital Insurance Trust Fund and 
        the Federal Supplementary Medical Insurance Trust Fund 
        established under the Social Security Act the sum of--
                    ``(A) the amount that would have been paid from the 
                Federal Hospital Insurance Trust Fund in such fiscal 
                year under section 1886(d)(5)(B) of such Act (as in 
                effect before the date of the enactment of the Health 
                Security Act), plus
                    ``(B) the amount that would have been paid from 
                such trust funds in such fiscal year under section 
                1886(h) of such Act (as so in effect).
    ``(c) Graduate Medical Education Account.--
            ``(1) Transfers.--There is allocated to the Graduate 
        Medical Education Account each fiscal year an amount equal to 
        the sum of--
                    ``(A) amounts described in subsection (b)(2)(B), 
                plus
                    ``(B) the excess of--
                            ``(i) the amounts made available under 
                        section 3033 of the Health Security Act, over
                            ``(ii) the amount described in subparagraph 
                        (A).
            ``(2) Expenditures.--Amounts in the Graduate Medical 
        Education Account are appropriated to make the payments 
        described in sections 3031 and 3055 of the Health Security Act, 
        and to the extent any such amount is not expended during any 
        fiscal year, such amount shall be available for such purpose 
        for subsequent fiscal years.
    ``(d) Academic Health Centers Account.--
            ``(1) Transfers.--There is allocated to the Academic Health 
        Centers Account each fiscal year an amount equal to the sum 
        of--
                    ``(A) amounts described in subsection (b)(2)(A), 
                plus
                    ``(B) the excess of--
                            ``(i) the amounts made available under 
                        section 3053 of the Health Security Act, over
                            ``(ii) the amount described in subparagraph 
                        (A).
            ``(2) Expenditures.--Amounts in the Academic Health Centers 
        Account are appropriated to make the payments described in 
        section 3051 of the Health Security Act, and to the extent any 
        such amount is not expended during any fiscal year, such amount 
        shall be available for such purpose for subsequent fiscal 
        years.
    ``(e) Rules Relating To Accounts.--
            ``(1) Insufficient funds.--If, for any fiscal year, the sum 
        of the amounts required to be allocated under subsections (c) 
        and (d) exceeds the amounts received in the Graduate Medical 
        Education and Academic Health Centers Trust Fund, then each of 
        such amounts required to be so allocated shall be reduced to an 
        amount which bears the same ratio to such amount as the amounts 
        received in the trust fund bear to the amounts required to be 
        so allocated (without regard to this paragraph).
            ``(2) Allocation of excess funds and interest.--Amounts 
        received in the Graduate Medical Education and Academic Health 
        Centers Trust Fund in excess of the amounts required to be 
        allocated under subsections (c) and (d), and amounts credited 
        to such trust fund under section 9602(b), for any fiscal year 
        shall be allocated to each account ratably on the basis of the 
        amounts allocated to the account for the fiscal year (without 
        regard to this paragraph).''.
    (b) Conforming Amendment.--Subchapter A of chapter 98 is amended by 
inserting after the subchapter heading the following new items:

                              ``Part I. General trust funds.
                              ``Part II. Health care trust funds.

                    ``PART I--GENERAL TRUST FUNDS''.

                   TITLE VIII--OTHER FEDERAL PROGRAMS

                   Subtitle A--Indian Health Service

SEC. 8101. PURPOSES.

    The purposes of this subtitle are as follows:
            (1) To ensure the delivery of health care services to 
        American Indians and Alaska Natives in a culturally appropriate 
        manner in fulfillment of the unique trust responsibility of the 
        Federal Government and legal obligation to American Indian and 
        Alaska Native people--
                    (A) derived from the province of international law; 
                and
                    (B) founded in the treaties, Constitution, 
                statutes, and court decisions of the United States.
            (2) To provide sufficient funding for the provision of the 
        standard benefit package as it applies to all eligible 
        beneficiaries under this subtitle.
            (3) To ensure that funding levels for services and benefits 
        that are not part of the standard benefits package described in 
        this subtitle are not diluted or diminished.
            (4) To raise the health status of American Indians and 
        Alaska Natives to the highest possible level.
            (5) To raise the quality of health care delivery to 
        American Indians and Alaska Natives to the highest possible 
        level.
            (6) To ensure that health care services provided to 
        American Indians and Alaska Natives are provided in a manner 
        consistent with, and carries out, the recognized Indian self-
        determination and tribal self-governance policy of the United 
        States.

SEC. 8102. DEFINITIONS.

    For the purposes of this subtitle--
            (1) the term ``American Indian'' has the meaning provided 
        the term ``Indian'' under paragraph (6);
            (2) the term ``Alaska Native'' has the meaning provided the 
        term ``Native'' under section 3(b) of the Alaska Native Claims 
        Settlement Act (43 U.S.C. 1602(b));
            (3) the term ``health program of the Indian Health 
        Service'' means a program which provides or is responsible for 
        obtaining health services under this Act or any other 
        applicable law through programs operated by the Indian Health 
        Service, Indian tribes, or tribal organizations, including 
        Indian tribes or tribal organizations operating under the 
        authority of the Indian Self-Determination and Education 
        Assistance Act (25 U.S.C. 450 et seq.);
            (4) the term ``reservation'' means the reservation of any 
        federally recognized Indian tribe, former Indian reservations 
        in Oklahoma, and lands held by incorporated Native groups, 
        regional corporations, and village corporations under the 
        provisions of the Alaska Native Claims Settlement Act (43 
        U.S.C. 1601 et seq.);
            (5) the term ``urban Indian program'' means any program 
        operated pursuant to title V of the Indian Health Care 
        Improvement Act; and
            (6) the terms ``Indian'', ``Indian tribe'', ``tribal 
        organization'', ``urban Indian'', ``urban Indian 
        organization'', and ``service unit'' have the same meaning as 
        given such terms under the Indian Health Care Improvement Act 
        (25 U.S.C. 1601 et seq.).

SEC. 8103. ELIGIBILITY AND HEALTH SERVICE COVERAGE OF INDIANS.

    (a) Coverage.--The programs of the Indian Health Service shall 
remain as the principal provider of health care for Indians, except 
that nothing in this subtitle shall limit the ability of Indians to 
seek care from providers outside the programs of the Indian Health 
Service.
    (b) Eligibility.--An Indian is eligible for services under a 
program of the Indian Health Service if the individual is--
            (1) eligible to receive services pursuant to sections 36.1 
        through 36.14 of title 42, Code of Federal Regulations (as in 
        effect on the day before the date of enactment of this Act);
            (2) an urban Indian residing in an area served by an urban 
        Indian program; or
            (3) an Indian described in section 809(b) of the Indian 
        Health Care Improvement Act (25 U.S.C. 1679(b)).
    (c) Limitation on Charges.--An eligible Indian (as defined in 
subsection (b)) receiving services from or being referred by a health 
program of the Indian Health Service shall not be subject to any charge 
for deductibles, copayments, coinsurance, or any other cost for health 
services provided under such program.

SEC. 8104. SUPPLEMENTAL INDIAN HEALTH CARE BENEFITS.

    (a) In General.--All individuals described in section 8103(b) shall 
remain eligible for such benefits under the laws administered by the 
Indian Health Service as supplement the standard benefit package. The 
individual shall not be subject to any charge or any other cost for 
such benefits.
    (b) Maintenance of Effort.--The Secretary shall ensure that the 
requirements of this subtitle do not result in a reduction of the level 
of supplemental benefits provided by or through the Indian Health 
Service.

SEC. 8105. PROVISION OF HEALTH SERVICES TO NON-INDIANS.

    (a) Contracts With Health Plans.--A health program of the Indian 
Health Service may enter into a contract with a health plan for the 
provision of health care services to individuals enrolled in such 
health plan if--
            (1) the appropriate official of the program determines that 
        the provision of such health services will not result in a 
        denial or diminishment of health services to any individual 
        described in section 8103(b); and
            (2) each tribe or urban Indian organization served by the 
        program authorizes or has authorized the provision of services 
        to such individuals.
    (b) Family Treatment.--A health program of the Indian Health 
Service may provide health care services to insured non-Indian family 
members of individuals described in section 8103(b) under the same 
restrictions as those described in subsection (a).
    (c) Applicable Individual Charges.--Non-Indians receiving services 
in a program under subsection (b) shall be subject to any applicable 
deductibles, copayments, coinsurance, or any other cost for health 
services provided.

SEC. 8106. ESSENTIAL COMMUNITY PROVIDERS.

    A health program of the Indian Health Service automatically 
certified as an essential community provider under section 1462 may 
elect to accept certification--
            (1) only for eligible individuals described in section 
        8103(b);
            (2) for non-Indian individuals if each tribe or tribal 
        organization served by the program authorizes or has authorized 
        serving non-Indians; or
            (3) for eligible individuals described in section 8103(b) 
        and family members of such individuals described in section 
        8505(b) who are enrolled in a plan other than a health program 
        of the Indian Health Service, if each tribe or urban Indian 
        organization served by the program authorizes or has authorized 
        serving such family members.

SEC. 8107. PAYMENT BY OTHER PROVIDERS.

    (a) Payment for Services Provided by Indian Health Service 
Programs.--Nothing in this subtitle shall be construed as amending 
section 206, 401, or 402 of the Indian Health Care Improvement Act (25 
U.S.C. 1621e, 1641, or 1642) or any other provision of law relating to 
payments on behalf of Indians for health services from other Federal 
programs or from other third party payers.
    (b) Payment for Services Provided by Contractors.--Nothing in this 
subtitle shall be construed as affecting any other provision of law, 
regulation, or judicial or administrative interpretation of law or 
policy concerning the status of the Indian Health Service as the payer 
of last resort for Indians eligible for contract health services under 
a health program of the Indian Health Service.
    (c) Payment for Services by Medicare.--Programs of the Indian 
Health Service shall be eligible for payments for services provided to 
Medicare beneficiaries.
    (d) Retention of Receipts.--Notwithstanding any other provision of 
law, the collections made by a health program of the Indian Health 
Service shall remain with the health program if the receipts are used 
to--
            (1) expand or improve its services;
            (2) increase the number of persons it is able to serve;
            (3) construct, expand or modernize its health care 
        facilities;
            (4) improve the administration of its health service 
        programs; or
            (5) develop or improve linkages with other health care 
        providers.
    (e) Collection.--Each health program of the Indian Health Service 
shall make every reasonable effort to collect appropriate reimbursement 
for its costs in providing health services to persons who are covered 
by public or private health insurance programs.

SEC. 8108. CONTRACTING AUTHORITY.

    Section 601(d)(1)(B) of the Indian Health Care Improvement Act (25 
U.S.C. 1661(d)(1)(B)) is amended by inserting ``(including personal 
services for the provision of direct health care services)'' after 
``goods and services''.

SEC. 8109. CONSULTATION.

    (a) OMB and Secretary.--The Director of the Office of Management 
and Budget and the Secretary shall consult, on an annual basis, with 
representatives of Indian tribes, tribal organizations, and urban 
Indian organizations concerning health care reform initiatives that 
affect Indian communities, and policy, funding, and administration of 
health programs of the Indian Health Service. The Secretary shall 
solicit and consider the views and recommendations provided by Indian 
tribes, tribal organizations, and representatives of urban Indian 
organizations in making determinations that affect Indians and Indian 
tribes and shall resolve any differences in favor of Indians and Indian 
tribes.
    (b) Federal Advisory Group.--
            (1) Establishment.--The Secretary shall establish an 
        advisory group to assess all aspects of the development and 
        administration of the budget for programs of the Indian Health 
        Service and advise the Office of Management and Budget, the 
        Secretary and Congress with respect to such aspects.
            (2) Composition.--The advisory group shall be comprised 
        of--
                    (A) not less than one representative from each area 
                of the Indian Health Service to be appointed by the 
                Secretary from nominees of tribes and tribal 
                organizations in the respective areas;
                    (B) not less than one urban Indian representative 
                from each area the Indian Health Service with an urban 
                Indian (as defined in section 4(f) of the Indian Health 
                Care Improvement Act (25 U.S.C. 1603(f)) program to be 
                appointed by the Secretary; and
                    (C) such other appointees as the Secretary 
                determines appropriate, on the condition that a 
                majority of the members are selected from nominations 
                submitted to the Secretary by a tribe or tribal 
                organization.

SEC. 8110. TRANSITIONAL STUDIES.

    (a) In General.--The Secretary shall conduct planning, feasibility, 
or similar health services studies related to the transition of the 
health programs of the Indian Health Service under health care reform. 
Such studies shall take into account the measurements and the means to 
accomplish the Healthy People 2000 objectives as required under 
sections 3 and 214 of the Indian Health Care Improvement Act. Such 
studies shall include an assessment of--
            (1) the feasibility of developing an Indian health plan or 
        plans;
            (2) the financing necessary to provide the same level of 
        standard benefits to American Indians and Alaska Natives as 
        will be available to all other Americans;
            (3) the staffing, program and infrastructure enhancements 
        required to deliver the standard benefits package;
            (4) the facility and capital construction needs necessary 
        to provide the standard benefit package; and
            (5) the administrative improvements necessary to network, 
        share and access patient data, quality management and 
        improvement data, and financial information.
    (b) Advisory Group.--
            (1) Establishment.--The Secretary shall establish an 
        advisory group to provide the Secretary with advise concerning 
        the focus, content and conduct of studies under subsection (a).
            (2) Composition.--The advisory group shall be comprised 
        of--
                    (A) not less than one representative from each area 
                of the Indian Health Service to be appointed by the 
                Secretary from among nominees of tribes and tribal 
                organizations in the respective areas;
                    (B) not less than one urban Indian representative 
                from each area of the Indian Health Service which an 
                urban Indian (as defined in section 4(f) of the Indian 
                Health Care Improvement Act (25 U.S.C. 1603(f)) program 
                to appointed by the Secretary; and
                    (C) other appointees as the Secretary determines 
                appropriate, except that the Secretary shall ensure 
                that a majority of the members so appointed are 
                selected from nominations submitted to the Secretary by 
                tribes or tribal organizations.
    (c) Recommendations.--Not later than June 30, 1997, the Secretary 
shall submit to Congress recommendations based on the studies conducted 
under this section, including recommendations for changes in the 
structure of Indian Health Services. A time-table for implementing 
health care reform activities shall be included in such final 
recommendations.

SEC. 8111. LOANS AND LOAN GUARANTEES.

    The Secretary may make loans, and guarantee the payment of 
principal and interest, to Federal and non-Federal lenders on behalf of 
health programs of the Indian Health Service for the purpose of 
improving and expanding such facilities. Loans and loan guarantees 
under this section shall be provided under such terms and conditions as 
the Secretary may prescribe.

SEC. 8112. SIMPLIFICATION OF BILLING.

    The Secretary shall take such action as may be necessary to ensure 
that health programs of the Indian Health Service may submit all claims 
for benefits or payment for services entitled to reimbursement in a 
manner consistent with that of all other health care providers.

SEC. 8113. LONG-TERM CARE DEMONSTRATIONS.

    Subject to the availability of appropriations under subtitle B of 
title II (for home and community-based long-term care services), the 
Secretary shall establish a demonstration program to provide five 
grants to health programs of the Indian Health Service to enable such 
Programs to plan and implement innovative methods of providing enhanced 
home and community-based long-term care services.

SEC. 8114. TECHNICAL ASSISTANCE.

    Indian tribes shall be eligible for funds made available under this 
Act for technical assistance or transitional support.

SEC. 8115. PUBLIC HEALTH PROGRAMS.

    Health programs of the Indian Health Service shall be eligible to 
apply for funding under public health programs authorized under title 
III of this Act (including those under section 3695(b)(14)), as deemed 
appropriate by the Secretary.

SEC. 8116. SURVEY OF HEALTH SERVICES AVAILABLE TO INDIAN VETERANS.

    (a) In General.--The Secretary, in consultation with the Secretary 
of Veterans Affairs, Indian tribes and tribal organizations, shall 
conduct a survey to assess the availability and accessibility of health 
care services for Indian veterans residing on Indian reservations.
    (b) Report.--Not later than 180 days after the date of enactment of 
this Act, the Secretary shall submit a report to Congress that shall 
include recommendations concerning the survey conducted under 
subsection (a).

SEC. 8117. RULE OF CONSTRUCTION.

    Unless otherwise provided in this Act, no part of this Act shall be 
construed to rescind or otherwise modify any obligations, findings, or 
purposes contained in the Indian Health Care Improvement Act (25 U.S.C. 
1601 et seq.) and in the Indian Self-Determination and Education 
Assistance Act (25 U.S.C. 450 et seq).

SEC. 8118. AUTHORIZATION OF APPROPRIATIONS.

    (a) Authorization.--
            (1) In general.--For the purpose of carrying out this 
        subtitle, including transitional costs and the purchase of 
        additional contract health care services for individual 
        eligible Indians, there are authorized to be appropriated 
        $515,000,000 for fiscal year 1995, $930,000,000 for fiscal year 
        1996, and $1,150,000,000 for each of the fiscal years 1997 
        through 2004.
            (2) Supplemental indian health care benefits.--In addition 
        to amounts otherwise authorized to be appropriated (including 
        the amounts authorized to be appropriated under paragraph (1)), 
        for the purpose of carrying out section 8104, there are 
        authorized to be appropriated $360,000,000 for fiscal year 
        1995, $400,000,000 for each of the fiscal years 1996 through 
        1999, and such sums as may be necessary for fiscal year 2000 
        and each fiscal year thereafter.
            (3) Loans and loan guarantees.--In addition to amounts 
        otherwise authorized to be appropriated (including the amounts 
        authorized to be appropriated under paragraph (1)), for the 
        purpose of carrying out section 8111, there are authorized to 
        be appropriated $500,000,000 for the principal of the loan. The 
        authority of the Secretary to make loans and to guarantee loans 
        under such section shall be subject to such amounts as may be 
        provided for in each fiscal year in advance in an 
        appropriations Act.
    (b) Relation to Other Funds.--The authorizations of appropriations 
established under this subtitle are in addition to any other 
authorizations of appropriations that are available for the purposes of 
carrying out this subtitle.

SEC. 8119. FUNDING METHODOLOGY.

    The Secretary shall establish new methodologies, consistent with 
the Indian Health Care Improvement Act, for the distribution to Indian 
tribes of all new funds that become available for health care 
initiatives under this subtitle. New distribution methodologies should 
consider differences in local resources, status of health (as declared 
under section 3 of such Act), socioeconomic status of tribal people, 
and facilities, equipment and staff available in concert with the 
establishment of Indian epidemiological centers under such Act.

               Subtitle B--Department of Veterans Affairs

SEC. 8101. SHORT TITLE.

    This Act may be cited as the ``Veterans Health Care Reform Act of 
1994''.

SEC. 8102. BENEFITS AND ELIGIBILITY THROUGH DEPARTMENT OF VETERANS 
              AFFAIRS MEDICAL SYSTEM.

    (a) Department of Veterans Affairs As a Participant in Health Care 
Reform.--
            (1) In general.--Title 38, United States Code, is amended 
        by inserting after chapter 17 the following new chapter:

    ``CHAPTER 18--ELIGIBILITY AND BENEFITS UNDER HEALTH SECURITY ACT

                        ``SUBCHAPTER I--GENERAL

``1801. Definitions.
                      ``SUBCHAPTER II--ENROLLMENT

``1811. Enrollment: veterans.
``1812. Enrollment: CHAMPVA eligibles.
``1813. Enrollment: family members.
                       ``SUBCHAPTER III--BENEFITS

``1821. Benefits for VA enrollees.
``1822. Chapter 17 benefits.
``1823. Supplemental 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.

                        ``SUBCHAPTER I--GENERAL

``Sec. 1801. Definitions
    ``For purposes of this chapter:
            ``(1) The term `health plan' means an entity that has been 
        certified under the Health Security Act as a health plan.
            ``(2) The term `VA health plan' means a health plan that is 
        operated by the Secretary under section 7341 of this title.
            ``(3) The term `VA enrollee' means an individual enrolled 
        under the Health Security Act in a VA health plan.
            ``(4) The term `standard benefit package' means the package 
        of benefits required to be provided by a health plan under the 
        Health Security Act.

                      ``SUBCHAPTER II--ENROLLMENT

``Sec. 1811. Enrollment: veterans
    ``Each veteran may enroll with a VA health plan. A veteran who 
wants to receive the standard benefit package through the Department 
shall enroll with a VA health plan.
``Sec. 1812. Enrollment: CHAMPVA eligibles
    ``An individual who is eligible for benefits under section 1713 of 
this title may enroll with a VA health plan in the same manner as a 
veteran.
``Sec. 1813. Enrollment: family members
    ``(a) The Secretary may authorize a VA health plan to enroll 
members of the family of an enrollee under section 1811 or 1812 of this 
title, subject to payment of premiums, deductibles, copayments, and 
coinsurance as required under the Health Security Act.
    ``(b) For purposes of subsection (a), an enrollee's family is those 
individuals (other than the enrollee) included within the term `family' 
as defined in section 1113(b) of the Health Security Act.

                       ``SUBCHAPTER III--BENEFITS

``Sec. 1821. Benefits for VA enrollees
    ``The Secretary shall ensure that each VA health plan provides to 
each individual enrolled with it the items and services in the standard 
benefit package under the Health Security Act, to the extent that such 
items and services can be provided consistent with appropriations for 
that purpose. In the event that appropriations are insufficient the 
Secretary may revise the standard benefit package available to enrolled 
individuals.
``Sec. 1822. Chapter 17 benefits
    ``The Secretary shall provide to a veteran the care and services 
not included in the standard benefit package that are authorized to be 
provided under chapter 17 of this title in accordance with the terms 
and conditions applicable to that veteran and that care under such 
chapter, to the extent that such items and services can be provided 
consistent with appropriations for that purpose. In the event that 
appropriations are insufficient the Secretary may revise the standard 
benefit package available to enrolled individuals.
``Sec. 1823. Supplemental health benefits plans
    ``(a) As part of a VA health plan, the Secretary may offer to 
veterans--
            ``(1) supplemental health benefits plans (as that term is 
        defined in section 1011(3)(B) of the Health Security Act) for 
        the care and services described in subsection (b); and
            ``(2) cost-sharing plans consistent with the requirements 
        of part 4 of subtitle B of title I of the Health Security Act.
    ``(b) The care and services referred to in subsection (a) are care 
and services that--
            ``(1) are not available under the standard benefit package; 
        and
            ``(2) can be provided by the Secretary at reasonable cost.
``Sec. 1824. Limitation regarding veterans enrolled with health plans 
              outside Department
    ``A veteran who is residing in a community-rated area in which the 
Department operates a health plan and who is enrolled in a health plan 
that is not operated by the Department may be provided the items and 
services in the standard benefit package by a VA health plan only if 
the plan is reimbursed for the care provided.

                   ``SUBCHAPTER IV--FINANCIAL MATTERS

``Sec. 1831. Premiums, copayments, and other charges
    ``(a) Except as provided in paragraph (2), the Secretary may not 
impose on or collect from a veteran described in subsection (b) who is 
a VA enrollee a cost-share charge of any kind (whether a premium, 
copayment, deductible, coinsurance charge, or other charge) for items 
and services in the standard benefit package that a VA health plan 
provides.
    ``(b) The veterans referred to in subsection (a) are the following:
            ``(1) Any veteran with a compensable service-connected 
        disability.
            ``(2) Any veteran whose discharge or release from the 
        active military, naval or air service was for a disability 
        incurred or aggravated in the line of duty.
            ``(3) Any veteran who is in receipt of, or who, but for a 
        suspension pursuant to section 1151 of this title (or both such 
        a suspension and the receipt of retired pay), would be entitled 
        to disability compensation, but only to the extent that such a 
        veteran's continuing eligibility for such care is provided for 
        in the judgment or settlement provided for in such section.
            ``(4) Any veteran who is a former prisoner of war.
            ``(5) Any veteran of the Mexican border period or World War 
        I.
            ``(6) Any veteran who is unable to defray the expenses of 
        necessary care as determined under section 1722(a) of this 
        title.
            ``(7) Any veteran referred to in subparagraph (A), (B), or 
        (C) of section 1710(e) of this title.
    ``(c)(1) Except as provided in paragraph (2), in the case of a VA 
enrollee who is not described in subsection (b), the Secretary shall 
charge premiums and establish copayments, deductibles, and coinsurance 
amounts for care and services provided under this chapter. The premium 
rate, and the rates for deductibles and copayments, for each VA health 
plan shall be established by that health plan based on rules 
established under the Health Security Act.
    ``(2) The Secretary may not charge a veteran referred to in 
paragraph (1) a premium for any care or service that the Secretary 
provides the veteran under a supplemental health benefits plan offered 
under section 1823 of this title if the Secretary is required to 
provide such care or service under chapter 17 of this title.
``Sec. 1832. Medicare coverage and reimbursement
    ``(a) For purposes of any program administered by the Secretary of 
Health and Human Services under title XVIII of the Social Security Act 
(42 U.S.C. 1395 et seq.), a Department facility shall be deemed to be a 
Medicare provider.
    ``(b)(1) A VA health plan shall be considered to be a Medicare HMO.
    ``(2) For purposes of this section, the term `Medicare HMO' means 
an eligible organization under section 1876 of the Social Security Act.
    ``(c) In the case of care provided under this chapter to a veteran 
(other than a veteran described in section 1831(b) of this title), or 
to a family member of a veteran, who is eligible for benefits under the 
Medicare program under title XVIII of the Social Security Act, the 
Secretary of Health and Human Services shall reimburse a VA health plan 
or Department health-care facility providing services as a Medicare 
provider or Medicare HMO in the same amounts and under the same terms 
and conditions as that Secretary reimburses other Medicare providers or 
Medicare HMOs, respectively. The Secretary of Health and Human Services 
shall include with each such reimbursement a Medicare explanation of 
benefits.
    ``(d) When the Secretary provides care to a veteran, or a family 
member of a veteran, for which the Secretary receives reimbursement 
under this section, the Secretary shall require the veteran to pay to 
the Department any applicable deductible or copayment that is not 
covered by Medicare.
``Sec. 1833. Recovery of cost of certain care and services
    ``(a) In the case of an individual provided care or services 
through a VA health plan who has coverage under a supplemental health 
benefits plan pursuant to part 4 of subtitle B of title I of the Health 
Security Act, a Medicare supplemental health insurance plan, or any 
other provision of law, the Secretary has the right to recover or 
collect charges for care or services (as determined by the Secretary, 
but not including care or services for a service-connected disability) 
from the party providing that coverage to the extent that the 
individual (or the provider of the care or services) would be eligible 
to receive payment for such care or services from such party if the 
care or services had not been furnished by a department or agency of 
the United States.
    ``(b) In the case of a veteran referred to in section 1831(b) of 
this title who is enrolled in a health plan other than a VA health plan 
and who is provided care or services for a service-connected disability 
by a VA health plan, the Secretary has the right to recover or collect 
charges for such care and services from the party operating the health 
plan to the extent that the veteran (or the provider of the care or 
services) would be eligible to receive payment for such care or 
services from such party if the care or services had not been furnished 
by a department or agency of the United States.
    ``(c) The provisions of subsections (b) through (f) of section 1729 
of this title shall apply with respect to claims by the United States 
under subsection (a) or (b) in the same manner as they apply to claims 
under subsection (a) of that section.
``Sec. 1834. Health Plan Fund
    ``(a) There is hereby established in the Treasury a revolving fund 
to be known as the `Department of Veterans Affairs Health Plan Fund'.
    ``(b)(1) Subject to paragraphs (2) and (3), amounts collected or 
recovered by the Department under this subchapter by reason of the 
furnishing of care and services to an individual by a VA health plan or 
the enrollment of an individual with a VA health plan (including 
amounts received as premiums, premium discount payments, copayments or 
coinsurance, and deductibles, amounts received as third-party 
reimbursements or reimbursements from Medicare, and amounts received as 
reimbursements from another health plan for care furnished to one of 
its enrollees) shall be credited to the revolving fund.
    ``(2) Premiums collected by the Department under this subchapter 
during fiscal year 1996 or 1997 by reason of the furnishing of care and 
services under a VA health plan to a veteran referred to in section 
1831(b) of this title shall be credited to the revolving fund 
established under subsection (a) only if the amount of funds 
appropriated to the Veterans Health Care Investment Fund established 
under subsection (a)(1) of section 7346 of this title for the fiscal 
year concerned is less than the amount specified to be credited to that 
fund for that fiscal year under subsection (c) of such section 7346.
    ``(3) Premiums received by the Department under this subchapter in 
any fiscal year after fiscal year 1997 by reason of the furnishing of 
care and services under a VA health plan to a veteran referred to in 
paragraph (2) shall be credited to the revolving fund established under 
subsection (a) only if the cost of providing such care and services is 
not covered by appropriations. The amount so credited shall be the 
amount of such premiums received that is necessary to cover the 
difference between the cost of such care and services and such 
appropriations.
    ``(c) The Secretary shall establish in the revolving fund a 
separate account for each VA health plan. The Secretary shall credit 
any amount received under subsection (b) by reason of the furnishing of 
care and services in or through a VA health plan or the enrollment of 
an individual with a VA health plan.
    ``(d) Amounts credited to the account of the revolving fund for a 
VA health plan under subsection (b) are hereby made available to the VA 
health plan for the expenses of the delivery by the VA health plan of 
the items and services in the standard benefit package and any 
supplemental health benefits plan offered by the VA health plan.''.
            (2) The table of chapters at the beginning of title 38, 
        United States Code, and at the beginning of part II of such 
        title, is amended by inserting after the item relating to 
        chapter 17 the following new item:

``18. Benefits and Eligibility Under Health Security Act....   1801.''.
    (b) Preservation of Existing Benefits for Facilities Not Operating 
as Health Plans.--(1) Chapter 17 of title 38, United States Code, is 
amended by inserting after section 1704 the following new section:
``Sec. 1705. Facilities not operating within health plans
    ``The provisions of this chapter shall apply with respect to the 
furnishing of care and services by any facility of the Department when 
it is not operating as or within a health plan certified as a health 
plan under the Health Security Act.''.
    (2) The table of sections at the beginning of such chapter is 
amended by inserting after the item relating to section 1704 the 
following new item:

``1705. Facilities not operating within health plans.''.

SEC. 8103. ORGANIZATION OF DEPARTMENT OF VETERANS AFFAIRS FACILITIES AS 
              HEALTH PLANS.

    (a) In General.--Chapter 73 of title 38, United States Code, is 
amended--
            (1) by redesignating subchapter IV as subchapter V; and
            (2) by inserting after subchapter III the following new 
        subchapter IV:

 ``SUBCHAPTER IV--PARTICIPATION AS PART OF NATIONAL HEALTH CARE REFORM

``Sec. 7341. Organization of health care facilities as health plans
    ``(a)(1) The Secretary may, subject to the availability of 
appropriations, organize health plans and operate Department facilities 
as or within health plans under the Health Security Act.
    ``(2)(A) The Secretary may prescribe regulations establishing 
standards for the operation of Department health care facilities as or 
within health plans under that Act. In prescribing such standards, the 
Secretary shall ensure that they conform, to the extent possible under 
the requirements of section 1821, to the requirements for health plans 
generally set forth in part 1 of subtitle B of title I of the Health 
Security Act.
    ``(B) Not later than 30 days after prescribing such standards, the 
Secretary shall submit to the Committees on Veterans' Affairs of the 
Senate and the House of Representatives a report describing the 
differences, if any, between such standards and the requirements for 
health plans generally referred to in subparagraph (A).
    ``(b) Health care facilities of the Department located within an 
area or region may be organized to operate as a single health plan 
encompassing all Department facilities within that area or region or 
may be organized to operate as several health plans.
    ``(c) In carrying out responsibilities under the Health Security 
Act, a State (or a State-established entity)--
            ``(1) may not impose any standard or requirement on a VA 
        health plan that is inconsistent with this chapter or any 
        regulation prescribed under this chapter or other Federal laws 
        regarding the operation of this chapter; and
            ``(2) may not deny certification of a VA health plan under 
        the Health Security Act on the basis of a conflict between a 
        rule of a State and this chapter or regulations prescribed 
        under this chapter or other Federal laws regarding the 
        operation of this chapter.
``Sec. 7342. Contract authority for facilities operating as or within 
              health plans
    ``(a) The Secretary shall designate a health plan director for each 
VA health plan organized and operated under this subchapter.
    ``(b) The health plan director of a VA health plan may enter into 
contracts and agreements for the provision of care and services to be 
provided under the VA health plan and contracts and agreements for 
other services (including procurement of equipment, maintenance and 
repair services, and other services related to the provision of health 
care services) consistent with section 1821 of this title.
    ``(c) Contracts and agreements (including leases) under subsection 
(a) shall not be subject to the following provisions of law:
            ``(1) Section 8110(c) of this title, relating to the 
        contracting of services at Department health-care facilities.
            ``(2) Section 8122(a)(1) of this title, relating to the 
        lease of Department property.
            ``(3) Section 8125 of this title, relating to local 
        contracts for the procurement of health-care items.
            ``(4) Section 702 of title 5, relating to the right of 
        review of agency wrongs by courts of the United States.
            ``(5) Sections 1346(a)(2) and 1491 of title 28, relating to 
        the jurisdiction of the district courts of the United States 
        and the United States Court of Federal Claims, respectively, 
        for the actions enumerated in such sections.
            ``(6) Subchapter V of chapter 35 of title 31, relating to 
        adjudication of protests of violations of procurement statutes 
        and regulations.
            ``(7) Sections 3526 and 3702 of such title, relating to the 
        settlement of accounts and claims, respectively, of the United 
        States.
            ``(8) Subsections (b)(7), (e), (f), (g), and (h) of section 
        8 of the Small Business Act (15 U.S.C. 637(b)(7), (e), (f), 
        (g), and (h)), relating to requirements with respect to small 
        businesses for contracts for property and services.
            ``(9) The provisions of law assembled for purposes of 
        codification of the United States Code as section 471 through 
        544 of title 40 that relate to the authority of the 
        Administrator of General Services over the lease and disposal 
        of Federal Government property.
            ``(10) The provisions of the Office of Federal Procurement 
        Policy Act (41 U.S.C. 401 et seq.), relating to the procurement 
        of property and services by the Federal Government.
            ``(11) Chapter 3 of the Federal Property and Administrative 
        Services Act of 1949 (41 U.S.C. 251 et seq.), relating to the 
        procurement of property and services by the Federal Government.
            ``(12) Office of Management and Budget Circular A-76.
    ``(c)(1) Contracts and agreements for the provision of care and 
services under subsection (a) may include any contract or other 
agreement that the health plan director of a VA health plan determines 
is consistent with section 1821 of this title and appropriate in order 
to provide care and services under the VA health plan.
    ``(2) Contracts and agreements under this subsection may be entered 
into without prior review by the Central Office of the Department.
    ``(d)(1) The entry into a contract or agreement under this section 
for services other than the services referred to in subsection (c) 
(including contracts and agreements for procurement of equipment, 
maintenance and repair services, and other services related to the 
provision of health care services) shall not be subject to prior review 
by the Central Office if the contract is consistent with section 1821 
of this title and the amount of the contract or agreement is less than 
$250,000.
    ``(2) The Central Office may conduct a prior review of a contract 
or agreement referred to in paragraph (1) if the amount of the contract 
or agreement is $250,000 or greater.
``Sec. 7343. Resource sharing authority
    ``(a) The Secretary may, consistent with section 1821 of this 
title, enter into agreements under section 8153 of this title with 
other health care plans, with health care providers, and with other 
health industry organizations, and with individuals, for the sharing of 
resources of the Department under a VA health plan.
    ``(b) The Secretary may, consistent with section 1821 of this 
title, enter into agreements with other departments and agencies of the 
Federal Government for the sharing of resources of the Department and 
such departments and agencies in order to provide care and services 
under a VA health plan.
``Sec. 7344. Administrative and personnel flexibility
    ``(a) Notwithstanding any other provision of law, the Secretary 
may--
            ``(1) appoint health care personnel to positions in any 
        facility of the Department operating as or within a VA health 
        plan in accordance with such qualifications for such positions 
        as the Secretary may establish; and
            ``(2) promote and advance personnel serving in such 
        positions in accordance with such qualifications as the 
        Secretary may establish.
    ``(b) Subject to the provisions of section 1125 of the Health 
Security Act, the Secretary may carry out appropriate promotional, 
advertising, and marketing activities to inform individuals of the 
availability of VA health plans.
``Sec. 7345. Expenditure authority
    ``(a)(1) To the extent that appropriations are available, the 
director of a VA health plan may expend funds available to a VA health 
plan (including funds available under section 1834(c) of this title, 
funds available under section 7346(d)(2)(B) of this title, and funds 
otherwise made available to the VA health plan by the Secretary) for 
any purpose, and in any amount, that the director determines 
appropriate in order to ensure that the VA health plan meets the 
requirements and the requirements of furnishing care and services to 
veterans under chapter 17 of this title.
    ``(2) Funds may be expended under this subsection in order to cover 
the following costs:
            ``(A) The costs of marketing and advertising under a VA 
        health plan.
            ``(B) The costs of legal services provided to a VA health 
        plan by the General Counsel of the Department.
            ``(C) The costs of acquisition (including acquisition of 
        land), construction, repair, or renovation of facilities.
    ``(3) The exercise by a health plan director of the authority 
provided in paragraph (1) shall not be subject to prior review by the 
Central Office of the Department.
    ``(b) Subsection (a) shall not apply to expenditures of funds 
provided to a facility by the Central Office of the Department 
exclusively for the purpose of the provision of the following services:
            ``(1) Services relating to post-traumatic stress disorder.
            ``(2) Services relating to spinal-cord dysfunction.
            ``(3) Services relating to substance abuse.
            ``(4) Services relating to the rehabilitation of blind 
        veterans.
``Sec. 7346. Veterans Health Care Investment Fund
    ``(a) There is hereby established in the Treasury of the United 
States a fund to be known as the Veterans Health Care Investment Fund 
(in this section referred to as the `Fund').
    ``(b) There is hereby authorized to be appropriated to the 
Department, in addition to amounts otherwise authorized to be 
appropriated to the Department for VA health plans, such amounts as are 
necessary for the Secretary of the Treasury to fulfill the requirement 
of subsection (c).
    ``(c) For each of fiscal years 1995, 1996, and 1997, the Secretary 
of the Treasury shall, subject to the availability of appropriated 
funds, credit to the Fund an amount in that fiscal year as follows:
            ``(1) For fiscal year 1995, $1,225,000,000.
            ``(2) For fiscal year 1996, $600,000,000.
            ``(3) For fiscal year 1997, $1,700,000,000.
    ``(d)(1) Subject to paragraph (2), amounts in the Fund shall be 
available to the Secretary only for the VA health plans organized and 
operated under this subchapter.
    ``(2)(A) For each of fiscal years 1996 and 1997, the Secretary 
shall estimate the total amount to be collected or recovered under 
sections 1831, 1832, and 1833 of this title by reason of the provision 
of care and services through VA health plans under chapter 18 of this 
title or the enrollment of individuals in such plans under that 
chapter. The Secretary shall estimate the amount to be so collected or 
recovered with respect to each VA health plan and with respect to all 
VA health plans.
    ``(B) For each such fiscal year, the Secretary shall make available 
to each VA health plan an amount that bears the same relationship to 
the total amount available in the Fund for the fiscal year as the 
amount estimated to be collected or recovered by the VA health plan 
during the fiscal year bears to the total amount estimated to be 
collected or recovered by all VA health plans during that fiscal year.
    ``(e) Not later than March 1, 1997, the Secretary shall submit to 
Congress a report concerning the operation of the Department of 
Veterans Affairs health care system in preparing for, and operating 
under, national health care reform under the Health Security Act during 
fiscal years 1995 and 1996. The report shall include a discussion of--
            ``(1) the adequacy of amounts in the Fund for the operation 
        of VA health plans;
            ``(2) the quality of care provided by such plans; and
            ``(3) the ability of such plans to attract patients.
``Sec. 7347. Funding provisions: grants and other sources of assistance
    ``The Secretary may apply for and accept, if awarded, any grant or 
other source of funding that is intended to meet the needs of special 
populations and that but for this section is unavailable to facilities 
of the Department or to health plans operated by the Government if 
funds obtained through the grant or other source of funding will be 
used through a facility of the Department operating as or within a 
health plan.''.
    (b) Clerical Amendment.--The table of sections at the beginning of 
chapter 73 is amended by striking out the item relating to the heading 
for subchapter IV and inserting in lieu thereof the following:

 ``Subchapter IV--Participation as Part of National Health Care Reform

``7341. Organization of health care facilities as health plans.
``7342. Contract authority for facilities operating as or within health 
                            plans.
``7343. Resource sharing authority.
``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''.

            TITLE IX--WORKERS COMPENSATION MEDICAL SERVICES

SEC. 9000. APPLICATION OF INFORMATION REQUIREMENTS.

    (a) In General.--The provisions of subtitle B of title V shall 
apply to the provision of workers compensation medical services 
provided by a health plan or health care provider in the same manner as 
such provisions apply with respect to the provision of services 
included in the standard benefit package.
    (b) Information.--Subject to the provisions of subtitle C of title 
V, health plans and health care providers that render workers 
compensation medical services shall provide to the worker and to the 
workers compensation carrier, the employer or both, as appropriate, 
relevant health care information necessary to assist the worker in the 
safe and timely return to work.
    (c) Compliance With Duties and Requirements.--A health plan to 
which this section applies and its providers shall comply with legal 
duties and reporting requirements under State workers compensation 
laws, and other Federal and State laws, including laws regarding the 
reporting of occupational injuries and diseases.
    (d) Rules.--The Secretary of Labor shall promulgate rules to 
clarify the responsibilities of health plans and health care providers 
in carrying out the provisions referred to in subsection (a).

SEC. 9001. PROVISION OF CARE IN DISPUTED CASES.

    (a) In General.--In cases in which a workers compensation claim is 
challenged by the employer, the workers compensation carrier, or both, 
a health plan shall provide or pay for all medical care included in the 
standard benefit package according to the applicable workers 
compensation fee schedule, if any, until such time as a determination 
is made through the adjudication process that the claim is compensable 
as a workers compensation claim. If such a determination is made, the 
workers compensation carrier (or the employer, if self-insured) shall 
reimburse the health plan (for the cost of services delivered to the 
member for the work-related illness or injury) and the worker (for any 
copayments, deductibles or coinsurance costs incurred for such 
services).
    (b) Applicability.--Subsection (a) shall not apply in a case where 
compensation has been accepted by the insurer or the employer, or paid 
without prejudice.

SEC. 9002. DEMONSTRATION PROJECTS.

    (a) Authorization.--The Secretary of Health and Human Services and 
the Secretary of Labor are authorized to conduct demonstration projects 
under this section in one or more States with respect to treatment of 
work-related injuries and illnesses.
    (b) Development of Work-Related Protocols.--
            (1) In general.--The Secretary of Health and Human Services 
        and the Secretary of Labor, in consultation with the States and 
        such experts on work-related injuries and illnesses as each 
        such Secretary finds appropriate, shall develop protocols for 
        the appropriate treatment of work-related conditions.
            (2) Testing of protocols.--The Secretary of Health and 
        Human Services and the Secretary of Labor shall enter into 
        contracts with one or more community-rated health plans to test 
        the validity of the protocols developed under subsection (a).
    (c) Development of Capitation Payment Models.--The Secretary of 
Health and Human Services and the Secretary of Labor shall develop, 
using protocols developed under subsection (b) if possible, methods of 
providing for payment by workers compensation carriers to health plans 
on a per case basis, capitated payment for the treatment of specified 
work-related injuries and illnesses.

SEC. 9003. COMMISSION ON WORKERS COMPENSATION MEDICAL SERVICES.

    (a) Establishment.--There is hereby established a Commission on 
Workers Compensation Medical Services (hereafter in this section 
referred to as the ``Commission'').
    (b) Composition.--
            (1) In general.--The Commission shall consist of 15 members 
        appointed in accordance with paragraph (2). Members of the 
        Commission shall include--
                    (A) one or more individuals representing State 
                workers compensation commissioners;
                    (B) one or more individuals representing State 
                workers compensation funds;
                    (C) one or more individuals representing labor 
                organizations;
                    (D) one or more individuals representing employers 
                (other than workers compensation insurance carriers);
                    (E) one or more individuals representing workers 
                compensation insurance carriers;
                    (F) one or more members of the medical profession 
                having expertise in occupational health; and
                    (G) one or more educators or researchers having 
                expertise in the field of occupational health.
        Eight members of the Commission shall constitute a quorum.
            (2) Appointments.--Members of the Commission shall be 
        appointed by the President and shall include--
                    (A) three members appointed from among individuals 
                recommended by the Speaker of the House of 
                Representatives;
                    (B) three members appointed from among individuals 
                recommended by the Minority Leader of the House of 
                Representatives;
                    (C) three members appointed from among individuals 
                recommended by the Majority Leader of the Senate; and
                    (D) three members appointed from among individuals 
                recommended by the Minority Leader of the Senate.
            (3) No compensation except travel expenses.--Members of the 
        Commission shall serve without compensation, but each member 
        shall receive travel expenses, including per diem in lieu of 
        subsistence, in accordance with sections 5702 and 5703 of title 
        5, United States Code.
    (c) Duties.--
            (1) In general.--The Commission shall study the 
        relationship of workers compensation medical services to the 
        new health system under this Act in terms of impact on the cost 
        of workers compensation medical services, access to appropriate 
        care for injured workers, and quality of medical care and its 
        impact on functional and vocational outcomes for injured 
        workers.
            (2) Evaluation issues to be addressed.--In its 
        deliberations under paragraph (1), the Commission shall 
        consider the following issues in examining the relationship 
        between health plans and workers compensation medical services:
                    (A) The impact of health reform on workers 
                compensation medical costs and premium rates charged to 
                employers for workers compensation insurance.
                    (B) The extent and impact of cost-shifting and 
                price discrimination between the workers compensation 
                medical system and traditional health insurers.
                    (C) The impact of experience rating adjustments 
                resulting from workers compensation medical services on 
                workplace safety.
                    (D) The advantages and disadvantages of maintaining 
                separate financing, payment and delivery systems for 
                workers compensation medical services, including the 
                impact on--
                            (i) the quality of medical care delivered 
                        to workers injured or made ill on the job;
                            (ii) the incentives for employers to 
                        maintain safe work-places; and
                            (iii) workers compensation indemnity 
                        benefit costs, medical costs and the overall 
                        costs of the workers compensation system.
                    (E) The advisability and appropriateness of 
                transferring financial responsibility for some or all 
                workers compensation medical benefits to health plans.
                    (F) The impact of State-to-State variations in 
                medical and rehabilitation benefits on costs, access 
                and quality of care.
                    (G) The options that are available to accomplish 
                the delivery of workers compensation benefits not 
                included in the standard benefit package in integrated 
                systems
                    (H) Whether capitated rates can be developed for 
                workers compensation medical benefits, and the impact 
                of using such rates on medical and indemnity costs, 
                access, and quality of care.
                    (I) The impact of provider choice, with respect to 
                an injured worker, on workers compensation medical 
                costs, wage-loss benefits costs, and quality of care.
    (d) Staff Support.--The Secretary of Health and Human Services and 
the Secretary of Labor shall provide staff support for the Commission.
    (e) Reports.--Not later than October 1, 2000, the Commission shall 
submit a final report on its work to the President, the Committee on 
Labor and Human Resources of the Senate and the Committee on Education 
and Labor of the House of Representatives. Such report shall include a 
recommendation as to whether a transfer of financial responsibility for 
some or all medical benefits to health plans should be effected, and a 
detailed implementation plan should such a transfer be recommended. 
Prior to the submission of the final report, the Commission shall 
submit such interim reports on issues addressed by the Commission as 
the members of the Commission determine to be appropriate.

                       TITLE X--PREMIUM FINANCING

     Subtitle A--National Health Care Cost and Coverage Commission

SEC. 10001. NATIONAL HEALTH CARE COST AND COVERAGE COMMISSION.

    There is established a commission to be known as the National 
Health Care Cost and Coverage Commission (hereafter in this title 
referred to as the ``Commission'').

SEC. 10002. COMPOSITION.

    (a) Composition.--The Commission shall be composed of 7 members 
appointed by the President and confirmed by the Senate. Members shall 
be appointed not later than 9 months after the date of the enactment of 
this Act based on their expertise and national recognition in the 
fields of health economics including insurance practices, health care 
benefit design, health care provider organization and reimbursement, 
and labor markets. In appointing members of the Commission, the 
President shall ensure that no more than 4 members of the Commission 
are affiliated with the same political party.
    (b) Chairperson.--The President shall designate 1 individual 
described in subsection (a) who shall serve as Chairperson of the 
Commission.
    (c) Terms.--
            (1) In general.--The terms of members of the Commission 
        shall be for 6 years to commence on January 1, 1996, except 
        that of the members first appointed, 3 shall be appointed for 
        an initial term of 4 years, 3 shall be appointed for an initial 
        term of 5 years and the chairperson shall be appoint for an 
        initial term of 6 years.
            (2) Continuation in office.--Upon the expiration of a term 
        of office, a member shall continue to serve until a successor 
        is appointed and qualified.
    (d) Vacancies.--
            (1) In general.--A vacancy in the Commission shall be 
        filled in the same manner as the original appointment, but the 
        individual appointed to fill the vacancy shall serve only for 
        the unexpired portion of the term for which the individual's 
        predecessor was appointed.
            (2) No impairment of function.--A vacancy in the membership 
        of the Commission does not impair the authority of the 
        remaining members to exercise all of the powers of the 
        Commission.
            (3) Acting chairperson.--The Commission may designate a 
        member to act as Chairperson during any period in which there 
        is no Chairperson designated by the President.

SEC. 10003. DUTIES OF COMMISSION.

    (a) In General.--The general duties of the Commission are to 
monitor and respond to--
            (1) trends in health care coverage; and
            (2) changes in per-capita premiums and other indicators of 
        health care inflation.
The Commission may be advised by individuals with expertise concerning 
the economic, demographic, and insurance market factors that affect the 
cost and coverage of health insurance.
    (b) Annual Reports.--
            (1) In general.--The Commission shall report to Congress 
        annually on January 1 (beginning in 1997) concerning trends in 
        health care coverage and costs. Such reports shall categorize 
        such information on a national basis, a State by State basis, 
        and a community rating area basis.
            (2) Health care coverage.--For purposes of this title, the 
        term ``health care coverage'' means coverage under--
                    (A) a certified standard health plan providing a 
                standard benefits package or an alternative standard 
                benefits package;
                    (B) the medicare program under title XVIII of the 
                Social Security Act;
                    (C) the medicaid program under title XIX of the 
                Social Security Act;
                    (D) the health care program for active military 
                personnel under title 10, United States Code;
                    (E) the veterans health care program under chapter 
                17 of title 38, United States Code;
                    (F) the Civilian Health and Medical Program of the 
                Uniformed Services (CHAMPUS), as defined in section 
                1073(4) of title 10, United States Code;
                    (G) the Indian health service program under the 
                Indian Health Care Improvement Act (25 U.S.C. 1601 et 
                seq.);
                    (H) a State single-payer system approved under 
                subpart B of part 3 of subtitle F of title I; or
                    (I) any governmental health care program for 
                institutionalized individuals.
            (3) Contents of report.--Each report under paragraph (1) 
        shall include the findings of the Commission with respect to 
        the following:
                    (A) Demographics and employment status of the 
                uninsured individuals, and findings on why such 
                individuals are uninsured.
                    (B) Structure of delivery systems.
                    (C) Status of insurance reforms.
                    (D) Development and operation of purchasing 
                cooperatives and other buyer reforms.
                    (E) Success of market and other mechanisms in 
                expanding coverage and controlling health expenditures 
                and premium costs among employers and families.
                    (F) Success of the tax imposed under section 4521 
                of the Internal Revenue Code of 1986.
                    (G) Success and adequacy of the individual and 
                employer subsidy programs under title VI in expanding 
                coverage through employers and families.
                    (H) Per capita cost of health care, including--
                            (i) the rate of growth in health care costs 
                        categorized by type of health care provider and 
                        type of payor in States and community rating 
                        areas;
                            (ii) the expected rate of growth in per 
                        capita health care costs;
                            (iii) the causes of such growth; and
                            (iv) proposed strategies for controlling 
                        such growth.
                    (I) The percentage of the resident population in 
                the United States, and each State, that has health care 
                coverage.
            (4) Benefits issues.--The Commission shall consult with the 
        National Health Benefits Board in gathering data and in making 
        recommendations concerning issues that effect the standard 
        benefit package.
    (c) Affordability Reports.--
            (1) In general.--As part of each annual report under 
        subsection (b), beginning with the report for 1999, the 
        Commission shall include information on--
                    (A) the affordability of health care coverage for 
                families and employers; and
                    (B) the success of market incentives and other 
                provisions of this Act in achieving health care cost 
                containment.
            (2) Determination and recommendations.--If the Commission 
        determines for any year that health care coverage is 
        unaffordable (as described in paragraph (3)) or that cost 
        containment efforts under this Act are unsuccessful, the 
        Commission shall submit recommendations in the annual report 
        for systematic improvements as provided for in paragraph (4).
            (3) Cost of coverage.--The Commission shall make a 
        determination of unaffordability under paragraph (2) if the 
        Commission finds that, with respect to the year for which the 
        report is submitted, fewer than 35 percent of those eligible to 
        enroll in community-rated health plans were able to enroll in 
        plans with a premium that was at or below the reference premium 
        for the community rating area involved.
            (4) Recommendations.--If the Commission makes a finding 
        under paragraph (3) with respect to any year, the Commission 
        shall recommend to Congress a means of controlling health care 
        costs in order to ensure that the growth in the per capita 
        premium for community-rated plans is at or below the growth in 
        the target per capita premium for the community rating area 
        involved. The Commission may recommend alternative target per 
        capita premium growth if the Commission determines that such 
        alternative would be more appropriate.
            (5) Congressional consideration.--The recommendations of 
        the Commission under paragraph (4) shall be submitted to 
        Congress in the form of an implementing bill which contains 
        such statutory provisions as the Commission determines are 
        necessary or appropriate to implement such recommendations. 
        Such bill shall be considered under the procedures established 
        under section 10004.
    (d) Coverage Trigger.--
            (1) Commission determination.--By January 1, 2000, the 
        Commission shall make a determination as to the percentage of 
        the resident population in the United States, and each State, 
        that has health care coverage.
            (2) Attainment of coverage goal.--
                    (A) In general.--If, under paragraph (1), the 
                Commission determines that health care coverage of at 
                least 95 percent of the resident population in the 
                United States has been attained, the Commission shall 
                submit recommendations (under subparagraph (B)) in its 
                annual report to Congress on January 1, 2000.
                    (B) Recommendation requirement.--The 
                recommendations of the Commission under subparagraph 
                (A) shall include methods to expand health care 
                coverage to those who are not covered. Such 
                recommendations shall address all relevant parties, 
                including States, employers, employees, unemployed and 
                low-income individuals, and public program 
                participants.
            (3) Coverage goal not attained.--
                    (A) In general.--If, under paragraph (1), the 
                Commission determines that health care coverage of at 
                least 95 percent of the resident population in the 
                United States has not been attained by January 1, 2000, 
                the Commission shall submit recommendations (under 
                subparagraph (B)) in its annual report to Congress not 
                later than May 15, 2000.
                    (B) Recommendation requirements.--The 
                recommendations of the Commission under paragraph (1) 
                shall include one or more legislative proposals for 
                expanding health care coverage to cover the remaining 
                uninsured population. Such recommendations shall 
                address all relevant parties, including States, 
                employers, employees, unemployed and low-income 
                individuals, and public program participants.
                    (C) Congressional consideration.--The 
                recommendations of the Commission under subparagraph 
                (A) shall be submitted to Congress in the form of one 
                or more implementing bills which contains such 
                statutory provisions as the Commission determines are 
                necessary or appropriate to implement such 
                recommendations. Such bill shall be considered under 
                the procedures established under section 10004.

SEC. 10004. CONGRESSIONAL CONSIDERATION OF COMMISSION RECOMMENDATIONS.

    (a) Implementing Bills.--
            (1) In general.--Except as provided in paragraph (2), an 
        implementing bill described in section 10003(c)(5) or section 
        10003(d)(3)(C) shall be considered by Congress under the 
        procedures for consideration described in subsection (b), 
        except that with respect to an implementing bill described in 
        section 10003(c)(5), the date described in subsection (b)(3) 
        shall not apply.
            (2) GAO consideration.--With respect to an implementing 
        bill described in section 10003(d)(3)(C), to be eligible for 
        Congressional consideration under subsection (b), the General 
        Accounting Office must certify that, if implemented, the 
        legislative proposals in such bill would expand health care 
        coverage to cover the remaining uninsured population.
    (b) Congressional Consideration.--
            (1) Rules of house of representatives and senate.--This 
        subsection is enacted by Congress--
                    (A) as an exercise of the rulemaking power of the 
                House of Representatives and the Senate, respectively, 
                and as such is deemed a part of the rules of each 
                House, respectively, but applicable only with respect 
                to the procedure to be followed in that House in the 
                case of an implementing bill described in subsection 
                (a), and supersedes other rules only to the extent that 
                such rules are inconsistent therewith; and
                    (B) with full recognition of the constitutional 
                right of either House to change the rules (so far as 
                relating to the procedure of that House) at any time, 
                in the same manner and to the same extent as in the 
                case of any other rule of that House.
            (2) Introduction and referral.--On the day on which the 
        implementing bill described in subsection (a) is transmitted to 
        the House of Representatives and the Senate, such bill shall be 
        introduced (by request) in the House of Representatives by the 
        Majority Leader of the House, for himself or herself and the 
        Minority Leader of the House, or by Members of the House 
        designated by the Majority Leader and Minority Leader of the 
        House and shall be introduced (by request) in the Senate by the 
        Majority Leader of the Senate, for himself or herself and the 
        Minority Leader of the Senate, or by Members of the Senate 
        designated by the Majority Leader and Minority Leader of the 
        Senate. If either House is not in session on the day on which 
        the implementing bill is transmitted, the bill shall be 
        introduced in that House, as provided in the preceding 
        sentence, on the first day thereafter on which that House is in 
        session. If the implementing bill is not introduced within 5 
        days of its transmission, any Member of the House and of the 
        Senate may introduce such bill. The implementing bill 
        introduced in the House of Representatives and the Senate shall 
        be referred to the appropriate committees of each House.
            (3) Period for committee consideration.--If the committee 
        or committees of either House to which an implementing bill has 
        been referred have not reported the bill at the close of July 
        1, 2000 (or if such House is not in session, the next day such 
        House is in session), such committee or committees shall be 
        automatically discharged from further consideration of the 
        implementing bill and it shall be placed on the appropriate 
        calendar.
            (4) Floor consideration in the senate.--
                    (A) In general.--Within 5 days after the 
                implementing bill is placed on the calendar, the 
                Majority Leader, at a time to be determined by the 
                Majority Leader in consultation with the Minority 
                Leader, shall proceed to the consideration of the bill. 
                If on the sixth day after the bill is placed on the 
                calendar, the Senate has not proceeded to consideration 
                of the bill, then the presiding officer shall 
                automatically place the bill before the Senate for 
                consideration. A motion in the Senate to proceed to the 
                consideration of an implementing bill shall be 
                privileged and not debatable. An amendment to the 
                motion shall not be in order, nor shall it be in order 
                to move to reconsider the vote by which the motion is 
                agreed to or disagreed to.
                    (B) Time limitation on consideration of bill.--
                            (i) In general.--Debate in the Senate on an 
                        implementing bill, and all amendments and 
                        debatable motions and appeals in connection 
                        therewith, shall be limited to not more than 30 
                        hours. The time shall be equally divided 
                        between, and controlled by, the Majority Leader 
                        and the Minority Leader or their designees.
                            (ii) Debate of amendments, motions, points 
                        of order, and appeals.--In the Senate, no 
                        amendment which is not relevant to the bill 
                        shall be in order. Debate in the Senate on any 
                        amendment, debatable motion or appeal, or point 
                        of order in connection with an implementing 
                        bill shall be limited to--
                                    (I) not more than 2 hours for each 
                                first degree relevant amendment,
                                    (II) one hour for each second 
                                degree relevant amendment, and
                                    (III) 30 minutes for each debatable 
                                motion or appeal, or point of order 
                                submitted to the Senate,
                        to be equally divided between, and controlled 
                        by, the mover and the manager of the 
                        implementing bill, except that in the event the 
                        manager of the implementing bill is in favor of 
                        any such amendment, motion, appeal, or point of 
                        order, the time in opposition thereto, shall be 
                        controlled by the Minority Leader or designee 
                        of the Minority Leader. The Majority Leader and 
                        Minority Leader, or either of them, may, from 
                        time under their control on the passage of an 
                        implementing bill, allot additional time to any 
                        Senator during the consideration of any 
                        amendment, debatable motion or appeal, or point 
                        of order.
                    (C) Other motions.--A motion to recommit an 
                implementing bill is not in order.
                    (D) Final passage.--Upon the expiration of the 30 
                hours available for consideration of the implementing 
                bill, it shall not be in order to offer or vote on any 
                amendment to, or motion with respect to, such bill. 
                Immediately following the conclusion of debate in the 
                Senate on an implementing bill that was introduced in 
                the Senate, such bill shall be deemed to have been read 
                a third time and the vote on final passage of such bill 
                shall occur without any intervening action or debate.
                    (E) Debate on differences between the houses.--
                Debate in the Senate on motions and amendments 
                appropriate to resolve the differences between the 
                Houses, at any particular stage of the proceedings, 
                shall be limited to not more than 5 hours.
                    (F) Debate on conference report.--Debate in the 
                Senate on the conference report shall be limited to not 
                more than 10 hours.
            (5) Floor consideration in the house of representatives.--
                    (A) Proceed to consideration.--On the sixth day 
                after the implementing bill is placed on the calendar, 
                it shall be privileged for any Member to move without 
                debate that the House resolve itself into the Committee 
                of the Whole House on the State of the Union, for the 
                consideration of the bill, and the first reading of the 
                bill shall be dispensed with.
                    (B) General debate.--After general debate, which 
                shall be confined to the implementing bill and which 
                shall not exceed 4 hours, to be equally divided and 
                controlled by the Chairman and Ranking Minority Member 
                of the Committee or Committees to which the bill had 
                been referred, the bill shall be considered for 
                amendment by title under the 5-minute rule and each 
                title shall be considered as having been read. The 
                total time for considering all amendments shall be 
                limited to 26 hours of which the total time for 
                debating each amendment under the 5-minute rule shall 
                not exceed one hour.
                    (C) Rise and report.--At the conclusion of the 
                consideration of the implementing bill for amendment, 
                the Committee of the Whole on the State of the Union 
                shall rise and report the bill to the House with such 
                amendments as may have been adopted, and the previous 
                question shall be considered as ordered on the bill and 
                the amendments thereto, and the House shall proceed to 
                vote on final passage without intervening motion except 
                one motion to recommit.
            (6) Computation of days.--For purposes of this subsection, 
        in computing a number of days in either House, there shall be 
        excluded--
                    (A) the days on which either House is not in 
                session because of an adjournment of more than 3 days 
                to a day certain, or an adjournment of the Congress 
                sine die, and
                    (B) any Saturday and Sunday not excluded under 
                subparagraph (A) when either House is not in session.
            (7) Points of order based on expanding coverage.--
                    (A) In general.--It shall not be in order in the 
                Senate to consider--
                            (i) any bill;
                            (ii) any bill prior to third reading; or
                            (iii) any conference report;
                under the procedures described in this subsection if 
                such bill or conference report has not been certified 
                by the General Accounting Office under subsection 
                (a)(2) as expanding coverage to cover the remaining 
                uninsured.
                    (B) Waiver or suspension.--Subparagraph (A) may be 
                waived or suspended in the Senate only by the 
                affirmative vote of \3/5\ of the members duly chosen 
                and sworn. An affirmative vote of \3/5\ of the members 
                of the Senate duly chosen and sworn shall be required 
                in the Senate to sustain an appeal of the ruling of the 
                chair on a point of order raised under this paragraph.
    (c) Failure to Enact Legislation.--If Congress fails to enact 
legislation with respect to an implementing bill under section 
10003(d)(3)(C) by December 31, 2000, the employer and individual 
premium financing provisions of subtitle B shall become effective on 
January 1, 2002 with respect to those States determined by the 
Commission under 10003(d)(3)(A) to have health care coverage for less 
than 95 percent of the resident populations of each such State.

SEC. 10005. OPERATION OF THE COMMISSION.

    (a) Meetings; Quorum.--
            (1) Meetings.--The Chairperson shall preside at meetings of 
        the Commission, and in the absence of the Chairperson, the 
        Commission shall elect a member to act as Chairperson pro 
        tempore.
            (2) Quorum.--Four members of the Commission shall 
        constitute a quorum thereof.
    (b) Administrative Provisions.--
            (1) Faca not applicable.--The Federal Advisory Committee 
        Act (5 U.S.C. App.) shall not apply to the Commission.
            (2) Pay and travel expenses.--
                    (A) Pay.--Each member of the Commission shall be 
                paid at a rate equal to the daily equivalent of the 
                minimum annual rate of basic pay payable for level IV 
                of the Executive Schedule under section 5315 of title 
                5, United States Code, for each day (including travel 
                time) during which the member is engaged in the actual 
                performance of duties vested in the Commission.
                    (B) Travel expenses.--Members of the Commission 
                shall receive travel expenses, including per diem in 
                lieu of subsistence, in accordance with sections 5702 
                and 5703 of title 5, United States Code.
            (3) Executive director.--
                    (A) In general.--The Commission shall, without 
                regard to section 5311(b) of title 5, United States 
                Code, appoint an Executive Director.
                    (B) Pay.--The Executive Director shall be paid at a 
                rate equivalent to a rate for the Senior Executive 
                Service.
            (4) Staff.--
                    (A) In general.--Subject to subparagraphs (B) and 
                (C), the Executive Director, with the approval of the 
                Commission, may appoint and fix the pay of additional 
                personnel.
                    (B) Pay.--The Executive Director may make such 
                appointments without regard to the provisions of title 
                5, United States Code, governing appointments in the 
                competitive service, and any personnel so appointed may 
                be paid without regard to the provisions of chapter 51 
                and subchapter III of chapter 53 of such title, 
                relating to classification and General Schedule pay 
                rates, except that an individual so appointed may not 
                receive pay in excess of 120 percent of the annual rate 
                of basic pay payable for GS-15 of the General Schedule.
                    (C) Detailed personnel.--Upon request of the 
                Executive Director, the head of any Federal department 
                or agency may detail any of the personnel of that 
                department or agency to the Commission to assist the 
                Commission in carrying out its duties under this Act.
            (5) Other authority.--
                    (A) Contract services.--The Commission may procure 
                by contract, to the extent funds are available, the 
                temporary or intermittent services of experts or 
                consultants pursuant to section 3109 of title 5, United 
                States Code.
                    (B) Leases and property.--The Commission may lease 
                space and acquire personal property to the extent funds 
                are available.
    (c) Authorization of Appropriations.--There are authorized to be 
appropriated such sums as are necessary for the operation of the 
Commission.

Subtitle B--Employer and Individual Premium Requirements and Assistance

SEC. 10101. APPLICATION OF SUBTITLE.

    (a) In General.--The provisions of the subtitle shall apply as 
provided in section 10003(c).
    (b) Application With Respect To Individuals.--
            (1) Lawful residents.--
                    (A) In general.--This subtitle shall only apply 
                with respect to an individual who is residing in a 
                State involved and who is--
                            (i) a citizen or national of the United 
                        States; or
                            (ii) an alien permanently residing in the 
                        United States under color of law (as defined in 
                        subparagraph (B)).
                    (B) Alien permanently residing in the united states 
                under color of law.--The term ``alien permanently 
                residing in the United States under color of law'' 
                means an alien lawfully admitted for permanent 
                residence (within the meaning of section 101(a)(20) of 
                the Immigration and Nationality Act), and includes any 
                of the following:
                            (i) An alien who is admitted as a refugee 
                        under section 207 of the Immigration and 
                        Nationality Act.
                            (ii) An alien who is granted asylum under 
                        section 208 of such Act.
                            (iii) An alien whose deportation is 
                        withheld under section 243(h) of such Act.
                            (iv) An alien who is admitted for temporary 
                        residence under section 210, 210A, or 245A of 
                        such Act.
                            (v) An alien who has been paroled into the 
                        United States under section 212(d)(5) of such 
                        Act for an indefinite period or who has been 
                        granted extended voluntary departure as a 
                        member of a nationality group.
                            (vi) An alien who is the spouse or 
                        unmarried child under 21 years of age of a 
                        citizen of the United States, or the parent of 
                        such a citizen if the citizen is over 21 years 
                        of age, and with respect to whom an application 
                        for adjustment to lawful permanent residence is 
                        pending.
            (2) Individual responsibilities.--With respect to a State 
        to which this subtitle applies, each individual described in 
        paragraph (1)(A)--
                    (A) must enroll in (or be covered under) a health 
                plan for the individual, and
                    (B) must pay any premium required, consistent with 
                this Act, with respect to such enrollment.
            (3) Individuals covered under equivalent health care 
        programs.--This subtitle shall not apply with respect to an 
        individual covered under an equivalent health care program.
            (4) Equivalent health care program.--As used in paragraph 
        (1), the term ``equivalent health care program'' means--
                    (A) part A or part B of the medicare program under 
                title XVIII of the Social Security Act,
                    (B) the medicaid program under title XIX of the 
                Social Security Act,
                    (C) the health care program for active military 
                personnel under title 10, United States Code,
                    (D) the veterans health care program under chapter 
                17 of title 38, United States Code,
                    (E) the Civilian Health and Medical Program of the 
                Uniformed Services (CHAMPUS), as defined in section 
                1073(4) of title 10, United States Code,
                    (F) the Indian health service program under the 
                Indian Health Care Improvement Act (25 U.S.C. 1601 et 
                seq.), and
                    (G) a State single-payer system approved by the 
                Secretary under subpart B of part 3 of subtitle F.
            (5) Inmates.--This subtitle shall not apply with respect to 
        an individual who is an inmate of a public institution (except 
        as a patient of a medical institution).
            (6) Exemption.--
                    (A) In general.--The requirements of this subtitle 
                shall not apply with respect to an individual granted a 
                qualified religious exemption.
                    (B) Qualified religious exemption.--
                            (i) In general.--The term `qualified 
                        religious exemption' means an exemption granted 
                        by the Secretary to an individual--
                                    (I) who is a member of a recognized 
                                religious sect or division thereof with 
                                respect to which such Secretary makes 
                                the findings referred to in 
                                subparagraphs (C), (D), and (E) of 
                                section 1402(g)(1) of the Internal 
                                Revenue Code of 1986,
                                    (II) who is an adherent of 
                                established tenets or teachings of such 
                                sect or division as described in such 
                                section, and
                                    (III) who submits an application 
                                for such exemption which contains or is 
                                accompanied by the evidence described 
                                in section 1402(g)(1)(A) of such Act 
                                and a waiver described in section 
                                1402(g)(1)(B) of such Act.
                    (C) Limitation.--An exemption granted under this 
                paragraph shall cease to apply beginning on the date 
                such Secretary determines that the individual, or the 
                sect or division, ceased to meet the requirements of 
                subparagraph (B).

SEC. 10102. DEFINITIONS.

    For purposes of this title:
            (1) Full-time equivalent employees; part-time employees.--
                    (A) In general.--A qualifying employee who is 
                employed by an employer--
                            (i) for at least 120 hours in a month, is 
                        counted as 1 full-time equivalent employee for 
                        the month and shall be deemed to be employed on 
                        a full-time basis, or
                            (ii) for at least 40 hours, but less than 
                        120 hours, in a month, is counted as a fraction 
                        of a full-time equivalent employee in the month 
                        equal to the full-time employment ratio (as 
                        defined in subparagraph (B)) for the employee 
                        and shall be deemed to be employed on a part-
                        time basis.
                    (B) Full-time employment ratio defined.--The term 
                ``full-time employment ratio'' means, with respect to a 
                qualifying employee of an employer in a month, the 
                lesser of 1 or the ratio of--
                            (i) the number of hours of employment such 
                        employee is employed by such employer for the 
                        month, to
                            (ii) 120 hours.
                    (C) Full-time employee.--The term ``full-time 
                employee'' means, with respect to an employer, an 
                employee who is employed on a full-time basis (as 
                specified in subparagraph (A)) by the employer.
                    (D) Part-time employee.--The term ``part-time 
                employee'' means, with respect to an employer, an 
                employee who is employed on a part-time basis (as 
                specified in subparagraph (A)) by the employer.
                    (E) Consideration of industry practice.--As 
                provided under rules established by the Secretary of 
                Labor, an employee who is not described in subparagraph 
                (C) or (D) shall be considered to be employed on a 
                full-time or part-time basis by an employer (and to be 
                a full-time or part-time employee of an employer) for a 
                month (or for all months in a 12-month period) if the 
                employee is employed by that employer on a continuing 
                basis that, taking into account the structure or nature 
                of employment in the industry, represents full or part-
                time employment in that industry.
                    (F) Qualifying employee.--
                            (i) The term ``qualifying employee'' means, 
                        with respect to an employer for a month, an 
                        employee who is employed by the employer for at 
                        least 40 hours in the month, subject to the 
                        limitation set forth in clause (ii).
                            (i) The term qualifying employee shall not 
                        include, with respect to an employer for a 
                        month, an employee of a nonelecting employer.
            (2) Family adjusted income.--
                    (A) In general.--Except as otherwise provided, the 
                term ``family adjusted income'' means, with respect to 
                a family, the sum of the adjusted incomes (as defined 
                in subparagraph (B)) for all members of the family.
                    (B) Adjusted income.--In subparagraph (A), the term 
                ``adjusted income'' means, with respect to an 
                individual, adjusted gross income (as defined in 
                section 62(a) of the Internal Revenue Code of 1986)--
                            (i) determined without regard to sections 
                        135, 162(l), 911, 931, and 933 of such Code, 
                        and
                            (ii) increased by the amount of interest 
                        received or accrued by the individual which is 
                        exempt from tax.
                    (C) Presence of additional dependents.--At the 
                option of an individual, a family may include (and not 
                be required to separate out) the income of other 
                individuals who are claimed as dependents of the family 
                for income tax purposes, but such individuals shall not 
                be counted as part of the family for purposes of 
                determining the size of the family.
            (3) Nonenrolling employee.--The term ``nonenrolling 
        employee'' means an employee of an employer who does not enroll 
        in a health plan offered by the employer.
            (4) Reference premium.--The term ``reference premium'' 
        means the reference premium established under section 4512 of 
        the Internal Revenue Code of 1986.
            (5) Secretary.--The term ``Secretary'' means the Secretary 
        of Labor.
            (6) Self-employed individual.--The term ``self-employed 
        individual'' means, for a year, an individual who has net 
        earnings (as defined in section 1402(a) of the Internal Revenue 
        Code of 1986) from self-employment for the year.
            (7) Weighted average premium.--The term ``weighted average 
        premium'' has the same meaning given such term in section 
        6002(b)(1)(C).

                   PART 1--EMPLOYER PREMIUM PAYMENTS

SEC. 10111. OBLIGATION.

    (a) In General.--Except as otherwise provided in this subtitle, a 
contributing employer (as defined in subsection (b)) shall make health 
care coverage premium payments on behalf of the qualifying employees of 
the employer in accordance with this subtitle.
    (b) Contributing Employer.--As used in subsection (a), the term 
``contributing employer'' means an employer that--
            (1) employs, on average, 25 or more employees; or
            (2) employs less than 25 employees that elects under 
        subsection (c) to be a contributing employee.
    (c) Election.--
            (1) In general.--An employer that does not meet the 
        requirements of subsection (b) may elect to be treated as a 
        community-rated employer under the procedures to be developed 
        by the Secretary.
            (2) Community-rated employer.--An exempt employer shall be 
        treated as a community-rated employer as of the first date of 
        the first year following an election made under paragraph (1).
            (3) Self-employed.--A self-employed individual that does 
        not employ at least one full-time employee may not make an 
        election under paragraph (1).

SEC. 10112. COMMUNITY-RATED EMPLOYERS.

    (a) Requirement.--
            (1) In general.--Each community-rated contributing employer 
        for a month shall pay at least an amount equal to the sum 
        across all qualifying employees of the amount specified in 
        subsection (b) for each such qualifying employee of the 
        employer. Such payments shall be made in accordance with 
        standards established by the Secretary.
            (2) Treatment of certain employment by experience-rated 
        employers.--An experience-rated employer shall be deemed, for 
        purposes of this subtitle, to be a community-rated employer 
        with respect to qualifying employees who are not experience 
        rate eligible individuals.
    (b) Premium Payment Amount.--
            (1) General rule.--The amount of the employer premium 
        payment under subsection (a) for a month for each qualifying 
        employee of the employer who is residing in a community rating 
        area, shall be equal to the sum of--
                    (A) 50 percent of the weighted average premium of 
                the purchasing cooperative through which the employer 
                offered health plan coverage with respect to each such 
                employee in such area; and
                    (B) the employer collection shortfall add-on 
                described in paragraph (2).
            (2) Employer collection shortfall add-on.--The employer 
        collection shortfall add-on for a month for each qualifying 
        employee of the employer residing in a community rating area 
        shall be equal to 50 percent of the amount described in section 
        10134 with respect to each such employee.
            (3) Part-time employees.--With respect to a part-time 
        employee, the payment required under paragraph (1) (and the 
        add-on described in paragraph (2)) shall be based on a pro-
        rated share (to be established by the Secretary) of the 
        weighted average premium of the purchasing cooperative involved 
        (or, with respect to the shortfall add-on, the amount described 
        in paragraph (2)).

SEC. 10113. EXPERIENCE RATED EMPLOYERS.

    (a) Requirement.--Each experience-rated employer that in a month 
employs a qualifying employee who is--
            (1) enrolled in an experienced-rated health plan sponsored 
        by the employer, shall provide for a payment toward the premium 
        for the plan for such employee in an amount specified under 
        subsection (b); or
            (2) is not so enrolled, shall make employer premium 
        payments with respect to such employee in an amount that is 
        equal to 50 percent of the weighted average premium (for the 
        applicable class of family enrollment) of the community rating 
        area in which the employee resides.
    (b) Premium Payment Amount.--
            (1) General rule.--The amount of the experience rated 
        employer premium payment under subsection (a)(1) for a month 
        for each qualifying employee of the employer, shall be equal to 
        50 percent of the weighted average premium of the health plans 
        offered by the employer.
            (2) Self-insured plans.--In the case of a self-insured 
        health plan, the amount of the premium payment under subsection 
        (a) shall be equal to the premium equivalent of the self-
        insured health plan.
            (3) Part-time employees.--With respect to a part-time 
        employee, the payment required under paragraph (1) shall be a 
        pro-rated share (to be established by the Secretary) of the 
        amount described in subsection (a)(2).
            (4) Premium areas.--An experience-rated plan sponsor 
        employer may, based on regulations promulgated by the 
        Secretary, establish premium areas. Experience rated employers 
        may base their payments under this section on the weighted 
        average premium of the health plans offered in such premium 
        areas.

                PART 2--FAMILY PAYMENT RESPONSIBILITIES

                        Subpart A--Family Share

SEC. 10131. ENROLLMENT AND PREMIUM PAYMENTS.

    (a) Requirement.--Each family enrolled in a community-rated health 
plan or in a experienced-rated health plan in a class of family 
enrollment is responsible for payment of the family share of premium 
payable respecting such enrollment. Such premium may be paid by an 
employer or other person on behalf of such a family.
    (b) Family Share of Premium Defined.--In this part, the term 
``family share of premium'' means, with respect to enrollment of a 
family--
            (1) in a community-rated health plan, the amount specified 
        in section 10132(a) for the class; or
            (2) in an experienced-rated health plan, the amount 
        specified in section 10132(b) for the class.

SEC. 10132. FAMILY SHARE OF PREMIUMS.

    (a) Community-Rated Health Plans.--
            (1) In general.--The family share of premiums for a family 
        enrolled in a community-rated health plan based on a class of 
        family enrollment shall equal the sum of the base amounts 
        described in paragraph (2) reduced (but not below zero) by the 
        sum of the amounts described in paragraph (3).
            (2) Base.--The base amounts described in this paragraph 
        (for a plan for a class of enrollment) are--
                    (A) the applicable premium specified in section 
                10133(a) with respect to such class of enrollment;
                    (B) 50 percent of the applicable collection 
                shortfall add-on (computed under section 10134 for such 
                class); and
                    (C) any applicable marketing fee as described in 
                section 1112(f).
            (3) Credits and discounts.--The amounts described in this 
        paragraph (for a plan for a class of enrollment) are--
                    (A) the amount of the family credit under section 
                10135(a); and
                    (B) the amount of any premium discount provided 
                under section 10136(a)(1).
    (b) Experience-Rated Health Plans.--
            (1) In general.--The family share of premiums for a family 
        enrolled in an experience-rated health plan based on a class of 
        family enrollment shall equal the premium described in 
        paragraph (2) reduced (but not below zero) by the sum of the 
        amounts described in paragraph (3).
            (2) Premium.--The premium described in this paragraph (for 
        a plan for a class of enrollment) is the applicable plan 
        premium specified in section 10133(b) with respect to the plan 
        and class of enrollment involved.
            (3) Credits and discounts.--The amounts described in this 
        paragraph (for a plan for a class of enrollment) are--
                    (A) the amount of the family credit under section 
                10135(a); and
                    (B) the amount of any premium discount provided 
                under section 10136(a).
            (4) Multistate employers.--For purposes of this subsection, 
        the Secretary shall establish alternative contribution rules 
        for multistate self-insured employers.

SEC. 10133. AMOUNT OF PREMIUM.

    (a) Community-Rated Plans.--The amount of the applicable premium 
charged by a community-rated health plan for all families in a class of 
family enrollment under a community-rated health plan offered in the 
health care coverage area is equal to the product of--
            (1) the final community rate for the plan; and
            (2) the premium class factor established by the Secretary 
        of Health and Human Service for that class under subpart D of 
        part 1 of subtitle E of title I;
increased for any applicable plan marketing fees (described in section 
1112(f)) and purchasing cooperative membership fees (described in 
section 1324).
    (b) Reference to Other Premiums.--The amount of the premium charged 
by an experience-rated employer for all families in a class of family 
enrollment under an experience-rated health plan is specified under 
section 10113.

SEC. 10134. COLLECTION SHORTFALL ADD-ON.

    (a) In General.--The collection shortfall add-on for a community 
rating area for a class of enrollment for a year, is a per enrollee 
amount (determined under rules developed by the Secretary of Health and 
Human Services), adjusted proportionately by the premium class factors 
described in section 10133(a)(2), such that the total of the adjusted 
per enrollee amounts in the community rating area equals the aggregate 
collection shortfall as determined under subsection (b).
    (b) Aggregate Collection Shortfall.--
            (1) In general.--Each State shall estimate, for each 
        community rating area for each year (beginning with the first 
        year for which this section applies) the total amount of 
        payments which the State can reasonably identify as owed to 
        community-rated health plans under this Act for the year and 
        not likely to be collected during a period specified by the 
        Secretary beginning on the first day of the year.
            (2) Exclusion of government debts.--The amount under 
        paragraph (1) shall not include any payments owed to a 
        community-rated health plan by the Federal, State, or local 
        governments.
            (3) Adjustment for previous shortfall estimation 
        discrepancy.--The amount estimated under this subsection for a 
        year shall be adjusted to reflect over (or under) estimations 
        in the amounts so computed under this subsection for previous 
        years (based on actual collections), taking into account 
        interest payable based upon borrowings (or savings) 
        attributable to such over or under estimations.

SEC. 10135. FAMILY CREDIT.

    (a) In General.--The credit provided under this section for a 
family enrolled through an employer in a community-rated or experience-
rated plan for a class of family enrollment is equal to the amount of 
the minimum employer premium payment required under part 1 with respect 
to the family.
    (b) Family Not Enrolled Through Employer.--The credit provided 
under this section for a family that is not enrolled in a community-
rated or experience-rated plan through an employer for a class of 
family enrollment is equal to 50 percent of the premium of the plan in 
which the family is enrolled. In no case shall such amount exceed the 
weighted average premium in the community rating area involved.

SEC. 10136. PREMIUM SUBSIDY.

    (a) In General.--Except as otherwise provided in this section, each 
family enrolled with a community-rated or experience-rated plan is 
entitled to a premium discount under this section, in the amount 
specified in subsection (b)(1).
    (b) Amount of Premium Discount.--
            (1) In general.--Subject to the succeeding paragraphs of 
        this subsection, the amount of the premium discount under this 
        subsection for a family under a class of family enrollment is 
        equal to--
                    (A) 50 percent of the lesser of--
                            (i) the weighted average premium for 
                        community-rated plans offered in the community-
                        rating area involved, increased by any amount 
                        provided under paragraph (2); or
                            (ii)(I) in the case of a family enrolled 
                        through a community-rated employer, the 
                        weighted average premium for the purchasing 
                        cooperative through which the family obtains 
                        coverage; or
                            (II) in the case of a family enrolled 
                        through an experience-rated employer, the 
                        weighted average premium for the premium area 
                        of the health plans offered by the employer; 
                        less
                    (B) the sum of--
                            (i) the family obligation amount described 
                        in subsection (c); and
                            (ii) the amount of any voluntary employer 
                        payment (not required under part 1) towards the 
                        family share of premiums for covered members of 
                        the family.
            (2) Increase for community-rated families to assure 
        enrollment in at-or-below-average-cost plan.--In the case of a 
        family enrolled in a community-rated plan, if a State 
        determines that a family eligible for a discount under this 
        section is unable to enroll in an at-or-below-average-cost plan 
        (as defined in paragraph (3)) that serves the area in which the 
        family resides, the amount of the premium discount under this 
        subsection is increased to the extent that such amount will 
        permit the family to enroll in a community-rated plan without 
        the need to pay a family share of premium under this part in 
        excess of the sum described in paragraph (1)(B).
            (3) At-or-below-average-cost plan defined.--In this 
        section, the term ``at-or-below-average-cost plan'' means a 
        community-rated plan the premium for which does not exceed, for 
        the class of family enrollment involved, the weighted average 
        premium for the community-rating area.
    (c) Family Obligation Amount.--
            (1) Determination.--Subject to paragraphs (2) and (3), the 
        family obligation amount under this subsection is determined as 
        follows:
                    (A) No obligation if income below income threshold 
                amount.--If the family adjusted income of the family is 
                less than the income threshold amount (specified in 
                paragraph (4)), the family obligation amount is zero.
                    (B) Income above income threshold amount.--If such 
                income is at least such income threshold amount, the 
                family obligation amount is the sum of the following:
                            (i) For income (above income threshold 
                        amount) up to the poverty level.--The product 
                        of the initial marginal rate for the applicable 
                        class of family enrollment (specified in 
                        paragraph (2)) and the amount by which--
                                    (I) the family adjusted income (not 
                                including any portion that exceeds the 
                                applicable poverty level for the class 
                                of family involved), exceeds;
                                    (II) such income threshold amount.
                            (ii) Graduated phase out of discount up to 
                        200 percent of poverty level.--The product of 
                        the final marginal rate for the applicable 
                        class of family enrollment (specified in 
                        paragraph (2)) and the amount by which the 
                        family adjusted income exceeds 100 percent (but 
                        is less than 200 percent) of the applicable 
                        poverty level.
            (2) Marginal rates.--In paragraph (1), for a year:
                    (A) Initial marginal rate.--The initial marginal 
                rate is the ratio of--
                            (i) 4 percent of the applicable poverty 
                        level for the class of enrollment involved for 
                        the year; to
                            (ii) the amount by which such poverty level 
                        exceeds such income threshold amount.
                    (B) Final marginal rate.--The final marginal rate 
                is 12 percent.
            (3) Limitation to 8 percent for all families.--
                    (A) In general.--In no case shall the family 
                obligation amount under this subsection for the year 
                exceed 8 percent of the adjusted income of the family.
                    (B) Families above 200 percent of poverty.--With 
                respect to a family with a family adjusted income that 
                exceeds 200 percent of the applicable poverty level, 
                the family obligation amount shall be equal to 8 
                percent of such family adjusted income.
            (4) Income threshold amount.--
                    (A) In general.--For purposes of this subtitle, the 
                income threshold amount specified in this paragraph is 
                $1,000 (adjusted under subparagraph (B)).
                    (B) Indexing.--For the 1-year period beginning on 
                January 1, 1995, the income threshold amount specified 
                in subparagraph (A) shall be increased or decreased by 
                the same percentage as the percentage increase or 
                decrease by which the average CPI for the 12-month-
                period ending with August 31 of the preceding year 
                exceeds such average for the 12-month period ending 
                with August 31. 1993.
                    (C) Rounding.--Any increase or decrease under 
                subparagraph (B) for a year shall be rounded to the 
                nearest multiple of $10.

SEC. 10137. NO LOSS OF COVERAGE.

    In no case shall the failure to pay amounts owed under this Act 
result in an individual's or family's 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.

    Subject to the limitations described in section 10142, a family 
with an employer contribution for a month that is less than the family 
credit amount described in section 10135, shall be liable for payment 
of an amount equal to the family credit amount less any employer 
contributions for the family for the month.

SEC. 10142. LIMITATION OF LIABILITY BASED ON INCOME.

    (a) In General.--In the case of an eligible family described in 
subsection (b), the repayment amount required under section 10141 with 
respect to a year shall not exceed the amount of liability described in 
subsection (c) for the year.
    (b) Eligible Family Described.--An eligible family described in 
this subsection is a family which is determined by the State for the 
community rating area in which the family resides, to have wage-
adjusted income (as defined in subsection (d)) below 200 percent of the 
applicable poverty level.
    (c) Amount of Liability.--
            (1) Determination.--Subject to subsection (f), in the case 
        of a family enrolled in a class of enrollment with wage-
        adjusted income (as defined in subsection (d)), the amount of 
        liability under this subsection is determined as follows:
                    (A) No obligation if income below income threshold 
                amount.--If such income is less than the income 
                threshold amount (specified in section 10136(c)(4)), 
                the amount of liability is zero.
                    (B) Income above income threshold amount.--If such 
                income is at least such income threshold amount, the 
                amount of liability is the sum of the following:
                            (i) Initial marginal rate.--The initial 
                        marginal rate (specified in paragraph (2)(A)) 
                        of the amount by which--
                                    (I) the wage-adjusted income (not 
                                including any portion that exceeds the 
                                applicable poverty level for the class 
                                of family involved), exceeds
                                    (II) such income threshold amount.
                            (ii) Final marginal rate.--Where wage-
                        adjusted income exceeds 100 percent of the 
                        applicable poverty level, the final marginal 
                        rate (specified in paragraph (2)(B)) of the 
                        amount by which the wage-adjusted income 
                        exceeds 100 percent of the applicable poverty 
                        level.
            (2) Marginal rates.--In paragraph (1)--
                    (A) Initial marginal rate.--The initial marginal 
                rate, for a year for a class of enrollment, is the 
                ratio of--
                            (i) 4 percent of the applicable poverty 
                        level for the class of enrollment for the year, 
                        to
                            (ii) the amount by which such poverty level 
                        exceeds such income threshold amount.
                    (B) Final marginal rate.--The final marginal rate, 
                for a year for a class of enrollment, is the ratio of--
                            (i) the amount by which (I) 50 percent of 
                        the weighted average premium in the community 
                        rating area (for the class and year) exceeds 
                        (II) 4 percent of applicable poverty level (for 
                        the class and year); to
                            (ii) 100 percent of such poverty level.
    (d) Wage-Adjusted Income Defined.--In this subtitle, the term 
``wage-adjusted income'' means, for a family, family adjusted income of 
the family, reduced by the sum of the following:
            (1)(A) Subject to subparagraph (B), the amount of any wages 
        included in such family's income that is received for 
        employment which is taken into account in the computation of 
        the amount of employer premiums under part 1.
            (B) The reduction under subparagraph (A) shall not exceed 
        for a year $5,000 (adjusted under section 10136(c)(3)(B)) 
        multiplied by the number of months (including portions of 
        months) of employment with respect to which employer premiums 
        were payable under part 1.
            (2) The amount of unemployment compensation included in 
        income under section 85 of the Internal Revenue Code of 1986.
    (e) Determinations.--A family's wage-adjusted income and the amount 
of liability under subsection (c) shall be determined by the State upon 
application by a family.

            TITLE XI--ENSURING HEALTH CARE REFORM FINANCING

SEC. 11001. ENSURING HEALTH CARE REFORM FINANCING.

    (a) Purpose.--The purpose of this section is to ensure that the 
enactment of this Act does not result in unanticipated increases in the 
Federal deficit.
    (b) Legal Entitlements Contingent.--Any entitlement provided by 
this Act, including those to premium assistance, shall be subject to 
the operation of this section.
    (c) Determination of Unfinanced Health Spending.--
            (1) Initial health care baseline.--Not later than the date 
        that is 60 days after the date of enactment of this Act, the 
        President shall, using up-to-date estimates, issue an order 
        setting forth the initial health care baseline for fiscal year 
        1995 and for each subsequent fiscal year through 2004, which 
        shall consist of estimates (for each year) projecting the 
        following:
                    (A) total direct spending outlays resulting from 
                this Act and under the Medicare and Medicaid programs; 
                and
                    (B) total revenues resulting from this Act.
            (2) President's budget to include a current health care 
        baseline.--When the President submits the budget for fiscal 
        year 1997 (as required by section 1105 of title 31), and for 
        each fiscal year through 2004, the President shall include--
                    (A) a current health care baseline (as specified in 
                paragraph (3)) with respect to the current fiscal year, 
                the budget year, and the 4 following fiscal years; and
                    (B) an estimate of the difference between the 
                current health care baseline and the initial health 
                care baseline for the current fiscal year, the budget 
                year, and the 4 following fiscal years.
            (3) Current health care baseline.--The current health care 
        baseline shall, for the applicable fiscal year, consist of--
                    (A) updated spending and revenue amounts contained 
                in the initial projection (as set forth in paragraph 
                (1)); plus or minus
                    (B) other outlays or revenue changes contained in 
                legislation enacted after the date of enactment of this 
                Act offsetting outlays or revenues resulting from this 
                Act.
            (4) Comparing initial and current health care baselines.--
        Once OMB has determined the difference between the initial and 
        current health care baselines, OMB shall remove from that 
        difference any health care variable not attributable either to 
        this Act or to any legislation described in paragraph (3)(B).
    (d) Offsetting Unfinanced Health Spending.--
            (1) Requirement for sequestration to fully offset 
        unfinanced health spending.--If the President's budget includes 
        a determination that the current health care baseline exceeds 
        the initial health care baseline pursuant to subsection 
        (c)(2)(B) for the budget year and the current fiscal year by 
        more than $10,000,000,000 in total, such determination shall be 
        accompanied by a proposed order to become effective on October 
        1 of that calendar year which fully offsets in the budget year 
        and the following fiscal year the sum of such excess (for the 
        budget year and the current fiscal year) in the manner provided 
        in this subsection. Such proposed order shall be accompanied by 
        such proposed regulations as the President deems necessary to 
        carry out the sequester.
            (2) Offsets.--
                    (A) In general.--The offsets required by this 
                subsection shall be accomplished through a combination 
                of--
                            (i) subject to the provisions of 
                        subparagraph (B), in the case of the premium 
                        assistance program, reducing the percentages 
                        otherwise in effect for the fiscal year under 
                        subparagraphs (A), (B), and (C) of section 
                        6002(a)(2);
                            (ii) adjusting the deductible for Medicare 
                        drugs as provided in section 1834(d)(1)(B)(i) 
                        of the Social Security Act; and
                            (iii) reducing each direct spending program 
                        provided in the Act by a uniform percentage,
                to the extent (subject to paragraph (3)) necessary to 
                accomplish all of the sequestrations necessary to fully 
                offset the amounts required for that fiscal year.
                    (B) Eligibility percentage for pregnant women and 
                children reduced last.--Any reduction under 
                subparagraph (A)(i)--
                            (i) shall be made first by reducing the 
                        percentages under section 6002(a)(2)(A); and
                            (ii) to the extent sufficient offsets may 
                        not be made under subparagraph (A), shall then 
                        be made by reducing the percentages under 
                        section 6002(a)(2) (B) and (C).
            (3) Proportionality.--The President shall apply the offset 
        mechanisms provided in paragraph (2)(A) (i), (ii), and (iii) 
        proportionally (based on the ratio of the outlays caused by 
        each program to the total outlays of all sequesterable programs 
        under paragraph (2)(A)), to the extent possible, in the budget 
        year and the following fiscal year, but in no case shall the 
        total amount of offsets be less than the amount required by 
        paragraph (1).
            (4) Effective period.--For purposes of a fiscal year not 
        subject to an order under this section following a fiscal year 
        subject to an order under this section, this Act and the 
        amendments made by this Act shall be assumed to continue as if 
        the order had not been issued.
            (5) Consultation.--The President shall confer with the 
        National Health Benefits Board and the National Health Care 
        Cost and Coverage Commission in carrying out this subsection.
    (e) Final Sequester Determination.--Using the same economic and 
technical assumptions as used in making the preliminary determination 
under subsection (c), the President shall reestimate the current health 
care baselines on September 15 based on legislation in effect as of 
September 10. If the aggregate difference between the initial and 
updated baseline is more than $10,000,000,000 in the current fiscal 
year and budget year combined, the President shall issue a final order 
(and accompanying final regulations) following the procedure set forth 
in subsection (d).
    (f) Suspension in the Event of War or Low Growth.--
            (1) Low growth.--The President shall not issue either a 
        proposed or final order under this section if the Office of 
        Management and Budget notifies the Congress that--
                    (A) during the period consisting of the quarter 
                during which such notification is given, the quarter 
                preceding such notification, and the 4 quarters 
                following such notification, the Office of Management 
                and Budget has determined that real economic growth is 
                projected or estimated to be less than zero with 
                respect to each of any 2 consecutive quarters within 
                such period; or
                    (B) the most recent of the Department of Commerce's 
                advance preliminary or final reports of actual real 
                economic growth indicate that the rate of real economic 
                growth for each of the most recently reported quarter 
                and the immediately preceding quarter is less than 1 
                percent.
            (2) War.--The President shall not issue either a proposed 
        or final order under this section if a declaration of war is in 
        effect.
    (g) Recommendations for Alternative Reductions.--If the President's 
budget for a fiscal year is accompanied by an order under subsection 
(d)(1), the National Health Benefits Board shall, within a reasonable 
time, transmit to the President, the Speaker of the House of 
Representatives, and the President of the Senate a report including 
alternative proposals to offset the projected excess set forth in 
subsection (c)(4).
    (h) GAO Audit of Reductions.--If the President has issued an order 
under subsection (d)(1), the General Accounting Office shall report to 
Congress, as soon thereafter as possible following the date of 
transmittal of the President's budget, an analysis of whether the order 
has fully complied with the requirements of this section.
    (i) Additional OMB Reporting Requirements To Be Included in 
President's Budget.--
            (1) Adjusted estimate of total Federal health care costs.--
                    (A) In general.--When the President submits the 
                budget for fiscal year 1997, and each fiscal thereafter 
                through 2004, the President shall include an estimate 
                of total Federal health care costs as described in 
                subparagraph (B).
                    (B) Total federal health care costs.--Total Federal 
                health care costs are--
                            (i) Federal spending in the current health 
                        care baseline (as determined under subsection 
                        (c)(3)); plus
                            (ii) discretionary health care spending 
                        on--
                                    (I) the health care program for 
                                active military personnel under title 
                                10, United States Code;
                                    (II) the veterans health care 
                                program under chapter 17 of title 38, 
                                United States Code;
                                    (III) the Civilian Health and 
                                Medical Program of the Uniformed 
                                Services (CHAMPUS), as defined in 
                                section 1073(4) of title 10, United 
                                States Code;
                                    (IV) the Federal Employee Health 
                                Benefit Plan under chapter 89 of title 
                                5, United States Code (FEHB); and
                                    (V) the Indian health service 
                                program under the Indian Health Care 
                                Improvement Act (25 U.S.C. 1601 et 
                                seq.).
            (2) Cost as a percent of total revenues.--The President 
        shall include with the estimate required by this subsection a 
        calculation by OMB of the percentage of personal and corporate 
        income taxes needed to pay for total Federal health care costs, 
        as adjusted by this subsection, in excess of dedicated health 
        revenues. OMB shall assume that all dedicated health revenues 
        resulting from amendments made by this Act will be allocated 
        for total Federal health care costs, as adjusted by this 
        subsection.
    (j) Additional Commission Reporting Requirements.--Effective 
beginning in 1997, the National Health Care Commission shall report 
annually on how health care expenses are being financed. Among other 
things, this report shall include--
            (1) how much is spent annually in premiums, out-of-pocket 
        expenses, and third party expenses; and
            (2) the number of businesses that provide health insurance 
        and a profile of businesses that do not provide health 
        insurance, including the earnings of such businesses.
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